Commissioner of Taxation v Prestige Motors P/L
[1993] FCA 347
•02 JUNE 1993
COMMISSIONER OF TAXATION v. PRESTIGE MOTORS PTY LTD
No. NG288 of 1993
FED No. 347
Number of pages - 6
Income Tax
(1993) 93 ATC 4359
(1993) 114 ALR 507
(1993) 25 ATR 338
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Gummow J(1)
CATCHWORDS
Income Tax - trust estate - notices of assessment - whether certain notices were notices of assessment for the purposes of the Income Tax Assessment Act 1936 - action for declaratory relief remitted by the High Court of Australia.
Income Tax Assessment Act 1936
Judiciary Act 1903
Batagol v The Commissioner of Taxation of the Commonwealth of Australia (1963) 109 CLR 243.
HEARING
SYDNEY, 7 May 1993
#DATE 2:6:1993
Counsel and solicitors Mr A.H. Slater QC and
for the plaintiff: Mr J.W. Durack instructed
by the Australian Government Solicitor.
Counsel and solicitors Mr D.H. Bloom QC and
for the defendant: Mr R.F. Edmonds instructed
by Mr C.R. Fieldhouse.
ORDER
THE COURT DECLARES THAT:
(1) For the purposes of the Income Tax Assessment Act 1936, the notices referred to in para. 4 of the statement of claim herein are notices of assessment served by the plaintiff upon the defendant.
(2) Income tax assessed to the defendant, as referred to in the said para. 4, was due and payable by the defendant to the plaintiff pursuant to s. 204 of the said Act on the 30th day after service of each of the said notices.
AND THE COURT ORDERS THAT:
The defendant pay the costs of the plaintiff of this action.
Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.
JUDGE1
GUMMOW J This is an action commenced in the original jurisdiction of the High Court. Jurisdiction was attracted by s. 75 (iii) of the Constitution. By order of Mason CJ made 23 February 1993, the action was remitted to this Court, pursuant to s. 44 of the Judiciary Act 1903.
On the pleadings, it is admitted that the defendant is and at all material times was the trustee of the trust estate known as the "Prestige Toyota Trust" and that on or about 19 June 1991 the plaintiff sent to the defendant's address for service certain notices each entitled "Notice of Assessment" and each addressed to "Prestige Toyota Trust". The defendant denies that these notices are notices of assessment within the meaning of the Income Tax Assessment Act 1936 ("the Act").
The plaintiff seeks declarations that the notices do answer that description and that income tax assessed to the defendant as trustee was due and payable by it to the plaintiff pursuant to s. 204 of the Act on the 30th day after service of each of the notices.
The plaintiff contends that the notices set forth the details of the tax and additional tax assessed by him as tax for which the defendant as trustee of the Prestige Toyota Trust was liable in respect of the years of income ended 30 June 1979 to 30 June 1990 inclusive.
When the action was called on for hearing, counsel informed the Court that the following facts had been agreed, in addition to those admitted on the pleadings:
(1) In its capacity as trustee, the defendant caused tax returns containing information as to the income and deductions of the trust estate to be lodged for the plaintiff. (The evidence shows that on the forms that were used for the returns, the item "NAME OF TRUST ESTATE" was completed as "PRESTIGE TOYOTA TRUST" and the "POSTAL ADDRESS FOR SERVICE OF NOTICES" was given as "C/o PRICE WATERHOUSE 200 ST GEORGES TERRACE PERTH 6000". The "FILE NUMBER" was shown as 78 805 021. The form included the statement:
"FULL NAME OF THE TRUSTEE to whom notices should be sent Do not complete if the Trustee is a company or if there is no trustee resident in Australia. See item 31 on page 3 where the trustee is a company." Item 31 is headed "COMPANY AS TRUSTEE". The following appeared thereunder in the return for the year ending 30 June 1981 (and it is not suggested this materially varied in any of the other years):
"If the trustee is a company, advise: Name of Company PRESTIGE MOTORS PTY LTD File No. 93028035
Address of Registered Office 133 ADELAIDE TERRACE, PERTH 6000 Name of Public Officer
Allan Richard BRIANT"
Mr Briant signed a declaration on the first page of the returns verifying the accuracy of the returns. Price Waterhouse signed the Agent's Certificate. There was a statement of the net income of the trust estate.)
(2) Before 19 June 1991, officers of the plaintiff calculated amounts as taxable income of the Prestige Toyota Trust estate, which is the tax contended for by the plaintiff as payable in respect of that taxable income, together with additional tax contended by the plaintiff to be payable.
