Stevens and Commissioner of Taxation
[2012] AATA 34
•23 January 2012
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2012] AATA 34
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2011/4908-4910
TAXATION APPEALS DIVISION ) Re BARRY STEVENS Applicant
And
COMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal Mr A Sweidan, Senior Member Date23 January 2012
PlacePerth
Decision The applicant's application for re-instatement is refused. ..(SGD) Mr A Sweidan.....
Senior Member
CATCHWORDS
Practice and procedure - application for re-instatement - application previously withdrawn and deemed to be dismissed - applicant claims that withdrawal and hence deemed dismissal was in error - held no relevant error shown - re-instatement refused
LEGISLATION
Administrative Appeals Tribunal Act 1975 s 42A(10)
CASES
Myers v Commissioner of Taxation [2004] AATA 1337
Re Wicke-Fitzgerald and Secretary, Department of Education, Employment and Workplace Relations [2008] AATA 811
Goldie v Minister for Immigration and Multicultural Affairs (2002) 121 FCR 383
Kerford and Secretary, Department of Families, Community Services and Indigenous Affairs [2007] AATA 1730
White and Secretary, Department of Families, Community Services and Indigenous Affairs [2007] AATA 1712REASONS FOR DECISION
23 January 2012 Mr A Sweidan, Senior Member Background and Relevant Principles
1. Applicant seeks reinstatement of his application under s 42A(10) of the Administrative Appeals Tribunal Act 1975 (“the AAT Act”).
2. Although his submissions make reference to the power to reinstate under s 42A(9) of the AAT Act, the submissions also cite (at paragraph 5) the Tribunal’s decision in Myers v Commissioner of Taxation [2004] AATA 1337 in which it was held at [8] that the reinstatement power in s42(9) is limited exclusively to s 42A(8) of the AAT Act and hence is only available where an application is dismissed under s 42A(2) of the AAT Act.
3. In the present case the earlier application was dismissed under s 42A(1B) and, consistently with the decision in Myers, it is clear that the only available power to reinstate is that contained in s 42A(10) of the AAT Act.
4. S 42A(10) confers a discretion on the Tribunal to reinstate an application which has been dismissed in error. The error is a precondition to the exercise of the powers. If there is no relevant error then the power to reinstate under S 42A(10) is not enlivened: Re Wicke-Fitzgerald and Secretary, Department of Education, Employment and Workplace Relations [2008] AATA 811.
5. It is clear that the error need not be an administrative error on the part of the Tribunal: Goldie v Minister for Immigration and Multicultural Affairs (2002) 121 FCR 383. In that decision of the Full Federal Court the majority (Wilcox and Downes JJ) held (at[28]):
“The only limitations that we can see in s 42A(10) are:
(i) that the Tribunal has dismissed the application; and
(ii) that the act of dismissal was attended with error.”
6. If an error is established with the meaning of s 42A(10, reinstatement is not automatic but a matter for the Tribunal’s discretion. The guiding principles for the exercise of the discretion are those summarised by Deputy President Forgie of the Tribunal in Kerford and Secretary, Department of Families, Community Services and Indigenous Affairs [2007] AATA 1730, (set out in paragraph 8 of the applicant’s submissions and see below).
History - Was There an Error?
7. The application was dismissed by the Tribunal on 12 August 2009 under s 42A(1B) of the AAT Act following notice of withdrawal of the application given to the Tribunal by the applicant’s solicitor under s 42A(1A) of the AAT Act. As a result of the withdrawal under s 42A(1A) there is deemed to be a dismissal of the application under s 42A(1B).
8. It is not entirely clear what error the applicant claims to have occurred.
9. His affidavit of 16 November 2011 in support of the reinstatement application fails to identify what is said to be the relevant error in the dismissal of the application. At paragraph 4 of his affidavit he says that he withdrew his application “on the basis of a settlement with the Respondent that I considered was equitable and just. I also believed that the respondent would take a holistic view in exercise of its discretion when dealing with my debt release application. However, as the debt release applications process progressed it became quite apparent that the Respondent had failed to accord due recognition to the fact that I was a victim of an accountant’s fraud”.
10. However in his submissions the error relied upon is identified as “the error on behalf of the applicant who agreed to the dismissal of his action relying on the ATO’s view that he was at fault in regard to the alleged taxation debt.” This is not supported by the applicant’s affidavit evidence. Further, for the reasons discussed below, it is clear that the ATO's views on the matters in issue in the application did not involve any consideration of or finding in relation to "fault".
