The Crest Hotel v Chief Commissioner of State Revenue
[2015] NSWCATAD 3
•13/01/2015
|
New South Wales |
Case Name: | The Crest Hotel v Chief Commissioner of State Revenue |
Medium Neutral Citation: | [2015] NSWCATAD 3 |
Hearing Date(s): | 17 September 2014 |
Date of Orders: | 13/01/2015 |
Decision Date: | 13/01/2015 |
Jurisdiction: | Administrative and Equal Opportunity Division |
Before: | A Verick, Senior member |
Decision: | The matter is remitted to the Chief Commissioner to make the apportionment of the refund in accordance with the assessment action as directed. |
Catchwords: | TAXES AND DUTIES - Gaming Machine Tax – whether the Commissioner is entitled to make apportionment of refund – two hoteliers during the relevant period but assessment made against only one. |
Legislation Cited: | Gaming Machine Tax Act 2001(NSW) |
Cases Cited: | A J Holdings (NSW) Pty Limited v Chief Commissioner of State Revenue [2014] NSWCATAP 40 |
Category: | Principal judgment |
Parties: | The Crest Hotel (Applicant) |
Representation: | Counsel : |
File Number(s): | 1410274 |
REASONS FOR DECISION
The Applicant seeks a review of the decision made by the Chief Commissioner to apportion a tax refund between the Applicant and another hotelier pursuant to s 10(3) of the Gaming Machine Tax Act 2001 (“the Act”) in respect of the period 1 July 2012 to 30 June 2013 (“the relevant period”).
The questions identified by the parties for determination relate essentially to the Chief Commissioner’s discretion under s 10(3) of the Act. But an issue also arises as to whether the Chief Commissioner was entitled to exercise the discretion notwithstanding an assessment had only been issued to the Applicant for the relevant period for the full liability under the Act.
Factual Background
The relevant background facts are not in dispute.
On 12 August 2013, the Chief Commissioner issued to the Applicant a Notice of Assessment for the relevant period which indicated that the 4 quarterly instalments paid exceeded the tax payable by an amount of $60,191.26. The Notice of Assessment also confirmed that a ‘refund cheque for $60,191.26 will be issued under separate cover’.
However, for reasons not explained, the Chief Commissioner paid a refund of the amount of $60,191.26 on 14 August 2013 into the bank account of Benchmark Hotels Pty Limited, a previous owner of the Crest Hotel.
But on 3 October 2013 a cheque for $60,191.26 was also issued to the Applicant as “The Crest Hotel” c/o Mr Dylan Walters the then licensee of the Crest Hotel.
Sometime after the 3 October 2013, the Chief Commissioner became aware that the ownership of the Crest Hotel had changed during the 2013 Tax Year. Until 17 December 2012 of the relevant period, Benchmark Hotels Pty Ltd owned the Crest Hotel and Stephen Harband was the licensee. The ownership of Crest Hotel was transferred to Goldfish Potts Point Pty Ltd with effect from 17 December 2012. The new licensee was Ramy Arnaout from 17 December 2012 until 22 March 2013 when Dylan Walters became the licensee.
This information confirmed that the Chief Commissioner had, through some oversight, issued two refunds of the actual amount due as a refund in respect of the relevant period.
On 10 October 2013, the Chief Commissioner informed the administrator of Benchmark Hotels Pty Ltd, which was then in liquidation, that ‘information received by this office confirms that Benchmark Hotels Pty Limited was not entitled to receive the refund’ and that this ‘payment was inadvertently paid into’ the bank account of Benchmark Hotels Pty Limited. The Chief Commissioner requested that the amount be returned to the Chief Commissioner within 14 days.
The Chief Commissioner also proceeded to take further action, as set out in his written submission -
9. On 15 October 2013, the Chief Commissioner requested information from Maxgaming, regarding the profits and assessments recorded by the Crest Hotel gaming machines for various periods. Maxgaming is a company which operates an authorised Central Monitoring Service (CMS) as a holder of a CMS license under Part 9 of the Gaming Machines Act 2001 (NSW) (GMA). The CMS records electronic data about the operation of gaming machines connected to it, such as turnover, wins and profit.
