Metricon Qld Pty Ltd v Chief Commissioner of State Revenue
[2013] NSWSC 982
•25 July 2013
Supreme Court
New South Wales
Medium Neutral Citation: Metricon Qld Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 982 Hearing dates: 27 June 2013 Decision date: 25 July 2013 Jurisdiction: Equity Division - Revenue List Before: White J Decision: Refer to paras [62] and [63] of judgment.
Catchwords: TAXES AND DUTIES - taxation administration - reassessment of tax liability of taxpayer under s 9 of Taxation Administration Act 1996 - Chief Commissioner made reassessment after taxpayer began proceedings for review in Administrative Decisions Tribunal - whether existing proceedings in tribunal or court prevents Chief Commissioner from making a valid reassessment - ratio decidendi of St George Leagues Club Ltd v Commissioner of Land Tax [1983] 2 NSWLR 399 Legislation Cited: Land Tax Management Act 1956
Taxation Administration Act 1996
Valuation of Land Act 1916
Income Tax Assessment Act 1936 (Cth)
Taxation Administration Act 1953 (Cth)Cases Cited: St George Leagues Club Ltd v Commissioner of Land Tax [1983] 2 NSWLR 399
Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184
B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; (2008) 74 NSWLR 481
Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] HCA 41; (2011) 245 CLR 446
Federal Commissioner of Taxation v S Hoffnung & Co Ltd (1928) 42 CLR 39
White Industries Australia Pty Ltd v Federal Commissioner of Taxation [2003] FCA 599; (2003) 129 FCR 276
W & A McArthur Ltd v Federal Commissioner of Taxation (1930) 45 CLR 1
McNally v Commissioner of State Revenue [2003] NSWSC 1118; (2003) 54 ATR 651
Epov v Federal Commissioner of Taxation [2007] FCA 34; (2007) 65 ATR 399
Fabry v Commissioner of Taxation [2003] FCA 1043; (2003) 132 FCR 239Category: Separate question Parties: Metricon Qld Pty Ltd (Plaintiff)
Chief Commissioner of State Revenue (Defendant)Representation: Counsel:
Dr H Sorensen (Plaintiff)
Mr I Young (Defendant)
Solicitors:
Bolster & Co (Plaintiff)
Crown Solicitor (Defendant)
File Number(s): 2013/120263
Judgment
HIS HONOUR: On 27 June 2013 I made an order by consent pursuant to r 28.2 of the Uniform Civil Procedure Rules that the following question be determined separately and in advance of any other questions in the proceedings, namely:
"Whether the assessment notified by the 2010 land tax assessment notice (ID 1566119952) (showing the amount of the reassessment) issued on 9 August 2012 is invalid and beyond the power conferred by s 9 of the Taxation Administration Act 1996 ('TAA') for the defendant to make a reassessment solely on account that the initial assessment for the 2010 land tax year, being land tax assessment notice (ID 1538278886), issued on 8 December 2010 was already the subject of a review under Pt 10 of the TAA?"
On 8 December 2010 the Chief Commissioner of State Revenue ("the Commissioner") wrote to the solicitors for the plaintiff enclosing a land tax assessment notice for the 2009 and 2010 tax years. For the 2010 tax year the plaintiff was assessed to be liable to pay land tax of $532,135.70 based on 73 parcels of aggregated land having a taxable value of $27,920,867. The notice of assessment stated that three parcels of land, namely two parcels of land at Terranora and a parcel of land at Banora Point, were exempt from land tax. In the covering letter accompanying the notice of assessment the Office of State Revenue advised that those three parcels of land had been accepted as being the subject of the "primary production exemption" (in s 10AA of the Land Tax Management Act 1956) from February 2009, or, in one case, from 28 July 2009. The Office of State Revenue advised that five other properties did not qualify for the primary production exemption.
The notice of assessment also included an assessment for land tax for the 2009 tax year. None of the properties was assessed as being exempt from land tax for that year.
On 3 February 2011 the plaintiff lodged an objection to the 2009 and 2010 land tax assessment notice. The plaintiff contended that all eight properties were exempt from land tax pursuant to s 10AA of the Land Tax Management Act for the 2009 and 2010 years. On 29 May 2012 the Chief Commissioner disallowed the objection.
On 25 July 2012 the plaintiff filed an application in the Administrative Decisions Tribunal pursuant to s 96 of the Taxation Administration Act 1996 for the review of the decision of the Chief Commissioner that had been the subject of the objection. The application for review described the decision to be reviewed as that made on 29 May 2012, that is, the decision to disallow the objection. That was an error.
On 9 August 2012 the Chief Commissioner wrote to the plaintiff enclosing a land tax assessment notice covering the 2010 to 2012 tax years. In relation to the 2010 tax year, the notice of assessment was a reassessment. The three properties that formerly had been assessed as being exempt from land tax were instead assessed as being liable for land tax. The result was that the plaintiff was assessed for land tax for the 2010 tax year on land having a taxable value of $67,469,601. It was assessed as being liable for land tax for the 2010 year in the sum of $1,323,110.40. The notice of assessment stated that it replaced the previous notification and that the reason for the new assessment was "exemption/concession change for land item".
