Decision impact statement

Commissioner of Taxation v Queensland Trading & Holding Co Ltd

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Venue: Federal Court of Australia
Venue Reference No: NSD 646 and 647 of 2005
Judge Name: Ryan, Heerey and Edmonds JJ
Judgment date: 6 July 2006
Appeals on foot:
No

Impacted Advice

Relevant Rulings/Determinations:

• IT 2521

Subject References:
Objections and appeals
where Commissioner assessed primary and additional tax
where notice of assessment incorporated notice of both
where taxpayer pursued objection and appeal
whether open to the taxpayer to request reasons pursuant to section 13 of the Administrative Decisions (Judicial Review) Act 1977
whether decision separate from objection decision

Brief summary of facts

The taxpayers were members of the Industrial Equity Limited (IEL) group of companies which also included Spassked Pty Ltd (Spassked). The taxpayers were transferees of losses from Spassked. In Spassked Pty Ltd v FCT 2003 ATC 5099, the Full Federal Court decided that Spassked was not entitled to a deduction for interest on loans to acquire shares in a subsidiary and, therefore, Spassked had no losses which it could transfer to other group members, including each of the taxpayers under section 80G of the Income Tax Assessment Act 1936 (ITAA 1936).

Following the High Court's refusal to grant Spassked special leave to appeal against the Full Federal Court's decision, the Commissioner amended the taxpayers' assessments to deny the deduction for the losses transferred from Spassked and impose penalties under Pt VII of the ITAA 1936.

The Commissioner disallowed the taxpayers' objections to these assessments and the taxpayers lodged appeals to the Federal Court pursuant to Part IVC of the Tax Administration Act 1953 (TAA).

In the proceedings before the Federal Court, the taxpayers sought particulars in relation to the Commissioner's decision to not further remit penalty imposed pursuant to section 223 and section 226, and remitted in terms of section 227(3) of the ITAA 1936. The particulars, and further and better particulars, were provided by the Commissioner.

Subsequently, when the taxpayers sought reasons under section 13 of the ADJR Act for the decisions not to remit the penalties, the Commissioner refused on the basis that the decisions were excluded decisions. Section 3(1) of the ADJR Act provides that a decision set out in subparagraph (ga) of Schedule 1 excludes a decision under section 14ZY of the TAA disallowing an objection to an assessment or calculation of tax, charge or duty from judicial review.

The Federal Court (Conti J), at first instance, decided for the taxpayer. The Commissioner appealed to the Full Federal Court.

Issues decided by the court or tribunal

On appeal, the Full Federal Court held that the Commissioner's refusal to further or fully remit the additional tax was subsumed in the objection decision. As a result, the objection decision was no less a decision under section 14ZY of the TAA disallowing an objection to an assessment of tax than it would be if the objection on which the decision is made had been grounded solely in matters going to primary tax.

Consequently, the court concluded that it was not necessary to consider the issues as to whether additional tax payable pursuant to Pt VII of ITAA 1936 was a tax or charge for the purposes of subparagraph (ga) of Schedule 1, or whether it was a penalty.

Further, the court said that where the issue of remission formed part of the ordinary tax appeals process, it was the Pt IVC process which was applicable. The Court found that the Full Federal Court decision in FCT v Mostyn (1987) 18 FCR 260 had no relevance to the facts before the court. Mostyn dealt with a review of the power to remit additional tax independently of the assessment and appeal process where the taxpayer had not lodged appeals against the relevant assessments.

The Commissioner's appeal was allowed.

Implications of the decision

ATO position remains unchanged.

The previously accepted position that taxpayers who appeal against the disallowance of objections under Part IVC of the TAA do not have a right to review under s13 of the ADJR Act remains unchanged as a result of the decision of the Full Federal Court in this case.

Administrative Treatment

Implications on current Public Rulings & Determinations

The Commissioner's public ruling in this matter, IT 2521, has been revised to include the findings of the Full Court. IT 2521 was subsequently withdrawn as it is no longer current and only relevant for pre-2001 years.

PS LA 2012/5 outlines the current penalty laws.

Implications on Law Administration Practice Statements

None

Amendment history

Court citation:
[2006] FCAFC 112
63 ATR 445
63 ATR 445

Legislative References:
Administrative Decisions (Judicial Review) Act 1977
3(1)
13
Sch1

Taxation Administration Act 1953
14ZL
14ZQ
14ZR
14ZY

Income Tax Assessment Act 1936
6(1)
175
175A
177
227

Case References:
Spassked Pty Ltd v FCT
2003 ATC 5099
54 ATR 546
136 FCR 441

FCT v Mostyn
18 FCR 260
87 ATC 5056
19 ATR 588