10. On or about 22 October 2013, the Chief Commissioner also obtained information the OLGR (Office of Liquor, Gaming and Racing) regarding the ownership and licensee of the Crest Hotel during the 2013 Tax Year. The Chief Commissioner then apportioned the refund between the hoteliers based upon the split of the gaming machine profit between the hoteliers, using the figures in the spread sheet found at T4, p11 (under the heading ‘EGM Profit’). The figures for the EGM Profit” were used, those amounts being the total turnover less the total wins, but before deducting the amount of linked jackpot prizes paid. This produced a proportion of 0.436886 to the Applicant (ie $2,757,605.43 / $6,311,955.45).
11. On 24 October 2013, the Chief Commissioner wrote to the Applicant, informing it that the refund should have been $26,296.72. The consequence of this was that the Applicant had been overpaid by $33,894.54, and the Chief Commissioner sought repayment of that amount. The Chief Commissioner stated that because the Applicant had owned the hotel from 18 December 2010 to 30 June 2012, the refund should be apportioned to the Applicant in the proportion of 0.436886.
The Chief Commissioner, in making the apportionment, relied on advice and figures provided by the Office of Liquor, Gaming and Racing (OLGR) operating under the Gaming and Liquor Administration Act 2007.
On 29 November 2013 the Chief Commissioner in a letter to the Applicant further explained the basis of the apportionment. The Chief Commissioner confirmed that the apportionment was calculated on the basis of the applicant’s profit ratio of the total profit for the relevant period.
The Chief Commissioner also explained that, had the Chief Commissioner sought to use effective tax rate, the Applicant would not have be entitled to a refund as the effective rate of tax paid was equal to the effective rate applied under s 12(5) of the Act.
The Chief Commissioner also indicated that another ‘option considered by the Chief Commissioner was to proportion on tax paid ratio of 0.426475’ and that on ‘this option the Applicant would have only received a refund of $25,670.07’.
On 16 December 2013, solicitors acting for Dylan Fredrick Walters lodged an objection against the Chief Commissioner’s decision to apportion the refund. The Chief Commissioner disallowed the objection on 2 April 2014.
Gaming Machine Tax – Relevant Legislative Provisions
A gaming machine tax is payable by persons made liable under s 6 of the Act which was in the following terms in the relevant period:
6 Tax on gaming machines
(1) A tax is payable on profits from gaming machines kept in a hotel or on the premises of a registered club.
(2) The tax is payable by the hotelier or registered club concerned.
(3) In the event of a tax default (within the meaning of the Taxation Administration Act 1996) in respect of an amount of tax for which a hotelier is liable:
(a) the hotelier, and
(b) any person who, at the time the amount became due, was directly interested in the business, or the profits of the business, carried on under the hotel licence,
are jointly and severally liable to pay the amount concerned, and section 45 of that Act applies accordingly.
The tax is paid by instalments as set out in s 7:
7 Payment by Instalments
(1) For the purposes of this Act:
(a) each tax year of a hotelier is divided into 4 periods of 3 months commencing on 1 July, 1 October, 1 January and 1 April, and
(b) each tax year of a registered club is divided into 4 periods of 3 months commencing on 1 September, 1 December, 1 March and 1 June.
(2) Quarterly instalments of tax are payable by a hotelier or registered club to the Chief Commissioner within 21 days after the end of each instalment period.
(3) A hotelier or registered club must:
(a) before the end of each such 21-day period, deposit the amount payable in a bank or financial institution, and
(b) make such arrangements with the Chief Commissioner as enable the Chief Commissioner to access or appropriate that amount (such as by way of direct debit from the account of the hotelier or registered club concerned).
Maximum penalty: 20 penalty units.
(4) In the case of hoteliers, the liability to pay such an instalment lies with the hotelier who holds the relevant hotel licence at the time the instalment is due.
