Commissioner of Taxation v Cancer and Bowel Research Association Inc as Trustee for the Cancer and Bowel Research Trust
Document type: Decision Impact Statement
Venue: Federal Court of Australia (SAD 150 of 2013 and SAD 151 of 2013)
Judgment date: 25 November 2013
Date published: 21 January 2014

Summary of decision:
Outlines the ATO's response to this case which concerned whether the AAT correctly exercised its power to remit an objection decision to the ATO for reconsideration and correctly limited the Commissioner's power to revoke the endorsement of an entity.

Overview of facts:
As from 1 July 2000, the Commissioner had endorsed the trustee as exempt from income tax as a charitable institution under section 50-105 of the Income Tax Assessment Act 1997 (ITAA 1997), and the trust as a Deductible Gift Recipient (DGR) under item 2 of the table in subsection 30-15(2) of the ITAA 1997. The Commissioner later endorsed the trustee as a charitable institution under subsection 176-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and under section 123E of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) as from 1 July 2005. | After review, the Commissioner concluded that the trustee did not meet the requirements for endorsement as a charitable institution or as a DGR, and had not met those requirements since 1 July 2000. | The Commissioner notified the trustee on 16 February 2012 that he had decided to revoke the endorsements as from 1 July 2000 under section 426-55 of Schedule 1 to the Taxation Administration Act 1953 (TAA). | In [2013] AATA 336, the Administrative Appeals Tribunal ('AAT') affirmed the Commissioner's objection decision in respect of the revocation of the endorsement as a DGR. | However, under section 42D of the Administrative Appeals Tribunal Act 1975 (AAT Act), the AAT remitted the objection decision relating to the charitable institution status back to the Commissioner for further consideration. The remittal by the AAT was done on the basis that subsection 426-55(1) requires consideration of an entity's entitlement to endorsement at the time the decision to revoke is made. The AAT considered that the Commissioner was only empowered to retrospectively revoke an endorsement under subsection 426-55(2) if the entity was not entitled to be endorsed at the time of the revocation decision. | Issues decided by the court | On appeal to the Federal Court, the Commissioner argued that the AAT expressed a direction of law at paragraphs 79 and 80 of its decision, namely that section 426-55 did not permit a revocation of endorsement from a date earlier than the date of the revocation decision. The Commissioner argued that the direction to reconsider on those terms, for the purpose of ascertaining the position as at 16 February 2012, was a decision under subparagraph 43(1)(c)(ii), not section 42D, of the AAT Act. | Accordingly, the Commissioner appealed to the Federal Court under section 44 of the AAT Act on the basis that the AAT had made a decision under section 43 of the AAT Act that incorrectly narrowed the application of section 426-55. | In the alternative, the Commissioner sought relief under section 39B(1A) of the Judiciary Act 1903 . | The Commissioner's appeal under section 44 of the AAT Act. | The Full Court held that the Commissioner's appeal was incompetent as no appealable decision had been made by the AAT [paragraph 10]. | The Full Court found that the AAT formed a view about a question of law upon which its final decision upon the review of the objection decision depended, namely the construction of section 426-55, and in consequence of that construction, considered that the application of the section to the trustee required further evidence before a final decision could be made. | The Full Court found that the AAT chose not to determine the application for review by making a decision under section 43 of the AAT Act, but instead chose to remit the objection decision to the Commissioner under section 42D for further consideration. | A decision by the AAT to reconvene at a later date to receive further evidence itself would not have been an appealable decision (in the Chaney sense). | The AAT's decision to remit the further consideration of the trustee's entitlement to endorsement as at 16 February 2012 was similarly not a decision in the sense explained in Chaney [1] as no part of the proceeding was decided or determined. | Judicial review proceedings | The Commissioner contended that the AAT had erred in its view of subsection 426-55, and that section 42D did not permit the AAT to remit the matter under review to the Commissioner with a direction as to the construction of section 426-55. | The Full Court found no error in the AAT's exercise of the section 42D power. The Court rejected the Commissioner's contention that the AAT had wrongly exercised the power in section 42D by remitting the objection decision to the Commissioner with an impermissible direction to apply section 426-55 in a particular way. | The Full Court considered that the AAT's view on section 426-55 did not bind the Commissioner, and the Commissioner acting responsibly could affirm his earlier decision.[15] | While the Full Court considered that the AAT's construction of section 426-55 could be considered in any appeal from a final decision of the AAT, that construction was the catalyst for the exercise of the power in section 42D, and it was desirable to bring to finality the question of construction by determining the question of law.[16] | The Full Court supported the AAT's construction of section 426-55 [19-21]. The Court considered that, as a matter of policy, there is nothing intrinsically erroneous in the construction of a power for the retrospective cancellation of an endorsement being made to depend upon lack of entitlement to the endorsement as at the date the decision is being made. The Court observed that this would preserve endorsement during periods where the entitlement for endorsement had ceased but where any defect had been cured by the date the Commissioner had made the decision. | The Full Court found that nothing prevents the Commissioner from enquiring into the past to determine the period from which any revocation is to take effect. However, the Court agreed with the AAT that subsection 426-55(1) required that the condition for revocation must exist both at the date of the decision by the Commissioner and from any earlier period the Commissioner may consider to revoke the endorsement. | The Full Court considered that this view was supported by subsection 426-55(3), the absence of any provision for partial suspension or revocation, and the absence in section 426-55 of any provision like those permitting amended assessments. | The Full Court found that the subject matter of the power in section 426-55 as one of revocation is capable of attaching only to the single fact of a prior endorsement so that any revocation of the endorsement is complete and must necessarily take effect for the whole of the time it had otherwise applied. The provisions cannot operate to effect a suspension of endorsement over time.

