Re The Trustee for the Confidential Trust and Commissioner of Taxation
[2013] AATA 682
•24 September 2013
CATCHWORDS – TAXATION – STAY APPLICATION – application for review of reviewable objection decision – whether power to stay decision – inconsistency between s 25(6) of the Administrative Appeals Tribunal Act 1975 and s 14ZZB(1)(a) of the Taxation Administration Act 1953 – s 14ZZB prevails – no power to stay.
DECISION AND REASONS FOR DECISION [2013] AATA 682
ADMINISTRATIVE APPEALS TRIBUNAL )
) 2013/3721
SMALL TAXATION CLAIMS TRIBUNAL )
ReTHE TRUSTEE FOR THE CONFIDENTIAL TRUST
Applicant
AndCOMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Date: 24 September 2013
Place: Melbourne
Decision:The Tribunal decides that it has no power to stay the operation or implementation of the respondent’s objection decision which was dated 27 May 2013 and which disallowed the applicant’s objection to the assessments issued to two minor beneficiaries of the Confidential Trust.
_(sgd) S A Forgie_
Deputy President
Cobiac v Liddy (1969) 119 CLR 257
Goodwin v Phillips (1908) 7 CLR 1
Re Beiruti and Commissioner of Taxation [2013] AATA 634
Royal Automobile Club of Australia Incorporating Imperial Service Club v Sydney City Council (1992) 27 NSWLR 282; 75 LGRA 292
Administrative Appeals Tribunal Act 1975, ss 25, 27, 28, 29, 30, 33, 34D, 35, 35A, 37, 38, 39, 40, 41, 42C, 43, 44A
Income Tax Assessment Act 1936, ss 102AE(2)(b)(ii), 175A
Offenders Probation Act 1913 (SA), s 4
Road Traffic Act 1961 (SA), s 47
Taxation Administration Act 1953 ss 8AAB, 8AAC, 8AAD, 8AAF, 8AAG, 14ZL, 14ZZ, 14ZZA, 14ZZB, 14ZZC, 14ZZD, 14ZZE, 14ZZF, 14ZZG, 14ZZJ, 14ZZK, 280-170, 298-30
Taxation Boards of Review (Transfer of Jurisdiction) Act 1986
Black’s Law Dictionary with pronunciations, 5th edition, 1989, West Publishing Company, St Paul
REASONS FOR DECISION
The beneficiaries of what I have described as the Confidential Trust are the Trustee’s two daughters, both of whom are minors. On 11 March 2013, the Commissioner of Taxation (Commissioner) issued a Notice of Assessment to each of the Trustee’s daughters in respect of income distributed to them under the ET. The Trustee lodged an objection to each of the assessments on the basis that the income distributed to them was excepted income in that it had been derived from a worker’s compensation amount in accordance with s 102AE(2)(b)(ii) of the Income Tax Assessment Act 1936 (ITAA36). If he were correct, the income would be subject to income tax at the ordinary rates. If the income was not excepted income, the income would be subject to special rates of tax and a lower tax free threshold under Division 6AA of Part III of ITAA36.
The Commissioner disallowed the objection on 27 May 2013 and the Trustee has applied for review of the reviewable objection decision disallowing his objections. He has applied for a stay of the operation or implementation of the objection decision pending the Tribunal’s review of the decision. He has done so under what he described as the Tribunal’s “plenary powers” and, as I understand his submissions, under s 41 of the Administrative Appeals Tribunal Act 1975 (AAT Act). On behalf of the Commissioner, Mr Sadhu submitted that the Tribunal does not have power to stay those decisions as s 14ZZB(1)(a) of the Taxation Administration Act 1953 (TAA) has provided that s 41 of the AAT Act does not apply in relation to a reviewable objection decision.
