ATO ID 2007/61: Excise: licence conditions in relation to notification of change of trustee for a trust
Date of decision: 22 March 2007
Business line: Indirect Tax

Issue
Can the Collector impose a condition on a licence under subsection 39D(3) of the Excise Act 1901 (Excise Act) that requires the trustee for a trust to notify the Collector of the appointment of a new trustee in writing and prior to the appointment of the new trustee?

Decision
Yes. The Collector can impose a condition on a licence under subsection 39D(3) of the Excise Act that requires the trustee for a trust to notify the Collector of the appointment of a new trustee in writing and prior to the appointment of the new trustee.

Facts
A company, in its capacity as trustee for a trust, has made an application to the Collector under section 39 of the Excise Act for a licence to manufacture excisable goods.

Reasons for decision
Summary: All legislative references which follow are made to the Excise Act. Section 25 provides that it is an offence to manufacture excisable goods without a licence. An application for a licence may be made under section 39. Section 39A provides that the Collector may grant, or refuse to grant, a licence to a natural person, a partnership or a company. Therefore, the Collector cannot license a trust, but may grant a licence to a natural person or a company in its capacity as trustee for a trust. A licence is subject to the conditions set out in subsection 39D(1), any conditions prescribed under subsection 39D(2) and any conditions specified in the licence under subsection 39D(3). The conditions that can be specified in the licence under subsection 39D(3) are conditions that are considered by the Collector to be necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts. Subsection 4(1) defines 'Collector' to mean the Commissioner of Taxation or an authorised officer. Subsection 4(1) also provides that 'Excise Acts' mean the Excise Act and any instruments (including rules, regulations or by-laws) made under the Excise Act and any other Act, and any instruments (including rules, regulations or by-laws) made under any other Act, relating to excise in force within the Commonwealth or any part of the Commonwealth. The term 'necessary for the protection of the revenue' was considered in Re Francesco Martino Applicant v. Australian Taxation Office Respondent (2002) AATA 1242 (unreported, Deputy President Forgie, 29 November 2002). At paragraphs 51 and 52 of the judgement in that case Deputy President Forgie stated: 51...the ordinary meanings of the word 'protect' include 'keep safe, take care of', (The New Shorter Oxford English Dictionary, 3rd edition, 1993) and they would seem to be in the senses in which the word is used in the expression 'protect the revenue'. Mr Martino's licence may only be cancelled if it is necessary to take care of the money belonging to the Crown in right of the Commonwealth. That has the aspect of ensuring that the Commonwealth receives all that it should in the form of any excise that is ultimately payable in respect of tobacco originally grown on Mr Martino's farm and keeps all that it receives. It also has the aspect of not spending more of the Commonwealth's money than need be spent in carrying out its supervisory duties and responsibilities under the Act and in ensuring that the tobacco is not marketed illegally in Australia, and so avoid the payment of excise duty, if it cannot be marketed legally. 52 What is meant by the word 'necessary'? I have taken the view that the meaning adopted by Allen J in State Drug Crime Commission of NSW v Chapman (1987) 12 NSWLR 447: As to the word 'necessary' it does not have, in my judgement, the meaning of 'essential'. The word is to be subjected to the touchstone of reasonableness. The concept is one as to what reasonably is necessary in a commonsense way. As Pollock CB said in Attorney General v Walker (1849) 3 Ex 242; 154 ER 833: "it may be stated as a general rule that those things are necessary for the doing of a thing which are reasonably required or which are legally ancillary to its accomplishment." (page 452) The following two elements for the protection of the revenue may be drawn from Deputy President Forgie's judgement. A licensed trustee is not required by subsection 39D(1) to notify the Collector in the event that a new trustee is appointed. However, as only a licensed person may manufacture excisable goods, the trust will be unable to continue its excise related activities unless and until the new trustee is appropriately licensed. For this to occur, any new trustee that is appointed will have to apply for a licence, and the Collector will require sufficient time to consider whether a licence should be granted. Ensuring adequate time for this to happen is considered necessary to ensure compliance with the Act. Further, if an existing trustee departs before a new trustee is granted a licence, any remaining excisable goods will no longer be in the possession of a licensed person. In addition to this being an offence, the risk to revenue is that the goods will be delivered into home consumption without payment of the requisite excise duty. It is reasonable that the Collector take steps to mitigate against these events happening therefore, the Collector can impose a condition on a licence under subsection 39D(3) that a trustee must notify the Collector in writing and prior to the appointment of a new trustee on the basis that it is necessary or desirable for the protection of the revenue or to ensure compliance with the Excise Acts.

Legislative references: Excise Act 1901 subsection 4(1) section 25 section 39 section 39A section 39D subsection 39D(1) subsection 39D(2) subsection 39D(3)
Case references: Re Francesco Martino Applicant and Australian Taxation Office Respondent [2002] AATA 1242 (2002) 70 ALD 403
Subject references: Excise Excise collections Licensing