The Property Applicants and Commissioner of Taxation
[2006] AATA 441
•23 May 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 441
ADMINISTRATIVE APPEALS TRIBUNAL )
) No NT2005/552 ) & NT2005/553
TAXATION APPEALS DIVISION ) Re
The Property Applicants
Applicants
And
Commissioner of Taxation
Respondent
DECISION
Tribunal Mr J. Block, Deputy President Date23 May 2006
PlaceSydney
Decision The Tribunal does not have jurisdiction to hear the applications and accordingly dismisses them. [SGD] Mr J. Block
Deputy President
CATCHWORDS
TAXATION – jurisdiction - application for private ruling – question of whether property “active asset” – business ceased to be carried on outside 12 months - no extension obtained – no “dissatisfaction” in relevant sense – limited to hypothetical facts in notice of private ruling – year of income in which ruling sought not identified – new legislation considered – no jurisdiction and applications dismissed
Income Tax Assessment Act 1997 – sections 152-35, 152-40, 995-1
Taxation Administration Act 1953 – section 14ZAH; Schedule 1, sections 359-5, 359-25
Tax Laws Amendments (Improvements to Self Assessment) Act (No. 2) 2005 – Schedule 2, sections 28, 29, 31, 32
CTC Resources NL v Federal Commissioner of Taxation (1994) 48 FCR 397
Commissioner of Taxation v McMahon (1997) 79 FCR 127
National Speakers Association of Australia Inc v Commissioner of Taxation (1997) 97 ATC 5131
REASONS FOR DECISION
23 May 2006 Deputy President J. Block Part A: Introduction and Background
1. The objection decision before the Tribunal is the disallowance of an objection dated 7 October 2005 by the Applicants (who are married to each other) against a private ruling made on 1 September 2005 ("the relevant year"). The Applicants are the joint owners of real property (referred to in these reasons as the “PC property")
2. Mr J. Hmelnitsky of counsel instructed by Ms C. Leslie of the Australian Government Solicitor appeared for the Respondent while the Applicants were self-represented. The argument for the Applicants was presented by the Applicant husband who also furnished written submissions and including diagrams. The Tribunal had before it the T-Documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 in respect of each Applicant. Except for some differences in respect of dates (not material for the purposes of this decision) the T-Documents in relation to each Applicant are the same.
3. At the request of the Respondent and following a letter addressed by Ms Leslie to the Applicants dated 27th of April 2006 a jurisdiction hearing was held on 12 May 2006. At the request of the Applicants the matter was heard confidentially; this decision has been prepared on this basis, and in consequence of which some quoted material has been edited accordingly.
4. It is convenient to commence by including the content of the Respondent’s Statement of Facts and Contentions dated 1 May 2006 under the head of “Facts” (edited as set out in clause 3) and contained in clauses 1 to 13 as follows:
“FACTS
1.The Applicants acquired [the PC property] in or about 1987 and remain the owners thereof.
2.On 16 February 2005, [the Applicant’s accountant] wrote to the Respondent applying on behalf of the Applicants for a private ruling (“the first application letter”).
3.Under the heading “Questions to be answered and issues to be considered”, the first application letter sought confirmation of various propositions including that the [PC property] qualified as an “active asset” for the purposes of paragraph 152‑40(1)(a) of the Income Tax Assessment Act 1997 on the basis that it was being used, or held ready for use, in the course of carrying on a business.
4.After setting out various details concerning the Applicants’ ownership of the property and the activities conducted by them, the first application letter then noted under the heading “Arrangement being seriously considered”:
[The Applicant husband and the Applicant wife] are seriously considering the sale of the [PC property] on the basis that, the sale of the [RS properties] now complete and they having no intention to rent or otherwise use the [PC property], they have no further need for the [PC property]. The [PC property] has not yet been put on the market but it is anticipated that it will be within the next 6 months or so.
5.The first application letter was accompanied by a completed form of application for a private ruling. At Part 4 of the form, certain questions were answered as follows:
Has the arrangement commenced? — No
Is the arrangement being seriously contemplated? — Yes
Are the facts of the arrangement known with reasonable certainty? — Yes
What years are you seeking the private ruling for? — Year ended 01/07/04 … until sold.
