The Institute of Engineers Australia v Commissioner for Act Revenue (Administrative Review)
[2015] ACAT 50
•9 June 2015
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
THE INSTITUTE OF ENGINEERS AUSTRALIA v COMMISSIONER FOR ACT REVENUE (Administrative Review) [2015] ACAT 50
AT 15/06
Catchwords: ADMINISTRATIVE REVIEW – payroll tax – charitable organisation – extension of time to lodge objection – reason for delay
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 (ACT) ss 60, 68
Payroll Tax Act 2011 ss 48, Schedule 2 Part 2.2, 87C
Payroll Tax Act 1987 (repealed) s 9(1)(b)
Taxation Administration Act 1999 ss 9, 19A, 100, 101, 102, 103, 107A, 108A Schedule 1, Schedule 2
Cases cited:BHP Billiton Direct Reduced Iron Pty Ltd (ACN 058 025 960)
v Duffus, Deputy Commissioner of Taxation [2007] FCA 1528
BHP Billiton Direct Reduced Iron Pty Ltd v Deputy
Commissioner of Taxation (2007) 67 ATR 578
Brown v Commissioner of Taxation [1999] FCA 563
Chamber of Commerce and Industry of Western Australia v Commissioner of State Revenue (2012) 89 ATR 797
Hunter Valley Developments Pty Ltd & Ors v The Hon Barry Cohen, Minister for Home Affairs and Environment [1984] FCA 186
Jones v Commission of Taxation [2008] AATA 542
National Jet Systems Pty Ltd and Commissioner of Taxation (2011) 82 ATR 740
PAAN Investments Pty Ltd (In Liquidation) v Commissioner for Revenue for the Australian Capital Territory [2014] ACTSC 161
PAAN Investments Pty Ltd (In Liquidation) v Commissioner for ACT Revenue [2012] ACAT 19
Spencer v Commissioner of Taxation [2007] AATA 119
Windshuttle, T.V. v. Deputy Commissioner of Taxation of the Commonwealth of Australia [1993] FCA 843
Zizza v Commissioner of Taxation [1999] FCA 37Zizza v Commissioner of Taxation [1999] FCA 848
Tribunal: Ms W. Corby – Senior Member (Presiding)
Mr M. Sinclair – Senior Member
Date of Orders: 9 June 2015
Date of Reasons for Decision: 7 August 2015
ACT CIVIL & ADMINISTRATIVE TRIBUNAL AT 15/6
BETWEEN:
THE INSTITUTE OF ENGINEERS AUSTRALIA
Applicant
AND:
COMMISSIONER FOR ACT REVENUE
Respondent
TRIBUNAL: Ms W. Corby – Senior Member (Presiding)
Mr M. Sinclair – Senior Member
DATE: 9 June 2015
ORDER
The Tribunal orders that:
Pursuant to section 68 of the ACT Civil and Administrative Tribunal Act 2008, the reviewable decision dated 19 December 2014 is set aside.
The Tribunal substitutes its decision that pursuant to section 103 of the Taxation Administration Act 1999, the Tribunal grants the applicant an extension of time within which to lodge objections to the assessments for the years ended:
a. 30 June 2008;
b. 30 June 2009;
c. 30 June 2010;
d. 30 June 2001;
to 30 days from the date of this order.
Signed………………………………..
Ms L. Crebbin – General President
For and on behalf of the Tribunal
AUSTRALIAN CAPITAL TERRITORY )
CIVIL AND ADMINISTRATIVE TRIBUNAL ) NO: AT 15/06
RE:THE INSTITUTION OF ENGINEERS AUSTRALIA
Applicant
AND:COMMISSIONER FOR ACT REVENUE
Respondent
AMENDED ORDER
Tribunal:Ms W. Corby – Senior Member
Mr M. Sinclair – Senior Member
Date: 9 June 2015
The Tribunal orders that:
- The Tribunal’s orders dated 9 June 2015 are amended as follows:
a.Order 2 d: delete “2001 and insert “2011”.
Signed....................................
Ms L.K. Crebbin
General President
for and on behalf of the
Tribunal.
REASONS FOR DECISION
The Institute of Engineers Australia (the ‘Applicant’) applied to the ACT Civil and Administrative Tribunal (‘ACAT’) for review of the Commissioner for ACT Revenue’s (the ‘Respondent’) decision dated 19 December 2014. On 19 December 2014 the Respondent denied the Applicant’s application for an extension of time pursuant to section 103 of the Taxation Administration Act 1999 (the ‘TAA’) to lodge objections out of time in respect of payroll tax assessments made for the financial years (‘FY’) 2008, 2009, 2010 and 2011 (the ‘reviewable decision’).
Reference to a FY is to the year ending on 30 June of that year.
The application to ACAT is made pursuant to section 108A of the TAA. The reviewable decision is a decision mentioned in Schedule 1 at section 1.2(i) of the TAA.
Background
On 6 September 2012 the Applicant wrote to the Respondent requesting that the Applicant be granted exemption from payroll tax on the basis that it is a ‘charitable organisation’ for the purpose of and pursuant to section 48 and Schedule 2 Part 2.2 of the Payroll Tax Act 2011 (the ‘PTA’). A charitable organisation is exempt from liability to pay payroll tax (section 10(2) of the PTA) as the wages it pays are not ‘taxable’ wages.
The Applicant further requested that if the Respondent determined that the Applicant was a charitable organisation, the Respondent refund (pursuant to section 19A of the TAA) the payroll tax the Applicant had paid in the preceding 5 years – being FYs 2008 to 2012 inclusive.
In relation to the years preceding 1 July 2011, the relevant exemption for a charitable organisation is set out in section 9(1)(b) of the Payroll Tax Act 1987 (repealed). Although the Tribunal accepts that there was a change to the definition of the term ‘charitable organisation’ effected by the repeal of the 1987 Act, and this may be relevant to the Commissioner’s consideration of the Applicant’s objections in the years preceding 1 July 2011, the change is not relevant to the consideration of this matter. The repeal of the 1987 Act does not impact on the consideration and conclusions set out below.
