BORAL RESOURCES (WA) LIMITED v DFC of T
Members:RD Fayle SM
Tribunal:
Administrative Appeals Tribunal (sitting as the Small Taxation Claims Tribunal)
RD Fayle (Senior Member)
The applicant, being out of time to object to Fringe Benefits Tax assessments in relation to each of the four years ended 31 March 1989 to 31 March 1992, inclusively, lodged notices of objection together with a request that the respondent accept those objections as having been duly lodged, which request was accompanied by an explanation for the delay in filing the objections.
Preliminary
2. The respondent refused the applicant's requests and the applicant has applied to this Tribunal for a review of those decisions. A decision refusing to grant such an application may be reviewed pursuant to Part IVC of the Taxation Administration Act 1953 (``TAA'').[1]
3. At the hearing the applicant was represented by Mr Paul Gerrard, assisted by Mr Andrew Roles, both of KPMG Chartered Accountants. Mr John Nankivell, assisted by Mr Greg Dwyer, both officers of the Australian Taxation Office, represented the respondent. The documents filed by the respondent pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 were before the Tribunal. No witnesses were called.
Statutory framework
4. Before addressing the relevant facts it is necessary to set out the statutory framework in which this matter is to be decided. The legislation is the Fringe Benefits Tax Assessment Act 1986 (``the FBT Act''). That legislation operates on what is known as a ``self-assessment'' basis, that is, the employer must file with the respondent a return setting out certain information and a calculation of the ``fringe benefits taxable amount'' for the year of tax and the amount of tax payable thereon. In particular, s 72 states:
``72 Where:
- (a) at a particular time, a return under this Act in relation to an employer in relation to a year of tax is furnished; and
ATC 2160
- (b) before that time, no return has been furnished, and no assessment has been made, in relation to the employer in relation to the year of tax;
the following provisions have effect:
- (c) the Commissioner shall be deemed at that time to have made an assessment (in this section referred to as the `deemed assessment' ) of:
- (i) the fringe benefits taxable amount (including a nil amount) of the employer of the year of tax; and
- (ii) the amount (including a nil amount) of tax payable on that fringe benefits taxable amount;
being those respective amounts as specified in the return referred to in paragraph (a);
- (d) the return referred to in paragraph (a) shall be deemed to be a notice of the deemed assessment and to be under the hand of the Commissioner;
- (e) the notice referred to in paragraph (d) shall be deemed to have been served at that time on the person liable to pay the tax.''
5. The FBT Act then provides respective time periods in which to request an amendment, in the case of the employer, or amend that assessment, in the case of the Commissioner. Those amendments may result in more or less tax payable as the case may be. Section 74 provides:
``74(1) The Commissioner may, at any time within a period of 3 years after the original assessment date in relation to an assessment, amend the assessment by making such alterations or additions to it as the Commissioner thinks necessary.
74(2) Subject to this section, the Commissioner may, after the end of 3 years after the original assessment date in relation to an assessment, amend the assessment by making such alterations or additions to it as the Commissioner thinks necessary.
74(3) Where:
- (a) an employer does not make a full and true disclosure of all the material facts necessary for an assessment of the tax payable by the employer;
- (b) the Commissioner makes an assessment; and
- (c) there is an avoidance of tax;
the Commissioner may:
- (d) where the Commissioner is of the opinion that the avoidance of tax is due to fraud or evasion - at any time; and
- (e) in any other case - within 6 years after the original assessment date in relation to the assessment;
amend the assessment by making such alterations or additions to it as the Commissioner thinks necessary.
74(4) No amendment effecting a reduction in the liability of an employer under an assessment shall be made after the end of 3 years after the original assessment date.
74(5) Where an assessment has been amended under this section in any particular, the Commissioner may, within 3 years after the date on which the amended assessment is made, make, in or in respect of that particular, such further amendment of the assessment as, in the Commissioner's opinion, is necessary to effect such reduction in the liability of the employer liable to pay tax under the assessment as is just.
74(6) Where an employer:
- (a) applies, within 3 years after the original assessment date in relation to an assessment, for an amendment of an assessment; and
- (b) supplies to the Commissioner within that period all information needed by the Commissioner for the purposes of determining the application made by the employer;
the Commissioner may amend the assessment, notwithstanding that that period has expired.
