Benson Healthcare Enterprises Pty Ltd and Commissioner of Taxation (Practice and Procedure)
[2025] ARTA 19
•15 January 2025
Benson Healthcare Enterprises Pty Ltd and Commissioner of Taxation (Practice and Procedure) [2025] ARTA 19 (15 January 2025)
Applicant/s: Benson Healthcare Enterprises Pty Ltd
Respondent: Commissioner of Taxation
Tribunal Number: 2024/8063
Tribunal:General Member C. Willis
Place:Melbourne
Date:15 January 2025
Decision:The Tribunal refuses to grant the Applicant’s application to extend the period during which the Applicant may apply for a review of the Respondent’s reviewable objection decision dated 21 July 2021.
...............................[sgd]........................................
General Member C. Willis
GENERAL DIVISION
Catchwords
PRACTICE AND PROCEDURE – Extension of time to lodge application for review of objection decision – factors to be taken into account – explanation for delay – whether arguable case – procedural fairness and public interest - Cash Flow Boost – Scheme - Tax agent dispute with Tax Practitioners Board – Administrative Review Appeals Act 2024 (Cth), s 19
Legislation
Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 (Cth)Cases
Brown and Federal Commissioner of Taxation (1999) 42 ATR 118
Re Griffith and Federal Commissioner of Taxation (2011) 83 ATR 960
Huang and Tax Practitioners Board [2021] AATA 1824
Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 844
Re Jennings and Another and Federal Commissioner of Taxation (2004) 57 ATR 1339Secondary Materials
Practice Statement Law Administration PS LA 2005/24 ‘Application of General Anti-Avoidance Rules’
Statement of Reasons
INTRODUCTION
In 2020 Benson Healthcare Enterprises Pty Ltd (the ‘Applicant’) claimed an entitlement to a payment (‘CFB Payment’) under the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 (Cth) (‘CFB Act’). The Commissioner of Taxation (‘Respondent’) determined that the Applicant was not entitled to the CFB Payment.
In April 2021 the Applicant lodged an objection (‘Objection’) against the Respondent’s decision, which was subsequently disallowed in July 2021 (‘Objection Decision’). At that time the Applicant did not pursue any further review or appeal rights in relation to the Objection Decision.
However in late 2023 the Tax Practitioners Board (‘TPB’) made a decision (‘Deregistration Decision’) to terminate the registration as a tax agent of Mr Warren Seeto (‘Mr Seeto’), a former director of the Applicant. One of the matters referred to by the TPB in their Deregistration Decision was their view that Mr Seeto had caused the Applicant to enter into a scheme to obtain the CFB Payment, in contravention of certain integrity provisions within the CFB Act.
In 2024 Mr Seeto commenced separate proceedings in the Tribunal (‘TPB Proceeding’) seeking review of the Deregistration Decision. He believes that in order for him to fully argue his case in the TPB Proceeding, the Objection Decision of the Respondent must be challenged. Neither the Applicant nor the Respondent is a party to the TPB Proceeding.
Applications for review of objection decisions of the Respondent must ordinarily be lodged with the Tribunal within 60 days of their issue. Clearly that time has passed, and the Applicant must therefore apply to the Tribunal to extend the period during which it may seek a review of the Objection Decision, and therefore brings this proceeding (‘EOT Application).
Mr Seeto is no longer a director of the Applicant, however he has persuaded the Applicant to make the EOT Application. Neither Mr Seeto nor the TPB is a party to the EOT Application proceeding, although Mr Seeto has provided a Witness Statement in this matter.
The Applicant is also seeking a review of the Objection Decision. This decision only covers the issue of whether an extension of the period for applying to the Tribunal for a review should be granted, such that a substantive review of the Objection Decision could proceed.
BACKGROUND
The following outline is drawn from the witness statements filed by the Applicant (together with documents appended to those witness statements), additional documents filed by the Applicant on 28 November 2024 and the written and oral submissions of both parties. Factual matters which are not agreed between the parties are identified below or in the ‘Consideration’ section of this decision.
It is sometimes not clear in the witness statements whether particular events or actions relate specifically to the Applicant or an associated individual. There are also some minor inconsistencies between the witness statements as to dates. This most likely reflects the time that has elapsed since the events occurred and will not be relevant to the issues in contention. Any discrepancies in evidence which are relevant to the Tribunal’s decision are also identified in the ‘Consideration’ section below.
The Applicant was registered in January 2009[1]. Ms Sarah Benson (‘Ms Benson’) has been a director of the Applicant since its registration and is currently its sole director. She has been the Applicant’s sole shareholder at all times. She carries on a practice as a physiotherapist through the Applicant.
[1] See extract of ASIC Current and Historical Company Extract at Exhibit SB-1 to Ms Benson’s Witness Statement.
Ms Benson met Mr Seeto in 2010 when he was referred to her for physiotherapy following an injury. At that time Ms Benson and the Applicant were operating a physiotherapy business at a hospital in NSW in conjunction with another physiotherapist. Mr Seeto was a principal and director of Clarity CA Pty Ltd (‘Clarity’) which provided accountancy and tax agent services. In late 2013 or 2014 the Applicant and Ms Benson became clients of Clarity.
