Balnaves v. Deputy Federal Commissioner of Taxation.
Judges:Fox J
Morling J
Wilcox J
Court:
Full Federal Court
Fox, Morling and Wilcox JJ.
This is an appeal from a decision of a Judge of the Court upholding an objection to the competency of an application made pursuant to the Administrative Decisions (Judicial Review) Act 1977. The appellant, a chartered accountant and a registered tax agent, sought a review of a decision of the Deputy Commissioner of Taxation that no reinstatement of arrangements to lodge income tax returns beyond 31 December 1984 would be granted to him. The learned Judge held that the decision was not a decision to which the Judicial Review Act applied since, in his view, it was not ``made under an enactment'' as that expression is used in sec. 3(1) of the Act. His Honour found it unnecessary to deal with an alternative submission that the Deputy Commissioner's decision was not open to review because it was a decision included in the class of decisions referred to in para. (e) of Sch. 1 of the Judicial Review Act.
The making of returns by taxpayers and of assessments by the Commissioner is dealt with in Pt IV of the Income Tax Assessment Act 1936. Section 161 of that Act requires every person, if required by the Commissioner by notice published in the Gazette, to furnish an income tax return within the time specified in the notice, or within such extended time as the Commissioner may allow. The time specified in the Gazette notice with respect to the financial year 1983/1984 was 31 August 1984. This was consistent with the practice over many years prior to the financial year 1983/1984. In respect of those years the time specified had been 31 August of the relevant year. However, in order to spread the burden of preparing income tax returns over a period longer than two months from 30 June to 31 August and also to ease the administrative burden in the Taxation Office, it has been the practice each year, as it was in 1983/1984, for the Commissioner to enter into arrangements with tax agents for the lodging of returns. These arrangements have the effect of spreading over a longer period the preparation of income tax returns and also of the consequent assessments of tax.
In each year the Commissioner issues a circular to tax agents setting out arrangements for the lodgment of income tax returns. The Commissioner issued such a circular in June 1984. It was not expressed to have been issued pursuant to any particular provision of the Income Tax Assessment Act. A major question in the appeal is whether it was issued pursuant to any such provision or merely in the exercise of the Commissioner's general administrative responsibilities under that Act. The circular informed tax agents that lodgment of returns would be permitted under one of two alternative programmes - the Standard Lodgment Programme and the Alternative Lodgment Programme. The former programme
ATC 4594
was applicable to the appellant. It required that 50 per cent of the returns to be lodged by an agent were to be lodged by 31 October 1984, 60 per cent by 30 November 1984, 70 per cent by 31 December 1984, 80 per cent by 31 January 1985, 90 per cent by 28 February 1985 and 100 per cent by 31 March 1985. Agents were required by the circular to notify the Commissioner of additions to and deletions from the list of clients whose income tax returns they would be lodging in order that the agents' lodgment performances in terms of percentages might be assessed.The circular contained the following paragraph:
``(3) The key date for both programmes is 31 December and the continuation of arrangements beyond 31 December will depend on programme requirements being met at that date.''
The effect of this paragraph (and of other paragraphs in the circular which emphasize the importance that the Commissioner placed upon the agents' performance as at 31 December) was that a tax agent and his clients were at risk if programme requirements had not been met by that date.
At some time after 12 January 1985 the Deputy Commissioner wrote to the appellant notifying him that because of dissatisfaction with his lodgment performance an extension of time beyond 31 December 1984 would not be granted. On 21 January 1985 the appellant requested reconsideration of the Commissioner's decision but on 7 February 1985 the Acting Deputy Commissioner wrote to the appellant informing him that no reinstatement of arrangements to lodge returns beyond 31 December had been granted and that returns lodged after that date would be liable to additional tax for late lodgment.
