Mark Van Gestel and Commissioner of Taxation
[2014] AATA 396
•20 June 2014
[2014] AATA 396
Division Taxation Appeals Division File Number(s)
2014/0616
Re
Mark Van Gestel
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Senior Member Bernard J McCabe
Date 20 June 2014 Place Brisbane The Tribunal has jurisdiction to hear the application.
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Senior Member Bernard J McCabe
CATCHWORDS
TAXATION – GST Assessment and Penalty Decision – Alleged identity fraud in lodgement of Business Activity Statement – Consideration of whether taxpayer is ‘dissatisfied’ in relevant sense with the objection decision – Tribunal has jurisdiction to review the objection decision.
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) ss 25(1); 43(1)
Taxation Administration Act 1953 (Cth) ss 8AAZLH; 14ZL; 14ZZ
CASES
CTC Resources NL v Federal Commissioner of Taxation (1994) 48 FCR 397
Command Recruitment Group (Qld) Pty Ltd and Commissioner of Taxation [2008] AATA 619REASONS FOR DECISION
Senior Member Bernard J McCabe
20 June 2014
The taxpayer in this case says he has been the victim of identity fraud that resulted in an assessment which means he owes money to the Commissioner. The taxpayer has asked the Tribunal to review the objection decision that followed the assessment but the Commissioner has raised a jurisdictional issue. The Commissioner says the taxpayer is not technically dissatisfied with the objection decision in the sense intended by the legislation. On that argument, the taxpayer is unable to challenge the objection decision. The Commissioner says the taxpayer should approach the Australian Federal Police if he believes he has been the victim of identity fraud. In the meantime, the Commissioner says the taxpayer should pay the monies he is required to pay under the assessment (subject to a small variation in the precise amount).
This unhappy tale begins with the lodgement of Business Activity Statements (“BAS”) in respect of the periods 1 July 2010 to 31 July 2010 and 1 August 2010 to 31 August 2010. Both forms were lodged electronically. The first claimed sales of $11,098 in the period which attracted GST of $1,009 – but also recorded purchases of over $123,000, which resulted in a claim for input tax credits. After adjustments to take into account other monies the taxpayer owed to the Commissioner, a refund in the amount of $9,695 was paid into an account held in the name of a third party. The Commissioner says the third party account was nominated by the taxpayer over the phone. The second BAS also recorded an excess of purchases over sales and a fuel tax credit leading to a total refund of $8,791 after adjustments. That refund was paid into an account in the name of a different third party whose identity was also supplied to the Commissioner over the phone.
The Commissioner subsequently conducted an audit of the taxpayer’s business, only to find there wasn’t one. The taxpayer says he had not conducted a business for some time, and denied ever lodging a BAS in July or August 2010. He says he did not supply the names of the third party bank accounts or receive the money that was refunded. He claims he is mystified as to how the payments came to be made. He says he has been the victim of identity fraud, and thinks the Commissioner has been taken in by a fraudster as a result of shortcomings in internal processes. The taxpayer says the Commissioner should pursue the fraudsters rather than taking the easy option of attempting to recover the monies from the taxpayer.
The Commissioner says his officers would only deal with someone over the phone – someone supplying the account details for the purposes of a refund, for instance – if the caller was able to answer a number of security “challenge” questions. That apparently occurred in this case, so the Commissioner is not inclined to believe his procedures are at fault. He says it is up to the taxpayer to prove there was fraud. In the meantime, the Commissioner wants the refund monies back from the taxpayer (although the total amount owing has been reduced after some of the monies were recovered directly from one of the third party accounts using a garnishee order).
There does not appear to be any dispute over the reasoning in the objection decision – although the taxpayer says it is all based on a fraud perpetrated by third parties that should not result in recovery action against the taxpayer. I am not in a position to form a view as to whether the taxpayer’s claims of fraud should be accepted in the absence of a full hearing. I note there have been some discussions between the parties that were summarised in a letter from the Commissioner to the taxpayer dated 6 July 2012: exhibit one at pp 38-39. If the conversations have been summarised accurately, it is unclear whether the taxpayer’s claim of identity fraud would be made out. But I would need to hear the taxpayer’s testimony under oath, review the relevant documents and hear all of the other evidence (including evidence describing the Commissioner’s procedures) before I reached a view as to the taxpayer’s credit and the likelihood of his story being true. If the taxpayer is believed, it would suggest the Commissioner’s internal safeguards against fraud are inadequate, or have not been followed.
The taxpayer wants the Tribunal to hear his story and reach a view about fraud so that he can be relieved of the obligation to pay the debt. That is where the Commissioner says there is a problem. He says it arises in this way. The Tribunal has the power to review a decision if an enactment authorises the Tribunal to review that decision: s 25(1), Administrative Appeals Tribunal Act 1975 (Cth) (“the AAT Act”). The effect of s 14ZL(1) of the Taxation Administration Act 1953 (Cth) (“the TAA”) is that objection decisions are reviewable under Part IVC of the Act. Section 14ZZ(1)(a)(i) says a person who is “dissatisfied” with a reviewable objection decision may apply to the Tribunal for review of the decision
There does not appear to be any doubt that the objection decision in question is a reviewable objection decision. But the Commissioner contends the taxpayer is precluded from seeking review because the taxpayer does not suggest he is dissatisfied with the objection decision in the sense intended by the legislation.
