Francis and Commissioner of Taxation (Taxation)

[2017] AATA 1250

Francis and Commissioner of Taxation (Taxation) [2017] AATA 1250 (14 June 2017)

Division:Taxation and Commercial Division

File Number(s):      2017/1757

Re:Louise Francis

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Deputy President S A Forgie

Date:               14 June 2017

Date of written reasons:        11 August 2017

Place:Melbourne

The Tribunal in its decision of 14 June 2017:

decided that it does not have jurisdiction to review matters raised in the respondent’s letters of 19 January 2017 and 1 March 2017:

(1)because none is a reviewable objection decision within the meaning of the Taxation Administration Act 1953; and

(2)therefore, the applicant is not entitled to make an application under s 14ZZ(1)(i) of the Taxation Administration Act 1953; and

(3)consequently and having regard to s 25 of the Administrative Appeals Tribunal Act 1975, the Tribunal does not have power to review any of the matters.

..........[sgd]..........................................................

Deputy President S A Forgie

Catchwords

TAXATION – jurisdiction – no reviewable objection decision – no jurisdiction

Legislation

Administrative Appeals Tribunal Act 1975 ss 3, 25, 42A
Administrative Decisions (Judicial Review) Act 1977 ss 3, 13
Income Tax Assessment Act 1936 ss 166, 167, 175A
Taxation Administration Act 1953 ss 14ZL, 14ZN, 14ZQ, 14ZW, 14ZX, 14ZY, 14ZZ
Tribunals Amalgamation Act 2015 s 3, Sch 1 and items 40 and 111

Cases

Secondary Materials

REASONS FOR DECISION

Deputy President S A Forgie

1. On 27 March 2017, Ms Francis lodged an application for review of two decisions she described as having been made by the Commissioner of Taxation (Commissioner) on 19 January 2017 and 23 January 2017 and conveyed to her in letters of those dates.  I decided on 14 June 2017 that the Tribunal does not have jurisdiction to review any of the matters raised in the two letters as they are not reviewable objection decisions and gave Ms Francis oral reasons for my reaching my decision.  Ms Francis asked for written reasons for my decision on 3 August 2017.  I now set out those reasons.[1]

   [1] Section 13(1) of the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act) provides that “Where a person makes a decision to which this section applies, any person who is entitled to make an application to the Federal Court or the Federal Circuit Court under section 5 in relation to the decision may, by notice in writing given to the person who made the decision, request him or her to furnish a statement in writing setting out the findings on material questions of fact, referring to the evidence or other material on which those findings were based and giving the reasons for the decision.”  A “decision to which this Act applies” is, among others, a decision of an administrative character made, proposed to be made or required to be made under an enactment: ADJR Act; s 3(1). If the person does not make the request within 28 days of receiving a written decision, his or her request may be refused under s 13(5)(a). I have not refused Ms Francis’s request.

APPLICATION FOR REVIEW

1. In her application, Ms Francis described the decisions of which she sought review:

   “There are 2 ATO decisions, one made 19 January 2017, received 23 January 2017, and another following dated 1 March 2017, received 3 March 2017, which demand 20 years of tax to be filed within 5 days.  I refute both letters and the ATO has not supplied the legislation that allows them to make such demands, and in such a limited timeframe 2 decades retrospectively.  Further, other parties are claiming a default judgment has been made but I sought an extension which was granted. …”

1. The Commissioner has provided two letters addressed to Ms Francis.  One is dated 19 January 2017 and the other 1 March 2017.  The words “Default assessment warning” appeared above the salutation on the letter of 19 January 2017 written in the name of a then Deputy Commissioner of Taxation.  The first two paragraphs of the letter advised Ms Francis:

   “According to information provided to us by third party trusts, you have been in receipt of distributions and not reported those distributions through income tax returns for the years ended 30 June 1999 to 30 June 2010.

   The enclosed Summary of your estimated income shows details of the amounts reported to us.

What you need to do

You need to review our Summary of your estimated income and lodge your tax returns or contact us by 16 February 2017.  If you do not lodge your tax returns or contact us by the due date we will issue you with default assessments.

The default assessments will be based on the Summary of your estimated income which includes the income reported to us by third parties.

The default assessments we raise may not include all income, offsets, deductions or other types of tax reductions you may be entitled to.

You may face penalties

If you do not lodge your tax returns by 16 February 2017 and we issue you with default assessments, you will be liable under Subdivision 284-B of Schedule 1 of the Taxation Administration Act 1953 to administrative penalties.  The penalty regime applies from 1 July 2000 in relation to income tax matters and will apply to each default assessment that results in an amount payable from the year ended 30 June 2001 onwards.  The application of the penalty regime to your circumstance is explained in the Penalty schedule enclosed with this letter.