The Applicant paid payroll tax pursuant to assessments in the FYs 2008, 2009, 2010, 2011 and 2012. The Applicant’s request for refund for the 5 years preceding its 6 September 2012 letter reflected the 5 year limitation on the Respondent providing reassessments and refunds as set out in sections 9 and 19A of the TAA.
On 6 December 2012 the Respondent advised that the Applicant was not considered to be a charitable organisation. Consequently, the Respondent concluded that the Applicant was not exempt from payroll tax. The Respondent did not reassess liability for, or refund the payroll tax paid, for the FY2012 or the previous years FY 2008 to 2011 inclusive.
The Tribunal notes that if the 6 December 2012 ‘decision’ was a ‘decision’ in relation to section 48 of the PTA, then it was not a reviewable decision under the PTA Schedule 3. Similarly if it was a decision in response to the Applicant’s application for a refund pursuant to section 19A of the TAA, then it is neither a reviewable decision (sections 107, 107A Schedule 1 and Schedule 2 of the TAA), nor a decision in relation to which the Applicant can lodge an objection under section 100(1) of the TAA.
On 5 February 2013 the Applicant wrote ‘objecting to’ the Respondent’s decision set out in the 6 December 2012 letter.
On 17 March 2014 the Respondent responded to the letter. The Respondent advised that it ‘deemed’ the Applicant’s 5 February 2013 letter to be an ‘objection’ to the payroll tax assessment dated 6 August 2012 for the FY 2012.
Unless an extension of time is granted, an objection to a tax assessment must be lodged within 60 days (sections 100(1)(a) and 102 of the TAA).
The Respondent granted an extension of time pursuant to section 103 of the TAA for the Applicant to lodge an objection to the 6 August 2012 assessment for the FY 2012 and treated the 5 February 2013 letter as an objection to the 6 August 2012 payroll tax assessment.
In the 5 February 2013 letter, the Applicant further requested that if the Respondent allowed the Applicant’s objection to the FY 2012 assessment, the Respondent exercise discretion under section 103 of the TAA to also extend the time to lodge objections to the payroll tax assessments in FY 2008, 2009, 2010 and 2011. The letter of 17 March 2014 did not respond to this further request by the Applicant. As noted above the Payroll Tax Act 1987 (repealed) would apply to the years FY 2008 to 2011, however in the Tribunal’s view nothing turns on this at this point.
Based on the 17 March 2014 decision, the Respondent cancelled the Applicant's registration for payroll tax on 19 March 2014.
The Respondent refunded the payroll tax the Applicant had paid relating to the FYs 2012, 2013 and 2014.
Clearly the Respondent had accepted that for the period from 1 July 2011 the Applicant was a ‘charitable organisation’ and therefore exempt from payroll tax liability.
Subsequent to the 17 March 2014 letter and after some consultation with the Respondent, on 30 April 2014 the Applicant sent a formal application to the Respondent requesting an extension of time within which to lodge objections to the payroll tax assessments made in FY 2008, 2009, 2010 and 2011.
On 23 May 2014 the Respondent advised the Applicant that the extension of time was not granted. The Applicant requested a review of that decision on 22 July 2014. On 19 December 2014 the Respondent made the reviewable decision to refuse the request. On 15 January 2015 the Applicant filed with ACAT the application dated 13 January 2015 for review of the reviewable decision.
The Hearing
The matter was heard on 9 June 2015. The Applicant was represented by Mr Thomas of counsel, instructed by Mr Small of PriceWaterhouseCoopers (the Applicant’s accountants).
The Respondent was represented by Ms Katavic of counsel, instructed by Ms Gasser of the ACT Government Solicitor’s Office.
Mr Michael Allen is the Applicant’s Executive General Manager of Corporate Services. Mr Allen attended the hearing. His written statement dated 7 April 2015 with attachments was tendered into evidence (Exhibit A1) on behalf of the Applicant without objection. Mr Allen was not cross examined on his statement. Financial documents relating to the Applicant were also tendered (Exhibit A2).
The term ‘Tribunal’ will be used in these Reasons for Decision when referring to the Tribunal members who heard the matter on 9 June 2015.
At the conclusion of the hearing on 9 June 2015 the Tribunal made orders. The Respondent’s representative made a verbal request for a statement of reasons pursuant to section 60 of the ACAT Act. This was followed by a written request. This is the Tribunal’s written statement of reasons in response to that request pursuant to section 60(2) of the ACAT Act.
Information considered by the Tribunal
In its consideration of this matter the Tribunal took into account the Tribunal Documents (the ‘T Docs’) filed by the Respondent. The T Docs are the documents that the Respondent identified as documents which the Respondent holds and which are relevant to the reviewable decision.
The Tribunal took into account the Exhibits tendered during the hearing.
The Tribunal took into account the documents filed by or on behalf of the parties before the hearing including Statements of Facts and Contentions.
The Tribunal considered the oral submissions made by the parties’ representatives at the hearing and the Authorities to which the Tribunal was referred and which were relied on by the parties.
The relevant legislative provisions referred to in these Reasons for Decision are set out in the attached Schedule.
Consideration of application for extension of time section 103 of the TAA
A taxpayer can lodge an objection to a tax assessment pursuant to section 100 of the TAA. An objection must be lodged within 60 days of the notice of assessment (section 102 of the TAA). Section 103 of the TAA gives the Respondent, and on review the ACAT, an unfettered discretion to grant an extension of time within which to lodge an objection. When undertaking an administrative review the Tribunal can exercise any function that was available to the reviewable decision maker (section 68(2) of the ACAT Act).
The Applicant says that the Tribunal should be guided by the approach set out by Justice Hill in Brown v Federal Commissioner of Taxation [1999] FCA 563 at [59]:
What is required is the balancing of the delay; the explanation for it; the circumstances which gave rise to it and such prejudice if any as may be shown to exist to the Commissioner against the prejudice which may arise to the taxpayer who has by reason of the failure to object in time lost the right to a review of the assessment. In this balancing process the Commissioner or the tribunal on a review will be guided by what the justice of the case requires. The balancing process should be approached on the basis that while Parliament has stipulated a time in which objections are required to be lodged it has entrusted to the Commissioner a power to extend that time in appropriate circumstances.
