Ruairi Browne and Commissioner of Taxation

Case [2013] AATA 866

[2013] AATA  866

Division TAXATION APPEALS DIVISION

File Number(s)

2013/4555

Re

Ruairi Browne

APPLICANT

And

Commissioner of Taxation

RESPONDENT

DECISION

Tribunal

Deputy President S E Frost
Date 15 November 2013
Date of written reasons 5 December 2013
Place Sydney

Pursuant to section 42D of the Administrative Appeals Tribunal Act 1975, the Tribunal remits to the Respondent for reconsideration on or before 29 November 2013 the decision of the Respondent dated 9 August 2013.

................[sgd]........................................................

Deputy President S E Frost

CATCHWORDS

PRACTICE AND PROCEDURE – Taxation – Respondent suggests resolution of dispute under s 42C of the AAT Act – effect of proposed s 42C decision is to allow the Applicant's objection in full – Applicant reluctant to agree to s 42C terms – alternative application by Respondent for remittal under s 42D of the AAT Act – Respondent foreshadows entirely favourable outcome for Applicant – Applicant opposes remittal – Applicant dissatisfied with reasons – whether remittal under s 42D should be ordered only in rare instances – discretion to be exercised according to the circumstances of the particular case, confined only by the subject matter and object of the section – appropriate to exercise the discretion in this case – decision remitted for reconsideration

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth), ss 2A, 25, 27, 42C, 42D

Taxation Administration Act 1953 (Cth), s 14ZZ

CASES

NT98/41-48 and Commissioner of Taxation [1998] AATA 311

Re Lavery and Registrar, Supreme Court of Queensland (No. 2) (1996) 23 AAR 52

N1112/00A v Minister for Immigration and Multicultural Affairs [2000] FCA 1597

REASONS FOR REMITTAL UNDER S 42D OF THE AAT ACT

Deputy President S E Frost

5 December 2013

INTRODUCTION

  1. The decision under review is the Commissioner’s objection decision dated 9 August 2013 disallowing the taxpayer’s objection against an income tax assessment. 

  2. On 6 November 2013 the Commissioner applied for an order under s 42D of the Administrative Appeals Tribunal Act 1975 (AAT Act) remitting the objection decision to the Commissioner for reconsideration.  The taxpayer opposed the making of such an order, and filed written submissions in support of his position on 7 November 2013.  In preparation for an interlocutory hearing on 15 November 2013, the Commissioner filed written submissions in support of his application on 14 November 2013 and on the same day the taxpayer provided further written submissions in reply.

  3. After hearing the parties on 15 November 2013, I granted the Commissioner’s application and gave brief oral reasons for my decision.  I indicated to the parties that I would provide more detailed written reasons shortly.  These are those reasons.

    BACKGROUND

  4. The taxpayer is an Irish citizen who arrived in Australia on a working holiday visa on 30 June 2011.  He departed Australia on 29 June 2012.

  5. On 16 July 2012 the taxpayer lodged an income tax return for the year ended 30 June 2012.  The return, as lodged, reflected the taxpayer’s view that he was a resident of Australia in the relevant income year.  After conducting a review of the return,…

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Ruairi Browne and Commissioner of Taxation [2013] AATA 866
Case
[2013] AATA 866
Decision Date

CaseChat Overview and Summary

The case of Ruairi Browne and the Commissioner of Taxation involves a dispute regarding the residency status of the taxpayer, Ruairi Browne, for the purposes of Australian income tax during the year ended 30 June 2012. The Commissioner initially assessed that Browne was not a resident of Australia for income tax purposes in that year, a view which Browne contested. The case proceeded through several stages of objection and review, culminating in an application by Browne to the Administrative Appeals Tribunal (AAT) for review of the Commissioner’s decision to disallow his objection. During the course of these proceedings, the Commissioner revised his position, acknowledging that Browne might be considered a resident for income tax purposes.