The Independent Liquor and Gaming Authority constituted under the Gaming and Liquor Administration Act 2007 is the authority given the power to ensure that hoteliers and clubs pay the proper gaming tax. The authority works in tandem with the Chief Commissioner. The Authority issues licences to hoteliers and clubs to operate gaming machines. The Authority has under its legislation appointed Maxgaming NSW Pty Ltd as a licensee to operate a Centralised Monitoring System (CMS) that, subject to the supervision of the Authority, monitors and reports the performance of gaming machines in New South Wales.
The Authority is given power under s 8 of the Act to require hoteliers and clubs to lodge with the CMS licensee returns in relation to the performance of gaming machines and the tax payable. The CMS licensee uses this information and information obtained from data supplied as a result of the direct connection of the machines with the CMS to assess the gaming machine tax due for each hotelier or club in respect of each quarterly period: s 9 of the Act. The CMS licensee is also required to inform the Chief Commissioner and the hotelier of the calculated amount of tax payable.
Under s 9 of the Act, the Authority also supplies the Chief Commissioner with information, if any recalculation of tax is required in any particular case. The Chief Commissioner is required under s 9(2A) to notify the hotelier or registered club concerned of any recalculation advised by the Authority. Under s 9(3) the Chief Commissioner ‘is to assess or reassess, under Part 3 of the Taxation Administration Act 1996, tax liabilities according to calculations, and any recalculations, made under this section and any rebate available under Part 4’.
The Chief Commissioner is required to make adjustments under s 10 which was, in the relevant period, in the following terms:
10 Adjustments
(1) Following the end of a tax year and after payment by a hotelier or registered club of the instalment payable in respect of the last of the instalment periods for the tax year, the Authority must, on application by the hotelier (or any relevant previous hotelier) or by the Club concerned, make a comparison of the tax payable in respect of that tax year and the total of the relevant 4 quarterly instalment made, and advise the Chief Commissioner of the result of the comparison.
(2) If the amount of tax assessed to be payable is less than the amount paid by the hotelier or registered club for the tax year concerned, the Chief Commissioner may:
(a) hold the difference in credit for the hotelier or club, or
(b) refund the difference in accordance with Part 4 of the Taxation Administration Act 1996.
(3) In a case where the tax for the tax year concerned was paid by more than one hotelier, any credit or refund of tax may be apportioned among those hoteliers in such proportions as the Chief Commissioner considers appropriate.
Under s 11 of the Act the Chief Commissioner is allowed to apportion liability for tax in certain circumstances and was in the following terms:
(1) The Chief Commissioner may, in such manner as the Chief Commissioner considers appropriate:
(a) apportion the liability for tax between hoteliers:
(i) in any case where there has been a change in the ownership of a hotel licence, or
(ii) in such other circumstances as the Chief Commissioner considers appropriate, and
(b) apportion the liability for tax as between registered clubs:
(i) in the event of a amalgamation of a registered club as referred to in Registered Clubs Act 1976, or
(ii) in such other circumstances as the Chief Commissioner considers appropriate.
(2) Subsection (1)(a) does not affect the operation of section 7(4).
Gaming Machine Tax is calculated on metered profit and collected quarterly by direct debit by the Chief Commissioner. In relation to gaming machines operated by hoteliers, there is no tax on the first $200,000 profit. On profit exceeding $200,000 and up to $1m, the tax rate for the relevant period was 33%. Profit exceeding $1m and up to $5m the rate was 36% and a 50% rate applied for profit exceeding $5m.
Submissions
The Applicant’s primary submission was that s 10(2) of the Act should apply and that the current hotelier is entitled to the whole of the refund. The Applicant contended that it is entitled to the whole refund because the ‘evidence discloses only one assessment of annual tax liability has been issued’ that is ‘the assessment dated 13 August 2013 issued to the applicant’. And that the Chief Commissioner ‘ought to be bound by the assessment of annual tax liability dated 13 August 2013’, the ‘effect of this is that the applicant would be entitled to the full refund of $60,191.26’. It was also submitted that -
11. There is no evidence that there has been any reassessment made of the tax liability of either the applicant or Benchmark pursuant to s 9 of the Taxation Administration Act and there is no evidence as to the legal interpretations and assessment practices generally applied by the Chief Commissioner in relation to matters of relating to gaming tax at the time the tax liability arose which would justify the making or a reassessment.
