Morrow and Commissioner of Taxation (Taxation)

Morrow and Commissioner of Taxation (Taxation) [2019] AATA 5524 (10 December 2019)
Division:Taxation and Commercial Division
File Number(s): 2019/4769
Re:Marie-Therese Morrow
APPLICANT

AndCommissioner of Taxation
RESPONDENT

DECISION
Tribunal:Deputy President Bernard J McCabe
Member Rebecca Arends
Date:10 December 2019
Place:Brisbane

The application for an extension of time is refused.
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Deputy President Bernard J McCabe
CATCHWORDS
PRACTICE AND PROCEDURE – extension of time application – jurisdiction – futility of granting an extension of time – prospects of success of the substantive application – power of the Tribunal – Tribunal operating in the shoes of the original decision-maker – extension of time refused
LEGISLATION
Administrative Appeals Tribunal Act 1975 ss 2A, 5, 25, 29 and 43
Income Taxation Assessment Act 1936 ss 185, 188 and 221
Public Governance, Performance and Accountability Act 2013 s 65
Taxation Administration Act 1953 s 14ZZC
Taxation Laws Amendment (No. 3) Act 1991 s 114
CASES
Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd (1979) 24 ALR 307
Frugtniet v Australian Securities and Investments Commission [2019] HCA 16
Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344
REASONS FOR DECISION
Deputy President Bernard J McCabe
Member Rebecca Arends
10 December 2019
INTRODUCTION