Issues decided:
On appeal to the Federal Court, the Commissioner argued that the AAT expressed a direction of law at paragraphs 79 and 80 of its decision, namely that section 426-55 did not permit a revocation of endorsement from a date earlier than the date of the revocation decision. The Commissioner argued that the direction to reconsider on those terms, for the purpose of ascertaining the position as at 16 February 2012, was a decision under subparagraph 43(1)(c)(ii), not section 42D, of the AAT Act. Accordingly, the Commissioner appealed to the Federal Court under section 44 of the AAT Act on the basis that the AAT had made a decision under section 43 of the AAT Act that incorrectly narrowed the application of section 426-55. In the alternative, the Commissioner sought relief under section 39B(1A) of the Judiciary Act 1903 . | The Commissioner's appeal under section 44 of the AAT Act.: The Full Court held that the Commissioner's appeal was incompetent as no appealable decision had been made by the AAT [paragraph 10]. The Full Court found that the AAT formed a view about a question of law upon which its final decision upon the review of the objection decision depended, namely the construction of section 426-55, and in consequence of that construction, considered that the application of the section to the trustee required further evidence before a final decision could be made. The Full Court found that the AAT chose not to determine the application for review by making a decision under section 43 of the AAT Act, but instead chose to remit the objection decision to the Commissioner under section 42D for further consideration. A decision by the AAT to reconvene at a later date to receive further evidence itself would not have been an appealable decision (in the Chaney sense). The AAT's decision to remit the further consideration of the trustee's entitlement to endorsement as at 16 February 2012 was similarly not a decision in the sense explained in Chaney [1] as no part of the proceeding was decided or determined. | Judicial review proceedings: The Commissioner contended that the AAT had erred in its view of subsection 426-55, and that section 42D did not permit the AAT to remit the matter under review to the Commissioner with a direction as to the construction of section 426-55. The Full Court found no error in the AAT's exercise of the section 42D power. The Court rejected the Commissioner's contention that the AAT had wrongly exercised the power in section 42D by remitting the objection decision to the Commissioner with an impermissible direction to apply section 426-55 in a particular way. The Full Court considered that the AAT's view on section 426-55 did not bind the Commissioner, and the Commissioner acting responsibly could affirm his earlier decision.[15] While the Full Court considered that the AAT's construction of section 426-55 could be considered in any appeal from a final decision of the AAT, that construction was the catalyst for the exercise of the power in section 42D, and it was desirable to bring to finality the question of construction by determining the question of law.[16] The Full Court supported the AAT's construction of section 426-55 [19-21]. The Court considered that, as a matter of policy, there is nothing intrinsically erroneous in the construction of a power for the retrospective cancellation of an endorsement being made to depend upon lack of entitlement to the endorsement as at the date the decision is being made. The Court observed that this would preserve endorsement during periods where the entitlement for endorsement had ceased but where any defect had been cured by the date the Commissioner had made the decision. The Full Court found that nothing prevents the Commissioner from enquiring into the past to determine the period from which any revocation is to take effect. However, the Court agreed with the AAT that subsection 426-55(1) required that the condition for revocation must exist both at the date of the decision by the Commissioner and from any earlier period the Commissioner may consider to revoke the endorsement. The Full Court considered that this view was supported by subsection 426-55(3), the absence of any provision for partial suspension or revocation, and the absence in section 426-55 of any provision like those permitting amended assessments. The Full Court found that the subject matter of the power in section 426-55 as one of revocation is capable of attaching only to the single fact of a prior endorsement so that any revocation of the endorsement is complete and must necessarily take effect for the whole of the time it had otherwise applied. The provisions cannot operate to effect a suspension of endorsement over time.

