MXSN and Commissioner of Taxation (Practice and procedure)
[2025] ARTA 557
•7 April 2025
MXSN and Commissioner of Taxation (Practice and procedure) [2025] ARTA 557 (7 April 2025)
Applicant:MXSN
Respondent: Commissioner of Taxation
Tribunal Number: 2023/6663
Tribunal:Deputy President Thompson SC
Place:Perth
Date:7 April 2025
Decision:The application to expand the grounds of review to include proposed grounds C3 and C4 is dismissed.
The application to expand the grounds of review to include proposed grounds C5 and C6 is allowed.
Statement made on 07 April 2025 at 10:03am
Deputy President
CATCHWORDS
PRACTICE AND PROCEDURE - TAXATION – application to expand the grounds of review - fringe benefits tax in respect to work vehicle – Applicant is a company – application to expand grounds of review to include personal tax affairs of director of the Applicant – director’s personal tax affairs still under consideration of the Commissioner – whether Tribunal has jurisdiction to make findings on taxpayer whose affairs are not before the Tribunal – Commissioner would not be bound by Tribunal’s findings in relation to director’s personal tax affairs – legal and practical incontestability – application dismissed – application to expand ground regarding car purchase price allowed – whether director is the owner of the car due to resulting trust - application to expand ground relating to resulting trust allowed
LEGISLATION
FRINGE BENEFITS ASSESSMENT ACT 1986 (CTH) – S 136(1)(II)(A)
TAXATION ADMINISTRATION ACT 1953 (CTH) – S 14ZZK, PART IVC, SCHEDULE 1 S 355-50(2)
CASES
Bosanac v Commissioner of Taxation (2022) 275 CLR 37; [2022] HCA 34
Commissioner of Taxation v Futuris Corp Ltd (2008) 237 CLR 146
Giris Pty Ltd v Federal Commissioner of Taxation (1969) 119 CLR 365Seglar and Commissioner of Taxation (Taxation) [2024] AATA 4286
Statement of Reasons
INTRODUCTION
On 24 March 2025 I heard an argument by the Applicant to expand the grounds of review. Following argument, I made the orders at paragraph [29] and otherwise dismissed the application. The Applicant has sought written reasons for making those orders, these are my reasons for doing so.
The Applicant is a company which provides taxation services to members of the public. Its sole director and shareholder is Mr P. Mr P is a registered tax agent of long-standing, and prior to that was an employee of the Australian Taxation Office.
In about early 2023 the Respondent (Commissioner) made default assessments for fringe benefits taxable value and fringe benefits tax (FBT) against the Applicant in respect to a 2010 Ferrari California car purchased by the Applicant and used by Mr P as his work vehicle. Following an unsuccessful objection, the Applicant commenced this application for review in September 2023. In the meantime, Mr P’s personal taxation affairs were also under consideration by the Commissioner. I am not aware of the detail other than there is an objection currently on foot, and that FBT issues form at least part of the matters under consideration in Mr P’s personal taxation affairs.
BACKGROUND
The application for review was filed with on 7 September 2023, following an objection decision made on 25 August 2023. On 30 October 2024, the Applicant filed its Statement of Facts, Issues and Contentions (SFIC), albeit, as a Statement of Issues, Facts and Contentions. In doing so it set out contentions C3, C4, C5 and C6, four grounds it sought to argue which were not raised in the objection to the Commissioner. The SFIC sought the Tribunal’s discretion to expand the grounds of review pursuant to s 14ZZK of the Taxation Administration Act 1953 (Cth) (TAA), which otherwise limits a taxpayer to the maters raised in their objection.
Grounds C3 and C4 seek to argue two grounds which raise factual and legal issues arising out of the personal tax affairs of the director of the Applicant. The director’s taxation affairs are presently before the Commissioner, being the subject of assessments which have been objected to under Part IVC TAA, but which are not yet determined.
Ground C5 seeks to explain a 10% difference in the manner in which the cost price of the vehicle was calculated.