Further, as you did not lodge your tax returns by the original due date for lodgement, a separate penalty for failing to lodge on time (the FTL penalty) may also apply.  How much you are liable to pay will depend on your income and how long we waited for you to lodge your tax returns.  For most people the penalty is between $180 and $900.  We will advise you of the penalty amount in a separate notice.

Interest charges may apply

If we issue you with a default assessment, you may have to pay a general interest charge on the amount payable from the date your tax assessment was originally due.  Where any amount is not paid by the due date, the general interest charge accrues on the outstanding balance until the entire amount has been paid.  For more information about interest charges – go to our website

For more information

If you believe you do not need to lodge, or have any questions, contact …

…”

1. Attached to the letter was a document entitled “Summary of your estimated income”.  It showed that, in the year ended 30 June 1999, Ms Francis received trust distributions of $29,987 from the Louise Francis Trust and a further $4,575 from the J.K.F. Trust.  In the years ending 30 June 2000 to 30 June 2010, Ms Francis was recorded as having received further distributions from the Louise Francis Trust.  In all, the distributions totalled $413,825 over the 12 year period.  Her total taxable income for those years was also recorded as $413,825 and her estimated taxation liability as totalling $77,350.57.  The letter also included an estimate of Ms Francis’s penalty in a further attachment entitled “Penalty Schedule”.  The estimated penalty for the years ending 30 June 2001 to 30 June 2010 was $54,012.75.

1. It is apparent from the Deputy Commissioner’s letter dated 1 March 2017 that Ms Francis sent an email to the Australian Taxation Office (ATO) on 15 February 2017 in response to the letter of 19 January 2017.  The second letter advised her:

   “To enable us to make an informed and fair decision regarding your entitlement to deductions, tax offsets, and carried forward losses, you are required to provide the following information and documents by 10 March 2017:

   1.A breakdown by income year of all deductions you contend you are entitled to claim and documentation to support and quantify your claim;

   2.Details of all tax offsets you contend you are entitled to claim and documentation to support your claim;

   3.All documentation to support carried forward losses, for income years prior to 30 June 1999.”

If the ATO did not receive the requested information and letters by 10 March 2017, the letter continued, she would be assessed as described in the earlier letter dated 19 January 2017.

THE TRIBUNAL’S POWER TO REVIEW DECISIONS

1. Section 25(1) of the Administrative Appeals Tribunal Act 1975 (AAT Act) provides that:

   “An enactment may provide that applications may be made to the Tribunal:

   (a)for review of decisions made in the exercise of powers conferred by that enactment; or

   (b)for the review of decisions made in the exercise of powers conferred, or that may be conferred, by another enactment having effect under that enactment.”

2. The meanings of an “enactment” include an Act.[2]  In relation to assessment of a person’s taxation liability, the only enactment that provides that applications may be made to the Tribunal is the Taxation Administration Act 1953 (TA Act).  It provides that applications may be made to the Tribunal for review of reviewable objection decisions and extension of time refusal decisions.  An “extension of time refusal decision” is a decision made by the Commissioner under s 14ZX refusing to extend the time within which an objection may made under s 14W. As Ms Francis has not made an objection, and for reasons I will give could not do so, s 14ZX(4) providing that a person may apply for review of an extension of time refusal decision is not relevant.

   [2] AAT Act; s 3(1)

1. Only s 14ZZ(1)(i) of the TA Act is relevant and it provides:

   “If the person is dissatisfied with the Commissioner’s objection decision (including a decision under paragraph 14Y(1A)(b) to make a different private ruling), the person may:

   (a)       if the decision is a reviewable objection decision – either:

   (i)        apply to the Tribunal for review of the decision; ...”

1. A “reviewable objection decision” is “… an objection decision that is not an ineligible income tax remission decision”.[3]  There is no suggestion that the Commissioner has made an ineligible income tax remission decision.[4]  What, then, is an “objection decision”? It is a decision made by the Commissioner under ss 14ZY(1), (1A) or (1B).[5] As this matter does not relate to a private ruling, only ss 14ZY(1) is relevant in the circumstances of this case.[6]  It provides that:

   “… if the taxation objection has been lodged with the Commissioner within the required period, the Commissioner must decide whether to:

   (a)       allow it, wholly or in part; or

   (b)       disallow it.”

   [3] TA Act; s 14ZQ

   [4] The expression “ineligible income tax remission decision” is defined in s 14ZS of the TA Act.