ATO view of decision:
The ATO accepts that it was open for the Court to conclude that the AAT had not made a decision under section 43 of the AAT Act and, therefore, that the Commissioner's appeal under section 44 was incompetent. | The ATO also accepts the Court's finding that the AAT correctly exercised its power under section 42D when remitting the matter to the Commissioner. The ATO notes that the Court found that section 42D does not permit the AAT to remit a matter back to the Commissioner with a direction as to how he must reconsider the objection decision under section 426-55. | The ATO accepts the Court's view in relation to the construction of section 426-55 of the TAA 1953, i.e., that section 426-55 requires the condition for revocation to exist both at the date of the decision by the Commissioner to revoke and from any earlier period the Commissioner may consider to revoke the endorsement. | Subsection 426-55(2) provides that any revocation has effect from a day specified by the Commissioner (which may be a day before the Commissioner decided to revoke the endorsement.) However, in exercising this discretion it is a precondition that the entity was not entitled to endorsement at the time of the decision to revoke.

Administrative treatment:
Implications for ATO precedential documents (Public Rulings & Determinations etc) | None

Legislative references: Administrative Appeals Tribunal Act 1975 s 42D s 43 s 44 A New Tax System (Goods and Services Tax) Act 1999 Division 176 Fringe Benefits Tax Assessment Act 1986 s 123D Income Tax Assessment Act 1997 Subdivision 50-B Judiciary Act 1903 s 39B(1A) Taxation Administration Act 1953 Part IVC Schedule 1 s 426-55
Case references: Director-General of Social Services v Chaney [1980] FCA 87 (1980) 31 ALR 571 FC of T v Futuris Corporation Ltd (2008) 237 CLR 146 Geographical Indications Committee v The Hon Justice O'Connor [2000] FCA 1877 (2000) 64 ALD 325 Kirk v Industrial Court (NSW) [2010] HCA 1 (2010) 239 CLR 531 R v Foster ex parte Clth Steamship Owners' Association [1953] HCA 86 (1953) 88 CLR 549 Re Ego Pharmaceuticals P/L and Minister for Health and Ageing [2010] AATA 935 Re Refugee Review Tribunal ex parte Aala [2000] HCA 57 (2000) 204 CLR 82 SZBYR v Minister for Immigration and Citizenship [2007] HCA 26 (2007) 81 ALJR 1190
Subject references: AAT power to remit for reconsideration Endorsement as exempt from tax Revocation of endorsement Charitable institution Deductible gift recipient