Decision impact statement

Hii v Commissioner of Taxation

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Court Citation(s):
[2015] FCA 375
2015 ATC 20-501
(2015) 327 ALR 207
(2015) 230 FCR 385

Venue: Federal Court of Australia
Venue Reference No: QUD 622/2014
Judge Name: Justice Collier
Judgment date: 23 April 2015
Appeals on foot: No
Decision Outcome: Favourable to the Commissioner

Impacted Advice

Relevant Rulings/Determinations:

• This decision has no impact for ATO Rulings/Determinations

Impacted Practice Statements:

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

Subject References:
Tax assessments
Amendment of assessments
Administrative law
Judicial review

Précis

Outlines the ATO response to a Federal Court decision that it was not a requirement for the validity of an amended assessment made following an objection decision, that the Commissioner re-form at objection any opinion that was necessary to authorise the making of the earlier assessment.

Brief summary of facts

In July and August 2012, following an audit, the Commissioner issued notices of amended assessment to Mr Hii, increasing his taxable income and tax payable for the years ended 30 June 2001 to 30 June 2004, and 30 June 2007 to 30 June 2008. The basis on which the amended assessments were made was that Mr Hii was, contrary to how he had prepared his tax returns, an 'Australian resident' as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). Some of the notices were issued more than four years after the date of the respective original assessments. For those, the Commissioner's power to amend was expressed to be sourced in item 5 of the table in subsection 170(1) of the Income Tax Assessment Act 1936 (ITAA 1936) as an EL2.1 officer employed by the Australian Taxation Office, holding the appropriate authorisation, had positively formed the opinion that there had been an avoidance of tax due to evasion (the evasion opinion).

Mr Hii objected to the amended assessments on three grounds: that he was not an Australian resident, that the statutory period to amend provided under item 5 in the table in subsection 170(1) of the ITAA 1936 had expired as his acts did not amount to evasion, and that the assessments were excessive as they improperly calculated his taxable income. The objections were allowed in part, on the third ground (the objection decisions). Further amended assessments giving effect to the objection decisions were issued in early 2014 (the further amended assessments). At the time of making the objection decisions, the evasion opinion was undisturbed and the Commissioner did not re-form his opinion that Mr Hii had avoided tax due to fraud or evasion.

Mr Hii filed an originating application in the Federal Court under section 39B of the Judiciary Act 1903 (Cth), alleging that the further amended assessments were void and of no effect as the formation, at or about the time when the objection decisions were made, that there had been an avoidance of tax due to fraud or evasion, was a jurisdictional fact upon which the power to issue the further amended assessments depends. Mr Hii sought orders by way of declaratory relief, certiorari, mandamus and prohibition.

Issues Decided by the Court

The Court (Collier J) dismissed the application.

Collier J concluded, at paragraphs 106 to 108, that the Commissioner made the further amended assessments in compliance with the power in item 5 of the table in subsection 170(1) of the ITAA 1936 to amend an assessment as a result of an objection made by the taxpayer. It was not necessary for the Commissioner to re-determine, ab initio, all issues relevant to the original decision.

Collier J also concluded that, even if the Commissioner's actions had failed to comply with the terms of section 170 of the ITAA 1936 in respect of the further amended assessments:

the combined effect of s 175 and s 177 of the ITAA 1936 is that any failure by the Commissioner to comply with a provision of the tax legislation when issuing an assessment does not thereby render the assessment invalid. The decision of the High Court in Futuris, in particular as subsequently applied in this Court, is authority for the proposition that unless an assessment is tentative or provisional, or is produced as a result of conscious maladministration, it is not susceptible to challenge pursuant to s 39B of the Judiciary Act [at paragraph 90].

The further amended assessments were not tentative or provisional, nor on the facts of the case attended by bad faith so as to constitute conscious maladministration. In the view of Collier J, if the Commissioner's actions did not comply with section 170 they would simply have been wrong at law. Accordingly, it was not open for Mr Hii to obtain the relief sought.

ATO view of decision

The ATO agrees with the decision, which is in accordance with established principles.

The ATO notes that the decision is a further example where the Federal Court has interpreted the decision in Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 (Futuris) as having narrowed the class of case where the Court has power to intervene in challenges to assessments pursuant to section 39B of the Judiciary Act 1903 (Cth) to cases involving tentative or provisional assessment or conscious maladministration.

Administrative Treatment

Implications for impacted ATO precedential documents (Public Rulings and Determinations)

Nil

Implications for impacted Law Administration Practice Statements

Nil

Legislative References:
Income Tax Assessment Act 1936
Subsection 170(1)
Subsection 170(2)

Judiciary Act 1903
Section 39B

Case References:
Federal Commissioner of Taxation v Futuris Corporation Ltd
(2008) 237 CLR 146
(2008) 2008 ATC 20-039
(2008) 69 ATR 41

Fletcher v Commissioner of Taxation
(1998) 19 FCR 442
(1988) 84 ALR 295
(1988) 19 ATR 1765
(1988) 88 ATC 4834
[1988] FCA 362

Roberts v Deputy Commissioner of Taxation
[2015] FCA 238

Roberts v Federal Commissioner of Taxation
[2013] FCA 1108
(2013) 228 FCR 280

Woods v Deputy Commissioner of Taxation
[2011] TASSC 68
(2011) 2011 ATC 20-297
(2011) 86 ATR 620