Icehot and Commissioner of Taxation (Taxation)

[2017] AATA 1505

Icehot and Commissioner of Taxation (Taxation) [2017] AATA 1505 (25 August 2017)

Division:TAXATION & COMMERCIAL DIVISION

File number:           2017/3075

Icehot Pty Ltd

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Dr James Popple, Senior Member

Date:25 August 2017

Date of written reasons:        15 September 2017

Place:Canberra

The Tribunal does not have jurisdiction to hear the application. The application for review is dismissed under s 42A(4) of the Administrative Appeals Tribunal Act 1975.

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James Popple, Senior Member

CATCHWORDS

TAXATION — assessment of GST net amount — objection decision wholly allowed taxation objection — whether objection decision reviewable by Tribunal — person can only apply for review if dissatisfied with objection decision — objection decision not reviewable — application dismissed.

LEGISLATION

Administrative Appeals Tribunal Act 1975, ss 2A(c), 42A(4)

A New Tax System (Goods and Services Tax) Act 1999, ss 9-5, 17-5, 105-5, 195-1

Income Tax Assessment Act 1997, ss 4-5, 995-1,

Taxation Administration Act 1953, ss 2(1), 3AA, 8AAZN, 14ZL, 14ZQ, 14ZY, 14ZZ; Schedule 1, ss 155-5, 155-80, 155-90

WRITTEN REASONS FOR ORAL DECISION

Dr James Popple, Senior Member

15 September 2017

1. On 25 August 2017, I conducted a hearing in this matter.  I gave my decision, and my reasons, orally at that hearing.  On 29 August 2017, the applicant company, Icehot Pty Ltd (Icehot), requested written reasons for my decision. These are those written reasons. My reasons have been prepared having regard to the requirement, in s 2A(c) of the Administrative Appeals Tribunal Act 1975 (the AAT Act), that the Tribunal pursue the objective of providing a mechanism of review that is proportionate to the importance and complexity of the matter.

   Summary

2. The Commissioner made an objection decision which wholly allowed Icehot’s taxation objection. Icehot is dissatisfied with aspects of the Commissioner’s reasons for the objection decision. But Icehot cannot be dissatisfied with the objection decision itself, because it is precisely the decision that Icehot sought when it lodged its taxation objection. It follows that Icehot cannot apply to the Tribunal for review of the objection decision under s 14ZZ of the Taxation Administration Act 1953 (the TA Act).  The objection decision is not reviewable by the Tribunal.

   Background

3. Icehot owned two properties.  Those properties were subject to a mortgage held by the Bendigo and Adelaide Bank (the Bank).  The Bank took possession of the properties, and sold them on 3 April 2013.

4. On 3 May 2013, the Bank’s agent in the sale of the properties paid the Australian Taxation Office (the ATO) $53,386.32, which was said to be the goods and services tax (GST) liability arising from the sale of the properties.  On 7 May 2013, the ATO credited $53,386 to Icehot’s running balance account (RBA).

5. On 10 August 2016, Icehot lodged a “nil” business activity statement (BAS) for the quarter ending 30 June 2013.

6. On 5 September 2016, the Commissioner of Taxation issued an amended assessment of a GST net amount of $53,386.  The ATO debited $53,386 from Icehot’s RBA.

7. On 24 February 2017, Icehot lodged an objection against the amended assessment.  Icehot said that it was not liable to pay GST in respect of the sale of the two properties.

8. On 2 May 2017, the Commissioner allowed Icehot’s objection.  The Commissioner issued another amended assessment, this time with an assessed amount of nil, and the ATO credited $53,386 to Icehot’s RBA.  On 4 May 2017, the ATO debited $53,386 from Icehot’s RBA.[1]

   [1] See [21] below.

9. On 24 May 2017, Icehot applied to the Tribunal, under s 14ZZ of the TA Act, for review of the Commissioner’s decision.

   Decision under review

10. Icehot seeks review of the Commissioner’s objection decision on 2 May 2017.[2]

    [2]     Icehot’s application purported to be an application for review of a letter that the ATO sent Icehot on 4 May 2017, headed “Why your activity statement refund has been reduced”.  That letter was not a notice of a decision.  It was providing information to Icehot (wrong information—see [21] below) about the effect of the Commissioner’s decision on 2 May upon Icehot’s RBA.  Icehot’s application can only be understood as an application for review of the 2 May decision.

    Issue

11. The issue in this review is whether the Tribunal can review the objection decision. That depends on whether s 14ZZ(1)(a)(i) of the TA Act applies to the objection decision.

