MINPROC ENGINEERS LIMITED v DFC of T

Members:
RD Fayle SM

Tribunal:
Administrative Appeals Tribunal (sitting as the Small Taxation Claims Tribunal)

Decision date: 8 July 1998

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RD Fayle (Senior Member)

The applicant, being out of time to object to Fringe Benefits Tax assessments in relation to each of the years ended 31 March 1990 and 1991 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 request and the applicant has applied to this Tribunal for a review of that decision. A decision refusing to grant such an application

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may be reviewed pursuant to Part IVC of the Taxation Administration Act 1953 (``TAA'').<sup>[1]</sup> Section 116 of Act No 216 of 1991, a ``transitional provision'' treats decisions made by the Commissioner under the ``old law'', as is the case in point, which were made after the commencement of Part IVC of the Taxation Administration Act 1953 (1 March 1992), to be considered under the ``new law''. The decisions here under review were notified after 1 March 1992 and are therefore considered in terms of Part IVC of the aforementioned Act. By s 14ZO of the TAA such decisions are to be considered pursuant to Division 4 of Part IVC. Section 14ZQ of the TAA defines `` extension of time refusal decision '' as meaning ``a decision of the Commissioner under subsection 14ZX(1) to refuse a request by a person''. That definition applies in this instance. Therefore, the Commissioner's refusal of the applicant's request is a ``relevant decision'' as defined in s 24AA of the Administrative Appeals Tribunal Act 1975, and therefore heard in accordance with Part IIIAA - Small Taxation Claims Tribunal, of that Act.

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. In addition to the documents filed by the respondent pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 the Tribunal had before it one exhibit, a letter from the respondent to the applicant dated 4 August 1995, tendered by the applicant with the consent of the respondent. No additional evidence was called by either party.

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
• (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

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  ATC 2172

• (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 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 s 30(1) of the FBT Act:

``30(1) Where-

• (a) at a particular time, in respect of the employment of an employee of an employer, the employer pays an allowance to the employee; and
• (b) it would be concluded that the whole or a part of the allowance is in the nature of compensation to the employee for-
  • (i) additional expenses ( not being deductible expenses ) incurred by the employee during a period; or
  • (ii) additional expenses ( not being deductible expenses ) incurred by the employee, and other additional disadvantages to which the employee is subject, during the period,

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    ATC 2173

  by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment,

the payment of the whole, or a part, as the case may be, of the allowance constitutes a benefit provided by the employer to the employee at that time.''

[Emphasis added]

Facts

9. The applicant was, at the relevant time, an engineering and construction company, providing services to companies in the mining, natural resource processing and chemical industries. Its business was process engineering design, construction management and feasibility studies of mineral tenements and selected infrastructure projects.

10. During the two years in question the applicant paid allowances to employees who were required to live at various locations in the course of their employment, away from their usual place of residence. These employees were required to live near the work sites until the respective projects were completed. They generally worked for 28 consecutive days (including weekends) before taking 4 days off. They were transported to the work sites by the employer and returned to their home at the end of each site visit, what is called a ``fly-in, fly- out'' arrangement. Whilst at the respective sites, employees used messing facilities which were open to the public. Their allowance was paid to compensate them for sustenance and other incidental expenses such as laundry. The objection for the 1990-1 year (at T6) includes a schedule showing the various locations where the employees worked. These were in Queensland, Western Australia, Tasmania and in the case of two employees, overseas. Of the 74 employees involved, 32 were on site less than 22 days.

11. In its Fringe Benefits Tax Return Form for the year ended 31 March 1990, the applicant disclosed, inter alia, the following information, which is directly to the point of this review:

``Living away from home allowance - 115 benefits; - gross value - $45,659; taxable value - $45,659.''

On the last page of that return there is a declaration by the employer, signed by the public officer on 1 May 1990, to the effect that the particulars shown in the return and any accompanying documents are true and correct in every detail etc. The space for a signature of a Tax Agent who may have assisted in the preparation of the return is blank leaving the inference that the return was completed in- house without assistance by a Tax Agent (T3).^[2] All references to the s 37 documents, referred to above, are shown as prefixed by ``T''.

