Moreton Resources Ltd and Commissioner of Taxation (Taxation)
[2024] AATA 1157
•16 April 2024
Moreton Resources Ltd and Commissioner of Taxation (Taxation) [2024] AATA 1157 (16 April 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s):2024/0203, 2024/0204, 2024/0205, 2024/0206
Re:Moreton Resources Ltd
APPLICANT
Commissioner of TaxationAnd
RESPONDENT
DISMISSAL
Tribunal:Deputy President F D O'Loughlin KC
Date of decision: 16 April 2024
Date of written reasons: 17 April 2024
Place:Melbourne
The Tribunal has no jurisdiction (meaning no power) to deal with the applicant’s present dissatisfaction with the subject matter of the objection lodged and accordingly the application is dismissed.
...........................................[sgd].............................
Deputy President F D O’Loughlin
CATCHWORDS
PRACTICE AND PROCEDURE – Whether s 14ZYA(2) notice can be suspended and reactivated, whether document is a s 14ZYA(2) notice – whether document is an objection decision – whether objection decision has been made – whether Tribunal has jurisdiction to review.
CASES
Commissioner of Taxation v McGrouther [2015] FCAFC 34, particularly at [25].
Jonshagen v Commissioner of Taxation [2016] FCA 1545
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth)
Taxation Administration Act 1953 (Cth)Income tax Assessment Act 1936 (Cth)
REASONS FOR DISMISSAL
Deputy President F D O'Loughlin KC
17 April 2024
BACKGROUND
The present dispute is the most recent in the chain of disputes ultimately concerning entitlements to R&D Concession benefits associated with a coal seam gas project conducted in Queensland more than a decade ago.[1] Having prevailed in the Tribunal in its dispute over registration and characterisation of its activities as eligible for the R&D Concession,[2] the applicant and the respondent have not yet come to a common view as to the applicant’s financial entitlements for the 2013 Year[3] and the applicant seeks review by the Tribunal under Part IVC of the Administration Act[4] so as to determine those entitlements.
[1]The history to the present application is the series of decisions:
(a) Moreton Resources Ltd and Innovation and Science Australia [2018] AATA 3378.
(b) Moreton Resources Ltd v Innovation and Science Australia [2019] FCAFC 120.
(c) Moreton Resources Ltd and Industry Innovation and Science Australia [2022] AATA 3804.
[2]Refundable research and development tax offset entitlements.
[3]A 12-month period ending on 30 June in any calendar year.
[4]The Taxation Administration Act 1953 (Cth).
The applicant contends, and the respondent disputes, that the present state of affairs and events concerning R&D Concession entitlements can be reviewed by the Tribunal.
In short compass the critical facts relevant to whether the Tribunal has jurisdiction are that:
(a)on 26 September 2016, the applicant lodged an objection concerning its R&D Concession entitlements for Years including the 2013 year;
(b)on 17 November 2022, the applicant lodged a s 14ZYA(2) notice[5] concerning its objection;
[5]A notice pursuant to s 14ZYA(2) of the Administration Act.
(c)on 12 December 2022, by agreement with the respondent, the objection and s 14ZYA(2) notice were to be held in abeyance while other matters concerning the applicant’s entitlement to the R&D Concession were attended to;
(d)in October 2023, discussions concerning the outstanding matters with which the applicant continued to be dissatisfied resumed;
(e)on 27 December 2023, the applicant wrote to the respondent in terms which the applicant contends either:
(i)if it had not already happened because of resumed discussions reactivated the earlier s 14ZYA(2) notice; or
(ii)constituted a new s 14ZYA(2) notice,
in either case with the effect that a deemed objection decision has been made by operation of s 14ZYA(3);[6] and
(f)on 8 January 2024, the respondent wrote to the applicant in terms that the applicant says constituted an objection decision; and
(g)on or about 8 January 2024, the applicant lodged documents with the Tribunal that purport to seek review of an objection decision.
[6]Administration Act, s 14ZYA(3).
Over a course of dealings payments have been made to the applicant with the effect that the applicant’s only ongoing dissatisfaction pertains to the 2013 Year.
The Applicant’s contentions
There are four threads to the applicant’s contentions:
(a)that s 14ZY[7] on its own in the circumstances is enough to allow the Tribunal to begin a review because the respondent has not made a formal objection decision and sufficient time has passed for that delay to be unreasonable;
(b)more than 60 days have elapsed since the applicant’s original s 14ZYA(2) notice such that there has been a deemed disallowance of the applicant’s 26 September 2016 objection,
(c)the 27 December 2023 email from the applicant to the respondent constituted a s 14ZYA(2) notice and more than 60 days have now elapsed such that there has been a deemed disallowance of the applicant’s September 2016 objection; and
(d)the respondent’s 8 January 2024 email is an objection decision.