The Respondent submitted that the Tribunal may be guided by the principles in PAAN Investments (in liquidation) v Commissioner for ACT Revenue [2012] ACAT 19 being:
(a)whether there is an acceptable reason for the delay;
(b)whether it has caused irremediable prejudice to the respondent;
(c)the merits of the taxpayer’s case; and
(d)fairness between the taxpayer and others in a similar position.
The Tribunal has considered the various Authorities it has been referred to by the parties, in particular, Brown v Federal Commissioner of Taxation (1999) 42 ATR 118; Hunter Valley Development Pty Ltd & Ors v The Hon Barry Cohen, Minister for Home Affairs and Environment [1984] 3 FCA 186; National Jet Systems Pty Ltd v Commissioner of Taxation (2011) 82 ATR 740; Zizza v Federal Commissioner of Taxation [1999] FCA 848; Zizza v Federal Commissioner of Taxation [1999] FCA 37, BHP Billiton Direct Reduced Iron Pty Ltd v Deputy Commissioner of Taxation (2007) 67 ATR 578; Jones v Commission of Taxation [2008] AATA 542; PAAN Investments Pty Ltd (In Liquidation) v Commissioner for ACT Revenue [2012] ACAT 19; PAAN Investments Pty Ltd (In Liquidation) v Commissioner for Revenue for the ACT [2014] ACTSC 161; Spencer v Commissioner of Taxation [2007] AATA 119; Windshuttle, T.V. v. Deputy Commissioner of Taxation of the Commonwealth of Australia [1993] FCA 843.
Taking into account the approach adopted in the Authorities referred to and the specific legislative provisions that apply, when exercising the discretion in section 103 of the TAA the Tribunal must consider the objects of the relevant legislation and the particular factual circumstances that apply to the situation of this matter. The Tribunal must decide whether or not the preferable decision is to grant the extension of time sought by the Applicant, and if so on what, if any, condition. Whilst the approach taken and the matters identified for consideration in other matters and or jurisdictions may be helpful, the Tribunal’s task is to make its decision based on the circumstances of this matter.
In the Authorities to which the Tribunal has been referred, this approach is unanimously endorsed by the various tribunals and courts considering the exercise of a discretion of the kind afforded by section 103 of the TAA. A helpful review is provided in the decision of Justice French in BHP Billiton Direct Reduced Iron Pty Ltd v Deputy Commissioner of Taxation and Another [2007] FCA 1528 at paragraphs 112-117 (this extract is set out in the attached Schedule to these reasons for Decision).
The Tribunal accepts that the matters identified by Justice Wilcox in Hunter Valley Development Pty Ltd & Ors v The Hon Barry Cohen, Minister for Home Affairs and Environment [1984] 3 FCA 186 provide a useful list of considerations which, logically, would likely be relevant when considering an application for an extension of time where the decision maker is afforded an unfettered discretion. However Justice Wilcox specifically cautioned that these were not intended to represent an exhaustive or mandatory list of considerations. Not all of the matters identified by Justice Wilcox will be relevant in every matter. Additional considerations may apply because of the particular circumstances and the legislation being applied. Similarly, the weight to be given to any relevant consideration and how the various considerations are to be balanced in arriving at a decision will vary. Justice Hill’s observations to this effect (Brown v Commissioner of Taxation [1999] FCA 563 at paragraphs 33 to 41) were endorsed by the Federal Court in Zizza v Commissioner of Taxation [1999] FCA 848 at paragraph 13:
It would be an error to regard the [Justice Wilcox’s] summary as complete, or to treat each of the six principles it contains as necessarily applicable to any particular application for extension of time, especially an application under different legislation.
In the current matter, the Tribunal considered the following matters were relevant. These were the matters the Tribunal took into account in making the decision to set aside the reviewable decision and to grant the application for an extension of time to the lodge objections to the assessments for the FYs 2008 to 2011.
The purpose of the legislation
The purpose of the PTA (and the Payroll Tax Act 1987 (repealed)) is, among other things, to require taxpayers who meet the relevant threshold and who pay taxable wages to register and pay payroll tax as assessed. If a taxpayer who might otherwise be liable for payroll tax pays ‘exempt wages’, they are not required to pay payroll tax. The Tribunal accepts that the onus rests with the taxpayer to demonstrate that they are exempt from payroll tax liability.
In the Tribunal’s view it is appropriate in this matter to adopt the approach of Justice Hill in Brown v Commissioner of Taxation [1999] FCA 563 at paragraph 51:
The Commissioner is entitled to collect tax due under an assessment whether or not there is an objection. He is obliged to collect tax in accordance with a correct assessment, that is to say, to collect the correct amount of tax, no more and no less. If an assessment is excessive, it would be improper for the Commissioner to seek to collect tax payable under it.
The Tribunal accepts that until the Applicant’s letter of 6 September 2012, the Respondent was not aware that the applicant considered that it was exempt from payroll tax liability because, as a charitable organisation, it paid exempt wages pursuant to section 48 and Schedule 2 Part 2.2 of the PTA (and section 9(1)(b) of the Payroll Tax Act 1987 (repealed)).
Prejudice to Respondent and Applicant caused by delay
The Applicant has consistently, from 6 September 2012, including in its 5 February 2013 and 30 April 2014 letters to the Respondent, and in Mr Allen’s witness statement (Exhibit A1), submitted that it seeks exemption from payroll tax because it is a 'charitable organisation'.
The Applicant says that it has, in the earlier correspondence to the Respondent and in the documents filed in its application to the Tribunal, provided to the Respondent all of the documentary information that it will rely on in lodging the objections should the application to lodge the objection/s out of time be granted.
The Respondent did not assert that there was any prejudice to the Respondent caused by the delay in this matter.
The consideration of the Applicant’s objection will be largely, if not solely, confined to documentary information. Most, if not all, of that documentary information has already been provided to the Respondent and some of it will have already been considered by the Respondent in the process of providing the decision of 17 March 2014.
In the Tribunal’s view there is no asserted or identified prejudice to the Respondent caused by the delay in this matter.
The Tribunal does not accept the Respondent’s submission that, because there is no evidence that the payment of the payroll tax caused any restriction in the Applicant’s ability to carry out its activities, the Tribunal should not consider that the Applicant would experience prejudice if the extension of time were not granted and it was denied the opportunity to test its objections. As the Tribunal understands it, the Respondent’s submission is that even if the objection is valid and the payroll tax would not have been payable, the Applicant has managed to carry out its functions and therefore is not prejudiced if it is not able to recover any amount that might have been overpaid.