12. The Fringe Benefits Tax Return Form for the year ended 31 March 1991 disclosed, inter alia, the following information, which is also directly to the point of this review:

``Living away from home allowance - 39 benefits; gross value - $97,491; taxable value - $97,491.''

That return was signed by the public officer of the applicant, on 27 May 1991, and also bore the signature of a partner of KPMG Peat Marwick, the then Tax Agent of the applicant, which charged a fee for assisting in the preparation of the return.

13. Under the provisions of the FBT Act therefore, those returns were deemed to have been duly lodged and assessed on 1 May 1990 and 27 May 1991 respectively, the respective 60 day periods in which to object pursuant to s 80 of the FBT Act expiring on or about 30 June 1990 and 26 July 1991.

14. On 27 November 1996, KPMG, Chartered Accountants, wrote to the respondent on behalf of the applicant objecting against each of the two years' assessments of fringe benefits tax on the disclosed living-away-from- home allowance benefits as above. Those two letters 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 27 November 1996 satisfied the requirements of s 82 as above, a matter with which the Tribunal agrees.

15. The evidence is that in completing its FBT return for each year the applicant was guided by the respondent's ruling, Miscellaneous Taxation Ruling MT 2030.

FBT or income tax?

16. Before considering that Ruling in detail, 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

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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 living-away-from-home allowance paid to an employee which is a fringe benefit, pursuant to s 30(1) of the FBT Act, is exempt income in the hands of the employee. A ``living-away-from- home allowance'' under the FBT Act excludes any allowance for additional expenses incurred by the employee which would qualify as deductible expenses of the employee pursuant to the Income Tax Assessment Act 1936.<sup>[3]</sup> See definition of ``deductible expenses'' in s 136(1) of the FBT Act. To that extent, a living-away-from-home allowance paid to an employee is assessable income of the employee against which the employee can claim any deductible expenses incurred. And to that extent the amount of the allowance is not a fringe benefit assessable to the employer.

17. It becomes obvious therefore, that the classification for taxation purposes of a living- away-from-home allowance paid to an employee is critical to determining who is liable for any tax applicable to it. If it is a ``fringe benefit'' under the FBT Act then the employer is liable. If not, because it is to provide for additional expenses incurred by the employee which would be deductible, then the employee is potentially liable.^[4] It is possible for an allowance to be apportioned between the deductible additional expenses component and the remainder, the latter being subject to FBT.

MT 2030 - relevant provisions

18. MT 2030 is part of the respondent's ``Taxation Rulings System'' introduced in 1986 as a method of publishing and disseminating decisions on interpretation of the laws administered by the Commissioner of Taxations^[5] See Tax Ruling No. 1, 6 December 1982. to fulfil obligations under the Freedom of Information Act 1982. The object of the system is to make available for public scrutiny, copies of documents used by the respondent in making decisions. At the relevant time Taxation Rulings were not binding on the Commissioner and did not purport to state the law conclusively. In other words, taxpayers were on notice as to how the respondent may interpret a particular tax law but they were not bound to follow Taxation Rulings in completing tax returns.^[6] However, if an employer did not follow a public ruling and it was later proven wrong on that count then it was exposed to the possibility of heavy penalties.

19. MT 2030 was issued on 30 September 1986. It is headed ``Fringe Benefits Tax: Living-Away-From-Home Allowance Benefits''. Relevant extracts from that ruling follow:

``Preamble

Section 136 of the Fringe Benefits Tax Assessment Act 1986 (the Act) defines a living-away-from-home allowance benefit as a benefit referred to in sec. 30 of the Act. Section 30 sets out the circumstances in which an allowance paid by an employer to an employee will qualify as a living-away- from-home allowance.