The Applicant further submitted that it ‘was necessary for the respondent to apportion liability pursuant to s 11, prior to conducting any apportionment of a refund of tax as it would be inequitable to refund tax to a party which was not liable to pay it’.
And the Applicant submitted that -
15. It was therefore open to the respondent to conduct an assessment as to the respective liabilities for tax between Benchmark and the applicant and conduct any apportionment around the time that the change of hoteliers took place. Any apportionment of liability for annual tax would necessarily have required the respondent to employ a method which had regard to the respective profits obtained by the parties within the time that each was the hotelier (or employed the hotelier). The appropriate method to determine this is the average daily profit method projected on an annual basis …
It was further contended that, if the Commissioner was entitled to apportion the refund, the correct and preferable method should be ‘the daily average profits determined by reference to the profits made by each hotelier within the time that they were hoteliers. This submission was put as follows:
21. OLGR indicated two possible methods to be used for the apportionment, being time in possession and proportion of total profits.
22. The preferable course is a method which acknowledges each of these factors. The manner in which this is able to be achieved is by determining profits of each party within the time that they operated the gaming machines in order to determine average daily profit and the determining what the relevant annual tax payable would have been.
23. Using the OLGR dates (set out at page 18) and estimated profits (page 11) the applicant was in possession for 195 days and made a net profit within that time of $2,220,261.86 and the predecessor was in possession for 170 days and made a net profit within that time of $2,766,067.22.
24. The respective average daily profit of the parties based on this information was $11,385.96 for the applicant and $16,270.98 for Benchmark. Projecting the daily average profits for the respective parties shows an annual profit of $4,155,875.40 for the applicant and $5,938,907.70 for Benchmark.
25. The tax payable by each party based on the annualised average daily profit would have been $1,400,115.14 for the applicant, and $2,173,453.85 for Benchmark. The effective tax rates of the applicant and Benchmark respectively would have been 33.69% and 36.60%.
26. The total tax paid on the aggregated instalments was $1,759,269.73 and the total tax payable on annual basis was $1,699,078.47. Both figures are considerably more than the amount that the applicant would have been liable to pay based on its projected daily average over the tax year.
Finally, it was submitted that, if the applicant’s average daily profits basis is not accepted, the applicant is in any case ‘entitled to a larger proportion of the refund than the respondent has deemed that it is entitled to’ on the following grounds:
28. The operation of s 7(4) of the Act deems a hotelier who holds the licence at the end of each quarter to be liable to pay tax at the end of each quarter.
29. The relevant hotelier at the end of three out of the four quarters in the relevant year was related to the applicant.
…
32. It is not correct or preferable that a party receive a refund for tax that it is not deemed to be liable to pay. The only tax Harband has been deemed liable to pay pursuant to s 7(4) is the amount assessed as set in the invoice on page 7 of the respondent’s bundle - $585,210.41. In respect of the rest of the tax paid for the year it was the hoteliers in the employ of the applicant that were liable to pay and the refund should therefore be apportioned in that way.
33. Applying a simple time analysis to the apportionment, the applicant would be entitled to ¾ of the $60,191.26 refund (being an amount of $45,143.45) and would be required to repay only $15,047.82, rather than $33,894.54.
It was also claimed that the latter formula, based on the Applicant’s liability of 33.2% of the total tax paid under s 7(4) of the Act, only requires the Applicant to refund $19,983.49. Alternatively, using the proportionate profit method on the basis that the Applicant’s contribution of 31.5% of the total profit, it was claimed the Applicant would only be required to repay $18,960.25.
