"WAY" and Commissioner of Taxation
[2003] AATA 720
•30 July 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 720
ADMINISTRATIVE APPEALS TRIBUNAL )
) No WT2001/4026
TAXATION APPEALS DIVISION ) Re “WAY”
Applicant
And
COMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal Ms G Ettinger – Senior Member
Associate Professor G Barton - Member
Date 30 July 2003
Place Perth
Decision The decision under review is affirmed.
….........(sgd G Ettinger)......................
Ms G Ettinger
Senior Member
catchwords
Sales tax – how assessed whether excessive – whether payable – decision affirmed
legislation
Income Tax Assessment Act 1936 ss 190, 264(1)
Sales Tax Assessment Act 1992 ss 16, 51, 61, 99, 100, 101, 103, 111, 113, 116
Taxation Administration Act 1953 ss 14ZZKcase law
Revlon Manufacturing Ltd v FCT (1995) 32 ATR 48
FCT v Dalco 90 ATC 4088REASONS FOR DECISION
30 July 2003 Ms G Ettinger – Senior Member
Associate Professor G Barton - Member
1. The decision under review before the Administrative Appeals Tribunal (“the Tribunal”), was the decision of the Commissioner of Taxation (“the Commissioner”), (the Respondent in these proceedings), dated 27 February 2001 (T77), to disallow the Applicant’s objection of 18 October 2000 to two notices of assessment under the Sales Tax Assessment Act 1992 (“the STAA”) issued to the Applicant on 9 October 2000 (T70). The assessments were raised under section 101 of the STAA for outstanding amounts of sales tax of $3,618.97, and $1,672.80, in respect of the taxable value of industrial tools and supplies sold by wholesale during the periods 1 May 1998 to 31 July 1998, and 1 November 1998 to 31 January 1999 respectively. In both instances the penalty amounts assessed under section 99 of the STAA were entirely remitted under section 100 of the STAA.
2. The Applicant, known as “WAY” in these proceedings, which were heard in private, applied to the Tribunal for a review of the Commissioner’s decision for the following reasons:
“Their decision was illegal and based on deliberate and misleading and deceptive conduct. No assessment was ever physically done by the ATO. The Perth Local Court allowed their decision and awarded a sumary (sic) judgement on the 30th November 2001 because the court did not have the jurisdiction to go behind the relevant Sales Tax Act.”
3. In his written submissions, he stated:
“Not only do I believe the assessment to be excessive but I believe the facts show it to be nefarious and that no assessment should have been made at all.”
4. The Applicant appeared at the Tribunal self represented, and the Commissioner was represented by Ms T Kelly, assisted by Mr A Lambe.
ISSUE BEFORE THE TRIBUNAL
5. The issue to be decided by the Tribunal was whether the Applicant’s sales tax liability for the periods 1 May 1998 to 31 July 1998 amounting to $3,618.97 and $1,672.80 for the period 1 November 1998 to 31 January 1999 was excessive.
LEGISLATIVE CONTEXT
6. The relevant legislation in this matter was the Sales Tax Assessment Act1992, (“the STAA”), in particular sections 16, 51, 61, 99, 100, 101, 103, 111, 113, 116 and the Taxation Administration Act 1953, (“TAA”), in particular section 14ZZK.
7. Pursuant to section 107 of the STAA, a taxpayer who was dissatisfied with an assessment made in relation to the taxpayer was able to object against it in the manner set out in Part IVC of the TAA.
“Taxpayer may object against assessment
107. A taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.”
8. Section 14ZZ of the TAA provided that if the person was dissatisfied with the Commissioner’s objection decision, the person could apply to the Tribunal for review of the decision.
“14ZZK Grounds of objection and burden of proof
On an application for review of a reviewable objection decision:
(a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
(b) the applicant has the burden of proving that:
(i) if the taxation decision concerned is an assessment (other than a franking assessment)—the assessment is excessive; or
(ii) if the taxation decision concerned is a franking assessment—the assessment is incorrect; or
(iii) in any other case—the taxation decision concerned should not have been made or should have been made differently.”
9. According to section 116(1) of the STAA, the production of a notice of assessment in such review proceedings was not conclusive evidence that the assessment was duly made, and that other particulars in the assessment were correct. Section 116(1) provided:
“The production of:
(a) a notice of assessment; or
(b)a document that is signed by the Commissioner and appears to be a copy of a notice of assessment;
is conclusive evidence that the assessment was duly made and that the amounts and other particulars in the assessment are correct. This subsection does not apply in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment.”
10. Section 14ZZK of the TAA, limited the Applicant to the grounds stated in the taxation objection to which the decision related, unless the Tribunal ordered otherwise, and provided that the Applicant had the burden of proving that the assessment was excessive. The combined effect of section 116(1) of the STAA, and Section 14ZZK of the TAA was that the Applicant had to persuade the Tribunal on the balance of probabilities that the assessments were excessive.
