WEBB v DFC of T (NO 2)
Judges:Hill J
Court:
Federal Court
Hill J
Mr Webb, the applicant, seeks judicial review pursuant to the provisions of the Administrative Decisions (Judicial Review) Act 1977, of a decision made by the Deputy Federal Commissioner of Taxation (``the Commissioner'') refusing to remit under s. 207(1A) of the Income Tax Assessment Act 1936 (as amended) (``the Act'') additional tax for late payment of $40,446.44 which had accrued on instalments for quarterly provisional tax and on his liability for income tax payable in respect of the year ended 30 June 1989. Mr Webb sought also to rely upon s. 39 of the Judiciary Act 1903, but raised no different issue in so doing. The present is not a case where the matters which became relevant in
David Jones Finance and Investments Pty Ltd & Anor v FC of T 91 ATC 4315; (1991) 28 FCR 484 arose for consideration.
There is a long history of dispute between Mr Webb and the Commissioner. That history is background material which, to a large extent, explains why the present application is before the Court.
Mr Webb is a barrister practising in Brisbane. He had lodged objections to assessments made in respect of the years of income ended 30 June 1977, 1978, 1979, 1982, 1983 and 1984 which objections, being disallowed, he appealed against. One of these objections raised the question of the disallowance of a deduction claimed in respect of Mr Webb's involvement in a tax avoidance arrangement, said to be
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modelled on the decision of the High Court inFC of T v Westraders Pty Limited 80 ATC 4357; (1980) 144 CLR 55.
In due course his appeals came before the Administrative Appeals Tribunal and, in circumstances not, it would seem, the fault of Mr Webb, no one appeared to represent him, as a result of which his appeals were struck out. The appeals were later restored and when they came once more before the Tribunal again no one was present to represent Mr Webb. In the result they were again struck out, but this time the Tribunal refused to reinstate them.
Discussions followed between Mr Webb and representatives of the Australian Taxation Office to effect a settlement of Mr Webb's affairs. While these negotiations were proceeding, the Commissioner issued a notice, or notices, under s. 218 of the Act, as a result of which moneys held by Mr Webb were seized by the Commissioner and appropriated towards tax said to be due by Mr Webb to the Commissioner. The amount seized is not in evidence before me.
Perhaps it is not surprising, in consequence, that relations between Mr Webb and an officer of the Australian Taxation Office handling his affairs were rather strained. However, negotiations continued into the latter part of 1989 to resolve the matters outstanding between Mr Webb and the Commissioner.
In the meantime, in accordance with the system of quarterly provisional tax payments which had commenced in 1988, notices were issued to Mr Webb requiring him to pay provisional tax each quarter in respect of the 1989 year of income.
The negotiations with the Australian Taxation Office ultimately concluded with the execution of a Deed dated 27 June 1990 between Mr Webb and the Commissioner which required Mr Webb to pay the total amount of $200,000 by instalments concluding on 30 December 1993. The payments were to be taken in full and final satisfaction of all income tax assessed and additional tax due and payable in respect of assessments referred to in the schedule to that Deed being assessments and amended assessments of income for the years ended 30 June 1977 to 30 June 1988 inclusive. Neither the provisional tax in respect of the 1989 income tax year nor tax ultimately assessed in respect of the 1989 year were covered by that Deed.
The Deed ultimately executed had as its genesis an offer made by Mr Webb's solicitors on 21 December 1989 which made clear that Mr Webb did not intend that provisional tax in respect of the year ended 30 June 1989 would be included in the settlement. On 21 February 1990 an adjustment was made in respect of the final instalment of provisional tax increasing slightly the amount of the fourth instalment from $16,566 to $16,732. The additional amount as notified was due and payable on 28 March 1990 and indeed a sum of $166 was paid on that date and credited against the applicant's income tax debt. The fourth instalment notice had originally issued to Mr Webb on 2 May 1989.
On 12 March 1990 there issued to Mr Webb the document which is critical in the present case. It was a document familiar in shape and colour to all taxpayers in that year and indeed in the years which preceded it. It was addressed to Mr Webb and bore an issue date 12 March 1990 and showed his file number. It gave details of Mr Webb's ``assessment'' in the following terms:
" $ c
YOUR TAXABLE INCOME IS $130582
TAX ON TAXABLE INCOME A 56836.18DR
MEDICARE LEVY O 1632.27DR
CREDIT FOR 1989 PROVISIONAL TAX F 66398.00CR
REBATES AND OTHER CREDITS G 791.00CR
BALANCE OF THIS ASSESSMENT L 8720.55CR
OTHER AMOUNTS PAYABLE (NOTE 13) 179246.91DR
NET AMOUNT PAYABLE 170526.36DR
***DUE DATE FOR PAYMENT OF $170526.36***
*** IS AS PREVIOUSLY ADVISED ***
*******************ADDITIONAL INFORMATION********************
YOUR PROVISIONAL TAX FOR THE YEAR ENDED 30 JUNE 1990 IS
$57677.00
THE BALANCE IN THIS NOTICE DOES NOT INCLUDE AMOUNTS OF
PROVISIONAL TAX PREVIOUSLY NOTIFIED.
