The Full Federal Court has unanimously allowed the Commissioner’s appeal from the decision in McGrouther v FCT [2014] FCA 1102. In that case, the Court ruled (as the taxpayers had sought), that the taxpayers could not withdraw a notice they had given the Commissioner under s 14ZYA of the Taxation Administration Act 1953 that triggers the 60-day time limit for the Commissioner to make an objection decision so that if no decision was made, the objections would be deemed to be disallowed and the appeal process could be set in train.
The taxpayers originally agreed to withdraw the notices as part of an agreement with the Commissioner to withdraw examination notices he had issued to the taxpayers under s 264 of the ITAA 1936. However, the taxpayers successfully argued before the Court at first instance that the notices could not be legally withdrawn. They apparently did so in order to expedite the matter by way of the appeal process (which may have otherwise been lost as there may not have been an objection decison from which to appeal) – and particularly as the Commissioner had commenced recovery proceedings against the taxpayers and had also secured freezing orders against one of the taxpayer’s Australian assets.
However, the Full Federal Court unanimously allowed the Commissioner’s appeal from that decision and agreed that the principle that “any person can waive a statutory provision that is entirely for his or her own benefit” applied in this case. In doing so, the Court also noted that the purpose of s14ZYA was to facilitate proper tax administration for the benefit of a taxpayer who may invoke it, and that there was nothing in the provision to prevent a taxpayer from waiving any such benefit.
From a practical point of view it also meant that the 60 day period for the Commissioner to make an objection decision had not begun to run.
(FCT v McGrouther [2015] FCAFC 34, Full Federal Court, Allsop CJ, Pagone J and Davies J, 16 March 2015.)
[LTN 52, 18/3/15] [IT 18/3/15]
FJM Note
The taxpayers had lodged objections and later the Commissioner issued a s264 notice to obtain information relevant to the objections. Two days later the taxpayers issued a s14ZYA(2) notice requiring the Commissioner to determine their objections (on pain of the objection being deemed to be disallowed, if not determined within the next 60 days). The taxpayers also launched judicial review proceedings to challenge the Commissioner’s decision to issue the s264 notice. The taxpayers agreed to withdraw their s14ZYA(2) notices in return for the Commissioner agreeing to adjourn the s264 examination. Then the taxpayers commenced proceedings under Part IVC of the Taxation Administration Act 1953 appealing from the deemed disallowance of their objections – claiming that despite their agreement to withdraw the s14ZYA(2) notices, this was not legally possible. This was seeking tactical advantage in having the appeal from the objection decision determined without having to answer the s264 questions prior to the appeal).
Extract from [2015] FCAFC 34
13. In the present case, the respondents gave the Commissioner written notices (“the notices”) requiring him to make an objection decision on their objections. The notices were given two days after the Commissioner had served the first respondent with a notice under s264 of the Income Tax Assessment Act 1936 (Cth) (the “ITAA36”) requiring him to attend an examination to assist the Commissioner in making a decision on the objections. The respondents “withdrew” their notices before the end of the 60 day period referred to in s 14ZYA(3) as a condition of the Commissioner agreeing to adjourn the examination of the first respondent until after the hearing and determination of judicial review proceedings in which the first respondent was seeking orders to prevent the Commissioner from conducting the s264 examination.
14. Notwithstanding that they had withdrawn their notices, when the 60 day period referred to in s 14ZYA(3) expired, the respondents commenced an appeal under Part IVC of the TAA against the disallowance of their objections. The Commissioner applied to have the respondents’ Part IVC appeal struck out or dismissed on the basis that there was no objection decision against which a Part IVC appeal could be made. The respondents contended that once an election has been made by a taxpayer to give a notice given under s 14ZYA(2), the notice cannot be withdrawn by the taxpayer and, accordingly, that their objections were deemed to have been disallowed by operation of s 14ZYA(3). The Court below accepted the respondents’ argument that it is not possible for a taxpayer to withdraw a s 14ZYA(2) notice, once given, and dismissed the Commissioner’s application.