11. The general rules for taxing assessable dealings were at the relevant time, in section 16(1) of the Act. The rules have been drafted by reference to Table 1 of Schedule 1 of the Act. Table 1 set out the assessable dealings that could be subject to sales tax, the person liable for the tax, the time of the dealing and its normal taxable value.
“General rules for taxing assessable dealings
16. (1) Table 1 sets out all the assessable dealings that can be subject to sales tax.”
12. Subsection 16(3) of the STAA provided that the amount of any sales tax liability in relation to an assessable dealing was calculated by applying the rate of sales tax under the Sales Tax (Exemptions and Classifications) Act 1992 to the taxable value of the dealing less an exempt part of the taxable value.
“16. (3) To calculate the amount of the tax:
(a) determine the taxable value of the dealing under Division 3 of this Part;
(b) deduct any exempt part of the taxable value that applies under Division 4 of this Part;
(c) multiply the result by the rate that applies under the Exemptions and Classifications Act.”
13. Pursuant to subsections 16(2)(c)(d) and 61(1) and (2) of the STAA, the tax became payable at the time of the dealing, and was due for payment 21 days after the end of the month or quarter in which the liability arose, depending on whether the taxpayer was a monthly or quarterly remitter.
“16. (2) If the time of an assessable dealing (as specified in column 4 of the Table) is on or after the first taxing day, and no exemption applies under Division 2 of this Part, then:
….(c) the tax becomes payable at the time of the dealing, as specified in column 4;
(d) the tax is due for payment at the time that applies under Division 2 of Part 5.
Requirement to lodge returns
61. (1) A person who is a monthly remitter for a month during which the person becomes liable to tax must lodge a return within 21 days after the end of the month.
(2) A person who is a quarterly remitter for a sales tax quarter during which the person becomes liable to tax must, within 21 days after the end of the quarter, lodge either:(a) a return for the quarter; or
(b) a separate monthly return for each month in the quarter.”
14. Persons liable for sales tax were required by section 61 of the STAA to lodge monthly or quarterly returns within 21 days after the month or quarter in question. The Act did not define “return” for these purposes. Section 113 of the STAA however, provided that any return must be in a form approved by the Commissioner; it must contain such information as the form required, and such further information as the Commissioner required, and it must be lodged at the place and in the manner that the Commissioner required. Liability for sales tax arose independently of an assessment which could issue in respect of such sales tax liability. (Revlon Manufacturing Ltd v FCT (1995) 32 ATR 48 and sections 16, 61, 63 and 103 of the STAA).
“Formal requirements for returns, notifications etc.
113. Any return, application, notification or other document that a person is required or permitted to give to the Commissioner under this Act:
(a) must be in a form approved by the Commissioner; and
(b) must contain such information as the form requires, and such further information as the Commissioner requires; and
(c) must be lodged at the place and in the manner that the Commissioner requires.”
15. Section 51 of the STAA related to credit entitlements which arose in the situations set out in Tables 3 and 3A of Schedule 1 of the STAA. Subsection 51(3) provided that entitlement to a credit was lost if the credit was not claimed within 3 years after the time when it arose. Subsection 51(4) provided that a claim for a credit had to be made in the form and manner approved by the Commissioner and be accompanied by such supporting evidence as the Commissioner required.
“Credit entitlements
51. (1) Tables 3 and 3A set out the situations in which a claimant is entitled to a credit.
(2) A claimant is not entitled to a credit for an amount of tax for which a credit entitlement has previously arisen (whether for the claimant or another person).
(3) A claimant is not entitled to a credit unless the claim for the credit is lodged within 3 years after the time when the credit arises.
(4) A claim for a credit must be made in the form and manner approved by the Commissioner, and must be accompanied by such supporting evidence as the Commissioner requires.”
16. Section 101(1) of the STAA conferred an unfettered discretion on the Commissioner to make an assessment of tax payable by a person on an assessable dealing or assessable dealings at any time. Section 101(1) was to be read with section 103(1) which provided:
“A taxpayer’s liability to tax on an assessable dealing, and the due date for payment of that tax, are not dependent on, or in any way affected by, the making of an assessment in respect of that dealing.”
BACKGROUND
17. The Applicant commenced business in the latter half of 1996 as a sole trader. He then traded in partnership, reverted to being a sole trader and, in April 1999, registered a company with a view to incorporation. On 30 April 1999, in response to various queries from the Commissioner, including a notice pursuant to section 264(1) of the Income Tax Assessment Act 1936, the Applicant delivered two boxes of documents to Ms Elaine Hogan of the ATO at the Northbridge office in Perth. One of the boxes contained some sales tax records.
18. The Applicant also handed Ms Hogan a handwritten letter, addressed to her, and dated 28 April 1999, which was tendered at the Hearing, and is Exhibit R5 and is also to be found at T25. In that letter, the Applicant informed Ms Hogan of certain figures, including the following sales tax figures:
“Sales Tax figures May – July 98 $3618.97 (END of financial year sale)
Aug – OCTOBER 98 ? NO records ?
