MW McIntosh Pty Ltd v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (NSD 7 of 2009 (FFC); S 205 of 2009 (HC))
Judgment date: 28 July 2009
Date published: 18 November 2011

Summary of decision:
Outlines the ATO view concerning the taxpayers' application for judicial review of the Commissioner's decision refusing the head company taxpayer's application in 2006 to retrospectively consolidate with respect to the year ended 30 June 2004.

Overview of facts:
McIntosh brought proceedings in the Federal Court, pursuant to the AD(JR) Act and section 39B of the Judiciary Act 1903, seeking to challenge the Commissioner's decision not to exercise his discretion under section 388-55 of the TAA to extend the period for making a choice to form a consolidated group under section 703-50 of the ITAA97. | The Commissioner refuse to exercise his discretion on the grounds that: 1) the Commissioner was not empowered by section 388-55 of the TAA to extend the time for the head company to lodge a notice to consolidate pursuant to section 703-50 of the ITAA 1997; and 2) even if the Commissioner was so empowered, a favourable exercise of the discretion to extend the time for notification was not considered to be warranted in the circumstances of this case. | 1) the Commissioner was not empowered by section 388-55 of the TAA to extend the time for the head company to lodge a notice to consolidate pursuant to section 703-50 of the ITAA 1997; and 2) even if the Commissioner was so empowered, a favourable exercise of the discretion to extend the time for notification was not considered to be warranted in the circumstances of this case. | The matter was heard by Graham J. at first instance. He handed down his decision on 19 December 2008 and he found that the Commissioner was not empowered to exercise his discretion under section 388-55 in respect of section 703-50. | The taxpayer appealed the decision to the Full Federal Court. On 28 July 2009, the Full Court (Mansfield, Stone and Edmonds JJ) affirmed the decision at first instance. | The taxpayer then applied to the High Court for special leave to appeal against the decision of the Full Federal Court. The special leave application was heard by the High Court on 3 September 2010. The High Court refused the taxpayers' application. | Issues decided by the court | Issues | Whether special leave to appeal to the High Court was warranted with respect to the following issues: 1) whether section 388-55 of Schedule 1 to the TAA is confined in its operation to provisions which require the giving of an approved form or whether it also extends to provisions by which taxpayers may choose to lodge approved forms; and 2) whether the 'period for giving the choice' in subsection 703-50(3) of the ITAA 1997 is fixed and not to be extended by the general power contained in subsection 388-55(1) of Schedule 1 to the TAA. | 1) whether section 388-55 of Schedule 1 to the TAA is confined in its operation to provisions which require the giving of an approved form or whether it also extends to provisions by which taxpayers may choose to lodge approved forms; and 2) whether the 'period for giving the choice' in subsection 703-50(3) of the ITAA 1997 is fixed and not to be extended by the general power contained in subsection 388-55(1) of Schedule 1 to the TAA. | Answers to Issues | The High Court refused the taxpayers' application for special leave because: a) the legislative provisions under consideration in this matter had been amended in May 2010 with effect from 1 July 2002 such that only a narrow category of taxpayers remained adversely affected by the provisions as they previously stood; and b) even if the Court found, contrary to the submissions of the Commissioner, that the discretion in section 388-55 applied to section 703-50, the Commissioner had decided that in the alternative he would refuse to exercise the discretion favourably in this matter in any event, based on the merits of the case. As a result, a grant of special leave on the grounds sought would not necessarily result in finally disposing of the matter. | a) the legislative provisions under consideration in this matter had been amended in May 2010 with effect from 1 July 2002 such that only a narrow category of taxpayers remained adversely affected by the provisions as they previously stood; and b) even if the Court found, contrary to the submissions of the Commissioner, that the discretion in section 388-55 applied to section 703-50, the Commissioner had decided that in the alternative he would refuse to exercise the discretion favourably in this matter in any event, based on the merits of the case. As a result, a grant of special leave on the grounds sought would not necessarily result in finally disposing of the matter.