On 26 September 2012 the plaintiff lodged an objection to the land tax assessment for the 2010, 2011 and 2012 tax years. In the objection the plaintiff contended that the eight properties were exempt from land tax in respect of each of the tax years 2010, 2011 and 2012 because they were used for primary production and otherwise satisfied the requirements of s 10AA of the Land Tax Management Act.
On 18 April 2013 the plaintiff filed a summons in this Court seeking orders that the assessments for each of the 2010, 2011 and 2012 tax years be revoked and that the matter be remitted to the Chief Commissioner for determination in accordance with the Court's finding or decision. That was an application pursuant to s 97 of the Taxation Administration Act for review of the Chief Commissioner's decision that had been the subject of the objection. In its Appeal Statement in support of the summons the plaintiff contended, amongst other things, that the 2010 assessment was invalid because the Chief Commissioner could not amend an assessment that was already the subject of a review under Pt 10 of the Taxation Administration Act. That is the question now to be determined.
In support of that contention, Dr Sorensen, who appeared for the plaintiff, relied on the decision of Lee J in St George Leagues Club Ltd v Commissioner of Land Tax [1983] 2 NSWLR 399. He submitted that there were close similarities between the provisions of the Land Tax Management Act 1956 concerning assessments, reassessments, objections and appeals as it stood at the time of that decision and the current provisions of the Taxation Administration Act. He submitted that in the St George Leagues Club case Lee J found that it was not open to the Commissioner to exercise the statutory powers affecting an assessment, once a statutory appeal had been initiated. By parity of reasoning, the same was true of Div 2 of Pt 10 of the Taxation Administration Act. Dr Sorensen submitted that the intent of Div 2 of Pt 10 of the Taxation Administration Act was that once an application for review was made to the Administrative Decisions Tribunal or to the Supreme Court, it was for the tribunal or court to determine whether the assessment was to be confirmed, revoked or replaced by an assessment made by the tribunal or the court and it was not open to the Chief Commissioner to issue a reassessment, except if the matter was remitted to the Chief Commissioner for determination in accordance with the finding or decision of the court or tribunal, or to give effect to such a decision (Taxation Administration Act, ss 101(1)(d) and 102(1)).
The starting point is not the decision in the St George Leagues Club case, but the relevant provisions of the Taxation Administration Act and the Land Tax Management Act.
Sections 8 and 9 of the Taxation Administration Act provide:
"8 General power to make assessment
(1) The Chief Commissioner may make an assessment of the tax liability of a taxpayer.
(2) An assessment of a tax liability may consist of a determination that there is not a particular tax liability.
9 Reassessment
(1) The Chief Commissioner may make one or more reassessments of a tax liability of a taxpayer.
(2) A reassessment of a tax liability is to be made in accordance with the legal interpretations and assessment practices generally applied by the Chief Commissioner in relation to matters of that kind at the time the tax liability arose except to the extent that any departure from those interpretations and practices is required by a change in the law (whether legislative or non-legislative) made after that time.
(3) The Chief Commissioner cannot make a reassessment of a tax liability more than 5 years after the initial assessment of the liability, unless:
(a) the reassessment is to adjust tax to give effect to a decision on an objection or review as to the initial assessment, or
(b) at the time the initial assessment or a reassessment was made, all the facts and circumstances affecting the liability under the relevant taxation law of the person in respect of whom the assessment or reassessment was made were not fully and truly disclosed to the Chief Commissioner and, as a result, the tax liability was assessed at a lower amount than the Chief Commissioner would otherwise have assessed it, or
(c) the reassessment is authorised to be made more than 5 years after the initial assessment by another taxation law, or
(d) the reassessment is made as a consequence of an application by a taxpayer, being an application made within 5 years after the initial assessment of the liability, and the reassessment reduces the tax liability.
(4) The initial assessment of a tax liability remains the initial assessment of the liability for the purposes of this Act even if it is withdrawn under section 13."
Section 13 provides that the Chief Commissioner may withdraw an assessment for which a notice of assessment has been issued at any time within five years after the date of issue of the notice, whether or not the amount of tax specified in the assessment has been paid.
Section 14 provides:
"14 Notice of assessment, reassessment or withdrawal of assessment
(1) The Chief Commissioner may issue a notice of assessment (showing the amount of the assessment).
(2) If the Chief Commissioner has not issued a notice of assessment of the tax liability of a taxpayer, the Chief Commissioner must issue the notice if a request to do so is made by the taxpayer within 5 years after the liability arose.
(3) If the Chief Commissioner makes a reassessment, the Chief Commissioner must issue a notice of assessment (showing the amount of the reassessment).