In 2017 the arrangements with the hospital came to an end, and in 2017 or 2018 Ms Benson and her family relocated to New Zealand. Clarity advised the Applicant and Ms Benson on financial matters relating to the termination of the arrangements. Mr Seeto became a director of the Applicant in February 2018.[2] Ms Benson said that she wanted to keep the Applicant registered as she intended to recommence her physiotherapy business in the future and it was necessary for the Applicant to have an Australian resident director to remain registered.[3]
[2] As per Footnote 1.
[3] Paragraph 9 of Ms Benson’s Witness Statement of Ms Benson, paragraph 11 of Mr Seeto’s Witness Statement.
Ms Benson, Mr Seeto and their families also maintained social contact after her relocation to New Zealand.
The Applicant was dormant for a period after Ms Benson moved to New Zealand. In April 2019, Ms Benson contacted Mr Seeto to discuss her plans to recommence work as a physiotherapist in Australia. Ms Benson states that from June 2019 she started flying to Sydney to see patients, then returning to her family in New Zealand. She also recalls that the Applicant was registered for GST and GST was charged on services she provided.
Mr Seeto states that on 1 July 2019 he had a telephone conversation with Ms Benson about matters relating to the recommencement of the Applicant’s business activities. This included a discussion around distribution of revenue of the Applicant. Mr Seeto states that he agreed with Ms Benson that she would receive director’s fees of $400 per month which would be credited to her director’s loan account with the Applicant. This would be done by a credit entry being made in the Applicant’s accounts recording an amount that was owed by the Applicant to Ms Benson. Ms Benson recalled this conversation, and that she did not want the arrangements to be complicated. The amount of $400 per month was nominated as it fell below the threshold for triggering obligations under the superannuation guarantee charge and NSW worker’s compensation laws.
A ‘Minutes of Meeting of Director’ [sic] held by telephone on 1 July 2019 (‘Minute’)[4] was prepared setting out matters relating to Ms Benson’s director’s fees for the 2019/2020 financial year. It is signed by Ms Benson (only). However it is not clear when the Minute was actually drafted and signed as it is undated. Neither Ms Benson nor Mr Seeto positively stated when the Minute was prepared, although Ms Benson believed that it accurately recorded what she discussed with Mr Seeto in July 2019.[5] Ms Benson could not recall the exact date on which the discussion took place.
[4] Page 10 of Exhibit SB-1.
[5] Paragraph [19] of Ms Benson’s Witness Statement.
The Respondent indicated that the Minute may have been signed (or prepared) in August 2020, based on a copy of an email dated 17 August 2020 from Clarity to Ms Benson’s husband attaching a draft for signing, and which was included with Mr Seeto’s witness statement.[6]
[6] See email dated 17 August 2020 at page 19 of Exhibit WJS-1.
Due to international travel restrictions during the Covid-19 pandemic, Ms Benson remained in New Zealand across 2020 and 2021.
Cash Flow Boost incentive
In March 2020 Mr Seeto sent Ms Benson an email with general information about the Australian government’s financial support programs for small business during the Covid-19 pandemic.[7] This included information about ‘cash flow assistance for small business.’ Ms Benson says that after receiving this email she did some personal online research about the cash flow boost initiative, including looking at media articles and the Respondent’s website.
[7] See page 12 of Exhibit SB-1.
Mr Seeto states that an accountant employed by Clarity had lodged ‘nil’ business activity statements for the Applicant for the periods ending 30 June 2019, 30 September 2019 and 31 December 2019. Mr Seeto said that he had failed to inform his employee that the Applicant had recommenced its business activities. This error was identified in May 2020 and the business activity statements were amended in June 2020 to disclose taxable supplies and remuneration paid.
Unlike other types of tax concessions, the CFB Act did not require a taxpayer to apply separately for a CFB payment. CFB payments were delivered to eligible taxpayers based on information contained in the business activity statements lodged by the taxpayer, in particular PAYG withholding information showing that the taxpayer had made payments of amounts such as salary and wages or directors fees.
In August 2020 an officer of the Respondent contacted the accountant at Clarity, advising that the Respondent was assessing the Applicant’s eligibility for the CFB Payment and seeking certain information in support of the Applicant’s entitlement (‘First Review’). The accountant sent copies of pay slips and the Minute to the Respondent and provided further information about the Applicant’s activities during the relevant periods. Discussions about substantiation of the Applicant’s entitlement, including provision of bank statements, continued into early September 2020.
On 8 September 2020 the Respondent sent a letter to Clarity[8] advising a decision the Applicant was not eligible for the CFB Payment. The Respondent stated that the Applicant had not met the eligibility criteria, based on a lack of documentation evidencing remuneration payments. The Respondent also noted ‘you will not be eligible for the cash flow boost if you change the way you operate for the sole or dominant purpose of becoming entitled to the cash flow boosts when you would otherwise not be entitled.’
[8] Although Mr Seeto said at paragraph [30] of his Witness Statement that the letter was sent to Ms Benson, the letter was addressed to the Applicant ‘C/- Clarity Professional Group’. Ms Benson also says at paragraph [28] of her Witness Statement that she did not recall seeing correspondence from the ATO.
