Case: Re Peerless Marine Pty Ltd and Commissioner of Taxation [2006] AATA 765 ; 2006 ATC 2419
Outcome: considered
v Commissioner of Taxation (1994) 94 ATC 4049 (Saffron's Case) is a case which preceded the ANZ Savings Bank Case but which was decided after the 1986 amendments. Saffron's Case was an appeal from the Administrative Appeals Tribunal, not an appeal in the original jurisdiction against an objection decision. Nonetheless, in his reasons for judgement, Davies J (at 4050-4051) made the following observations of a generic nature as to the role of either this Court or the Tribunal when seized with a challenge to (termed by him a review of) an objection decision: The review authority, the Court or the Tribunal, must come to its own decision on the facts and the issues. Walsh J said in Krew's case at 4216:- "I have a duty to reach my own conclusions on the questions of fact which have to be decided and to give effect to those conclusions. .. I must make my own decisions as to the facts." Although the taxpayer may be untruthful and a tax evader, that factor, of itself, is no reason not to undertake a calculation of income tax as contemplated by the Act, if such a calculation can be made. As Walsh J said in Krew's case at 4219, "A witness upon whose word one cannot rely may yet give evidence which is true in part." In that case, although Walsh J held that he could not accept the appellant himself as a reliable witness, he nevertheless found that several of the facts alleged by the taxpayer were established as a matter of probability and accordingly that four of the amended assessments before the Court should be set aside. Moreover, in the calculation of the taxable incomes of years past, exact proof may not be available. As Burchett J said in Ma v Commissioner of Taxation (1992) 92 ATC 4373 at 4379:- '... the making of estimates upon Inexact evidence, which IS so much a feature of both judicial and administrative decision-making, cannot be uniquely excluded from appeals against betterment assessments.' If, despite the general untruthfulness of a witness and the lack of records, the Court or the Tribunal nevertheless feels satisfied, as a matter of probability, as to the existence of a relevant fact or factor, effect must be given to that conclusion. Though these observations predate by some months those made later in that year by the High Court in the ANZ Savings Bank Case , they draw upon the same cases which the High Court regarded as authoritative and are not inconsistent with the High Court's own observations. However, though the observation made by Davies J that "effect must be given to that conclusion" is no less generic than his Honour's other observations, it is necessary to recall that he was not called upon in that case expressly to decide whether it was within the Court's power to set aside the objection decision so as to increase the amount of an appellant taxpayer's taxable income. The other two judges constituting the Full Court in Saffron's Case , Gummow and Lee JJ, did not find it necessary to make such generic observations. A number of propositions may be distilled from the authorities as to what constitutes the carrying on of a "business" (adopting for this purpose a summary which commended itself to Deputy President Hack SC in Re Peerless Marine Pty Ltd v Commissioner of Taxation [2006] AATA 765 ; 2006 ATC 2419 (Peerless Marine)): Identifying the "commencement" of a business is, obviously, a question of fact but that does not mean that the question will always admit of an easy answer. That is nicely illustrated by Peerless Marine . Peerless Marine professed to be carrying on a boat production business in respect of luxury motor cruisers. It had sold none but sought, inter alia, to claim input tax credits in respect of the design and construction of a prototype. It succeeded in establishing that its then activity did amount to an "enterprise" for GST purposes because, inter alia, there was evidence that the development and successful exhibiting and availability for inspection of a prototype was an essential first step in the carrying on of such a business, not a precursor to the commencement of that business. Determining whether or not a particular business exists calls for a thorough understanding of the nature of the market in which the asserted business operates and exactly what is entailed in commencing to carry on business in that market. On this basis, the partnership is not entitled to the input tax credits claimed because they were not acquired for a creditable purpose. During the course of what Mr Russell termed "Stage 1" in his business plan, there was not yet a business of a naturist retreat being carried on, only the undertaking of steps which were precursors to the commencement of such a business. A remaining issue is whether, insofar as it related to a period prior to 1 July 2002, the issuing of the GST assessment was beyond power. The inspiration for Mr Russell's raising this issue would seem to be the supposed expiration of the 4 year period after which, subject to an exception to which I shall shortly refer, in the absence of a notice from the Commissioner within that period requiring payment, an unpaid net amount together with any related general interest charge ceases to be payable: see s 105-50 of Schedule 1 to the TAA. The exception to this statutory expiration arises where the Commissioner is satisfied that the payment of the amount was avoided by fraud or evasion.