6.On 29 April 2005 and 28 June 2005, the Respondent issued notices of private ruling to [the Applicant husband] and [the Applicant wife] respectively (together “the first ruling”). In each case, the private ruling was expressed to apply to the year ended 30 June 2005.
7.On 6 June 2005, [the Applicant’s accountant] wrote to the Respondent forwarding a “Request for Private Ruling Review and Lodgement of Objection” in relation to the ruling issued to [the Applicant husband] on 29 April 2005 together with various additional materials (“the objection letter”).
8.On 25 July 2005, the Applicants wrote to the Respondent requesting withdrawal of the first ruling and the issue of new private rulings taking into account all matters included in both the first application letter and the objection letter. The period for which the ruling was sought remained unchanged.
9.On 10 August 2005, [the Applicant accountant] wrote to the Respondent providing further information in response to a telephone inquiry from a taxation officer.
10.On 1 September 2005, the Respondent issued a further notice of private ruling (“the subject ruling”). The subject ruling was expressed to apply to the year ended 30 June 2005.
11.The Applicants objected to the subject ruling on 7 October 2005.
12.On 25 November 2005, the Respondent disallowed the Applicants’ objections.
13.On 19 December 2005, the Applicants applied to the Tribunal for review of the Respondent’s decisions on objection.”
5. Until 14th December 2004 the Applicants were the owners of two other parcels of real property, which are collectively referred to in these reasons as the “RS properties”. The Applicants said that the RS properties were leased out to tenants. However, the Applicants also said that from the PC property, they provided repair and other services to the tenants of the RS properties. The services in question were, so the Tribunal was told, provided to those tenants and no-one else. The RS properties were sold in 2004; contracts were exchanged on 15th October 2004 and the sale was completed on 14th December 2004. That latter date is referred to as the "Cessation Date" on which date, so the Tribunal was informed, the Applicants ceased to provide services to the tenants of the RS properties.
Part B: the Tax Act legislation and related matters
6. The provisions of the Income Tax Assessment Act 1997 ("the Tax Act") which are of particular relevance so far as the Applicants are concerned in their claim that the PC property should be treated as an active asset are sections 152-35 and 152-40, which read as follows:
“152-35 Active asset test
A CGT asset satisfies the active asset test if the asset was an active asset of yours:
(a) just before the earlier of:
(i) the CGT event; and
(ii) if the relevant business ceased to be carried on in the last 12 months or any longer period that the Commissioner allows— the cessation of the business; and
(b) during at least half of the period beginning at the later of:
(i) when you acquired the asset; and
(ii) if you have owned the asset for more than 15 years—15 years before the time that applies under paragraph (a);
and ending at the time that applies under paragraph (a).
152-40 Meaning of active asset
(1) A CGT asset is an active asset at a given time if, at that time, you own it and:
(a) use it, or hold it ready for use, in the course of carrying on abusiness; or
(b) it is an intangible asset that is inherently connected with a business that you carry on (for example, goodwill or the benefit of a restrictive covenant); or
(c) it is used, or held ready for use, in the course of carrying on a business by:
(i) your* small business CGT affiliate; or
(ii) another entity that is connected with you.
(2) Subsection 392‑20(1) is disregarded in determining, for the purposes of subsection (1) of this section, whether an entity is carrying on a business.
Note: An entity would be taken to be carrying on a primary production business under subsection 392‑20(1) if the business is carried on by a trust and the entity is presently entitled to trust income.
(3) A CGT asset is also an active asset at a given time if, at that time, you own it and:
(a) it is either a share in a company that is an Australian resident at that time or an interest in a trust that is a resident trust for CGT purposes for the income year in which that time occurs; and
(b) the total of:
(i) the market values of the active assets of the company or trust; and
(ii) any capital proceeds that the company or trust received, during the 2 years before that time, from CGT events happening to its active assets and that the company or trust holds in the form of cash or debt pending the acquisition of new active assets;
is 80% or more of the market value of all of the assets of the company or trust.