74(7) Nothing in this section prevents the amendment of an assessment:
- (a) in order to give effect to a decision on a review or appeal; or
- (b) by way of reduction in any particular pursuant to an objection made under this Act or pending an appeal or review.''
6. At the relevant time the FBT Act provided, in s 80(1) (below), that an employer could
ATC 2161
lodge a formal written objection against an assessment within 60 days of the date of the deemed assessment. It also provided an avenue, where the 60 day objection period had passed, to seek redress by lodging a notice of objection to the assessment in question, out of time, and requesting a further period of time in which that objection be accepted. Those provisions are contained in subs 80(1) and s 82 respectively, which state:``80(1) An employer who is dissatisfied with an assessment may, within 60 days after service of the notice of that assessment, lodge with the Commissioner an objection in writing against the assessment stating fully and in detail the grounds on which the employer relies.
...
82(1) Where the period for the lodgment by an employer of an objection against an assessment has ended, the employer may, notwithstanding that the period has ended, send the objection to the Commissioner together with an application in writing requesting the Commissioner to treat the objection as having been duly lodged.
82(2) (not relevant)
82(3) An application under subsection (1)... shall state fully and in detail the circumstances concerning, and the reasons for, the failure by the employer to lodge the objection... as required by this Act.''
7. Section 83 requires the Commissioner to consider a request to treat an objection as having been duly lodged and he may grant or refuse the application, advising the applicant in writing. If an employer is dissatisfied with that decision then the matter can be referred to this Tribunal for review, which has been done in this instance.
8. It is relevant also to cite ss 35 and 36 of the FBT Act:
``35 BOARD BENEFITS
35 Where, at a particular time, a person (in this section referred to as the `provider' ) provides a board meal to another person (in this section referred to as the `recipient' ) the provision of the meal shall be taken to constitute a benefit provided by the provider to the recipient at that time.
36 TAXABLE VALUE OF BOARD FRINGE BENEFITS
36 Subject to this Part, the taxable value of a board fringe benefit in relation to a year is-
- (a) in a case where the recipient had attained the age of 12 years before the beginning of the year of tax - $2.00; or
- (b) in any other case - $1.00;
reduced by the amount of the recipients contribution.''
9. The terms ``board meal'' and ``recipients contribution'' are defined in s 136(1) of the FBT Act. There is no dispute between the parties that what the applicant provided to its employees fits the description of a ``board meal'' and that there was no ``recipients contribution'' made by the employees in that respect.
10. Section 37 of the FBT Act provides, in effect, that if, at the time when the board (meal) benefit was provided, the recipient had incurred expenditure in obtaining that meal, which expenditure would have been tax deductible pursuant to s 51(1) of the Income Tax Assessment Act 1936, then the taxable value of the board benefit is reduced accordingly. The rule in s 37 is called the ``otherwise deductible rule''.
Facts
11. The facts as agreed between the parties are set out in the T documents at pages 4 and 5:
- ``Throughout the relevant fringe benefits tax years, the employer's activities included quarrying, the manufacture of concrete and asphalt, transportation, and contracting to the mining and construction industries. These tasks were carried out at various locations.
- Whilst engaged in those activities, the employees were required to live near the various work locations until the projects were completed. The employees worked for a number of days at the various sites before returning to their usual place of residence. The work cycles extended up to periods of 42 days.
- Whilst located at the sites, the employees were provided with meals and accommodation. They were not required to make contributions towards either of these benefits. In ascertaining its fringe benefits tax liability for the years in question, the employer included the value of meals
ATC 2162
provided to employees based on a value of $2.00 per meal. - The employer lodged the relevant fringe benefits tax returns on the following dates:
YEAR DATE LODGED 1989 28 April 1989 1990 30 April 1990 1991 26 April 1991 1992 28 April 1992 - Assessments were deemed to have issued on the lodgement dates pursuant to section 72 of the FBT Act. Pursuant to the then s 80 of the FBT Act, objections were required to be lodged within 60 days after service of those assessments.