KEEP THIS NOTICE! YOU WILL NEED IT TO OBTAIN INFORMATION
ABOUT YOUR PERSONAL TAX AFFAIRS FROM THE TAXATION OFFICE."
At the end of the document, opposite the printed signature of Mr Newton as Deputy Commissioner of Taxation, was shown the total amount payable of $170526.36 and in a box below under that amount with the remark ``Date due and payable'' were the words ``SEE ABOVE''.
At the back of the form were a number of explanatory notes. Under the heading ``Payment of Provisional Tax'', the note read as follows:
``From 1 July 1987, a system of paying provisional tax by quarterly instalments applies where provisional tax charged for the preceding year (that is, the provisional tax credit allowed on this notice) is more than $5000. If this system applies to you, the provisional tax instalments payable are advised by separate quarterly notices.''
Under the heading ``Date for payment of other amounts'' there was the following note:
``The date for payment shown on this notice refers only to the balance of this assessment. If you owe the Tax Office other amounts, the dates for payment of those amounts remain as previously notified.''
On the original document the symbols A, O, F, G and L were not explained.
On 2 February 1990, Mr Webb's solicitors had written to the Commissioner seeking details of income tax and penalties outstanding, presumably for the years in dispute. No reply was ever forthcoming, notwithstanding a discussion which appears to have taken place on 17 April 1990 in which a reply was promised. On 3 May 1990 Mr Webb's solicitors wrote to the Australian Government Solicitor advising that they were still awaiting a reply. On 15 May 1990 a document setting out details of assessments for the years through to 1988 and amounts credited or shown as payments in respect of those years was forwarded to Mr Webb. The document does not on its face appear to indicate anything about the disposition of the s. 218 moneys and if it were intended to indicate the state of Mr Webb's account with the Commissioner, it was somewhat unhelpful.
On 25 May 1990 Mr Webb's solicitors wrote to the Australian Government Solicitor acknowledging receipt of the details but complaining that the schedule had not given information concerning penalties. The letter said also that Mr Webb's accountant, a Mr Taylor, had been endeavouring to ascertain Mr Webb's ``current liability for provisional tax and has not yet received details of the amount owing''. The letter concluded with the following paragraphs:
``It is important that our client have details of his current provisional tax liability in order that he can ensure that sufficient funds are available to meet that liability together with the liabilities arising pursuant to the Deed under reference.
If you are able to provide assistance in that regard, it would be appreciated. We are concerned that the matter not become protracted and that these matters can be resolved as soon as possible.''
On 31 May 1990 Mr Webb's solicitors again wrote to the Australian Government Solicitor, relevantly as follows:
``Our client instructs us that he is most anxious to have all his taxation affairs resolved and now requires only information in relation to his current provisional tax liability in order to endeavour that sufficient funds are available to satisfy all liabilities in respect of provisional tax and in relation to proposed Deed of Settlement. We await your reply but hopefully you will be able to assist in that regard.''
On 7 June 1990 the Australian Government Solicitor wrote to Mr Webb's solicitors as follows:
``In reference to your letter dated 25 May 1990, I note that the agreement reached between our respective clients was that the payment of $200,000 was to be in full and final satisfaction of income tax and
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additional tax in respect of years ended 30 June 1977 to 30 June 1988. It was specifically agreed that provisional tax ascertained for the period commencing 1 July 1988 was not included in the settlement. Therefore to propose to amend the Deed to include additional tax for late payment of quarterly instalments of provisional tax to the date of signing the Deed is to depart from the terms of agreement...As your client has already agreed to make certain payments irrespective of his liability for quarterly provisional tax I fail to appreciate how the inability of your client's accountant to ascertain your client's current liability for provisional tax can delay the execution of the Deed.''
On 18 June 1991 Mr Webb received a document which on its face appeared to be a notice of assessment for the 1990 income tax year. That document gave similarly a credit for provisional tax (1990 year) of $57,677 and showed a debit balance of $32,270.28 on the assessment. It showed other amounts payable as $80,526.36 and notified provisional tax for the 1991 year as $97,624. Mr Webb's notice of assessment for the year ended 30 June 1991 showed the balance of the assessment, after credit being given for 1991 provisional tax, as being credit $28,518.80, with other amounts payable $40,526.36. It showed a net amount payable of $12,007.56. His provisional tax for the year ended 30 June 1992 was notified as $76,371.