[7]Administration Act, s 14ZY.
The Legislation
Section 14ZY is held in the following terms:
14ZY Commissioner to decide taxation objections
(1)Subject to subsection (1A), 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.
….
(2) A decision of the Commissioner mentioned in subsection (1), (1A) or (1B) is an objection decision.
…
Section 14ZYA is held in the following terms:
14ZYA Person may require Commissioner to make an objection decision
(1)This section applies if the taxation objection (other than one under subsection 155 - 30(2) or 359 - 50(3) in Schedule 1) has been lodged with the Commissioner within the required period and the Commissioner has not made an objection decision by whichever is the later of the following times
(a)the end of the period (in this section called the original 60 - day period ) of 60 days after whichever is the later of the following days:
(i)the day on which the taxation objection is lodged with the Commissioner;
(ii)if the Commissioner decides under section 14ZX to agree to a request in relation to the taxation objection--the day on which the decision is made;
(b)if the Commissioner, by written notice served on the person within the original 60 - day period, requires the person to give information relating to the taxation objection--the end of the period of 60 days after the Commissioner receives that information.
(2)The person may give the Commissioner a written notice requiring the Commissioner to make an objection decision.
(3) If the Commissioner has not made an objection decision by the end of the period of 60 days after being given the notice, then, at the end of that period, the Commissioner is taken to have made a decision under subsection 14ZY(1) to disallow the taxation objection.
CONSIDERATION
Tribunal jurisdiction generally
At a high level, the Tribunal’s jurisdiction is not disputed. For completeness the Tribunal’s general jurisdiction is summarised below.
(a)The Tribunal is a body established by a Commonwealth statute, namely the Tribunal Act.[8] See in particular s 5 which is in the following terms:
[8]The Administrative Appeals Tribunal Act 1975 (Cth).
5Establishment of Tribunal
There is hereby established an Administrative Appeals Tribunal.
(b)What the Tribunal can do is limited by the powers conferred on it by the Tribunal Act and other legislation which in conjunction with the Tribunal Act empower the Tribunal to do what it does. The Tribunal’s general jurisdiction is conferred by s 25. As is relevant to reviews of Commonwealth taxation decisions, s 25 is in the following terms:
25Tribunal may review certain decisions
Enactment may provide for applications for review of decisions
(1) 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.
…
(3) Where an enactment makes provision in accordance with subsection (1) or (2), that enactment:
(a) shall specify the person or persons to whose decisions the provision applies;
(b) may be expressed to apply to all decisions of a person, or to a class of such decisions; and
(c) may specify conditions subject to which applications may
be made.…
(c)As is apparent from the terms of s 25:
(iii)it is necessary to look to another piece of legislation which provides that an application may be made to the Tribunal; and
(iv)other legislation conferring powers on the Tribunal to review decisions can specify the person or persons whose decisions are reviewable and the particular of decisions that are reviewable.
(d)In a Commonwealth income tax setting, Part IVC of the Administration Act is the relevant other legislation that directly links to, or with, s 25 of the Tribunal Act. Part IVC of the Administration Act creates objection and objection decision processes, and rights to have objection decisions reviewed by the Tribunal. Sections 14ZO and 14ZZA (both contained in Part IVC) reveal the linkage:
(i)s 14ZO provides that:
14ZODivision 4 —Tribunal review
Division 4 contains provisions about applications to the Tribunal for review of decisions by the Commissioner in relation to certain taxation objections and requests for extension of time.
and
(ii)s 14ZZA identifies the Commonwealth taxation decisions that are reviewable by the Tribunal in the following terms:
14ZZAModified AAT Act to apply
The AAT Act applies in relation to:
(a) the review of reviewable objection decisions; and
(b) the review of extension of time refusal decisions; and
(c)AAT extension applications;
subject to the modifications set out in this Division.
(e)A reviewable objection decision is an objection decision, other than an ineligible income tax remission decision.[9] An objection decision is a decision of the respondent to allow, either wholly or in part, or disallow an objection lodged by a taxpayer.[10]
(f)Drawing these provisions together for the Tribunal to have any jurisdiction to review an action taken by the respondent in the present setting, it is necessary for the relevant taxpayer to be affected by an objection decision.