On the same day Mr Seeto referred the Applicant’s CFB Payment matter to the Tax Practitioner Stewardship Group (‘TPSG’) at the Respondent. He followed up on the matter in early December 2020. An officer from the Complex Technical Unit, Superannuation & Employer Operations area of the Respondent contacted Mr Seeto in mid December 2020 and arranged for a further review of the Applicant’s entitlement (‘Second Review’). The Respondent sought documentation to evidence that the Applicant had met the ‘Activity test.’ Mr Seeto provided copies of invoices for periods in 2019.[9]
[9] Exhibit WSJ-1 at pages 51 to 73.
There was contact between Mr Seeto and the Respondent in February 2021, and Mr Seeto provided a further copy of the Minute as well as extracts from the Applicant’s general ledger account showing Ms Benson’s loan account. On 21 April 2021 the Respondent sent a letter to Clarity[10] advising that the Applicant was not eligible for the CFB Payment as it had not met the eligibility criteria[11]. The Respondent said that this was because the Applicant had not provided evidence that it made eligible payments to employees before 12 March 2020, and that it considered that the Applicant had ‘entered into or carried out a scheme for the sole or dominant purpose of becoming entitled to or increasing the amount of your cash flow boost.’
[10] Again, this letter was addressed to the Applicant C/- Clarity and marked to the attention of Mr Seeto.
[11] Exhibit WSJ-1, page 105.
The reasons provided with this Second Review decision were:
·The evidence provided did not substantiate that payments subject to withholding were made to Ms Benson as a director of the Applicant.
·The lodgements of business activity statements before 12 March 2020 did not detail payments of wages, with all reports of wages being made after the cash flow boost was announced.
·Neither constructive payment nor an employment relationship had been substantiated.
·The Respondent was unable to establish that the Applicant did not change the way it was operating for the sole or dominant purpose of becoming entitled to cash flow boost when otherwise it would not be entitled.
On 26 April 2021 Mr Seeto as tax agent for the Applicant lodged an objection against this decision (‘Objection’).[12] The Objection responded to each of the bullet point reasons above. In relation to the final bullet point, the Objection said:
‘The case officer has not demonstrated any reasons why this taxpayer was not entitled to the cash flow boost and that there had been a change in the way the company operated.’
No further analysis was provided.
[12] A copy of the Objection was provided to the Tribunal the afternoon before this interlocutory hearing.
The Applicant sought to obtain further information to provide to the Respondent. This included records from Ms Benson’s mobile phone provider to corroborate the July 2019 phone call with Mr Seeto, however the mobile phone provider advised that they did not hold records beyond 14 months.
On 21 July 2021, the Respondent disallowed the Objection. The Objection Decision was that the Applicant ‘did not meet the eligibility requirements to receive Cash Flow Boost (CFB).’ In the reasons for decision the Respondent said that:
·Information provided by the Applicant to substantiate the payment of wages or directors fees to Ms Benson was not contemporaneous.
·The Applicant had not sufficiently substantiated the actual or constructive payment of wages or directors fees to Ms Benson, such that it did not satisfy the payment and withholding requirement for a CFB payment.
·For the purposes of the integrity rule in paragraph 5(1)(g) of the CFB Act the Applicant entered into or carried out a scheme for the sole or dominant purpose of increasing the amount of CFB payments to which it was entitled.
The factors taken into account in concluding that a scheme had been entered into or carried out were set out at paragraph 18 of the reasons for the Objection Decision.[13]
[13] Exhibit WJS-1, pages 111 to 114.
The Applicant contends that the Objection Decision was incorrect because it had provided information that substantiated its entitlement to the CFB Payment based on the requirements for a payment under the CFB Act. Further, the conditions of paragraph 5(1)(g) of the CFB Act were not met in the Applicant’s circumstances. Mr Seeto says that he did not have a proper opportunity to put forward the Applicant’s case relating to an alleged ‘scheme.’[14]
[14] Mr Seeto’s Witness Statement at paragraph [51].
Mr Seeto met with officers of the Respondent in July 2021 to discuss the Objection Decision outcome, including the process that led to the ‘scheme’ finding. He says that he wanted the opportunity to provide submissions on the scheme opportunity, but this was rejected by the Respondent.[15]
[15] Mr Seeto’s Witness Statement at paragraphs [51] to [54].
In its EOT Application and written submissions the Applicant says that it strongly disagreed with the Objection Decision when it was made in 2021, however the Applicant made the decision not to seek review at that time on the basis that it would not be economic to do so, having regard to the amount of the CFB payment in contention ($20,000) when compared to the potential cost of running a proceeding in the Tribunal.
Ms Benson recalls a discussion with her husband during which he told her that the Respondent had decided that the Applicant was not entitled to the CFB Payment and that she subsequently spoke with Mr Seeto about it. She says that she does not recall seeing any correspondence from the Respondent explaining the decision. She also does not recall what Mr Seeto told her during their subsequent conversation and does not recall speaking with Mr Seeto about the cash flow boost before this conversation.[16] From the material provided it is not clear whether these discussions occurred after the First Review, Second Review or Objection Decision.
[16] Ms Benson’s Witness Statement at paragraphs [28] and [29].
Mr Seeto says that in August 2021, after his discussion with the Respondent, he emailed Ms Benson and her husband and then had a teleconference with them. Mr Seeto recalls explaining the option of a review in the (then) Administrative Appeals Tribunal. Based on a discussion with another tax agent who had taken a CFB dispute to the Tribunal, Mr Seeto estimated the cost of a review in the Tribunal to be around $10,000. Mr Seeto says that he had not charged the Applicant for work he or Clarity had undertaken in relation to the CFB Payment, but he advised the Applicant that Clarity could not fund a review in the Tribunal. Mr Seeto says that Ms Benson and her husband advised him that they did not want to pursue the matter further because of the cost of bringing proceedings and the uncertainty of the potential outcome.[17]
[17] Mr Seeto’s Witness Statement at paragraphs [55] to [57].