(4) If the Chief Commissioner withdraws an assessment, the Chief Commissioner must issue a notice of withdrawal of assessment.
(5) The notice is to be in a form approved by the Chief Commissioner."
Section 119 provides:
"119 Evidence of assessment
Production of a notice of assessment, or of a document signed by the Chief Commissioner purporting to be a copy of a notice of assessment, is:
(a) conclusive evidence of the due making of the assessment, and
(b) conclusive evidence that the amount and all particulars of the assessment are correct, except in objection or review proceedings when it is prima facie evidence only."
Consistently with s 119, s 16 provides that the validity of an assessment is not affected because a provision of a taxation law has not been complied with.
Section 86 provides:
"86 Objections
(1) A taxpayer who is dissatisfied with:
(a) an assessment that is shown in a notice of assessment served on the taxpayer, or
(b) any other decision (within the meaning of section 6 of the Administrative Decisions Tribunal Act 1997) of the Chief Commissioner under a taxation law,
may lodge a written objection with the Chief Commissioner.
(2) However, a taxpayer may not lodge such an objection in respect of the following:
(a) an assessment made under section 12 (Compromise assessment) with the agreement of the taxpayer,
(ab) a decision not to make an assessment under section 12,
(b) the determination of an objection under this Part (including such part of any reassessment that gives effect to the determination of an objection that is allowed in whole or in part),
(c) a decision to reassess the taxpayer's tax liability that does not have the effect of increasing that liability where the taxpayer seeks to lodge the objection more than 60 days after the date of service of the notice of the initial assessment,
(d) a decision not to reassess the taxpayer's tax liability where the taxpayer seeks to lodge the objection more than 60 days after the date of service of the notice of the initial assessment.
(3) The provisions of subsection (2) (c) and (d) do not preclude the lodgment of an objection that is sought to be lodged more than 60 days after the date of service of the notice of the initial assessment if the Chief Commissioner permits its lodgment. The provisions of section 90 (2)-(5) apply to any such objection in the same way as they apply to an objection referred to in section 90 (1)."
In s 3 "assessment" is defined as follows:
"assessment means an assessment made by the Chief Commissioner under Part 3 of the tax liability of a person under a taxation law, and includes:
(a) a reassessment and a compromise assessment under Part 3, and
(b) an assessment by the Supreme Court or the Administrative Decisions Tribunal on an application for a review."
Section 87(2) provides that in the case of a reassessment the grounds for objection are "limited to the extent of the reassessment".
Section 91 requires the Chief Commissioner to consider an objection and either allow the objection in whole or in part or disallow the objection.
Sections 96 and 97 provide that a taxpayer may apply to the Administrative Decisions Tribunal or to the Supreme Court for a review of a decision of the Chief Commissioner that has been the subject of an objection under Div 1 of Pt 10 if the taxpayer is dissatisfied with the Chief Commissioner's determination of the taxpayer's objection, or if 90 days have passed since the taxpayer's objection was served on the Chief Commissioner and the Chief Commissioner has not determined the objection. Section 91(2) provides that the Chief Commissioner may determine an objection that is the subject of an application for review under Div 2 (that is, ss 96 or 97) at any time before the hearing of the application for review commences. Section 99 requires that an application for review following a determination by the Chief Commissioner of an objection must be made not later than 60 days after the date of issue of the notice of the Chief Commissioner's determination of the objection. That period can be extended. By reason of s 100(2) neither the taxpayer's case nor the Chief Commissioner's case on an application for review is limited to the grounds of the objection.
Section 101(1) provides:
"101 Powers of court or tribunal on review
(1) The court or tribunal dealing with the application for review may do any one or more of the following:
(a) confirm or revoke the assessment or other decision to which the application relates,
(b) make an assessment or other decision in place of the assessment or other decision to which the application relates,
(c) make an order for payment to the Chief Commissioner of any amount of tax that is assessed as being payable but has not been paid,
(d) remit the matter to the Chief Commissioner for determination in accordance with its finding or decision,
(e) make any further order as to costs or otherwise as it thinks fit."
The plaintiff contends that there is an implied limitation on the Chief Commissioner's power under s 9 to make one or more reassessments of a tax liability of a taxpayer and the power cannot be exercised where an application for review of a decision that has been the subject of the objection is made to the Administrative Decisions Tribunal or to the Supreme Court.
There is an express limitation in s 9(3) as to the time by which the Chief Commissioner can make a reassessment of a tax liability after the initial assessment. Section 9(2) regulates how a reassessment of a tax liability is to be made. These are the only express qualifications to the Chief Commissioner's power to reassess. If the limitation contended for were intended, it could be expected that it would be made expressly.
No such limitation could be implied unless the exercise of the power under s 9 to make a reassessment would compromise review proceedings brought in the tribunal or the court following the disallowance of an objection to an initial assessment, or a failure to make an initial assessment within the time prescribed.
