Commissioner of Taxation v Administrative Appeals Tribunal
Document type: Decision Impact Statement
Venue: Federal Court of Australia (VID 738 of 2010)
Judgment date: 17 March 2011
Date published: 17 June 2011
Decision outcome: Adverse decision.

Summary of decision:
Review rights where the Commissioner refuses to make a determination in relation to contributions under s 292-465 of the Income Tax Assessment Act 1997(Cth ) (prior to amendments made by the Superannuation Legislation Amendment Act 2010 ) ( Cth )

Overview of facts:
• This was an appeal by the Commissioner against a decision of the Administrative Appeals Tribunal ('AAT') that it did not have jurisdiction to review certain excess contributions tax ('ECT') assessments on the basis of the Commissioner's refusal to exercise his discretion in relation to excess superannuation contributions. • The taxpayers in the case before the AAT sought review of certain objection decisions purportedly made under Part IVC of the Taxation Administration Act 1953 ('TAA 1953') in relation to their ECT assessments. The taxpayers argued that the Commissioner should have made a determination in their favour under s 292-465 of the Income Tax Assessment Act 1997 ('ITAA 1997') to disregard excess contributions they had made, or to allocate them to another financial year. • On 3 August 2010, the AAT held that it did not have jurisdiction to review the taxation objections on this basis: McMennemin & Anor v Federal Commissioner of Taxation [2010] AATA 573; 2010 ATC 10-145. • The Commissioner appealed to the Federal Court under s 44 of the Administrative Appeals Tribunal Act 1975 and, in the alternative, sought relief under s 39B of the Judiciary Act 1903 in relation to the AAT's decision. • On 16 November 2010, the Superannuation Legislation Amendment Act 2010 received the Royal Assent. The legislation clarifies that an ECT assessment is reviewable under Part IVC of the TAA 1953 on the basis of the Commissioner's discretion in s 292-465 of the ITAA 1997. However, the legislation only applies where the taxpayer applied for the determination on or after 17 November 2010. | • This was an appeal by the Commissioner against a decision of the Administrative Appeals Tribunal ('AAT') that it did not have jurisdiction to review certain excess contributions tax ('ECT') assessments on the basis of the Commissioner's refusal to exercise his discretion in relation to excess superannuation contributions. • The taxpayers in the case before the AAT sought review of certain objection decisions purportedly made under Part IVC of the Taxation Administration Act 1953 ('TAA 1953') in relation to their ECT assessments. The taxpayers argued that the Commissioner should have made a determination in their favour under s 292-465 of the Income Tax Assessment Act 1997 ('ITAA 1997') to disregard excess contributions they had made, or to allocate them to another financial year. • On 3 August 2010, the AAT held that it did not have jurisdiction to review the taxation objections on this basis: McMennemin & Anor v Federal Commissioner of Taxation [2010] AATA 573; 2010 ATC 10-145. • The Commissioner appealed to the Federal Court under s 44 of the Administrative Appeals Tribunal Act 1975 and, in the alternative, sought relief under s 39B of the Judiciary Act 1903 in relation to the AAT's decision. • On 16 November 2010, the Superannuation Legislation Amendment Act 2010 received the Royal Assent. The legislation clarifies that an ECT assessment is reviewable under Part IVC of the TAA 1953 on the basis of the Commissioner's discretion in s 292-465 of the ITAA 1997. However, the legislation only applies where the taxpayer applied for the determination on or after 17 November 2010. | Issues decided by the court | • By majority, the Full Federal Court held that the AAT was correct to conclude that the assessments could not be reviewed under Part IVC of the TAA 1953 on the basis of the Commissioner's refusal to make a determination under s 292-465 of the ITAA 1997. • The Commissioner argued that his refusal to make the determinations was 'integral' to the process of assessment, or was 'sufficiently connected' to that process to be reviewable as part of the assessment. The majority held that the Commissioner's submission was inconsistent with the scheme established by Part IVC of the TAA 1953, which was designed to avoid uncertainties surrounding the question of what decisions are or are not connected or integral to the process of assessment. The majority found particular difficulty in the fact that a determination could only be made after an assessment had issued, and would not necessarily lead to the making of an amended assessment. Their Honours also found that the legislative amendments made in 2010 suggested, if anything, that prior to those amendments the legislation did not have the effect argued for by the Commissioner. • Downes J's dissenting view was that the assessments could be reviewed under Part IVC of the TAA 1953 on the basis of the Commissioner's decision not to make a determination. His Honour held that an objection to an assessment which challenged that decision was