2. A living-away-from-home allowance exists where it is reasonable to conclude from all the surrounding circumstances that some or all of the allowance is in the nature of compensation to the employee for additional expenses incurred and other disadvantages suffered, because the employee is required to live away from his or her usual place of residence in order to perform the duties of employment. Additional expenses do not include expenses for which the employee would be entitled to an income tax deduction . [Emphasis added]

3. The whole or such part of the allowance as satisfies these tests is a living-away-from- home allowance fringe benefit, the taxable value of which is calculated in accordance with the rules contained in sec. 31....

...

10. This ruling contains guidelines for determining the circumstances in which an allowance paid to an employee is to be treated as a living-away-from-home allowance.... Finally, the ruling explains the principles that distinguish between a travelling allowance [which would be assessable income of the employee] and a living-away-from-home allowance. [ Comment added]

Ruling

...

24. Subject to the qualification indicated in earlier paragraphs, it would normally follow that employees in the following kinds of situations would, as specific examples be regarded as living away from a usual place of residence:

• • construction workers living in camps, barracks or huts;
• ...

39. Travelling allowances are often paid for comparatively short periods, exceptions being allowances paid where the

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employment is inherently itinerant in nature or where travelling is a regular incident of the occupation, e.g. commercial travellers, travelling entertainers, etc....

40. The nature of an allowance is not to be determined by reference solely to the period for which it is paid. As mentioned, a travelling allowance might be paid to a commercial traveller almost continuously throughout the year whereas another employee may receive a living-away-from- home allowance only for a month or so.

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]

Discussion and reasons

20. The evidence, which is not disputed, is that the applicant completed its two Fringe Benefits Tax returns on the basis that the so- called ``21 day rule'', set out in MT 2030 paragraph 41, applied.

21. 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.^[7] See tables at ATC pages 4517 and 4518.

22. 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.''

23. His Honour then distinguishes
FC of T v Toms 89 ATC 4373 in the context of his 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

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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.''

24. On 25 November 1993, following the RTA of NSW decision, the respondent issued another ruling,^[8] Which then was a ``public ruling'' binding on the Commissioner pursuant to Part IVAA of the TAA, the law in regard to the status of rulings having changed in the meantime. Taxation Determination TD 93/230, concerning the appropriate tax treatment of camping allowances paid to employees. That ruling reinforces the respondent's earlier view in relation to the ``21 day rule''. it states relevantly:

``...

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 to be applied in circumstances where the employee is away from his or her home base for a brief period and it is difficult 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 51J 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.''

25. 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.

...

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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.''

26. T7, a copy of a letter from the applicant to the respondent, dated 27 November 1996, includes the following paragraph (at page 31):

``By letter dated 29 May 1995, [the applicant] sought amendment of the FBT assessment for the 1992 FBT year. The amendment request was disallowed by the [ respondent] by letter dated 4 August 1995, with reliance placed solely on the 21 day rule.''

27. The respondent's letter of 4 August 1995 [ Exhibit A1] indicates that the respondent was required to consider the request of 29 May 1995. It states inter alia:

``It is considered that the living-away-from- home allowances (LAHA) paid to your employees are generally paid to compensate the employee for additional expenses which may be `deductible expenses' pursuant to section 30 of the Fringe Benefits Tax Assessment Act 1986. The circumstances under which the allowance is paid generally accord with those relied on by Hill J in Roads and Traffic Authority v FC of T (1993) 26 ATR 76, 93 ATC 4508 (RTA case).

However, in the RTA case one of the factors discussed by Hill J was that the relevant employees were at the camps for `relatively short periods of time'. The Commissioner's view is that the decision in the RTA case will apply to make the additional expenses `deductible expenses' in those cases where the period is considered to generously accord with the concept relied by Justice Hill (sic), and it is also consistent with the view expressed in Taxation Ruling MT 2030 in relation to differentiating between travelling allowances and living-away-from- home allowances.

As your employees generally spent 28 days at the work-site, it is considered that the employees would not be entitled to an income tax deduction for expenses incurred on meals etc. Therefore, pursuant to sub- section 30(1) of the FBTAA, the LAHA allowances (sic) are paid to compensate the employees for additional expenses incurred by the employees during the period. These expenses would not constitute `deductible expenses'.