[9]Administration Act, s 14ZQ. An ineligible income tax remission decision is defined in Administration Act, s 14ZS and is one that relates to remission of prescribed additional taxes. That type of decision is not presently relevant because the liability imposed on Ms Lewis arises under Division 269 which is not an additional tax payable within the meaning of s 14ZS.
[10]Administration Act, s 14ZY(1).
The s 14ZY and alleged unreasonable delay
The s 14ZY foundation for the Tribunal’s jurisdiction as contended for by the applicant is misplaced.
That the respondent is obliged to make an objection decision as contemplated by s 14ZY does not create any jurisdiction as contemplated by the foregoing for the Tribunal to review a state of affairs where an objection decision has not been made however unreasonable or otherwise the time taken. If there is a remedy to compel the respondent to make an objection decision by compelling him to exercise or discharge s 14ZY responsibilities, that remedy needs to be taken up in a court. The Tribunal is not conferred with any jurisdiction to afford that kind of remedy.
A s 14ZYA(2) notice coming out of hibernation?
The applicant contends that the s 14ZYA(2) notice was not withdrawn but merely put in suspension or hibernation and has been reactivated with the s 14ZYA(3) deemed decision effect now in place. The applicant contends that the word abeyance has an accepted meaning in the law, albeit no authority was advanced to bear this proposition out, that meaning is not the same as withdraw or waive, and that the s 14ZYA(2) entitlement is purely for the benefit of the taxpayer and the taxpayer has complete flexibility in its invocation.
In support of its proposition that the Tribunal has jurisdiction the applicant the applicant calls in aid the Full Federal Court decision in McGrouther[11] and the later Federal Court decision in Jonshagen.[12]
[11]Commissioner of Taxation v McGrouther [2015] FCAFC 34, particularly at [25].
[12]Jonshagen v Commissioner of Taxation [2016] FCA 1545 particularly at [74] to [84] which significantly endorse what was said at [25] in McGrouther.
These decisions, however, do not support the applicant’s contentions. They are limited to a discussion as to whether a s 14ZYA(2) notice can be withdrawn which was the product of the exclusivity to the taxpayer of any benefit conferred by s14ZYA(2). And having regard to what the operation of s 14ZYA(2) as observed in the McGrouther reasons the correct conclusion to reach is that a s 14ZYA(2) notice cannot be put in suspension or hibernation. Rather, if the process is to be reactivated the simple expedient of a new notice is required.
Omitting citations, in his McGrouther reasons, Chief Justice Allsop explained the role that s 14ZYA plays in the process of ensuring objection decisions are made in the following terms:
2Section 14ZYA of the Taxation Administration Act 1953 (Cth) (“TAA”) provides a form of statutory benefit or advantage to the taxpayer. It is unnecessary to be too particular about the legal character of that benefit or advantage. Its practical content and operation are real: the Commissioner has a legal duty to deal with an objection to an assessment: TAA, s 14ZY. The TAA does not prescribe a time for the performance of that task, after due consideration. It lies within the hands of the taxpayer to bring about a decision on the objection by the giving of a notice under s 14ZYA(2). In its statutory context, s 14ZYA provides a benefit or advantage to the taxpayer by the bringing forward to a point 60 days hence (if not before) when a decision will be taken to have been made (or will have been made) by the Commissioner on the objection. Review of the disallowance by the Court or the Administrative Appeals Tribunal will then be available. An indeterminate time for decision-making has been shortened and crystallised into a nominated time frame, to the general benefit and advantage of the taxpayer.
3The evident purpose of the provision to be taken from its terms, as well as from the history of its enactment (referred to by the primary judge) is to give some control to, and protection of, the taxpayer in connection with the length of time for bureaucratic decision-making in relation to the taxpayer’s objection. In a very general sense, it is a provision in aid of efficient and timely decision-making; but this is achieved by the placing in the hands of the taxpayer the power to bring about a decision in respect of the objection. The furtherance of the public interest in good and timely administration is brought about by the granting of a form of power to the taxpayer to bring about a decision on the objection.
4Whilst s 14ZYA(3) is clear, the words of that subsection, and the section as a whole, should be read in the context of accepted maxims or canons of construction of statutes. One such maxim (quilibet potest renunciare juri pro se introducto) is that “[a]ny one may, at [her or] his pleasure, renounce the benefit of a stipulation or other right introduced entirely in [her or] his own favour”.
5The form and context in which the maxim operates are various. They include the proposition that everyone may renounce a benefit or waive a privilege which the law has conferred on her or him.