(3) On or about 19 June 1991, the plaintiff sent to the address for service of the defendant, within the meaning of regulation 38 of the Income Tax Regulations ("the Regulations") documents ("the notices") true copies of which were annexed to the statement of agreed facts and marked "A1" to "A12" inclusive. (Each notice is headed "NOTICE OF ASSESSMENT" and identifies a particular year of income. Beside the heading (in print): "Your file number" appears, typed in "78 805 021". In a box at the head of the notice appears in type face: "PRESTIGE TOYOTA TRUST
c/- PRICE WATERHOUSE
13TH FLOOR
200 ST GEORGES TCE
PERTH WA 6000".
Then there appears in print "Details of your assessment". The vital message then appears: "YOUR TAXABLE INCOME IS . . .". The tax due and payable is there specified.)
(4) The defendant objected to the notices, doing so in writing in the form of the document being document 5 in the list of documents in matter NG434 of 1992. One of the grounds of objection was that there had been no assessment in accordance with the Act.
(5) Thereafter the defendant by its solicitors negotiated with the plaintiff an arrangement whereby, without admission as to the validity of the notices as valid notices of assessment, half of the amount shown therein as tax was paid.
There is nothing to suggest that the plaintiff assessed any beneficiary of the Trust in respect of any share of the net income of the trust estate.
Regulation 38 of the Regulations was formerly reg. 29. It was renumbered by Statutory Rule No. 192 of 1990, with effect from 1 July 1990. Regulation 38 is as follows:
"38 The address for service last given to the Commissioner by any person shall, for all purposes under the Act and Regulations, be his address for service, but where no address for service has been given to the Commissioner, or where the departmental records disclose that such person has subsequently changed his address and he has not notified the Commissioner, either in the return or by separate written advice, of such change, then the address of the person, as described in any record in the custody of the Commissioner, shall be his address for service."
Regulation 170 (1), formerly reg. 59, is as follows:
"170 (1) Any notice or other communication by or on behalf of the Commissioner may be served upon any person:
(a) by causing it to be personally served on him; or
(b) by leaving it as his address for service; or
(c) by posting it by prepaid letter post, addressed to him at his address for service; and in any case to which paragraph (c) applies, unless the contrary is proved, service thereof shall be deemed to have been effected at the time when it would, in the ordinary course of post, have arrived at the place to which it was addressed."
This provision is merely facultative. That is to say, it does not require the Commissioner to adopt one of the 3 methods of service which are set out therein: Briggs v Deputy Federal Commissioner of Taxation (1986) ATC 4,583 at 4,587-8. The regulation, in its application to notices of assessment, must be read with the general terms of s. 174 of the Act. I will shortly refer further to s. 174.
Section 166 of the Act states:
"166 From the returns, and from any other inform-ation in his possession, or from any one or more of these sources, the Commissioner shall make an assessment of the amount of the taxable income of any taxpayer, and of the tax payable thereon."
Section 204 provides that subject to the provisions of Part VI of the Act, any income tax assessed shall be due and payable by the person liable to pay the tax "on the date specified in the notice as the date upon which the tax is due and payable, not being less than 30 days after the service of the notice, or, if no date is specified, on the thirtieth day after the service of the notice".
Sub-section 170 (3), in the form in which it was considered in Batagol v The Commissioner of Taxation of the Commonwealth of Australia (1963) 109 CLR 243 provided that where a taxpayer had made to the Commissioner a full and true disclosure of all the material facts necessary for the assessment of the taxpayer, "and an assessment is made after that disclosure", no amendment increasing the liability of the taxpayer might be made except to correct an error in calculation or a mistake of fact. The High Court held that an assessment within the meaning of this sub-section was not made until the Commissioner, having gone through the process of calculation, served upon the taxpayer a notice that he has assessed the taxable income and the tax at specified amounts. It followed that until notices of assessment were served on a taxpayer the Commissioner needed no statutory authority to review all or any of the steps taken in his office in relation to a return of income tax and to correct anything considered erroneous.