Ms Benson also recalls the decision not to take the matter any further. In her witness statement she said she remembered thinking ‘it was all too hard’ and that it was ‘probably the right outcome because [husband] and I were living in New Zealand.’
Mr Seeto ceased to be a director of the Applicant in March 2022.
On 7 December 2023 the TPB made the Deregistration Decision, terminating the registration as a tax agent of Mr Seeto, with effect from 22 January 2024 and prohibiting him from applying for registration for a period of two years.
A copy of the Deregistration Decision was not provided to the Tribunal. The Applicant states that:
·the Deregistration Decision was made under subparagraphs 60-125(2)(b)(ii) and paragraph 40-5(1)(b) of the Tax Agent Services Act 2009 (the ‘TASA’), and
·one of the matters the TPB alleged against Mr Seeto was that he caused the Applicant to enter into a scheme that contravened paragraph 5(1)(g) of the CFB Act, thus breaching the Code of Professional Conduct under the TASA.[18]
[18] Per the EOT Application filed with the Tribunal.
The TPB’s position is that for the purposes of the TPB Proceeding it is entitled to rely upon the unchallenged Objection Decision which says amongst other things that the Applicant entered into and carried out a scheme to increase the amount of CFB payments to which it was entitled. Citing the observations of Deputy President McCabe in Huang and Tax Practitioners Board (Huang)[19] the TPB says that the Tribunal in the TPB Proceeding is unable to adjudicate on the correctness of the Objection Decision.[20] The Applicant therefore believes it is necessary for it to challenge the Objection Decision to allow Mr Seeto to pursue his case against the TPB.
[19] Huang and Tax Practitioners Board [2021] AATA 1824 at paragraph [13] per DP McCabe.
[20] See letter from TPB to the Applicant’s representative dated 9 September 2024, pages 8 to 11 of Exhibit TW-1 to Ms Waterhouse’s Witness Statement.
The Applicant lodged both the EOT Application and an application for review of the Objection Decision with the Tribunal on 10 October 2024.
RELEVANT LAW
An application to the Tribunal for review of a ‘reviewable objection decision’ must be made within 60 days after the person making the application is served with notice of the decision: subsection 14ZZC(1) of the Taxation Administration Act 1953 (‘TAA 1953’).[21]
[21] Section 14ZZC of the TAA 1953 provided for the same time period prior to the commencement of the ART and ART Act, albeit referring to the former AAT and AAT Act.
A person may, under section 19 of the Administrative Review Tribunal Act 2024 (Cth) (‘ART Act’), apply to the Tribunal to extend the period:
Application to extend period
(1) A person (the applicant) may apply to the Tribunal to extend the period during which the applicant may apply to the Tribunal for a review of a decision
(2) The Tribunal may, by order, extend the period if the Tribunal considers that it is reasonable in all the circumstances to do so.
(3) The Tribunal may extend the period even if it has expired.
Section 19 does not prescribe the criteria that must be considered by the Tribunal in determining whether an extension of the period would be reasonable. The matters set out by Wilcox J in Hunter Valley Developments Pty Limited v Cohen (1984) 3 FCR 344[22] have been applied by courts and tribunals in relation to the exercise of a statutory discretion to extend time, including under the legislation governing this Tribunal.[23] However these matters were intended to serve as a guide and are not exhaustive.[24] Subsection 19(2) expressly provides that the Tribunal may extend the period if the Tribunal considers it is reasonable 'in all the circumstances' to do so. Further, different emphasis may be placed on particular factors depending on the sort of application in relation to which the extension of time is being sought.[25]
[22] Hunter Valley Developments at paragraphs [18] to [23] per Wilcox J.
[23] Parr v Commissioner of Taxation [2022] FCA 678 at paragraphs [40] and [47] per Banks-Smith J.
[24] Brown v Federal Commissioner of Taxation (1999) 42 ATR 118 at paragraphs [33] and [34] per Hill J.
[25] Re Griffith and Federal Commissioner of Taxation [2011] AATA 400.
Reference is made below to various provisions of the CFB Act as context to this EOT Application, however the purpose of this interlocutory proceeding is not to decide matters relating to the application of the CFB Act.
CONSIDERATION
The following headings reflect factors articulated by the Federal Court in Hunter Valley Developments and Brown, and subsequently applied by the Tribunal in other applications for extension of time.
Length of and explanation for the delay in making the application to the Tribunal
Where a time limit has been prescribed by Parliament, it should not be ignored. The prima facie position is that proceedings should not be commenced outside that legislative period without an acceptable or satisfactory explanation for the delay.[26]
[26] Hunter Valley Developments at [18] per Wilcox J, Brown at [42] to [44] per Hill J.
The period prescribed by statute for seeking review by the Tribunal of an objection decision is 60 days. As the Objection Decision was made in July 2021 it is clear that this statutory period has been substantially exceeded.
