The Taxpayer and Commissioner of Taxation
[2004] AATA 941
•10 September 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 941
ADMINISTRATIVE APPEALS TRIBUNAL )
) No NT2003/265
TAXATION APPEALS DIVISION ) Re THE TAXPAYER Applicant
And
COMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal The Hon R N J Purvis Q.C., Deputy President Date10 September 2004
PlaceSydney
Decision The Tribunal is without jurisdiction in this matter.
[Sgd] R N J Purvis Q.C.
Deputy President
CATCHWORDS
TAX – late lodgement of tax returns – reviewable objection decision – jurisdiction of the AAT to hear a matter concerning an objection against the assessment of additional tax for late lodgement of tax returns – ineligible income tax decision remission – inclusion of Medicare levy, taxes payable and provisional tax in income tax remission decision – inclusion of the Medicare levy in the calculation of the base figure for determining the percentage of additional tax – calculation of penalty payments for late lodgement – AAT is without jurisdiction
Administrative Appeals Tribunal Act 1975 section 25
Taxation Administration Act 1953 sections 14ZZ, 14ZQ, 14ZS
Income Tax Assessment Act 1936 sections 222, 227
Case 58/95, 95 ATC 467
Case 12/96, 96 ATC 204
Creagh v FCT 99 ATC 2193
Case 3/2003, 2003 ATC 137
Grollo Nominees Pty Limited v Commissioner of Taxation (1997) 73 FCR 452
REASONS FOR DECISION
10 September 2004 The Hon R N J Purvis Q.C., Deputy President THE PRESENT APPLICATION
1. This is an application to determine whether the Tribunal has jurisdiction to hear and deliver a decision in respect of an objection against assessment of additional tax payable by the Taxpayer in respect of the years ended 30 June 1994 and 30 June 1995.
2. The Tribunal is empowered by section 25 of the Administrative Appeals Tribunal Act 1975 to review only a decision that an Act authorises it so to do. So far as the present matter is concerned the Act is the Taxation Administration Act 1953 (“the Act”) and the relevant section is section 14ZZ. This section enables a person dissatisfied with the Commissioner’s decision, in this case not to remit additional tax, to apply to the Tribunal for review of the reviewable objection decision.
3. A reviewable objection decision is defined by section 14ZQ of the Act to mean:
“…
reviewable objection decision means an objection decision that is not:
(a) an ineligible income tax remission decision; or
(b) an ineligible sales tax remission decision.”
4. An ineligible income tax remission decision is defined by section 14ZS of the Act to mean:
“14ZS Ineligible income tax remission decisions
(1)…
(2)
An objection decision is an ineligible income tax remission decision if it relates to the remission of additional tax payable by a taxpayer under the Income Tax Assessment Act 1936 (other than Division 11 of Part IIIAA), except where the additional tax is payable under section 163B, 224, 225, 226, 226G, 226H, 226J, 226K, 226L or 226M of that Act, whatever its amount, or is payable under a provision of Part VII of that Act other than any of the preceding sections and its amount, after the decision is made, exceeds:
(a) in the case of additional tax payable under section 222 of that Act because of the refusal or failure to furnish a return, or any information, relating to a year of income—the amount calculated, in respect of the period commencing on the last day allowed for furnishing the return or information and ending on:
(i) the day on which the return or information is furnished; or
(ii) the day on which the assessment of the additional tax is made;
whichever first happens, at the rate of 20% per year of the tax properly payable by the taxpayer in respect of the year of income; or
…”
5. In respect of the present substantive application for review the Commissioner maintains that the assessed additional tax is in an amount which renders it an ineligible income tax remission decision and hence not reviewable as such by the Tribunal.