Nov 98 to Jan 99 $1672. 80 (xmas sales)
Feb 99 to April 99 $ (not quite completed 28/4/99)… ”
19. The Commissioner’s assessments were based on this information.
20. Section 264(1) of the Income Tax Assessment Act 1936 states as follows:
“Commissioner may require information and evidence
264(1) The Commissioner may by notice in writing require any person, whether a taxpayer or not, including any officer employed in or in connection with any department of a Government or by any public authority:
(a) to furnish him with such information as he may require; and
(b) to attend and give evidence before him or before any officer authorized by him in that behalf concerning his or any other person's income or assessment, and may require him to produce all books, documents and other papers whatever in his custody or under his control relating thereto.”
21. The Applicant wrote to the Respondent’s solicitor on 18 October 2000 (T71), objecting to the assessments on the following grounds:
“A) The purported debt has been vehemently repudiated on numerous occasions in verbal correspondence to yourself and written correspondence dated 16, 23 August 1999 repeatedly through to 25 September 2000.
B) The ATO commenced legal action on Local Court action 6209/2000 for the purported debt and formally discontinued the action once it was defended, citing and I quote verbatim “we don’t have a case, it will be thrown out of court” unquote
C) As previously advised in fact I have over payed the ATO for sale (sic) tax to the sum of $923.60 and hereby request a cheque to be forwarded to the above in 14 days.”
22. The Applicant and the witnesses for both parties testified as to the circumstances surrounding the raising of the assessments. At no stage was it disputed, and the Tribunal accepted, that the Applicant was a person liable for any outstanding amounts of sales tax in respect of the assessable dealings for the periods stated in the assessments under review (“the assessments”), and that the assessments were based on sales tax figures provided to the Commissioner by the Applicant in a letter dated 28 April 1999. At the Hearing and in his written submissions to the Tribunal of 9 May 2003, the Applicant confirmed that he traded as a sole trader for the periods covered by the assessments, and the Tribunal was satisfied of the accuracy of that situation for purposes of the matter before it.
EVIDENCE BEFORE THE TRIBUNAL
23. The Tribunal had before it the statement and documents (“T-documents”) lodged by the Respondent pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, as modified by section 14ZZF of the Taxation Administration Act1953 (“the TAA”).
“(1) Section 37 of the AAT Act applies in relation to an application for review of a reviewable objection decision as if:
(a) the requirement in subsection (1) of that section to lodge with the Tribunal such numbers of copies as is prescribed of statements or other documents were instead a requirement to lodge with the Tribunal such numbers of copies as is prescribed of:
(i) a statement giving the reasons for the decision; and
(ii) the notice of the taxation decision concerned; and
(iii) the taxation objection concerned; and
(iv) the notice of the objection decision; and
(v) every other document that is in the Commissioner's possession or under the Commissioner's control and is considered by the Commissioner to be necessary to the review of the objection decision concerned; and
(vi) a list of the documents (if any) being lodged under subparagraph (v); and
(b) the power of the Tribunal under subsection (2) of that section to cause a notice to be served containing a statement and imposing a requirement on a person were instead:
(i) a power to make such a statement and impose such a requirement orally at a conference held in accordance with subsection 34(1) of the AAT Act; and
(ii) a power, by such a notice, to make such a statement and impose a requirement that the person lodge with the Tribunal, within the time specified in the notice, the prescribed number of copies of each of those other documents that is in the person's possession or under the person's control; and
(iii) a power, by such a notice, to make such a statement and impose a requirement that the person lodge with the Tribunal, within the time specified in the notice, the prescribed number of copies of a list of the documents in the person's possession or under the person's control considered by the person to be relevant to the review of the objection decision concerned.
(2) Paragraph (1)(b) does not affect any powers that the Tribunal has apart from that paragraph.
(3) The imposition of a requirement covered by subparagraph (1)(b) (iii) does not prevent the subsequent imposition of a requirement covered by subparagraph (1)(b)(ii).”
24. Five documentary Exhibits (marked A1 – A5) were tendered by the Applicant, and 10 documentary Exhibits (marked R1 – R10) were tendered by the Respondent.
DOCUMENT
DATE
EXHIBIT NUMBER
Affidavit of Way
25 October 2002
Exhibit A1
Way - Issues in Dispute
Filed 16 December 2002
Exhibit A2
Way - Bundle of Documents (without T40)
28 June 2002
Exhibit A3
Way – Correspondence
30 May 2002
Exhibit A4
Way – Statement of Facts and Contentions
30 May 2002
Exhibit A5
T-Documents
T1 – T96
Exhibit R1
Anthony Joseph Lambe
13 February 2003
Exhibit R2
Pro-Forma Sales Tax Return
Exhibit R3
Way’s Company Brochure
Exhibit R4
Way - Handwritten Letter
28 April 1999 (T25)
Exhibit R5
Two pages (originals)
T27/82 & T29/84
Exhibit R6
Commissioner – Statement of Facts and Contentions
10 September 2002
Exhibit R7
Commissioner - Submissions
6 May 2003
Exhibit R8
Mark Beadle
20 December 2002
Exhibit R9
Elaine Hogan-Watts
8 January 2003
Exhibit R10
25. Oral evidence was given by the Applicant Way, Anthony Lambe, John DeVaney, Sylvia Clarke, Mark Beadle and Elaine Hogan-Watts. The Applicant and Respondent made oral and written closing submissions. Further written submissions made by the parties after the close of the hearing were also before the Tribunal.