- Objections to the inclusion of board fringe benefits in the relevant years were subsequently lodged by the employer's representative on 4 November 1997. Applications to treat the objections as having been lodged within the prescribed period accompanied those objections. The period (for) which each of the objections was lodged late is set out as follows:
YEAR PERIOD LATE 1989 8 years 5 months 1990 7 years 5 months 1991 6 years 5 months 1992 5 years 5 months - The employer's representative was advised (that) the question of extensions of time in relation to the 1989 to 1992 objections would be held in abeyance awaiting the outcome of the decision in Mt Gibson Manager Pty Ltd v DFC of T.''
12. The objections claim that the taxable value of fringe benefits provided for each year in question should be reduced by the following amounts:
1989 $26,220
1990 $103,274
1991 $134,871
1992 $143,480
13. The Fringe Benefits Tax Return Forms for the respective years disclosed, inter alia, the following information at Item J - Board Benefits, which is also directly to the point of this review:
YEAR NUMBER OF TAXABLE
BENEFITS VALUE
1989 800 $33,588
1990 95 $113,838
1991 120 $144,554
1992 162 $154,040
14. The copies of documents reproduced in the T documents do not indicate, for the years 1989 to 1991, who signed the returns. The T documents contain, at T6, a copy of the 1992 return which indicates that it was signed by an officer of the applicant and not by a registered tax agent. The implication is that that return at least, was prepared without professional assistance being rendered by a tax agent.
15. The notices of objection referred to above, dated 4 November 1997, were sent by the applicant's then tax agent, KPMG, Chartered Accountants. Those letters for each FBT year are similar and include a detailed explanation of why the objections were delayed as well as submissions as to why the objections in question should not only be accepted late but also be allowed. It seemed to be common ground in this review that the letters of 4 November 1997 satisfied the requirements of s 82 as above, a matter with which the Tribunal agrees.
FBT or income tax?
16. It is relevant to reflect on the distinctive tax treatment of ``fringe benefits'' provided by an employer to an employee, as the value of those benefits are assessed either to the employer under the FBT Act or alternatively, to the employee under the Income Tax Assessment Act 1936. Any ``fringe benefit'' as defined by s 136 of the FBT Act, provided by an employer is not, in the hands of the employee, assessable income for income tax purposes, as it is deemed to be exempt income by reason of s 23L of the Income Tax Assessment Act 1936. So, any board benefit, as defined in s 35 of the FBT Act, is exempt income in the hands of the employee. The taxable amount of any board fringe benefit under the FBT Act excludes the amount of a notional deduction, pursuant to s 51(1) of the Income Tax Assessment Act 1936, to which the employee would have been entitled had they incurred expenditure in obtaining that meal. To that extent, a board fringe benefit is not included in the employer's fringe benefits taxable amount nor is any value ascribed assessable income of the employee.
17. It becomes obvious therefore, that the classification for taxation purposes of the value of board meals consumed by an employee is critical to determining who is liable for any
ATC 2163
applicable tax. If it is a ``fringe benefit'' under the FBT Act then the employer is liable. If not, because the employee would be entitled to an income tax deduction for the cost of the meal had that employee paid for it, then the employee is potentially liable.[2]Discussion and reasons
18. The evidence, which is not disputed, is that the applicant completed the relevant fringe benefits tax returns on the basis that each meal provided to its employees on work sites had a taxable value of $2.00. The Tribunal was not directed to any specific Taxation Ruling which guided the employer in this regard, although reference was made to Miscellaneous Taxation Ruling MT 2030 which deals with allowances paid to employees required to live away from their usual residence in order to carry out their work for their employer. That ruling does not address the situation which the applicant had, that is, the provision of meals free of charge at work sites. Reference is made to MT 2030 in letters from the applicant to the respondent (T7 to T11 inclusively), but those make no claim that it was guided by the contents of that ruling in completing the fringe benefits tax returns in question.[3]
19. In July 1993, two and three years after the filing of the applicant's FBT returns for 1990-91 and 1989-90 respectively, the Federal Court handed down its decision in
Roads and Traffic Authority of NSW v FC of T 93 ATC 4508 (Hill J). That case concerned, among other matters, whether daily allowances, paid to employees to fund the costs of living in camp sites at or near work sites (which were usually more than 70 kilometres from the employees' places of residence), were living-away-from- home allowance fringe benefits or assessable income of the employees (because the expenses would be tax deductible). Typically the employees lived in the camp during the week returning home for weekends. The sample on which the evidence was established reduced to 19 employees. Their stays in these camps during a year, not counting the weekends, varied from just a few days to a couple of hundred days.[4]
20. The relevance of the RTA decision to the applicant is that it throws light on whether, if the employees had been required to pay for the meals provided, they would have been entitled to an income tax deduction for the cost of those meals. That is, in that event, there would have been no taxable value attributed to the meals provided on the basis of what is called the ``otherwise deductible rule'' provided for in s 37 of the FBT Act (mentioned above).