The Tribunal accepts the Applicant’s submission that the Applicant has paid the payroll tax in the relevant years. Consequently, if the Applicant is successful in its objection, the retention of funds by the Respondent for the period of delay will have impacted on the Applicant.
Further, the Applicant says that because it is a not-for-profit organisation and is not permitted to repay amounts to members, any refunded amount, if the objection is allowed, would be ‘ploughed back into’ the organisation for its ‘charitable purposes’.
In Brown v Commissioner of Taxation [1999] FCA 563 (at paragraph 51) Justice Hill observed:
Except where the effluxion of time may affect adversely the ability of the Commissioner to defend an assessment, it is hard to see what prejudice there could be to the Commissioner.
Justice Hill goes on to say (at paragraph 55) that the Commissioner or the Tribunal should take into account:
…against the absence of prejudice to the Commissioner, the considerable prejudice to a taxpayer who is otherwise denied a right of independent review of an assessment which he or she claims to be excessive.
Justice Hill further observes (at paragraph 49):
The length of delay will likewise be relevant. But these are factors to be weighed against other matters, particularly the fact that to deny a taxpayer the right to have the assessment reconsidered by the Commissioner, or ultimately by the Tribunal, may be conducive of injustice.
In this matter, the Tribunal considers there is no apparent prejudice to the Respondent caused by the delay. There is likely prejudice to the Applicant in denying the application for an extension of time to test its proposed objections.
Period of delay
There were two periods of delay in this matter:
a)The period from the end of the 60 day period after the assessment in each of the financial years until the Applicant’s letter to the Respondent of 6 September 2012 when it first requested that, for the purpose of payroll tax, it be determined as an exempt charitable organisation; and
b)The period subsequent to 6 September 2012 and ending on 30 April 2014 when the Applicant first ‘formally’ requested an extension of time in relation to the payroll tax assessments in the FYs 2008, 2009, 2010 and 2011.
In the Tribunal’s view, the Respondent was on notice from 6 September 2012 that the Applicant sought exemption from payroll tax. In the Tribunal’s view the period of delay in relation to each financial year ends on 6 September 2012.
In the letter of 6 September 2012 and again in the 5 February 2013 letters to the Respondent, the Applicant referred to the payroll tax assessed in the FYs 2008 to 2011. The 5 February 2013 letter explicitly requested the exercise of the discretion in section 103 of the TAA (T345) in respect of the preceding 5 years. The Respondent did not address this request in either its 6 December 2012 or 17 March 2014 decisions. As a result, the Applicant was advised by the Respondent of the need to make the further application on 30 April 2014 which, after further internal review by the Respondent, led to the reviewable decision on 19 December 2014.
No new matter of significance was raised by the Applicant after 6 September 2012. It was clear from the Applicant’s letter of 6 September 2012 that it sought to be considered exempt from the obligation to pay payroll tax in the FYs 2008 to 2012 inclusive on the basis that it was a charitable organisation (pursuant to section 48 of the PTA and section 9(1)(b) of the Payroll Tax Act 1987 (repealed)).
The longest ‘period’ of delay commenced, in relation to FY 2008, on 26 September 2008 (being 60 days after the FY 2008 assessment on 28 July 2008) and ended, in the Tribunal’s view, almost 4 years later on 6 September 2012. The Respondent submitted, and the Tribunal accepts, that this is a significant period of delay. The Applicant conceded this period of delay was ‘neither immaterial nor negligible’ but submitted that it was not so long as to be a factor that should prevent the Applicant testing its liability via the objection process.
The period of delay reduced by approximately 12 months in relation to each of the subsequent financial years after 26 September 2008. The shortest period of delay was from 26 November 2011 (when the 60 days following the FY 2011 assessment ended) until 6 September 2012, a period of about 10 months. The basis for each of the proposed objections is identical.
The Tribunal accepts the period of delay in relation to the FY 2008, and then less so with each subsequent year, is significant. If it were the only matter for consideration, at least in respect of some, and perhaps all, of the proposed objections, the period of delay would weigh against the exercise of the discretion to grant the extension of time. However, the Tribunal accepts that the basis for and the information and documents relating to the proposed objections in respect of each of the FY 2008, 2009, 2010 and 2011 will be, in effect, identical. Indeed, because the 2006 Charter (this is discussed further in paragraphs 76-78 below) applied in relation to the period 1 July to 26 September 2011, the information has already been considered in relation to the FY 2012 objection that was allowed by the Respondent.
In the particular circumstances of this matter the Tribunal does not consider that the delay in respect of any of the FYs 2008 to 2011 is such that it should operate to preclude the exercise of the discretion to extend the time to lodge the proposed objections pursuant to section 103 of the TAA.
Explanation for delay
The Applicant's explanation for its delay is set out in the witness statement of Michael Allen dated 7 April 2015 (Exhibit A1 at paragraphs 21 to 23).
In his witness statement, Mr Allen (at paragraph 21) provided details about various applications made by the Applicant to be treated as an ‘exempt’ charitable organisation in relation to land tax, stamp duty and payroll tax in various States and Territories between March 2008 and September 2009. Based on the outcome of those applications, the Applicant formed the view that from 2009 there was a ‘uniform approach being taken’ by revenue authorities around Australia to reject such applications. In relation to the ACT, the only decision referred to by Mr Allen was the Respondent’s rejection on 3 September 2009 of the Applicant’s request to be granted exemption as a charitable organisation in respect of land tax.
Mr Allen states (Exhibit A1 at paragraph 22) that, as the Applicant is a ‘not for profit’ organisation and based on its conclusion about the ‘approach’ of revenue authorities after 2009, the Applicant considered it was not appropriate to expend further funds on testing the matter in respect of payroll tax.
Mr Allen says that (Exhibit A1 at paragraph 23) the advice from its accountant in 2012 to pursue the issue of its possible exemption coincided with the Applicant’s perception that there appeared to be a change in the approach by revenue offices around Australia to their preparedness to make positive determinations that organisations similar to the Applicant were 'charitable organisations'. Mr Allen said this change followed a Western Australian decision (Chamber of Commerce and Industry of Western Australia v Commissioner of State Revenue (2012) 89 ATR 797). Based on the accountant’s advice and this ‘change’ the Applicant decided to 'test the situation' in respect of payroll tax in the ACT and the letter of 6 September 2012 was sent.