Note: Paragraph 152‑35(b) requires a CGT asset to have been an active asset over a period of time. For a share in an Australian resident company to meet this requirement, the company would have to satisfy the 80% test in this subsection throughout that same period.
Exceptions
(4) However, the following CGT assets cannot be active assets:
(a) interests in an entity that is connected with you, other than shares and interests covered by subsection (3);
(b) shares in companies, other than shares covered by subsection (3);
(c) interests in trusts, other than interests covered by subsection (3);
(d) financial instruments (such as loans, debentures, bonds, promissory notes, futures contracts, forward contracts, currency swap contracts and a right or option in respect of a share, security, loan or contract);
(e) an asset whose main use in the course of carrying on the* business mentioned in subsection (1) is to derive interest, an annuity, rent, royalties or foreign exchange gains unless:
(i) the asset is an intangible asset and has been substantially developed, altered or improved by you so that its market value has been substantially enhanced; or
(ii) its main use for deriving rent was only temporary.”
7. The Applicants sought a ruling that the PC property be treated as an active asset as defined in section 152-40(1) of the Tax Act on the basis that it satisfied the active asset test set out in section 152-35(a)(ii) of the Tax Act.
8. On the assumption (which is by no means clear) that the activities of the Applicants in the PC property constituted a business as that term is defined in section 995-1 of the Tax Act, it may be assumed that the date on which the activities ceased was the Cessation Date and when the sale was completed. The fact that the date of exchange may have been the relevant date for capital gains tax purposes (in respect of the RS properties) is not relevant for the purposes of this decision. As to whether the nature of those activities constituted a business which was not excluded through the operation of section 152-40(4)(e) of the Tax Act is a question which need not be resolved for the purposes of this decision.
9. Assuming that the business referred to in clause 8 of these reasons for decision was not excluded on the basis set out in the preceding clause, the PC property would satisfy the provisions of section 152-35(a) of the Tax Act only if the business ceased to be carried on "in the last 12 months or any longer period that the Commissioner allows". It is not in dispute that the statutory period of 12 months expired on 14 December 2005 and that, subject to the provisions of clause 11 of these reasons for decision below, an extension of that period has not been sought or obtained by the Applicants.
10. In applying for a ruling that the PC property qualified as an active asset the Applicants described the proposed arrangement in the manner set out previously in these reasons and sought a ruling for the period commencing with the year ended 1st July 2004 and ending on the date of sale of the PC property. The Respondent issued two rulings each of which was expressed to be in respect of the relevant year. The ruling to which this decision relates to is the later of the two rulings. In the earlier ruling (T4/50) the Respondent posed the question as being: “Will the [PC property] be considered an active asset…?" and answered it “no". In the later ruling, and being the ruling with which the Tribunal is concerned, the same views were expressed but in more expanded form at T8/165 as follows:
“RULING:
1.Is [the PC property] an active asset under section 152-40 of the ITAA 1997 for the purposes of the CGT small business concessions?
No.
2.Does the exception contained in paragraph 152-40(4)(e) of the ITAA 1997 exclude the property from being treated as an active asset under section 152-40 of the ITAA 1997?
As the property is not an active asset under section 152-40 of the ITAA 1997, it is not necessary to consider this question.
3. Is subparagraph 152-35(a)(ii) of the ITAA 1997 satisfied if the property is sold within 12 months (or such further time as the Commissioner allows) of completion of the sale of the [RS properties], rather than 12 months from the contract date?
As the property is not an active asset under section 152-40 of the ITAA 1997, it is not necessary to consider this question.
4. Is subparagraph 152-35(b)(ii) of the ITAA 1997 satisfied in respect of the property?
As the property is not an active asset under section 152-40 of the ITAA 1997, it is not necessary to consider this question.”