In their witness statements Mr Seeto and Ms Benson agree that a decision was positively made by the Applicant (through Mr Seeto and Ms Benson) in or around August 2021 not to seek a review of the Objection Decision.
The Applicant in its EOT Application says that this decision not to seek review was made on the basis that it would have been uneconomic to do so. In an email to Ms Benson and her husband, Mr Seeto advised that although he believed the Objection Decision was wrong, the commercial outcome would not warrant the cost of pursuing the matter and would expose Ms Benson and her husband to more scrutiny.[27] Ms Benson’s recollection of the decision is less clear, and she suggested that at the time she may have thought it was ‘probably the right outcome’ for the CFB Payment entitlement to be rejected. However I accept that the financial and commercial reasons were put by Mr Seeto to the Applicant for their consideration as per his email.
[27] Exhibit WJS-1 at page 117.
The Applicant stated that the trigger for making the EOT Application in 2024 is the Deregistration Decision and Mr Seeto’s need to challenge the Objection Decision in the course of the separate TPB Proceeding. The TPB has referred to the decision of the Tribunal in Huang in support of their position that they are able to rely upon the Objection Decision in the TPB Proceeding.[28] In the Huang case DP McCabe confirmed that in the context of proceedings involving the TPB, it was not appropriate to litigate the underlying tax dispute. If a tax agent wanted to dispute the tax matter, a proceeding under Part IVC of the TAA 1953 was the appropriate forum.
[28] Exhibit TW-1, pages 10 to 11.
The Respondent says the convenience of the Applicant or its tax agent to seek a review in 2024 is not an adequate reason for the delay beyond time limits prescribed by statute. I am not sure that I would describe disciplinary actions by TPB as a matter of convenience, but I agree that in the present circumstances the Applicant was aware of, and made an informed choice at the time not to pursue, rights of review in the Tribunal.
Ms Benson says that if she had known in July 2021 that Mr Seeto was going to be investigated by the TPB, she would have caused the Applicant to challenge the Objection Decision at that time.[29] I accept that the motivation for the Applicant agreeing to make the EOT Application was Ms Benson’s genuine wish to support a friend and former co-director during a difficult time in his professional life.
[29] Ms Benson’s Witness Statement at paragraph [32].
However, the Applicant has effectively changed its mind in relation to seeking a review of the Objection Decision, not because of matters particular to its entitlement to the CFB Payment or its access to review and objection processes conducted by the Respondent, but because of disciplinary proceedings subsequently commenced by a different regulator against Mr Seeto as a tax agent. At the hearing Counsel for the Applicant acknowledged that the implications to the Applicant are subsidiary to the interest of Mr Seeto. The circumstances of the Applicant, which were known at the time that the statutory review rights existed in relation to the Objection decision, have not changed.
In the context a significant delay beyond a time limit prescribed by statute, I do not believe this is a satisfactory explanation for the delay.
A further ground of explanation for delay was raised in the Applicant’s submissions and Mr Seeto’s witness statement, which overlaps with the ‘procedural fairness’ and ‘public interest factors considered further below. The Applicant claims that the alleged scheme was not identified, or at least not adequately identified, in the letters for the First Review and Second Review and the Objection Decision. In particular, the alleged involvement of Mr Seeto in the scheme was not identified in 2021. He only became aware of this concern after the TPB commenced its investigations into him.
My reasons for rejecting the contention that there was a lack of procedural fairness by the Respondent are set out in greater detail below. In summary, although I agree that the Respondent could have provided better and more detailed reasons for its decisions relating to the CFB Payment, particularly in relation to defining the alleged scheme, I do not believe the Applicant was misled by the Respondent about the existence of a scheme being a basis for its decision. That a scheme was being alleged was known by the Applicant at the time the Objection Decision was received (if not before) and therefore was known by the Applicant during the period prescribed by statute for seeking review by the Tribunal.[30] I do not believe this matter represents an acceptable or satisfactory explanation for the delay by the Applicant in seeking a review of the Objection Decision.
[30] This may be contrasted with the circumstances in Re Griffith and Federal Commissioner of Taxation [2011] AATA 400 and Re Jennings and Another and Federal Commissioner of Taxation [2004] AATA 1191 where the taxpayers were not aware of key matters relevant to their review rights due to misunderstanding or error on the part of their advisers.
Other action taken by Applicant
Related to the question of whether an acceptable explanation for delay has been provided is whether the applicant for the extension of time had led the original decision maker to believe that the matter was concluded, or whether they continued to make the decision maker aware that they contested the decision. Finality in disputes is desirable. The passing of time may also make it difficult for the decision maker to recall the circumstances surrounding the making of the decision.[31]
[31] Hunter Valley Developments at [19] per Wilcox J, Brown at [48] per Hill J.
The Applicant states that it has always contended that the Objection Decision was incorrect. Although in her witness statement Ms Benson suggests a (possibly personal) view that the Objection Decision may have reflected the right outcome, I accept that the advice and recommendations put to the Applicant by Mr Seeto in August 2021 when the Applicant was considering whether to seek review by the Tribunal reflected a rejection at that time of the legal basis of the Objection Decision.
The Respondent argues that the Applicant ‘rested on its rights’ having made the decision in 2021 not to pursue the matter, and describes this as a significant factor against permitting an extension of time.
