Rebmik Contractors Pty Ltd v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2007/553)
Judgment date: 24 April 2008
Date published: 5 August 2008

Summary of decision:
Off-road credits for diesel fuel used in excavation work carried out for the construction of an aged care facility and a medical school. Imposition of penalty for failure to exercise reasonable care. | Imposition of penalty for failure to exercise reasonable care.

Overview of facts:
The applicant claimed entitlement to an off-road credit (and, therefore, an energy grant) pursuant to s 53(4) of the Energy Grants Act for diesel fuel used in excavation activities connected with construction of two separate facilities (an aged care facility and a medical school). The aged care facility was erected on land on which a hospital was also situated. The medical school was linked by a walkway over a highway to an adjacent hospital. | The applicant's claim was refused as, in the Commissioner's view; the diesel fuel used in the construction of the two facilities was not eligible for credits under the Energy Grants Act. | The Tax Office also imposed administrative penalty at 25% for lack of reasonable care at the time the claim for an energy grant was made. | Issues decided by the court or tribunal | Whether diesel fuel used in earthwork activities for the construction of an aged care facility and a medical school near hospitals is eligible for energy grant credits per s 53 (4) (c) of the Energy Grants Act being " use at a hospital or nursing home or at any other institution providing medical or nursing care ". | The Tribunal also considered the use of ATO Interpretive Decisions and the imposition of penalty for a failure to take reasonable care. | The Tribunal affirmed the reviewable decisions. | The applicant's claim for off road credits under the Energy Grants Act failed. The Tribunal found that the Applicant used the diesel fuel for which credits were claimed in excavation works adjacent to the relevant Hospital. However, the fuel was not used for the purposes of the hospital and, therefore the Applicant could not meet the purposive element of the relevant provision. Similar reasoning was applied in relation to the claims in respect of diesel fuel used in the excavation work at the site of the medical school. | The applicant could not have relied on ATOID 2006/280 as it was issued after its claim was lodged. In any event interpretative decisions are not binding on the Commissioner nor do they necessarily accurately state the law. | Tribunal also found that prior to making a claim for off-road credits, the applicant failed to take reasonable care as it did not seek advice from the ATO nor did it seek any legal advice regarding the interpretation of the relevant sections of the Energy Grants Act. The Tribunal considered that the administrative penalty of 25% should be applied. | At the hearing the Applicant made no submissions on the penalty issue. The Tribunal made the finding that the administrative penalty of 25% should be applied having regard to the facts and circumstances of the case.

Issues decided:
Whether diesel fuel used in earthwork activities for the construction of an aged care facility and a medical school near hospitals is eligible for energy grant credits per s 53 (4) (c) of the Energy Grants Act being " use at a hospital or nursing home or at any other institution providing medical or nursing care ". The Tribunal also considered the use of ATO Interpretive Decisions and the imposition of penalty for a failure to take reasonable care. The Tribunal affirmed the reviewable decisions. The applicant's claim for off road credits under the Energy Grants Act failed. The Tribunal found that the Applicant used the diesel fuel for which credits were claimed in excavation works adjacent to the relevant Hospital. However, the fuel was not used for the purposes of the hospital and, therefore the Applicant could not meet the purposive element of the relevant provision. Similar reasoning was applied in relation to the claims in respect of diesel fuel used in the excavation work at the site of the medical school. The applicant could not have relied on ATOID 2006/280 as it was issued after its claim was lodged. In any event interpretative decisions are not binding on the Commissioner nor do they necessarily accurately state the law. Tribunal also found that prior to making a claim for off-road credits, the applicant failed to take reasonable care as it did not seek advice from the ATO nor did it seek any legal advice regarding the interpretation of the relevant sections of the Energy Grants Act. The Tribunal considered that the administrative penalty of 25% should be applied. At the hearing the Applicant made no submissions on the penalty issue. The Tribunal made the finding that the administrative penalty of 25% should be applied having regard to the facts and circumstances of the case.

ATO view of decision:
The decision of the Tribunal accords with the Commissioner's views on the operation of paragraph 53(4)(c). The Commissioner considers that the provision requires diesel fuel purchased for use and used at a hospital or nursing home or at any other institution providing medical or nursing care to be used in the operations of and for the purposes of these institutions to satisfy the purposive elements of the provision. | In relation to the penalty issue, whether there has been a failure to take reasonable care turns on an evaluation of all the circumstances surrounding the making of the false or misleading statement. The Commissioner does not take the remarks made by the Tribunal that the Applicant: " failed to take reasonable care as it did not seek advice from the ATO nor did it seek any legal advice regarding the interpretation of the relevant sections of the Energy Grants Act " (Tribunal decision paragraph 33) as imposing a requirement for taxpayers or applicants to seek, in every case, advice from the Tax Office or legal advice. Although the Commissioner considers that not obtaining ATO advice or legal advice may, in the particular circumstances of a matter, be relevant considerations, the mere fact that ATO advice or legal advice was not obtained does not necessarily lead to a conclusion that reasonable care was not taken. | The Commissioner's considered views on penalties relating to statements are set out in draft Miscellaneous Tax Ruling 2008/D1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard, in particular, paragraph 28.

Administrative treatment:
Implications on current Public Rulings & Determinations | Nil

Legislative references: Energy Grants (Credits) Scheme Act 2003 53(4)(c) Taxation Administration Act 1953 284-75
Subject references: Energy grants Off-road credits Use at a hospital Location test Purpose Test Reliance on ATOID Administrative penalty Reasonable care