The exercise of the Chief Commissioner's power to make a reassessment should not compromise review proceedings. If the reassessment is that the taxpayer's liability is increased, the taxpayer has the right to object and if the objection is unsuccessful, to apply for the review of the reassessment. That is this case. The applications for the review of the initial assessment and the reassessment can be heard together. There can be some administrative dislocations where one application for review is made to the tribunal and the other is made to the court. In this case, those administrative difficulties are to be addressed by the earlier application to the tribunal being withdrawn for the purposes of the court's dealing with the matter, provided that the tribunal approves that course pursuant to s 97(2). Any such procedural complications are the result of a dual system for review and do not imply any limitation on the power of the Chief Commissioner to make a reassessment pursuant to s 9.
The Chief Commissioner's decision that is the subject of review under s 96 or s 97 is the decision that was the subject of objection, not the decision on the objection (Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [28] and [53]; B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; (2008) 74 NSWLR 481 at [123], 506). The court or tribunal reviewing the initial decision conducts a de novo review that is not limited to the materials before the Chief Commissioner. The parties are not bound by the grounds of objection or reasons for decision on the objection. The taxpayer is not required to show that the Chief Commissioner had erred on the materials before the Chief Commissioner, or that the exercise of any discretion by the Chief Commissioner was vitiated by a mistake of law, or failure to have regard to a consideration to which regard was required to be had, or by having regard to extraneous considerations (Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] HCA 41; (2011) 245 CLR 446 at [13]-[22], 452-455). On the de novo review the court or tribunal is not confined to confirming or revoking the assessment. It can make an assessment in place of the Chief Commissioner's assessment, and can make an order for payment of any amount of tax that is assessed as being payable but has not been paid, including tax that is assessed by the court or tribunal as being payable (Taxation Administration Act, ss 3, 101(1)(b) and (c)).
Accordingly, the issues raised by a notice of reassessment could be ventilated in the proceedings for the review of the Chief Commissioner's decision to make the initial assessment, even if the times for objection to the reassessment and the making of a decision on the objection were still running, and that process had not run its course. A reassessment is an amendment of the initial reassessment, not an independent and additional assessment (Federal Commissioner of Taxation v S Hoffnung & Co Ltd (1928) 42 CLR 39 at 54; White Industries Australia Pty Ltd v Federal Commissioner of Taxation [2003] FCA 599; (2003) 129 FCR 276 at [30], 282-283). The decision of the court or tribunal on the review of the original assessment will conclusively determine (subject to appeal) the taxpayer's liability (W & A McArthur Ltd v Federal Commissioner of Taxation (1930) 45 CLR 1 at 10). Accordingly, the decision of the court or tribunal on review of the initial assessment will also determine the matters arising under a notice of reassessment. The issue of a notice of reassessment will not stultify the proceedings. All that will be required is that the issues raised by the reassessment be dealt with in the review proceedings.
The fact that the taxpayer is entitled to object to the Chief Commissioner's decision to make the reassessment and to have that objection considered and determined by the Chief Commissioner may mean that review proceedings from the initial assessment may have to be adjourned to allow that to be done. That is because there is one assessment and the decision of the court or tribunal will be determinative, subject to appeal. But there is no reason the taxpayer could not waive its right to have its objection to a reassessment considered and determined by the Chief Commissioner. Both parties could advance before the court or tribunal in the proceedings for review of the initial assessment the arguments that would be raised in the objection to the reassessment and the decision on that objection.
The position is even clearer if the Chief Commissioner decided to make a reassessment that reduced the taxpayer's liability whilst review proceedings were pending. Assume a case where the Chief Commissioner had initially assessed the tax liability of the taxpayer to be $100,000. The taxpayer asserted that it had no tax liability, but the Chief Commissioner wholly rejected the objection. An application for review was made to the tribunal or to the court. On further consideration the Chief Commissioner considered that the true tax liability of the taxpayer was not $100,000 but $50,000, but the taxpayer adhered to its contention that there was no liability. No doubt on the hearing of the application for review, the contest between the parties would be whether the taxpayer's liability was $50,000 or nil or some other figure, presumably not more than $50,000. But in the meantime, if the Chief Commissioner did not have the power to make a reassessment and issue a notice showing the amount of the reassessment because review proceedings were pending, pursuant to ss 103(1) and 119 of the Taxation Administration Act, the notice of the initial assessment would be conclusive evidence (except in the review proceedings) that the assessment was correct, notwithstanding the pendency of the application for review. The taxpayer might be wound up in insolvency on the basis that it could not dispute a liability of $100,000 even though that was no longer the Chief Commissioner's position.
For these reasons, I do not consider that there is anything in the Taxation Administration Act from which a limitation is to be implied on the power of the Chief Commissioner to make a reassessment pursuant to s 9 of that Act because review proceedings are pending.