11. The Tribunal is of the view that in either case no relevant error is disclosed. The error must bear some relation to the dismissal. It must precede the dismissal. Clearly events subsequent to the dismissal which may have led to a change of mind by the applicant, as appears to be the case here, cannot constitute an error for the purposes of s 42A(10).
12. The dismissal of the application by the Tribunal under s 42A(1B) was made following the receipt of the letter of withdrawal from the applicant’s solicitor. There is no suggestion that the Tribunal made an error in identifying the applicant’s withdrawal of the application.
13. There is also no suggestion that the applicant did not intend to withdraw his application. The applicant was legally represented at all relevant times and the decision to withdraw was made, as the applicant says in his affidavit, “on the basis of a settlement that I considered was equitable and just”. It is reasonable to infer that the applicant received legal advice as to the effect of a withdrawal of his application. There is nothing to suggest that he did not understand that withdrawal of his application under s 42A(1A) would lead to a dismissal of the application under s 42A(1B).
14. In White and Secretary, Department of Families, Community Services and Indigenous Affairs [2007] AATA 1712 Deputy President Forgie of the Tribunal in dealing with an application to reinstate following the withdrawal of an application in similar circumstances concluded that there was no error within the meaning of s 42A(10) and said, relevantly:
“41. I do not consider that Mrs White’s application was dismissed in error. As I have said, her application for review was dismissed immediately the Tribunal received her notice of withdrawal. There was no doubt that her notice of withdrawal was such a notice and the Tribunal has not made an error in identifying it as such.
42. Mrs White did not make an error in sending the notice of withdrawal to the Tribunal. She knew what she was sending and that is so even though she later thought that she should not have sent it at all but should have continued with the review process. Whichever stream of authority is followed regarding the meaning of an “error” in s 42A(10), the error must bear some relation to the dismissal. There is no error of that kind in this case. That is so even though Mrs White thought that she had received advice from the Conference Registrar and that the Conference Registrar’s advice was incorrect. As is apparent below, I do not consider that any view expressed during the Outreach by the Conference Registrar as to the merits of Mrs White’s application was incorrect. The extent to which a Conference Registrar should express a view in conducting an Outreach as opposed to, for example, a conciliation conference, was not raised or discussed in this case; only the fact that the Conference Registrar had expressed a view was raised. I can understand that she felt that the outcome of her sending the notice of withdrawal was to deny her the opportunity to have the Secretary's decision reviewed when that is the purpose of the review process. That denial is, though, an outcome of the decision by Parliament to permit an applicant to end proceedings without a review and, in some instances, the Tribunal to do so. It is not an outcome of any error within the meaning of s 42A(10).”
15. The Tribunal finds that there was no relevant error for purposes of s42A(10).
If there was an error, should the discretion to reinstate be exercised?
16. As the Tribunal finds there was no error within the meaning of s 42A(10) the reinstatement application must be dismissed, as the Tribunal has no power to reinstate in the absence of an error. However, even if contrary to the Tribunal’s findings there was a relevant error, the Tribunal is of the view that it should not exercise the discretion to reinstate the application in the circumstances here.
Merits of Application
17. It is clear that a relevant consideration for the exercise of the discretion to reinstate is the merits of the application:
“A further consideration is whether the application, if reinstated, would have merits. That does not require an exhaustive consideration of the merits but it does require a consideration of whether the application would have any chance of success if reinstated. To reinstate an application in circumstances in which there can be no chance at all of its being successful is to give false hope to an applicant as well as to waste the resources of both parties let alone of the Tribunal.”:
Kerford, Deputy President Forgie at [66].
18. The Tribunal is of the view that the application for review has no chance of success. The claimed “new evidence” relating to the activities of Mr Osborne, the applicant’s tax agent, only further undermines the applicant’s case in the Tribunal’s opinion.
19. The objection decision under review in the application (annexure BS3 to the applicant’s affidavit) related to amended assessments which deferred losses claimed by the applicant from Paulownia tree growing activities in his taxation returns in each of the years ended 30 June 2001, 30 June 2002 and 30 June 2003. These losses were deferred in those years under Division 35 of the Income Tax Assessment Act 1997 (“ITAA 1997”).