The Objection Decision correspondence from the Respondent identified formal external review or appeal rights to the Tribunal or Federal Court. Mr Seeto contacted the Respondent after receiving the Objection Decision to inquire about options for complaint and access to records of the Respondent. The Respondent sent him information about complaint and freedom of information processes, as well as noting the Inspector General of Taxation (‘IGOT’) as another external scrutineer body.[32] Mr Seeto discussed the options of a review by the Tribunal and referral to the IGOT with Ms Benson in August 2021, confirming that the Applicant had until 21 September 2021 to apply to the Tribunal and that in any event he would like to lodge a complaint highlighting deficiencies by the Respondent in processing the case.[33]
[32] Exhibit WSJ-1, pages 115 to 116.
[33] Exhibit WSJ-1, page 117.
The Applicant did not provide any evidence of having made such a referral to the IGOT, lodging a complaint or making an FOI request to obtain documents about the Respondent’s decision making process. Mr Seeto included with his witness statement a letter from the Respondent to the IGOT, however this appears to be a letter prepared by the Respondent in December 2020 and published in response to a report of the IGOT on the implementation and administration of various Covid-19 economic stimulus measures. It does not reference the Applicant’s case.
Although Mr Seeto may have personally maintained his advice to the Applicant that the Objection Decision was wrong, no further action was taken by the Applicant to make the Respondent aware that the Applicant maintained its challenge until this EOT Application was lodged in October 2024. Mr Seeto may have communicated his disagreement with the Objection Decision to the TPB in the course of its investigation and the TPB Proceeding, but the Respondent is not a party to that matter. I believe these matters weigh against granting the EOT Application.
Prejudice to the Respondent
It is relevant to consider whether any prejudice would result to the Respondent from having to engage in delayed proceedings, particularly where the passing of time adversely affects the ability of the Respondent to defend the case. Prejudice which amounts only to ‘administrative convenience’ may not be sufficient to deny the extension request.[34]
[34] Brown at paragraph [51] per Hill J.
The Applicant says that if the extension of time is granted, the review of the Objection would largely proceed on the basis of material already held by the Respondent. The Applicant contends that it is reasonable to expect the Respondent has still holds all relevant records. The Applicant believes that it would only need to file one or two witness statements, it is unlikely that officers of the Respondent would be required to give evidence and the matter could therefore be determined quickly.
The Respondent contends that the delay in commencing a review, should the EOT Application be granted, would prejudice it by causing unnecessary legal expenditure for an ulterior purpose, being the issues relating to the registration of Mr Seeto as the Applicant’s tax agent. The Respondent drew a distinction between the Applicant’s circumstances and those described in Huang on the basis that Mr Seeto’s role as a director of the Applicant involved minimal oversight or control of the Applicant.
I acknowledge that should a review of the Objection Decision proceed, the Respondent is likely to have additional and unexpected legal expenditure arising from a matter which it was reasonable to believe had long been finalised. However I agree with the Applicant that the Respondent is likely to retain the records and information that would be relevant to and required for a review.
On balance I do not believe the potential prejudice to the Respondent is sufficient, of itself, to refuse the EOT Application.
Public interest considerations and fairness
Both the Applicant and Respondent contended that their cases were aligned with the objectives of the Tribunal as set out in section 9 of the ART Act.
The Applicant said that granting the EOT Application and allowing a review of the Objection Decision would support the transparency and quality of government decision-making within paragraph (d) of section 9. The Applicant raised concerns that the alleged scheme to was not articulated until the Objection Decision was issued and Mr Seeto was not referred to in the Objection Decision. The Applicant believes that TPB has not had full particulars of the scheme in making its Deregistration Decision and arguing the TPB Proceeding in the Tribunal. A review of the Objection Decision would provide an opportunity to clarify the elements of the scheme and shed light on the Respondent’s decision making processes in relation to the scheme. In turn, this would promote public trust and confidence in the Tribunal under paragraph (e) of section 9.
The Respondent referred to other objectives within section 9, including resolution of applications as quickly and with as little expense as is proper within paragraph (b) and wider considerations of fairness under paragraph (a). The Respondent pointed to the significant amount of time that has elapsed, its contention that the Applicant has rested on its rights and the fact that the explanation for the extension of time request is based on matters extraneous to the Applicant. To grant an extension would be contrary to the objectives of the Tribunal.
In its submissions the Applicant raised an additional ground for an extension of time, arguing that it had been denied procedural fairness by the Respondent during the Objection process, contrary to the Respondent's own policies relating to the administration of the CFB Act.[35] On this basis the Applicant says that if the EOT Application is not granted, it will be permanently denied an opportunity for a fair hearing on the Objection Decision.
[35] Including Practice Statement Law Administration PS LA 2005/24 ‘Application of General Anti-Avoidance Rules’ as it relates to findings by the Respondent of a ‘scheme.’
Mr Seeto says that he was not aware of the Respondent's position that there was a scheme under paragraph 5(1)(g) until the Objection Decision dated 21 July 2021 was received[36], and therefore the Applicant did not have the opportunity to provide submissions in relation to the alleged scheme, including as part of the Objection process. Attached to Mr Seeto's Witness Statement is a copy of the letter from the Respondent dated 12 April 2021, addressed to Ms Benson but apparently sent to Mr Seeto, advising the outcome of the Second Review. This letter states:
[36] Mr Seeto’s Witness Statement at paragraph [49].