The purpose of the Taxation Administration Act is to make general provision with respect to the administration and enforcement of the other taxation laws (s 7(1)). I was not referred to anything in any other taxation law, apart from the Land Tax Management Act that would be relevant to the extent of the Chief Commissioner's power under s 9. Section 9AA of the Land Tax Management Act bears on that question. Subsection 9(4) of the Land Tax Management Act provides that the land value of land, in relation to a land tax year, is the value entered in the Register of Land Values kept under s 14CC of the Valuation of Land Act 1916 as the land value of the land as at 1 July in the previous year. Land tax is levied on the taxable value of all land in New South Wales owned by the taxpayer (s 7). The taxable value of that land is the total sum of the average value of each parcel of that land. The average value is to be calculated in accordance with s 9AA, on the basis of the land value of the land (s 9(2) and (3)). Pursuant to s 9AA(1) the average value of a parcel of land is the average of the land value of the land in relation to the year for which the average value is being ascertained and the land value in the two preceding land tax years. The land values are those that are entered on the Register. Those values can be adjusted pursuant to the Valuation of Land Act 1916 as the result of revaluations of land made by the Valuer-General.
Section 9AA(10) of the Land Tax Management Act provides:
"9AA Average value of land
...
(10) If the land value of land in relation to a land tax year is altered (whether as a result of being reascertained or on objection or appeal or for the correction of a clerical error or misdescription), the average value of the land must be reascertained on the basis of the altered land value."
The effect of this provision is that the Chief Commissioner may be required to make a reassessment of the land tax payable in relation to a land tax year after an initial assessment has been made by reason of a subsequent revaluation of land made by the Valuer-General. This is inimical to the suggested limitation on the power of the Chief Commissioner to make a reassessment if review proceedings are pending.
The decision in St George Leagues Club Ltd v Commissioner of Land Tax
In St George Leagues Club Ltd v Commissioner of Land Tax the Commissioner initially assessed the St George Leagues Club as being liable to pay land tax on two properties, one of which was situated at Wollongong and the other at Baulkham Hills. The Wollongong property was used as a caravan park for members of the Club. The Baulkham Hills property was used as a base for waterskiing by members of the Club. The Club objected to the assessments. The Commissioner decided on the objections that the Baulkham Hills property was exempt from land tax and he partly allowed the objection in respect of the Wollongong property. The Club requested that its objection to the Wollongong assessment be treated as an appeal to the Supreme Court. It was dissatisfied with having been given only a partial exemption. When the appeal to the Supreme Court was pending, the Commissioner by a letter dated 1 December 1982 purported to vary his decision on the objections by advising that both properties were wholly liable for tax.
At the time the provisions concerning assessments, reassessments, objections and appeals in relation to land tax were all contained in the Land Tax Management Act. Section 14 of the Land Tax Management Act provided that the Commissioner of Land Tax should cause an assessment to be made of the taxable value of the land owned by any taxpayer and for the land tax payable thereon. Subsection 16(1) provided:
"(1) Subject to the provisions of this section, the Commissioner may, of his own motion or upon an application received from a taxpayer, amend any assessment by making such alterations in or addition thereto or such further alterations in or additions thereto as he thinks necessary to ensure its completeness and accuracy."
Subject to immaterial exceptions, such an amendment to an assessment was to be made within three years after the service of the notice of assessment or of any amendment thereof (s 16(2)(c)). The notices of assessment were issued on 5 March 1980. The Commissioner's letter of 1 December 1982 was within the three-year period.
Section 35 provided:
"(1) Any taxpayer who is dissatisfied with an assessment made by the Commissioner under this Act or with any alteration in or addition to any assessment may, within thirty days after service of the notice of assessment or of the alteration in or addition to an assessment, or within such further time as the Commissioner may allow, post to or lodge with the Commissioner an objection in writing against the assessment, alteration, or addition, stating fully and in detail the grounds on which he relies.
...
(3) The Commissioner shall, with all reasonable despatch, consider the objection and may either disallow it or allow it either wholly or in part.
(4) The Commissioner shall give to the objector written notice of his decision on the objection.
(5) A taxpayer who is dissatisfied with the decision of the Commissioner may, within thirty days after service of the notice of that decision or within such further time as the Commissioner may allow, in writing request the Commissioner to treat his objection as an appeal and to forward it to the Supreme Court, and the Commissioner shall, within thirty days of the receipt by him of the request, forward it accordingly."
Section 37(2) provided that a taxpayer was limited on the hearing of the appeal to the grounds stated in his objection. Section 37(3) provided:
"If the assessment has been reduced by the Commissioner after considering the objection, the reduced assessment shall be the assessment appealed from."
Section 37(4) provided that on the hearing of the appeal the Court could make such order as it thought fit and reduce, increase or vary the assessment.