The taxable value of the LAHA benefits will therefore not be reduced as requested.''

28. In his submissions on behalf of the applicant, Mr Gerrard made the following statement:

``Objections against the assessments for the FBT years ended 31 March 1990 through to 31 March 1996 were lodged in November 1996, including the requests before the Tribunal today and a similar request for the 1992 objection.

The Commissioner, upon consideration of these objections, allowed in full the objections for the 1992 to 1996 years, granting the extension of time request in relation to the 1992 objection. The granting of these objections confirmed that the allowances paid to employees of the applicant were for deductible expenses, notwithstanding that employees generally were on site for 28 days at a time. [The applicant] says that the Commissioner had significantly changed his position regarding the 21-day rule, which is relevant to these applications today, and that change in position is confirmed by the following factors.

The unequivocal reliance on the 21-day rule to initially disallow the 1992 amendment request; the acceptance of the 1992 to 1996 objections; and the granting of objections for other clients of the applicant's advisers [a

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reference to KPMG] at or around the same time....''

[Transcript p. 14, lines 13-29]

29. The Tribunal being mindful of the unusual way in which it was informed of these events invited Mr Nankivell to object to any aspect of the applicant's submissions which it considered should be unacceptable.

30. Relying on s 33(1)(a) of the Administrative Appeals Tribunal Act 1975, the Tribunal accepts this information (in effect, evidence) as reliable if only because Mr Nankivell for the respondent agreed and made no objection to the Tribunal being informed of those particulars in this manner [Transcript p. 30, lines 12-21]. Further, the Tribunal understands that Mr Nankivell conceded that the substance of the objections lodged out of time in relation to the FBT years ended 31 March 1990 and 1991, the subject of these applications, have merit^[9] See transcript p. 41, lines 13-16. and, as the Tribunal understands his submission, would now be allowed having regard to the changed attitude of the respondent in relation to the so-called ``21 day rule''. It would appear that the respondent has somewhat resiled from the position taken in MT 2030 and held out at least till January 1996 when TD 96/7 was published.<sup>[10]</sup> The irony of that of course, is that had the objections been within time, that is, had they each been filed within 60 days of their respective deemed assessment days (the date of lodgment) they would not have been allowed since the respondent most likely would have imposed the ``21 day rule'' — as is evident from his letter to the applicant of 4 August 1995 (Ex. A1).

31. Indeed, in
Mt Gibson Manager Pty Ltd v DFC of T 98 ATC 4012, a decision of French J on 18 December 1997, a case indirectly involving the very same provisions of the FBT Act as this, his Honour noted that ``the merits of the substantive application were conceded by the respondent'' (p. 4017). In that case his Honour found that the Tribunal had not erred in law in its decision not to grant an extension of time in which the late objections against the FBT assessments could be considered. Therefore the AAT's decision stood.

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. For each of the two FBT years in question those periods expired on or about 30 June 1990 and 26 July 1991 respectively.

33. In the opinion of the Tribunal the applicant was acting reasonably by following the respondent's published ruling MT 2030 in completing its FBT returns and the same could be said for KPMG Peat Marwick, the Tax Agent which charged a fee for assisting in relation to the preparation of the 1990/91 FBT return. Whilst the relevant question would appear to be simple - whether the allowances paid to employees when expended on meals would give rise to allowable deductions for the purpose of s 51(1) of the Income Tax Assessment Act 1936 - the answer was not, at least until some time after the decision in Mt Gibson Manager, settled law. And it was because of this doubt that the respondent, in September 1986, issued public ruling MT 2030, to clarify the doubt and provide a reliable guideline to assist employers in complying with the FBT Act.