EVIDENCE OF THE APPLICANT, WAY
26. The Applicant whose Affidavit dated 25 October 2002 (Exhibit A1), and correspondence were before the Tribunal, gave oral evidence and made both oral and written submissions, the latter, by agreement of the Tribunal, after close of the Hearing.
27. He gave evidence regarding the commencement of his business in 1996. The Applicant told the Tribunal that the document at T21 which showed the deregistration of his business on 26 February 1997, was incorrect, and directed the Tribunal to his letter at T18 where he had indicated what he considered were the correct dates. The Tribunal was not particularly concerned with these dates because the sales tax liability in dispute was in regard to the Applicant as a sole trader for the periods 1 May 1998 – 31 July 1998 and 1 November 1998 to 31 January 1999, and as such the Applicant’s earlier corporate structure did not impact on the Tribunal’s decision making.
28. The Applicant told the Tribunal that he traded in industrial supplies such as toilet paper, abrasives, and safety gear and machinery.
29. He agreed in cross-examination when referred to the audit of Mark Beadle that he had been using the wrong sales tax number. However he asserted in his Affidavit (Exhibit A1), that Mr Beadle had, as a result of the audit, concluded his (Way’s) records were poor, but were adequate to meet legal requirements, and that no avoidance was detected.
30. As to records; the Applicant said that he had been to the Commissioner’s office and had given records to Elaine Hogan in April or May 1999 and directed the Tribunal’s attention to the receipt for documents signed by Ms Hogan which was at T27. He added that after 15 December 1999, he had lost control of the business which was in the hands of administrators. The Applicant added that he did not know much about records at the time, because he had had no training in that respect, but added that 98 percent of his sales were to exempt users.
31. At no stage during the Hearing did the Applicant tender any sales and purchase records covering the periods of the assessments. In his written submissions of 9 May 2003 he stated:
“With relation to the objection of the assessment process, I confess that I took the whole process with a pinch of salt as I considered it blatantly bias and a waste of time …”.
32. The Applicant contended that the assessments were excessive, and indeed should never have been made, for the following reasons:
(i)The assessments were based exclusively on the Applicant’s letter of 28 April 1999 delivered to the Respondent almost 18 months before the assessments were issued on 9 October 2000. The Respondent never established the Applicant’s sales tax liability independently of this letter.
In his Affidavit (Exhibit R1), the Applicant stated that:
“The letter of 28th April 99 (T25 pages 78 – 80) was extemporaneously performed under extreme pressure and harrassment from the ATO to supply records and figures, as evidence by their letters and unannounced personal visits by Elaine Hogan and Wayne Arthrell. T22-24 pages 74 – 78.”
(ii)The Applicant advised the Respondent in a hand written facsimile message of 23 August 1999 that the amounts of sales tax previously returned in the letter of 28 April 1999 were “covered by periodic sales tax exemption forms”. He claimed that via the letter of 23 August 1999, he had asserted that no sales tax was payable, and that in fact the Commissioner owed him $923.60.
(iii)Prior to the raising of the assessments, an action to recover the outstanding sales tax amounts by the Respondent in the Perth Local Court was discontinued, and a decision by the Respondent to apply the Applicant’s entitlement to a tax refund against the sales tax liability were reversed.
(iv)The Respondent’s computerised record of the outstanding amount of sales tax of $3,618.97 for the quarter 1 May 1998 to 31 July 1998 was falsified.
mr anthony lambe
33. Mr Lambe whose statement dated 13 February 2003 was before the Tribunal as Exhibit R2, gave oral evidence. He is an employee of the ATO, and testified that between January 1999 and September 2002, he worked in the Sales Tax Review & Litigation Team. His responsibilities included undertaking sales tax objection cases.
34. On 19 October 2000 he was given the Applicant’s letter of 18 October 2000 (T71), addressed to the Respondent’s solicitor Ms Tracey Kelly, objecting to the assessments. On 15 November 2000 he sent a letter to the Applicant explaining that the assessments were based on the Applicant’s letter of 28 April 1999, and requesting sales and purchase records covering the periods of the assessments (T75). In the event that the Applicant no longer held the records, he requested the contact details of the parties currently holding them or, if the records were no longer available: “Could you provide me with the names and contact telephone numbers of your suppliers and customers of goods that were sold in the relevant periods”.