11. As noted previously in these reasons, the Applicants did not, subject to this clause, seek an extension of time under section 152-35(a)(ii) of the Tax Act; it is not disputed that the PC property has not been sold and so that at this date and without the grant of such an extension the PC property cannot satisfy the active asset test, even assuming that the exclusionary provision to which I referred earlier in these reasons does not apply. The Applicants contended that at a preliminary conference hearing held on 1st March 2006 before Mr Shepherd, Ms Gorman who represented the Respondent at that hearing agreed to grant an extension of time of 12 months; it was not clear to me whether the Applicants sought to contend that the extension referred to commenced with the expiry of the statutory period of 12 months or on the date of the preliminary conference. The Tribunal expresses no view as to whether Ms Gorman did or did not do so or (if relevant) as to whether she had the authority and power to do so, and it is necessary only to note that as a matter of law there cannot be an estoppel against the operation of the Tax Act.
12. As noted previously, the Applicants did not in the ruling application specify the years in respect of which the ruling was sought. Section 14ZAH of the Taxation Administration Act 1953 ("TAA") at that time read as follows: --
“14ZAH A year of income to which an application applies may be:
(a)a past year of income; or
(b)the current year of income; or
(c) a future year of income."
13. The Applicants contended that the reference to "six months" in respect of the proposed arrangement and the date of the ruling application had the effect that an inference could and should be drawn to the effect that they were seeking a ruling both for the relevant year and also the subsequent year; this is so, so they contended, because the proposed period of six months would take their application into the year of income subsequent to the relevant year. It may be noted at this early stage that having regard to the case authority referred to in Part C below the Tribunal does not believe that any such inference can be drawn.
Part C: Case law
14. There are three cases which are of particular relevance. They are CTC Resources NL v Federal Commissioner of Taxation (1994) 48 FCR 397 ("CTC"), Commissioner of Taxation v McMahon (1997) 79 FCR 127 ("McMahon") and National Speakers Association of Australia Inc v Commissioner of Taxation (1997) 97 ATC 5131 ("National Speakers").
15. (a) In CTC the majority judgment was delivered by Gummow J. with whom Jenkinson J. agreed. In respect of that judgment, Gummow. J. said at page 408:
“ Accordingly, there is substance in the submissions that (i) the situation
which is thus revealed is markedly different from that in Mellifont v
Attorney-General (QLD) (1991) 173 CLR 289; there the accused had been discharged, the Attorney-General had referred points of law
to the Queensland Court of Criminal Appeal under s. 669A of The Criminal Code
(QLD) and on the day after the reference, the accused was informed that another
indictment would be presented against him on the same charge if the reference
were successful (see at 290), and (ii) when 30 June 1993 passed and
CTC's arrangement was not implemented, any invocation of the original
jurisdiction of this Court with respect to the ruling and the disallowance of
CTC's objection to it, would be in relation to circumstances that had not
occurred and could never happen; a decision by the Court could produce no
legal consequences for CTC under the taxation laws. I accept those
submissions.
In my view, if regard is had to the context in which s. 14ZZ appears, in
its operation upon the jurisdiction of this Court, then the "dissatisfaction"
of the person initiating the proceeding is of the following nature. It is a
dissatisfaction with the absence of a favourable decision upon the objection
which would, if now rectified by the Court, place the party in the position
for the administration of the taxation laws which should have applied if the
ruling had been made by the Commissioner in the terms sought. A mere
curiosity or interest in having a formal ruling by the Commissioner for some
collateral commercial purpose of the applicant is not sufficient to amount to
"dissatisfaction" in the relevant sense. That being the case, s. 14ZZ clearly
is valid. There is thus no occasion to consider what might have been the
position if the provision were more widely construed.”
(b) It will be noted in particular that Gummow J held that where in relation to the relevant year the proposed arrangement had not happened and could not happen (as is the case in this instance) the Applicants could not be "dissatisfied" in the relevant statutory sense. It will be remembered that the ruling in its terms was expressed to relate to the relevant year and to no other year.
