Clyne, P. v Commissioner of Taxation

CATCHWORDS

ADMINISTRATIVE LAW - application for an order

of review -

decision of respondent with respect to applicant's provisional

income - objection to competency

- whether decision is one to

which the Act applies	- whether liability to pay provisional tax
is a "tax".

Administrative Decisions (Judicial Review) Act 1977

S S . 3 ( 1 ) r

S(1)

Income Tax Assessment Act 1936 ss.221YAr 221YB, 221YDA.

Mac Cormick v. Commissioner of Taxation (1984) 58

A.L.J.R. 268

Commissioner of Taxation v. Clyne (1958) 100 C.L.R.

246

PETER CLYNE V. DEPUTY COMMISSIONER

OF TAXATION

No. G210 of 1986

Jackson J.

11 September 1986

Sydney.

IN THE FEDERAL COURT OF AUSTRALIA

)

NEW SOUTH WALES DISTRICT REGISTRY

1	No. G210 of 1986

)

DIVISION

GENERAL

)

BETWEEN :

PETER CLYNE

Applicant

-	AND :	DEPUTY COMMISSIONER	OF
TAXATION

Respondent

CORAM :	JACKSON J.
-	DATE :	11 September 1986
PLACE :	SYDNEY

MINUTES OF ORDER

THE COURT ORDERS

THAT:

The objection to competency

be overruled.

NOTE :

Settlement and entry

of orders is dealt with

Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA--

)

NEW SOUTH WALES DISTRICT REGISTRY

)	No. G210 of 1986

DIVISION

GENERAL

)

BETWEEN: PETER

CLYNE

Applicant

-	AND :	DEPUTY COMMISSIONER	OF
TAXATION

Respondent

CORAM:

JACKSON J.

DATE :

11 September

1986

PLACE :

SYDNEY

REASONS FOR JUDGMENT

On 24th January 1986 the respondent issued a notice

of assessment of the income tax payable

y the applicant in

respect of the year ended 30th June 1985.

The notice of

assessment showed amongst other things that the amount to

paid as provisional tax was

$24,712.00 and on 3rd February

1986 the applicant sent to the respondent a letter, and an

application for variation

of provisional tax, in which he

claimed that he estimated his taxable income	f o r the year
ended 30th June 1986 as nil, and stated that:-

"This estimate

is made on the assumption that

objection is allowed to a sufficient extent to show a

nil income, or a loss, for the year ended 30th June

-	1985, so that provisional tax properly payable would
be nil."

Whilst the taxpayer is entitled to furnish the

Commissioner with an estimate

of his taxable income

in respect

of the year for the purposes of calculation of provisional tax

(Income Tax Assessment Act 1936, s.ZZlYDA(l)), the

Commissioner is not bound to accept such	an estimate and
s.ZZlYDA(4) provides that:-

"(4)	Where the Commissioner has reason to believe

that the taxable income which will be

or has been

derived by a taxpayer in a year of income is greater

than the estimated taxable income, the Commissioner

may -

(a)

estimate the respective amounts which,

in his

opinion, should have been the amounts estimated

by the taxpayer in pursuance

of sub-section (1)

in respect of that year of income;

(b) calculate the amount

of provisional tax that

would be payable if the amount

so estimated

had been shown in a statement duly furnished	by
the taxpayer under sub-section (l); and

(c)

serve on the taxpayer notice in writing

specifying the amount

of provisional tax so

calculated,

and the amount of provisional tax

so specified is

the amount of provisional tax payable

by the

taxpayer.

The term "estimated taxable income" referred to	in s.ZZlYDA(4)
is defined by s.221YA(l) to mean:-

"... the amount of the estimated taxable income of the

taxpayer for that

year of income as shown

in a

-	statement furnished to the Commissioner under s.221YDA;"

3 .

The Commissioner by letter dated 20th May 1986

informed the applicant that he was exercising the powers

conferred by s.221YDA(4) and stated that

a calculation of

provisional tax had been made on the basis that the amount

taxable income estimated

in the applicant's application for

variation of provisional tax would be increased to

$50,755.00

and that the amount

of provisional tax payable

on the basis of

that assessment was

$21,307.00.