The Applicant's representative noted that Mr Allen’s witness statement was tendered during the Tribunal hearing without objection. Mr Allen was not cross-examined.
The Respondent submits that the Applicant has provided no adequate explanation for the delay between 2008 and the 6 September 2012 letter when the question of its exemption was first raised by the Applicant. The Respondent says that despite the explanation provided by the Applicant, the only real change was that it had a new adviser in 2012. The Respondent urged that, as in the decision of PAAN Investments (In Liquidation) v Commissioner for ACT Revenue [2012] ACAT 19; and PAAN Investments (In Liquidation) v Commissioner for ACT Revenue [2014] ACTSC 161, the Tribunal should conclude that the inadequacy of the Applicant’s explanation outweighed other factors and the Tribunal should not grant the extension of time.
The Tribunal agrees with the Respondent's submission that it is not directly relevant that the Respondent rejected the Applicant’s application for exemption in relation to land tax in 2009. That decision by the Respondent was made in respect of a different tax law and perhaps different considerations were relevant. The Tribunal also considers that if there was a delay between the WA decision the Applicant has referred to and the Applicant’s 6 September 2012 letter then the Applicant provided no explanation for that delay.
Nonetheless, the Tribunal accepts the explanation for the delay provided by the Applicant is plausible.
As noted, this explanation was provided by Mr Allen in his witness statement (Exhibit A1). Mr Allen was not cross examined and the Applicant’s explanation was not directly challenged by the Respondent.
The Respondent submits that this explanation does not amount to an ‘acceptable’ explanation for the significant delay in the Applicant’s proposed objections in relation to all of the years of assessment (FYs 2008 – 2011). The minimum period of delay dates back to 26 November 2011 when the 60 day period following the FY 2011 assessment ended. The period of delay then increases each year going back until 26 September 2008 when the first objection period, for the FY 2008, ended.
The Respondent says that the Applicant’s letter of 30 April 2014 is the first ‘formal’ application for an extension of time pursuant to section 103 of the TAA in respect of the FY 2008 to 2011. Thus, says the Respondent, the minimum period of delay is almost 2.5 years and this delay is not ‘insignificant’. The maximum period is over 5.5 years and, says the Respondent, the Applicant has not provided an ‘acceptable’ explanation for this ever more significant period of delay of at least 2.5 and up to 5.5 years.
For the reasons set out above [see the discussion under the heading Period of Delay] the Tribunal considers that the ‘end date’ for the period of delay should be 6 September 2012, rather than 30 April 2014. Thus the delay is approximately 10 months in relation to the FY 2011 which commenced on 26 November 2011. It then increases to almost 4 years in respect of FY 2008 which commenced on 26 September 2008. The Tribunal accepts the Respondent’s submission that even the least period of delay, given the 60 day time limit in section 102 of the TAA, cannot be regarded as insignificant and becomes more significant with each year.
On balance the Tribunal considers that the Applicant’s explanation is ‘acceptable’ although not compelling. If it were the only factor for consideration then, in the Tribunal’s view, it would not outweigh the desirability for finality in decision making. Until 6 September 2012 the Respondent was unaware that the Applicant had any objection to the payroll tax assessments made in the FY 2008 to 2012.
Merits of the Applicant’s proposed objection
The Tribunal considers that the Applicant’s proposed objections to the FY 2008 to 2011 (inclusive) payroll tax assessments are neither frivolous nor without merit.
On 17 March 2014 the Respondent determined the Applicant to be exempt from payroll tax from 1 July 2011 on the basis that it is a charitable organisation. The Respondent cancelled the Applicant’s registration for payroll tax liability on 19 March 2014.
The Applicant’s activities are governed by a ‘Royal Charter’. The Charter has been amended at various times. The Charter made on 6 February 2006 (Exhibit A1 Attachment MA-2) (the ‘2006 Charter’) operated until the current Charter (T196-226) which was implemented on 26 September 2011 (the ‘2011 Charter’). Thw 2006 Charter applied in respect of the Applicant’s operations in the period covering the FY 2008 to 2011 and up until 26 September 2011 when the 2011 Charter was implemented.
Mr Allen (Exhibit A1 at paragraphs 10 to 13) asserts that there was no change in the ‘activities’ of the Applicant as a result of the change from the 2006 Charter to the 2011 Charter. Mr Allen says that there was merely a change in wording so that the Charter more accurately describes the Applicant’s activities.
The Tribunal does not make any finding as to whether Mr Allen’s assertions are correct, or as to whether the activities of the Applicant in the period 1 July 2007 to 30 June 2011 will satisfy the requirements of section 9(1)(b) of the Payroll Tax Act 1987 (repealed). This is obviously a matter for the Respondent to consider in relation to the proposed objections. However, the Tribunal notes that the Respondent granted the Applicant an exemption for the full period of FY 2012, namely from 1 July 2011 to 30 June 2012. During the period 1 July to 25 September 2011, the 2006 Charter still operated.
The Tribunal is satisfied that the Applicant has at least an arguable case and that taken at its highest, its objections in relation to the FYs 2008 to 2011 have merit.
Other matters
The response to the Applicant’s 6 September 2012 letter
The 6 September 2012 letter from the Applicant appears to be an ‘application for a refund’ pursuant to section 19A of the TAA. In the 6 September 2012 letter the Applicant based this request on its assertion that it was a 'charitable organisation' pursuant to section 48 and Schedule 2 Part 2.2 of the PTA and therefore exempt from liability for payroll tax. The Applicant asked the Respondent to, in effect, ‘backdate’ the exemption for 5 years. This is the maximum period within which the Respondent could, pursuant to section 19A of the TAA, grant a refund. The 5 year limit also applies to reassessments by the Respondent (section 9 of the TAA).
On 6 December 2012 the Respondent made a decision not to grant the Applicant’s request for a refund. In those circumstances it was not necessary for the Respondent to deal with the Applicant’s further request to backdate the exemption and reassess and refund payroll tax for any of the periods covered by the request.
