Greig and Commissioner of Taxation (Taxation)

[2019] AATA 3639

Greig and Commissioner of Taxation (Taxation) [2019] AATA 3639 (16 August 2019)

Division:Taxation and Commercial Division

File Number(s):  2018/0634

Re:Mathew GREIG

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Dr N A Manetta, Senior Member

Date of oral reasons:             16 August 2019

Date of written reasons:        13 September 2019

Place:Adelaide

For the reasons given orally at the conclusion of the hearing of this matter, the Tribunal:

1.Refuses permission to the Applicant to add to his grounds of review in this Tribunal; and

2.Dismisses the Applicant’s application to this Tribunal pursuant to section 42B(1)(a) of the Administrative Appeals Tribunal Act1975.

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Dr N A Manetta
Senior Member

TAXATION – whether applicant can establish that assessment is excessive or otherwise incorrect – assessment the subject of the review reduced following objection decision – where applicant’s claimed deductions did not reduce taxable income below the amended assessment – application dismissed as having become misconceived or lacking in substance.   

Legislation

Administrative Appeals Tribunal Act 1975 (Cth)
Income Tax Assessment Act 1997 (Cth)

Cases

Hutchins v Federal Commissioner of Taxation (1988) 20 FCR 29

Secondary Materials

Nil

REASONS FOR DECISION

13 September 2019

Dr N A Manetta, Senior Member

1. At the conclusion of the hearing of this matter, I delivered my decision to refuse Mr Grieg leave to add to his grounds of review and to dismiss his application for review.  I gave oral reasons for my decision.  The Applicant has requested a statement in writing of my reasons. 

2. I have reviewed the transcript of my reasons and made minor amendments to it.  I formally adopt the transcript as amended as a statement in writing of my reasons in answer to the Applicant’s request.  I attach a copy of the transcript as amended.

I certify that the following twenty-nine (29) paragraphs are a true copy of the reasons for the decision herein of Dr N A Manetta, Senior Member.

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Legal and Administrative Assistant

Date of hearing:	29 July 2019
Applicant:	In person
Respondent’s Representative:	Mr S. Linden, on instructions from the Commissioner of Taxation

ORAL DECISION OF SENIOR MEMBER MANETTA

1. SENIOR MEMBER:  This is an application by Mr Mathew Greig seeking a review of a decision of the Respondent, the Commissioner of Taxation.  By his decision, the Commissioner declined certain deductions claimed by Mr Greig in his taxation return for the financial year ending 30 June 2016.

2. These deductions were claimed by Mr Grieg in connection with his ownership of a number of rental properties.  There has been disagreement between Mr Greig and the Commissioner in respect of the appropriate treatment of certain expenses incurred in connection with these properties.

3. At the hearing before me, Mr Greig represented himself; Mr Linden represented the Commissioner.  Hearing the matter afresh on the evidence before me, I must decide two issues: first, whether to permit Mr Grieg to adduce the new ground he now wishes to adduce; and secondly, if I do permit Mr Grieg to adduce the ground, whether the ground is made out.

4. For reasons I shall explain, I have decided not to permit Mr Grieg to adduce the ground he wishes to raise before me.  I need not consider the second issue.  I shall explain the orders I propose to make at the end of these reasons.

5. I now set out certain background facts in relation to this matter. 

6. Mr Grieg indicated in his evidence to me that he is involved in commercial procurement on a full-time basis as an independent contractor.  Independently of this work, Mr Grieg has built up a portfolio of investment properties. 

7. These properties were described to me in Mr Grieg’s evidence as follows: first, a property in Neale Lane, Lightsview acquired on 13 April 2010; secondly, a property in Rapid Avenue, Lightsview acquired on 30 June 2010; thirdly, a property in Clearview acquired on 15 June 2012; fourthly, land in Klemzig acquired on 19 May 2014 and built on at the end of 2017; fifthly, a property at Aragon Road, Ingle Farm acquired on 4 August 2014; and sixthly, the neighbouring property at Aragon Road, Ingle Farm acquired on the same date of 4 August 2014.