On 27th May 1986 the applicant instituted proceedings

to review the decision of the respondent that the applicant's

provisional income in respect of the year ended 30th June 1986

be estimated at $50,755,00, the application being brought

under the Administrative Decisions (Judicial Review) Act 1977.

An objection to competency has been

made, the ground of the

objection being that the Commissioner's decision in question

is not one to which that Act applies.

By s.5(1) of the Administrative Decisions (Judicial

Review) Act, a person who

is aggrieved by "a decision

to which

this Act applies" may apply to the Court for an order of

review in respect of the decision. A "decision to which this

Act applies" is (s.3(1)):-

' l... a decision of an administrative character

made,

proposed to be

made, or required to be

made, as the

case may be (whether

in the exercise of a discretion

or not) under an enactment, other than

... a decision

included in any of the classes of decisions set out

in Schedule

; ' I

4. .

Schedule 1 to the Act lists a number of classes of

decisions which are not decisions to which the Act applies

that which is presently relevant is contained

in paragraph (e)

which I shall set out

in full:-

"(e) decisions making,

or forming part of the process of

making, or leading up to the making of, assessments

or calculations of tax or duty, or decisions

disallowing objections to assessments or calculations

of tax or duty, or decisions amending, or refusing to

amend, assessments or calculations of tax or duty,

under any of the following

Acts:

Australian Capital Territory Taxation (Administrati

on) Act 1

Coal Excise Act 1949

Customs Act 1901

Customs Tariff Act 1966

Estate Duty Assessment Act 1914

Excise Act 1901

Gift Duty Assessment Act 1941

Income Tax Assessment Act 1936

Pay-roll Tax Assessment Act 1941

Pay-roll Tax (Territories) Assessment Act 1971

Sales Tax Assessment Act (No 1) 1930

Sales Tax Assessment Act

(No 2) 1930

Sales Tax Assessment Act (No 3) 1930 Sales Tax Assessment Act (No 4) 1930

Sales Tax Assessment Act

(No 5) 1930

Sales Tax Assessment Act (No 6) 1930 Sales Tax Assessment Act (No 7) 1930 Sales Tax Assessment Act (NO 8) 1930 Sales Tax Assessment Act (No 9) 1930 State Receipts Duties (Administration) Act 1970

Taxation (Unpaid Company

Tax) Assessment Act 1982

Trust Recoupment Tax Assessment Act 1985

Wool Tax (Administration) Act 1964; 'I

The part of paragraph (e) which is relied

on by the

Commissioner as relevant for present purposes is that part

which refers to "decisions

making, or forming part of the

process of making, or leading up to the making

of, ...

calculations of tax

... under ... (the) Income Tax Assessment

There is no doubt in

my mind that the estimation

a d

calculation referred to

in s.221YDA(4) by the Commissioner

involves the making

of a "decision" in terms of

the

Administrative Decisions (Judicial Review) Act. Further, it

is a step forming part

of the process of making, or leading up

to the making

of, a calculation of

an amount payable under the

Income Tax Assessment Act 1936.

I turn then to consider whether the liability to pay

provisional tax is a "tax".

In MacCormick v. Commissioner of Taxation (1984)

A.L.J.R.

268, the High Court discussed the features which went

to make up a "tax".

See at 273 where

Gibbs C.J., Wilson,

Deane and Dawson JJ. said:-

"The exactions in question answer the usual

description of a tax.

They are compulsory. They are

to raise money for governmental purposes. They do not constitute payment for services rendered. See Matthews v. Chicory Marketing Board (Vic.)(1938) 60

C.L.R.

263 at 276 per Latham

C.J.;

Leake v.

Commissioner of Taxation (State)(1934)6 W.A.L.R.

at 67-68 per Draper J. They are not penalties since the liability to pay the exactions does not arise

from any failure to

discharge antecedent obligations

on the part of the persons upon whom the

exactions

fall.

See R. v. Barger (1908) 6 C.L.R.

41 at 5 4 per

Isaacs J.

They are not arbitrary. Liability

imposed by reference to

criteria which are

sufficientlv aeneral in their atmlication and which mark out the objects and subject-matter of the tax.

See Federal Commissioner of Taxation

v. Hipsleys Ltd

(1926) 38 C.L.R. 219

at 236."

and-also per Brennan J. at 278.

6. b

I do not doubt that if the word "tax" is considered in

isolation the liability to pay provisional tax is a liability

to pay a "tax".