This case raises for consideration the apparent inconsistency between s 25(6) of the AAT Act and s 14ZZB(1) of the TAA. In response to my invitation to make further submissions, Mr Sadhu referred me to the history of s 14ZZB and the recommendations of the Administrative Review Council (ARC).[1] That report led to the enactment of s 14ZZC’s predecessor – s 14ZD – by the Taxation Boards of Review (Transfer of Jurisdiction) Act 1986. In interpreting the provisions of the TAA and the AAT Act, I must:
“... ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction.”[2]
[1] Review of Taxation Decisions by Boards of Review: Report to the Attorney-General, Report No. 17, 1983; ISBN: 9780644027168
[2] Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297; 35 ALR 151 at 320, 169-170 per Mason and Wilson JJ
Legitimate aids to construction include extrinsic material such as an ARC report but only in limited circumstances.[3] I have decided that those circumstances do not arise in this case as Parliament’s intention is plain from the words when regard is had to the authorities regarding the implied repeal of earlier legislation. That leads me to decide that s 14ZZB(1) prevails over s 25(6) of the AAT Act and that the Tribunal does not have power to stay the operation or implementation of the reviewable objection decision made by the Commissioner.
[3] See generally Statutory Interpretation in Australia 7th edition, DC Pearce and RS Geddes, LexisNexis Butterworths, Sydney, 2011 at Chapter 3.
Persons in the particular circumstances of this Trustee cannot be expected to have an understanding of those authorities and understandably thought that the Tribunal’s powers could not be qualified except to the extent permitted by the AAT Act. While s 25(6) remains in the AAT Act, persons such as this Trustee will continue to be misled in this way. It is difficult to see what useful purpose the provision continues to serve.
LEGISLATIVE PROVISIONS
The general structure of the AAT Act
The Tribunal was established under the AAT Act. While that legislation prescribes its powers when reviewing decisions and underpins those powers and its procedures generally, the Tribunal does not gain its power to review a particular decision or type of decision from the AAT Act itself. Rather, it gains its power to review a decision only when an application for review is made to it.[4] That application has to be made under an enactment other than the AAT Act.[5] That follows from the fact that Parliament has not chosen to prescribe or identify in the AAT Act those decisions in respect of which an application may be made to it. Instead, it waits until it is dealing with a particular subject matter and decides whether or not an application for review of decisions made in relation to that subject matter should be reviewable. Therefore, all that it provides in the AAT Act is that:
“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.”[6]
[4] AAT Act; s 25(4)
[5] AAT Act; s 25(1)
[6] AAT Act; s 25(1)
That enactment must specify the decisions of which review may be sought by specifying them by reference to the person or persons who made them. It may specify all decisions of that person or to a class of those decisions. Furthermore, it may specify the conditions to which an application for review may be made.[7]
[7] AAT Act; s 25(3)
Apart from making provision for the paths by which an application may be made to the Tribunal, Part IV of the AAT Act gives the Tribunal the tools it may use in taking an application through the review process to an outcome. There are a number of ways in which an outcome may be achieved but, in summary, an outcome will be achieved by a decision by the Tribunal,[8] agreement between the parties[9] or dismissal of the application.[10]
[8] This will follow a hearing where oral, as well as written, material is considered or on the papers. In making its decision, the Tribunal “… may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision …”: AAT Act; s 43(1)
[9] The outcome is the same whether parties may do this by themselves or in the course of an alternative dispute resolution process but, in the first instance, is achieved by means of s 42C and, in the second, by s 34D of the AAT Act.
[10] An applicant may withdraw the application with the outcome that the matter is taken to be dismissed AAT Act; s 42A(1A). The Tribunal may dismiss an application on various grounds: AAT Act; ss 42A(1), (1A), (2), (4), (5) and (7) and s 42B.