8. Mr Grieg explained in his evidence that the acquisition of these properties were part of his retirement strategy.  Mr Grieg is presently 49 years of age.  He hopes to secure good capital growth for the properties.  The rent is used to repay monies Mr Grieg has borrowed to fund the acquisition of the properties.

9. Mr Grieg referred to his strategy in choosing the properties as follows. All properties he has acquired have been new or nearly new, that is no older than two years.  In this way he hopes to obtain a higher rent and to minimise repair expenses as repairs on new homes are likely to be fewer.  All properties are located in the same general area in Adelaide’s suburbs.

10. Mr Grieg uses the same property management company to advertise the properties when they are vacant.  He vets prospective tenants personally.  He takes care of all maintenance requests personally and, if necessary, personally attends at the property in question.  Work requiring the services of a qualified contractor (for example, plumbing, gas or electricity work) is referred by Mr Grieg to his preferred contractors.  Mr Grieg inspects properties for himself on a regular basis, cleans the gutters, and handles all enforcement issues although he has not had yet to evict tenants to date.

11. He takes care of all accounting issues in terms of reconciling incoming rent and outgoing expenses.  He paints the properties himself and spring cleans them.  As I have said, he handles minor repairs himself.

12. The dispute before me focused on whether certain items purchased by Mr Grieg in the course of the year ending 30 June 2016 might be deducted in their entirety in that tax year.  These items are as follows: first, an iPhone purchased for $1,209 and used in connection with the properties; secondly, a scanner purchased for $683 and used in connection with the properties; thirdly, a laptop purchased for $2,633 used in connection with the properties; fourthly, an iPad purchased for $687 and used in connection with the properties; and fifthly, a hard-drive backup for the laptop purchased for $478.  The total comes to $5,690.

13. Mr Grieg wishes to claim $5,690 as a one-off deduction in the 2016 financial year.  The Commissioner has not allowed a one-off deduction but has allowed $162 per property to be deducted in the 2016 tax year.  This amounts to a total of $972 given there are six properties.  This leaves the parties in dispute over a net figure of $4,718, that is $5,690 minus $972.

14. Mr Grieg understands the Commissioner has disallowed a total deduction of $5,690 because the Commissioner has concluded that Mr Grieg is not conducting a business in respect of the six investment properties.  Mr Grieg maintains he is conducting a business.

15. In normal circumstances I would proceed to determine this issue but there are two complexities to which I now refer.  The first complexity is that the issue of the deductibility of $5,690 is not a ground of objection in Mr Grieg’s application to this Tribunal.  It is clear that other deductions have been the principal issue between Mr Grieg and the Commissioner.  These have included certain travel deductions and capital depreciation allowances.  I need not detail these.  It is sufficient to note that these issues alone formed the basis of Mr Grieg’s application to the Tribunal and that the sole ground of dispute that was agitated before me on the day of the hearing does not form part of the grounds raised by Mr Grieg. 

16. By law, I may not consider this new ground unless I make an order permitting Mr Grieg to raise it: see section 1422K of the Income Tax Assessment Act.  The question that arises is whether I should make such an order.  Normally an order would be made so as to allow the parties to resolve the entirety of their dispute.  It is at this point however, that the second complexity I mentioned earlier arises.  It is common ground between the parties that the Commissioner issued a notice of amended assessment after the filing by Mr Grieg of his application in this Tribunal.

17. As a result of that amended assessment there is no longer a dispute between the parties over the matters raised in Mr Grieg’s application to the Tribunal.  Importantly, for reasons that I must say were not entirely clear to me but which were fully accepted by Mr Grieg, the Commissioner’s notice of amended assessment has been generous to Mr Grieg and has reduced his taxable income to a level that is lower than Mr Grieg himself believes appropriate even when allowance is fully made for a deduction of $5,690 in respect of the equipment costs to which I have earlier referred.

18. Mr Grieg was specifically questioned about this matter in the course of his evidence before me and he accepted that a proper notice of assessment which allowed him the full $5,690 as a deduction would not lead to a lower taxable income than is recorded in the notice of amended assessment.