35. Mr Lambe stated that he did not receive a reply to this letter, and sent a further letter on 16 January 2001 requesting the same information, specifying that a reply be dated no later than 2 February 2001, failing which the objection would be determined on the basis of the information provided in the letter of 28 April 1999 (T76). He commented that sales tax was a self assessment regime, and stated in his oral evidence that he had not seen the Applicant’s letter of 23 August 1999 regarding his sales tax, (T84/208), until the year 2000.
36. Mr Lambe stated that the requested information was not provided by Way, and all he had to rely on was the letter of the Applicant of 28 April 1999, on the basis of which he disallowed the objection. A Notice of Decision on Objection dated 27 February 2001 (T77) was sent to the Applicant together with reasons for the decision.
mr mark beadle
37. Mr Beadle, whose statement dated 20 December 2002 was before the Tribunal as Exhibit R9, gave oral evidence. He is Senior Technical Advisor of the ATO Call Centre, and testified that on 5 November 1997, when his role within the ATO was to conduct field visits and audits of small to medium businesses in relation to sales tax, PAYE and the prescribed payments system, he was instructed to audit the Applicant’s business.
38. Mr Beadle testified that he had several years experience in ATO audit, also in providing support to ATO staff who use AIS, and that he had a knowledge of the codes used on AIS, which is a record keeping system of client accounts. He stated that the code “TAXO” meant that the taxpayer had self assessed a sales tax liability by lodging a sales tax return on a pre-printed form (Exhibit R3), sent to the taxpayer. He agreed when questioned about it in his oral evidence, that the Commissioner would also accept returns in other formats as indeed it had in the case of the Applicant. Mr Beadle wrote in his statement that he kept notes of his audit, and therefore had good records of what transpired.
39. Mr Beadle wrote in his statement about the legal entities with which the Applicant was involved, including the partnership with another person, his unsuccessful attempt to corporatise, and his assessment that the Applicant and his partner were unfamiliar with sales tax procedures and their obligations in that regard.
40. A report of Mr Beadle’s audit visit dated 6 July 1998 after which he had no further contact with the Applicant, was at T12. He concluded there that the Applicant’s records were:
“poor but adequate to meet the legal requirements. As a result I can not be confident that the taxpayer is complying. I discussed this with Mr ... [Way] who said that he did not have confidence in his records either. .... Apart from the problems noted above no avoidance was detected.”
41. In his oral evidence Mr Beadle acknowledged that Way was working hard, but confirmed that Way’s records were poor, and that there was little referencing and cross referencing.
42. When questioned about the letter of the Applicant dated 23 August 1999, addressed to him and to Ms Hogan, Mr Beadle said that he had not seen it prior to 12 December 2002, when Ms Kelly showed it to him. He added that this letter would in any case not have been sufficient for revision of a sales tax liability, and that had it been received, an auditor would have made contact with Way to get more information.
43. The Applicant was throughout the Hearing concerned regarding an entry in the ATO’s AIS system dated 26 August 1998 of $3,618.97 (T91/254), and questioned Mr Beadle regarding how this could have been entered in the Commissioner’s AIS record on 28 August 1998 when he did not notify his sales tax liability until his letter of 28 April 1999. Mr Beadle’s reply was that the information must have been received by the ATO, perhaps notified by telephone by the Applicant or his partner.
ms elaine hogan-watts
44. Ms Hogan, whose statement dated 8 January 2003 was before the Tribunal as Exhibit A10, gave her work designation as Team Leader of the GST Client Verification Centre, and had been working as Source Deduction Auditor in the Withholding Taxes business line at the relevant time when she dealt with the Applicant. She is familiar with ATO data systems, including CaMRA and TAXO, and confirmed that the entry for 26 August 1998 (T91/254), about which the Applicant was concerned, indicated that the Applicant or his partner, had lodged a sales tax return for the 1 May 1998 to 31 July 1998 quarter declaring a sales tax liability of $3,618..97. She stated that the amount was recorded on the partnership account because that would have been the role identified on the pre-printed sales tax return. A pro-forma copy of a quarterly sales tax return was admitted at the Hearing as Exhibit R3.
45. Ms Hogan confirmed that after correspondence and other contact, the Applicant had attended unannounced at the Commissioner’s offices on 30 April 1999 with some boxes of records and his letter of 28 April 1999 (T25). Subsequently, on 7 July 1999, she had interviewed him in the company of a colleague. Ms Hogan told the Tribunal about contact made with the Applicant, and the attempts to get information from him.
46. Ms Hogan denied that the Applicant’s letter of 23 August 1999 (T84), had been received. She said that if she had seen it, she would have asked for substantiation of the claims made. Ms Hogan referred to paragraph 40 of her statement (Exhibit R10), and said that the first time she had seen that letter was on 12 December 2002, and that it had been part of the documents filed by the Applicant in the Local Court proceedings. The Tribunal noted the words “Fax Transmission” printed at the top of the cover page to the letter, and that there was no marking on it to indicate it had been sent. Ms Hogan, in answer to a question from the Applicant, stated that, to her knowledge, her office kept no records of facsimiles received.