Part IV sets out the manner in which each of these outcomes is arrived at, how it obtains relevant material and also the way in which the Tribunal must conduct itself. It must, for example, hold the hearing of a proceeding in public except in certain circumstances.[11] The criteria that are used to judge whether circumstances are circumstances justifying a hearing that is something other than “in public” are set out in s 35(2).[12] In general terms, s 33 gives the Tribunal discretion as to the procedure it adopts. Although this gives the Tribunal a very broad discretion, the AAT Act makes specific provision for some procedures so that it is clear that they are permitted. Participation by telephone is one such example.[13] Section 37 imposes an obligation on the decision-maker to lodge a statement of reasons and relevant evidence or other material. The Tribunal may summons persons to give evidence or to produce books, documents or things to it under s 40. When exercising its powers, the Tribunal must, with certain qualifications:[14]
“… ensure that every party to a proceeding before the Tribunal is given a reasonable opportunity to present his or her case and, in particular, to inspect any documents to which the Tribunal proposes to have regard in reaching a decision in the proceeding and to make submissions in relation to these documents.”
[11] AAT Act; s 35(1)
[12] An express exception is made for a proceeding in the Tribunal’s Security Appeals Division: AAT Act; s 35(1AA)
[13] AAT Act; s 35A(1) although an express exception is made for a proceeding in the Tribunal’s Security Appeals Division: AAT Act; s 35A(2)
[14] Most noticeably any confidentiality issues arising under s 35 in Divisions other than the Security Appeals Division: AAT Act; s 39(1)
In summary, what the AAT Act sets out to do is to set the framework within which the review of administrative decisions will be conducted if an enactment has provided that an application for their review may be made to the Tribunal. What it then does is to permit variations of some of those provisions by the enactment providing for applications to be made to the Tribunal. It has done this in s 25(6) which provides:
“If an enactment provides for applications to the Tribunal:
(a)that enactment may also include provisions adding to, excluding or modifying the operation of any of the provisions of sections 27, 29, 32, 33 and 35 or of subsection 41(1) or 43(1) or (2) in relation to such applications; and
(b)those sections and subsections have effect subject to any provisions so included.”
Section 25(6) and a reading of the AAT Act as a whole suggest that Parliament wanted to maintain the general framework of powers and procedures it established in the AAT Act but to permit addition to, variation or modification of certain limited parts of that framework. It did not want to permit addition to, variation or modification of the whole of it or to parts of it that it had not specifically mentioned either in s 25(6) or in other specific provisions found throughout the AAT Act.[15]
[15] See, for example, those relating to proceedings in the Security Appeals Division of the Tribunal.
Provision made for applications for review of Commissioner’s reviewable objection decisions
Consistent with ss 25(1) and (3), Parliament has provided in s 14ZZ(1)(a)(i) of the TAA that a person who is dissatisfied with the Commissioner’s objection decision may apply to the Tribunal for review of that decision.[16] The Commissioner may only make a reviewable objection decision on an objection. An objection may only be made if a provision of an Act or of the Regulations permits it to be made.[17] There is no doubt that the Trustee has correctly made an objection under s 175A of ITAA36 as a taxpayer dissatisfied with an assessment and that the Commissioner has made a reviewable objection decision.
[16] TAA; s 14ZZ(1)(a)(i). That person may also choose to appeal to the Federal Court for its review: TAA; s 14ZZ(1)(a)(ii).
[17] TAA; s 14ZL
There is no question that he has lodged the application within the time permitted by s 29, as modified by s 14ZZC of the TAA. Modification of s 29 is expressly permitted by s 25(6) of the AAT Act. That time is 60 days after the person making the application to the Tribunal was served with notice of the decision of which review is sought. That is to be contrasted with the time generally allowed under s 29 of the AAT Act for lodgement of applications.
Modification of provisions of AAT Act by enactment providing for applications to be made
Section 14ZZA of the TAA provides that “The AAT Act applies in relation to … the review of reviewable objection decisions … subject to the modifications set out in this Division” i.e. Division 4 of Part IVC of the TAA.[18] Division 4 modifies or excludes ss 27 and 41,[19] 28 and 44A,[20] 29,[21] 30,[22] 35,[23] 37,[24] 38,[25] and 43[26] of the AAT Act. The modifications of ss 28, 30, 37, 38 and 44A as well as provisions of ss 41 and 43 (other than ss 41(1) and ss 43(1) and (2)) are not envisaged by s 25(6) of the AAT Act.[27] I will return to consider whether it is possible to reconcile s 25(6) with these modifications but consider first s 41 of the AAT Act as that is the provision at the heart of this proceeding.
