Tax & ATO News Australia
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WLQC and Commissioner of Taxation [2018] AATA 14
In WLQC and Commissioner of Taxation Deputy President McCabe examines an application for review brought by a series of Applicants in relation to a number of assessments raised by the Commissioner for a nil amount follow the Commissioner’s refusal to recognise the Applicants as a consolidated group.
The Applicants sought to apply for review by the Administrative Appeals Tribunal (‘AAT’) of a series of objection decision made to uphold assessments of nil for the 2004, 2005 and subsequent financial years as the Commissioner refused to treat the Applicants as a consolidated group.
Deputy President McCabe examined whether the nil assessments issued in 2004, 2005 and subsequent years provided the Applicants with a right of review pursuant to Part IVC of the Taxation Administration Act 1953.
2004 nil assessments:
With respect to the nil assessments in the 2004 financial year, section 175A of the Income Tax Assessment Act 1936 (‘ITAA36’) at the relevant time provided that:
“A taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953”
Further, section 6 of the ITAA36 at the relevant time defined assessment as:
(a) the ascertainment of:
i. the amount of taxable income
The Commissioner contended that the language of these provisions make it tolerably clear that references to specific amounts of taxable income and a determination of the amount the taxpayer was liable to pay were essential features of an assessment at that relevant time.
In support of this position the Commissioner relied upon Batagol v Commissioner of Taxation [1963] HCA 51, which concluded an assessment within the means of the ITAA36 must ascertain an actual amount of tax being due and payable.
Conversely, the Applicants relied upon the Full Federal Court’s finding in Commissioner of Taxation v Ryan (1998) 82 FCR 345 that a nil assessment can be made under the ITAA36. However, the decision was overturned by the High Court on appeal on another point.
Ultimately, Deputy President McCabe found he was inclined to accept he was bound by the authorities, thus accepted that the nil assessments issued for the 2004 financial year were not valid, and that there is no right of review with respect to those decisions under Part IVC.
2005 and subsequent nil assessments:
Deputy President McCabe considered the assessments issued with respect to the 2005 and subsequent financial years separately, as the Tax Laws Amendment (Improvements to Self-Assessment) Act (No. 2) 2005 amended sections 6 and 175A of the ITAA36. Following the amendments sub-section 175A(2) was included, which reads:
(2) A taxpayer cannot object under sub-section 175A(1) against an assessment ascertaining that
(a) the taxpayer has no taxable income; or
(b) the taxpayer has an amount of taxable income and no tax is payable
Unless the taxpayer is seeking an increase in the taxpayer’s liability
The Applicants were unable to confirm whether any particular Applicant with a nil assessment was seeking an increase in liability as it would require further analysis of other companies in the corporate group.
On this basis, Deputy President McCabe found that section 175A(2) of the ITAA36 could not be satisfied by the Applicants’ merely foreshadowing the possibility of an increase.
Jurisdiction:
With respect to jurisdiction the Applicants argued that the Tribunal should not focus on whether the assessments were invalid, it should concern itself instead with whether the assessments were excessive.
In rejecting this argument the Deputy President McCabe found that:
“if there is no assessment – and I am constrained to accept there is no assessment in the 2004 year of income where the taxpayers have received a nil assessment – or if the legislation specifically limits the right of review as it has done in s175A(2), the Tribunal has no jurisdiction to review what has been decided”.
Co-authored with Ben Caratti
Posted in: Tax & ATO News Australia at 29 January 18
The Simple Solution to Solve the Budget
I have had an epiphany.
I can solve the budget shortfall for the Federal Government by showing the Treasurer how to raise unlimited revenue. My plan is simple. The legislation is already in place and the Courts and the AAT have shown us that it is possible.
We are going to tax dead people.
I am not talking about an estate tax, or death duty. That would be politically unpopular.
No, what I am proposing is that the ATO issue default assessments under s167 of the ITAA 36 to every single person who has died in Australia since 1936. How can the Government do this, you wonder? That’s the beautiful part of my plan – all the ATO has to do is to make a determination under s170 that every deceased tax payer avoided tax due to fraud or evasion. Then the ATO can go as far back as it likes and raise new assessments.
The Courts have said time and again in cases like Rigoli and Futuris that the ATO does not even need to try very hard to come up with a figure. They just need to have a bit of an educated guess and then it’s up to the taxpayer to prove that this figure is wrong.
So each deceased taxpayer can get a tax assessment for, say, $10m. Section 177 means that’s proof they owe the tax. And the proof of tax evasion? Well, the ATO doesn’t need to prove that either. That’s up to the taxpayer too. If a figleaf of justification was required (and it’s not, according to the Courts) the ATO will say what it always does in such cases – any taxpayer who owed such a large amount of money must have known they had more tax to pay. Ergo they deliberately understated their taxable income, ergo tax evasion.
Cheating non-taxpaying bastards. We’d lock them up if they weren’t already dead. On the otherhand, fortunately for the Government, being dead makes it hard for the taxpayer to prove their case. If there is a material witness to a question of fact, Jones v Dunkel says you have to produce them to give that evidence or risk an adverse factual finding. And no-one is more material to a question of tax evasion by a taxpayer than the taxpayer him or herself.
The plan is foolproof. Naturally it’s extremely unlikely any money will be collected from estates that have already been distributed and finalised, but quite alot of people will probably cough up a couple of million each to save the cost and expense of having to fight a losing battle against the ATO, with their unlimited litigation budgets.
This was right in front of our eyes the whole time. The Courts and the AAT have already sanctioned it, as recently as last week. Check out this if you don’t believe me.
Well, that’s that problem solved. I’m off to the middle east next to solve that little pickle by introducing effective Workplace Health and Safety Laws.
Posted in: Tax & ATO News Australia at 09 July 15
New transfer pricing rules broaden the ATO’S power
Transfer pricing rules address arrangements under which profits are shifted out of Australia. On 8 September 2012, the first tranche of the new transfer pricing rules received Royal Assent. The new transfer pricing rules (Division 815) replace the former transfer pricing rules found in Division 13 of the ITAA 36.
Posted in: Tax & ATO News Australia at 10 December 12
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