These proceedings arise out of the inclusion of an overseas pension in the Applicant’s assessable income in the financial years ending 30 June 1976 to 1985 (“the 1976 to 1985 assessments”).
On 30 April 2004 the Applicant sought an extension of time to lodge objections with the Commissioner of Taxation against the inclusion of her overseas pension in her assessable income in the financial years ending 1976 to 1999. The Commissioner allowed an extension of time to lodge objections in relation to the financial years ending 30 June 1986 to 1999, and allowed those objections. However, the Commissioner considered he did not have the statutory power to allow an extension of time to lodge objections to the 1976 to 1985 assessments.
The Applicant’s son, Mr Eric Morrow, acting on her behalf under a Power of Attorney, has recently applied to the Tribunal for review of the 2004 decision not to extend time to lodge an objection. Given the delay, the applicant needs an extension of time from the Tribunal before she can proceed to challenge the 2004 decision. She also seeks compensation, although that issue is not before the Tribunal.
The extension of time application is unsuccessful. We explain our reasons below.
BACKGROUND
The Applicant claims, and the Respondent does not dispute, that during the relevant period she was a resident, but not a citizen, of Australia for income tax purposes[1] and that from 1 January 1970 she received a French Civil Pension (“French pension”) as a result of having been a teacher in France.[2]
[1] T1, pages 14-16.
[2] T3, page 52.
In correspondence that the Applicant sent to the Commissioner in March[3] and April[4] 2004 the Applicant stated that:
·She started living in Australia on 5 July 1970;
·Shortly after her arrival in Australia she asked the Taxation Office if she had to pay tax on her French pension. She was told “no” but shortly afterwards she was told this was a mistake and her French pension was taxable, and that she had to declare it;
·She duly declared her French pension on her husband’s, and subsequently her own, income tax returns;
·In 2004 she made inquiries with the General Treasury in France about whether there was an agreement between Australia and France, and received correspondence indicating that an agreement had been made in 1976; and
·Pursuant to the agreement her French pension was not taxable.
[3] T1, pages 14-16.
[4] T3, pages 51-53.
In her correspondence she enclosed documents relating to her French pension, and:
·Asked for confirmation that the agreement applied to her, that her French pension was incorrectly taxed since 1976 and that she no longer had to declare it;
·Asked for redress for the tax she had already paid; and
·Asked for a Private Ruling and an extension of time to lodge an objection.
On 30 July 2004 the Commissioner issued a Notice of Decision[5] accompanied by Reasons for Decision.[6] The Notice of Decision states that:
·The Applicant’s application for an extension of time with respect to the 1976 to 1985 assessments was disallowed on the basis that there was no statutory power to grant an extension of time where the time limit had expired before 1 July 1986;
·The Applicant’s application for an extension of time with respect to the objections relating to assessments for the financial years ending 30 June 1986 to 1999 were allowed; and
·The objections with respect the assessments for the financial years ending 30 June 1986 to 1999 were allowed in full.
[5] T4.
[6] T2.
The Notice of Decision was accompanied by an information sheet that advised that if the Applicant was dissatisfied with “the decision on your application for an extension of time to lodge an objection you can request the Small Taxation Claims Tribunal (“STCT”) to review the decision” and that there was a 28 day time limit.
The Applicant does not claim to have lodged a review in the STCT within the 28 day limit or at all. It appears that, around this time, Mr Morrow started dealing with the matter for the Applicant. He recalls asking a Tribunal for assistance in 2004 but concedes that it may have been the wrong Tribunal. He also made a complaint to the Ombudsman and he has provided a letter from the Ombudsman, dated 29 October 2004, acknowledging receipt of his complaint.[7]
[7] E35.
In January 2005, Mr Morrow made representations to the Taxation Office about this matter.[8] He expressed dissatisfaction with the way the Taxation Office had dealt with the matter and stated that:
“…I feel that the ATO has taken the easy way out, and has justified keeping my mothers [sic] money because there is no legislation that obliges it to refund the money.”[9]
[8] E13.
[9] E13, page 2.
On 25 February 2005 the Commissioner wrote to Mr Morrow stating that the Applicant’s case was being reviewed and considered by the appropriate area.[10] Mr Morrow again contacted the Taxation Office about the matter in March 2005,[11] having not received a response about the Applicant’s matter. Later that year he forwarded a document entitled “Explanatory Advice”[12] to the Taxation Office for inclusion in the review of the Applicant’s matter. Mr Morrow submits that because of the advice contained in this document, the Applicant believed she had to include her French pension in her assessable income. He suggests that the document was given to the Applicant by the Taxation Office.[13]
[10] E10.
[11] T1, page 19.
[12] Applicant’s written submissions, page 13, and a copy of the advice is at E5.
[13] Applicant’s written submissions, pages 8 to 13, and page 11 at paragraph 78.
Mr Morrow submits that no decision was ever communicated to him or the Applicant. The material before the Tribunal indicates that the Commissioner does not have any record of an internal review decision having been made and that any documents relating to the request for review could well have been destroyed in accordance with Taxation Office policy given the time that has elapsed.[14]