Section 41 of the AAT Act: its addition to or exclusion or modification by the TAA
[18] TAA; s 14ZZA(a) Similar provision is made in relation to the review of extension of time refusal decisions and AAT extension applications: TAA; ss 14ZZA(b) and (c)
[19] TAA; s 14ZZB(1)
[20] TAA; s 14ZZB(2) Section 28 provides that a person may request a statement of reasons and s 44A provides that an appeal does not affect the operation or implementation of the Tribunal’s decision but confers power on the Federal Court to stay that decision.
[21] TAA; s 14ZZC
[22] TAA; s 14ZZD Section 30 identifies the parties to a proceeding for review of a decision and provides for those whose interests are affected by a decision to apply to be made a party to that proceeding.
[23] TAA; s 14ZZE
[24] TAA; s 14ZZF
[25] TAA; s 14ZZG
[26] TAA; s 14ZZJ
A. Section 41 of the AAT Act
Section 41(1) of the AAT Act provides:
“Subject to this section, the making of an application to the Tribunal for a review of a decision does not affect the operation of the decision or prevent the taking of action to implement the decision.”
Section 41(2) then sets out the Tribunal’s power to stay the operation or implementation of the decision. It provides:
“The Tribunal may, on request being made, as prescribed, by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.”
Sections 41(3) to (6) all relate to matters that might generally be described as relating to procedural fairness,[28] variation or revocation of a stay order[29] and conditions that may be imposed on any order that is made.[30]
[28] AAT Act; ss 41(4) and (5)
[29] AAT Act; s 41(3)
[30] AAT Act; s 41(6)
B. Section 14ZZB of the TAA
Section 14ZZB(1) provides that s “… 41 of the AAT Act do[es] not apply in relation to … a reviewable objection decision …; or … an extension of time refusal decision.” The practical effect of removing s 41(2)-(6) is to remove the Tribunal’s power to stay the operation or implementation of a reviewable objection decision. Removal of s 41(1) and its replacement with s 14ZZM of the TAA has not led to any practical change other than in wording. Section 14ZZM provides:
“The fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending.”
In other words, the pending review “… does not affect the operation of the decision or the taking of action to implement the decision” as s 41(1) of the AAT Act provided.
Even if the Tribunal’s powers to stay the decision had not been removed by Parliament’s providing in s 14ZZB(1) that s 41, as a whole, does not apply, the Tribunal would only have been able to stay the collection of the amount due and owing under a particular assessment, determination, notice or decision of which review is sought. This does not mean that all amounts which a taxpayer may be liable to pay can be the subject of a stay order.
Take, for example, an assessment of income tax which has been objected to, a reviewable objection decision made and an application made to the Tribunal. The assessment of liability to pay income tax is one thing (and could have been stayed if s 41(2)-(5) were operative) but the imposition of the General Interest Charge (GIC) is another. Liability to pay the GIC is imposed by specific provisions in various enactments. They are gathered together in s 8AAB(4) of the TAA. The amount of that GIC is calculated under s 8AAC at the rate worked out under s 8AAD. The Commissioner gives the person liable to pay the GIC notice of the amount of the charge for a particular day or days and does so under s 8AAF. The Commissioner may remit the GIC, or part of it, under s 8AAG. No provision is made for the person liable to the GIC or unhappy with a remission decision to object to its imposition or its amount. As a taxpayer cannot object to a decision imposing GIC, there can be no reviewable objection decision. In the absence of a reviewable objection decision, the Tribunal has no power to review it. The imposition and remission of GIC is a process quite separate from that of assessing liability to income tax and review of a reviewable objection decision does not pick up review of the GIC.[31]
[31] The principles to which I referred in my reasons in Re Beiruti and Commissioner of Taxation [2013] AATA 634 at [34]-[49] separating assessment of a tax liability from its collection or satisfaction are equally applicable in this case.