6. The Taxpayer on the other hand maintains that it is reviewable by relying primarily on the ground that the relevant decision is not an ineligible income tax remission decision. This is because the base figure upon which it was calculated improperly includes the Medicare Levy, taxes already paid and provisional tax. In addition the Taxpayer raised the following matters:
·alleged incorrect application of the Commissioner’s discretion;
·alleged omission from the calculations of tax instalments pre-paid;
·inclusion of the provisional tax deductions;
·alleged “misleading written information” emanating from the Commissioner as to:
a)reasons given to the Applicant for the decisions to impose tax penalty for late lodgement;
b)non-compliance with the Commissioner’s discretionary guidelines;
c)decision referable to remission of penalty not warranted;
·alleged misleading verbal information as to the Commissioner’s lodgement policy and the meaning of an extension of time to lodge a tax return;
·Commissioner’s policy of “accepting amendments to the lodged objection”;
·alleged inconsistent application of Commissioner’s discretion;
·alleged “discriminatory, biased, unfair application” of the Commissioner’s discretion;
·penalty for late lodgement not clearly set out in terms that “the non practitioner would understand”;
·Applicant’s objection was not “fully considered” and was wrongly considered.
ASSESSMENT OF THE ADDITIONAL TAX
7. It was not until 14 May 2003 that the Taxpayer lodged his income tax returns for the years ended 30 June 1994 and 30 June 1995, they having been initially required to be lodged by the 31 October 1994 and 31 October 1995.
8. As to the 1994 year the Commissioner issued a notice of assessment rendering the Taxpayer liable to:
“Tax on Taxable Income $6898.26
Medicare Levy . . . 441.16
Additional Tax for Late Return 5962.71
Rebates . . . 594.66”.
9. The additional tax was assessed pursuant to section 222 of the Income Tax Assessment Act 1936, this section relevantly provides:
“Penalty for failure to keep or furnish documents or information
222(1)Where a taxpayer refuses or fails to furnish, when and as required under or pursuant to this Act or the regulations to do so, a return, or any information, relating to a year of income, being a return relating to or information relating to, or to the affairs of, the taxpayer, the taxpayer is liable to pay, by way of penalty, additional tax equal to double the amount of tax payable by the taxpayer in respect of the year of income.
…”
10. The Commissioner exercised his discretion under section 227 of the Assessment Act and calculated the additional tax as:
“…
Calculate the ‘Basic’ Component
This component is the imposition of penalty for the late lodgement of the return.
Percentage rate used is 20.00
Due date for lodgement is 31/10/1994
Lodgement date is 30/04/2003
Period late in weeks is 443
Basic LLP component (Tax owing x rate x period late /52) 5,962.71”
11. In respect of the 1995 year the assessment rendered the Taxpayer liable to:
“Tax on Taxable Income 3,724.36
Medicare Levy . . . 317.15
Additional Tax for Late Return 3,586.42.
Rebates 71.84”.
12. The Commissioner exercised his discretion under section 227 of the Assessment Act and calculated the additional tax as:
“Calculate the ‘Basic’ Component
This component is the imposition of penalty for the late lodgement of the return.
Percentage rate used: 20.00
Due date for lodgement is 31/10/1995
Lodgement date is 30/04/2003
Period late in weeks is 391
Basic LLP component (Tax owing x rate x period late / 52) 2,869.14”
MEANING TO BE ASCRIBED TO THE WORDS “TAX PROPERLY PAYABLE” – 14ZS(2)(A)
13. It is on the provisions of section 14ZS (2) (a) that the Commissioner relies when contending that the Tribunal is without jurisdiction to hear and determine the Taxpayer’s objection to the decision of the Commissioner to impose the additional tax.
14. The Commissioner says that the additional tax assessed is in an amount less than 20 per cent per year of the tax properly payable in that the amount has been calculated in respect of the period commencing on 31 October 1994, the last day allowed for furnishing the return and ending on 14 May 2003 being the day on which the return was furnished resulting in a figure of 10.4 per cent per year of the tax properly payable.
