Segler and Commissioner of Taxation (Taxation)

[2024] AATA 4286

Segler and Commissioner of Taxation (Taxation) [2024] AATA 4286 (11 October 2024)

ReviewNumber:       2024/6251; 2024/6252

Division:TAXATION AND COMMERCIAL DIVISION

File Numbers:         2024/6251; 2024/6252

Re:Sharon Segler

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Deputy President Thompson SC 

Date:11 October 2024

Place:Perth

The application for review is dismissed on the basis that the Tribunal does not have any jurisdiction.

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

Deputy President Thompson SC

CATCHWORDS

TAXATION – income tax – Taxation Administration Act 1953 (Cth) – Tribunal has no jurisdiction – refuse to exercise discretion to refund credit amounts from income tax to reduce debt owed – no taxation decision – no taxation objection – no reviewable objection decision – running balance account – application dismissed

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth), ss 5, 25

Administrative Decisions (Judicial Review) Act 1977 (Cth)

Judiciary Act 1903 (Cth), s 39B

Taxation Administration Act 1953 (Cth), ss 8AAZL(1)-(4), 8AAZLA, 8AAZLB, 14ZL, 14ZY, 14ZZ, 14ZQ, 14ZZA, 18-70

SECONDARY MATERIALS

Commissioner of Taxation, Practice Statement Law Administration 2011/21 – Offsetting of refunds and credits against taxation and other debts (14 April 2011)

Pearce, Dennis, Administrative Appeals Tribunal (LexisNexis Butterworths, 4th ed, 2015)

REASONS FOR DECISION

1. On 24 August 2024, Ms Sharon Segler applied to the Tribunal for ‘judicial review’[1] of the Respondent’s refusal to exercise a discretion to refund credit amounts from her income tax returns for the years ended 30 June 2022 and 30 June 2023 (ITRs) to reduce a debt she owed to the Respondent (Commissioner), which had accrued from earlier income years.[2]

   [1] 2024/6251 – RE Segler and Commissioner of Taxation Chronology of Events, filed with the Tribunal on 24 August 2024, including attachments SLS1-SLS11 (Application supporting document) at [32]; SLS11.

   [2] SLS10.

2. On 1 October 2024, I dismissed the applications on the grounds that the Tribunal does not have jurisdiction to review the decision. Ms Segler has sought reasons for that decision. These are my reasons.

   BACKGROUND

   Legal framework

3. Part IIB of the Taxation Administration Act 1953 (Cth) (TAA) empowers the Commissioner to establish a running balance account (RBA) for a taxpayer which records a taxpayer’s debits and credits in a single account. Division 3 of Part IIB contains the powers regarding payments and credits to an RBA. The scheme of Part IIB provides for the recording of tax debts, interest and penalties applied to debts, including the remission of interest and penalties, and the application of credits reducing the tax debt. An RBA deficit debt arises when the balance in the RBA is in favour of the Commissioner, that is, a taxpayer is indebted to the Commissioner. An RBA deficit debt may be reduced in three main ways:

   (a)by a payment made to the Commissioner by the taxpayer or on their behalf;

   (b)by an offset being applied, meaning a payment due to the taxpayer by the Commissioner is applied in reduction of the RBA deficit debt;[3] or

   (c)by remission of penalties or interest charges.

   [3] TAA, s 8AAZLA.

4. Section 8AAZL of the TAA provides that a refund may only be made to a taxpayer who has a tax debt when:

   (a)the tax debt is owing but not yet payable;

   (b)the amount owing is under a payment arrangement which the taxpayer is complying with;

   (c)the Commissioner has agreed to defer recovery of the tax debt; or

   (d)the amount owing is to be offset against a director penalty debt.

5. The Commissioner’s Practice Statement Law Administration 2011/21 – Offsetting of refunds and credits against taxation and other debts (PSLA 2011/21) is a policy document which provides guidance on how to apply the offset provisions of Division 3 of Part IIB, and when a refund may be provided to a taxpayer instead of offsetting a credit against a tax debt.

6. Part IVC of the TAA contains the provisions relating to a taxpayer’s rights to seek review of certain decisions made by the Commissioner. Those rights include the ability to apply to the Tribunal in certain circumstances.

7. The Tribunal is established by s 5 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act). It provides an avenue for merits review of some Commonwealth decisions. The scheme of the AAT Act requires a conferral of jurisdiction by another Act[4] as the Tribunal has no general jurisdiction of itself. Consequently, when a person seeks a review in the Tribunal, the Tribunal will only have jurisdiction if there is a relevant provision of a conferring Act. The TAA is a conferring Act in respect to some decisions made by the Commissioner.

   [4] AAT Act, s 25.

8. As Pearce explains:[5]

   To determine whether the AAT can review a decision there are three matters that must be considered:

   Does an enactment confer jurisdiction;

   Has a ‘decision’ been made; and

   Has that decision been taken under the enactment conferring jurisdiction.  

   [5] Dennis Pearce, Administrative Appeals Tribunal (LexisNexis Butterworths, 4^th ed, 2015) at [3.1].