Our decision
We have reviewed the information provided and have determined you are
not eligible for the CFB payment as you have not met the necessary
eligibility criteria. This is because:
› you didn't provide evidence that you made eligible payments to employees
before 12 March 2020
› we consider you have entered into or carried out a scheme for the sole or
dominant purpose of becoming entitled to or increasing the amount of your
cash flow boost.
This letter clearly identifies that the Respondent had, at least by April 2021, identified a position that a 'scheme' relating to a CFB Payment existed. Although the letter does not reference the specific statutory provision, the wording of the second bullet point tracks the language of paragraph 5(1)(g). Counsel for the Applicant suggested that as the CFB Act was new and had been implemented quickly, Mr Seeto may not have been familiar with the provisions and not realised that a scheme was alleged. This is not a satisfactory explanation. It is reasonable to expect that a qualified tax professional advising a client on CFB Act matters should have recognised this issue, particularly as the word ‘scheme’ is used. Contrary to Mr Seeto’s statement, an alleged scheme was referenced by the Respondent at least by the time of the Second Review decision.
The Second Review decision letter goes on to outline the Applicant's right to object against this decision. The Applicant did exercise its right to object to this decision, with the Objection being lodged on 26 April 2021. The grounds of Objection simply stated that the Respondent’s case officer had not demonstrated that there had been a change in which the Applicant operated. Whatever the reason, Mr Seeto as representative for the Applicant did not engage with the allegation of the scheme at this time.
The Respondent’s ‘scheme’ position was described in greater detail in the Objection Decision. Mr Seeto for the Applicant did seek engagement with the Respondent at this point, and was advised of options for review, appeal and complaint which the Applicant apparently did not take up.
In her Witness Statement Ms Benson said that she could not recall having seen correspondence from the ATO relating to the denial of the CFB Payment. After her husband mentioned it, she recalls speaking to Mr Seeto but does not remember his explanation. She said that she remembered thinking that ‘it was all too hard.’[37] Her witness statement suggests she was not actively engaged with the process for seeking the CFB Payment and subsequent review activities by the Respondent.
[37] Ms Benson’s Witness Statement at paragraph [28].
In these circumstances it does not appear that the Applicant will be denied procedural fairness if the EOT Application is not granted. I agree with the Applicant that the Objection Decision could have been better drafted to provide clearer details of the alleged scheme. However there were clearly opportunities afforded to the Applicant for review of the Objection Decision, as well as options for clarification of or complaint about the processes of the Respondent. It may have been that the individuals associated with the Applicant did not appreciate the significance of certain matters at the time or did not engage with those issues, but this does not mean that there will be injustice to the Applicant if they are not able to reagitate their case in 2024.
Another matter raised by the Applicant was the question of fairness to Mr Seeto. As Mr Seeto's actions and disciplinary proceedings are central to the Applicant's case, and section 19 of the ART Act requires consideration of 'all the circumstances' it is appropriate for me to consider this matter. There is some overlap between the Applicant's arguments relating to procedural fairness to the Applicant, and the question of fairness to Mr Seeto and similar factual matters are relevant. As stated previously, opportunities were afforded to the Applicant for review of the Respondent’s decisions, or alternatively options for clarification or complaint were given. At this time Mr Seeto was directly handling the engagement with the Respondent over the Applicant’s affairs so was aware of this.
Mr Seeto may face difficulties in challenging those aspects of the Deregistration Decision which rely on the scheme finding relating to the Applicant. The Applicant was unable to provide a copy of the Deregistration Decision, but in the Applicant’s submissions and the EOT Application, the scheme finding for the Applicant was described as ‘one of the matters the Board alleged against Mr Seeto’[38] and ‘amongst other things[39] which gave rise to the TPB’s decision. The Tribunal does not know what alternative options Mr Seeto may have in the TPB Proceeding to obtain further information to support his case. Neither Mr Seeto nor the TPB are parties to this EOT Application.
[38] Per EOT Application lodged with the Tribunal.
[39] Applicant’s submissions at paragraph [3].
In summary, I am not convinced that these matters carry significant weight in favour of granting the EOT Application.
During the course of the hearing counsel for the Applicant suggested that adverse implications about the credibility of Ms Benson’s evidence were being made which therefore made it even more critical that the EOT Application be granted, to allow Ms Benson the opportunity to be heard on any case put against her. The Applicant suggested this was another example of procedural fairness needing to be afforded by means of a Tribunal review of the Objection Decision.
I have noted above that there were some inconsistencies between the witness statements of Mr Seeto and Ms Benson and that I viewed these as generally being explicable by the elapse of time since the relevant events occurred. Ms Benson indicated in her statement where she could not recollect certain details. The Applicant provided these witness statements and the documents exhibited to the statements in support of their case. Counsel for both the Applicant and the Respondent drew my attention to particular parts of these statements and documents as part of their submissions on the relevant circumstances for this extension of time request. I make no findings in this interlocutory proceeding as to the credibility of Ms Benson. I do not believe any of this discussion weighs significantly in favour of granting the EOT Application on procedural fairness or public interest grounds.
Strength of Applicant’s case
The merits of the substantial application are a relevant matter to be taken into account in considering an extension of time to make that application, however it is not the role of the Tribunal to undertake a trial of the merits. The relevant question for the Tribunal has been described as whether the applicant’s version of events ‘on its face discloses a case which is arguable’ as opposed to one which is ‘frivolous’.’[40] The focus here is on the Applicant’s case in relation to the Objection Decision, and not Mr Seeto’s case in the TPB Proceeding.