The Chief Commissioner’s principal submission was that it had acted under s 10(3) of the Act and correctly apportioned the refund on the basis of the annual total profit method. The total profit for the relevant period was $6,311,955.45. The refund was apportioned by the Chief Commissioner on the basis of the profit ratio – in the case of the previous owner from 1 July 2012 to 17 December 2012, the profit was $3,554,350.02 and against the total profit this produced a profit ratio of 0.563113927. When applied against the total refund of $60,191.26, the refund due to the previous hotelier was determined as $33,894.54. In the case of the applicant, for the period 18 December 2012 to 30 June 2013, the profit was $2,757,605.43, which produced a profit ratio of 0.436886073 and the amount of the refund due to the applicant, was as such $26,296.72.
The Chief Commissioner’s response to the Applicant’s submission that the Chief Commissioner ought to be bound by the assessment dated 12 August 2013, which required a refund of the full amount to the Applicant, was as follows:
a. Under ss 3(1) and 8(1) of the TAA, an ‘assessment’ is an assessment made by the Chief Commissioner of the taxpayer’s tax liability. Here the liability was the product of the tax payable of $1,699,078.47, less amounts previously paid, giving the total amount payable of $0. That is, there was zero liability. In apportioning the refund pursuant to s 10(3) of the Act, the Chief Commissioner is not disturbing the assessment. The liability, the amount of tax payable and the amount previously paid are unchanged. All that is altered is the allocation or apportionment of the refund between the two hoteliers. Although the amount of the ‘refund cheque’ is stated on 13 August 2013 assessment, it does not form part of the assessment. It is not, in the words of s 8(1) TAA, “the tax liability of a taxpayer”.
b. Section 10(3) of the Act also operates independently of ss 8(1) and 9 of the TAA. The construction that the Applicant contends for would give s 10(3) no work to do. The purpose of s 10(3) is to apportion the refund, it does not affect the assessment.
c. The refund apportionment does not depend on an assessment. There may be no assessment to a previous hotelier (noting that they are not liable at year end, absent an apportionment pursuant to s 11). Gaming machine tax liability is not dependent on there being a notice of assessment: AJ Holdings (NSW) Pty Limited v Chief Commissioner of State Revenue [2014] NSWCATAP 40 at [84].
d. The Chief Commissioner is currently still in time to make a reassessment under s 9 of the TAA, and would be free to do so. The Respondent accepts that it would not be desirable to issue a reassessment while the review is being heard and decided by the Tribunal. The Respondent submits that if, contrary to its submission, the Applicant’s contention at [10]-[11] AS is accepted, the Tribunal should nonetheless decide the correct and preferable apportionment under s 10(3).
The Chief Commissioner also rejected the Applicant’s submission that the Chief Commissioner ought to have apportioned the liability between the hoteliers pursuant to s 11(1) of the Act on the ground that it ‘is misconceived’ as it ‘ignores the clear words of s 10(3), which operates independently of s 11 and does not require any apportionment under s 11 before it is enlivened’.
The Chief Commissioner further considered the alternative methods of apportionment suggested by the Applicant.
In the case of the ‘annualised average daily rate’ suggested by the Applicant, it was submitted that it would produce an outcome ‘broadly consistent with results of the Annual Effective Rate Method’. But that it should be rejected for the following reasons:
… Instead of projecting average daily profits, the Annual Effective Tax Rate Method simply looked at the effective tax rates for each quarter and the year. It showed that, in the two quarters for which the Applicant owned the hotel licence for the entire quarters, it paid an effective rate of 34%, which was equal to the effective annual rate (see RS [16]).
14. The conclusion which the Tribunal should reach from these facts, however, is not the one which the Applicant contends for. The ‘projection’ of annual profit figure, that might hypothetically have resulted if there had been one hotelier for the entire year, is unnecessary because the actual amount of gaming machine profit for the year is known.
15. The Respondent agrees with the submission which the Applicant makes at AS [19] that “[i]t was due to the fact that the Applicant traded and obtained less average profits than Benchmark that the overpayment of tax arose and a refund was “required”. The effective tax rate figures demonstrate that the overpayment of tax was by Benchmark’s overpayment, not the Applicant’s. Benchmark paid an effective tax rate of 36%, which was well in excess of the 34% annual effective tax rate (see RS [16]). Given that it was Benchmark’s overpayment of tax in its quarterly instalments which gives rise to the refund, it would be unjust for the refund to go to the Applicant.