15. The relevant figures in respect of the 1994 year are:
“Due date for lodgement: 31 October 1994
Date return lodged: 14 May 2004-08-26
Length of period: 8.5 years (approx)
Tax properly payable: $6,744.76 (Tax on taxable income plus Medicare Levy less Rebates)
Additional tax for late lodgement: $5,962.71.
Rate: 10.4% per annum (approx.)
Additional Tax 100
(Calculated as: _________________ x ______% ÷length of period)”
Tax properly payable 1
16. A similar calculation applies in respect of the 1995 year resulting in a figure of 12 per cent per year of the tax properly payable. The relevant figures are:
“Due date for lodgement: 31 October 1995
Date return lodged: 14 May 2003
Length of period: 7.5 years (approx)
Tax properly payable: $3,969.67 (Tax on taxable income plus Medicare Levy less Rebates)
Additional tax for late lodgement: $3,586.42
Rate: 12.0 % per annum (approx.)…”
17. It is as to the inclusion of the Medicare Levy in the compilation of the base figure in the tax properly payable, that the Taxpayer takes issue. The Taxpayer maintains that the Medicare Levy should not be included in the tax properly payable and if this be so the objection decision is not an ineligible income tax remission decision and hence is reviewable by the Tribunal as a reviewable objection decision.
18. The inclusion of the Medicare Levy in the calculation of the base figure for determining the percentage rate of additional tax imposed was discussed by the Tribunal in Case 58/95, 95 ATC 467. At page 472 of that decision it is said:
“23. The addition of Medicare levy into the “tax properly payable” used for calculating the rate per annum at which penalty tax for late lodgement has been imposed can cause substantial differences in the outcome of the calculation.
…
25. The phrase “tax properly payable” found, inter alia, in paragraph 14 ZS (2) (a) of the Administration Act, is not defined. Section 222A of the Assessment Act defines “proper tax” as meaning “the tax properly payable by the taxpayer in respect of that year on the taxpayer’s taxable income after allowing credits properly allowable to the taxpayer”.
26. Part IIIB of the Assessment Act deals with Medicare levy. Section 251R (7) provides:
“251R(7) In this Act (other than this Part, the definition of ‘year of tax’ in subsection 6(1), section 102AAN, Division 17 of Part III and sections 160AQU, 160AQX, 160AQY and 160AQZ), unless the contrary intention appears, ‘income tax’ or ‘tax’ includes levy payable in accordance with this Part”’
…
28. Do the references mentioned mean that the phrase “tax properly payable” in paragraph 14ZS (2) (a) should be read so as to include Medicare Levy? The Administration Act is silent on the question but it seems to me that there is an inference that the phrase should have the same meaning as it does in the Assessment Act. There is nothing in the legislation that I can find which suggests that the phrase is to have a different meaning when used in the Administration Act. I am therefore satisfied that the phrase “tax properly payable” in paragraph 14ZS (2) (a) includes assessed Medicare Levy. When calculating the rate at which penalty tax was imposed for each of the years of income in dispute, the amount of Medicare Levy assessed must be included as tax properly payable. In my view the effect of subsection 251R(7) is applicable in the circumstances of this case.”
19. I do not consider that it is a matter of “inference” that the phrase “tax properly payable” should “have the same meaning” as stated in paragraph 28 of Case 58/95 (supra) referred to above, where there is not anything in the legislation suggesting that the phrase is to have a different meaning. It is a matter of proper statutory construction that unless otherwise indicated the phrase should be given the same meaning where it appears in statutes dealing with the same or indeed similar subject matter. In application 12/96, 96 ATC 204 the Tribunal again discussed the inclusion of the Medicare Levy and concluded that the tax properly payable in the context of section 14ZS (2) (a) includes the assessment of Medicare levy.
