Deputy Commissioner of Taxation v Murray
[2013] FCA 129
FEDERAL COURT OF AUSTRALIA
Deputy Commissioner of Taxation v Murray [2013] FCA 129
Citation: Deputy Commissioner of Taxation v Murray [2013] FCA 129 Parties: DEPUTY COMMISSIONER OF TAXATION v DENNIS MURRAY File number: NTD 36 of 2012 Judge: MANSFIELD J Date of judgment: 1 March 2013 Catchwords: TAXATION – disputed assessments – objections disallowed – proof of claim by certificates Legislation: Judiciary Act 1903 (Cth) s 39B(1A)
Taxation Administration Act 1953 (Cth) ss 14V, 14S, 19ZZK, 14ZZO, 14ZZM, 14ZZR, Schedule 1, ss 255-45, 298-10, 298-30
Income Tax Assessment Act 1936 (Cth) ss 6, 166, 170, 174, 175, 175A, 177
Income Tax Assessment Act 1997 (Cth)Cases cited: R v The Deputy Federal Commissioner of Taxation for South Australia; Ex parte Hooper (1926) 37 CLR 368 cited
Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 cited
WR Carpenter Holdings Pty Ltd v Commissioner of Taxation (2008) 237 CLR 198 cited
Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 cited
Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 cited
Deputy Commissioner of Taxation v Katalina Park Pastoral Pty Ltd (2005) 61 ATR 298 citedDate of hearing: 14 February 2013 Place: Darwin Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 34 Counsel for the Applicant: The applicant appeared in person Counsel for the Respondent: S Cole Solicitor for the Respondent: Australian Government Solicitor
IN THE FEDERAL COURT OF AUSTRALIA
NORTHERN TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
NTD 36 of 2012
BETWEEN: DEPUTY COMMISSIONER OF TAXATION
ApplicantAND: DENNIS MURRAY
Respondent
JUDGE:
MANSFIELD J
DATE:
1 MARCH 2013
PLACE:
DARWIN
REASONS FOR JUDGMENT
This matter was heard with matter NTD 31 of 2012 in which the respondent, Mr Murray is the applicant, and the Commissioner of Taxation is the respondent.
The two matters are related. This matter involved the Deputy Commissioner seeking to recover from Mr Murray debts payable pursuant to assessments issued in respect of the years of income ended 30 June 2009, 30 June 2010 and 30 June 2011. As at 30 January 2013, the debts total $938,879.45. The matter NTD 31 of 2012 is an appeal under s 14V of the Taxation Administration Act 1953 (Cth) (the TAA 1953) against the making of a departure prohibition order made under s 14S of the TAA 1953 on 13 December 2011 against Mr Murray, and based upon his tax liability which was the subject of this action.
It became apparent at an early stage of the hearing that Mr Murray disagreed with the assessments of his taxation liability, but that he had not fully taken advantage of the means available to challenge them. Each of the three notices of assessment was issued on 12 December 2011. Mr Murray on 11 April 2012 and 3 May 2012 had objected to the three assessments, and (I was told) those objections were each disallowed on 27 July 2012. Mr Murray did not then seek to appeal from those decisions either to the Administrative Appeals Tribunal under Division 4 of the TAA 1953 or to this Court under Division 5 of the TAA 1953.
The time limit prescribed for each of those processes is 60 days, so if he now wishes to do so he will also first have to seek an extension of time within which he may take one or other of those steps.
At present, in the light of the evidence from the Deputy Commissioner, the Court had to accept the evidence and resolve the issues in this matter in favour of the Deputy Commissioner. Orders were made accordingly.
On 14 February 2013, the Court:
(1)declared pursuant to section 39B(1A) of the Judiciary Act 1903 (Cth) that, as at 30 January 2013 the amount of $938,879.45 is an amount due and payable by the Respondent in respect of income tax and administrative penalties for the income tax years ended 30 June 2009, 30 June 2010 and 30 June 2011; and
(2)entered judgment against the respondent in the sum of $938,879.45 which is due and unpaid together with further general interest charge from 1 February 2013, imposed pursuant to the Income Tax Assessment Act 1997 (Cth) and the TAA 1953.
Mr Murray, in the face of those orders, indicated that he wished to seek further advice on his application to set aside the departure prohibition order. That application was not opposed by the Commissioner. That application has been listed for directions at 9:00 am on 24 April 2013, with liberty to apply to bring the matter on earlier.
The following are the reasons for the orders made in this proceeding.
The Deputy Commissioner’s claim is for income tax liabilities and administrative penalties imposed on Mr Murray in respect of the income years ending 2009, 2010 and 2011 (collectively referred to as the relevant years).