The Applicant did not agree with the Respondent’s 6 December 2012 decision.
The Applicant made inquiries of the Respondent as to how it could challenge the Respondent’s 6 December 2012 decision. The Tribunal accepts that it is correct to say that the decision was not a reviewable decision under the PTA or TAA.
The Tribunal notes that had the Respondent come to a different conclusion in respect of the 6 September 2012 letter, it may have resulted in the Respondent reassessing and refunding the payroll tax the Applicant had paid for some or all of the years the Applicant identified in the 6 September 2012 letter.
Had the 6 September 2012 letter been an objection to the 6 August 2012 assessment of the Applicant’s FY 2012 payroll tax reconciliation, this objection would have been in time as it is within the 60 days of the FY 2012 assessment. The Respondent’s decision of 6 December 2012 would then have been an internally reviewable decision. Further, the Applicant’s request about the previous tax years might have been ‘deemed’ to be a request for extension of time to lodge objections in respect of the payroll tax assessments in FY 2008 to 2011. This decision would have been a reviewable decision.
Whilst the Tribunal accepts that the above paragraphs do not set out the approach that was adopted, the Tribunal considers that these are matters which support the conclusion that any delay after 6 September 2012 is not a factor that operates against the exercise of the discretion in section 103 of the TAA in this matter.
Similarly, in considering the period over which the Applicant is seeking to lodge objections, it is relevant that the 5 year period reflects the period for which the Respondent is authorized to make reassessments and grant refunds (sections 9 and 19A of the TAA). If, as the Applicant asserts, it has been a charitable organization at all times since the 2006 Charter commenced and following the commencement of the 2011 Charter in 26 September 2011, then it may have achieved the outcome it will seek by the proposed objections if the Respondent had made the decision on 6 December 2012 that it later made on 17 March 2014.
In the Tribunal’s view, this is a matter that supports the exercise of the discretion under section 103 of the TAA to give the Applicant the opportunity to test their proposed objections.
Applicant has already paid payroll tax assessed
The Applicant has already paid the assessed payroll tax for each of the FYs 2008 to 2011 inclusive. Thus there has been no prejudice caused, other than to the Applicant, by the delay in consideration of the proposed objections.
No broader impact of decision in this matter
This is a matter involving a taxpayer which seeks an extension of time within which to object to payroll tax assessments directed at it. The Applicant asserts that, if the extension is granted, then for reasons relating to its particular circumstances concerning how it operates and the activities it undertakes, it will satisfy the Respondent that it pays exempt wages is not liable for payroll tax.
In the Tribunal’s view, the matters which arise for consideration and the decision to be made by the Tribunal in this matter, do not have any wider application. As Justice Hill stated in Brown v Commissioner of Taxation [1999] FCA 563 at paragraph 57 –
...there can be no question of fairness arising so far as other taxpayers are concerned. They are entitled to lodge objections and if out of time to seek an extension of time in which to lodge their objections, just as Mr Brown [here the Applicant] is.
There is no matter of wider public interest, or any concern that this Applicant has gained some advantage over other taxpayers, which is relevant to the Tribunal’s consideration of the exercise of the discretion in section 103 of the TAA.
Section 9 and section 19A of the TAA – 5 year period
The Applicant has at all time restricted the period in relation to which it seeks to be exempt from payroll tax based on the proposed objections to the 5 years prior referred to in its letter of 6 September 2012. The 5 year period commenced on 7 September 2007. It reflects the 5 year limitation on the Respondent’s power to reassess and refund taxation pursuant to sections 9 and 19A of the TAA. In the Tribunal’s view it is appropriate that the proposed objection to the FY 2008 to be lodged by the Applicant pursuant to the orders made by the Tribunal 9 June 2015 should be limited to the period from 7 September 2007.
Conclusion
The Applicant has sought an extension of time within which to lodge objections to payroll tax assessments made in FY 2008 to 2011 inclusive.
The Tribunal has, for the reasons set out above, concluded that the Applicant has an acceptable explanation for the delay in seeking to lodge the proposed objections. The period of delay in relation to each year is either significant (FY 2008) or at best ‘not insignificant’ (FY 2011), however in the particular circumstances of this matter the Tribunal concluded that this is not a factor that should operate to preclude the exercise of the discretion to extend the time for lodging the proposed objections.
The Applicant’s proposed objections, taken at their highest, have merit. There is no prejudice to the Respondent caused by the delay but probable prejudice to the Applicant if it is not provided the opportunity to test the proposed objections.
On balance the Tribunal considers that the discretion pursuant to section 103 of the TAA should be exercised to grant the extension of time for the Applicant to lodge objections to the payroll tax assessments for the FY 2008, 2009, 2010 and 2011.
By way of final comment, although not referred to in the orders made on 9 June 2015, the Tribunal notes that the Applicant restricted its proposed objection in the FY 2008 to the period commencing 7 September 2007 to reflect the 5 years prior to the letter of 6 September 2012. The Tribunal considers that it is appropriate that the Applicant’s objection in FY 2008 be restricted to the period commencing 7 September 2007.
………………………………..
Ms W. Corby – Senior Member
for and on behalf of the Tribunal
Schedule of Legislative Provisions
68Review of decisions
(1)This section applies if the tribunal reviews a decision by an entity.
(2)The tribunal may exercise any function given by an Act to the entity for making the decision.
NoteA reference to an Act includes a reference to the statutory instruments made or in force under the Act, including regulations (see Legislation Act, s 104).
(3)The tribunal must, by order—
(a)confirm the decision; or
(b)vary the decision; or
(c)set aside the decision and—
(i)make a substitute decision; or
(ii)remit the matter that is the subject of the decision for reconsideration by the decision-maker in accordance with any direction or recommendation of the tribunal.
Taxation Administration Act 1999
9Reassessment
(1)The commissioner may make 1 or more reassessments of a tax liability of a taxpayer.
(2)A reassessment of a tax liability must be made in accordance with the legal interpretations and assessment practices generally applied by the commissioner in relation to matters of that kind at the time the tax liability arose except to the extent that any departure from those interpretations and practices is required by a change in the law (whether legislative or non-legislative) made after that time.