21. At page 4521 his Honour said:
``Wilcox J, who dissented in
FC of T v Cooper 91 ATC 4396; (1991) 29 FCR 177, was of the view that there was a close connection between the outgoings of the taxpayer and his employment as a footballer. However, in referring to living-away-from- home expenses, his Honour said (at ATC pp 4404-4405; FCR 187-188):`Take the instance of a taxpayer visiting another city for business purposes. The taxpayer incurs expenditure for meals at his or her hotel. On one view, the essential character of the expenditure is the sustenance of the taxpayer. Such a purpose has no connection with the derivation of assessable income; other than in the broad sense - irrelevant because it is applicable to everyone - that one must eat to live and, therefore, to work and to earn assessable income. However, the expenditure may also be characterised as being the cost of sustenance incurred by the taxpayer because of his or her absence from home on business. The difference between the two characterisations is that the latter takes account of the occasion of the expenditure. When this characterisation is adopted, a work-connection immediately appears and a deduction is granted.'
With respect, the same is true in the present case. Where a taxpayer is required by his employer, and for the purposes of his employer, to reside, for periods at a time, away from home and at the work site, and that employee incurs expenditure for the cost of sustenance, or indeed other necessary expenditure which, if the taxpayer had been living at home, would clearly be private expenditure, the circumstance in which the expenditure is incurred, that is to say, the occasion of the outgoing operates to stamp that outgoing as having a business or employment related character.''
22. His Honour then distinguishes
FC of T v Toms 89 ATC 4373 in the context of his
ATC 2164
decision in the RTA of NSW case, saying, at page 4522:``The facts of the present case are quite different. First, each of the persons deemed hypothetically to have incurred the expenditure are employees. They are not carrying on their own business. Second, they are required, as an incident of their employment, by their employer and for the purposes of the employer to live close by their work site for relatively short periods of time. No question arises of their choosing to live in these places. Each of the persons in question has a permanent house in which he lives when not in camp. None of the employees spend inordinate periods of time in the camps so that the camp becomes their home. Their house is retained and the employees in question travel home at weekends. They do not remain in the camps. The costs in question here are an incident of the employment. The costs in Toms were not.
It follows in my view that the amounts in question were deductible amounts and accordingly the benefits in question were excluded from the category of living-away- from-home allowance benefits under s. 30(1) of the [FBT] Act.''
23. It is relevant to note that until then the respondent, in its Miscellaneous Taxation Ruling MT 2030 had stated, at paragraph 41 of that ruling:
``41. There will be circumstances, however, when an employee is away from his or her home base for a brief period in which it may be difficult to conclude whether the employee is living away from home or travelling. As a practical general rule, where the period away does not exceed 21 days the allowance will be treated as a travelling allowance rather than a living-away-from- home allowance . For longer periods, it will be necessary to determine the nature of the allowance with the guidance provided by this Ruling.''
[Emphasis added]
24. It is implied by that ``practical general rule'' that if an employee is away for periods not exceeding 21 days (``the 21 day rule'') then any allowance paid to compensate the employer for additional costs incurred in living away from their home will be assessable income of the employee, who, in turn, will be entitled to deduct any expenditures incurred satisfying the provisions of s 51(1) of the Income Tax Assessment Act 1936. That is, the allowance will not be subject to fringe benefits tax levied on the employer. The corollary is that where the stay exceeds 21 days then the allowance (or meals provided) are subject to fringe benefits tax.
25. The RTA of NSW case makes no direct reference to the tax treatment of meals provided free of charge to employees living in close proximity to work sites which are away from the employees' respective private residences. To that extent the decision is indicative only so far as the applicant is concerned.