6The question is ultimately one of statutory construction and interpretation: Is the taxpayer, once having given a notice under s 14ZYA(2) entitled to renounce the consequences of s 14ZYA(3) by purporting to withdraw and abjure the notice (here with the agreement of the Commissioner)? Of course, the act in the world of the giving of the notice can never be undone, physically. Once sent out, a word takes wing irrevocably. But the question here is whether the legal consequences of the act are ineluctable. They are not if a legal principle allows the party for whose benefit the provision is enacted to retract its effect by renouncing the benefit to be created by it, before the operation of the statute and the statutory consequence of s 14ZYA(3).
7As a matter of statutory interpretation, this result requires the operation of s 14ZYA(3) to assume a valid notice that has not been renounced or withdrawn by the taxpayer. That construction is achieved by reading the words of the statute against the maxim or canon of construction to which I have referred.
8I do not see any inconvenience or difficulty in this position. To the contrary, there may be inconvenience in the denial to the taxpayer (for whose benefit the provision stands) of the flexibility that withdrawal might give – especially if the utilisation of the notice provokes activity from the Commissioner that leads to discussion and compromise, salutary consequences that the construction of s 14ZYA(3) promoted by the respondents may impede.
9The provision should not only be read against the background of the maxim or canon of construction to which I have referred, but also against an assumed desired framework of flexibility, and not stiffness, of machineryprovisions concerned with the regulation of the bureaucratic decision-making process.
Paragraph [3] of the Chief justice’s reasons are effectively repeated in [25] of the McGrouther reasons to which the applicant refers.
A notice served under s 14ZYA(2) creates a statutory effect of a deemed negative objection decision if 60 days elapse without the respondent making an actual objection decision provided that the entitlement to the deemed objection decision has not been abandoned. That statutory effect of a s 14ZYA(2) notice at the end of the 60th day is a decision to disallow the objection. So seen, one effect of s 14ZYA(3) when enlivened is to give the taxpayer what may be desired, namely an acceleration of an objection decision which might otherwise be a long way off. Another effect of s 14ZYA(3) when enlivened is to take away from the respondent any ability to make an objection decision on the terms that may otherwise have been preferred or seen as desirable or appropriate.
The McGrouther and Jonshagen decisions make it clear that at the taxpayer’s election the statutory effect of a s 14ZYA(2) notice can be stopped before it crystallises. It doesn’t matter whether the form of expression which affects the entitlement to the s 14ZYA(3) deemed objection decision is expressed in terms of waiver, withdrawal, abeyance, suspension or like synonym. However, if the 60th day from service of a notice passes without the s 14ZYA(3) effect crystalising because the entitlement to it has been released, the effect of the earlier notice is effectively spent. Here the applicant has expressed itself in terms of abeyance. That abeyance period was longer than the 60 days. The notice given has effectively been spent.
The statute does not provide a mechanism for suspension of the latent s 14ZYA(3) effect and reactivation of that effect after the period of suspension. The system does allow, and the respondent correctly agrees,[13] a taxpayer to file a s 14ZYA(2) notice and withdraw it and file a subsequent s 14ZYA(2) notice whereupon the threshold conditions for producing the s 14ZYA(3) effect are, again, set in train. There is nothing to stop the applicant, and the respondent agrees, filing a new s 14ZYA(2) notice in respect of its dissatisfaction with the respondent’s, thus far, refrain from making an objection decision. That simple expedient cures any perceived disadvantage that might be associated with an inability to reactivate a suspended or hibernated s 14ZYA(2) notice and obviates a need to strain the words of the statute to avoid inappropriate and unintended outcomes.
[13]The McGrouther reasons at [29] make this feature of the system quite clear.
The applicant’s contentions cannot be accepted.
The 27 December 2023 email as a s 14ZYA(2) notice?
The applicant contends that the 27 December 2023 email is clear in its expression of the applicant’s desire to be paid its R&D Concession entitlements, that the statute does not mandate any particular form for a valid notice, and the email should be regarded as a s 14ZYA(2) notice.
What constitutes a valid notice in these circumstances calls for consideration of the statute in its full context. While it can be accepted that the legislation does not prescribe any form of notice, one effect of a valid notice is to take away from the respondent any ability to make an objection decision on the terms the respondent would prefer. Sometimes the form of an objection decision can be important. For example, a preferred or appropriate objection decision might entail the respondent making a determination, or forming an opinion or making a judgment that otherwise might not be possible due to expired amendment periods.[14] Accordingly, it is necessary that a s 14ZYA(2) notice at least make clear that an objection decision is required. Without more, asserting contentions as to substantive entitlements on the merits of the objection that has been lodged is not the same as asking for an objection decision.
[14]See s 169A(3) of the Income Tax Assessment Act 1936 (Cth).
