Donnellan and Deputy Commissioner of Taxation

[2004] AATA 769

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 769

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No WS2004/6-13

SMALL TAXATION CLAIMS TRIBUNAL		)
Re		CHRISTINE DONNELLAN

Applicant

And DEPUTY COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Associate Professor G Barton, Member

Date14 July 2004

PlacePerth

Decision The Tribunal affirms the decision under review.

…...........(sgd G Barton)...........................

Member

CATCHWORDS

Income tax – taxpayer lodged notices of objection against her income tax assessments for the years ended 30 June 1978 to 30 June 1985 and requests for extension of time to lodge the objections, on 29 August 2003 – requests for extension of time refused because Commissioner lacked the power to grant them

Income Tax Assessment Act 1936 s 185, s 186, s 188, s 188A

Taxation Boards of Review (Transfer of Jurisdiction) Act 1986 s 221

Taxation Laws Amendment Act (No 3) 1991 s 2(10); s114

Taxation Administration Act 1953 s 142W; s 142x

REASONS FOR DECISION

14 July 2004 Associate Professor G Barton, Member

1. The applicant, Christine Donnellan, applied to the Small Taxation Claims Tribunal (‘the Tribunal’) for a review of the respondent’s decision of 10 February 2004 to disallow her request for an extension of time to lodge objections against her income tax assessments for the years ended 30 June 1978 to 30 June 1985 (‘the years of income’). Her application was made to the Tribunal in a letter of 17 February 2004 signed by her parents (T1). She was represented at the hearing by her father, Mr Walter Martins, who testified, and lodged written submissions, on her behalf. The respondent was represented by Mr Richard McGrade. The Tribunal had before it documents T1 – T30 (‘the T documents’) lodged by the respondent pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 and a copy of the respondent’s Statement of Facts and Contentions of 30 April 2004, and of the respondent’s amended Statement of Facts and Contentions of 11 May 2004.

2.      None of the relevant facts was in dispute as between the parties.   They are set out in the respondent’s amended Statement of Facts and Contentions as follows:

“FACTS

1.The Applicant sustained serious injuries as a result of an accident which occurred on 25 December 1973. This left her blind and with a serious loss of short term memory.

2. Subsequently an action was commenced in the District Court of Western Australia on behalf of the Applicant against David Unkovich for damages in respect of these injuries.

3. On 15 April 1977 the Public Trustee in and for the State of Western Australia ("the Public Trustee") certified, pursuant to section 35 of the Public Trustee Act 1941-1975 (WA), that the Applicant was an "infirm person" for the purposes of that Act by reason of his satisfaction that the Applicant was incapable of managing her own affairs. The effect of this certificate was that the Public Trustee undertook, pursuant to section 36C of that Act, the care and management of the Applicant's estate.

4. In a judgement dated 2 August 1977 made by agreement between the parties to the above District Court action the Applicant was, amongst other things, awarded:

a) a lump sum of $75,000; and

b) periodic payments for the rest of her life payable quarterly in advance for the cost of an attendant.

5. The following expenses were incurred by the Public Trustee on the Applicant's behalf with respect to the employment of nursing attendants for the Applicant:

Year ended 30 June

1978   $3,984.67

1979   $5,938.39

1980   $6,440.08  

1981  $7,392.78  

1982  $7,577.72

1983  $8,688.94

1984   $9,638.39

1985  $15,922.21

6. The Public Trustee lodged income tax returns on the Applicant's behalf in respect of the above years of income.  Copies of these income tax returns are documents T3, T5, T7, T9, T11, T13, T15 and T17 of the "T" documents lodged herein.

7.The said income tax returns specified an address for service of notices as care of           the Public Trustee Office.

8. The outgoings referred to in paragraph 5 above entitled the Applicant to "concessional expenditure rebates" pursuant to section 159P of the Income Tax Assessment Act 1936 ("ITAA"). None of the said income tax returns included a claim for concessional expenditure rebate.

9. During the year ended 30 June 1979 the Applicant received $3,221 as a disability pension. This pension was exempt income for the purposes of the IT AA.  The income tax return for the year ended 30 June 1979 lodged by the Public Trustee included the said disability pension as assessable income.

10. The Respondent issued notices of assessment to the Applicant in respect of the above years of income (see "T" docs T4, T6, T8, T10, T12, T14, T16 and T18) which were, in each case, where relevant, in accordance with the said income tax returns lodged by the Public Trustee.