simply an objection to the assessment. His Honour also found that the legislative amendments made in 2010 appeared to reflect an intention that the relevant provisions were always to have the operation which his Honour found them to have had. | • By majority, the Full Federal Court held that the AAT was correct to conclude that the assessments could not be reviewed under Part IVC of the TAA 1953 on the basis of the Commissioner's refusal to make a determination under s 292-465 of the ITAA 1997. • The Commissioner argued that his refusal to make the determinations was 'integral' to the process of assessment, or was 'sufficiently connected' to that process to be reviewable as part of the assessment. The majority held that the Commissioner's submission was inconsistent with the scheme established by Part IVC of the TAA 1953, which was designed to avoid uncertainties surrounding the question of what decisions are or are not connected or integral to the process of assessment. The majority found particular difficulty in the fact that a determination could only be made after an assessment had issued, and would not necessarily lead to the making of an amended assessment. Their Honours also found that the legislative amendments made in 2010 suggested, if anything, that prior to those amendments the legislation did not have the effect argued for by the Commissioner. • Downes J's dissenting view was that the assessments could be reviewed under Part IVC of the TAA 1953 on the basis of the Commissioner's decision not to make a determination. His Honour held that an objection to an assessment which challenged that decision was simply an objection to the assessment. His Honour also found that the legislative amendments made in 2010 appeared to reflect an intention that the relevant provisions were always to have the operation which his Honour found them to have had.

Issues decided:
• By majority, the Full Federal Court held that the AAT was correct to conclude that the assessments could not be reviewed under Part IVC of the TAA 1953 on the basis of the Commissioner's refusal to make a determination under s 292-465 of the ITAA 1997. • The Commissioner argued that his refusal to make the determinations was 'integral' to the process of assessment, or was 'sufficiently connected' to that process to be reviewable as part of the assessment. The majority held that the Commissioner's submission was inconsistent with the scheme established by Part IVC of the TAA 1953, which was designed to avoid uncertainties surrounding the question of what decisions are or are not connected or integral to the process of assessment. The majority found particular difficulty in the fact that a determination could only be made after an assessment had issued, and would not necessarily lead to the making of an amended assessment. Their Honours also found that the legislative amendments made in 2010 suggested, if anything, that prior to those amendments the legislation did not have the effect argued for by the Commissioner. • Downes J's dissenting view was that the assessments could be reviewed under Part IVC of the TAA 1953 on the basis of the Commissioner's decision not to make a determination. His Honour held that an objection to an assessment which challenged that decision was simply an objection to the assessment. His Honour also found that the legislative amendments made in 2010 appeared to reflect an intention that the relevant provisions were always to have the operation which his Honour found them to have had. • By majority, the Full Federal Court held that the AAT was correct to conclude that the assessments could not be reviewed under Part IVC of the TAA 1953 on the basis of the Commissioner's refusal to make a determination under s 292-465 of the ITAA 1997. • The Commissioner argued that his refusal to make the determinations was 'integral' to the process of assessment, or was 'sufficiently connected' to that process to be reviewable as part of the assessment. The majority held that the Commissioner's submission was inconsistent with the scheme established by Part IVC of the TAA 1953, which was designed to avoid uncertainties surrounding the question of what decisions are or are not connected or integral to the process of assessment. The majority found particular difficulty in the fact that a determination could only be made after an assessment had issued, and would not necessarily lead to the making of an amended assessment. Their Honours also found that the legislative amendments made in 2010 suggested, if anything, that prior to those amendments the legislation did not have the effect argued for by the Commissioner. • Downes J's dissenting view was that the assessments could be reviewed under Part IVC of the TAA 1953 on the basis of the Commissioner's decision not to make a determination. His Honour held that an objection to an assessment which challenged that decision was simply an objection to the assessment. His Honour also found that the legislative amendments made in 2010 appeared to reflect an intention that the relevant provisions were always to have the operation which his Honour found them to have had.