(c) Hill J. also delivered a judgment in which he came to much the same conclusion but through a different route. He said at pages 432 and 433:
“In my opinion a person will only be "dissatisfied" in the relevant sense
if that person is a person to whom the "ruling" is still capable of having
legal effect. In the case of a ruling relating to a proposed arrangement,
that means that the arrangement must be one which, if entered into, will fall
within the ruling. If the ruling relates to a year of income which has passed
before the appeal is instituted (or perhaps before the appeal has been heard)
so that the ruling can not affect the taxation liability of a putative
appellant, that person, no matter how discontented, will not be a "person
dissatisfied".
It may be that s.14ZAQ is beyond power in purporting to permit the
Commissioner to make assumptions of future facts or "other matters" which then
must be taken into account by the Court in an appeal. If there be facts
relevant to the making of the ruling, these will, in the first instance, be
supplied by the taxpayer, and if deficient the Commissioner may require
additional facts to be supplied to supplement those already given: s.14ZAM.
The Court is not empowered in exercising its jurisdiction to find facts and if
the facts were inadequate would be obliged to refer the matter back to the
Commissioner to exercise the power given to him under s.14ZAM. As presently
advised I doubt the ability of the Court to draw inferences from the given
facts, but if the Court had that power there is a big difference between the
drawing of inferences and the making of assumptions. The Court is given the
statutory task of deciding whether the objection decision ought to have been
made differently: s.14ZZO, or in other words, whether the ruling is wrong. In
so doing the Court must rely upon the facts stated in the ruling in coming to
its conclusion. But to empower the Commissioner to make assumptions (it must
be presumed that the only assumptions contemplated are assumptions of fact the
Commissioner could hardly make assumptions of law which would render the
ruling useless) and then to require the Court to rule upon assumed facts
would, in my view, involve the Court in being forced to decide a question of
law on facts not put forward by the taxpayer as relevant to the proposed
arrangement. Facts assumed by the Commissioner, albeit that the assumption
made is that which the Commissioner under s.14ZAQ considers the most
appropriate, may bear no real relationship to the actual facts upon which the
ruling is sought. However, that question does not arise for decision here.
Neither ruling proceeds upon any real assumption.”
16. Mr Hmelnitsky contended that the minority judgment in CTC could be construed on the basis that a court (and this Tribunal) might have jurisdiction but that a decision would have no practical effect. It is unnecessary from me to consider the precise reasoning contained in the minority judgment because it is the majority judgment delivered by Gummow J. which is binding on the Tribunal.
17. I can most conveniently deal with McMahon by setting out clauses 16 and 17 of the letter by Ms Leslie to the Applicants (with which I agree) and referred to previously in these reasons, as follows:
“16. In Commissioner of Taxation v McMahon (1997) 79 FCR 127, the Full Federal Court held that, in reviewing a decision of the Commissioner disallowing a taxpayer’s objection to a private ruling on the way in which, in the Commissioner’s opinion, a tax law or tax laws would apply to the taxpayer in respect of a year of income in relation to an arrangement, the Administrative Appeals Tribunal is confined and limited to the hypothetical facts constituting the arrangement as identified by the Commissioner in his notice of private ruling.
17. We enclose for your consideration a copy of this decision and note that the members of the Court deal at some length with the nature of rulings made under the provisions of Part IVAA of the Taxation Administration Act 1953 (“TAA”) — as then in force — and the procedure for review of objections to rulings by the Tribunal. In this regard, we refer you generally to the comments of Lockhart J at pp. 132-134, Beaumont J at pp. 140-141, and Emmett J at pp. 149-150 and in particular to the following passages:
“When making a private ruling the Commissioner does not make finings of fact. He simply identifies facts and then states his opinion about the way in which the relevant tax laws apply to the applicant in relation to those identified facts.” (Lockhart J at p. 133A.)