20. In Creag v FCT 99 ATC 2193 the Tribunal was to consider “whether the tax properly payable is to be calculated before or after the deduction of tax payments made through the PAYE system”. After agreeing with the opinion expressed in case 58/95 (supra) that the meaning to be ascribed to the phrase “tax properly payable” should be the same when considering either taxation legislation, the learned Senior Member (as he then was) concluded that:
“12. The Tribunal considers that in calculating tax properly payable, tax already paid should be taken into account. This being so the additional tax is above the threshold and the Tribunal does have jurisdiction…”
21. However in Case 3/2003, 2003 ATC 137 the Tribunal constituted by the same Member as in Creagh v FCT (supra) reversed the earlier decision. At paragraph 113 of the reasons for decision the learned Deputy President (as he had then become) noted:
“I refer next to clauses 65 to 72 (but excluding clause 71) of Annexure B, with all of which I agree, and which are included, as a matter of convenience, in the body of these reasons as follows:
“65. The Explanatory Memorandum to the Taxation Laws Amendment Act 1986 where reference is made to penalty provisions provides that:-
‘By sub-section 170AA (1) a taxpayer will… be liable to pay interest on an increase in tax under an amended assessment. The amount (referred to as the “principal amount” in respect of which interest is payable is the amount by which the tax payable (emphasis added) under the amended assessment exceeds the tax payable under the assessment that was amended.
Tax payable means the gross amount of tax assessed in respect of the taxable income less rebates of certain tax credits such as those applicable to overseas tax paid. Credits for tax instalment deductions, prescribed payment system deductions or provisional tax are not deductible in ascertaining the amount of tax payable on which interest is to be charged’ (emphasis added).
66. Paragraph 13 of the Explanatory Memorandum to the Taxation Laws Amendment Act (No.2) 1995 which refers to tax payable in respect of late lodgement penalty provides:-
‘Additional tax and interest are calculated on the lesser: the income tax payable on assessment; or a person’s net tax payable.
The amount of income tax payable on assessment is the amount of tax payable on taxable income or, if in the case of trustees the amount of tax payable on net income, as defined in section 6(1). The tax payable is the amount after allowing any rebates or deductions under section 100(2) allowable to the person in making the assessment. Any crediting or applying of amounts under the various tax collection systems, or advance tax payments made by a taxpayer on account of income tax do not form part of the assessment process or are excluded from calculating the amount of income tax payable on assessment (emphasis added’.
67. Paragraph 11.32 of the Explanatory Memorandum defines what is net tax payable and refers to the fact that:-
‘… tax payable does not include any credit available to the tax payer under the collection system or advance payments (paragraph 11.33 of the EM).’”
The Deputy President then states that:
“the above Explanatory Memoranda clearly exclude collection credits (which include PAYE tax instalment deductions) from calculation of ‘tax properly payable”.
This conclusion, consistent with the Explanatory Memoranda referred to, is with respect, clearly correct. He continues by noting that:
“69. Section 6(1) ITAA 36 defines ‘assessment’ to mean unless the contrary intention appears ‘(a) the ascertainment of the amount of taxable income and the tax payable thereon’. Section 166 ITAA 36 requires the Commissioner to make an assessment of the amount of taxable income and the tax payable thereon. There is an evident parallel between the definition of assessment in section 6(1) and the reference in section 166 to ‘an assessment of the amount of taxable income of any taxpayer, and of the tax payable thereon’.
70. The reference to ‘tax payable’ is a reference to an amount payable by the person to the Commonwealth under or by virtue of the ITAA36. Tax becomes due under ITAA 36 when it is assessed and a notice of assessment is issued.
…
72. In Punin v DFC of T & anor 2000 ATC 4288 at 4299 Emmett J considered the sales tax context and section 97 the penalty provision for making false statements. In considering section 97 which operates in the same way as section 223 and in particular the expression “the tax properly payable by the person” Emmett J at 4299 paragraph 51 said:-
‘…the word “properly” is used in the context of section 97(1) (a), which refers to a person making a false statement. Accordingly, the expression “the tax properly payable” must be construed as being the tax that would be payable if there had been no impropriety consisting of the false statement upon which the question is predicated.’”