In the present action, counsel referred to the following well known passage in the judgment of Kitto J of Batagol (supra at 251-2):
"The word 'assessment' is defined in s. 6 to mean, unless the contrary intention appears, the ascertainment of the amount of taxable income and of the tax payable thereon. There is nothing in s. 170 to show the contrary intention. But the definition is not sufficient by itself to answer the question before us, because 'ascertainment' is a word the force of which depends upon the context. It is here used in an Act under which the service of a notice of assessment is the levying of the tax. Assessment in the sense of mere calculation produces no legal effect. No step that the Commissioner may take, even to the point of satisfying himself of the amount of the taxable income and of the tax thereon, has under the Act any legal significance. But if the Commissioner, having gone through the process of calculation, serves on the taxpayer a notice that he has assessed the taxable income and the tax at specified amounts, the tax comes by force of the Act due and payable on the date specified in the notice or (if no date is specified) on the thirtieth day after the service of the notice: s. 204. Thus, and thus only, there is brought about an 'ascertainment' of the taxable income and of the tax, in the sense that thereafter it is possible to say what could not have been said before: that amounts have been fixed so that they are to be taken for all purposes (except those of appeal: s. 177) to be the result flowing from the application of the Act in a particular case. The respective amounts of the taxable income and the tax have been rendered certain. The word 'ascertainment' being understood in this sense, the definition of 'assessment' means, in my opinion, the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case."
Kitto J referred to s. 174. Sub-section (1) thereof provides:
"174 (1) As soon as conveniently may be after any assessment is made, the Commissioner shall serve notice thereof in writing by post or otherwise upon the person liable to pay the tax."
His Honour concluded that this provision should be understood to mean that the Commissioner shall serve a written notice of assessment "as soon as conveniently may be after his work for the making of the assessment has been done". Kitto J. went on (at 253) to reiterate the conclusion that "without a notice of assessment of fixing a taxable income and a tax there is no assessment".
For the purposes of the present case, the term "assessment" is relevantly defined in sub-s. 6 (1) of the Act to mean:
"(a) the ascertainment of: . . .
(iv) in the case of any taxpayer that is the trustee of a trust estate . . . - so much of the net income of the trust estate as is net income in respect of which the trustee is liable to pay tax;
and of the tax payable on that . . . net income."
Where the beneficiary is not assessed, then sub-ss. 98 (1), 99 (2), 99A (4), (4A), (4B) and (4C) of the Act direct that it is the trustee, not the trust fund, who is liable to be assessed and pay the tax in the circumstances contemplated by those provisions. As indicated in Batagol, the process of assessment will not be complete and liability to tax will not arise unless and until a "notice of assessment" has been issued and served upon the taxpayer. These propositions are not in dispute. Nor is the proposition that mere service of a document cannot convert it into a notice of assessment if it does not properly have that character.
However, the defendant submits that a document will not be a "notice of assessment" for the purposes of the Act unless "on its face" three things appear. These are (a) the name of the taxpayer (being in this case the trustee), (b) the amount of the net income ascertained as the taxable income upon which that trustee is liable to pay the tax, and (c) the amount of tax payable by the trustee. Then it is said that each "notice" in the present case does not answer that description. It is submitted that this is so because the notice does not name or identify the taxpayer, the reference to "Prestige Toyota Trust" being to an entity which is neither a taxpayer nor the trustee.
Then the defendant submits that it follows from Batagol that the "process of assessment" is not yet complete and therefore no liability to tax yet has arisen. The defendant concedes that there is no impediment to the plaintiff now proceeding to complete that process by issuing and serving on the defendant a proper notice of assessment.
The above submissions are said to constitute a point which was left open in Deputy Federal Commissioner of Taxation v Truhold Benefit Pty Ltd (1984) 84 ATC 4912 at 4919-4920.
The returns had been furnished by the defendant, as trustee of the trust estate, had identified file No. 78 805 021 as the tax file number, and had given "c/- Price Waterhouse 200 St Georges Tce Perth" as the postal address for service of notices upon the trustee. The plaintiff had ascertained so much of the net income of the trust estate as was net income in respect of which the trustee was liable to pay tax, the tax payable thereon, and certain additional tax. The notices had identified the same file number as "Your file number", and had given "Details of your assessment", being "your taxable income" and the tax on taxable income. The notices were addressed and sent to what the defendant had given as the postal address for services of notices upon it. There is no dispute that the notices were received there and came to the attention of the trustee which, indeed, by its public officer, signed and lodged Notices of Objection.
In those circumstances, the plaintiff had served in writing by post upon the person liable to pay the tax notices of the assessments he had made, and thereby completed the assessment process. The use of the file number, the address for service nominated by the trustee, and the reference to "Your file number", "Details of your assessment" and "your taxable income . . ." made this clear.
Of course, "Prestige Toyota Trust" appeared above the address for service as shown on the notices, and "Prestige Toyota Trust" was not a relevant legal entity. But the returns had identified Prestige Toyota Trust as the trust estate in respect of the net income of which the returns had been furnished. The use of the same phrase on the notices served to confirm that the trustee was assessed by reason of its office as trustee of that particular trust.
The plaintiff should have the declaratory relief he seeks and the defendant should pay the costs of the action.
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