The Chief Commissioner also rejected the Applicant’s alternative method of calculation based on liability on the ground that it was ‘not consistent with the wording of s 10(3) of the Act’ which ‘does not restrict the Chief Commissioner to allocating refunds between hoteliers on a quarterly basis’. Counsel for the Chief Commissioner further submitted that -
… on any orthodox interpretation of s 10(3) the Chief Commissioner has a broad discretion to apportion a refund between hoteliers in such proportions that he or she considers appropriate. The wording of s 10(3) clearly allows an apportionment which divides a quarter between hoteliers, notwithstanding that the new hotelier is liable for gaming machine tax for the whole quarter, by virtue of s 7(4).
Consideration
The facts clearly establish that the Chief Commissioner on 12 August 2013 issued an annual assessment for the period 1 July 2012 to 30 June 2013 to the Applicant. The assessment indicated that a refund of $60,191.26 was due to the Applicant. This was subsequently paid to the Applicant on 3 October 2013.
It is not in dispute that the Chief Commissioner had, in error, treated the Applicant as the hotelier for the whole relevant period. It is also not in dispute that the previous owner was Benchmark Hotels Pty Ltd for the period 1 July 2012 to 17 December 2012. The Applicant’s licensee was the hotelier from 18 December 2012 to 30 June 2013.
The Chief Commissioner also, in error, paid the full refund amount to both the previous owner and the Applicant.
The short question that arises is whether the Chief Commissioner was in these circumstances entitled to proceed under s 10(3) of the Act to make an apportionment and seek refunds from both parties.
In order to deal with this issue it is necessary to consider the effect of the assessment issued to the Applicant which, the facts disclose, has not been amended or otherwise dealt with by the Chief Commissioner.
The Chief Commissioner has advanced a number of contentions to support the action taken in this matter to proceed to apportion the refund under s 10(3) of the Act. These contentions may be summarised: that the assessment issued to the Applicant on 12 August 2013 disclosed a ‘zero liability’; that in making the apportionment, the Chief Commissioner is ‘not disturbing the assessment’ in particular the ‘liability, the amount of tax payable and previously paid are unchanged’; that s 10(3) of the Act operates independently of sections 8(1) and 9 of the Taxation Administration Act 1996 (the TA Act); that the refund apportionment does not depend on an assessment; and that gaming machine tax liability is not dependent on there being a notice of assessment (AJ Holdings (NSW) Pty Limited v Chief Commissioner of State Revenue [2014] NSWCATAP 40 at [84]).
Dealing first with the Chief Commissioner’s powers to issue assessments. Pursuant to s 9(3) of the Act, the Chief Commissioner is directed to assess or reassess, under Part 3 of the TA Act.
The Chief Commissioner’s general power to make assessments is stated in s 8 of the TA Act which is in the following terms:
8 General power to make assessment
(1) The Chief Commissioner may make an assessment of the tax liability of a taxpayer.
(2) An assessment of a tax liability may consist of a determination that there is not a particular tax liability.
The Chief Commissioner also has power to issue, subject to certain conditions, one or more reassessments of a tax liability of a taxpayer under s 9 of the TA Act.
The Chief Commissioner is, in addition, given a power under s 13 of the TA Act to ‘withdraw an assessment (being an assessment for which a notice has been issued) at any time within 5 years after the date of issue of the notice, whether or not the tax specified in the assessment has been paid’.
Section 8(2) of the TA Act permits the Chief Commissioner to make an assessment disclosing no liability in a particular case. This power is quite crucial because, in the absence of this provision, the Chief Commissioner would be restricted to issue only assessments which disclose a tax liability (see FCT v Ryan [2000] 201 CLR 109; (2000) 43 ATR 694; 2000 ATC 4079 – the majority of the High Court in Ryan held that a notice disclosing a ‘zero’ amount of tax liability was not an assessment because ‘zero’ was not a positive amount).