Shortfall interest charges and penalties are other examples. The TAA does allow for an objection to be lodged to the Commissioner’s decision not to remit an amount of shortfall interest charge on, among other taxes, an additional amount of income tax.[32] It also allows for an objection to be made to an assessment of penalties.[33] Therefore, a person may apply to the Tribunal for review of any reviewable objection decision made on objections of that type but the review is only possible because separate provision has been made for it. Review would not be encompassed within review of, in my example, assessment of liability to pay income tax.
[32] TAA; Schedule 1, s 280-170
[33] TAA; Schedule 1, s 298-30
Are s 25(6) of the AAT Act and s 14ZZB of TAA reconcilable?
There is a very real practical difference between leaving ss 41(2) to (6) of the AAT Act in place (as would seem to have been contemplated by s 25(6)) and overriding its operation and substituting new provisions in Part IVC of the TAA. It is this. Taking an assessment of income tax as an example, if s 14ZZB prevails, the Tribunal cannot stay the collection of that tax when an application is made to it for review of the reviewable objection decision relating to that objection. If the effect of s 25(6) is that s 14ZZB could not have been enacted, the Tribunal could stay that collection.
What the Tribunal could not do, and never could do in that case, was stay the imposition or collection of GIC, shortfall interest charge or penalties. Had the taxpayer objected separately to a decision not to remit shortfall interest charge or imposition or an assessment of penalties, he or she could have applied to the Tribunal for review of the reviewable objection decision made on the objection. The Tribunal would then have had power to stay the implementation of the decision and so stay their collection. If s 14ZZB prevails, however, the Tribunal does not have power to stay the operation or implementation of the decision. It has never had powers in relation to GIC. There is no way to reconcile the two outcomes at least in so far as s 25(6) of the AAT Act provides for the addition to, exclusion or modification of s 41(1) but not of the remaining provisions of s 41 and, in particular, of the power to stay it confers.
Reconciling the irreconcilable
A.Relevant principles of statutory interpretation
That takes me back to principles of statutory interpretation. They require me to do what I have done i.e. to examine the two pieces of legislation to see whether they can be reconciled. In Cobiac v Liddy,[34] the High Court considered s 47(4) of the Road Traffic Act 1961 (SA) (RT Act) and s 4 of the Offenders Probation Act 1913 (SA) (OP Act). The earlier Act provided that the court could, in certain circumstances where it thought the charge proved, exercise a range of powers including dismissing the charge without conviction, convict the person but without penalty and, either with or without conviction, require a person to be of good behaviour and subject to other conditions. The later Act, being the RT Act, provided:
“Notwithstanding any other Act the minimum amount of any fine and the minimum period of imprisonment or disqualification prescribed by this section shall not be reduced or mitigated in any way except as follows:-
In the case of a first offence, the court, if it is satisfied by evidence given on oath that the offence is trifling, may order disqualification for a period less than three months but not less than fourteen days.”