The primary legal issue before the Tribunal was whether the matter should be resolved through a consent decision, under section 42C of the Administrative Appeals Tribunal Act 1975 (AAT Act), or whether the decision should be remitted back to the Commissioner for reconsideration under section 42D of the AAT Act. Browne expressed a preference for proceeding to a hearing to seek clarification on the application of residency criteria to his circumstances, while the Commissioner advocated for a more expeditious resolution through a consent decision.

The Tribunal considered the objectives outlined in section 2A of the AAT Act, which mandate that the Tribunal should provide a mechanism of review that is fair, just, economical, informal, and quick. The Tribunal found that proceeding to a hearing was neither economical nor would it provide a quick resolution. It also noted the potential impact on the Tribunal’s efficiency and ability to provide timely reviews to other litigants. Consequently, the Tribunal decided that the most efficient resolution would be to remit the decision back to the Commissioner for reconsideration under section 42D of the AAT Act. The Tribunal emphasized that while it cannot compel a party to accept the other’s proposed terms, it should act to achieve the objectives of efficiency and expeditious resolution when appropriate.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

After hearing the parties on 15 November 2013, I granted the Commissioner’s application and gave brief oral reasons for my decision. I indicated to the parties that I would provide more detailed written reasons shortly. These are those reasons.BACKGROUND The taxpayer is an Irish citizen who arrived in Australia on a working holiday visa on 30 June 2011. He departed Australia on 29 June 2012. On 16 July 2012 the taxpayer lodged an income tax return for the year ended 30 June 2012. The return, as lodged, reflected the taxpayer’s view that he was a resident of Australia in the relevant income year. After conducting a review of the return, the Commissioner formed the view that the taxpayer was not a resident of Australia in that year, and issued a notice of assessment consistent with that view. The taxpayer objected against the assessment but the Commissioner considered the objection invalid. The taxpayer objected again. This time the Commissioner accepted the objection as a valid objection, but he disallowed the objection. The taxpayer then applied to the Tribunal for review of the objection decision. THE TRIBUNAL PROCEEDINGS AND THE COMMISSIONER’S REVISED POSITION The Tribunal listed the matter for a preliminary conference before a Conference Registrar, to take place on 7 November 2013. However, on 6 November 2013, the day before the conference was to take place, the Commissioner sent a letter to the Tribunal to outline the Commissioner’s revised position:The Respondent has considered the particulars of the Applicant’s case, and has determined that the objection decision dated 9 August 2013 should be set aside, and the objection allowed in full. The Respondent has reached this position on the basis that, on a balancing of all the facts available, we are not satisfied that the Applicant had a usual place of abode outside Australia during the relevant year. Accordingly, we have reconsidered our view, and now consider that the Applicant is an Australian resident for income tax purposes for that year. The letter also explained that the Commissioner had sent to the taxpayer’s representative a proposed consent decision under s 42C of the AAT Act, by which the Tribunal would set aside the objection decision and substitute a decision that the objection was allowed in full, on the basis that, in respect of the 2012 income year, “[t]he Applicant is an Australian resident for income tax purposes, pursuant to subsection 995-1(1) of the Income Tax Assessment Act 1997”. It seems that the taxpayer’s representative had already foreshadowed a reluctance to have the application disposed of by way of a consent decision under s 42C. That explains why the Commissioner’s letter dated 6 November 2013 continues as follows:Should the Applicant proceed with their view that the matter should be heard by the Tribunal, the Respondent would respectfully request that the Tribunal remit the decision back to the Respondent for reconsideration of the decision under section 42D(1) of the Act. Remission under this section can be made at any stage of a proceeding for review, and may be ordered by a Conference Registrar.The Respondent further considers that progressing the matter under section 42C, preferably, or 42D in the alternative, would assist the Tribunal in pursuing its stated objectives [of providing a mechanism of review that is fair, just, economical, informal and quick: s 2A of the AAT Act].THE TAXPAYER’S POSITION