On 22 April 1992 Mr Taylor, Mr Webb's accountant, wrote to the Commissioner referring to the notice of assessment issued on 13 April 1992 and asking for details as to how the other amounts payable of $40,526.36 had been arrived at. It seems that this letter came to the attention of a Ms Brady who was then the officer responsible in the Australian Taxation Office for Mr Webb's file. She investigated, it would seem, the matter and appears to have formed the view that Mr Webb was entitled to a refund of $28,518.80 and indeed advised someone from Mr Taylor's office that this could be applied towards Mr Webb's next payment due under the deed. Ms Brady apparently went so far as to make enquiries as to how such a refund might be processed in the Australian Taxation Office.
On 29 June 1992 Mr Webb wrote personally to the Commissioner with reference to the instalment due under the deed on or before 30 June 1992 and said:
``This instalment has been paid before this date as appears by the application of the credit balance of the assessment (L - $28518.80) against `other amounts payable' (note 13; $40,526.36) as per my assessment notice for the year ended 30/6/91, a copy of which is attached.''
Nothing further was heard by Mr Webb until late September 1992 when he was advised as a matter of courtesy by an officer of the Australian Government Solicitor that instructions had been received to commence proceedings against him in the sum of $209,801.21. Subsequently, on 2 October 1992 the Australian Government Solicitor wrote to Mr Webb advising him that he was in default under his obligations under the deed and advising further that the credit shown under the 1991 assessment was not available for offset against the principal sum under the deed. This precipitated further correspondence between Mr Webb or his solicitors, on the one hand, and the Commissioner or the Australian Government Solicitor, on the other, as to the amount of Mr Webb's liability.
It is hardly surprising, in these circumstances, that Mr Webb's solicitors sought what they referred to as ``a full reconciliation'' of Mr Webb's position, including a statement of the amount of tax which Mr Webb compromised under the deed of settlement and amounts paid thereafter. The Australian Government Solicitor maintained that Mr Webb owed the Commissioner $209,801.21 for quarterly provisional tax, together with additional tax for late payment to 13 October 1992. It was pointed out in correspondence that credits shown in the assessment notices for 1988 and 1989 were ``for accounting purposes so that a taxpayer is not billed again for quarterly provisional tax previously notified to him''. In a letter of 23 November 1992 the Australian Government Solicitor, while not conceding that any mistake had occurred, produced a reconciliation which showed that the amount owing by Mr Webb to the Commissioner (other than amounts outstanding under the deed) amounted to $69,224.54, and not $209,801.21, being unpaid tax for 1989 plus additional tax for late payment either of the 1989 income tax or the provisional
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tax payment in respect of that year. A detailed statement was ultimately prepared. Although there was further correspondence, there seems little doubt but that the figure of $69,605.09 was correct (not including moneys owing under the deed of settlement).In due course Mr Webb made an application for extension of time to pay the outstanding 1989 income tax. That application, made under s. 206 of the Act, was rejected and that rejection was not the subject of challenge before me. Mr Webb also requested the Commissioner to remit the additional tax payable under s. 207 of the Act. The gravamen of his complaint was that the manner in which the assessment for the 1989 year had been made created confusion, that he believed the reference to other amounts payable were reference to amounts ultimately dealt with under the deed of settlement, that the Australian Taxation Office itself had been confused in the manner in which it had dealt with the matter and indeed that in essence there had been a mistake made by the Australian Taxation Office in issuing the so-called assessment for the 1989 year, which mistake was beyond Mr Webb's control.
Three issues were initially agreed between the parties to be raised in the present proceedings. The first was whether the document of 12 March 1990 was in fact a notice of assessment. The second was an allegation of bias or bad faith on the part of Ms Saarimaki, the person agreed to have been the decision-maker in the decision rejecting Mr Webb's application for remission of the additional tax. The final issue was whether in making the decision Ms Saarimaki had failed to take into account matters that were relevant or whether the decision she had made was so unreasonable that no reasonable decision-maker could have made it: cf
Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948] 1 KB 223. Of these issues, after cross- examination, the second was properly withdrawn. It was clear from Ms Saarimaki's evidence that her decision was not vitiated by any bias towards Mr Webb and that no suggestion of bad faith could be made against her.
I turn now to deal with the two remaining matters in dispute between the parties.