11. These notices of assessment were posted to the Applicant, care of the Public Trustee at 565 Hay Street, Perth 6000 by prepaid letter postage on the following dates.

Year ended 30 June

1978   9 February 1979

1979  13 December 1979

1980   18 November 1980

1981  12 November 1981

1982   24 November 1982

1983  9 December 1983

1984  28 November 1984

1985  22 November 1985

12. In the ordinary course of post, the said notices of assessment would have arrived at the address of the Public Trustee no more than a few days after these respective dates.

13. If the said assessments had been made on the basis that:

a) the above concessional expenditure rebates had been allowed; and

b) the said disability pension had not been included in the Applicant's assessable income for the year ended 30 June 1979;

the income tax payable by the Applicant in respect of each of the above years of income would have been reduced by the following amounts:

Year ended 30 June

1978  $348.45

1979  $2,535.75

1980   $1,603.92

1981   $1,856.89

1982   $1,916.07

1983   $2,177.24

1984   $2,291.52

1985  $2,043.72

14. No objections were lodged against any of the above assessments within sixty days of the time when in the ordinary course of post the relevant notices of assessment would have arrived at the office of the Public Trustee or at all.

15. The Applicant was married to Keith Donnellan in June 1984 and resided with him until 17 October 2002.  Keith Donnellan is blind and partially deaf.

16. On 17 October 2002 the Applicant ceased to reside with Keith Donnellan and began to reside with her parents, Walter and Audrey Martins, again.  On the Applicant's return to her parents' home they were shocked at her neglected and abused state.

17. On 15 November 2002 the Applicant's parents made an application to the Guardianship and Administration Board of Western Australia for appointment as joint plenary guardians for the Applicant pursuant to the Guardianship and Administration Act 1990 (WA). They were duly appointed joint plenary guardians on 2 December 2002 (see folio 59 of the T docs).

18. On 21 March 2003 the Applicant's parents made an application to the Guardianship and Administration Board of Western Australia for appointment as joint plenary administrators of the estate of the Applicant pursuant to the Guardianship and Administration Act 1990 (WA). They were duly appointed joint plenary administrators on 11 August 2003 with all the powers and duties conferred by the Guardianship and Administration Act 1990 (WA) - (see folio 60 of the T docs).

19. Pursuant to subsection 71(2) of the Guardianship and Administration Act 1990 (WA) the effect of this appointment was that the applicant's parents were empowered to perform, or refrain from performing, in relation to the estate of the Applicant, or any part of the estate, any function that the Applicant could herself perform, or refrain from performing, if she were of full legal capacity.

20. After numerous requests the Applicant's parents received financial statements and other papers relating to the Applicant's affairs from the Public Trustee in July and August of 2003.  Among these papers was correspondence from the Public Trustee's solicitors addressed to the solicitors for the MVIT (David Unkovich's insurers) dated 6 June 1991 in which an admission was made that no claims for income tax deductions for the wages of nursing attendants and insurance premiums had been made by the Public Trustee on the Applicant's behalf.

21. It was the discovery of this correspondence which alerted the Applicant's parents to the failures of the Public Trustee to make the claims for concessional expenditure rebate referred to above.

22. By letter dated 29 August 2003 (T doc T21) the Applicant's parents requested

extensions of time in which to lodge objections against the Applicant's income  tax assessments for the years ended 30 June 1978 to 30 June 2001 inclusive.

23. By letter dated 10 February 2004 the Respondent disallowed the requests for an extension of time with respect to the Applicant's assessments for the years ended 30 June 1978 to 30 June 1985 inclusive.

24. By applications dated 17 February 2004 the Applicant's parents seek a review of the Respondent's decision to disallow the said requests for extension of time.”

3.      The respondent disallowed the applicant’s request on the basis that the relevant law does not permit him to extend the prescribed time for taxpayers to object to assessments to income tax for the years of income.

4. In the years of income, objections to assessments to income tax were governed by ss 185 and 186 in Part V of the Income Tax Assessment Act 1936 (‘the Act’). Section 185 prescribed that a taxpayer might lodge, with the respondent, an objection against an assessment “within sixty days after service of the notice of assessment”. The objection had to be in writing and it had to state fully and in detail the grounds on which the taxpayer relied. The respondent was obliged, by s 186, to consider the objection and to notify the taxpayer in writing of his decision to disallow it or to allow it either wholly or in part.