20. Division 35 of ITAA 1997 applies to losses from certain business activities including primary production activities such as the Paulownia tree growing projects. Where the losses exceed the assessable income from that business activity in that year the excess losses are treated as if they were not incurred in the particular year unless:
20.1 the “Exception” in s 35 – 10(4) applies;
20.2one of the four tests in sections 35 – 30, 35 – 35, 35 – 40 or 35 – 45 is met; or
20.3 the Commissioner exercises the discretion in section 35 – 55.
21. The Reasons for Decision for the Objection Decision discussed each of these requirements in turn and concluded that the applicant is unable to satisfy any of them. Satisfaction of these requirements in each case is a matter of fact. The applicant has never, and does not now, put forward any evidence indicating that there is any arguable basis upon which the applicant might satisfy any of these requirements.
22. The effect of Division 35 is not to allow losses exceeding income from the business activity to be taken into account in a particular year where the requirements are not met. The losses can be taken into account in a later year where one of the requirements can be shown to have been met. That is, the losses are effectively deferred until there is income from the business activity against which they can be offset. The operation of Division 35 is therefore conditioned upon a finding that the losses would otherwise be deductible under s 8 – 1 of ITAA 1997.
23. In the present case, the Commissioner assumed, for the purposes of his objection decision that:
23.1the losses claimed, where substantiated, were allowable deductions under s 8 – 1 of ITAA 1997; and
23.2the applicant was carrying on a Paulownia tree growing business (see page 5 of the Reasons for Decision).
24. The applicant does not contend that he is able to satisfy the requirements of Division 35 (see paragraph 23 of the applicant’s submissions). It now seems to be the applicant’s position that the information provided by his tax agent regarding the Paulownia tree growing activities in the applicant’s tax returns lodged by the applicant’s tax agent was false.
25. This cannot in any way assist the applicant’s case. If correct, it means that the assumption made by the respondent in his objection decision that the losses claimed were otherwise deductible under s 8 – 1 of ITAA 1997 was wrong. If so, it merely provides another reason supporting the respondent’s disallowance of those losses. Whilst this would mean that the operation of Division 35 would no longer need to be considered, the end result would be the same i.e. the amended assessments disallowing the claimed deductions would not be excessive. Reliance on his tax agent’s alleged false statements in the applicant’s tax returns only reinforces the conclusion that the application has no chance of success.
26. It is apparent that the applicant’s real concern is that the tax refunds obtained by the applicant as a result of the losses claimed in his tax returns were sent in the normal course to his tax agent who allegedly then misappropriated those refunds. This is not, however, a matter which is relevant to the question of whether the amended assessments were excessive. If the tax agent misappropriated the refunds as alleged, this cannot have the effect of making these amounts deductible for the applicant when they are not otherwise deductible in the years in question.
27. The Tribunal notes that at paragraph 20 of the applicant's submissions it is contended that the Tribunal has jurisdiction to determine whether or not the applicant should be released from the debt. This is not correct. The application which the applicant seeks to have reinstated is one seeking review of the objection decision of 25 September 2006 to disallow the applicant's objections to the amended assessments for the 2001-2003 years. The issue on review by the Tribunal would be whether or not those amended assessments were excessive and the Tribunal's jurisdiction would be limited to review of that issue. The Tribunal would have no jurisdiction in this application to review or determine whether the applicant should be released from any debt (especially so here where any decision by the ATO not to release the debt was not made until after the dismissal of the application now sought to be reinstated).
28. An application for release from particular liabilities in cases of serious hardship can be made to the Commissioner under s340-5 of Schedule 1 to the Taxation Administration Act 1953 '(TAA"). Serious hardship is the only criteria on which release can be sought under that section. A taxpayer can object against the Commissioner's decision on such an application for release under s340-5 (7) of that Act. An appeal can then be brought to the Tribunal under Part IVC of the TAA from the Commissioner's decision on that objection. Any such application would, however, be entirely separate from the application which the applicant is here seeking to have reinstated.
29. It follows that the applicant’s application for re-instatement is in the Tribunal’s opinion misconceived.
Decision
30. The application for re-instatement is refused.
I certify that the 30 preceding paragraphs are a true copy of the reasons for the decision herein of Mr A Sweidan, Senior Member
Signed:...(sgd) T Freeman...............
AssociateDate/s of Hearing 13 January 2012
Date of Decision 23 January 2012
Counsel for the Applicant Dr J Hockley
Solicitor for the Applicant Mr Shahid Shakur
Counsel for the Respondent Mr T Burrows
Solicitor for the Respondent Australian Government Solicitor
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