    Legislative framework

    Commissioner’s assessment

12. Section 155-5(1) of Schedule 1 to the TA Act[3] provides that “[t]he Commissioner may at any time make an assessment of an *assessable amount (including an assessment that the amount is nil)”. Section 155-80 provides that “[a]n amended assessment of an *assessable amount is an assessment for all purposes of any *taxation law”. Section 155-5(2) relevantly provides that a “net amount” is an assessable amount. Section 3AA(2) of the TA Act provides that an expression has the same meaning in Schedule 1 as in the Income Tax Assessment Act 1997 (the ITAA 1997). Section 995-1 of the ITAA 1997 provides that “net amount” has the same meaning as in s 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act). Section 195-1 of the GST Act relevantly provides that “net amount” has the meaning given by s 17-5, which includes a formula for calculating the net amount: the GST for which the person is liable less any input tax credits to which the person is entitled.

    [3] The provisions in Schedule 1 to the TA Act have effect because of s 3AA. For the remainder of these reasons, I adopt the shorthand of referring to provisions in Schedule 1 as if they were provisions in the TA Act proper.

13. So, the Commissioner may, at any time, make an assessment of a net amount, using the formula in the GST Act.

    Commissioner’s objection decision

14. Section 155-90 of the TA Act provides:

    155-90  Review of assessments

    You may object, in the manner set out in Part IVC of this Act, against an assessment of an *assessable amount of yours if you are dissatisfied with the assessment.

    Section 4-5 of the ITAA 1997 provides that “you” applies to entities generally, not just to individuals.[4] Section 14ZL of the TA Act (which is in Part IVC) provides that “[t]his Part applies if a provision of an Act … provides that a person who is dissatisfied with an assessment, determination, notice or decision … may object against it in the manner set out in this Part” and that “[s]uch an objection is in this Part called a taxation objection”.[5] Section 14ZY(1) relevantly provides that, when a person lodges a taxation objection, the Commissioner must decide whether to allow it (wholly or in part) or disallow it. Section 14ZY(2) provides that such a decision is an “objection decision”.

    [4] An expression has the same meaning in Schedule 1 to the TA Act as in the ITAA 1997: TA Act, s 3AA(2) (see [12] above).

    [5] See also s 14ZQ which provides (redundantly, as far as I can tell) that, in Part IVC, “taxation objection has the meaning given by section 14ZL”.

15. So, if:

    ·the Commissioner makes an assessment of a net amount,[6] using the formula in the GST Act; and

    ·a person is dissatisfied with their assessment

    then:

    ·the person may lodge a taxation objection against that assessment; and

    ·the Commissioner must make an objection decision.

    Tribunal review

    Section 14ZZ of the TA Act relevantly provides:

    [6] A net amount is an assessable amount: s 155-5(2) of the TA Act (see [12] above).

    14ZZ  Person may seek review of, or appeal against, Commissioner’s decision

    (1)If the person is dissatisfied with the Commissioner’s objection decision …, the person may:

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

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

    (ii)appeal to the Federal Court against the decision; …

    …

    Section 14ZQ provides that “reviewable objection decision means an objection decision that is not an ineligible income tax remission decision”. Section 2(1) provides that “Tribunal means the Administrative Appeals Tribunal”.

16. So, if:

    ·a person lodges a taxation objection against the Commissioner’s assessment of a net amount, using the formula in the GST Act;

    ·the Commissioner makes an objection decision; and

    ·the person is dissatisfied with that objection decision

    then the person may apply to the Tribunal for review of the Commissioner’s objection decision.

    Is the objection decision reviewable by the Tribunal?

17. Applying the legislative framework to the facts of this case:

    ·the Commissioner made an amended assessment (under s 155-5(1) of the TA Act) of a net amount ($53,386), using the formula in s 17-5 of the GST Act;

    ·Icehot was dissatisfied with that assessment;

    ·Icehot lodged a taxation objection (under s 155-90 of the TA Act) against that assessment;

    ·the Commissioner made an objection decision (under s 14ZY(1) of the TA Act), and issued another amended assessment of a net amount of nil; and

    ·Icehot now applies to the Tribunal (under s 14ZZ of the TA Act) for review of the Commissioner’s objection decision.