   [5] TA Act; s 14ZY(2)

   [6] Section 14ZY(1A) relates to a taxation objection against the Commissioner’s failure to make a private ruling. No such private ruling has been requested by Ms Francis. Section 14ZY(1B) depends on a taxpayer’s having lodged a taxation objection and so does not arise in this case as Ms Francis has not done so.

1. It follows that, in order to have an objection decision, a person must first have lodged a taxation objection with the Commissioner.  What is a “taxation objection”?  Division 3 of Part IVC of the TA Act describes how a taxation objection is to be made by a person and how they are to be dealt with by the Commissioner.[7]  When they may be made depends on whether a provision of an Act or of Regulations:

   “… provides that a person who is dissatisfied with an assessment, determination, notice or decision, or with a failure to make a private ruling, may object against it in the manner set out in this Part.”

This is provided for in s 14ZL and the reference to “this Part” is a reference to Part IVC of the TA Act.

[7] TA Act; s 14ZN

1. The practical effect of s 14ZL is that a person must examine the relevant Act and Regulations in order to decide whether it provides that he or she may object against the particular assessment, determination, notice or decision with which he or she is dissatisfied. In a case such as this, there is no provision in any of the legislation relating to taxation that provides that a person may object against a letter written by the Commissioner requesting information and advising that default assessments might follow if the person did not provide the information or respond to the letter. There was no assessment, determination, notice or decision that had been made by the Commissioner and that had been communicated to Ms Francis in either the letter dated 19 January 2017 or that dated 1 March 2017.

1. As no assessment, determination, notice or decision had been made by the Commissioner, Ms Francis could not lodge an objection under Part IVC of the TA Act.  As she could not lodge an objection decision, the Commissioner could not make an objection decision.  As he could not make an objection decision, there could be no reviewable objection decision.  As there was no reviewable objection decision, Ms Francis could not make an application for review to the Tribunal.  As she could not make an application for review to the Tribunal, it had no power to consider any application she did make.  Therefore, I decided that the Tribunal did not have jurisdiction to consider her application. 

1. The power to make that decision must be implied from s 25(1) of the AAT Act. That is to say, as s 25(1) of the AAT Act sets out the circumstances in which a person has a right to make an application to the Tribunal, the Tribunal’s powers must depend on there being such an application. If an application cannot properly be made to it, the Tribunal cannot lawfully consider the application.[8]  That is what has happened in Ms Francis’s case and the Tribunal does not have the power to consider it.

   [8] Before s 25(4) was repealed by s 3 and Schedule 1, Item 40 of the Tribunals Amalgamation Act 2015 (Tribunals Amalgamation Act) with effect from 1 July 2015, the Tribunal’s position was clearer. Section 25(4) of the AAT Act provided that the Tribunal had power to review any decision in respect of which an application was made to it under any enactment. With the repeal of s 25(4), the Tribunal’s power to do so must now be implied from s 25(1) and the terms of the relevant enactment providing that applications may be made to the Tribunal. Section 42A(4), which was inserted by s 3 and Schedule 1, Item 111 of the Tribunals Amalgamation Act does not give me power to dismiss the application for the Commissioner has not made a decision of any description. That section provides: “The Tribunal may dismiss an application without proceeding to review the decision if the Tribunal is satisfied that the decision is not reviewable by the Tribunal.”  It presupposes that a decision of some sort has been made.

A FUTURE POSSIBILITY

1. If the Commissioner were to make default assessments and Ms Francis is dissatisfied with them, she will be able to lodge an objection to them. She will be able to do so because s 175A of the Income Tax Assessment Act 1936 (ITAA 1936) provides:

   “(1)     A taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.

   (2)A taxpayer cannot object under subsection (1) against an assessment ascertaining that:

   (a)the taxpayer has no taxable income; or

   (b)the taxpayer has an amount of taxable income and no tax is payable.”

   A “default assessment” is an assessment made under s 167 of ITAA36 when the Commissioner either is not satisfied with the return lodged by any person or has reason to believe that any person has not furnished a return has derived taxable income.

1. If Ms Francis should choose to lodge an objection, the Commissioner will make a decision that will be an objection decision.  When she has received that objection decision and assuming that it is not an ineligible income tax remission decision, she will be able to lodge an application for its review in the Tribunal.  All that is for the future and, as matters stand, Ms Francis’s application to the Tribunal is premature.

I certify that the preceding fifteen [15] paragraphs are a true copy of the reasons for the decision herein of

 Deputy President S A Forgie.

........[sgd]..........................................................

Associate

Date of oral decision: 14 June 2017

Date of written reasons: 11 August 2017

Date of hearing by telephone:	14 June 2017
Self-represented Applicant:	Ms Louise Francis
Solicitor for the Respondent:	Mr Vince Tavolaro Australian Government Solicitor