5. No provision was made for lodging objections after the 60 day period stipulated in s 185 had expired until the enactment of the Taxation Boards of Review (Transfer of Jurisdiction) Act no. 48 of 1986 (‘TBR Act’), which inserted a new s 188 and s 188A in the Act permitting taxpayers to lodge late objections with a request that they be treated by the respondent as duly lodged and conferring on the respondent a power to grant or refuse such requests. The relevant new provisions were as follows:

“Applications for extension of time

188.  (1) Where the period for the lodgement by a taxpayer of an objection against an assessment has ended, the taxpayer may, notwithstanding that the period has ended, send the objection to the Commissioner together with an application in writing requesting the Commissioner to treat the objection as having been duly lodged.

(2) …

(3)  An application under sub-section (1) or (2) shall state fully and in detail the circumstances concerning, and the reasons for, the failure by the taxpayer to lodge the objection or request as required by this Act.

Consideration of applications for extension of time for lodging applications

188A. (1) The Commissioner shall consider each application made under sub-section 188(1) and may grant or refuse the application.

(2) The Commissioner shall give to the taxpayer who made the application notice in writing of the decision on the application.

(3) A taxpayer who is dissatisfied with a decision under sub-section (1) in respect of an application made by the taxpayer may apply to the Tribunal for review of the decision.

(4) Where an application under sub-section 188 (1) has been granted, the taxpayer who made the application shall, for the purposes of this Part, be treated as having duly lodged the objection to which the application relates.”

By s 221 of the TBR Act, the new provisions in ss 188(1) and (2) did not apply to assessments for which the 60 day objection period had expired before 1 July 1986. It was not disputed, and the Tribunal finds, that the 60 day objection period in respect of each of the applicant’s assessments for the years of income had expired before 1 July 1986.

6.      The Taxation Laws Amendment Act (No.3) of 1991 (‘the Amendment Act of 1991’) repealed Part V of the Act and inserted Part IVC in the Taxation Administration Act 1953 (‘TA Act’). Division 3 of Part IVC of the TA Act governs taxation objections. The provisions prescribing when taxation objections are to be made are in s 14ZW. Sections 14ZW(2) and (3) relate to requests for extension of time to lodge an objection and s 14ZX requires the respondent to consider such requests and to either agree to them or refuse them.

7. By s 114 and the relevant proclamation pursuant to s 2(10) of the Amendment Act of 1991, Part IVC of the TA Act applies to objections to assessments notified, or first notified, after 1 March 1992. It was not disputed, and the Tribunal finds, that each of the applicant’s assessments for the years of income was notified before 1 March 1992. So the combined effect of s 114 of the Amendment Act of 1991 and s 221 of the TBR Act is that the respondent’s power to allow, or agree to, a request for an extension of time to lodge an objection to an assessment to income tax under the Act does not extend to the applicant’s assessments for the years of income. This was the respondent’s reason for the decision under review and the respondent’s contention at the hearing.

8.      Mr Martins did not dispute the technical validity of the decision under review.  He urged the Tribunal to look through the technicalities of the relevant legislation and to review the respondent’s decision in light of the special circumstances in which the assessments for the years of income arose.  He also referred to the fact that the law was subsequently amended to provide for extensions of time to lodge objections and that if the applicant were able to lodge the objections they would almost certainly be allowed.

9. The Tribunal finds that it is unable to proceed in the manner contended for by the applicant. The period for lodging objections to the applicant’s assessments for the years of income was prescribed in s 185 of the Act without any power in the respondent to extend it. When the legislature conferred a power of extension on the respondent it did so prospectively, thereby preserving the definite period of sixty days within which an objection could be lodged to the applicant’s assessments for the years of income.

10.     The Tribunal affirms the respondent’s decision of 10 February 2004 not to grant the applicant an extension of time to lodge objections against her income tax assessments for the years ended 30 June 1978 to 30 June 1985.

I certify that the 10 preceding paragraphs are a true copy of the reasons for the decision herein of Associate Professor G Barton, Member

Signed:         ..................(sgd V Wong).............................
  Associate

Date/s of Hearing  19 May 2004
Date of Decision  14July 2004
Counsel for the Applicant         Mr W Martins
Counsel for the Respondent     Mr R McGrade
Solicitor for the Respondent     Australian Taxation Office Legal Services