47. Ms Hogan agreed in cross-examination by the Applicant, that she had received his letter of 16 August 1999 (T36), and that accordingly she may have expected him to supply further figures, as he said he did in his letter of 23 August 1999.
mr john devaney
48. The Affidavit of Mr John Michael DeVaney of the ATO Litigation Unit, was dated 29 October 2001, and was sworn for purposes of the Perth Local Court proceedings (part of Exhibit A2), commenced by the ATO on 23 March 2000 against Way. Mr DeVaney who took the decision to discontinue the proceedings, gave oral evidence at the Hearing.
49. In his Affidavit Mr DeVaney stated as follows regarding the decision to discontinue:
“Any decision by the Deputy Commissioner to discontinue legal proceedings is made in light of existing debt recovery policy and generally in light of commercial practicalities after weighing the costs and benefits of pursuing recovery action against the likelihood of any return….”
50. The Tribunal noted that Mr DeVaney reviewed the legislation regarding sales tax and the collection of it by the Commissioner in detail in his Affidavit which was before the Tribunal. The Tribunal has noted that evidence, but has not reproduced that here.
51. Mr DeVaney told the Tribunal he was not involved in the garnishee of the Applicant’s tax refund.
52. Mr DeVaney also told the Tribunal that the Applicant’s letter of 23 August 1999 (T84), (which appeared in the T-documents with the seal of the Perth Local Court), regarding amendment to the sales tax figures, was not received. He said however that if he had seen it, then that would have reinforced his decision to have the proceedings discontinued.
ms sylvia clarke
53. Ms Clarke, Team Leader, Core Management Team of the ATO gave oral evidence before the Tribunal. Ms Clarke said that she was aware that in August 2000, a tax refund owed to the Applicant was intercepted, and part of it applied against his sales tax liability as part of a standard procedure where there was a debt owed to the Commissioner. She told the Tribunal, referring to T49, that it was she who on 9 August 2000, reversed that decision because the sales tax debt was disputed.
THE TRIBUNAL
54. The Tribunal had to take into account the evidence before it, both written and oral, the submissions of the parties, and the case law and legislation to make the correct and preferable decision regarding Way’s sales tax liability for the periods 1 May 1998 to 31 July 1998, and 1 November 1998 to 31 January 1999, with the amounts under review being $3,618.97 and $1,672.80 respectively.
55. The Tribunal noted by way of completeness, that Way had traded as a sole trader with a business name, had been in a partnership with another person, (unnamed here due to the confidentiality provisions under which this matter was heard), and had attempted to corporatise. Various transactions, both related to business and to taxation took place in the partnership, and with the Applicant as a sole trader. However, it was quite clear to the Tribunal that in the relevant period, 1 May 1998 to 31 July 1998 and 1 November 1998 to 31 January 1999, Way, as a sole trader, was the legal entity who had the liability for the sales tax issue which this Tribunal had to decide (section 16(2) of the STAA).
56. The Applicant relied on the fact that the assessments were made solely on the liabilities for sales tax reported by the Applicant in his letter of 28 April 1999 (T25), liabilities which he has since consistently denied. In the reasons for his application for review he stated: “No assessment was ever physically done by the ATO”. Implicit in this statement was the contention that the Commissioner’s power to assess was not properly exercised in the absence of additional information extraneous to the Applicant’s letter of 28 April 1999, and that the assessments were excessive. The Applicant, in this regard, also set store by the fact that the assessments were raised some 18 months after his letter to the Respondent, and only after the Respondent had discontinued recovery proceedings for the disputed amounts. The Tribunal noted from the voluminous amount of material before the Hearing, that the Commissioner’s officers had great difficulty in their efforts to obtain information from the Applicant about his sales tax liability.
57. The Tribunal finds however that the assessments were duly made for the following reasons. Pursuant to section 111 of the STAA, the Respondent has the general administration of the sales tax law. Section 101(1) of the STAA which empowers the Commissioner to make an assessment of tax payable on an assessable dealing or dealings, specifically states that the power can be exercised at any time. It does not include any statutory conditions precedent to the making of an assessment. The Tribunal noted that liability for sales tax arises independently of an assessment which may issue in respect of such sales tax liability (Revlon Manufacturing Ltd v FCT (1995) 32 ATR 48 and sections 16, 61, 63 and 103 of the STAA). This is of course in direct contrast to income tax liability which is dependent on the notice of assessment (Part IV of the Income ITAA see sections 166 – 169).
“Commissioner has general administration of sales tax law
111. The Commissioner has the general administration of the sales tax law.
And
General powers of Commissioner to make an assessment of tax
payable by a person
101. (1) The Commissioner may at any time make an assessment of tax payable by a person on an assessable dealing or assessable dealings (whether or not the Commissioner has previously made an assessment in relation to that dealing or any of those dealings).”