(3)The commissioner must not make a reassessment of a tax liability more than 5 years after the initial assessment of the liability, unless—
(a)the purpose of the reassessment is to give effect to a decision on an objection or appeal as to the initial assessment; or
(b)at the time the initial assessment or a reassessment was made, all the facts and circumstances affecting the liability under the relevant tax law of the person in relation to whom the assessment or reassessment was made were not fully and truly disclosed to the commissioner.
(4)The initial assessment of a tax liability remains the initial assessment of the liability for this Act even if it is withdrawn under section 13.
19AApplication for refund
(1)If a taxpayer claims to be entitled to a refund of tax paid under a tax law, the taxpayer may apply to the commissioner for a refund.
NoteIf a form is approved under s 139C for this provision, the form must be used.
(2)The application must be made within 5 years after the tax was paid.
(3)This section does not affect the operation of any other provision of a tax law that authorises or requires a refund of tax paid.
Objection
(1)A taxpayer may lodge a written objection with the commissioner if the taxpayer is dissatisfied with—
(a)an assessment, other than a compromise assessment, that is shown in a notice of assessment served on the taxpayer; or
(b)a decision mentioned in schedule 1 or schedule 2; or
(c)a decision under a tax law that is prescribed under the law for this section.
NoteDecisions are prescribed for this section under the following Acts:
·Duties Act 1999, s 252
·Land Rent Act 2008, s 33
·Land Tax Act 2004, s 38
·Rates Act 2004, s 70.
(2)An objection must be accompanied by the fee (if any) determined under section 139A (Determination of fees) for the objection.
(3)The commissioner must refund a fee paid under this section if—
(a)the commissioner allows the objection in whole or in part; or
(b)the taxpayer applies to the ACAT and—
(i)the ACAT, or a court hearing an appeal on the matter, upholds the objection in whole or in part; or
(ii)the period when any further appeal can be made has ended; and
(iii)neither the taxpayer nor the commissioner has applied to the ACAT in relation to a part of the objection that was upheld.
101Grounds for objection
(1)The grounds for the objection must be stated fully and in detail, and must be in writing.
(2)The grounds for the objection, for a reassessment, are limited to the extent of the reassessment.
(3)The burden of showing that an objection should be sustained lies with the taxpayer making the objection.
102Time for lodging objection
An objection must be lodged with the commissioner not later than 60 days after the date that the notice of the assessment, or of the decision objected to, is served on the taxpayer, except as provided by section 103.
103Objections lodged out of time
(1)The commissioner may permit a person to lodge an objection after the 60 day period.
(2)The person seeking to lodge the objection must state fully and in detail, in writing, the circumstances concerning and the reasons for the failure to lodge the objection within the 60 day period.
(3)The commissioner may grant permission unconditionally or subject to conditions or may refuse permission.
Note 1The commissioner’s decision to refuse a person permission is an internally reviewable decision (see s 107, def internally reviewable decision), and the commissioner must give an internal review notice to the person (see s 107B).
Note 2The commissioner’s decision to grant a person permission subject to a condition is a commissioner-reviewable decision (see s 107, def commissioner‑reviewable decision), and the commissioner must give an internal review notice to the person (see s 107B).
107Definitions—div 10.2
In this division:
commissioner-reviewable decision means a decision mentioned in schedule 2.
internally reviewable decision means—
(a)an assessment, other than a compromise assessment, that is shown in a notice of assessment served on a taxpayer; or
(b)a decision mentioned in schedule 1, section 1.2; or
(c)a decision under a tax law that is prescribed under the law for this section.
108AApplications for review
The taxpayer in relation to whom a reviewable decision is made may apply to the ACAT for review of the decision.
NoteIf a form is approved under the ACT Civil and Administrative Tribunal Act 2008 for the application, the form must be used.
Schedule 1Decisions reviewable by commissioner and ACAT
(see s 100, s 107 and s 107A)
1.1Objections and reviews
A person dissatisfied with a decision mentioned in section 1.2 may—
(a)lodge an objection under section 100; and
(b)if dissatisfied with the determination of the objection—apply to the ACAT under section 108A (Applications for review).
1.2Decisions subject to objection or review
Section 1.1 applies to a decision—
(a)under section 8 determining the existence and effect of a tax avoidance scheme; or
(b)under section 31 to impose penalty tax; or
(c)under section 34 to impose increased penalty tax; or
(d)under section 37 refusing to remit penalty tax; or
(e)under section 40 (5) revoking a variation previously granted in relation to requirements for a return; or
(f)under section 43 refusing an application for special arrangements for lodgment of returns or methods of payment; or
(g)under section 44 imposing conditions on an approval under section 43; or
(h)under section 45 varying or cancelling an approval under section 43; or
(i)under section 103 refusing permission to lodge a late objection.
Schedule 2Decisions reviewable by commissioner only
(see s 100 and s 107)
2.1Objections
A person dissatisfied with a decision listed in section 2.2 may lodge an objection under section 100.
2.2Kinds of decision subject to objection
Section 2.1 applies to a decision—
(a)under section 29 refusing to remit interest in accordance with the taxpayer’s application; or
(b)under section 40 (3), refusing to vary the time for lodging a return in accordance with the taxpayer’s application; or
(c)under section 40 (3), refusing to vary the period to which a return relates in accordance with the taxpayer’s application; or
(d)under section 52—
(i)refusing to extend the time for payment of tax; or
(ii)refusing to accept payment by instalments; or
(iii)imposing a condition on an extension of time or acceptance of payment by instalments; or
(a)under section 103 imposing conditions on a grant of permission to lodge a late objection.
Charitable organisations
Wages mentioned in schedule 2, part 2.2 are exempt wages.
Schedule 2Other ACT provisions
(see s 8, ss 48 to 51 and s 53A)
2.2Employer not member of group—amount of tax payable each month
(1)The amount of payroll tax payable by an employer on taxable wages paid or payable by the employer in a month is the amount worked out as follows:
(2)If D is equal to or more than TW for a month, the employer is not required to pay payroll tax for the month.
(3)In this section:
D means the deductible amount mentioned in section 2.3 or section 2.4 for the employer.
R means the rate determined under the Taxation Administration Act 1999, section 139 for this section.