“If a taxpayer seeks a review of the private ruling before the Tribunal, the subject matter of that review is the arrangement as identified by the Commissioner in his private ruling. That arrangement is constant throughout the process of the private ruling and any review or appellate process that ensues.” (Lockhart J at p. 133C)
“The procedure, thus, is not designed to determine disputed questions of fact or even to make any binding determination of fact at all.” (Emmett J at p. 149E)”
18. (a) In National Speakers, Emmett J said at page 5134 of his (short) judgment:
“That leaves the primary question as to whether or not there was a valid application for a private ruling. As I have said above, the formal application declined to identify any year of income and declined to indicate whether or not the "arrangement" had commenced. I consider that the scheme of the legislation contemplates that the applicant must set out, with such particularity as the applicant chooses, details of an arrangement. As I have said, it is in the interests of an applicant to specify an arrangement which will bear as much resemblance as possible to an arrangement which might actually come into operation.
However, it is essential that the application identify a year of income in respect of which the ruling is sought. It need not be limited to a single year of income. It may be a past year of income, the current year of income or a future year of income as is expressly provided by section 14ZAH. Unless, the Commissioner is told what year of income he is asked to express an opinion about it appears to me that there is no application within the meaning of Part IVAA.
In the circumstances, I am disposed to conclude that there was no valid application for a ruling. It follows that the process of objection and appeal to this Court has miscarried. Accordingly, I will make a declaration that the application dated 1 October 1996 made by the Association to the Commissioner is not a valid application pursuant to section 14ZAF of the Income Tax Assessment Act and a declaration that no valid private ruling has been made by the Commissioner pursuant to section 14ZAT.”
(b) The decision in National Speakers is also binding on the Tribunal. Its effect is that where no year of income was specified in the ruling request it could not be a valid ruling request and so that the ruling itself is also invalid. On this basis also the Tribunal must hold that it does not have jurisdiction.
Part D: arguments by the Applicants.
19. The Applicants contended that their case is to be distinguished from CTC in that the arrangement in CTC was a "shonky" dividend arrangement which had not occurred and could not occur, whereas their sale of the PC property would indeed occur. The Tribunal does not consider that there is a relevant distinction.
20. The Applicants argued also that inferentially their ruling request application must be construed so as to relate to at least the relevant year and the year subsequent to it. (I do not agree that such an inference can or should be drawn.)
21. The Applicants contended moreover that the private ruling was wrong and that if it had been correct (and so that if it had concluded that the PC property was indeed an active asset) there would have been a window of opportunity of a few months within the statutory period of 12 months (between September and December 2005) within which to sell the PC property. The Tribunal does not consider on the facts submitted it is possible to say that the decision was wrong.
22. As to National Speakers, the Applicants contended that it should be distinguished on the basis that in National Speakers no years of income at all were specified whereas in their case and albeit inferentially, years of income were specified; in addition they contended that they had set out a concrete arrangement in contrast with the taxpayer in National Speakers who did not.
23. The Tribunal does not consider that the Applicants’ contentions are tenable. Their application for a private ruling did not specify a year of income or, for that matter, years of income. The relevant ruling was issued in respect of the relevant year and in which the proposed arrangement did not occur. In any event they cannot come within the provisions of the Tax Act without an extension of time, since the statutory period of 12 months from the Cessation Date has elapsed. (This leaves aside the question raised previously as to whether Ms Gorman could or did indeed did give them an extension of time.) It also leaves open the question of whether in fact the PC property was an active asset, on the basis that the business or activity was not excluded through section 365-40(4)(e) of the Tax Act.
Part E: the new legislation
24. With effect from 1 January 2006, TAA has been amended. In particular the extent to which a private ruling can be sought has been expanded. I refer in particular in this context to sections 359-5 and 359-25 contained in schedule 1 to TAA which read as follows:
“359-5(1) The Commissioner may, on application, make a written ruling on the way in which the Commissioner considers a relevant provision applies or would apply to you in relation to a specified *scheme. Such a ruling is called a private ruling.
Note: Section 357-55 specifies the relevant provisions.
359-5(2) A *private ruling may cover any matter involved in the application of the provision.”
“359-25(1) A *private ruling may specify the time from which it begins to apply and the time at which it ceases to apply.
359-25(2) The specified start time, or end time, may be before, when, or after the *private ruling is made and may be determined by reference to a specified event.
359-25(3) A *private ruling that does not specify a start time applies from the time when it is made.
