In this case, the AAT decided that the terms of a Settlement Deed, which the trustee and the Commissioner executed, prevented the trustee objecting and precluded the AAT reviewing the assessments issued in accordance with that Deed.

  • The taxpayer was the trustee of a family trust.
  • There had been ongoing disputes, audits and negotiations regarding the assessable income of the trust for the 1999 to 2005 income years.
  • Though there were various parties involved, only the trustee was a party to the Settlement Deed.
  • The Commissioner issued various assessments to the trustee (Taxpayer) in accordance with the Settlement Deed (relevantly for amounts for which just the Trustee was liable – eg. shortfall penalties, where the trustee is liable and not the beneficiaries).
  • Notwithstanding the Deed, the Taxpayer objected to these assessments, despite the assessments being ordained by the Deed, and the existence of some terms appearing to prevent the Taxpayer objecting to these assessments.
  • However, the taxpayer later objected to these assessments and the Commissioner refused to determine them as being invalid (because of the Deed).
  • The Taxpayer then sought to review the Commissioner’s decision (in the AAT under Part IVC of the TAA53). Its grounds included the following:
    • That the terms of the deed did not actually precluded the taxpayer objecting to these assessments; and
    • Even if they did, a deed cannot take away a statutory right, such as the right to object to an assessment (under Part IVC of the TAA53).

On the first ground: the AAT held that the parties clearly intended, the arrangements set out in the Deed, would finalise all matters in dispute between the parties, once and for all. It contained clauses clearly abrogating the taxpayer’s rights to object to, or to request amendment or review of, the assessments. There was no attempt to hide or obfuscate these clauses.

The second ground is perhaps the more legally interesting. The issue is, essentially, can you ‘contract out of’ a statutory right?

  • There might be contractual consequences for doing something you’ve promised NOT to do (such as damages), but does that actually preclude the person exercising the statutory right.
  • Does it mean, for instance, that the Commissioner does not have to determine the objection, because it is not valid (which is what he did in this case).

The AAT held that a taxpayer can contract out of its objection right and the Commissioner was justified in not determining the objection, and, consequently, the AAT had no jurisdiction to determine the matter as there was no relevant ‘objection decision’ to review [para 93 of its reasons].

The AAT first noted the principle that a person may ‘barter away’ legal rights, including statutory rights, the latter only if they are for their benefit alone (and not also, for the public benefit). [para 90]

In Davies v. Davies [1919] HCA 17; (1919) 26 CLR 348, at p 362, Higgins J. expressed the general rule when he said:

‘Anyone is at liberty to renounce a right conferred by law for his own sole benefit ; but he cannot renounce a right conferred for the benefit of society.’

The AAT then noted the Full Federal Court had concluded, in CofT v McGrouther [2015] FCAFC 34, that another objection related right (in s14ZYA of the TAA53, deeming an objection to be disallowed, if not determined within 60 days of serving the relevant notice) [para 92]. The effect here was that the taxpayer’s withdrawal of his ‘notice’ was effective, so that the Commissioner was not deemed to have disallowed the objection and there was no basis on which the AAT review of the deemed disallowance of the objection could be reviewed, in the AAT [see Tax Technical article about McGrowther’s case].

The Tribunal concluded that the right a right to object to an assessment, is like the s14ZYA power – for the benefit of the taxpayer alone, and can be waived by contract. [para 93]

It might be of interest to note the type of right that can’t be waived (because it is also for the public benefit). Continuing on with the quote from Davies v Davies, above:

That was the doctrine on which the final decision in Hyman v. Hyman (1929) AC 601 stands. Lord Hailsham said (1929) AC, at p 614 that

‘. . . the power of the Court to make provision for a wife on the dissolution of her marriage is a necessary incident of the power to decree such a dissolution, conferred not merely in the interests of the wife, but of the public, and . . . the wife cannot by her own covenant preclude herself from invoking the jurisdiction of the Court or preclude the Court from the exercise of that jurisdiction’.

(EE&C Pty Ltd as Trustee for the Tarcisio Cremasco Family Trust v CofT [2018] AATA 4093, AAT, DP Forgie, 30 October 2018.)

FJM 23.11.18

[LTN 213, 5/11/18; Tax Month – November 2108]

CPD questions (answers available)

  1. Did the Taxpayer execute a settlement deed?
  2. Did the Taxpayer agree not to object to the specified assessments?
  3. Did the Taxpayer object to them, anyway?
  4. Did the Commissioner disallow the objections?
  5. Did the Taxpayer apply to the AAT to review the Commissioner’s objection decision?
  6. Was one of the Taxpayer’s arguments that he can’t contract out of his statutory right to object?
  7. What kind of right does the law accept can be effectively waived by agreement?
  8. Did the AAT point to a right to, give the Commissioner a s14ZYA notice, that he must determine an objection, within 60 days, or he will be deemed to have disallowed the objection?
  9. What was the name of this case?
  10. Did the taxpayer (in that case) claim that his agreement, to withdraw that notice, was ineffective to undo this statutory right to a deemed disallowance of his objection?
  11. Did the AAT treat the Taxpayer’s agreement (in this Case), to not object to the specified assessments, as the same withdrawing a s14ZYA notice?
  12. What was the result, in this case?

 

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