58. The information on which the Commissioner based the assessments was information that the Applicant was obliged to provide to the Respondent quarterly, pursuant to the terms of Section 61 of the STAA:
“Requirement to lodge returns
61 (1) A person who is a monthly remitter for a month during which the person becomes liable to tax must lodge a return within 21 days after the end of the month.
(2) A person who is a quarterly remitter for a sales tax quarter during which the person becomes liable to tax must, within 21 days after the end of the quarter, lodge either:
(a) a return for the quarter; or
(b) a separate monthly return for each month in the quarter”
59. Indeed Way provided his letter of 28 April 1999 in response to a coercive notice of the Respondent, given pursuant to section 264(1) of the ITAA, dated 16 April 1999, (T23), and after an audit, and much correspondence had passed between the parties. The Tribunal was mindful that section 113 of the STAA confers a power on the Commissioner to prescribe the form and content of such returns. A pro-forma copy of a quarterly sales tax return was tendered at the hearing as Exhibit R3. The Respondent is, however, at liberty to approve a return in any form, and did so by accepting the letter of the Applicant dated 28 April 1999 (T25), and delivered by the Applicant to the Commissioner on 30 April 1999.
“Formal requirements for returns, notifications etc.
113. Any return, application, notification or other document that a person is required or permitted to give to the Commissioner under this Act:
(a) must be in a form approved by the Commissioner; and
(b) must contain such information as the form requires, and such further information as the Commissioner requires; and
(c) must be lodged at the place and in the manner that the Commissioner requires.”
60. Sales tax becomes payable at the time of an assessable dealing, and is due for payment 21 days after the end of the month or quarter in which the liability arose. Section 103(1) of the STAA provides specifically that the liability for sales tax, and the due date for payment are not dependent on, or in any way affected by, the making of any relevant assessment by the Respondent. The Respondent administers the Act in the first instance on the basis of self-assessed sales tax liabilities reported by taxpayers in returns that require the approval of the Respondent.
“Taxpayer's liability not dependent on assessment
103. (1) A taxpayer's liability to tax on an assessable dealing, and the due date for payment of that tax, are not dependent on, or in any way affected by, the making of an assessment in respect of that dealing.”
61. One of the Applicant’s main arguments was that different amounts of liability for sales tax were shown on various documents. The Tribunal was satisfied that this could be explained by the fact interest had been added due to the lapse of time. Way referred in particular to the document dated 26 August 1998, (T91), and submitted to the Tribunal that as this predated his letter of 28 April 1999, there had been falsification of documents by the Commissioner.
62. The Tribunal noted that a copy of an extract from the ATO mainframe computer system known as the ATO Integrated System (“AIS”) was at T91. The AIS system records taxpayer data, including liabilities and credits relating to taxpayers, the posting dates and the period date for such entries. The extract lodged with the Tribunal related to the Applicant and his former partner (whose liabilities were joint and several), and included the following account posting:
Date Code Period Debits Credits Period Balance
26/8/98 TAXO Jul 98 3,618.97 3618.97.
63. T84 was a copy of a handwritten facsimile message by the Applicant to Elaine Hogan and Mark Beadle of the ATO, dated 23 August 1999. In it the Applicant advised:
“that all of our books and records have been brought up to date. Upon a complete internal audit …….. There appears to be some gross anomalies in the assessments of Mark’s audits and our own ……
2) The big anomaly occurs with the sales tax components attributed to the … for the periods May – July 98 and November to Jan 99 being end of financial year and Christmas sales respectively.
Unbeknown to me the sales tax I have attributed towards these sales tax components are covered by periodic sales tax exemption forms renewed yearly and filed separately in our internal ‘system’.”
64. The parties were at odds in relation to two issues arising from the above. Firstly, the Applicant alleged that the account posting in the AIS record adverted to above had been falsified. This was because he had notified the ATO of the amount of $3,618.97 in his letter of 28 April 1999 which was some eight months after the recorded posting date of 26 August 1998. Secondly, he alleged that he had informed the ATO in his message of 23 August 1999 that the amounts of outstanding sales tax notified in the letter of 28 April 1999 were incorrect.
65. Both Mr Beadle and Ms Hogan denied that the AIS record had been antedated to 26 August 1998. They also denied receiving the facsimile message of 23 August 1999, and stated that they had not known of its existence until Ms Kelly showed it to them on 12 December 2002 as part of the documents lodged by the Applicant in connection with the Local Court proceedings.
66. The Tribunal was mindful of the evidence given that the Applicant’s business was conducted somewhat chaotically at the time, and that the Applicant often dispatched facsimile messages late at night. Accordingly, the Tribunal was satisfied that even though he may have written the letter of 23 August 1999, it is more likely that not, that the Applicant overlooked the transmission. Further, if one reviews the letter of the Applicant of 16 August 1999 (T36), in which he conveyed a message about “developments”, and discussed finalisation of matters with Ms Hogan, then it appears more likely than not that the letter of 23 August 1999 was not written on that date.