9. The Administrative Decisions (Judicial Review) Act1977 (Cth) (ADJR Act) and s 39B of the Judiciary Act 1903 (Cth) provide avenues for judicial review of administrative decisions made by Commonwealth bodies. The Federal Court of Australia, the Federal Circuit and Family Court of Australia, and the High Court of Australia may all exercise the ADJR Act and the Judiciary Act jurisdiction. No jurisdiction is given to the Tribunal under these Acts.

   Procedural background

10. In 2023 Ms Segler filed, through her registered tax agent, her ITRs for the 2022 and 2023 income years. In mid September 2023 she received notification from the Australian Taxation Office (ATO) that she was entitled to a refund of $10,612.67 for those years, being $1,936.34 for the year ended 30 June 2022 and $8,676.33 for the year ended 30 June 2023.[6]

    [6] Application supporting document at [1].

11. On 13 September 2023, Ms Segler checked her ATO account through MyGov and saw that the two refunds, totalling $10,612.67, had been transferred to her Integrated Client Account without apparent explanation or notice to her (refund issue).[7]

    [7] Application supporting document at [2].

12. Ms Segler sent three letters to the ATO, on 22 September 2023, 14 November 2023, and 18 January 2024. Ultimately the third of these was apparently referred to the Objections Team for consideration.[8] There is however no evidence to suggest that either the third letter, or its two predecessors, were at any time considered by an objections officer and a decision made in respect to them.  

    [8] Application supporting document at [7c].

13. On 27 March 2024, Ms Segler made a complaint to the ATO through its formal complaints system which dealt with both the refund issue, and other matters arising in the course of her dealings with the ATO.[9]

    [9] Application supporting document at [9].

14. On 17 April 2024, the ATO issued a letter to Ms Segler headed ‘The outcome of your complaint’ (First Response).[10]

    [10] SLS5.

15. On 7 June 2024, the ATO sent an email to Ms Segler headed ‘Your complaint outcome’ (Second Response).[11]

    [11] Provided to the Tribunal attached to an email dated 26 September 2024.

16. On 25 July 2024, the ATO issued a letter to Ms Segler headed ‘The outcome of your complaint’ (Third Response).[12]

    [12] SLS10.

17. On 24 August 2024, Ms Segler filed two applications[13] with the Tribunal seeking ‘judicial review pursuant to s 18-70’ of the TAA.[14]

    [13] Application 2024/6251 is for the 2022 income year and application 2024/6252 is for the 2023 income year.

    [14] Application supporting document at [32].

18. On 1 October 2024 I dismissed the applications for review.

    The underlying dispute

19. Ms Segler’s underlying complaint arises from the use of her income tax refund amounts for the 2022 and 2023 income years to pay a pre-existing debt she owed to the Commissioner and for which an RBA had been established.

20. In the Third Response the Commissioner explains the history of Ms Segler’s debt in the following terms:

    When we apply the proposed changes to your case, we find that at the time your credits became available these discretions did not apply. Your debt was placed on hold and reactivated numerous times prior to 2017. On 20 July 2015 your debt was reactivated, and collection action commenced. This debt was again placed on hold 20 February 2018 at your request following the Administrative Appeals (AAT) mediation. The debt was then reactivated to absorb income tax credits 18 December 2018. The latest decision to place your debt on hold was made in February 2019 at your request. As part of that action the Australian Taxation Office (ATO) discussed with you the possibility of offsetting any future credits against your debt on hold and issued correspondence detailing the terms and obligations of having a debt placed on hold (including offsetting) on 14 February 2019. This decision to place your debt on hold in 2019 was separate to any decision to place your debt on hold that had preceded it.

21. In the First Response the Commissioner records the following background:

    (a)Ms Segler was informed in a telephone conversation on 18 February 2019 that the debt could be re-raised at any time;

    (b)On 19 May 2022 correspondence was issued to Ms Segler advising that the debt was now due and payable, that action may now be taken to recover it, and that any tax refunds or credits she was entitled to may be used to pay it off; and

    (c)On 18 October 2023 a letter was issued to Ms Segler’s registered tax agent advising, amongst other things, that any tax refunds or credits Ms Segler became entitled to would be used to pay off any debts payable, including debts on hold.

22. Ms Segler’s application to the Tribunal seeks to review the reactivation of the debt, and the use of the 2022 and 2023 refund amounts to pay that debt, rather than refund the money to her.

    CONSIDERATION

    No Judicial review

23. As discussed at [9] above, the Tribunal does not have any jurisdiction to conduct judicial review of decisions. Any application for judicial review must be made to a Court with appropriate jurisdiction; in this case that would be the Federal Court of Australia.

24. Despite the request for judicial review, which is plainly incompetent, I will consider whether Ms Segler’s application can be dealt with as an application within the Tribunal’s jurisdiction.