The question which arises, however,

whether in the context of paragraph (e) of Schedule 1 the

decision in question is one making or forming part of the

process of making

or leading up to the making

of a calculation

of "tax under

(the) Income Tax Assessment Act 1936".

The nature of the imposition provided for as

provisional tax is contained in the opening	words of
s.221YB(l) and is as follows:-

"(l) For the purpose of enabling the income tax that

will be payable

by taxpayers to whom this section

applies to be collected during the financial year for

which the income tax

is levied, a person other than a

company, and a company in the capacity

of a trustee,

deriving assessable income, not being salary

wages, is liable to pay provisional tax in accordance

with this Division."

Provisional tax is prima facie payable in respect

the income of all years

of income by a person liable to pay

(~.221YB(2)) and it is not payable in respect

of the income of

a year of income unless the Act imposing income tax upon

taxable income of that year provides that provisional tax is

payable in accordance with the provisions of the Income Tax

Assessment Act (s.221YB(3)).

S.221YA(2) of the Act provides

that:-

" ( 2 )

In sections 206, 207,

208, 209, 214, 2 5 4 , 255,

258 and 259, but not in any

other section of this

1 .

Act, "income tax"

or "tax" includes provisional tax

and additional tax under s.221YDB."

and by s.221YA(3) the ascertainment of the amount of any

provisional tax is not deemed to be an assessment within the

meaning of any of the provisions of the

Act.

I would have thought that the opening words of s.221YB

(1)

indicate that a distinction

is to be drawn between income tax

payable under the Income Tax Assessment Act and the provisions made

by the Act for payment

of that income tax, one of the latter

provisions being the requirement that the tax be paid provisionally

in advance.

The nature of provisional tax under the Act

was considered

by the High Court in Commissioner

of Taxation v. Clyne (1958) 100

C.L.R.

246 when Dixon C.J., with whose judgment McTiernan, Williams,

Kitto and Taylor JJ. agreed, said at 260 that provisional

tax:-

' I . . .

is not a separate tax but a liability ancillary

to the income tax and social service contribution

which s.17 of the Assessment Act provides shall

levied and paid, at the rates declared

by the

Parliament, for each financial

year, upon the taxable

income derived during the year

of income by any

person.

That is the tax that is imposed. The

liability to pay provisional tax is ancillary to

that; it is not a liability to another and distinct

tax.

and at 262:-

"It is plain that these provisions assume the

existence of an income tax and provide means for an

anticipatory payment.

The payment is compulsory but

the liability to

make it is not imposed

as a separate

0 .

tax.	It is provisional as its name implies. Payment

made in pursuance of the liability for provisional

tax is applicable

in discharge of the ultimate

liability to income tax

and is otherwise repayable.

The purpose is not simply to ensure payment

of tax.

The purpose is to bring the discharge

of the burden

of tax into a closer temporal relation with the

accrual of the income upon which the tax is

levied."

In the light

of the statutory provisions

to which I

have referred and in the light

of the observations of Dixon

C.J. it seems to

me that provisional tax is what its name

implies, namely a requirement to make payments provisionally

on account of a tax calculated in accordance with other

provisions of the Act.

The fact that the description

of the

provisional payment is that it is a

"tax" and the fact that a

taxpayer who so chooses may make an assessment, which the

Commissioner may later vary, of the amount of provisional tax

does not carry with

it the connotation that the determination

under s.221YDA

( 4 ) is a decision which

is a calculation of tax

under the Income Tax Assessment

Ac .

In the circumstances I

do not think that the decision

is one to which paragraph

(e) of Schedule 1 applies

and I

overrule the objection

to competency.

I certify that this and the

preceding pages are a true copy

the Reasons for Judgment herein of his Honour Mr Justice Jackson.

Associate:

Date :

11 September 198G.

9 .

Counsel

for

the

applicant:

The

applicant

appeared

person.

Solicitors for the applicant:

M.F.

Twemlow & Co.

Counsel for the respondent:

Mr D.G.

H i l l , Q.C.

with Mr A. Cramer-Roberts

Solicitors

for

the

respondent:

Australian

Government

solicitor

hearing:

Dates

14, 21 August 1986

[1986] FCA 392

11 Sep 1986