[34] (1969) 119 CLR 257; Barwick CJ, Kitto, Windeyer and Owen JJ; McTiernan J dissenting at 268 per Windeyer J
Windeyer J considered an argument to the effect that the later RT Act abrogated the provisions of the earlier OP Act. The question whether the magistrate had been correct in exercising his power under the OP Act on the basis they had not been abrogated by the RT Act was, Windeyer J said:
“… to be decided not by any assumptions of what Parliament’s purpose was, but by its intention as expressed in the language it has used. … The proposition that the [OP] Act has been supplanted by the rigorous provisions of the later Act was put to us as an example of the contrast between the general and the special. So put, the proposition is the obverse of the maxim generalia specialibus non derogant: but whether a later Act has taken away a discretionary power given by an earlier Act must depend upon a comparison of the actual language of each, to see whether they stand together or whether the latter has, pro tanto, abrogated the former. The question is not answered by maxims. …”[35]
[35] (1969) 119 CLR 257 at 268
I am not concerned with a situation in which a later Act has taken away a discretionary power given by an earlier Act. I am concerned with a situation in which s 25(6) of the AAT Act was enacted long before power to review decisions in the taxation jurisdiction was transferred to the Tribunal from the former Taxation Boards of Review. That is a situation in which the restrictions on addition to, exclusion and modification of certain provisions seemed to be of general application and were enacted long before provisions such as s 14ZZB were enacted in a specific context and with their application limited to their context. As in Cobiac v Liddy, the proposition is the obverse of the maxim generalia specialia non derogant (“General words do not derogate from special.”[36]) to become generalibus specialia derogant (“Special things take from generals”[37]). The task I undertake must, therefore, be the same. I must look to the words of the legislation as I have done and see whether they can be reconciled. That is a task that does not permit regard to be had to:
“… hypothetical or possible conflicts. Legislation being concerned with the highly practical business of lawmaking, the issue in every case of a suggested conflict will be the practical ways in which the legislation operates together and whether, in that context, an irreconcilable conflict of duties really arises. In answering this question it is relevant to consider whether one of the statutes applies to a special class or subject matter whereas the other applies to a more general or wider subject matter …”.[38]
[36] Black’s Law Dictionary with pronunciations, 5th edition, 1989, West Publishing Company, St Paul
[37] Black’s Law Dictionary
[38] Royal Automobile Club of Australia Incorporating Imperial Service Club v Sydney City Council (1992) 27 NSWLR 282; 75 LGRA 292; Kirby P, Clarke JA and Handley JA at [4]; 294; 303 per Kirby P (citations omitted)
If there is an irreconcilable conflict, it is not a case of the earlier legislation giving way to the later but to provisions of general application giving way to provisions that are of particular application. This follows from what was said by O’Connor J in Goodwin v Phillips:[39]
“… Where there is a general provision which, if applied in its entirety, would neutralize a special provision dealing with the same subject matter, the special provision must be read as a proviso to the general provision, and the general provision, in so far as it is inconsistent with the special provision, must be deemed not to apply. …”[40]
[39] (1908) 7 CLR 1; Griffith CJ, Barton, O’Connor and Isaacs JJ
[40] (1908) 7 CLR 1 at 14 per O’Connor J
B. Applying the relevant principles of statutory interpretation
Applying these principles in this case begins from the proposition that s 25(6) and the provisions of the AAT Act are intended to set the broad framework within which applications may be made to the Tribunal and within which the Tribunal reviews the decisions to which the applications relate. Even though s 25(6) suggests that only limited modifications may be made to that framework, Parliament has clearly intended to change aspects of that framework in the case of applications it makes provision for in Part IVC of the TAA. In doing that, it must be taken to have been aware of the limitations expressed in s 25(6). By acting as if those limitations did not impose any barrier to its enacting legislation contrary to those limitations, it must be taken to have intended that they did not apply in this particular context. To that extent, the operation of s 25(6) and other provisions of the AAT Act must be taken to have been added to, excluded or modified by the provisions of Part IVC of the TAA in relation to the applications to which it applies. Those additions, exclusions and modifications are limited to those applications and do not have broader application.
This leads me to the conclusion that the provisions of s 41 of the AAT Act must be taken to have no application to applications made under, and subject to, Part IVC of the TAA. Therefore, s 41 of the AAT Act has no application as a result of the provision of s 14ZZB(1) of the TAA and the Tribunal does not have power to stay the operation or implementation of the Commissioner’s reviewable objection decision.
I certify that the twenty eight preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: ....(sgd).....................................................
Leah Berardi Associate
Date of Hearing 2 September 2013
Date of Decision 24 September 2013
Self-represented Applicant The Trustee
Solicitor for the Respondent Mr M Sadhu
ATO Legal Services Branch
“On an application for review of a reviewable objection decision:
(a)the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
(b) the applicant has the burden of proving that:
(i)if the taxation decision concerned is an assessment (other than a franking assessment) – the assessment is excessive; or
(ii)if the taxation decision concerned is a franking assessment – the assessment is incorrect; or
(iii)in any other case – the taxation decision concerned should not have been made or should have been made differently.”
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