The Federal Court has granted the application of husband and wife taxpayers under the Administrative Decisions (Judicial Review) Act 1977 and s 39B of the Judiciary Act 1903 to quash the Commissioner’s decision to issue a garnishee notices pursuant to s 260-5 of Sch 1 of the Taxation Administration Act 1953 to the taxpayers’ superannuation fund, which the taxpayers were apparently in the process of closing down and withdrawing funds from.
At the time of the issue of the notices, the taxpayers were allegedly indebted to the Commissioner in total for over $7m (including interest and penalties) following the issue of notices of amended assessments to them in respect of the 2002 to 2007 income years arising from information obtained by a former employee of a Liechtenstein bank under the Tax Office’s Wickenby project. (The taxpayers had previously been unsuccessful in arguing that the amended assessments were invalid on the grounds they were based on illegally obtained information: see Denlay v FCT (2011) 83 ATR 625.)
In granting the taxpayers’ application to quash the garnishee notices, the Federal Court found that the issue of the notices by the Commissioner had involved an improper exercise of power in the circumstances. These circumstances included that the Commissioner had failed to take into account a stay of enforcement of the judgment debt that had originally been granted in DCT v Denlay (2010) 80 ATR 109.
In addition, the Court found that the Commissioner had also failed to properly take into account that appeals against the amended assessments were still on foot before the Court and had only been partly heard.
Furthermore, it found that the Commissioner had failed to take into account the merits of the taxation appeals and the potential impact of issuing the garnishee notice on the appeals.
Accordingly, the Court ruled that the decision to issue the notices in the circumstances was so unreasonable that no decision-maker, acting reasonably, could have arrived at such a decision.
(Denlay v FCT [2013] FCA 307, Federal Court, Logan J, 5 April 2013.)
[LTN 65, 8/4/13]