The evidence includes the certificate of Robert Ravanello, Deputy Commissioner of Taxation of 1 February 2013 issued pursuant to s 255-45 in Schedule 1 to the TAA 1953 in respect of those income tax liabilities (together with Medicare levy and additional tax) in respect of the relevant years in the sum of $534,504.24 as at 30 January 2013. A separate certificate also of 1 February 2013 also certifies as to the imposition of administrative penalties imposed on Mr Murray pursuant to Div 284 of Sch 1 of the TAA 1953, the two certificates are prima facie evidence of the matters set out therein, including that the amounts referred to are due and owing.
Assessment is defined in s 6(a) of the Income Tax Assessment Act 1936 (Cth) (the ITAA 1936) to mean, in part:
(a)the ascertainment of the amount of taxable income (or that there is no taxable income) and of the tax payable on that taxable income (or that no tax is payable) …
Section 166 of the ITAA 1936 states:
From the returns, and from any other information 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 (or that there is no taxable income) of any taxpayer, and of the tax payable theron (or that no tax is payable).
Section 170 of the ITAA 1936 provides the Commissioner with power to amend assessments within certain prescribed time limits.
The character of an “assessment” was explained by Isaacs J in R v The Deputy Federal Commissioner of Taxation for South Australia; Ex parte Hooper (1926) 37 CLR 368 at 373, where his Honour stated:
An “assessment” is not a piece of paper: it is an official act or operation; it is the Commissioner’s ascertainment, on consideration of all relevant circumstances, including sometimes his own opinion, of the amount of tax chargeable to a given taxpayer. When he has completed his ascertainment of the amount, he sends by post a notification thereof called “a notice of assessment.” … But neither the paper sent nor the notification it gives is the “assessment.” That is and remains the act or operation of the Commissioner.
Under s 174(1) of the ITAA 1936 the Commissioner is required to issue a notice of assessment:
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.
Service of the notice of assessment on the taxpayer fixes the ascertainment of the amount of the taxable income and the amount of the tax payable by the taxpayer and brings to an end the process of assessment. In Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 at 252, Kitto J explained the position as follows:
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 becomes 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 … 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 the 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.
In respect of the assessments of administrative penalties for the relevant years, s 298-30(1) of Schedule 1 of the TAA 1953 provides that:
The Commissioner must make an assessment of the amount of an administrative penalty under Division 284.
There is no definition of “assessment” applicable specifically to assessments made pursuant to s 298-30 of Sch 1 of the TAA 1953. However, the general principles referred to above relating to the meaning of the term “assessment” in the context of assessments of income tax provide guidance as to the meaning of the term “assessment” in the context of s 298-30.
Section 175A of the ITAA 1936 provides the taxpayer with a statutory entitlement to object to an assessment issued pursuant to the ITAA 1936 in the manner set out in Pt IVC of the TAA 1953.
Similarly, s 298-30(2) of Sch 1 of the TAA 1953 states, in respect of assessments of administrative penalties, that a taxpayer who is dissatisfied with such an assessment may object against it in the manner set out in Pt IVC of the TAA 1953.
Under ss 14ZZK and 14ZZO of the TAA 1953, on an application for review by the Administrative Appeals Tribunal or on an appeal to this Court of an assessment, the taxpayer has the burden of proving that the assessment is “excessive”. The term “excessive” relates to the amount of substantive liability. In WR Carpenter Holdings Pty Ltd v Commissioner of Taxation (2008) 237 CLR 198, the High Court stated at 203:
The selection of the term “excessive” in a provision which preceded the enactment of s 14ZZO (namely s 190(b) of the Act in its original form) was said by Dixon CJ, McTiernan and Webb JJ in McAndrew v Federal Commissioner of Taxation to be “perhaps not a good choice”, but their Honours emphasised that “‘excessive’ relates to the amount of the substantive liability”. The adjective “substantive” is used in this field of discourse to contrast those provisions of the Act which relate to what is characterised as the procedure or mechanism of assessment. An error or slip by the Commissioner in following that procedure or in the operation of that mechanism does not necessarily produce any error in the amount of the substantive liability of the taxpayer, a point made by Brennan J in Federal Commissioner of Taxation v Dalco.
Notably, ss 14ZZM and 14ZZR of the TAA 1953 make it clear that the pendency of an objection or a review in respect of an assessment does not in the meantime interfere with, or affect, that assessment and that any tax, additional tax or any other amount may be recovered by the Commissioner as if no objection or review was pending. Section 14ZZM (which is relevantly identical to s 14ZZR) provides:
The fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending.