22. In this regard the reasons for decision conclude by saying:
“114. My decision in Creagh v FC of T 99 ATC 2193 was plainly incorrect… The “tax properly payable” should correctly have been calculated before taking into account credits for payments made.”
23. As with the “credits for payments made” so with the Medicare levy, the amount of the tax properly payable is to be calculated without any adjustment for these items. They have been included in and are regarded as a component of, the said calculation.
24. If this were the only matter raised by the Taxpayer for consideration the Tribunal would be satisfied that it is without jurisdiction to hear and determine the additional tax decision of the Commissioner.
OTHER MATTERS RAISED BY THE TAXPAYER
25. Unless the Taxpayer is able to establish that the rate of the additional tax per year of the tax properly payable exceeds 20 per cent, the relevant decision is an ineligible income tax remission decision and hence not reviewable by the Tribunal. If this be so any matter that pertains to the imposition of the additional tax, the procedure adopted, or the justification for its imposition, is not the subject of review. The additional matters raised by the Taxpayer fall into one or other of these categories.
26. The imposition of the additional tax by the Commissioner was, as has been already discussed, an income tax decision. The Taxpayer objected to its imposition and requested that it be remitted (Exhibits B and C). The Commissioner made a decision to refuse the request. The decision, the subject of the Taxpayers appeal to the Tribunal, is clearly an income tax remission decision.
27. The Taxpayer raised and discussed the following concerns which will be dealt with seriatim.
28. Matters of additional tax calculation, whether the objection decision is reviewable, the nature of the “additional tax payable” and the “tax properly payable”, each of which is raised in the Taxpayers Outline of Submissions, have already been discussed in these reasons. There are however other matters that were of concern to the Taxpayer.
29. Such latter mentioned matters earlier detailed in these reasons were summarised by the Taxpayer as:
-the Commissioner exceeding the powers given to him by the legislation;
- the lack of procedural fairness with which the Commissioner acted/exercised his discretion;
-only one of the objections relates directly to the remission of or further remission in part of additional tax.
30. The Taxpayer contends that “the Commissioner made a number of assessments, determinations, notices and decisions in relation to the tax matters of the Applicant for the years ending 30 June 1994 and 1995”, and the Taxpayer says that he is not satisfied “with several of those decisions”. It is further contended that the Commissioner “disallowed the Applicant’s taxation objections” and that each “of these objection decisions is a reviewable objection decision”. The Taxpayer maintains that the Commissioner made “just one decision as a response to many objections” and that this “would/may be seen as indicative of an ill considered objection decision” and that “all of the objections give raise to or necessitate an objection decision as an appropriate response from the Commissioner and … all of the objection decisions are reviewable by the AAT”.
31. It is clear that the Taxpayer sought to have the Tribunal review the decision referable to the imposition of additional tax. It is clear that the percentage threshold maintained in section 14ZS of the Act has not been reached by reason of the imposition of such additional tax. The Taxpayer has not sought to object and seek review of the tax assessed on the assessable income. It is only as to the additional tax that review was sought. It may well be that in the course of making an assessment of tax payable on assessable income and in arriving at an additional tax amount a number of preliminary decisions incidental to the ultimate decision have to be made. However, that is not germane to the matter now before the Tribunal. If it was competent for the Tribunal to consider the decision as to the imposition of additional tax then many of the matters raised by the Taxpayer would be the subject of such consideration.
32. The Taxpayer further maintains that the decision made by the Commissioner was not a “remission decision within the meaning of the Act”. He refers to the dictionary definition of remission and submits that “return of money unlawfully withheld is not a request for remission”. There is no evidence before the Tribunal which would ground this submission. There is no money that has been “unlawfully withheld”. The Tribunal is satisfied that the relevant decision related to the Commissioner refraining from seeking to impose the additional tax and that a decision of this nature is embraced by the use of the word “remission”.