TW means the total taxable wages paid or payable by the employer (otherwise than as a member of a group) in the month.
87CMeaning of reviewable decision—pt 8A
In this part:
reviewable decision means a decision mentioned in schedule 3, column 3 under a provision of this Act mentioned in column 2 in relation to the decision.
Exemption from tax
(1)Section 6 does not apply to wages paid or payable—
…
(b)by a charitable organisation (other than a charitable organisation carried on for an educational purpose); or
BHP Billiton Direct Reduced Iron Pty LTd v Duffus, Deputy Commissioner of Taxation [2007] FCA 1528
Paragraphs referred to in paragraph 35 of the decision above
The principles enunciated by Wilcox J in Hunter Valley Developments Pty Ltd 3 FCR 344 were said by the Commissioner in Taxation Ruling TR 98/12 to be relevant to the exercise of the statutory discretion under subs 80G(6A) of the ITAA 1936. The Ruling also stated that these general principles need to be balanced with a consideration of the underlying policy of s 80G which was identified as broadly aligning the treatment of company groups with divisional companies.
Hunter Valley Developments Pty Ltd 3 FCR 344 concerned the circumstances in which an extension of time would be allowed for bringing an application for an order of review of an administrative decision under s 11 of the ADJR Act. Wilcox J outlined a number of positions emerging from the authorities which he suggested could guide, albeit not in any exhaustive manner, the exercise of the Court’s discretion. In summary form (omitting authorities) they were as follows:
1.Although the section does not, in terms, place any onus of proof upon an applicant for extension an application has to be made. Special circumstances need not be shown but the Court will not grant the application unless positively satisfied that it is proper so to do. The “prescribed period” of 28 days is not to be ignored. Indeed it is the prima facie rule that proceedings commenced outside that period will not be entertained. It is a precondition to the exercise of discretion in his favour that the applicant for extension show “an acceptable explanation of the delay” and that it is “fair and equitable in the circumstances” to extend time.
2.Action taken by the applicant, other than by making an application for review under the Act, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished. A distinction is to be made between the case of a person who, by non-curial means, has continued to make the decision-maker aware that he contests the finality of the decision (who has not “rested on his rights”) and a case where the decision-maker was allowed to believe that the matter was finally concluded. The reasons for this distinction are not only “… for finality in disputes” but also the “fading from memory” problem.
3.Any prejudice to the respondent including any prejudice in defending the proceedings occasioned by the delay is a material factor militating against the grant of an extension.
4.The mere absence of prejudice is not enough to justify the grant of an extension. In this context, public considerations often intrude. A delay which may result, if the application is successful, in the unsettling of other people or of established practices is likely to prove fatal to the application.
5.The merits of the substantial application are properly to be taken into account in considering whether an extension of time can be granted.
6.Considerations of fairness as between the applicants and other persons otherwise in a like position are relevant to the manner of exercise of the Court’s discretion.
Those principles were related to applications for extensions of time to commence judicial review proceedings under the ADJR Act. That kind of discretion differs in purpose and character from the discretion presently under review. As Hill J observed in Brown v Federal Commissioner of Taxation (1999) 42 ATR 118, Wilcox J did not say that he was laying down principles of universal application or even covering all applications to commence proceedings for judicial review outside the time prescribed by the ADJR Act. Brown 42 ATR 118 was a case in which a taxpayer had sought from the Commissioner an extension of time for filing an objection against an income tax assessment. An objection to an assessment was quite different from an application for judicial review which would proceed on quite limited grounds. Hill J discussed the nature of the objection process (at 127):
It is the first step in a process whereby the assessment may be reconsidered by the Commissioner in the light of the objection and if disallowed may be the subject of merits review by an independent tribunal, the Administrative Appeals Tribunal, or by the court, (although before the court matters involving the exercise of discretion are the subject of judicial rather than merits, review). If the disallowance of the objection is reviewed by the tribunal and a decision adverse to the taxpayer is arrived at there is the possibility of an application to this court by way of an appeal on a question of law.
Hill J said that it had been in the past a “reproach to the law” that a taxpayer could be refused independent review of a meritorious objection even in circumstances where the failure to object may not have been his or her fault. While the explanation for delay in lodging an objection would be an important factor, the decision-maker was required to take into account all the circumstances of the particular case against the background that parliament had enacted a procedure to permit extensions of time being granted. Extensions should be granted where the justice of the case required. They should not be reserved for exceptional cases.
The emphasis on general considerations of injustice and the need for a balancing process continued in his Honour’s judgment at 132, where he said:
What is required is the balancing of the delay; the explanation for it; the circumstances which gave rise to it and such prejudice if any as may be shown to exist to the Commissioner against the prejudice which may arise to a taxpayer who has by reason of the failure to object in time lost the right to a review of the assessment. In this balancing process the Commissioner or the Tribunal on a review will be guided by what the justice of the case requires. The balancing process should be approached on the basis that while Parliament has stipulated a time in which objections are required to be lodged it has entrusted to the Commissioner a power to extend that time in appropriate circumstances. The decision maker should not lose sight of the fact that s 14ZW is an ameliorating provision designed to avoid injustice.
The Full Court in Zizza v Federal Commissioner of Taxation (1999) 42 ATR 371 said it would be an error to regard the summary in Hunter Valley Developments Pty Ltd 3 FCR 344 as complete or to treat each of the six principles it contained as necessarily applicable to any particular application for extension of time especially an application under different legislation. The Court agreed with the observations to that effect made by Hill J in Brown 42 ATR 118 (at 376).
End attachment
HEARING DETAILS
FILE NUMBER: | AT 6 of 2015 |
PARTIES, APPLICANT: | The Institute of Engineers Australia |
PARTIES, RESPONDENT: | Commissioner for ACT Revenue |
COUNSEL APPEARING, APPLICANT | Mr D. Thomas |
COUNSEL APPEARING, RESPONDENT | Ms K. Katavic |
SOLICITORS FOR APPLICANT | Price Water House Coopers |
SOLICITORS FOR RESPONDENT | ACT Government Solicitor |
TRIBUNAL MEMBERS: | Ms W. Corby – Senior Member (Presiding) Mr M. Sinclair – Senior Member |
DATE OF HEARING: | 9 June 2015 |
1
7
4