Ground C6 seeks to argue that the vehicle in question is now owned by Mr P, rather than this Applicant, because of a resulting trust arising out of Mr P personally making a balloon payment under a hire purchase agreement entered into by the Applicant when it financed the purchase of the car.
In early December 2024, I adjourned a directions hearing to February 2025 to enable the Applicant time for the objection decision in respect of the issues which are the subject of grounds C3 and C4 to be dealt with by the Commissioner, and foreshadowed that if an application for review was put before the Tribunal, the matters could likely be dealt with together. That course has not eventuated as the objection regarding Mr P’s personal affairs remains under consideration by the Commissioner, so no application can yet be made.[1] Consequently, this application to expand the grounds was listed for hearing.
[1] Segler and Commissioner of Taxation (Taxation) [2024] AATA 4286.
Written submissions were filed by the parties and an oral hearing was held. At the conclusion of that hearing, I gave the Applicant leave to identify and provide to me any authority on a proposition advanced at the hearing to the effect that section 355-50 of Schedule 1 of the TAA meant that it was open to the Commissioner to divulge in proceedings before the Tribunal information in respect to another taxpayer’s affairs.
The substantive hearing of the matter is listed before me for 3 days commencing on 13 October 2025.
CONSIDERATION
The grounds raised by C3 and C4 are matters which will require the Tribunal to make factual findings and draw legal conclusions as to the taxation affairs of a taxpayer, Mr P, whose affairs are not before the Tribunal.
I had raised with the parties at the February directions hearing that, in my view, there were two factors for consideration, being whether I had jurisdiction to consider the proposed contentions, and secondly, whether if I did, I should exercise my discretion to do so.
JURISDICTION
The Applicant did not address the question of my jurisdiction to determine the matters raised in the proposed additional grounds.
I accept the Applicant’s proposition that if Mr P’s taxation affairs were before the Tribunal I would have jurisdiction to determine them, but that rather misses the point. Those matters are not currently the subject of an application, hence the question I raised.
In the Commissioner’s submission I do not have jurisdiction to determine questions regarding a taxpayer whose affairs are not before the Tribunal. Given the statutory framework in which the Tribunal operates, that submission must be correct.[2]
[2] Ibid.
I have concluded that even if I had jurisdiction to hear the argument regarding the matters raised in contentions C3 and C4, given Mr P’s taxation affairs are not before me, the Commissioner and any future Tribunal would not be bound by any findings I made. That is, in the context of Mr P’s taxation affairs, any decision I made would be merely theoretical.
DISCRETION
C3 & C4
In favour of exercising my discretion the Applicant argues that the statutory context of FBT means that both the employer side of the ledger and the employee side of the ledger fall to be considered in any review. Further, he says to refuse leave would make the FBT an incontestable tax, which is unconstitutional.
Whilst I accept that there must be some consideration given to the factual scenario on both the employee and employer sides of the ledger in an FBT matter, that is not a reason for raising a contention which seeks to argue a theoretical position which is not properly before the Tribunal. The fact that any decision on these grounds would not bind the Commissioner in considering Mr P’s taxation affairs, which are currently the subject of an objection, strongly suggests that I should not exercise the discretion to permit the enlargement of the grounds.
The constitutional incontestability argument the Applicant raises is without merit. The argument fails to consider that legal and practical incontestability are two quite different things. The law proscribes legal incontestability, not practical incontestability.[3] Furthermore, the fact that both this Applicant and Mr P have rights enshrined in Part IVC of the TAA, and both are currently exercising those rights, means that the tax is not incontestable.[4]
[3] Giris Pty Ltd v Federal Commissioner of Taxation (1969) 119 CLR 365, 379.
[4] Commissioner of Taxation v Futuris Corp Ltd (2008) 237 CLR 146 at [9].
The Commissioner also raised the fact that given the obligations of secrecy which bind him and his officers in undertaking their duties, the Commissioner would not be in a position to lead evidence of Mr P’s taxation affairs in opposition to the matters raised by the Applicant on these two grounds. The Applicant countered this argument by reference to section 355-50(2) of Schedule 1 to the TAA, which he says permits the Commissioner to divulge a person’s taxation affairs to the Tribunal.