33. It was further submitted that the said decision of the Commissioner does not “relate to” remission of additional tax. The Taxpayer in this regard relied upon Grollo Nominees Pty Limited v Commissioner of Taxation (1997) 73 FCR 452. But the Court was there considering a situation where the assessment of primary tax was at issue as was the question of additional tax. In the present matter the objection decision relates to the imposition of additional tax only, and not to the assessment of primary tax. Grollo (supra) and the present matter may be distinguished accordingly. If the Taxpayer was dissatisfied with the assessment of primary tax then that distinction might be the subject of a separate appeal. There is no question of the Commissioner here exceeding as the Taxpayer alleges “the powers given to him by legislation”.
34. The Taxpayer further contends that the “Commissioner exceeded the authority given to him under sections 222 and 227(3)” of the Act. It is said that the Commissioner “made just one objection decision” that dealt with all the Applicant’s objections. This was not so. The Taxpayer objected to the imposition of the additional tax as well as complaining as to the procedure adopted by the Commissioner and information he had been given by officers of the Department of Taxation. The decision as to additional tax was the primary decision about which the complaint was made. The Commissioner maintained his original decision as to the additional tax that should be imposed. It was that decision that was the subject of the application to the Tribunal.
35. In the absence of the Tribunal having jurisdiction to hear and determine the application, other matters pertaining to procedure within the office of the Commissioner do not attract the jurisdiction of the Tribunal. It was said by the Taxpayer that the “Commissioners decisions to remit part of the additional tax were not correctly made”. “The amounts of penalty tax…were incorrectly calculated in accordance with formula set out in the Commissioner’s discretionary decisions…” Even if it was competent for the Tribunal to consider the decision to impose the additional tax no evidence was placed before the Tribunal as to any formula not being complied with. However, even if the latter had been so, the decision as to no jurisdiction would have been maintained.
36. Finally it was said that the Commissioner had not acted with “procedural fairness”. In the absence of jurisdiction it is not competent for the Tribunal to consider, let alone make a decision in relation to this matter.
37. It may be that the Taxpayer in this matter has reason to complain about the manner in which his concerns as to lodgement of his returns and the inclusion or non inclusion of information in them were dealt by the Commissioner. It may be that a number of the matters referred to by the Taxpayer such as those alleging misrepresentation, as to matters “not being taken into consideration”, discretion “not being properly exercised”, discretion “being exercised in a biased manner”, “being misled in his dealings”, there being “an absence of the application of procedural fairness principles”, there being “discrimination” between one taxpayer and another, the Taxpayer “not understanding matters” raised with him by officers of the Commissioner, “conflicting information” being given to him and the Commissioner’s “representatives”, “not providing accurate information”, receiving “a litany of misinformation” and a desire to hold “administrators to their assurances/statements”, have some merit and maybe they do not. Even if the Tribunal had jurisdiction to consider these questions which in the present circumstances it is without it does not have before it evidence which would support such suggestions or enable to make findings in relation to them.
38. If the Tribunal did have jurisdiction to consider the decision referable to the imposition of the subject additional tax, which it does not, it would have stood in the shoes of the Commissioner and considered the matter anew. Complaints about the conduct of the Commissioner and/or his officers might not have been then relevant because the Tribunal would have been required itself to consider all matters precedent to an additional tax decision being reached and arrive at its own conclusions in relation to them. It would have itself endeavoured to reach the correct or preferable decision. Matters which pertained to the making of the original decision might well not have been relevant to the making of a subsequent decision.
39. However, these matters do not arise having in mind the decision earlier made.
DECISION
40. I am, for the reasons herein before set forth, satisfied that the Tribunal is without jurisdiction in this matter.
I certify that the 40 preceding paragraphs are a true copy of the reasons for the decision herein of The Hon R N J Purvis Q.C., Deputy President
Signed: ..M.DiCondio ...................................................................................
AssociateDate/s of Hearing 16 August 2004
Date of Decision 10 September 2004
Applicant self-represented
Representative for the Respondent Mr D Ong
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