1. Whether the notice of 12 March 1990 was a notice of assessment within the meaning of s. 174(1) of the Act
The significance of this issue to Mr Webb's case was that Ms Saarimaki had proceeded on the basis that there had been an assessment of income tax for the 1989 year and indeed there could not be additional tax payable in respect of income tax for that year, unless there had been such an assessment. If there had been no assessment or if the notice was not a notice of assessment then, the parties agreed, Ms Saarimaki's decision-making function had miscarried.
The starting point of Mr Webb's submission that the notice was not a notice of assessment was the decision of the High Court in
Batagol v FC of T (1963) 13 ATD 202; (1963) 109 CLR 243. In that case, which concerned a notification to the taxpayer that as a result of losses carried forward there was no tax payable but indeed a refund was due, it was held that the notification was not a notice of assessment precluding the Commissioner from later issuing a further assessment without complying with the provisions of s. 170(3) of the Act.
On a narrow view Batagol was only authority as to the meaning of the word ``assessment'' in s. 170 of the Act and not as necessarily determining the meaning of the word ``assessment'' in other sections. Certainly the context of s. 170 where limitation periods depended upon the time at which tax became due and payable under an assessment, clearly required the conclusion that what was there referred to was a notice of assessment notifying a positive amount of tax payable.
Subsequent cases have, however, made it clear that the principle in Batagol applies not merely to s. 170 but to other sections, such as s. 177:
FJ Bloemen Pty Ltd v FC of T; Simons v FC of T 81 ATC 4280 at 4286; (1980-1981) 147 CLR 360 at 371-2 per Mason and Wilson JJ;
Smorgon & Ors v FC of T & Ors; FC of T & Ors v Smorgon & Ors 76 ATC 4364 at 4367; (1976) 134 CLR 475 at 480 per Stephen J. So much may be accepted. The question then is whether the present notice is a notice of assessment of the kind attracting the protection of s. 177 of the Act, or whether, because on its face it indicated the balance of the assessment as being a credit figure, it was incapable of being such a notice.
At the time the notice was given ``assessment'' was defined in s. 6(1) of the Act as meaning:
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``(a) the ascertainment of the amount of taxable income and of the tax payable thereon;''
The document clearly states both the taxable income and the tax payable thereon in the first two lines extracted above. The difficulty with the document, and the only reason the argument is remotely open to the applicant, is that the document then proceeds as a partial statement of account of the taxpayer's overall tax liability. The words ``balance of this assessment'' are not words which define the tax payable in respect of the 1989 income tax year but are words which appear to relate to the amount owing by, or in this case credit owing to, the taxpayer after credits and other rebates have been taken into account. That is not what is meant in s. 6(1) by the words ``tax payable thereon''.
In my view, at least in the case where the assessment is made under s. 166 of the Act, a notice will be a notice of assessment provided it states the taxable income as determined by the Commissioner and the amount of tax which is calculated as levied upon that taxable income. If a credit operates to reduce the tax actually payable by the taxpayer so that either no amount is payable or the taxpayer is entitled to a refund and the notice refers to this on its face, the notice will nevertheless be a notice of assessment.
There are two considerations which make this abundantly clear as a matter of policy. First, were it not so, a taxpayer receiving a notice such as the present would forever be at risk of the Commissioner issuing a fresh assessment in respect of the year in question. The time limits under s. 170 would never run. Second, a taxpayer dissatisfied with the computation of the taxable income and the tax relevant to it, would never be in a position to object to the calculation in accordance with the procedures now applicable under Part IVC of the Taxation Administration Act 1953. It is no answer, in my opinion, to say that by the use of administrative law remedies or other civil procedures a taxpayer might be able to have his taxation liability for the year determined outside of the ordinary objection and appeal procedures and in circumstances where the provisions of s. 177 would presumably have no application.
Each of these undesirable consequences, however, disappear once it is realised that the giving to the taxpayer of a notice which stipulates the taxable income and the tax payable referable to that taxable income in the year (a positive figure) will be a notice of assessment attracting the provisions of the objection and appeals procedure and s. 177.
My view is consistent with the decision of Hunt J in
DFC of T v Clyne 82 ATC 4070; (1982) 60 FLR 45 and that of Enderby J in
Commonwealth of Australia v Opiel 86 ATC 5013. The former case is not greatly different from the present. In that case Mr Clyne, who had received a notice of assessment showing a credit for provisional tax, sought to argue that the giving of that credit constituted an admission by the Commissioner that payment had been made for that amount or that a claim was no longer made in respect of that amount, or alternatively that the provisions of s. 177 rendered there conclusive evidence that the amount was no longer claimed by the Commissioner. This somewhat audacious argument was rejected by Hunt J who regarded the particulars of assessment referred to in s. 177 of the Act as constituting merely the two ingredients taxable income and the tax assessed with respect to that taxable income. The other material on the notice, including the credit, were, his Honour thought, particulars of the notice but not particulars of the assessment. The decision of Hunt J was followed by Enderby J in Opiel in holding that details of a refund stated in the assessment to be due to a taxpayer did not attract the conclusive evidentiary protection of s. 177.
