YWXJ and COMMISSIONER OF TAXATION
[2010] AATA 326
•4 May 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 326
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/4597
TAXATION APPEALS DIVISION ) Re YWXJ Applicant
And
COMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal Mr S E Frost, Senior Member Date4 May 2010
PlaceSydney
Decision The application under s 14ZZK(a) of the TAA 1953 is refused. ....................[sgd]..........................
S E Frost
Senior Member
CATCHWORDS
TAXATION – income tax – application to amend grounds of objection – two amended assessments made at different points in time – objection made against first amended assessment – objection allowed in part – increase in taxable income, on new grounds, notified to taxpayer in the “objection decision” – whether notification of the increase in taxable forms part of the “objection decision” – application refused
LEGISLATION
Taxation Administration Act 1953 – s 14ZZK(a), 14ZV, 14ZY, 14ZYA
Income Tax Assessment Act 1936 – s 6(1) – “assessment”
CASES
Fabry v Commissioner of Taxation (2003) 132 FCR 239
Epov v Commissioner of Taxation (2007) 244 ALR 334
CTC Resources NL v Commissioner of Taxation (1994) 48 FCR 397
Commissioner of Taxation v ANZ Savings Bank Limited (1994) 181 CLR 466
Lighthouse Philatelics Pty Ltd v Federal Commissioner of Taxation (1991) 32 FCR 148; 91 ATC 4942
REASONS FOR DECISION
4 May 2010 Mr S E Frost, Senior Member Introduction
1. The taxpayer has applied, under s 14ZZK(a) of the Taxation Administration Act 1953 (the TAA Act 1953), for an order allowing an extension to the grounds of her objection against an amended income tax assessment made by the Commissioner.
2. The Commissioner submits that, in the circumstances of this case, the Tribunal lacks jurisdiction to make such an order.
3. I have concluded that the Commissioner is correct. Accordingly, I decline to make the order requested by the taxpayer. My reasons follow.
Background
4. Following an audit of the taxpayer’s tax affairs, the Commissioner made an amended assessment (the First Amended Assessment) for the financial year ended 30 June 2000. The First Amended Assessment was notified to the taxpayer by notice dated 4 September 2008. The notice informed the taxpayer that two adjustments had been made to the taxpayer’s assessable income. The first was the addition to her income of an amount of “Trust/Estate Income” and the second was the addition of an amount of “Foreign Trust and Controlled Foreign Company Income”. A document that had been provided to the taxpayer on 20 May 2008, and which was described as a paper explaining “the Tax Office’s reasons for amending the tax return” of the taxpayer, identified both of those adjustment amounts. It explained that the first adjustment was made in reliance on s 99B of the Income Tax Assessment Act 1936 (the 1936 Act) and the second in reliance on s 102AAM of the 1936 Act (which applies as a direct consequence of the application of s 99B).
5. The taxpayer was dissatisfied with the First Amended Assessment, and objected against it. There were eleven grounds to her objection. Grounds 7 to 11 may be disregarded for the time being since they dealt with the validity of the amended assessment and the Commissioner’s assessment of administrative penalty, and raised some general protective arguments. Grounds 1 to 6, though, attacked the Commissioner’s inclusion of the first adjustment amount in the taxpayer’s assessable income, with grounds 1 to 4 explicitly referring to s 99B(2)(a) of the 1936 Act and ground 6 arguing that “[s]ection 99B in any case does not apply”. Ground 5 concerned itself with a capital gains tax argument.
6. The Commissioner allowed the objection in part. The Commissioner’s “Notice of decision of objection” at T16-188 (and which has been referred to by the parties as the “Objection Decision”) notes that the Commissioner had decided to make four specific changes to the First Amended Assessment. Two of those changes, which reflected the partial allowance of the objection, were represented by a decrease in each of the first and second adjustment amounts identified in the notice of the First Amended Assessment.
7. The third change upon which the Commissioner had decided, and which is now the focus of this preliminary issue before the Tribunal, resulted in an increase in the taxpayer’s assessable income on account of the Commissioner’s “[i]nclusion of ‘Transferor Trust Income’” of $20,034. The Commissioner’s reasons for decision explain that, for this adjustment, the Commissioner relied on the provisions of Division 6AAA of the 1936 Act. (The fourth change appears to be consequential upon the third, and does not need to be specifically dealt with.)
8. The taxpayer, dissatisfied, applied to the Tribunal on 25 September 2009 for review of the Objection Decision.
9. On 15 December 2009 the Commissioner served on the taxpayer a notice of the further amended assessment (the Second Amended Assessment) which had been foreshadowed in the “reasons for decision” of the “Objection Decision” to reflect the claimed increase in the taxpayer’s income in reliance on the transferor trust provisions in Division 6AAA. On 12 February 2010 the taxpayer objected against the Second Amended Assessment; this objection was characterised in a covering letter as one lodged to “protect our client’s position”.
10. The parties agree that the taxpayer was entitled to object against the Second Amended Assessment. However, the taxpayer considers that to do so is “procedurally burdensome” and “costlier”, and involves “procedural pain” on her part. She must wait for the Commissioner to determine her objection against the Second Amended Assessment before she can seek review of that objection decision in the Tribunal (assuming she is dissatisfied with it). Instead, she says, the Tribunal should allow her to amend the grounds of her objection against the First Amended Assessment to include the grounds she has raised against the Second Amended Assessment. She says that this is open to the Tribunal, seemingly on the basis that the decision to increase her income under Division 6AAA formed part of the Objection Decision of which she sought review on 25 September 2009. She says at [3] of her Outline of Submissions that “the Tribunal has ample power to deal squarely with the new matters arising on that Objection Decision”.
