Dalby and Commissioner of Taxation (Taxation)

[2023] AATA 3069

Dalby and Commissioner of Taxation (Taxation) [2023] AATA 3069 (31 August 2023)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2022/9851-9854

Re:Terrence Dalby

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Deputy President Bernard J McCabe

Date:31 August 2023

Place:Sydney

The application to transfer these proceedings to the Small Business Taxation Division is refused.

..........................[SGD].............................................

Deputy President Bernard J McCabe

CATCHWORDS

PRACTICE AND PROCEEDURE – correct division for application to proceed in – whether small business assessed at time of decision or financial year in review

LEGISLATION

Administrative Appeals Tribunal Act 1975

Income Tax Assessment Act 1997

CASES

Cavanagh and Commissioner of Taxation [2023] AATA 1700

SNSV and Commissioner of Taxation [2022] AATA 4047

SECONDARY MATERIALS

Explanatory Statement to the Administrative Appeals Tribunal Amendment (Small Business Taxation Division) Regulations 2019

REASONS FOR DECISION

Deputy President Bernard J McCabe

31 August 2023

1. Mr Terrence Dalby has been involved in a long-running dispute with the Commissioner of Taxation in relation to his affairs and those of various entities which he controls. The latest occasion for conflict arises out Mr Dalby’s affairs in the 2013-2016 years of income.

2. The notice of objection in relation to the assessments in the relevant years was lodged on 13 February 2019 and the objection decision was made on 25 October 2022. Mr Dalby has applied to the Tribunal for review of that objection decision. He says the review should be heard in the Tribunal’s Small Business Taxation Division (SBTD) rather than the Taxation & Commercial Division. Mr Dalby says he wants to take advantage of the ‘small business friendly’ arrangements in the SBTD. One benefit he appears to have in mind is the opportunity to access small business funding arrangements which are administered by the Commissioner.

3. While the objection decision appears to acknowledge Mr Dalby was a small business entity, the Commissioner says Mr Dalby is ineligible to proceed in the SBTD.

4. The parties were invited to make submissions on this jurisdictional issue. I thereafter convened a brief hearing of jurisdiction to discuss the matter on 28 August 2023. I indicated I would adjourn in order to prepare some short reasons given there have been so few cases where there has been dispute over the SBTD jurisdiction.

5. The two cases which have discussed aspects of the SBTD jurisdiction are SNSV and Commissioner of Taxation [2022] AATA 4047 and Cavanagh and Commissioner of Taxation [2023] AATA 1700. The applicant’s representative at the hearing, Mr Van Le, suggested neither case resolves the issue in dispute here because both cases turned on questions over whether the applicant was carrying on a business. Mr Van Le said there is no doubt Mr Dalby was carrying on business at all material times. The real question is whether he needs to establish he was a small business entity during the years of income in question, or at the time the objection decision was made. The timing issue is important because it is accepted Mr Dalby’s aggregated turnover in the years of income exceeded the thresholds that applied at the time, whereas he likely did not exceed the thresholds that were applicable at the time of the objection.

6. I described the jurisdictional arrangements that apply in the SBTD in my reasons for decision in Cavanagh. That decision explains:

   ·All reviews must be dealt with in a division of the Tribunal;

   ·The division in which a particular review is conducted may be determined by the enactment under which the reviewable decision was made, but matters will otherwise be allocated in accordance with the President’s directions: see s 17B of the Administrative Appeals Tribunal Act 1975(Cth)(the AAT Act). The power to issue directions is found in s 18B of the AAT Act;

   ·In the case of the SBTD, the President has directed pursuant to s 18B that the SBTD will deal with applications in relation to a small business taxation decision as that expression is defined in the Administrative Appeals Tribunal Regulations 2015 (other than a decision made under the Tax Agent Services Act 2009) and any applications under a taxation law that the Tribunal has agreed to hear at the same time as a small business taxation decision;

   ·The expression small business taxation decision is defined in the Regulations as a decision made under a taxation law in relation to a small business entity as that term is defined in the Income Tax Assessment Act 1997 (Cth) (ITAA97).

7. Section 328-110(1) of ITAA97 currently defines small business entity as follows:

   1)    You are a small business entity for an income year (the current year) if:

   a)you carry on a business in the current year; and

   b)one or both of the following applies:

   i)   you carried on a business in the income year (the previous year) before the current year and your aggregated turnover for the previous year was less than $10 million;

   ii)     your aggregated turnover for the current year is likely to be less than $10 million.