The learned trial Judge was of the view that the arrangements set out in the circular issued by the Commissioner were not made under the Income Tax Assessment Act but were made under an inherent power of the Commissioner to make administrative decisions for carrying out his functions. He was of the opinion that the Act nowhere gave express or implicit power to the Commissioner to enter into arrangements with tax agents to spread the lodging of income tax returns over a period longer than two months when he had caused to be published a notice in the Gazette effectively requiring all returns to be lodged by 31 August. Being of that opinion, it followed in his Honour's view that the Commissioner's decision not to reinstate the arrangements with respect to the applicant and the failure to reinstate those arrangements was not a decision made under the Act. He was of the opinion that the decision was made under the administrative arrangements embodied in the circular. Accordingly he upheld the objection to the competency of the application for review.
We are unable to agree with his Honour's conclusion that the decision sought to be reviewed was not a decision made under the Income Tax Assessment Act. In our opinion it is plain the Commissioner has power under sec. 161(1) to grant extensions of time for the furnishing of income tax returns. The statement in the circular that lodgment of returns would be permitted under the Standard Lodgment Programme or the Alternative Lodgment Programme was a statement of a decision made by the Commissioner extending time for the lodgment of tax returns in respect of the clients of registered tax agents, subject to compliance with the requirements of the circular. The effect of the circular was to extend time in respect of all such clients to 31 December 1984, subject to revocation of the extension in certain circumstances, and to extend time in respect of 30 per cent of the agent's clients beyond 31 December provided that the agent had complied with the performance requirements. The extension of time was a relaxation of the requirements of the Gazette notification for lodgment of returns by 31 August. We see no difficulty in characterizing it as a decision made under sec. 161(1) of the Act and, therefore as a decision ``under an enactment''.
The decision did not apply to the appellant in the capacity of a taxpayer, in the sense of granting to him an extension of time in relation to his own return. It was nevertheless a decision made under sec. 161(1). The decision was not made under the circular. The circular was an expression of the Commissioner's decision already made. Similarly, the Commissioner's decisions not to reinstate the arrangements with respect to the appellant were decisions under sec. 161(1), and not under the circular. The circular itself was not the source of the Commissioner's power to make decisions affecting the extension of time for filing
ATC 4595
returns. The source of that power was sec. 161(1) and accordingly the Commissioner's decisions were decisions made under sec. 161(1). They were therefore decisions ``under an enactment'' as that expression is used in sec. 3(1) of the Judicial Review Act.It is true that the decision to extend time is not communicated directly to particular taxpayers. Individual taxpayers may not, and perhaps cannot, know the full extent of the extension which will apply to their particular return. These features flow from the fact that the scheme relates to percentages of the tax agent's clients. A taxpayer will also be dependent upon his tax agent correctly notifying changes, in due time, to the list of names kept by the Commissioner. The final limit of an extension, so far as concerns a particular taxpayer, rests in the hands of the tax agent.
With these considerations in mind we can, with respect, understand that the trial Judge was of the view that the extension process in question was simply an administrative one. However the intent of the circular is to extend the time for lodgment of the returns to which it applies and, the statutory power of extension being conferred upon the Commissioner, it should be assumed in the absence of any indication to the contrary that he intended to exercise that power. It is worth noting that the exercise of the power of extension in this manner was not beyond the contemplation of the Parliament. Section 251M of the Act gives a right of action to a taxpayer against a tax agent for negligence resulting in the taxpayer having to pay a penalty or additional tax.