The 27 December 2023 email from the applicant to the respondent was part of an ongoing process of the respondent working out the applicant’s entitlement to the R&D Concession. The email is replete with assertions of entitlements to the R&D Concession payments, and requests for an explanation as to why payments were being withheld. The communication concludes with:
Given the Company has made the claim, the Company at the Full Bench of the Federal Court and within the AAT has been successful and the accounts and accounting is independently verified by external auditors for the Company and such expenditure features in the Audited half year and full year accounts since 2008 and throughout, what basis has the ATO to identify this as a risk.
Moreton Resources Limited would therefore appreciate clarity and a basis for what the ATO relies upon for making the above statements, which were included in the recent Requests for Information”.
We would appreciate the response to this by the 10th of January 2024, or to discuss the said matters so that the meeting of 10 January 2024 can be ontaken [sic] with the transparency and lawful basis of the ATO standing upon each of the above matters. We do seek to work toward a swift resolution to these matters and look forward to our meeting of 10 January 2024.
Where:
(a)the 27 December 2023 email does not refer to either the objection or s 14ZYA at all;
(b)the tenor of the 27 December 2023 email, while asserting an entitlement, is more a continuation of dialogue concerning an ongoing review, and a request for information to make a planned future meeting more meaningful; and
(c)a valid s 14ZYA(2) notice needs to put the respondent on notice that an objection decision is required (from which the respondent would be able to work out that if an objection decision is not made within 60 days the matter will be taken out of his hands),
the 27 December 2023 email is not to be regarded as a valid s 14ZYA(2) notice notwithstanding there is no prescribed form for the notice. It could not reasonably be regarded as being a communication putting the respondent on notice from which he could work out that his ability to make an objection decision on his terms is to be taken away from him.
The 8 January 2024 communication from the respondent an objection decision?
The applicant contends that the 8 January 2024 communication from the respondent makes it clear that an effective decision has been made that the applicant will not be paid the R&D Concession amounts it seeks.
The 8 January 2024 communication from the respondent is an explanation of the difference between succeeding in registration proceedings, which ultimately the applicant did, and being eligible for the R&D Concession for expenditure incurred in or on the eligible activities. The respondent explains that registration is one condition for entitlement to the concessions, but there are others. The respondent also explains in that communication that he was currently in the process of reviewing other eligibility entitlements. For example, the respondent denied he was currently withholding an amount from the applicant and explained:
Rather the Commissioner is presently considering, but has not yet determined, Moreton’s request dated 28 October 2022 in which Moreton claims to be entitled to certain amounts of refundable R&D tax offset in relation to the 2012 and 2013 years.
…
Verification and substantiation of Moreton’s R&D claims is required to address the risks outlined in our review management plan dated 30 November 2023. The risks identified relate to the other (non-registration) criteria necessary to establish entitlement to a R&D tax offset, in a particular amount, under section 355-100 of the ITAA 1997.
The Registration Proceedings made no findings as to the risks outlined in our review management plan. The Registration Proceedings only determined the eligibility of specific R&D activities in relation to the Kingaroy project not, for example, whether the notional R&D expenditure claimed was incurred and if so, nexus with those registered activities etc.
Workpapers and RFI responses provided by Moreton to date only allocate expenditure / depreciating assets to registered R&D activities at the project level / provide general statements about how these items were used in R&D activities. Moreton still needs to provide workpapers for each income year which allocate each item of expenditure / each line item in the tax fixed asset register to registered core or supporting R&D activities as determined in the Registration Proceedings.
This communication could not be regarded as any form of decision, definitive or otherwise, concerning the applicant’s entitlements to the R&D Concession as sought in the objection lodged and consequently cannot be regarded as a decision on that objection.
Years other than the 2013 Year
For Years other than the 2013 Year the applicant is no longer dissatisfied, in the relevant sense, with the effect that if there were any objection decision the applicant couldn’t be dissatisfied with it and the Tribunal would have no jurisdiction.
CONCLUSION
The Tribunal has no jurisdiction (meaning no power) to deal with the applicant’s present dissatisfaction with the subject matter of the objection lodged and accordingly the application is dismissed .
I certify that the preceding 28 (twenty-eight) paragraphs are a true copy of the reasons for dismissal herein of Deputy President F D O'Loughlin, KC.
...[sgd]................................
Associate
Dated: 17 April 2024
Date(s) of hearing: 16 April 2024 Applicant’s advocate: Mr Jason Elks Solicitors for the respondent: Australian Tax Office Advocate for the respondent Mr Alexander Dekkers
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