[14] E8 and E14.
On 7 June 2015, Mr Morrow wrote to the Commissioner advising that he had never been informed of any results or outcome of the review of the Applicant’s tax dispute.[15]
[15] T5.
On 11 November 2015 the Commissioner wrote to the Applicant advising her that the powers to make an objection decision are to be used only once in relation to the same particulars of an assessment, but that as a matter of good administrative practice the Taxation Office had the discretion to fix an obvious mistake and undertake a review where the taxpayer has made a legitimate complaint about the process. The letter advised that the Taxation Office had exercised this discretion, considered all of the information provided including the document entitled “Explanatory Advice”, and not found that there was an obvious mistake in the making of the objection decisions.[16]
[16] E7.
There was some further correspondence between Mr Morrow and the Taxation Office concerning records about which he sought information. Given the passage of time the Taxation Office was not able to answer his questions to his satisfaction, including being unable to verify whether the Explanatory Advice was issued by the Taxation Office.[17]
[17] E14 to E21.
On 2 August 2016, Mr Morrow sought assistance from the Inspector-General of Taxation (“IGT”). The IGT investigated the matter and provided a report which stated:
·     The IGT had asked the Taxation Office to conduct a further review of the matter focussing on the Explanatory Advice, and the Taxation Office had confirmed that the legislation did not allow for an extension of time to lodge objections to the 1976 to 1985 assessments, and that it was unable to verify the Explanatory Advice due to the passage of time;
·     The IGT had asked the Taxation Office to consider whether the Commissioner could exercise his discretion, more specifically a Statutory Remedial Power, to grant an extension of time to lodge the objections. However, the Taxation Office advised that the Statutory Remedial Power had not yet been legislated; and
·     Advised that, in relation to Mr Morrow’s intention to seek compensation from the Taxation Office, he could apply for that under the Scheme for Compensation for Detriment caused by Defective Administration;
and that the IGT considered the matter finalised.[18]
[18] E25- E28
We mention in passing that s 65 of the Public Governance, Performance and Accountability Act 2013 provides for a discretionary “Act of Grace” payment in certain circumstances but it is unclear whether this possibility has been brought to Mr Morrow’s attention.
THE REMEDIES SOUGHT BY THE APPLICANT
On 25 July 2019 the Applicant made an application to the Tribunal for an extension of time to seek review of the 2004 decision but, more broadly, the way the Commissioner had dealt with her French pension in the financial years ending 30 June 1976 to 1985.[19]
[19] E1.
The Applicant’s written submissions state:
“The Applicant’s substantive application seeks a review of the Commissioners [sic] decision to:
(a) Not evaluate the Explanatory Advice document; and
(b) Ignore Australia’s obligations under the Double Taxation Agreement with France.”[20]
[20] The Applicant’s submissions, paragraph 2.
The submission also asks for compensation without giving further details. In the hearing, Mr Morrow indicated that the compensation would be related to the amounts that, according to the Applicant’s claim, she was wrongly taxed.
The Tribunal is a statutory body created by the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”)[21] with the objective of providing a mechanism of review of government decisions that other legislation provides may be reviewed.[22]
[21] Section 5 of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”).
[22] Sections 2A, 5 and 25 of the AAT Act.
Section 25(1) of the AAT Act provides that:
1An 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, may be conferred, by another enactment having effect under that enactment.
Accordingly, the Tribunal can review the Commissioner’s alleged failure to (1) evaluate the Explanatory Advice and (2) Ignore Australia’s obligations under the Double Taxation Agreement with France only if, and as far as, those matters are relevant a reviewable decision before it.
The action that the Tribunal may take upon review of a decision is similarly limited. Section 43(1) of the AAT Act relevantly provides:
1For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision and shall make a decision in writing:
(a)affirming the decision under review;
(b)varying the decision under review; or
(c)setting aside the decision under review and:
(i) making a decision in substitution for the decision so set aside; or
(ii) remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal.
The Tribunal is not empowered to order compensation.
Section 29(2)(a) of the AAT Act provides that an application for review of a decision must be lodged with the Tribunal within 28 days from the day on which the notice of the decision was served on the applicant. That time limit is modified by s 14ZZC of the Taxation Administration Act 1953,[23] but that extended time limit may not apply in this case. In any event, the Applicant is clearly out of time given the objection decision was made on 30 July 2004.
[23] Note that for objections relating to assessments that were notified on or after 1 March 1992, s14ZZC of the Taxation Administration Act 1953 provides that the time limit is 60 days however the assessments in question were notified before that date so this modification of s29 of the AAT Act does not apply.