So to hold, however, does not mean that the document of 12 March 1990 was clear on its face or free from the potential to cause confusion. In my view it would be highly desirable that the Commissioner in any notice of assessment show only those particulars which the Act contemplates should be shown in it, that is to say, the taxpayer's name (and perhaps address for service), the taxable income and the tax payable thereon: cf
Prestige Motors Pty Limited v FC of T 93 ATC 5021. The document should not be used, in my view, as a statement of account, or, as in the present case, a partial statement of account, of the taxpayer's liability. If it be appropriate that there be a statement of account of a taxpayer's liability, then in my view it would be desirable that it be provided separately to the taxpayer.
The problem in the present case arises out of a number of matters, some of which are
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peculiar to the present case. The first is the credit given for provisional tax for the year. No doubt within the Commissioner's own accounting system, once a notice of quarterly instalment of provisional tax is served on a taxpayer a debit is raised for the amount against the taxpayer. Failure to pay each notice within the time limited gives rise to additional tax becoming payable. Once, however, the assessment for the year is made, that assessment operates to supersede the taxpayer's liability for provisional tax:Kinny v DFC of T 88 ATC 4049; (1987) 11 NSWLR 657. This is so notwithstanding that the only provision made by the Act in respect of crediting of amounts towards provisional tax arises when payment has been made (s. 221YE(1)). Thus, as McHugh J said in Kinny (at ATC 4054; NSWLR 662-663):
``The Act should be interpreted, therefore, as extinguishing the liability to pay provisional tax for a particular year upon the issue under sec. 174 of the notice of assessment of tax for that year. If provisional tax in respect of that year remains unpaid at that time, the Commissioner's only recourse is to sue for the income tax assessed for that year. He will of course be able to sue for any additional tax, payable in respect of provisional tax unpaid during the period when it was due and payable.''
To reflect this extinction of the provisional tax liability, the Commissioner's accounting system presumably requires there to be a credit of an amount equal to the quarterly provisional tax assessment served prior to the assessment of income tax for the year of income. It is that which is reflected by the entry in the present notice of credit for 1989 provisional tax.
There would, of course, have been no difficulty if a fuller statement of account had been made showing the amounts of the four quarterly provisional tax notifications and then showing a credit for the provisional tax brought about by Kinny's case. That presumably is the reason why the notice makes the comment that the balance does not include amounts of provisional tax previously notified.
The other difficulty which arises in the present case and arose at the time the notice was given, was the seeming impossibility of anyone from the Australian Taxation Office advising the taxpayer, notwithstanding his requests, how much money he in fact owed at that time. In the peculiar facts of this case where a notice had been issued under s. 218 and moneys seized under that notice had been applied towards tax indebtedness and where requests for elucidation of his tax liability were ignored, Mr Webb may well have been confused as to whether moneys seized had been credited against his provisional tax liability for the 1989 year, or whether they had been credited against some other liability. Indeed counsel for the Commissioner was unable to show me from any material in evidence where the moneys seized on the s. 218 notice had been credited. This is not to say that no credit had in fact been given, but rather to illustrate the confusion surrounding Mr Webb's affairs. This confusion could be relevant to the decision to remit additional tax, but could not lead to the conclusion that the notice in question was not a valid notice of assessment.
2. The decision complained of
Ms Saarimaki had available to her the Commissioner's file which contained the material and correspondence to which I have already referred. She set out in writing the matters she considered and the conclusions she reached. In summary, she concluded that the correspondence indicated an awareness of Mr Webb that he had an obligation to pay provisional tax. She concluded that he was aware that the deed of settlement did not relate to any provisional tax or tax assessed for the 1989 income tax year. She placed weight on the reference to quarterly provisional tax previously notified in the notice of assessment of the 1989 income tax. She concluded that Mr Webb was an educated man, capable of understanding advice and that he had, in correspondence with the Australian Taxation Office or the Australian Government Solicitor, been represented by accountants and solicitors, albeit that he did not practise as a barrister in the field of revenue law. She took the view that the income tax assessed for the 1989 year had never been the subject of any challenge by Mr Webb. In a paragraph of some significance she wrote:
``Mr Webb's solicitors did request details of the amount of provisional tax outstanding prior to the signing of the Deed. Those details were not provided to the taxpayer by the ATO. This is a mitigating circumstance; however the request was never followed up by, or on behalf of, the taxpayer.''