26. On 25 November 1993, following the RTA of NSW decision, the respondent issued another ruling,[5]
``...
5. Hill J in Roads and Traffic Authority of NSW v FC of T 93 ATC 4508 recently considered a camping allowance where the allowance was found not to be a living- away-from-home allowance as the expenses would have been deductible under section 51 of the ITAA had they been incurred by the employee. The factors taken into account by Hill J in determining whether section 51 would have applied to the expenses in that case included:
- (a) the employee was required by the employer, as an incident of their employment, to live close by their work;
- (b) the employee was only living away from home for relatively short periods of time;
- (c) the employee did not choose to live at the places where the camp sites were located; and
- (d) the employee had a permanent home elsewhere.
6. The question of what is a relatively short period of time was addressed in Taxation Ruling MT 2030 (which deals with the difference between a living-away-from- home allowance and a travelling allowance). Paragraph 41 sets out a practical general rule
ATC 2165
to be applied in circumstances where the employee is away from his or her home base for a brief period and it is difficult conclude whether the employee is living away from home or travelling. In these circumstances, where the allowance is for a period of up to 21 days, the allowance will be treated as a travelling allowance (the expenses against which are generally deductible under section 51) and not a living-away-from-home allowance. For periods in excess of 21 days, it would be necessary to consider the guidelines in MT 2030 in full.7. The general rule mentioned in paragraph 6 can be applied equally in determining what is a relatively short period of time for the tests in paragraph 5. In the Roads and Traffic Authority of NSW case where the camping allowances were only paid for periods of five days at a time (the employees went home to their families on the weekends), Hill J found that the expenses incurred would have been deductible under section 51 of the ITAA. Such a decision is consistent with MT 2030.''
27. On 31 January 1996 the respondent issued another Taxation Determination TD 96/7, which again reinforced the respondent's views in relation to the ``21 day rule''. That ruling states relevantly:
``TD 96/7 FRINGE BENEFITS TAX: IS FRINGE BENEFITS TAX (FBT) PAYABLE ON MEALS AND ACCOMMODATION PROVIDED TO EMPLOYEES WHO WORK AT REMOTE CONSTRUCTION SITES, WHERE THE ACCOMMODATION IS NOT THE USUAL PLACE OF RESIDENCE OF THE EMPLOYEE?
1. There will be no liability under the Fringe Benefits Tax Assessment Act 1986 (`the Act') in respect of the accommodation. However, there may be FBT payable on meals where the `otherwise deductible' rule does not apply.
...
3. Where meals are provided, and it is concluded that the employee is travelling in the course of their employment, the taxable value of the benefit will be reduced to nil under the `otherwise deductible' rule. The criteria for determining whether an employee is travelling in the course of performing their job are set out in paragraphs 35-43 of Taxation Ruling MT 2030. These criteria include:
- • the nature of the duties performed;
- • whether the employee is accompanied by dependants; and
- • the length of time spent away from home.
As a practical general rule, where the question of whether or not the employee is travelling cannot easily be determined and the period away does not exceed 21 days, the employee may be accepted as travelling.''
28. In each of its notices of objection for the FBT years in question, all dated 4 November 1997, the applicant states:
``It is [the applicant's] view that the taxable value of the meals benefits should be reduced to nil because of the operation of the `otherwise deductible' provisions in sections 37 or 44 of the [FBT Act]. This is because the relevant employees would have been entitled to an income tax deduction had they been required to incur expenses in providing themselves with the meals described above.
This opinion is primarily based on the decision of the Federal Court in Roads and Traffic Authority of NSW v FC of T 93 ATC 4508 (the RTA case) in which Hill J stated: (then follows the passage cited above):
`Where a taxpayer is required by his employer, and for the purposes of his employer, to reside, for periods at a time, away from home and at the work site, and that employee incurs expenditure for the cost of sustenance, or indeed other necessary expenditure which, if the taxpayer had been living at home, would clearly be private expenditure, the circumstance in which the expenditure is incurred, that is to say, the occasion of the outgoing operates to stamp that outgoing as having a business or employment related character.'''