We do not think anything turns on the precise form of the decision which the appellant seeks to have reviewed. In his letter of 7 February 1985 to the appellant the Deputy Commissioner expressed his decision as being that ``... no reinstatement of arrangements to lodge beyond 31 December 1984 has been granted, and returns lodged after that date will be liable for additional tax for late lodgment, or lodgment enforcement action...''. In our opinion this decision can fairly be described as a decision not to extend time, or further time, for the furnishing of taxation returns by the appellant's clients. It is true that the application for review is made in the name of the appellant, and not his clients, but we do not think anything turns on this. Plainly the appellant is aggrieved by the decision since it must have adverse consequences for his practice as a registered tax agent. As was said in
D.F.C. of T. v. Clarke and Kann 84 ATC 4273 at pp. 4276-4277; (1983) 52 A.L.R. 603 at p. 608, there is no warrant for construing the Judicial Review Act narrowly. In Australian National University v. Burns (1982) 43 A.L.R. 25 at p. 31 the Court quoted with approval the following observation of Ellicott J. when deciding that case at first instance (40 A.L.R. 707 at pp. 716-717):
``The clear object of the Act is to confer rights on aggrieved citizens as a result of the exercise of powers conferred by an enactment on Ministers, public servants, statutory authorities and others. In many cases the power exercised will be precisely stated in the legislation. In other cases the power to do a particular thing will be found in a broadly stated power. The Act should not be confined to cases where the particular power is precisely stated. In each case the question to be asked is one of substance, whether, in effect, the decision is made `under an enactment' or otherwise.''
We are in no doubt that, looking at the substance of the Deputy Commissioner's decision in this case, it was made ``under an enactment'', i.e. sec. 161(1) of the Income Tax Assessment Act. Accordingly, the first ground of the Commissioner's objection to competency fails.
We turn now to consider whether the decision is within the class of decisions referred to in para. (e) of Sch. 1 of the Judicial Review Act. If it is, it is not a decision to which the Judicial Review Act applies - see the definition of the term ``decision to which the Act applies'' in sec. 3(1). For relevant purposes, the decisions referred to in para. (e) are:
``(e) decisions making, or forming part of the process of making, or leading up to the making of, assessments or calculations of tax or duty, or decisions disallowing objections to assessments or calculations of tax or duty, or decisions amending, or refusing to amend, assessments or calculations of tax or duty, under any of the following Acts:
- ...
- Income Tax Assessment Act 1936.''
ATC 4596
Counsel for the Deputy Commissioner submitted that a decision to grant an extension of time for the lodgment of a return is a decision forming part of the process of making an assessment or, a fortiori, a decision leading up to the making of an assessment. This was said to follow from the fact that the lodgment of an income tax return is the normal procedure whereby the Commissioner determines to issue an assessment and calculates the amount of tax payable.
We do not think that this submission pays sufficient regard to the distinction between the Commissioner's administrative and assessment functions. In our opinion a decision to grant or withhold an extension of time for the lodgment of a return is made by the Commissioner in the course of discharging his administrative functions, and is remote from the process of assessment of tax. As was pointed out in D.F.C. of T. v. Clarke and Kann (supra) at ATC p. 4276; A.L.R. p. 607 a decision does not lead to the making of an assessment merely because it precedes the making of an assessment or because its purpose is to enable or facilitate the making of any assessment which may be made. In that case the Court also observed that a decision is not a decision leading up to the making of an assessment unless the making of an assessment has followed or will follow from the decision. The making of a decision to grant or withhold an extension of time for the lodgment of a taxation return will not necessarily be followed by the making of an assessment. In many, perhaps most, cases such a decision will be followed by an assessment but in other cases it will not. In some cases an assessment may issue although no return has been lodged: see sec. 166 of the Act.
In our opinion the decision sought to be reviewed in the present case, whilst being a decision which will normally precede the making of assessments, is not properly characterized as a decision forming part of the process of making assessments or leading up to the making of assessments. In
Minister for Industry and Commerce v. Tooheys Ltd. (1982) 42 A.L.R. 260 at p. 271 a Full Court of this Court approved a statement by Ellicott J., at first instance in that case, that ``[t]he words `leading up to the making' are intended to point to decisions which have to be made or in the circumstances it is appropriate to make before the actual process of assessment or calculation can begin''. That is not this case. The lodgment of a return and, a fortiori, the grant of an extension of time for its lodgment is so remote from the Commissioner's assessment activities as not to form part of or lead up to those activities. Accordingly, it is not a decision of a class referred to in para. (e) of the First Schedule to the Judicial Review Act.
