Decision impact statement

McGrouther & Anor v Commissioner of Taxation


Court Citation(s):
Federal Court
[2014] FCA 1102
2014 ATC 20-469
(2014) 320 ALR 524
Full Federal Court
[2015] FCAFC 34
2015 ATC 20-492
(2015) 229 FCR 466
(2015) 321 ALR 213
High Court
[2015] HCATrans 221

Venue: High Court
Venue Reference No: NSD 687 of 2014(FC)
NSD 1105/2014 (FFC)
S68 of 2015 (HCA)
Judge Name: Justice Edmonds (FC)
Justice Allsop, Justice Pagone, Justice Davies (FFC)
Justice Gageler, Justice Bell (HCA)
Judgment date: 11 September 2015
Appeals on foot: No, the High Court refused the taxpayer's special leave to appeal the Full Federal Court's decision
Decision Outcome: Favourable to the Commissioner

Impacted Advice

Relevant Rulings/Determinations:
  • None

Exclamation This decision has no impact for ATO precedential documents or Law Administration Practice Statements

Précis

Outlines the ATO's response to this case. This case concerned whether a taxpayer can 'waive' a notice they have given to the Commissioner under subsection 14ZYA(2) of the Taxation Administration Act 1953 (TAA) in respect of an objection requiring the Commissioner to make an objection decision. If a taxpayer can, whether waiving the notice has the effect that subsection 14ZYA(3) of the TAA cannot operate to deem the Commissioner to have disallowed the objection as a result of that notice.

Brief summary of facts

Mr and Mrs McGrouther (the taxpayers) lodged objections against amended assessments issued to them in respect of the 2000 to 2007 income years.

Prior to determining the objections the Commissioner issued a notice under section 264 of the Income Tax Assessment Act 1936 requiring Mr McGrouther to attend for an examination (the section 264 notice).

Two days later, the taxpayers served notices under subsection 14ZYA(2) of the TAA requiring the Commissioner to determine their objections. The consequence of which was that if the Commissioner did not determine the objection within 60 days of the notice being given, he would be deemed to have disallowed the objection pursuant to subsection 14ZYA(3) of the TAA and giving the taxpayer the right to appeal the deemed disallowance of the objection to the Federal Court under section 14ZZ of the TAA.

On 9 April 2014, the Taxpayers then commenced proceedings in the Federal court challenging the validity of decision to issue the section 264 notice issued to Mr McGrouther. At the preliminary stage of those proceedings, it was agreed between the taxpayers and the Commissioner that:

the Commissioner would defer the examination until at least 7 days after final orders were made determining the validation of the section 264 notice issued to Mr McGrouther; and

the taxpayer's were to withdraw the notices given under subsection 14ZYA(2) of the TAA, and not to issue further notices under subsection 14ZYA(2) in respect of the objections until the validity of the section 264 notice was determined.

On 10 April Nicholas J made orders in these proceedings noting the agreement made between the taxpayers and the Commissioner.

The taxpayers 'withdrew' the notices pursuant to that agreement. The taxpayers subsequently advised the Commissioner they were of the view they could not validly withdraw the notices. When 60 days had passed from the time they gave the notices, taking the view that their objections had been deemed to be disallowed by the Commissioner as a result of the operation of subsection 14ZYA(3) of the TAA, they commenced proceedings under section 14ZZ of the TAA appealing against the disallowance of their objections.

The Commissioner commenced interlocutory proceedings seeking to have the proceedings brought by the taxpayers under section 14ZZ of the TAA dismissed for want of jurisdiction on the grounds that the purported withdrawal meant there was no deemed objection decision against which an appeal to the Federal Court under section 14ZZ could be made.

Issues decided by the court/Tribunal

Decision at First Instance

As there is no express power conferred on a taxpayer to 'withdraw' or 'waive' on a notice they have given to the Commissioner under subsection 14ZYA(2) of the TAA, at issue before Edmonds J at first instance was whether there is an implied power to withdraw or revoke a notice given under subsection 14ZYA(2).

Edmonds J held that there was no implied right to withdraw or revoke a subsection 14ZYA(2) notice and dismissed the Commissioner's application to have the section 14ZZ proceedings dismissed.

Issues Decided by the Full Federal Court

On appeal by the Commissioner to the Full Federal Court the issue was argued before the full court on the basis of whether the taxpayers could 'waive' reliance on a notice given under subsection 14ZYA(2) of the TAA.

The Full Federal Court unanimously held that a taxpayer could 'waive' reliance on a notice given under subsection 14ZYA(2) of the TAA, it being a provision existing solely for the benefit of the taxpayer and not one whose observance was a condition of the exercise of a statutory power or enacted for a wider public purpose (per Pagone and Davies JJ at [26] and Allsop CJ at [10-11]).

Waiver of a subsection 14ZYA(2) notice can be validly effected by a notice to the Commissioner withdrawing the notice (per Pagone and Davies JJ at [26].

As the taxpayers had waived the subsection 14ZYA(2) notice given to the Commissioner, there was no deemed objection decision and the Federal court had no jurisdiction to hear the application made by the taxpayers under section 14ZZ of the TAA. The Court therefore dismissed the applications made by the taxpayers under section 14ZZ.

Pagone and Davies at [29] also observed in obiter that a taxpayer could, after having waived an earlier notice given under subsection 14ZYA(2) of the TAA, give the Commissioner subsequent notices under that section requiring him to determine the objection.

The taxpayers sought special leave to appeal the decision of the Full Federal Court to the High Court. The application for special leave was refused by the High Court. In doing so Bell J observed that1 '...there was no reason to doubt the correctness of the decision of the Full Federal Court".

ATO view of decision

The ATO accepts the decision of the Full Federal Court and will apply its reasoning.

Administrative Treatment

Implications for impacted ATO precedential documents (Public Rulings, Determinations, ATO IDs)

None.

Implications for impacted Law Administration Practice Statements

The decision has no impact on Law Administrative Practice Statements.

Legislative References:
Taxation Administration Act 1953
subsection 14ZYA(2)
subsection 14ZYA(3)
section 14ZZ