19. The Commissioner’s position before the tribunal is that I should not determine the question of the deductibility of the $5,690 because it cannot result in a lower assessment of Mr Grieg’s taxable income.  More precisely however, the contention must be that I should not exercise my discretion under section 1422K to permit Mr Grieg to raise a new ground where that new ground cannot lead to a lower taxable income.

20. In my opinion I should not allow Mr Grieg to raise a new ground concerning the deductibility of the $5,690.  Unless there is a realistic chance of the Tribunal making an order which would result in a lower assessment in favour of a taxpayer, the Tribunal would not ordinarily exercise the power it has to allow a new ground to be adduced.

21. I accept that Mr Grieg is bona fide in his dispute with the Commissioner but in the very unusual circumstances of this case Mr Grieg himself accepts that if he is right the amount of taxable income cannot be decreased to an amount lower than that reached by the Commissioner and notified to Mr Grieg in his notice of amended assessment.

22. I further accept the Commissioner’s argument that the Tribunal’s task is not as such to decide whether individual items claimed to be deductible are, in fact, deductible.  That is, I accept the Commissioner’s argument that the Tribunal’s task is to decide whether the overall assessment of taxable income is or is not excessive.

23. The Commissioner is permitted in law to support his contention that the taxable income figure he or she has settled on is not excessive in any manner provided, of course, due notice is given to the taxpayer.  It is the taxpayer who bears the burden of proof that the assessment of tax is excessive.

24. While Mr Greig may have been able to meet that burden at the time he first filed his application in this Tribunal, after the Commissioner issued his amended assessment Mr Greig was no longer able to demonstrate that the assessment of taxable income as amended was excessive.  To quote the language employed by his Honour, Jenkinson J, in a case to which I was referred:[1]

    …the matter which is the subject of this proceeding… has ceased to exist as a subject of controversy.

    [1] Hutchins v Federal Commissioner of Taxation (1988) 20 FCR 29, 33.

25. It is appropriate at this point to refer to two matters Mr Greig submitted to me.  First, Mr Greig submitted that he was still in dispute with the Commissioner over whether he is conducting a business so far as his rental properties are concerned.  He wants this issue determined.  In response to that submission, I would reiterate what the case authorities, have made clear, namely that the subject matter of the dispute between the parties is the assessment of taxable income and not necessarily the reasoning as such by which the Commissioner has arrived at his assessment.

26. Moreover, any decision I were to make in respect of the 2016 tax year as to whether or not Mr Greig was conducting a business at that time would not necessarily conclude the issue so far as later tax years are concerned.  Mr Greig indicated to me that the issue of whether he is conducting a business will arise in the future because of certain recent regulatory changes.  If that is the case the Commissioner will need to assess Mr Greig’s situation as at that future time.  Anything I might decide in respect of the 2016 tax year will not necessarily be decisive in respect of Mr Greig’s circumstances as they stand at a particular time in the future.

27. Secondly, Mr Greig also raised an argument that he wishes to claim monies from the Commissioner representing disbursements he has expended in the matter and representing also appropriate compensation for the time he has spent in his dispute with the Commissioner.  In my opinion, these are not matters that would warrant me in making an order to allow the new ground to be adduced as I am not satisfied these matters fall within my jurisdiction.

28. My formal order will be to refuse Mr Greig permission to adduce a new ground of review under section 1422K of the Income Tax Assessment Act. Noting that Mr Greig’s existing grounds of review have been superseded by the notice of amended assessment to which I have referred, I would make a further order dismissing Mr Greig’s application to this Tribunal as the application has now become “misconceived or lacking in substance” given the notice of amended assessment and given the lack of any prospect of an order being made that would reduce the level of taxable income further. That order will be made under section 42B of the Administrative Appeals Tribunal Act, 1975.

29. I appreciate that Mr Greig’s application was not misconceived or lacking in substance when it was first made but a subsequent event, that is, the issuing of the notice of amended assessment, has made it so.

    END OF ORAL DECISION