Reasons for delay in lodging objections
29. In his submissions on behalf of the applicant, Mr Gerrard informed the Tribunal of the circumstances giving rise to the late lodgment of the objections. These can be summarised. Until July 1993 when the RTA of
ATC 2166
30. The Tribunal notes s 33(1)(a) of the Administrative Appeals Tribunal Act 1975 and the unusual way it was informed of these events. In the circumstances it attributes little weight to any assertion that the applicant was guided by Miscellaneous Taxation Ruling MT 2030 in completing its FBT returns for the years in question, particularly in relation to the disclosures at Item J thereof. It reaches this conclusion because of a lack of supporting evidence and the obvious convenience of such an assertion to the applicant's case. This is in no way intended to question the sincerity of the applicant's representative.
31. The Tribunal accepts that the objections in question have merit, a proposition not disputed by Mr Nankivell. That is not to say that the Tribunal has drawn any definitive conclusion in relation to the merit of the objections, but just that they have merit and it would not be a futile exercise to have them considered.
Consideration of the evidence and reasons
Reasons for the delay and merit
32. The period prescribed by the relevant provision of the FBT Act in which an objection may be made against a deemed assessment is 60 days. As mentioned, the objections were between 5 years and 5 months to 8 years and 5 months out of time.
33. The Tribunal is not satisfied on the evidence that the applicant turned its mind to the correctness of its self-assessed FBT returns for each of the four years in question until late 1996 or early 1997 when it became aware (probably through the agency of its tax agent) that those assessments may be incorrect. And that view was not established until some years after the RTA of NSW decision, indeed, probably not until some time after January 1996 when the respondent issued Taxation Determination TD 96/7 which still held to the ``21 day rule''.
34. The relevant question which should have exercised the applicant's mind in these respects would appear to be simple - whether, had the employees been required to pay for the meals provided by the applicant, they would have been entitled to an allowable deduction for the expenditure, for the purpose of s 51(1) of the Income Tax Assessment Act 1936. However, it seems that that simplicity is belied as it was not until April 1997, when similar objections for later years, albeit lodged in time, were allowed, that there was any certainty that those objections might succeed. Further reassurance in this regard was given in December 1997, two months after the lodgment of the objections in question, when the decision in Mt Gibson Manager was handed down. In his decision in Mt Gibson Manager French J said:
``The merits of the substantive application were conceded by the respondent which had agreed that if the extension of time were granted to lodge the objections to the assessments the respondent would allow the substantive claim.''
(p. 4017)
35. In the Tribunal's opinion there was no basis until late 1996 at the earliest that the applicant could have had any reason to be dissatisfied with the earlier self assessed FBT returns for the FBT years 1989 to 1992 inclusive. And it was not until November 1997 that the respondent was alerted to this fact,
ATC 2167
despite similar objections for later years being lodged in April 1997.36. On the matter of merit, Mr Gerrard referred the Tribunal to the respondent's Taxation Ruling IT 2455 which deals with extensions of time for late objections. In that ruling, it states at paragraph 20:
``... However each application must be considered on its merits. In some cases it will be appropriate to take account of factors unrelated to the late lodgement of the objection such as those mentioned above. If, for example, an objection would clearly have been allowed if it had been lodged within the prescribed period and was lodged as soon as circumstances reasonably permitted, the objection should ordinarily be accepted as valid.''
37. In the present case it is clear that had the objections in question been lodged within the prescribed 60 day period, when there was no apparent bar to that then being done, they would not have been allowed. This conclusion is based on the respondent's then position in relation to the ``21 day rule'', as enunciated in MT 2030. That the applications have merit is a result of subsequent events. But as mentioned, with hindsight, it is clear that the applications have merit.
Proceedings commenced outside prescribed periods not ordinarily entertained
38. French J made the following observation in Mt Gibson Manager:
``... In my opinion however the statutory scheme is exhaustive. The means of redress for which it provides is lodgment of an objection within sixty days after the assessment and application for amendment of an assessment within three years of its date (ss 80 and 74 of the Fringe Benefits Tax Assessment Act 1986). I accept the submission of the Commissioner that these provisions reflect the legislative intention for finality in the assessment and objection process for fringe benefits tax.''