Pursuant to subsection 29(7) of the AAT Act, the Tribunal may extend the time for lodging an application if it “is satisfied that it is reasonable in all the circumstances to do so”. The merits of the substantive application are relevant to this assessment alongside a range of others.[24]
[24] Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344.
THE SUBSTANTIVE APPLICATION
The Respondent submits that the Applicant’s case cannot succeed because, among other reasons, “there is no legislative power to allow the Tribunal to make an order granting an extension of time to lodge an objection to the assessments for the years ended 1976 to 1985”.[25]
[25] Respondent’s submissions, page 5.
As a preliminary matter, the wording in the Notice of Decision and Reasons for Decision creates uncertainty about whether the Commissioner in fact made a decision, and if he did, what that decision was. Was it a decision to disallow an extension of time, a decision to disallow the objections because he was unable to grant an extension of time, or did he refrain from making any decision because he considered he had no discretion regarding an extension of time and therefore the objections were not before him? The Respondent contends the Commissioner made a decision not to allow an extension of time, albeit he did not have power to make that decision, but that this does not preclude the decision from being the subject of review.[26]
[26] Respondent’s submissions, page 5, referencing Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd (1979) 24 ALR 307 per Bowen CJ at 5 and Smithers J at 27.
However, we do not find it necessary to resolve this uncertainty because, in any event, for the reasons that follow, the substantive application cannot succeed.
Prior to 1 July 1986, s 185 of the Income Taxation Assessment Act 1936 (ITAA) provided that the time limit for lodging an objection was 60 days. There was no power to allow lodgement after the 60 days had expired.
On 1 July 1986, s 188(1) of the ITAA came into force. It provided that a taxpayer could ask the Commissioner to treat a late objection as having been duly lodged. Section 188A(1) provided that the Commissioner “shall consider each application made under sub-section 188(1) and may grant or refuse the application”. Section 221 limited the application of s 188(1) to objections where the time for lodgement had not expired before 1 July 1986. The effect of this was that the Commissioner could only consider a request for late lodgement if the assessment was notified before 2 May 1986. The only evidence before the Tribunal about when the 1976 to 1985 assessments, respectively, were notified to the Applicant is in the Reasons for Decision which states that the 1976 to 1985 assessments were all notified before 2 May 1986.[27] In the absence of evidence to the contrary, we accept that this is the case.
[27] E6, page 3 [2].
On 1 March 1992, the Taxation Laws Amendment (No. 3) Act 1991 repealed the provisions in the ITAA that concerned objections and inserted Part IVC into the Taxation Administration Act 1953 (TAA). Part IVC contained provisions dealing with objections. Section 114 of the Taxation Laws Amendment (No. 3) Act 1991 provided that those provisions (with some exceptions that are not relevant for present purposes) applied from the date of enactment.
It therefore appears that there was never a time when the Applicant could have been allowed to lodge her objections to the 1976 to 1985 assessments after the time limit had expired. This is because before 1 July 1986 there was no power for the Commissioner to allow late lodgement, after 1 July 1986 the Commissioner could not consider her request for late lodgement, and after 1 March 1992 the power to allow late lodgement did not apply to those assessments.
The Tribunal stands in the shoes of the original decision maker. Section 43(1) of the AAT Act relevantly provides that:
“For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision.”[28]
[28] Section 43(1) AAT Act.
The Tribunal is:
“…subject to the same general constraints as the original decision-maker and should ordinarily approach its task as though it were performing the relevant function of the original decision-maker in accordance with the law as it applied to the decision-maker at the time of the original decision”.[29]
[29] Rudy Frugtniet v Australian Securities and Investments Commission [2019] HCA 16 at [14].
As the legislation did not provide for the Commissioner to consider the Applicant’s request to treat her late objections as having been duly lodged, nor can the Tribunal consider that request. Further, the Tribunal cannot remit the matter to the Commissioner to re-consider her request because to do so would be to require the Commissioner to perform a function that he does not have power to perform.
As there is no power to treat the objections as having been duly lodged, matters that may be relevant to the objections – such as the Explanatory Advice and the Double Taxation Agreement between France and Australia – cannot be the subject of review by the Tribunal.
CONCLUSION
Given the futility of the Applicant’s substantive application, it is not reasonable in all the circumstances to grant her an extension of time to lodge her application.
DECISION
The application for an extension of time is refused.

42. I certify that the preceding 41 (forty-one) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe and Member Rebecca Arends.

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Associate
Dated: 10 December 2019

Date(s) of hearing: 25 October 2019

Solicitors for the Respondent: Mr V Tse, Australian Taxation Office

[2019] AATA 5524

10 December 2019

Key Legal Topics

Areas of Law

Tax Law

Administrative Law

Legal Concepts

Jurisdiction

Remedies

Date(s) of hearing:	25 October 2019
Solicitors for the Respondent:	Mr V Tse, Australian Taxation Office