[40] Hunter Valley Developments at [22] per Wilcox J, Brown at [29] and [58] per Hill J.
In its written and oral submissions the Applicant identified key paragraphs from the witness statements of Mr Seeto and Ms Benson, together with documents included as exhibits to those witness statements, which the Applicant believes demonstrate at least an arguable case for entitlement to the CFB Payment and the absence of a scheme. Much of that material was provided to the Respondent for the purposes of the First Review, Second Review and Objection and is described in the ‘Background’ above.
The Applicant referred to the recent decision of the Tribunal in Robis Consulting Pty Ltd and Commissioner of Taxation[41] in which Senior Member Olding noted the subjective nature of the inquiry as to purpose under paragraph 5(1)(g) of the CFB Act and accepted ‘plausible explanations’ from a witness that countered adverse implications drawn from other documentary evidence.[42] The objection decision, which also involved an alleged scheme relating to payment of wages, was set aside.
[41] Robis Consulting Pty Ltd and Commissioner of Taxation [2022] AATA 2832.
[42] Ibid, at paragraphs [78] to [80].
The Respondent stated that the strength of the Applicant’s case at the time of this extension of time hearing was to be considered on the basis of the grounds set out in the Objection and Objection Decision.
The correspondence setting out the decisions on the First Review and Second Review might be described as succinct and high level. The Objection lodged by the Applicant is similarly brief, essentially rebutting the conclusions of the Respondent, providing links back to the Respondent’s website, without any detailed analysis of factual matters or the CFB Act provisions. The Objection Decision provided more factual and legal analysis. However although the Objection Decision outlined factors taken into account in finding that there was a scheme, I agree with the Applicant that the Objection Decision does not specify details which actually defined the scheme, such as a step or steps which comprise the scheme or the participants in the scheme.
On balance, and possibly because of an apparent lack of detailed information and analysis on the part of both Applicant and Respondent shown in the material provided to the Tribunal in this EOT Application, I believe the Applicant has demonstrated that it has at least an arguable case were a review of the Objection Decision to proceed.
Fairness to other parties in like circumstances
Considerations of fairness as between applicants and other parties in like circumstances was a further factor identified in Hunter Valley Developments. A slightly unusual feature of this EOT Application is that the reasons given for seeking the extension of time for a review relate to the intervening circumstances of a person other than the Applicant. It might be viewed as unfair that other taxpayers whose objections had been disallowed, who treated the matter as final and who did not seek a review by the Tribunal would not have the same opportunity as the Applicant as a consequence of the Applicant’s tax agent being subject to disciplinary proceedings.
In Brown, Hill J suggested that the circumstances of other taxpayers who have decided not to object does not raise a question of fairness.[43] Overall I do not think this factor carries significant weight either for or against the grant of the EOT Application.
[43] Brown at paragraph [6] per Hill J.
Other matters
Although the focus of this factor is the strength of the Applicant’s case in relation to the Objection Decision, a practical issue arises. A central concern for Mr Seeto in the TPB Proceeding is the finding in the Objection Decision that a ‘scheme’ was entered into and carried out. The scheme finding is expressed in the Objection Decision as an alternative basis for disallowing the Objection; the Respondent also found that entitlement under other criteria had not been substantiated. Should a review of the Objection Decision proceed, it is possible that a Tribunal could affirm the Respondent’s Objection Decision on the ‘criteria not substantiated’ basis without needing to decide the ‘scheme’ basis. This would provide no greater clarity to the parties about the particulars of the scheme or the decision making process by which the Respondent reached their position that there was a scheme.
During the hearing Counsel for the Applicant expressed a concern that the proceeding was going beyond the proper boundary of an interlocutory hearing and straying into to the merits of the substantive matter. I had asked for clarification of some of the documents provided to the Tribunal, particularly those which had been provided by the Applicant the day prior to the hearing. Mr Seeto's original witness statement had also been withdrawn and refiled with the Tribunal with amended redactions a couple of days prior. I do not believe it was unreasonable for the Tribunal to confirm with the parties that I had all of the relevant documents, and the correct versions of those documents. Similarly, it was not inappropriate for the Tribunal to query whether the Applicant had intended to provide a copy of the Deregistration Decision on the basis that it was frequently referenced as a key reason for the EOT Application.
CONCLUSION
Although the Applicant has demonstrated it may have an arguable case in relation to the Objection Decision, I am not satisfied with the explanation provided for the delay in seeking a formal review of that decision. The public interest and fairness contentions outlined by the Applicant were not convincing. Having regard to the circumstances as outlined above I do not believe it would be reasonable to extend the period during which the Applicant may apply for a review of the Objection Decision.
I certify that the preceding 93 (ninety-three) paragraphs are a true copy of the reasons for the decision herein of General Member C. Willis
……………………[sgd]……………………….
AssociateDated: 15 January 2025
Date(s) of hearing: 29 November 2024 Counsel for the Applicant: Elizabeth Bishop, Justen Nixon
Solicitors for the Applicant: Tania Waterhouse Lawyers Counsel for the Respondent: Jill Gatland
Solicitors for the Respondent: Australian Taxation Office
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