359-25(4) A *private ruling that does not specify an end time ceases to apply at the end of the income year or other accounting period in which it started to apply.”
25. It will be noted that that under the legislation as amended it is now possible to apply for a ruling as to a rather wider range of matters and it is also possible to apply for a ruling by reference to a specified event.
26. The TAA was amended in accordance with Tax Laws Amendments (Improvements to Self Assessment) Act (No. 2) 2005. Part 3 of Schedule 2 of that Act is entitled “Transitional”; in particular sections 28, 29, 31 and 32 (contained in Part 4) read as follows:
“28
In this Part: commencement day means the later of:
(a)the day on which this Act receives the Royal Assent; and
(b)1 January 2006.
[CCH Note: The Act received assent on 19 December 2005.]
29 STATUS OF EXISTING RULINGS
(1)A public ruling in force immediately before the commencement day under Part IVAAA of the Taxation Administration Act 1953 has effect, on and after that day, as if it were a public ruling made under Division 358 in Schedule 1 to that Act as amended by this Act.
(2)A private ruling in force immediately before the commencement day under Part IVAA of the Taxation Administration Act 1953 has effect, on and after that day, as if it were a private ruling made under Division 359 in Schedule 1 to that Act as amended by this Act.
(3) An oral ruling in force immediately before the commencement day under Division 360 in Schedule 1 to the Taxation Administration Act 1953 has effect, on and after that day, as if it were an oral ruling made under Division 360 in Schedule 1 to that Act as amended by this Act.
(4)A ruling to which this item applies is taken to have been made on the day on which it was originally made.
31 PENDING APPLICATIONS
(1)An application for a private ruling or an oral ruling under the Taxation Administration Act 1953 made before the commencement day and not decided before that day has effect on and after that day as if it were an application for a private ruling under Division 359, or for an oral ruling under Division 360, in Schedule 1 to that Act as amended by this Act.
(2)The application is taken to have been made on the day on which it was originally made.
32. Application [contained in Part 4]
The amendments made by this Schedule apply to things done on or after the later of:
(a) the day on which this Act receives the Royal Assent; and
(b) 1 January 2006
27. Section 29(2) of the transitional provisions specifies that a private ruling in force immediately before the commencement date (1 January 2006) has effect as if it were a private ruling made under the amended legislation. The private ruling in question was issued on 1 September 2005 and was thus in force on the commencement date. It is a ruling against the Applicants and is referable to the relevant year only.
28. Section 31 of the transitional provisions cannot apply because the ruling request was decided before the new legislation took effect.
29. Under section 32 of the transitional provisions, the amendments in question took effect only on 1 January 2006. In respect of the ruling and the ruling requests in this matter, every relevant act, matter or thing took place prior to 1 January 2006.
30. In accordance with CTC the Tribunal does not have jurisdiction and must dismiss the applications. Although the Applicants may not approve this decision, it might on reflection be seen as a blessing in disguise. If I had held that the Tribunal does have jurisdiction, the Tribunal would have been obliged in conducting the review to confine itself (in accordance with McMahon's case) to the material which was before the decision maker; the legislative amendments are not affected by McMahon. On that basis, the Applicants would have been faced with difficulties which might well have been insuperable. In the first place there is the difficulty as regards an extension of time in relation to the statutory period of 12 months; as important is the fact that the Tribunal would have found it very difficult and probably impossible, on the evidence before the decision maker, to determine whether or not the relevant business was excluded through the operation of section 152-40(4)(e) of the Tax Act, and if so the Applicants would not have discharged the onus on them. The Applicants would therefore be well advised to commence afresh; the first step should be the resolution of the question of an extension of time (in relation to the statutory period) and that question having been resolved, full and complete evidence as to the nature and extent of the business should desirably accompany a fresh ruling application.
I certify that the 30 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J Block, Deputy President.
Signed: A. Garcia
AssociateDate of Hearing 12 May 2006
Date of Decision 23 May 2006
Representative of the Applicants Self representedCounsel for the Respondent Mr J. Hmelnitsky
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