Dr Sorensen for the plaintiff submitted that pursuant to s 35(5) it was the objection that was to be treated as an appeal and pursuant to s 35(1) the objection was an objection against the assessment. Hence the subject matter of the appeal was the assessment and not the decision of the Commissioner on the objection. This was made clear by s 37(3). That is also the position under the Taxation Administration Act.
In the St George Leagues Club case, Lee J said that the Commissioner's letter of 1 December 1982 sought to vary his decision on the objection (at 400F). His Honour said:
"The Club then appears to have treated this decision as a further decision under s 35(3) of the Act and, having objected, requested, pursuant to s 35(5), that its objection be treated as an appeal and forwarded to this court. This was done, and on 24th December 1982, the Club issued its second summons in these proceedings. That summons sought the following two orders:
(1) An order that the objection of the plaintiff dated 24th December, 1982, to the purported variation or assessment dated 1st December, 1982 ... be allowed.
(2) An order or declaration that the Commissioner for Land Tax has no legal power to vary by letter dated 1st December 1982, the allowance of objection by letter dated 28th September 1982 for the said [Baulkham Hills] property."
Notwithstanding that by its second summons the Club apparently treated the Commissioner's letter of 1 December 1982 as a reassessment to which it had objected, as well as a purported variation of the decision of 28 September 1982 on the objection to the initial assessment, that was not how the matter was dealt with. Rather, Lee J treated the letter of 1 December 1982 as a purported variation of the decision on the objections. His Honour said (at 401):
"In the result then, this second summons is seeking to appeal against a purported variation of a decision made in respect of the original assessment, which decision is itself the subject of the appeal under the first summons."
Lee J continued:
"The first question which arises is whether the purported variation by the letter of 1st December, 1982, of the decision given in the letter of 28th September, 1982 - that being a decision under s 35(4) - is of any legal consequence.
In my opinion the Commissioner is precluded from altering any decision made by him pursuant to s 35(3) after an appeal has been instituted in this Court pursuant to s 35(5). The plain intention of the appeal provisions is that after the appeal has been initiated under s 35(5), the court shall decide upon the correctness or otherwise of the Commissioner's decision and, having decided, shall act under s 37(4), that is, 'may make such order as it thinks fit and may reduce, increase or vary the assessment'. That section, to the extent that it refers to reducing, increasing or varying the assessment, contemplates that the court will in any of those events, by its orders, alter 'the assessment' and the assessment referred to is the original assessment or, if it has been reduced by the Commissioner after considering the objection, the reduced assessment: s 37(3). The intention of s 37 is, in my view, that if the Commissioner's decision is favourable and results in reduction of the liability stated in the assessment he will then assess the tax payable and that that assessment will be before the court on the appeal. That then becomes 'the assessment appealed from': s 37(3). If the decision on the objection is not favourable the original assessment is the assessment appealed from. In making the reduced assessment the Commissioner will be exercising the power given to him by s 16 to amend an assessment. The Act, it is to be noted, does not require that an assessment be in any particular form, and there is only one assessment in respect of all the land owned by the taxpayer at the appointed time: s 14. The absence of the reduced assessment at the appeal will not of itself, as the counsel for the Commissioner quite properly conceded, render the appeal incompetent. In a case such as the present, where the decision to exempt part of the land requires a valuation of that part of the land pursuant to s 54 of the Act, the assessment can only be made after the valuation is made and this may take some time, but that need not in most cases prevent the question raised by the objection being determined by the court.
It follows from the foregoing, that for all purposes, the Commissioner's letter of 1st December, 1982, advising the Club that the decision of 28th September, 1982, was varied was of no effect and the plaintiff is entitled under the second summons issued by it to a declaration to that effect."
The declaration made was that:
"... the letter dated 1st December, 1982 from the Commissioner for Land Tax to the Club purporting to vary the Commissioner's decision of 28th September, 1982, in regard to the objection of the Club to the assessments made by the Commissioner on 5th March 1980, effects no variation of the said decision and is devoid of all legal consequences."
Lee J considered whether it was open to the Commissioner to submit that the decision he made under s 35(3) was incorrect and that the original assessment should stand, even though he had no power to vary the decision (at 402-403). His Honour concluded that the Commissioner was free so to contend. His Honour observed that s 16 gave the Commissioner power of his own motion to amend an assessment by making such alterations as he though necessary to ensure its completeness and accuracy. Nonetheless, his Honour did not treat the Commissioner's letter of 1 December 1982 as a reassessment made under the power conferred by s 16. Notwithstanding the relief sought in para 1 of the second summons (see [40] above) it does not appear to have been argued that the letter of 1 December 1982 was a reassessment under that section.
Lee J noted that s 37(4) expressly gave the Court power to increase an assessment which implied that irrespective of any decision of the Commissioner under s 35, the Court was empowered nonetheless to determine the tax payable and increase the amount of duty beyond that assessed to make the assessment accord with the Act as properly construed (at 402).