8. The Commissioner points out the definition in place during the years of income was in similar terms to that set out above save that it fixed the aggregated turnover at $2 million, not $10 million. That is potentially a problem for Mr Dalby because he acknowledged his aggregated turnover (ie, the amount of turnover attributed to him from his various business interests and entities) during those years exceeded $2 million, whereas his aggregated turnover at the time the objection decision was made (and more recently) does not exceed the (revised) threshold.

9. Mr Van Le says the reference in s 328-110(1) to the entity being considered a small business entity ‘for an income year [being] (the current year)’ must be read in light of the evident purpose of the SBTD. That purpose was articulated in the explanatory statement which accompanied the Administrative Appeals Tribunal Amendment (Small Business Taxation Division) Regulations 2019 (Cth) which established the SBTD. The explanatory note said:

   Purpose

   To ensure that small businesses are not disadvantaged in disputes with the Australian Taxation Office (ATO), a dedicated Small Business Taxation Division will be created within the Tribunal. The new division will include a reduced application fee, procedural support, assistance through an expanded Outreach program, and a faster decision timeframe to ensure that the cost, time, or lack of understanding of the process does not prevent a small business from challenging an ATO decision. These features will help level the playing field and make it easier, cheaper and quicker for small businesses to resolve tax disputes with the ATO.

10. Mr Van Le said that purpose approach suggests the reference to the current year should be read as a reference to the year in which the objection was decided. He argued the construction preferred by the Commissioner disadvantaged taxpayers who were obviously intended to benefit from the SBTD simply because of timing issues. As I understand Mr Van Le’s argument the preferable interpretation is to link the assessment of the applicant’s status to the date of the objection decision to simplify the review process by avoiding complicated timing questions that prevent like taxpayers from being treated alike. He says I should not follow an observation by SM Olding in SNSV suggesting the relevant year in which the applicant must satisfy the test was the income year in question: at [26]. Mr Van Le said that remark was obiter, and the evident purpose for which the SBTD was established points to a different conclusion.

11. Mr McEniery, who appeared for the Commissioner, argued the references to ‘the current year’ in s 328-110(1) and in the sub-sections admits of one interpretation: the ‘current year’ must be the year of income under review. I agree. That is the plain meaning of the language in that section. I note the definition is used in and informs other provisions in the ITAA97. Its interpretation cannot depend on the purpose of the SBTD; the definition predates the establishment of the SBTD and plays a role in the legislative scheme which the provisions relating to the SBTD have simply adopted. It would be odd if the definition were to be read differently for our purposes given the general rule that “cognate expressions in a statute [and in the same legislative scheme, I would add] should be given the same meaning unless the context requires a different result”: see Kline v Official Secretary to the Governor-General [2013] HCA 52 at [32] per French CJ, Crennan, Kiefel and Bell JJ.

12. I am conscious the SBTD was established to facilitate small business taxpayers obtaining smoother, less expensive access to the Tribunal’s review. We have kept that objective in mind in the design of our processes, and when we case manage and hear matters that come before the SBTD. But I cannot ignore the rules which are imposed on the Tribunal. I must work within the strictures imposed by the legislation and the reality of the review process. Even with the best will in the world, there are limits to how far I can go in simplifying and shortening processes. The fact the eligibility rules are complex might be ironic, but it does not mean they are unclear. They apply on their terms. That means the applicant’s status as a small business will be assessed in the year(s) of income in question rather than the year in which the objection decision was made. Mr Dalby is therefore ineligible to proceed in the SBTD because he did not satisfy the aggregate turnover tests applicable at the time. That being so, he must proceed in the Taxation & Commercial Division.

    CONCLUSION

13. Mr Dalby’s application to transfer these proceedings to the Small Business Taxation Division is refused.

I certify that the preceding 13 (thirteen) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

............................[SGD]...........................................

Associate

Dated: 31 August 2023

Date(s) of hearing:	28 August 2023
Counsel for the Applicant:	Mr T Van Le
Counsel for the Respondent:	Mr B McEniery
Solicitors for the Respondent:	McInnes Wilson Lawyers