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I pause to say that that is literally true albeit somewhat of a half-truth. The request was not followed up for some time in writing but there were discussions between the accountant and representatives of the Australian Taxation Office about a credit offsetting Mr Webb's liability under the deed and once a demand for payment was made there immediately followed further requests for clarification of the amount owing.
Ms Saarimaki made reference to the erroneous advice given to Mr Webb's accountant about the availability of a credit, but dismissed this as not having been relied upon by Mr Webb. She considered as well matters contained in a published ruling IT2570 concerning remission of additional tax for late payment and formed the view that the case did not fall within the special circumstances outlined in that ruling.
Finally, in a summary of her consideration of special circumstances, she said, inter alia:
``22....
- (v) Confusion did exist regarding the 1988 QPT liability in 1992, and as to whether this was included in the Deed. The ATO finally resolved the matter in the taxpayer's favour.
- (vi) The ATO did in error advise Mr Webb's accountant's office on 20.05.92 that he was due for a refund. However, Mr Webb himself does not attribute his confusion regarding the 1989 tax liability to this advice.
- (vii) The ATO was remiss in not responding, in 1990, to the taxpayer's request for details of the 1989 tax liability, although the taxpayer never followed up on this request.
- (viii) I cannot conclude that the taxpayer reasonably believed that he had no liability for the 1989 year given the liability for the QPT instalments. A reasonable person who had not paid those instalments could not read the credit entry for provisional tax on his 1989 Notice of Assessment as anything other than a notional credit.''
3. The discretion to remit additional tax
The task of judicial review of an administrative decision requires attention to be given to the statutory context in which the decision is required to be made, in the present case, s. 207(1A) of the Act.
By force of s. 204 of the Act, income tax assessed becomes due and payable by the person liable to pay it on the date specified in the notice of assessment as the date upon which the tax is due and payable, except in a case where no date is so specified. The reference in s. 204 to ``income tax assessed'' does not include a reference to provisional tax, that not being income tax imposed by an Act (cf definition of income tax in s. 6(1)) but rather an amount payable in advance of income tax that will become payable by the taxpayer:
FC of T v Clyne (1958) 11 ATD 428; (1957-1958) 100 CLR 246.
Provisional tax becomes payable by a taxpayer pursuant to the provisions of s. 221YB(1). The quarterly payment system introduced in relation to the year of income commencing on 1 July 1987 and subsequent years of income requires that the provisional tax shown in an instalment only becomes due and payable once an instalment notice is served: (s. 221YBA(4)). Where instalments becomes payable, the provisional tax payable under s. 221YB(1) is, in consequence, not payable. The amount of a quarterly instalment is due and payable on the date shown in the notification: ss. 221YD(2A) and 221YDAA(1), that being a date not earlier than 30 days after the date of service of the notice and not earlier than a date specified in s. 221YDAA(3).
The taxpayer may apply to the Commissioner for an extension of time for payment of tax. If such an application be granted, the tax becomes due and payable in accordance with the Commissioner's determination. It will be recalled that in the present case an application for extension of time under s. 206 was made but rejected by the Commissioner. By force of s. 207(1) of the Act additional tax becomes due and payable by way of penalty by a person liable to pay tax at the rate (in the relevant years) of 20 percent per annum on the unpaid amount, computed from the time tax becomes due and payable. In the event of an extension of time under s. 206 the additional tax becomes payable only from the expiration of the new time fixed by the Commissioner.
Notwithstanding that the Act operates to impose a penalty for unpaid tax, the Commissioner is empowered to remit it or any part of it under s. 207(1A). Prior to 1982, the
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power of remission was contained in a proviso to s. 207(1) in the following terms:``Provided that the Commissioner may in any case, for reasons which he thinks sufficient, remit the additional tax or any part thereof.''
Section 207(1A) was inserted into the Act by Act No. 123 of 1982 and amended in a minor respect in 1984. It reads as follows:
``Where additional tax is due and payable by a person under this section in relation to an amount of tax and-
- (a) the Commissioner is satisfied that-
- (i) the circumstances that contributed to the delay in payment of the tax were not due to, or caused directly or indirectly by, an act or omission of the person; and
- (ii) the person has taken reasonable action to mitigate, or mitigate the effects of, those circumstances;
- (b) the Commissioner is satisfied that-
- (i) the circumstances that contributed to the delay in payment of the tax were due to, or caused directly or indirectly by, an act or omission of the person;
- (ii) the person has taken reasonable action to mitigate, or mitigate the effects of, those circumstances; and
- (iii) having regard to the nature of those circumstances, it would be fair and reasonable to remit the additional tax or part of the additional tax; or
- (c) the Commissioner is satisfied that there are special circumstances by reason of which it would be fair and reasonable to remit the additional tax or part of the additional tax,
the Commissioner may remit the additional tax or part of the additional tax.''