My understanding of the manner in which that provision is applied is that it is permissive of the disclosure to the Tribunal of the taxation affairs of the taxpayer who is the applicant in the Tribunal, in their own review proceedings. I am unaware of it being used to permit the disclosure of a third party’s taxation affairs in a taxation review. The Applicant was given leave to file any case authority for the proposition that it could be used more widely, so as to permit the Commissioner to use a third party’s taxation information in a review in the Tribunal to which that third party was not joined. Instead, it filed further argument on the proposition, without any case authority in support of it. The Commissioner had not been given the opportunity to file further submissions, and, given the submissions went beyond the grant of leave, I did not consider the Applicant’s further argument.
Weighing strongly against the exercise of my discretion is the inutility of making findings which will not and cannot bind the Commissioner, particularly when in doing so I will have incomplete information and when the issues are live before the Commissioner in an objection which is presently being considered.
In these circumstances I refused to permit reliance on grounds C3 and C4.
C5 & C6
Ground C5 seeks to argue that the cost base adopted by the Commissioner for the purchase of the car is incorrect. There is no evidence in support of that contention currently before the Tribunal, the Applicant relying on an inference for the purposes of the application.[5] That is unlikely to be sufficient at the substantive hearing.
[5] Whilst the submissions made were to the effect that there was evidence regarding this issue before me, it became plain in argument that there was in fact no actual evidence at this stage.
I accept that it is open to the Applicant to lead evidence which demonstrates that the 10% difference in what it says the cost base should be, and the cost base adopted by the Commissioner, is accounted for by amounts that should have been excluded in accordance with section 136(1)(ii)(A) of the Fringe Benefits Assessment Act 1986 (Cth) (FBTAA). If there is evidence to support the ground, it should be readily available.
Ground C6 raises a legal argument to the effect that the ownership of the car resulted[6] to Mr P by reason of him having paid the final balloon payment under a hire purchase agreement the Applicant entered into to fund the purchase of the car.
[6] That is, the legal construct of a resulting trust was created.
Like ground C5, this ground seeks to raise an argument that is limited in scope, and which arises directly in respect to this taxpayer, being whether it held the car or provided it to Mr P in respect to his employment after the payment was made, so as to come within the FBTAA. It is also an argument which will require some additional evidence, including evidence as to intention at the time of the payment.[7]
[7] Bosanac v Commissioner of Taxation (2022) 275 CLR 37; [2022] HCA 34.
Given the limited compass of the additional evidence on each of these two grounds, and the fact that the arguments are both discrete and directly referable to this Applicant’s taxation affairs, I granted leave.
DISPOSITION
I made orders for amended SFICs to be filed and additional evidence to be filed in support of grounds C5 and C6. The leave I granted does not give the Applicant a general opportunity to amend, nor to file evidence of a wider compass than that which is necessary for the prosecution of those two grounds alone.
ORDERS
For these reasons, I made the orders set out below.
1. The application to expand the grounds of review to include proposed grounds C3 and C4 is dismissed.
2. The application to expand the grounds of review to include proposed grounds C5 and C6 is allowed.
3. On or before 3 June 2025, the Applicant is to file with the Tribunal and serve on the Respondent an amended Statement of Facts, Issues and Contentions (SFIC) and any additional evidence in support of grounds C5 and C6.
4. On or before 8 July 2025, the Respondent is to file with the Tribunal and serve on the Applicant an amended SFIC and any evidence in opposition to grounds C5 and C6.
5. The matter be listed for directions by telephone on 29 July 2025 at 10 am.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for the decision herein of Deputy President Clare Thompson SC
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Associate
Dated: 7 April 2025
Date of hearing: 26 March 2025 Counsel for the Applicant: Mr M Crowley Solicitors for the Applicant: Mossensons Counsel for the Respondent: Ms E Luck Solicitors for the Respondent: Australian Taxation Office Litigation and Legal Services
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