It is also a well established principle of Commonwealth taxation law that an assessment stating no tax was payable or a refund was due, because tax instalments had been paid or some other tax offset or rebate was available, remains a valid notice of assessment. (Foster v Federal Commissioner of Taxation (1951) 82 CLR 606; Webb v Deputy Commissioner of Taxation (1993) 27 ATR 459; Spassked Pty Ltd v Federal Commissioner 2003 ATC 4184, [2003] FCA 84 and (2003) 52 ATR 337. In my opinion, this principle would equally apply to an assessment made by the Chief Commissioner under his powers found in Part 3 of the TA Act.
It is also important to note, as observed by the High Court (Knox CJ, Isaacs and Rich JJ) in R v Deputy Federal Commissioner (SA); Ex parte Hooper (1926) 37 CLR 368 per Isaacs J at 373-
An “assessment” is not a piece of paper: it is an official act or operation; it is the Commissioner’s ascertainment, on consideration of all relevant circumstances, including sometimes his own opinion, of the amount of tax chargeable to a given taxpayer.
The Chief Commissioner also contended that under the Act the ‘liability is not dependent on there being a notice of assessment’ and that ‘refund apportionment does not depend on an assessment’. These contentions ignore the scheme of the Act. A notice of assessment is not required because tax is paid by quarterly instalments pursuant to s 7 of the Act. But s 9 of the Act requires the Chief Commissioner to assess or reassess under Part 3 of the TA Act. Further, any adjustment made under s 10 of the Act is treated as an assessment – s 10(2) speaks of ‘the amount of tax assessed’ pursuant to the adjustment exercise. A refund of an amount can only arise if the amount of tax assessed to be payable is less than the amount paid by the hotelier for the tax year concerned. The Chief Commissioner may refund the difference in accordance with Part 4 of the TA Act. Finally, s 10(3) provides that where the tax for the tax year concerned was paid by more than one hotelier, any credit or refund of tax may be apportioned among those hoteliers. But this provision only operates where there has been an assessment, which discloses either a credit or refund.
But in this matter the assessment issued to the Applicant on 12 August 2013 was made by the Chief Commissioner pursuant to the general power given to the Chief Commissioner under s 8 of the TA Act. It was the Applicant’s liability that was determined under the assessment issued to the Applicant. The assessment also disclosed that the Applicant was entitled to a refund of $60,191.26, which was subsequently paid to the Applicant. The refund was calculated when making the assessment under s 8 of the TA Act. The refund provisions found in Part 4 of the TA Act were applicable to the refund.
The above observations lead me to the conclusion that the Chief Commissioner’s arguments and contentions have no merit and should be rejected.
The Applicant has correctly contended that in the absence of any further assessment action by the Chief Commissioner, the only assessment issued for the annual liability of the relevant period determined a refund of the full amount as payable to the Applicant. But the facts disclose that the Chief Commissioner erred in treating the Applicant as the sole hotelier when ascertaining the liability for the relevant period. The Applicant was in those circumstances not entitled to the full amount of the refund.
When the Chief Commissioner discovered that he had erred in paying the full refund to the Applicant and also a similar amount to the previous hotelier, the Chief Commissioner purported to act under s 10(3) to make an apportionment of the refund.
The proper course of action, in my opinion, required the withdrawal of the assessment issued to the Applicant under s 13 of the TA Act or the issue of a reassessment of the liability of the Applicant under s 9 of the TA Act. In addition, the Chief Commissioner was required to apportion the liability for tax as between the two hoteliers under s 11 of the Act. Only after having taken these steps, the Chief Commissioner was in a position to make any apportionment of the refund under s 10(3).
Accordingly, having regard to all the relevant facts, the relevant statutory provisions and case law, the correct and preferable decision is to remit this matter to the Chief Commissioner to take assessing action as identified above before making any apportionment of the refund between the parties.
Because of the view I take on the contentions made by the Chief Commissioner in relation to the assessment issued to the Applicant, it is really unnecessary for me to deal with the apportionment action taken by the Chief Commissioner. In passing, I will however make some short observations.