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The third factor overlaps with the first two. Section 2A of the AAT Act says that the Tribunal must “pursue the objective of providing a mechanism of review that is fair, just, economical, informal and quick”. To launch this matter towards hearing, as things stand at the moment, is not fair to the Commissioner, and it is not economical. Nor will it provide a quick resolution – or at least, not as quick a resolution as a remittal under s 42D should provide. And while the matter remains unresolved it has the potential to hinder the Tribunal’s ability to provide a fair, just, economical and quick outcome to other users of the Tribunal’s services who are waiting patiently in line: see Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 at [93]-[95].CONCLUSION On the current state of play the most efficient way to finalise this application would be through a consent decision under s 42C of the Act. While the Tribunal cannot force one party to accept the other party’s proposed terms of agreement, it should not be expected to stand idly by when efficiency demands that it act. That is why I chose to take the second most efficient way forward – to remit the objection decision to the Commissioner for reconsideration under s 42D.

Ratio Decidendi

Legal Principle Established

Mr Browne also told me that his client is prepared, in taking this matter to hearing, to risk an unfavourable outcome (that he was not a resident of Australia in the relevant year) for the sake of getting clarification on the identification and application of proper criteria to his circumstances. He said:… I am not at all in any way assuming that when this matter proceeds to the Tribunal that the Tribunal will hold that he’ll be a resident or a non-resident. It’s a completely open matter. [My client] understands that and we will get reasoning that I believe will add value to what is on the table at the moment which is principally a Tax Ruling 98/17. That will give him clarity as to whether he is properly treated as a resident or properly treated as a non-resident. CONSIDERATION One of the submissions the taxpayer makes is that remittal under s 42D “should only be made in rare instances”. That is said to be based on the observations of Senior Member Block (as he then was) in NT98/41-48 and Commissioner of Taxation [1998] AATA 311 (reported as Case 18/98 98 ATC 246; AAT Case 12,865 (1998) 39 ATR 1032). The observations referred to (see [17] below) follow a discussion of the decision of Deputy President Forgie in Re Lavery and Registrar, Supreme Court of Queensland (No. 2) (1996) 23 AAR 52. In Lavery the Deputy President explained the interaction of a number of provisions of the AAT Act, including the then recently introduced s 42D, and said at 56-57:…It would follow from the framework of the AAT Act and the nature of administrative merits review that the power given by section 42D to remit a decision to a decision maker should not be exercised simply because inadequate findings of fact, references to evidence or reasons have been given. Nor should it be exercised simply because a decision-maker supports his, her or its decision on a basis different from that originally put forward. The AAT Act provides other means to remedy those situations.Determining the occasions on which the power given by section 42D may be exercised is more difficult. It is not clear from the AAT Act itself. I have, therefore, looked to the Explanatory Memorandum which accompanied the Law and Justice Legislation Amendment Bill No. 3) 1994. Section 42D was inserted by Item 21 of Schedule 2 to that Bill. The notes in relation to that Item state: [99] The Tribunal does not have the power to order that a matter be remitted (sic) the decision-maker for further consideration unless it sets aside the decision under subparagraph 43(c)(ii) of the Act. This can result in matters proceeding to a hearing even where the parties agree that the decision-maker should review the decision.[100] Item 21 of Schedule 2 inserts new section 42D which will provide that the Tribunal has the power to order that a matter may be remitted to the decision-maker for further consideration at any stage of the proceedings. Where a decision is remitted the decision-maker may affirm, vary, or set aside the decision and make a new decision in substitution for the decision set aside.[101] New subsections 42D(3) and (4) will provide that where a decision is varied, or a new decision is substituted, the applicant may proceed with the application for review in respect of the varied or new decision or withdraw the application.The notes do not provide any assistance as to when the power should be exercised. There are, however, two things that can be gleaned from the notes. The first is that there seems to be an underlying assumption that case management procedures are at the heart of the new section 42D. The second is that the power is needed in cases in which the decision maker should review the decision but does not give any indication of when such cases might arise.…