Dr Sorensen for the plaintiff submitted that the power of the court and the tribunal under s 101(1)(b) is of the same width. He submitted that although the Chief Commissioner did not have power to amend an assessment, nonetheless the court or tribunal in dealing with an application for review of the initial assessment could make an assessment that increased the taxpayer's liability. I agree that the powers of the court or tribunal under s 101(1)(b) and (c) extend to making an assessment that increases the assessment the subject of review. But it does not follow that the Chief Commissioner lacks the power to make a reassessment where review proceedings are pending.
Because in the St George Leagues Club case Lee J treated the letter of 1 December 1982 as a purported variation of the Commissioner's decision on the objection under s 35(3) and not as an amendment to the assessment under s 16, to which separate objection could be taken, he was faced with a difficulty that under s 37(2) the taxpayer was limited on the hearing of the appeal to the grounds stated in the objection. Lee J concluded (at 403) that:
"When, therefore, the Commissioner comes before the court and claims that he has erred in making a decision favourable to the taxpayer on the taxpayer's objection (whether he has issued a reduced assessment or not) and claims that a greater amount of tax is payable and his decision would require, it seems to me that the taxpayer should thereby be regarded as free of the restriction placed upon him by s 37(2) and be entitled to rely upon any ground of exemption or circumstance which is relevant to the question of the proper amount of tax payable."
With respect, it is difficult to see how this reasoning can be reconciled with the express terms of s 37(2) that:
"A taxpayer shall be limited, on the hearing of the appeal, to the grounds stated in his objection."
Lee J justified this construction on the basis that justice required that s 37(2) have no application. That was only so if the amended decision were characterised as an invalid amendment to the decision on the objection. No such question would have arisen had the Court been asked to decide whether the Commissioner's letter was an amended assessment to which objection could be taken on grounds to be specified. Possibly the difficulty was that at the time of filing the second summons no decision would have been made on the objection apparently made to the "variation or assessment" of 1 December 1982 (to quote para 1 of the second summons). If that were so, the claim for relief in para 1 of the second summons may have been unsustainable because the second summons was filed prematurely, and there may have been no valid appeal from the "reassessment" under s 35(5).
The reasoning in the St George Leagues Club case is not easy to follow. The issue as formulated by Lee J was whether the Commissioner could vary his decision on the objection under s 35(3). Notwithstanding references to the Commissioner's power to amend an assessment under s 16, his Honour did not directly address the scope of that power.
Although it is not clear, his Honour's reasoning may have been turned on the fact that s 37(3) provided that if a reassessment resulted in a reduction of the liability stated in the assessment then the subject of the appeal would be the reduced reassessment, but there was no similar provision if the reassessment resulted in an increase in the stated liability. This implied that a reassessment resulting in an increased stated liability would not be the subject of the appeal, and this in turn implied that the Commissioner could not make a reassessment that increased the stated liability. This may be the reasoning in the passage quoted at [42] above, although Lee J did not expressly refer to the significance of the absence of an express provision concerning the impact of an increased reassessment on an appeal. The first implication would arise from the terms of s 37(3), and the second implication might arise from the fact that a determination of the appeal would conclusively determine the taxpayer's liability.
The Taxation Administration Act does not include a provision equivalent to the now repealed s 37(3). There is no provision addressing the impact on review proceedings of a reassessment that reduces a taxpayer's stated liability. Hence, no implication can be drawn from the absence of an express provision concerning the impact on review proceedings of a reassessment that increases the taxpayer's stated liability.
His Honour drew from s 14 that there could be only one assessment in respect of the taxpayer's land at the appointed time.
Section 14 was amended to provide that the Commissioner's duty to cause an assessment to be made of the taxable value of the land owned by any taxpayer and the land tax payable thereon is subject to the Taxation Administration Act. That is not a material change because at the time of the St George Leagues Club decision s 14 was subject to s 16. If, by the reference to s 14, Lee J was intending to convey that s 14 precluded the making of a reassessment where review proceedings were pending, I respectfully disagree. There was nothing in that section that could limit the Commissioner's power of reassessment under s 16.
I accept Dr Sorensen's submission that the decision in the St George Leagues Club case was not confined to a decision on the Commissioner's power to amend a decision on an objection under s 35(3). The finding at the conclusion of the passage quoted at [42] and the declaration that the Commissioner's letter of 1 December 1982 was devoid of all legal consequences demonstrate that Lee J must have been of the view that the Commissioner did not have the power to increase the initial assessment after the taxpayer had requested that the objection to the initial assessment be treated as an appeal to be forwarded to the Supreme Court. However, the reasons for this further conclusion are unclear. They appear to be primarily based on an implication to be derived from s 37(3) of the Land Tax Management Act as it then stood. There is no equivalent provision in the Taxation Administration Act.
I conclude that the St George Leagues Club case is not of assistance in deciding whether there is an implied limitation to the Chief Commissioner's power under s 9 of the Taxation Administration Act because a review proceeding is pending.