67. As to the Applicant’s allegations that documents were falsified by the Commissioner; the Tribunal was satisfied on balance that the entry of 26 August 1998 had been made as a result of information supplied either from documents lodged by Way’s clients, or notifications by the Applicant’s partner. The Tribunal was satisfied from the evidence before it that there was no falsification of documents by the Commissioner, and noted in particular, in relation to Mr Beadle, that his involvement with the Applicant’s sales tax matter ended at the end of 1998. It is accordingly unlikely that he would have known anything of the letter of 23 August 1999. The Tribunal was also satisfied that if the letter of 23 August 1999 had been received, the Applicant would have been asked to provide substantiating documents.
68. As to the issue of whether an assessment should have been issued; there is no requirement for the Commissioner to do so, and the liability in the self assessment regime under which sales tax was conducted, arose on lodgment of the taxpayer’s statement, whether or not in the prescribed form. Accordingly, although lodged under pressure, following a coercive notice of the ATO, (T23), the letter of the Applicant of 28 April 1999 (T25) served as such notice of his liability regardless of whether an assessment had been issued.
69. The Tribunal noted however that payment demands were made of the Applicant prior to the raising of the assessments. On 23 March 2000 the Applicant was summonsed to appear in the Perth Local Court to answer a claim for the outstanding sales tax. According to the reasons for the objection decision, this action was discontinued on 3 August 2000, as it was decided that assessments be raised before court action continue. The Applicant vehemently emphasised to the Tribunal both orally and in written submissions, that the action was discontinued because the case against him was weak.
70. The Tribunal had before it Mr DeVaney who made the decision to discontinue the proceedings, and who stated in his written evidence that such decision was made in light of the Commissioner’s debt recovery policy and commercial practicalities after weighing the costs and benefits of pursuing recovery action against the likelihood of return. The Tribunal noted that the action had been discontinued by the Commissioner, and makes comment only by way of completeness. The decision to discontinue the action did not, however, impact upon the Tribunal’s reasoning in coming to the decision in this matter.
71. The Tribunal was mindful however that in terms of section 14ZZK of the TAA, on an application for review of a reviewable objection decision, if the taxation decision concerned is an assessment, the Applicant has the burden of proving that the assessment is excessive. He had thus claimed.
“14ZZK Grounds of objection and burden of proof
On an application for review of a reviewable objection decision:
(a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
(b) the applicant has the burden of proving that:
(i) if the taxation decision concerned is an assessment (other than a franking assessment)--the assessment is excessive; or
(ii) if the taxation decision concerned is a franking assessment--the assessment is incorrect; or
(iii) in any other case--the taxation decision concerned should not have been made or should have been made differently.
….”
72. Section 14ZZK was inserted in the TAA on the repeal of section 190 of the Income Tax Assessment Act 1936 in 1991.
73. In that regard, the Tribunal noted that “Taxation decision” is defined in section 14ZQ to mean, inter alia, the assessment against which a taxation decision has been made.
“14ZQ General Interpretive provisions
…
taxation decision means the assessment, determination, notice or decision against which a taxation objection may be, or has been, made.”
74. In FCT v Dalco 90 ATC 4088, the Full High Court considered the meaning of “excessive” in section 190(b) of the Income Tax Assessment Act 1936. Section 190 provided:
“(a)the taxpayer shall, unless the … court otherwise orders, be limited to the grounds stated in his objection; and
(b)the burden of proving that the assessment is excessive shall lie upon the taxpayer.”
75. The High Court concluded that “excessive” referred to the amount of the assessment (see the judgment of Brennan J at 4089-4094), and that it was necessary for the taxpayer to discharge the burden of proving that his taxable income was in truth less than the amount assessed.
76. In the present matter it was necessary for the Applicant to satisfy the Tribunal, on the balance of probabilities, that the amount of his sales tax liability for the quarters covered by the assessments was actually less than that stated in the assessments.
77. In that regard the Applicant did not provide further records with regard to his sales tax liabilities, and the only evidence before the Tribunal that his liability was less than that stated in the assessments was the unsubstantiated statement of the Applicant in his letter of 23 August 1999 that the sales tax liability was covered by periodic sales tax exemption forms. Consequently the Tribunal concluded that the Applicant had not discharged the onus of proving that the assessments were excessive, and affirmed the decision under review.
78. The Tribunal places on record its appreciation of the preparation the parties accorded this matter. The Tribunal was particularly mindful of the difficulties the Applicant has encountered in business life.
DECISION
79. The decision under review is affirmed.
I certify that the 79 preceding paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger, Senior Member and Associate Professor G Barton, Member.
Signed: ..............(sgd V Wong)..................................
AssociateDate/s of Hearing 6 May 2003
Date of Decision 30 July 2003
Applicant Self Represented
The Respondent Ms T Kelly, Solicitor, Commissioner of Taxation
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