In
Re O'Reilly & Anor; Ex parte Bayford Wholesale Pty. Ltd. 83 ATC 4534; (1983) 57 A.L.J.R. 675, Dawson J. held that a decision by the Commissioner of Taxation pursuant to sec. 11 of the Sales Tax Assessment Act (No. 1) 1930 declining to register an applicant as a wholesale merchant was not a decision forming part of the process of making, or leading up to the making of, an assessment or calculation of tax under the Sales Tax Assessment Act. At ATC p. 4538; A.L.J.R. p. 678 his Honour said:
``The process of registration and the issue of certificates provides the apparatus which enables `decisions making, or forming part of the process of making, or leading up to the making of, assessments or calculations of' sales tax to be made, but decisions relating to the apparatus itself do not fall within that description. No doubt in one sense any decision under the Sales Tax Assessment Acts is a decision leading up to the making of an assessment or calculation of sales tax because the imposition of sales tax is the ultimate purpose of the legislation, but para. (e) of Sch. 1 of the Administrative Decisions (Judicial Review) Act makes a distinction between decisions answering that description and other decisions under the Sales Tax Assessment Acts. Given that distinction, I think that decisions relating to the registration of manufacturers or wholesalers and the issue of certificates of registration are of a sufficiently preliminary nature to fall outside the description contained in para. (e).''
The lodgment of income tax returns pursuant to the obligation imposed by sec. 161 of the Act provides the apparatus which enables the Commissioner to make decisions which form part of the process of making, or lead up to the making, of assessments of income tax. But, as in Bayford, decisions relating to the apparatus itself do not fall within that description. Just as it was held in that case that decisions relating to the issue of certificates of registration were of a
ATC 4597
sufficient preliminary nature to fall outside the description contained in para. (e), so it is proper to find that decisions relating to the granting or withholding of extensions of time for the lodgment of returns are of such a preliminary nature as to fall outside the description of the decisions referred to in para. (e).Counsel for the Deputy Commissioner sought to gain support for his argument from the circumstance that it would be open to an individual taxpayer who is a client of the appellant to seek review of any decision to impose additional tax upon him consequent upon the decision which the appellant seeks to have reviewed. Reliance was placed upon the observation of the Full Court in Tooheys' case (supra) at p. 271 where it was said:
``Our view that the Minister's decision in the present case does not fall within para. (e) is reinforced by the fact that it is an evident purpose of para. (e) to exclude from the classes of decision susceptible of review under the Judicial Review Act, decisions which adversely affect the citizen and which are reviewable on appeal generally to Boards of Review or the courts or both. Parliament intended the Judicial Review Act to provide a remedy to an aggrieved person to apply to this court for an `order of review' in respect of a decision of an administrative character made, proposed to be made or required to be made under Commonwealth statutory law. Generally, it did not intend to confer a second remedy for the same wrong.''
We do not think that what was said in Tooheys' case assists the Deputy Commissioner's argument. In the first place, it is not suggested that there is any alternative remedy open to the appellant, as distinct from his clients. In the second place, sec. 10(2)(b)(ii) of the Judicial Review Act contemplates that there will be cases in which decisions are reviewable both under that Act and under other legislation. Even if there were an alternative remedy open to the appellant (which there is not) that circumstance could not lead to the result that the decision which is the subject of the present application should be treated as falling within para. (e) if the words of that paragraph are not apt to apply to it.
For these reasons we are of the opinion that the appeal should be allowed and the objection to competency overruled. The respondent must pay the costs of the appeal, and of the hearing of the objection to competency.
THE COURT ORDERS AS FOLLOWS:
1. The appeal be allowed.
2. The orders made be set aside, and in lieu thereof the objection to competency be dismissed with costs.
3. The matter be remitted to be dealt with at first instance.
4. The respondent pay the appellant's costs of the appeal.
This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.