34. It was not until some time proximate to 29 May 1995 that the applicant sought an amendment to its 1991/92 FBT return. That would appear to be the first time the applicant suspected the reliability of MT 2030. And the respondent replied on 4 August 1995 to the effect that the sought after amendment would not be made, supporting this by reference to his then attitude that MT 2030 was still a reliable interpretation of when an allowance would generally be assessable to the employee and when it would qualify as a living-away-from- home allowance fringe benefit. This indicated, as late as August 1995, that the respondent maintained that the ``21 day rule'' was an appropriate objective measure to make the relevant distinction. So, at that time there is no reason why the applicant would have been dissatisfied with its self-assessed FBT returns lodged in May 1990 and May 1991. The fact is that the proper treatment of such allowances did not become apparent until the handing down of the decision in Mt Gibson Manager, in December 1997, where 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. The fact is that since 27 November 1996, when the respondent received the requests to amend later years' FBT returns, the respondent has resiled to some extent from that rule. This at least was the assertion made by Mr Gerrard and conceded by Mr Nankivell. So it was not until then that the applicant could have been certain about being dissatisfied with its earlier assessments. This certainty arose when the

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applicant's objection in respect of its 1991/92 FBT return, to reduce the taxable value by the living-away-from-home allowance benefits, was allowed.

36. In the Tribunal's opinion these factors point to a reasonable basis for the applicant having waited until November 1996, to seek an amendment to the two FBT assessments in question because the applicant could not have been alerted to the inadequacies of its two returns until some time after August 1995 at the very earliest. And the only certainty, at least until August 1995, was that any such request would have been futile, as proved by the respondent's initial reaction to the request concerning the 1991/92 FBT year made in May 1995.

37. 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.''

38. 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, based on the respondent's then position as enunciated in MT 2030.

39. That the applications have merit as a result of subsequent events, is not challenged.

Proceedings commenced outside prescribed periods not ordinarily entertained

40. 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)

41. 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.

42. 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.^[11] This is subject to s 74(6) which extends the time for the Commissioner to make the amendment providing the application is made within 3 years. The employer has no further right of review or appeal. Its only right is, pursuant to s 82, to object and request the objection be accepted even though out time. A refusal of that request is reviewable by this Tribunal. The statutory scheme is exhaustive in that respect; see Case 37/96,
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.

43. 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, the respondent had access to appropriate advice, it was assisted in the preparation of its 1990/91 FBT return by a registered Tax Agent, the matter of contention was not novel or complex - whether the allowance would give rise to a deductible expense when expended by the employee - and, if there was any doubt at all about the efficacy of the FBT returns (and therefore assessments) in question then the applicant

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ought to have lodged an objection within time rather than resting on its rights.

The statutory scheme for reviewing assessments

44. The relevant statutory scheme of the FBT Act provides scope for the respondent to open 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)).

45. 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, examples of which are at T3 and T4, 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 allowances worked. Nor do they disclose the number of continuous days each employee spends at each site. Nor does it disclose, in relation to each affected employee, where is 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 allowances paid 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.

46. There is no suggestion, in the present matter, that there was any evasive or fraudulent measures taken by the applicant. On the contrary, because it might be said that the applicant slavishly followed the respondent's direct public ruling in completing the relevant returns in respect of the living-away-from-home allowances, the applicant's honesty and forthrightness could not be faulted.

47. 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)

48. 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.

49. 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 to challenge an assessment only by objecting within 60 days of the deemed assessment. But an employer can request an amendment to reduce a previously assessed liability for FBT if that request is made within three years of the deemed assessment in question.^[12] Failing that, an employer can lodge an objection out of time and request the respondent to accept it (as is the case in point). 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. In the interest of fairness (and except

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in extraordinary circumstances) one might suppose that employers who base their self- assessed FBT liability on an interpretation of the law broadcast by the revenue authority, should have similar rights to object. That is, as in the instant case, where an employer has abided by what was understood to be a reliable public ruling which, as subsequent events reveal, was not correct, then the employer ought to be able to object to past assessments in an equal relation back period.