ATO view of decision:
The effect of the Court's ruling is that taxpayers will not be able to use the process in Part IVC of the TAA 1953 to seek review of certain assessments made under Division 292 of the ITAA 1997. | Specifically, an ECT assessment will not be reviewable under Part IVC of the TAA 1953 to the extent that: • the basis for review is a determination, or refusal to make a determination under s 292-465 of the ITAA 1997 (for convenience, 'a s 292-465 decision'); and • the taxpayer applied for the determination before 17 November 2010. | • the basis for review is a determination, or refusal to make a determination under s 292-465 of the ITAA 1997 (for convenience, 'a s 292-465 decision'); and • the taxpayer applied for the determination before 17 November 2010. | In such cases, the s 292-465 decision ('affected decision') is not part of the process of assessment. | Conversely, the Court's ruling is not considered to affect the ability of a taxpayer to obtain review under Part IVC of the TAA 1953 of an ECT assessment: • on the basis of a s 292-465 decision where the taxpayer applied for the determination on or after 17 November 2010; or • on a basis other than a s 292-465 decision | • on the basis of a s 292-465 decision where the taxpayer applied for the determination on or after 17 November 2010; or • on a basis other than a s 292-465 decision | Although the Court was concerned with the effect of the Commissioner's refusal to make a determination under s 292-465, its conclusion is considered to apply equally where the Commissioner makes such a determination. The Commissioner's inability to make that determination prior to the original assessment indicates that the determination is outside of the assessment process. While a taxpayer may be dissatisfied with the determination, Part IVC review only applies to an ECT assessment; and an amended assessment issued to give effect to a determination could only reduce the taxpayer's liability relative to their liability under the original assessment. | Conversely, the Federal Court appeared to accept that the legislative amendments made in 2010 enabled the review of an ECT assessment on the basis of a refusal to make a determination which the taxpayer applied for on or after 17 November 2010. This conclusion is considered to apply whether the refusal occurs before or after the issue of the original assessment.

Administrative treatment:
The Commissioner will decline to formally consider a taxation objection to the extent that it purports to be made under Part IVC of the TAA 1953 but is based upon a s 292-465 decision which the taxpayer applied for before 17 November 2010. | The Commissioner also expects that the AAT would dismiss, for want of jurisdiction, any application for review of a purported objection decision or ECT assessment to the extent that it purports to be made under Part IVC of the TAA 1953 but is based upon a s 292-465 decision which the taxpayer applied for before 17 November 2010. If any such applications are received, the Commissioner will draw this decision to the attention of the AAT and seek dismissal of the application. | The Commissioner will not formally consider a subsequent application to disregard or reallocate contributions which are already covered by a valid s 292-465 decision. Once such a decision has been made, the Commissioner's statutory power to make or refuse to make a determination is considered to have been exhausted. | While the law does not allow taxpayers to formally object to an affected decision under Part IVC of the TAA 1953, taxpayers can still talk to the ATO about the decision in order to ensure that there has not been any misunderstanding. If a taxpayer asks, in most cases the ATO will review the decision, consistent with good administrative practice. | Depending on the circumstances, a taxpayer who is dissatisfied with an affected decision may be able to seek review of that decision outside of Part IVC of the TAA 1953; for example under the Administrative Decisions ( Judicial Review ) Act 1977 . Taxpayers requiring information on alternative avenues of review should seek independent advice. | Implications for ATO precedential documents (Public Rulings & Determinations etc) | None | Implications for Law Administration Practice Statements | None