(p. 4019)
39. With respect, the Tribunal accepts that as appropriate in relation to the statutory scheme for the requesting of amendments outside the 3 year period. But, with respect, his Honour does not speak of the provisions of section 82 or 83 which provide a statutory basis for the lodgment of an objection outside the 60 day period, which requests must be considered by the respondent. Those provide for possible statutory recognition of a late objection as distinct from making a request for an amendment within the 3 year time frame pursuant to s. 74 of the FBT Act.
40. It is noted that a refusal by the respondent to amend an assessment as requested, where the statutory objection period has lapsed, is final. Further, by operation of s 74(4) the Commissioner is precluded from the making of any amendment to reduce an employer's previously ascertained liability for FBT outside 3 years after the making of the original assessment.[6]
96 ATC 394 which, at 399, in support cites Tamberlin J in
Chippendale Printing Co Pty Ltd v FC of T & Anor 96 ATC 4175 at 4181. The applicant in these proceedings is relying on its rights pursuant to s 82 of the FBT Act and Part IVC of the Taxation Administration Act 1953.
41. Mr Nankivell submitted that late objections should not generally be granted in circumstances where the objection period, relative to the statutory period, in this case 60 days, is long past. He submitted that this is a commercial matter involving a fairly straight- forward and not uncommon circumstance - whether, had the employees been required to pay for their site meals, that expenditure would give rise to a deductible expense of the employee. He submitted that had there been any doubt at all about the efficacy of the FBT returns (and therefore assessments) in question then the applicant ought to have lodged an objection within time rather than resting on its rights. He submitted that as the applicant made no effort to advise the respondent of dissatisfaction with the FBT returns and assessments in question for many years then it is unreasonable that the respondent be required to deal with them now, especially in the light of the statutory time limits within which to object or seek an amendment reducing a previous liability for fringe benefits tax. This, he submitted, is a clear case of the applicant resting on its rights.
42. The relevant statutory scheme of the FBT Act provides scope for the respondent to open
ATC 2168
up previously self-assessed FBT returns and issue amended assessments increasing the tax liability. That is found in s 74 of the FBT Act. As mentioned, the respondent may, for any reason, amend an assessment within three years of the assessment (s 74(1)). Further, where an employer has not made a full and true disclosure of all the material facts necessary for an assessment and there has been an avoidance of tax, the respondent has six years within which to amend the assessment (s 74(3)(e)). Or where, in the opinion of the respondent, the avoidance was due to fraud or evasion, the amendment may be made at any time, that is, in those circumstances there is no limit on how far back the respondent may go (s 74(3)(d)).43. These provisions therefore limit the right of the respondent to increase an employer's previously self-assessed fringe benefits tax liability. Because of the limited nature of the requirements for disclosure within the Fringe Benefits Tax return forms, an example of which appears at T6, it is not conceivable that a self- assessing employer, providing the basic information required by the return form to arrive at the fringe benefits taxable value and tax payable thereon, could ever ``make a full and true disclosure of all the material facts necessary for an assessment of the tax payable'', as provided for in s 74(3)(a). Only the barest of information is disclosed in the return form. In the instant case the returns did not disclose the locations of the various work sites at which the employees receiving the meals worked. Nor did they disclose the number of continuous days each employee spends at each site. Nor did it disclose, in relation to each affected employee, where was his or her usual place of residence. In the Tribunal's opinion that information is material to the task of assessing properly the fringe benefits taxable amounts in relation to board fringe benefits provided to employees. As that material information is not disclosed (and indeed not requested) then, in the Tribunal's opinion, there is no bar to the respondent going back within six years from the date of the deemed assessments to amend those assessments increasing the liability for fringe benefits tax.
44. There is no suggestion, in the present matter, that there was any evasive or fraudulent measures taken by the applicant. Indeed, the amounts objected to for each year in question are less than the amounts disclosed in each relevant year's FBT return.