The discretion granted to the Commissioner under s. 207(1A) is considerably narrower than that which was granted to him by the original proviso to s. 207(1) cf Ryan J in
Shell's Self Service Pty Ltd v DFC of T 89 ATC 4233 at 4245; (1989) 98 ALR 165 at 178. The ambit of discretion under s. 207(1A) clearly depends upon which paragraph the Commissioner proceeds under. If the matter falls within s. 207(1A)(a), the Commissioner's task is confined to reaching the state of satisfaction to which reference is made in that paragraph. If that satisfaction be reached, then the Commissioner is required to remit the additional tax. In my view there is no residual discretion in such a case and the word ``may'' in the final words of the section should not be construed as conferring such a residual discretion: cf
Finance Facilities Pty Ltd v FC of T 71 ATC 4082; 71 ATC 4225; (1970-1971) 127 CLR 106.
The discretion open to the Commissioner under s. 207(1A)(b) is wider. While framed in terms of the Commissioner reaching a particular state of satisfaction, sub-para. (b)(iii) introduces an element of discretion by requiring the Commissioner, having regard to the nature of the circumstances referred to in the paragraph, to form a view whether it would be fair and reasonable to remit the additional tax.
Neither of paras. (a) and (b) are relied upon here. Rather, the parties are in agreement that the only relevant paragraph that might be applicable in the present case is para. (c). Paragraph (c) requires the Commissioner to form a view whether the circumstances of the case are such that it can be said that there exist ``special circumstances''. Further, the Commissioner must then determine whether, having regard to those special circumstances, it would be fair and reasonable to remit the additional tax. As Wilcox J said in
Nestle Australia Limited v FC of T 87 ATC 4409 at 4424; (1987) 16 FCR 167 at 185 in determining the issue whether it would be fair and reasonable to remit the tax, the Commissioner is entitled to take into account in the exercise of that discretion the policy of the Act that additional tax is payable as at a certain date. That is a matter to be weighed in determining the fairness and reasonableness of remission.
It is neither necessary nor appropriate to determine what matters would constitute ``special circumstances''. Whether the circumstances of any particular case are ``special'' is a matter to be determined having regard to those circumstances. Perhaps all that may be said by way of a generalisation is that for circumstances to be ``special'' with para. (c), they must be such as not to fall within either paras. (a) or (b). That having been said, however, para. (c) permits a wide examination first to determine whether there are special circumstances and further to determine whether, by reason of those special circumstances, it
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would be fair and reasonable to remit the tax, or part of it.In the present case the special circumstances are said to be the ``misleading'' form of the 1989 notification of assessment, to be seen in the context of factual circumstances in which the Commissioner failed to respond to Mr Webb's requests for information as to the tax owing and where an officer of the Australian Taxation Office was confused as to the true situation.
4. The challenge to the exercise of discretion
It is clear that Ms Saarimaki concluded that no special circumstances existed. On the face of it this conclusion was reached after Ms Saarimaki had decided that there was nothing objectively confusing about the 1989 notice of assessment and had not been able to conclude that Mr Webb had formed the view that he had no liability for the income tax for the year ended 30 June 1989. She saw the case, it would seem, as a clear one where Mr Webb had derived taxable income for the 1989 year of $130,582, had been notified that the tax payable on the taxable income was $56,836.15 and had made no payment of the tax, despite having a liability to do so. Having reached the conclusion that there were no special circumstances it would not have been necessary for her to have determined whether it was fair and reasonable to remit the additional tax. She did, however, consider that question and formed the view adversely to Mr Webb.
Much was sought to be made by counsel for Mr Webb of a suggestion put to Ms Saarimaki in the course of evidence that she had reached an affirmative conclusion that Mr Webb had ignored paying the tax for the 1989 year because of a selective reading of the credit entry on the face of the notice of assessment. Ms Saarimaki in her evidence initially said that she had so concluded, but upon further cross- examination said that it was but one of three options available by way of conclusion to her. The other options were that Mr Webb may have just been unable to pay the tax and the third option was that the situation, as to the correct amount of tax, was confusing to him and it was for that reason that he had not paid the tax. Ultimately she said that she had not been affirmatively satisfied as to any of these three options.