The word ‘dissatisfied” in s 14ZZ was discussed in CTC Resources NL v Federal Commissioner of Taxation (1994) 48 FCR 397. That case dealt with objections to private rulings issued by the Commissioner. The Full Court concluded the taxpayer who applied for the ruling was not a person dissatisfied with the decision – and was therefore unable to appeal it to the Federal Court – because the circumstances referred to in the ruling “had not occurred and could never happen; a decision by the Court could produce no legal consequences for CTC under the taxation laws”: at 408 per Gummow J. His Honour held it was not enough for the taxpayer to be curious about the outcome of an appeal if the absence of a favourable result would have no legal consequences for the taxpayer. The fact the taxpayer might have some collateral commercial objective in pursuing the appeal did not mean he or she was dissatisfied with the decision: see also 432 per Hill J.
The Commissioner relied on the decision in CTC Resources to argue the taxpayer in this case could not be said to be dissatisfied with the objection decision. The objection decision concluded the taxpayer was not liable to pay GST on any of the sales referred to in each BAS – an outcome the taxpayer surely does not dispute. But it also concluded the taxpayer was not entitled to claim input tax credits and fuel tax credits. Once again, the Commissioner notes, the taxpayer agrees that is so. On that basis, I was told, there is really nothing left for the Tribunal to do: the review “could produce no legal consequences” for the taxpayer. I was then told the taxpayer was actually complaining about the refund of the excess on the running balance account (“RBA”). Section 8AAZLH of the TAA contemplates surpluses in the RBA being refunded to the taxpayer, and that payment of the surplus funds to an account nominated by the taxpayer amounts to a discharge of the Commissioner’s obligations: s 8AAZLH(5).
The taxpayer acknowledged in submissions that he could not challenge a decision in relation to the transfer or crediting of payments in the RBA. Section 8AAZLH is found in Part IIB of the TAA, and decisions made under that part do not give rise to a right of review in the Tribunal: see Command Recruitment Group (Qld) Pty Ltd and Commissioner of Taxation [2008] AATA 619 at [10] per DP Walker. But I was (at least implicitly) invited to conclude the taxpayer is not objecting to the original refund and demand for repayment in isolation.
The taxpayer is certainly unhappy with the objection decision that affirmed the assessments of net GST amounts and net fuel credit amounts. That decision has an important consequence for him: he owes a debt to the Commissioner. He owes the debt because of the Commissioner’s application of the law to a set of factual circumstances that everyone agrees were mis-described in the BAS and reframed in the audit. While the taxpayer does not dispute the reasoning in the objection decision, he disputes the factual premise on which the reasoning and the ultimate conclusion were based – namely, that he had sought credits in a BAS in the first place. But does that amount to being dissatisfied?
I acknowledge an administrative tribunal undertaking merits review of decisions is constrained by the statutes that authorise the review. The review cannot extend to matters beyond the legislative remit. In taxation cases like this, the Tribunal’s jurisdiction is confined to “objection decisions” that are identified as being reviewable, and only at the request of a person who is “dissatisfied” in the relevant sense. The Tribunal’s review is also shaped and limited by the fact its decision-making powers are those set out in s 43(1) of the AAT Act – namely to:
(a)Affirm;
(b)Vary; or
(c)Set aside a decision and either substitute a decision of its own or remit the matter to the decision-maker for further consideration in accordance with directions.
The Tribunal certainly does not have the power to undertake a general review of the Commissioner’s internal procedures or commence an open-ended investigation into allegations of fraud. The Tribunal must focus on the reviewable decision, not on matters that are collateral to that decision, and it may only make the decisions referred to in s 43.
Having said that, I accept the taxpayer is dissatisfied with the objection decision in this case. A review of that decision necessarily extends to its factual basis. The factual basis must include the agreed fact there was no business being carried on, and therefore no entitlement to claim input tax credits and fuel tax credits. But the factual basis may also include the disputed allegation that the taxpayer never claimed the credits in the first place. If that allegation were made out, the assessment would necessarily be amended to show the taxpayer did not have any liability at all arising out of the transactions referred to in the BAS.
Where, as here:
·there is a dispute as to the factual basis of the decision which might affect the outcome, and
·the outcome has an important consequences for the taxpayer,
the taxpayer who wants to proceed with a review can be said to be dissatisfied. It follows the Tribunal has jurisdiction to deal with the application for review. The taxpayer should be allowed to offer evidence in support of his claim that the BAS statement was lodged fraudulently without his knowledge. If the Tribunal is persuaded by that evidence and concludes the taxpayer was a stranger to the interactions with the Commissioner that have led to the debt being raised, a decision can presumably be made under s 43 of the AAT Act to either vary the decision or set it aside with a view to:
·substituting the (correct or preferable) decision that the taxpayer is not liable to pay any amount, or
·remitting the decision to the Commissioner to be dealt with in accordance with the findings.
I should add the taxpayer’s task at the hearing would not be an easy one. Section 14ZZK of the TAA makes it clear the taxpayer is responsible for establishing the Commissioner was wrong. It is unclear how the taxpayer would go about discharging that onus in the absence of a successful police investigation. The police should have been involved as soon as the allegation of fraud was made: it will be hard to work out now what happened in 2010. But that is a question that can be addressed at the hearing. For now, it is enough that I find the Tribunal has jurisdiction to entertain the review.
I certify that the preceding 15 (fifteen) paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe. ........................................................................
Associate
Dated 20 June 2014
Date of hearing 17 June 2014 Applicant In person Respondent In person Advocate for the Respondent Kevin O'Seighin
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