    Preconditions for review in the Tribunal

25. As set out in [7] above, jurisdiction is conferred on the Tribunal by legislation other than the AAT Act.

26. Relevantly, the TAA confers jurisdiction on the Tribunal to review some decisions made by the Commissioner of Taxation. However, as ss 14ZZ and 14ZZA of the TAA make plain, it is not every action by the Commissioner which is subject to review by the Tribunal. Relevantly, review is only available for matters which fall within the definition of ‘reviewable objection decisions’ which in turn requires that an ‘objection decision’ has been made. Objection decision is defined in s 14ZY to include, relevantly, a ‘taxation objection’ is defined in s 14ZL in the following terms:

    (1) This Part applies if a provision of an Act or a legislative instrument (including the provision as applied by another Act) provides that a person who is dissatisfied with an assessment, determination, notice or decision, or with a failure to make a private ruling, may object against it in the manner set out in this Part.

    (2) Such an objection is in this Part called a taxation objection. 

    (emphasis added)

27. In order for a taxpayer to commence the process of making a taxation objection, a ‘taxation decision’ must have been made. ‘Taxation decision’ is defined in s 14ZQ to mean ‘the assessment, determination, notice or decision against which a taxation objection may be, or has been, made’.

28. Consequently, the preconditions for a taxpayer seeking review in the Tribunal are:

    (a)a taxation decision must have been made;

    (b)a taxation objection must have been made; and

    (c)the taxation objection must be a reviewable objection decision.  

29. None of those preconditions exist in this case.

    No taxation decision

30. The issue raised by Ms Segler does not arise from any action of the Commissioner in issuing an assessment, determination or notice. I therefore consider whether a decision has been made within the definition of a taxation decision.

31. Whilst ‘taxation decision’ is defined, the word ‘decision’ is not. The Macquarie Dictionary defines decision in the following manner:

    decision

    noun 1.  The act of deciding; determination (of a question or doubt).

    2.  a judgement, as one formally pronounced by a court.

    3.  a making up of one’s mind.

    4.  that which is decided; a resolution.

    5.  the quality of being decided; firmness, as of character.

32. It is clear from this definition that a decision requires some positive action rather than, for example, the mere operation of a statute.

33. Sections 8AAZL(1) and (2) and ss 8AAZLA and 8AAZLB of the TAA mandate how the Commissioner must treat a credit due to a taxpayer. Whilst only one of either ss 8AAZLA and 8AAZLB can apply in any particular case, both mandate that credits due to a taxpayer must be paid to reduce debts owed by that taxpayer to the Commissioner. Thus, it is the operation of the law, and not a decision, which determines the treatment of a credit due to a taxpayer who has an outstanding debt.

34. Ms Segler had an RBA deficit debt so s 8AAZLA applied to the treatment of her credit and operated to use the credit to pay down the debt.

35. Sections 8AAZL(3) and (4) of the TAA set out the only circumstances in which a refund may be made to a taxpayer who has a RBA deficit debt. PSLA 2011/21 sets out how the discretion should be exercised when a taxpayer fits within the circumstances set out in

    
    

    ss 8AAZL(3) or (4). Ms Segler does not contend that she fits within s 8AAZL(3) or 8AAZL(4). Consequently, the effect of the law is that no decision could be made as to whether a refund should be provided.

36. As noted in PSLA 2011/21 at [2], the ATO accounting system rules generally apply automatic offsets in accordance with ss 8AAZL(1) and (2) of the TAA.

    No taxation objection

37. If there is no taxation decision within the meaning of Part IVC of the TAA, it is not possible for a taxpayer to make a taxation objection. This means that, whilst Ms Segler wrote to the Commissioner on three occasions seeking action on the refund issue,[15] none of those letters were a taxation objection within Part IVC of the TAA.

    [15] Application supporting document at [5], [6] and [7] and attachments SLS1, SLS2 and SLS3.

    No reviewable objection decision

38. The three responses Ms Segler received from the ATO[16] are all responses to the complaint she made on 27 March 2024.[17] In the absence of a valid taxation objection, they cannot be, and are not, reviewable objection decisions.

    [16] See [14]-[16] above.

    [17] Application supporting document at [9].

    Section 18-70 of Schedule 1 to the TAA

39. Ms Segler’s application sought review under ‘s 18-70 of the TAA’. Section 18-70 is contained within Part 2-5 of Schedule 1 of the TAA which contains the machinery provisions for the Pay as you go (PAYG) system. The PAYG system imposes obligations on entities who make certain types of payments, for example employers, to withhold part of a payment owed to a person, for example, income to an employee, and pay that money to the Commissioner, effectively on behalf of the person who would otherwise be entitled to the money.

40. Section 18-70 contains a right to apply to the Commissioner for a refund by a person who has had a PAYG amount which has been wrongly withheld. The right is limited to the circumstances set out in that section. A decision of the Commissioner under s 18-70 is a taxation decision which is reviewable under Part IVC TAA.

41. There is no evidence that Ms Segler made a request for a refund to the Commissioner pursuant to s 18-70, or even that s 18-70 or the PAYG provisions have any role to play in this matter.

42. In any event, in the absence of a taxation decision, a taxation objection and a reviewable objection decision, there is no right of review by the Tribunal.

    CONCLUSION

43. For the reasons set out above, on 1 October 2024 I dismissed the application for review on the basis that the Tribunal does not have any jurisdiction.

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for the decision herein of Deputy President Thompson SC

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

Associate:

Dated: 11 October 2024