Section 10(3) gives the Chief Commissioner a wide discretion without any prescription. Discretions of this kind can be challenged only in very narrow circumstances as explained by Mason J in Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 at 40 -
In the context of judicial review on the ground of taking into account irrelevant considerations, this Court has held that, where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except in so far as there may be found in the subject matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard.
….
By analogy, where the ground of review is that a relevant consideration has not been taken into account and the discretion is unconfined by the terms of the statute, the court will not find that the decision-maker is bound to take a particular matter into account unless an implication that he is bound to do so is to be found in the subject matter, scope and purpose of the Act.
More recently the Court of Appeal (Beazley P, Basten JA and Macfarlan JA) in Lo v Chief Commissioner of State Revenue [2013] NSWCA 180 per Basten JA at [9]-[11] sought to further clarify the kind of review available in cases where such a discretion is exercised -
….
The term “relevant considerations” is widely misunderstood: as used in leading authorities, such as Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; 162 CLR 24 at 39 (Mason J) it refers to a matter which the decision-maker is bound to take into account. The obligation may derive from the express terms of the power-conferring statute or may be implied from its subject matter, scope and purpose. A preferable term would be “mandatory consideration”. Further, a matter traditionally described as an “irrelevant consideration is one which is prohibited because, having regard to the subject matter, scope and purpose of the power being exercised, it can be seen to reflect an extraneous or improper purpose or to render the decision arbitrary or capricious. Between these two categories is usually a wide range of permissible considerations which the decision-maker may weigh or disregard without committing an error of law.
10 The next concept is that of “taking into account”. It covers a spectrum of conduct. If a decision-maker who gives reasons for a decision makes no reference to a particular matter, it may be inferred that he or she disregarded it, either deliberately or through inadvertence. In either case, if it were a mandatory consideration, there would be an error of law. If, however, the matter is referred to there may still be a basis for review. In some cases, it is asserted that there has been a failure to give “proper, genuine and realistic consideration”, to a particular matter. That is best understood as a complaint of failure “to give adequate weight to a relevant fact of great importance”: see Peko-Wallend at 41 (Mason J). The other side of this complaint is giving “excessive weight to a relevant factor of no great importance”. Dealing with these circumstances, Mason J continued:
“The preferred ground on which this is done, however is not the failure to take into account relevant considerations or taking into account irrelevant considerations, but that the decision is ‘manifestly unreasonable’. This ground of review was considered by Lord Greene in Wednesbury Corporation, in which his Lordship said that it would only be made out if it were shown that the decision was so unreasonable that no reasonable person could have come to it.”
11 Mason J left the matter with a warning that a court “should proceed with caution when reviewing an administrative decision on the ground that it does not give proper weight to relevant factors, lest it exceed its supervisory role by reviewing the decision on its merits”: at 42. This concern was reiterated by the High Court in Minister for Immigration and Citizenship v SZJSS [2010] HCA 48; 243 CLR 164 at [30] and by this Court in Allianz Australia Insurance Ltd v Cervantes [2012] NSWCA 244 at [15]-[24], in my judgment with which McColl and Macfarlan JJA agreed.
In this matter, the Applicant has not produced any evidence to demonstrate that the Chief Commissioner failed to take into account any ‘mandatory consideration’ or took into account any ‘irrelevant consideration’ in making the apportionment on the basis of the annual profit method. The Applicant has merely sought to argue that there were alternative approaches to determine the apportionment available to the Chief Commissioner, which would have produced a better outcome for the Applicant. The Chief Commissioner is given an extremely wide power under s 10(3) of the Act to conduct the apportionment ‘in such manner as the Chief Commissioner considers appropriate’. The choice of the approach taken by the Chief Commissioner, the annual profit basis, is in my opinion well within the ‘the subject matter, scope and purpose’ of the Act.
Order
The matter is remitted to the Chief Commissioner to make the apportionment of the refund in accordance with the assessment action as directed.
I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal.
Registrar
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