Finality in taxation matters

50. The Tribunal acknowledges the need for finality in taxation 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 which to object 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. But it should be open to employers to be granted an extension of time in which to object where an employer relied on a taxation ruling which later proved to be misleading There is a need, in the interests of fairness to both the taxpayer and the tax administration, whilst having regard to the relevant facts of each case, to draw a line in the sand so to speak, beyond which no amendments either way are permitted. That line however, should not be inviolate 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. But fairness seems to require, in this context, the same sunset periods for both employers to object to, and the revenue to amend, previously assessed FBT liabilities. Such a convention would ensure fairness between all employers in the sense that, subject to meeting the other established criteria for extending statutory time limits, all would be treated the same.^[13] The criteria is that spoken about in Re Pulitano and Telstra Corporation Limited (decision No. 8874, 27 July 1993) which refers to the oft-quoted decision of Wilcox J in Hunter Valley Developments v Minister for Home Affairs and Environment (1984) 3 FCR 344 , and discussed at length in Case 18/94, 94 ATC 204 . These reasons have had regard to those considerations and rely on the last- mentioned references as relevant authority. This proposition, of course, is not without difficulty because of the inherently subjective nature of decisions to grant an employer an extended period in which to object. But it may serve to remove some of that subjectivity.

Reasonable excuse for delay

51. The Tribunal is mindful of the fact, as referred to above, that in the present case the applicant could be excused for thinking that it had no basis on which to found an objection until more recent times, despite its original assessments dating back to May 1990 and May 1991 respectively. In the circumstances it is not unreasonable that the applicant did not approach the respondent prior to November 1996 to express dissatisfaction with its own self-assessed FBT tax for the 1989/90 and 1990/91 years.

No prejudice to respondent

52. A further matter which the Tribunal takes into account is the admission by Mr Nankivell that the respondent would suffer no prejudice should the objection be taken to be within time. There is no likelihood that any new evidence would be introduced nor is there any likelihood that the respondent would be disadvantaged by the fact that officers who dealt with the matter may have left the service.

53. In this regard it is noted that whilst the allowances would be assessable income of the employees for the years of income in which they were received, any attendant income tax liability is largely off-set by the deduction to which they would be entitled for the actual cost of the meals. That would result in a fairly insignificant amount of tax payable, if any.

54. Nor, it seems, is there any likelihood of prejudice to the wider public, all of whom had the same opportunities to object.

Merit acknowledged

55. There is no dispute in relation to the merits of the application. The evidence is that if the objections were to be taken to be within time then they would probably be allowed.

The preferred decision

56. On balance, the applicant has established that it had a justifiable reason for its failure to lodge objections against the assessments of FBT for the years in question and indeed, notify the respondent before then of its dissatisfaction with its previously self-assessed FBT liabilities. That reason, simply put, is that the applicant followed a public ruling in calculating the taxable value of the allowances paid to its employees living, for a period, on site and away from their usual residences. And it was not until some considerable time later that the applicant

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became aware that the public ruling may not be reliable in that respect. It was then that the applicant lodged its objections with the request that they be accepted as being within time. This conclusion, coupled with the facts that the applications have merit, that the respondent would suffer no prejudice and that there is unlikely to be any prejudice suffered by the wider public, supports a decision that the extensions sought should be granted. However, those aspects are balanced by the need for finality in taxation matters - that is, there need to be safeguards to promote certainty to the revenue; that taxpayers not be given carte blanc opportunities to reduce previously settled tax liabilities (especially those which are self- assessed) despite statutory limitations on that right, just because previously accepted interpretations of the law have changed.

57. For the above reasons the Tribunal is of the opinion that the preferred decision, having regard to the facts, be that the applications are granted where they were made within six years of the original self-assessed assessment of fringe benefits tax. That is, since the objection against the year ended 31 March 1990 was lodged some 6 years and 5 months thereafter, the decision under review is affirmed. In the case of the objection against the year ended 31 March 1991, which was lodged some 5 years and 4 months thereafter, the decision is set aside.

Decision

58. The decision under review in relation to the objection lodged in respect of the year ended 31 March 1990 is affirmed.

59. The decision under review in relation to the objection lodged in respect of the year ended 31 March 1991 is set aside, the matter being remitted to the respondent who is directed to grant the application.