The plaintiff's submission is not advanced by the decision in McNally v Commissioner of State Revenue [2003] NSWSC 1118; (2003) 54 ATR 651. In that case Gzell J distinguished St George Leagues Club Ltd v Commissioner of Land Tax, but the present issue did not arise. In that case the taxpayers, being husband and wife, were assessed for liability to land tax on the basis that one property (in Greenwich) was exempt as being the taxpayers' principal place of residence. Another property (at Noraville) was assessed as not being exempt. The taxpayers objected and sought a review of the Commissioner's decision on the basis that the Noraville property was also exempt from land tax as the principal place of residence of the husband. During the course of the proceedings, it emerged that there was an arguable basis for treating the Greenwich property as not being entitled to exemption. It does not appear that the Chief Commissioner made a reassessment. Instead, he argued that on the application for review under s 97(1) the Court could make an assessment of the land tax payable by making an assessment of the land value of the Greenwich property. Gzell J rejected that argument because s 101(1)(b) of the Taxation Administration Act empowers the Court to make an assessment or other decision in place of the assessment to which the application relates only in dealing with "the application for review". The application for review, his Honour held, related only to the taxable value of the Noraville property. Accordingly, s 101(1)(b) did not enable the Court to make an assessment of the taxable value of the Greenwich property (at [31]-[35]).
In McNally, Gzell J said (at [27]) that what is referred to the Court for review under s 97(1) is the adverse decision of the Chief Commissioner on the notice of objection. Dr Sorensen submitted that that was incorrect as what is referred to the Court for review is the assessment which was the subject of the objection. That is so, but it does not mean that there is anything in McNally that supports an implied limitation on the Chief Commissioner's power under s 9 to make a reassessment because review proceedings are pending.
The St George Leagues Club case was distinguished by Edmonds J in Epov v Federal Commissioner of Taxation [2007] FCA 34; (2007) 65 ATR 399, and on appeal to the Full Federal Court in Epov v The Commissioner of Taxation [2007] FCAFC 139; (2007) 68 ATR 8. That case concerned the scope of the power of the Commissioner of Taxation of the Commonwealth to amend an assessment pursuant to s 170 of the Income Tax Assessment Act 1936 (Cth). The section expressly provided that the Commissioner had power to amend an assessment at any time. Moreover, under s 14ZZN of the Taxation Administration Act 1953 (Cth) an appeal to the Federal Court is against an objection decision, not against the decision that was the subject of the objection. In Epov, Edmonds J, at first instance, and the Full Federal Court held that the St George Leagues Club case had no relevance to the power of the Commonwealth Commissioner of Taxation to amend an assessment under s 170 of the Income Tax Assessment Act. Clearly that is so. Because of the differences between the relevant Commonwealth legislation and the Taxation Administration Act 1996 (NSW) the decision in Epov does not dictate or indicate the decision to be made in this case.
For the same reason the decision of Merkel J in Fabry v Commissioner of Taxation [2003] FCA 1043; (2003) 132 FCR 239 on the scope of the Commissioner's power to amend an assessment "at any time" pursuant to s 170(1) of the Income Tax Assessment Act 1936 does not dictate the result of the present application. Nonetheless, for the reasons above the St George Leagues Club case is not an authority on the extent of the Chief Commissioner's power to make a reassessment under s 9 of the Taxation Administration Act. For the reasons above, there is nothing in the text or the context or purpose of that Act that impliedly limits the Chief Commissioner's power to make a reassessment where there is a pending review. To the contrary, such a limitation would be unworkable, at least in some cases (e.g. where reassessment of a land tax liability was required by s 9AA(10) of the Land Tax Management Act following a revaluation of land), could cause injustice and would serve no useful purpose.
For these reasons the separate question should be answered, "no".
I make the following order and declaration:
1. That the question in paragraph 1 of the defendant's amended notice of motion, namely:
"Whether the assessment notified by the 2010 Land Tax Assessment Notice (ID 1566119952) (showing the amount of the reassessment) issued on 9 August 2012 is invalid and beyond the power conferred by sec 9 of the Taxation Administration Act 1996 ('TAA') for the Defendant to make a reassessment solely on account that the initial assessment for the 2010 land tax year being Land Tax Assessment Notice (ID 1538278886) issued on 8 December 2010 was already the subject of a review under Part 10 of the TAA?"
be answered "no".
2. Declare that the defendant's assessment of the plaintiff's liability to land tax for the 2010 land tax year the subject of the defendant's land tax assessment notice (ID 1566119952) is not invalid on account of the defendant's initial assessment of the plaintiff's land tax liability for the 2010 land tax year referred to in the defendant's land tax assessment notice (ID 1538278886) issued on 8 December 2010 being already the subject of a review under Pt 10 of the Taxation Administration Act 1996.
Prima facie the defendant is entitled to his costs of the separate question. I will hear the parties on costs.
Decision last updated: 25 July 2013
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