The parties’ contentions
11. The Commissioner maintains that the Division 6AAA issue is not before the Tribunal because there is no “objection decision” in relation to that issue. In his Outline of Submissions he submits:
[16] An Objection Decision draws its identity from having, in accordance with the obligation conferred on the Commissioner by s 14ZY(1) [of the Taxation Administration Act 1953 (TAA 1953)], either allowed or disallowed a taxation objection lodged under s 14ZU of the TAA 1953.
[17] In including the Division 6AAA issue in the Objection Decision in this case the Commissioner concedes he ought to have made it plain that the issue was not part of the Objection Decision itself, for example by setting out the issue in a separate reasons for decision document. However, the fact that the Division 6AAA issue was included in the Commissioner’s Objection Decision ought to not distract from the fact that the Commissioner’s decision to vary [the taxpayer’s] liability by way of increase did not involve an exercise of power under s 14ZY(1) of the TAA 1953 to allow or disallow a taxation objection.
[18] Because [the taxpayer’s] increase in liability did not arise out of a decision by the Commissioner to allow or disallow a taxation objection, it cannot be said that there is an Objection Decision in relation to the Division 6AAA issue. The AAT accordingly is not seized with jurisdiction because the jurisdictional fact found in s 14ZZ of the TAA 1953 is not present.
[19] The proper course is for [the taxpayer], as she has done, to object to the Notice of Amended Assessment issued by the Commissioner on 15 December 2009. By virtue of s 14ZV of the TAA 1953, her rights of objection are limited to the Division 6AAA issue.
12. The taxpayer’s “first submission” in response to the Commissioner’s submissions is that, once the objection decision was referred to the Tribunal, the Commissioner had no power to issue the further amended assessment. However, as the Commissioner correctly points out in reply, that submission was dealt with by Merkel J in Fabry v Commissioner of Taxation (2003) 132 FCR 239 and by a Full Court in Epov v Commissioner of Taxation (2007) 244 ALR 334. The submission is rejected.
13. The taxpayer then submits that:
· the Tribunal’s jurisdiction depends on the existence of a “person dissatisfied” with an objection decision;
· the taxpayer is such a person;
· once a person is “dissatisfied” with an objection decision and applies to the Tribunal for review, the Tribunal is seized of the decision in its entirety (CTC Resources NL v Commissioner of Taxation (1994) 48 FCR 397 and Commissioner of Taxation v ANZ Savings Bank Limited (1994) 181 CLR 466); and
· the clear words of what is now s 14ZZK(a) should not be read narrowly (Lighthouse Philatelics Pty Ltd v Federal Commissioner of Taxation (1991) 32 FCR 148; 91 ATC 4942).
Consideration
14. While I agree with the taxpayer’s propositions just listed, it seems to me that the issue between the parties depends for its resolution on the proper identification of the “objection decision” made by the Commissioner.
15. An examination of the Commissioner’s “Notice of decision of objection” shows that it was doing two separate things. First, it was notifying the taxpayer of the Commissioner’s decision on the objection; that decision, made under s 14ZY of the TAA 1953, was to allow the objection in part. Secondly, it was notifying the taxpayer that the Commissioner had made a new assessment of the taxpayer’s taxable income. The process of assessment – the ascertainment of the amount of taxable income and of the tax payable on that taxable income (see the definition of “assessment” in s 6(1) of the 1936 Act) – was completed once the notice of the Second Amended Assessment was issued to the taxpayer on 15 December 2009. As a result of that new assessment, a new liability was established under Division 6AAA. This was an amended assessment, and it created in the taxpayer an entitlement to object against it, subject to the limitations expressed in s 14ZV of the TAA 1953:
If the taxation objection is made against a taxation decision, being an assessment … that has been amended in any particular, then a person’s right to object against the amended assessment … is limited to a right to object against alterations or additions in respect of, or matters relating to, that particular.
16. There currently exists a jurisdictional gap, in that the taxpayer’s objection against the Second Amended Assessment has not been determined. It would amount to an impermissible bridging of that jurisdictional gap to allow the taxpayer to include, as a ground of attack upon the First Amended Assessment, a ground on which she wishes to rely in attacking not that assessment, but an entirely different assessment which was made after her original objection was lodged.
17. It may be that the taxpayer will choose to exercise the right, given to her by s 14ZYA of the TAA 1953, to require the Commissioner to make a decision on her objection. That is a matter for her.
Conclusion
18. The taxpayer’s application under s 14ZZK(a) of the TAA 1953 is refused.
I certify that the 18 preceding paragraphs are a true copy of the reasons for the decision herein of Mr S E Frost, Senior Member
Signed: .....................................................................................
Ms B Dhanasar AssociateDate of Hearing 20 April 2010
Date of Decision 4 May 2010
Counsel for the Applicant Mr R Hamilton
Solicitor for the Applicant Ms M Waites, Argyle Lawyers
Counsel for the Respondent Mr B C Kasep
Solicitor for the Respondent ATO Legal Services