Having regard to the terms of para. 22(viii) of the document prepared by her recording her conclusions, it is somewhat difficult to escape the view that her original answer was the truth. At the time she considered the matter, Ms Saarimaki wrote that she could not conclude that Mr Webb had reasonably believed that he had no liability for the 1989 year, given the liability for the quarterly provisional tax instalments. A conclusion so expressed by a double negative does not necessarily entail a conclusion reworded in the positive that Mr Webb did reasonably believe that he had a liability for the 1989 tax. In any event, if Ms Saarimaki had found as a fact that Mr Webb deliberately avoided paying the provisional tax, although aware it was owing, it can hardly be said that in so doing (if she did) she made a reviewable error of law:
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321.
More significant is the submission put on behalf of Mr Webb that Ms Saarimaki really failed to take into account at all both the continuing and unanswered requests for clarification of the amount of tax outstanding and the erroneous advice given to Mr Webb's accountant as to the availability of a refund.
It will be recalled that Ms Saarimaki, while acknowledging that Mr Webb's solicitors had requested details of the amounts of provisional tax outstanding and noting that these details had not been provided, pointed out as a countervailing matter that the request was never followed up by or on behalf of the taxpayer. She repeated these comments in her conclusions at para. 22 (vi) and (vii), set out earlier.
Likewise, Ms Saarimaki wrote that she took into account the erroneous advice given to Mr Webb's accountant as to the right to a refund but then, as countervailing matters, appeared to dismiss that circumstance because it was not relied upon by Mr Webb in his submissions. Of itself the erroneous advice might not be seen to be important but it would be a circumstance relevant to Mr Webb's state of mind.
It is the submission of counsel for Mr Webb that having regard to the countervailing matters referred to by her, Ms Saarimaki had in reality failed to take into account each of the two matters of failure to reply and the supply of erroneous advice.
A matter must be really and not colourably taken into account: cf Nestle (supra at ATC 4423; FCR 184) and in a particular case it may not be sufficient that a decision-maker merely
ATC 5134
asserts that he or she has taken into account a particular matter. In the present case, however, I am of the view that Ms Saarimaki did take into account each of the matters favourable to Mr Webb as well as the countervailing matters. The weight to be given to each was a matter for her and not the Court. In so finding I should say that I was impressed by the way she gave her evidence and am of the view that she approached the task entrusted to her objectively and rationally.I am also of the view that she took into account the entirety of the correspondence between Mr Webb or his advisers, on the one hand, and the Australian Taxation Office or the Australian Government Solicitor, on the other, notwithstanding that her conclusions may in places have suggested otherwise.
The final submission was that Ms Saarimaki's decision was in the Wednesbury sense so unreasonable that no reasonable decision-maker could have come to it. I am of the view that this submission should likewise fail.
It will be recalled that Ms Saarimaki made no final decision on the three possibilities of Mr Webb's state of mind. She concluded, and that conclusion was more than open to her, that Mr Webb or his advisers were perfectly well aware that provisional tax, or for that matter income tax, for the 1989 year were not included in the settlement reached in the deed. It is hard to escape the conclusion that both Mr Webb and his advisers were aware that neither of the 1989 provisional tax or the 1989 income tax had in fact been paid. Ms Saarimaki also formed the view, and it was inescapable, that Mr Webb was an educated man, capable of understanding any advice he was given. She formed the view correlative to that, that his professional advisers would clearly enough have understood the situation and the meaning of the 1989 assessment notice. That conclusion was clearly equally open to her. She weighed up those matters against the two matters favourable to Mr Webb, namely that the Australian Taxation Office had not provided details to him of provisional tax outstanding, although it must be conceded that the requests were made more in the context of the negotiations surrounding settlement of the years to 1988 than in the present context. The later correspondence began only when demand for payment had been made. She took into account, as well, the erroneous advice given by the Commissioner.
On these matters it was clearly open to conclude that Mr Webb knew of his liability. In these circumstances it would not be unreasonable to assume that he would have understood the 1989 notice of assessment. If the most favourable alternative conclusion to Mr Webb were taken, namely that confusion existed, the fact remains that it is hard to escape the conclusion reached by Ms Saarimaki that Mr Webb's advisers understood the position in any event that Mr Webb still owed both the original tax and provisional tax.
A decision that there be in these circumstances no remission of additional tax hardly seems unreasonable in the Wednesbury sense.
The final possible conclusion was that Mr Webb may have just been unable to pay the tax because he had made no provision for it. That is not the case that Mr Webb made in the application for remission. But in any event a finding that no special circumstances existed, if that conclusion were reached, would not be unreasonable. A failure to provide for a proper liability would hardly seem, absent other circumstances, to amount to special circumstances, so as to warrant remission under s. 207(lA). So to find again would not have been unreasonable.
For these reasons the application must be dismissed with costs.
THE COURT ORDERS THAT:
1. Application dismissed.
2. Applicant to pay respondent's costs.
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