Issues decided:
Issues: Whether special leave to appeal to the High Court was warranted with respect to the following issues: 1) whether section 388-55 of Schedule 1 to the TAA is confined in its operation to provisions which require the giving of an approved form or whether it also extends to provisions by which taxpayers may choose to lodge approved forms; and 2) whether the 'period for giving the choice' in subsection 703-50(3) of the ITAA 1997 is fixed and not to be extended by the general power contained in subsection 388-55(1) of Schedule 1 to the TAA. 1) whether section 388-55 of Schedule 1 to the TAA is confined in its operation to provisions which require the giving of an approved form or whether it also extends to provisions by which taxpayers may choose to lodge approved forms; and 2) whether the 'period for giving the choice' in subsection 703-50(3) of the ITAA 1997 is fixed and not to be extended by the general power contained in subsection 388-55(1) of Schedule 1 to the TAA. | Answers to Issues: The High Court refused the taxpayers' application for special leave because: a) the legislative provisions under consideration in this matter had been amended in May 2010 with effect from 1 July 2002 such that only a narrow category of taxpayers remained adversely affected by the provisions as they previously stood; and b) even if the Court found, contrary to the submissions of the Commissioner, that the discretion in section 388-55 applied to section 703-50, the Commissioner had decided that in the alternative he would refuse to exercise the discretion favourably in this matter in any event, based on the merits of the case. As a result, a grant of special leave on the grounds sought would not necessarily result in finally disposing of the matter. a) the legislative provisions under consideration in this matter had been amended in May 2010 with effect from 1 July 2002 such that only a narrow category of taxpayers remained adversely affected by the provisions as they previously stood; and b) even if the Court found, contrary to the submissions of the Commissioner, that the discretion in section 388-55 applied to section 703-50, the Commissioner had decided that in the alternative he would refuse to exercise the discretion favourably in this matter in any event, based on the merits of the case. As a result, a grant of special leave on the grounds sought would not necessarily result in finally disposing of the matter.

ATO view of decision:
The decision of the Full Federal Court endorsed the Commissioner's view that the discretion in section 388-55 of the TAA could not be exercised to extend the period for making a choice to consolidate under section 703-50 of the ITAA97.

Administrative treatment:
The decision should have little impact because section 703-50 was amended by the Tax Laws Amendment (2010 Measures No. 1) Act 2010 , with effect from 1 July 2002, such that a taxpayer is no longer required to make a choice to form a consolidated group in an "approved form"; rather the choice needs simply be made in writing. Accordingly, section 703-50 is clearly outside the ambit of the Commissioner's discretion in section 388-55, which can only be exercised where a taxpayer is required to give the Commissioner a choice to form a consolidated group in an approved form. | Implications for ATO precedential documents (Public Rulings & Determinations etc) | None identified. | Implications for Law Administration Practice Statements | None identified.

Legislative references: Taxation Administration Act 1953 (Cth) 286-75 388-50 388-55 Income Tax Assessment Act 1997 (Cth) 701-1 703-50 Div 170 Subdiv 170-A New Business Tax System (Consolidation) Act (No. 1) 2002 (Cth) Item 37 of Sch 3 Item 38 of Sch 3 Income Tax Assessment Act 1936 (Cth) 80G 166A Corporations Act 2001 (Cth) 459G 588FF(3) A New Tax System (Tax Administration) Act (No. 2) 2000 (Cth)
Case references: Australian Paper Manufacturers Limited v CIL Inc (1981) 148 CLR 551 [1981] HCA 64 37 ALR 289
Subject references: Taxation Power of Commissioner s 388-55 of Sch 1 of the Taxation Administration Act 1953 (Cth) ('the TAA') Retrospectively consolidate Notice of the choice to consolidate Extension of time s 703-50(3) of the Income Tax Assessment Act 1997 (Cth) Discretionary power