Legislative references: Administrative Decisions (Judicial Review) Act 1977 (Cth) Administrative Appeals Act 1975 (Cth) Income Tax Assessment Act 1936 (Cth) Income Tax Assessment Act 1997 (Cth) Judiciary Act 1903 (Cth) Superannuation Legislation Amendment Act 2010 (Cth) Taxation Administration Act 1953 (Cth) Taxation Laws Amendment Act (No. 3) 1991 (Cth) Tax Laws Amendment (Simplified Superannuation) Act 2007 (Cth)
Case references: Allina Pty Limited v Commissioner of Taxation (1991) 28 FCR 203 21 ATR 1320 91 ATC 4195 Balnaves v Commissioner of Taxation (1985) 8 FCR 589 16 ATR 892 85 ATC 4592 Deputy Commissioner of Taxation v Clarke and Kann (1984) 1 FCR 322 15 ATR 483 84 ATC 4273 Commissioner of Taxation v Energy Resources of Australia Ltd [2003] FCAFC 314 135 FCR 346 2003 ATC 5179 54 ATR 608 Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32 237 CLR 146 69 ATR 41 2008 ATC 20-039 Constable Holdings Pty Ltd v Commissioner of Taxation (1986) 11 FCR 136 17 ATR 640 86 ATC 4329 Deputy Commissioner of Taxation v Richard Walter Pty Limited (1995) 183 CLR 168 95 ATC 4067 29 ATR 644 Domaine Finance Pty Ltd v Commissioner of Taxation (Cth) (1985) 8 FCR 538 16 ATR 778 85 ATC 4465 Grain Elevators Board (Victoria) v President, Councillors and Ratepayers of the Shire of Dunmunkle [1946] VLR 372 73 CLR 70 [1946] ALR 273 Federal Commissioner of Taxation v Administrative Appeals Tribunal and AC Goode & Co Ltd (1990) 21 ATR 250 90 ATC 4342 George v Federal Commissioner of Taxation [1952] HCA 21 86 CLR 183 Hadfield Finance Pty Ltd v Federal Commissioner of Taxation (1988) 19 ATR 1083 88 ATC 4300 Harts Australia Ltd v Federal Commissioner of Taxation [2001] FCA 1188 48 ATR 37 2001 ATC 4572 Hepples v Federal Commissioner of Taxation [1992] HCA 3 173 CLR 492 22 ATR 852 92 ATC 4013 Interlego AG v Croner Trading Pty Ltd (1992) 39 FCR 348 Kennedy v Administrative Appeals Tribunal [2008] FCAFC 124 168 FCR 566 2008 ATC 20-037 73 ATR 276 Isaacs v Commissioner of Taxation [2005] FCA 832 144 FCR 194 2005 ATC 4537 59 ATR 693 Intervest Corporation Pty Ltd v Commissioner of Taxation (1984) 3 FCR 591 15 ATR 1204 84 ATC 4744 McKinnon v Department of Treasury [2006] HCA 45 228 CLR 423 63 ATR 409 Mercantile Credits Ltd v Commissioner of Taxation (No 1) (1985) 8 FCR 510 16 ATR 855 85 ATC 4544 Meredith v Commissioner of Taxation [2002] FCAFC 271 125 FCR 308 2002 ATC 4730 50 ATR 528 Minister for Industry and Commerce v Tooheys (1982) 60 FLR 325 42 ALR 260 Re Command Recruitment Group (Qld) Pty Ltd v Commissioner of Taxation [2008] AATA 619 108 ALD 177 73 ATR 388 Re O'Reilly; Ex parte Bayford Wholesale Pty Ltd [1983] HCA 27 151 CLR 557 83 ATC 4534 14 ATR 610 Shi v Migration Agents Regulation Authority [2008] HCA 31 235 CLR 286 Spencer v The Commonwealth [2010] HCA 28 241 CLR 118 Tooheys Ltd v Minister for Business and Consumer Affairs (1981) 54 FLR 421 36 ALR 64
Subject references: TAXATION superannuation non-concessional contributions cap and excess contributions tax the nature of the rights of review available to a taxpayer, if the Commissioner refuses to make a determination under s 292-465 of the Income Tax Assessment Act 1997 (Cth) (as it stood prior to the amendments provided by the Superannuation Legislation Amendment Act 2010 (Cth)) whether the rights of revielude an application to the Administrative Appeals Tribunal under Pt IVC of the Taxation Administration Act 1953 (Ctw include an application to the Administrative Appeals Tribunal under Pt IVC of the Taxation Administration Act 1953 (Cth)