18. A person can only apply, under s 14ZZ, for review of an objection decision, if they are “dissatisfied” with the objection decision. The Commissioner points out that the objection decision was to wholly allow Icehot’s taxation objection. Icehot had objected to the amended assessment on the basis that it was not liable to pay GST in respect of the sale of the two properties. The Commissioner agreed, and issued another amended assessment of a net amount of nil. The Commissioner says that Icehot cannot be dissatisfied with a decision that wholly allowed its objection.

19. At the hearing, it became clear that Icehot is dissatisfied not with the objection decision, but with aspects of the Commissioner’s reasons for the objection decision.  In those reasons, the Commissioner said:

    In absence of evidence to the contrary, the sale of the two properties by the mortgagee in possession was a taxable supply.

    …

    Section 105-5 of the GST [Act] operates to take priority over section 9-5 of the GST Act. This section provides that the liability to pay GST on a taxable supply is that of the mortgagee in possession, namely [the Bank].

    The result of section 105-5 of the GST Act means that Icehot Pty Limited did not make a taxable supply and does not have a GST liability in relation to the sale. We have decided to allow your objection.

    …

    In order to address your concerns raised at objection in its entirety, it must be noted that whilst your objection to the amended assessment for Icehot Pty Limited has been allowed in full, the credit applied to the account of Icehot Pty Limited on 7 May 2013 of $53,386.32 is required to be removed.  The reason for the reversal of this credit is that the amount represents the GST liability paid by the mortgagee in possession in relation to the sale of two properties …

    The amount credited to the account of Icehot Pty Limited on 7 May 2013 was the amount received from the mortgagee in possession … which should not have been placed on your running balance account.  The amount was credited to the account of Icehot Pty Limited in error.

    Section 8AAZN of the Taxation Administration Act 1953 … enables the Commissioner to recover amounts paid to a person by mistake.

20. Icehot disagrees with the Commissioner about whether the Bank was liable to pay GST on the sale of the properties.  But the objection decision was not a decision that the Bank was liable to pay GST on the sale.  The objection decision was that the net amount was nil, because Icehot was not liable to pay GST on the sale.  Presumably, it was—and may still be—open to the Bank to argue that it was not liable to pay GST on the sale.  But, I note that, when the Bank paid the ATO $53,386.32 in May 2013, it did so on the basis that that was the GST liability arising from the sale of the properties.

21. Icehot also says that the ATO should not have reversed the credit that had been applied to Icehot’s RBA.  But that was not the objection decision, either.  Icehot points to a letter that the ATO sent Icehot on 4 May 2017 (two days after the objection decision).  That letter said that, after processing Icehot’s BAS for the quarter ending 30 June 2013, there was a credit of $53,386 owing to Icehot.  The letter then explained that that entire amount had been “used to reduce outstanding tax debts or other Commonwealth Government liabilities”, leaving a nil RBA balance.  As counsel for the Commissioner conceded at the hearing, the letter was wrong.  The credit of $53,386 (in May 2013) to Icehot’s RBA was reversed (in May 2017) because the Commissioner had come to the view that it had been credited in error.  It was not used to reduce outstanding tax debts or other liabilities.

    Conclusion

22. Icehot is dissatisfied with the Bank being liable to pay GST on the sale of the properties.  But that was not the objection decision.  And Icehot is dissatisfied with the ATO’s reversal of the credit that had been applied to Icehot’s RBA.  But that was also not the objection decision.  The objection decision was that the net amount was nil, because Icehot was not liable to pay GST on the sale of the properties.  Icehot cannot be dissatisfied with that decision.  It is precisely the decision that it sought when it lodged its taxation objection.

23. It follows that Icehot cannot apply to the Tribunal for review of the objection decision under s 14ZZ of the TA Act. I dismiss Icehot’s application for review, under s 42A(4) of the AAT Act, because the objection decision is not reviewable by the Tribunal.

24. This outcome is not the result of a technicality. Even if s 14ZZ did not require that Icehot be dissatisfied with the objection decision, the Tribunal could not make the decision that Icehot would want made on review. Even if the Tribunal agreed with Icehot that neither Icehot nor the Bank was liable to pay GST on the sale of the properties, it could do no more on review than the Commissioner did in the objection decision: make an assessment that Icehot’s GST net amount was nil.

I certify that the preceding 24 (twenty-four) paragraphs are a true copy of the reasons for the decision herein of Senior Member Popple

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Associate

Dated: 15 September 2017

Date of hearing:	25 August 2017
Advocate for the Applicant:	Mr Michael Buggy
Counsel for the Respondent:	Mr Vivek Raj
Solicitors for the Respondent:	Review and Dispute Resolution, Australian Taxation Office