45. That in the public interest there needs to be finality in taxation matters is, it seems, axiomatic; cf.
Lucic v Nolan (1982) 45 ALR 411 at 416; Case 36/94,
94 ATC 327 at 331; Pulitano and Telstra Corporation Limited, referred to in Case 26/95,
95 ATC 269 at 272; and
Assimakopoulos v FC of T 98 ATC 2037 at 2048 which also cites Case 33/93,
93 ATC 371. In this respect it was observed by the Tribunal in Case 37/96 (supra), a case where the issues were almost identical to the present case:
``If the application to extend time is granted on the ground of common law principles of unjust enrichment, despite the limitations imposed by statute, it would create massive disruption in the administration of the scheme regarding overpayments. A proper administration of the statutory provisions however, will not unsettle others or cause disruption to established practices.''
(p. 400)
46. In Assimakopoulos v FC of T, Senior Member Block, in agreeing with Senior Member Hallows in Case 33/93, said that taxpayers should not generally be able, years after the event, to seek to reopen old assessments simply because of an arguably different interpretation of the law.
47. All these considerations point to a rather obvious conclusion - that the respondent is generally, that is, except where fraud or evasion is manifest, estopped from reopening past assessments of fringe benefits tax made more than six years previously, whereas an employer may preserve his, her or its rights only by objecting within 60 days of the deemed assessment. But an employer can request an amendment to reduce a previous assessed liability for FBT if that request is made within three years of the deemed assessment in question. So where a court rules differently to accepted practice and exposes assessed FBT taxpayers to liabilities not previously anticipated, the respondent is able to reopen only those incorrect assessments made within six years. Where, however, the 60 day objection period has expired an employer may none the less lodge an objection with a request that it be accepted as within time - the situation now under consideration. The statute does not place a limit on the time when that may be done and one can readily bring to mind situations where to accept a late objection within time would be
ATC 2169
reasonable and just (see Taxation Ruling IT 2455).
Finality in taxation matters
48. In the interest of fairness and except in extraordinary circumstances, one might suppose that employers, basing their self-assessments of FBT liability on an interpretation of the law as dictated by the revenue, should have the same rights to amend. That is, where an employer has self-assessed its FBT liability relying on a public taxation ruling, then, if it turns out that that was wrong in law, fairness might suggest that the employer be able to object to past assessments in an equal relation back period. However, as discussed, it has not been established to the satisfaction of this Tribunal that the applicant, in completing the fringe benefits tax returns in question, relied on a public ruling (which turned out to be suspect).
49. The Tribunal acknowledges the need for finality in taxation matters and the clear legislative intent that disputes as to taxation should be brought to notice and resolved as soon as possible in order that the efficient and orderly collection of taxes and the administration of the taxation laws not be impeded. To extend time in every circumstance where interpretations change to reduce a previously settled tax liability would create an intolerable administrative burden on the respondent and cause serious disruption to established practices.
50. Sensible practice would dictate that there is a need, in the interests of fairness to both the taxpayer and the tax administration, to draw a line in the sand so to speak, beyond which no amendments either way are permitted, whilst acknowledging the need to allow the revenue authority full and free rein where fraud is manifest (as is the present statutory situation). Such a time line would no doubt result in tax being paid ``unjustly'' in some instances and tax not being collected ``justly'' in others. Whether discretion is exercised to allow an extension of time up to the discretionary limit must, in any event, be controlled by the facts of each case, bearing in mind the need for finality in revenue law matters.
Merit of the applications and prejudice to respondent
51. As mentioned, that the applications have merit is implied. Further, the respondent acknowledged that it would suffer no prejudice, nor is there any likelihood of a wider public prejudice, should the objections be taken to be within time.
The preferred decision
52. For the above reasons, the Tribunal decides that the preferred decision is to affirm the decisions under review.
53. The Tribunal is mindful of a decision (WS98/2 & 3) [reported at
Minproc Engineers Limited v DFC of T 98 ATC 2170] in the same jurisdiction and concerning similar (but not the same) statutory provisions, handed down on this same day, and the need, in the interests of consistency, to distinguish the two. The principal distinguishing feature which, in the opinion of the Tribunal is critically significant, is that in this case, unlike the other, the evidence does not support a conclusion that the applicant relied on a public taxation ruling (which turned out to be suspect) in completing the relevant self-assessed FBT returns.
Decision
54. The decisions under review, in relation to each of the years ended 31 March 1989 to 1992 inclusive, are affirmed.
Footnotes
[1][2]
[3]
[4]
[5]
[6]
This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.