The effect of ss 14ZZM and 14ZZR is to give primacy to the general right of the Commissioner to have tax paid irrespective of the pendency of an objection or an appeal and its merits.
In Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [44], Gummow ACJ, Heydon, Crennan and Kiefel JJ said of ss 14ZZM and 14ZZR:
But harsh though the operation of these provisions may be, they implement a long-standing legislative policy to protect the interests of the revenue. In Deputy Commissioner of Taxation v Niblett (1965) 83 WN (Pt 1) (NSW) 40 at 411, Asprey J struck out pleas of non-liability to a recovery action instituted by the Deputy Commissioner in the Supreme Court of New South Wales while objections were pending under what was then s 185 of the Assessment Act. His Honour observed:
“It may be thought to be a hardship that a taxpayer should have to pay the tax assessed when an objection to the assessment has not been decided upon but there are obvious financial considerations of high policy that must be weighed in the balance against cases of individual hardship with which the Commissioner through the appropriate use of his powers under [the Assessment Act] can cope … Where the meaning of the words of a statute is clear ‘it is not open to the Court to narrow or whittle down the operation of the Act by seeming considerations of hardship or of business convenience or the like’ – Attorney-General v Carlton Bank [1899] 2 QB 158 at 164.”
In any event, in this matter to date Mr Murray has not sought review of, or appealed from, the assessments or the administration penalties.
The evidence also includes the notices of assessment for the relevant years. Those notices are given conclusive evidentiary force by s 177(1) of the ITAA 1936, which provides:
The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct.
The validity of an assessment issued pursuant to the ITAA 1936 is unaffected by a failure by the Commissioner to comply with any provision of the ITAA 1936. That is made clear by s 175 of the ITAA 1936 which states:
The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with.
See generally Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146. A majority of the High Court held, in summary, that:
(1)where s 175 is read with ss 175A and 177(1) it is clear that the validity of an assessment is not affected by failure to comply with any provision of the ITAA 1936, but a dissatisfied taxpayer may object to the assessment in the manner set out in Part IVC of the TAA 1953;
(2)in review or appeal proceedings under Pt IVC, the amount and all the particulars of the assessment may be challenged by the taxpayer but with the burden of proof provided in ss 14ZZK and 14ZZO of the TAA 1953;
(3)the protection afforded by s 175 of the ITAA 1936 encompasses all errors in the process of assessment such as a failure to take into account a material factor, taking into account an extraneous factor or an error in the calculation of tax due, so those matters may be challenged only in the context of Part IVC proceedings; and
(4)only two categories of jurisdictional error remain outside the scope of s 175 of the ITAA 1936, namely where a purported assessment is “tentative or provisional”, or where there has been conscious maladministration of the assessment process.
The absence of a suggestion of, or any evidence of, conscious maladministration leaves no scope for any finding other than to act on and accept the assessments as proof of the asserted debt.
The above principles apply equally to the notices of assessment of administrative penalty. Section 298-10 of Schedule 1 of the TAA 1953 states:
The Commissioner must give written notice to an entity of the entities’ liability to pay the penalty and of the reasons why the entity is liable to pay the penalty. The Commissioner may do so in any other notice he or she gives to the entity. The Commissioner is not required to give reasons if he or she decides to remit all of the penalty.
A notice of administrative penalty issued pursuant to s 298-10 is also given conclusive evidentiary force pursuant to s 298-30(3) of Sch 1 of the TAA 1953.
In Deputy Commissioner of Taxation v Katalina Park Pastoral Pty Ltd (2005) 61 ATR 298 at [22], Sundberg J drew a comparison between the evidentiary force of s 177 of the ITAA 1936 and comparable provisions, stating:
The effect of s 177 of the 1936 act (and comparable provisions) is that unless a taxpayer can show that assessments are tentative or provisional, or were not made in good faith, the production of the assessments precludes challenge to their validity [citations omitted].
In the present proceeding, Mr Murray has filed no defence to the Statement of Claim dated 26 October 2012. Nor has he filed any evidence capable of being taken as relevant opposition to the Deputy Commissioner’s claim. He was given the opportunity to do so by earlier directions. His concern, as he expressed it orally, is that the assessments should not have been made if other facts were fully appreciated. But, as noted above, he has taken no proceedings under Pt IVC of the TAA 1953.
In those circumstances, I find that Mr Murray owes a debt to the Commonwealth of Australia which, as at 30 January 2013, reflects the amount of the assessments and administrative penalties referred to in the two certificates described in [10]. Accordingly, the Court made the declaration and granted the orders set out in [6] above.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. Associate:
Dated: 1 March 2013
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