On 16 December 2021, the Full Federal Court has confirmed that a bankrupt taxpayer had no standing to apply for a review of a decision disallowing her objections to amended assessments. Ordinarily a taxpayer is not relevantly ‘dissatisfied’. Here, however, the taxpayer had been charged with various offences based on there being a tax debt, and she sought to establish that this made her relevantly ‘dissatisfied’ (assuming that challenging the debt helped her defend the charges).
The facts were these:
- In October 2016, the ATO disallowed the taxpayer’s objections to various amended assessments.
- In April 2018, after the ATO had obtained judgment for a tax debt of just over $2m, the taxpayer was declared bankrupt.
- 18 months later, she was charged with obtaining a financial advantage by deception and conspiracy to defraud the ATO, in relation to the assessed amounts.
- In August 2020, the taxpayer sought an extension of time to apply to the AAT for review of the October 2016 objection decision.
- Although a bankrupt would not normally have standing to challenge the decision (by virtue of the majority decision in McCallum v FCT [1997] FCA 533), the taxpayer submitted that as a successful review of the objection decision would have relevance for the criminal charges against her, she had continued cause to be “dissatisfied” with the decision within the meaning of s 14ZZ of the TAA.
- The AAT disagreed (see Pitman and FCT [2020] AATA 5308).
The Full Federal Court has unanimously held that the AAT’s decision did not involve any error of law and therefore dismissed the taxpayer’s appeal. The Full Court:
- rejected the taxpayer’s contention that the AAT’s construction of s 14ZZ of the TAA53 would operate to impose an incontestable tax liability on the taxpayer. The High Court established that a tax is only ‘incontestable’ where, though justified as being a tax, by being imposed on criteria, there was no right to contest the applicability of those criteria – Giris Pty Ltd v CofT [1969] HCA 5; 119 CLR 365 (Giris), 378–379, and that s14ZZ did not preclude this, but simply changed the person relevantly ‘dissatisfied’ with the tax, to the insolvent administrator. Notwithstanding this, Hill J, in dissent in McCallum held that it was not necessary to show that the legal right, to object (etc.) had been lost, however, in this case (Pitman), the Full Court (Davies J, para 9) saw no reason to depart from the majority judgement in McCallum.
- it refused to reconsider the majority decision in McCallum as it had stood for many years, been followed in many decisions and the taxpayer had not presented cogent and forceful submissions directed at persuading the Court that the majority decision was “plainly wrong”. The Court noted, however, that the majority judgement did allow for some chance that a taxpayer could remain relevantly dissatisfied, even though bankrupt. For instance, a tax appeal arising during the period of bankruptcy, could affect tax liability in subsequent years, that would not be releasable, under that insolvent administration.
- it held that the AAT had not erred in law, in the manner in which it approached the question of whether the appellant taxpayer was relevantly ‘dissatisfied’. The AAT’s analysis proceeded on an examination of whether the existence of the tax debt actually bore on each of the 4 state charges, and the lack of evidence about such things (paras 79-83 of the AAT’s reasons, reproduced in para 13 of the reasons of Davies J).
The State charges were withdrawn (affecting the utility of this appeal). They were, however, replaced with Federal Charges, in respect of which the Appellant taxpayer (Pitman) sought to adduce further evidence. The Full Court refused, as it was not germane to this appeal, which was remitted from the AAT’s decision, that was based on the existence of the State charges (see generally, para 16 of the reasons of Davies J). It may, therefore, be open to the Appellant taxpayer, to make fresh application to the AAT, for review of the objection decisions and, in doing so, learn some of the lessons, from this appeal (eg. evidence of how these new charges might prejudice Pitman’s criminal defence prospects, as a basis for establishing that she was relevantly dissatisfied).
There may be other ways for Ms Pitman to approach her substantive objective of appealing her tax liability. This would be by applying to the Court for an order, to allow her to run the appeal herself (at her own expense). Davies J observed (at para 8) that in McCallum, Lehane J said (at pp 475-476):
[A] bankrupt taxpayer, who wishes to challenge an assessment but lacks standing to do so, is not left without remedy. An extended passage in the majority judgment in Cummings [1996] HCA 19; 185 CLR 124, at 138, 139, emphasises that the Court will use its power to prevent injustice or oppression and that the power is available, and may be exercised (at least if it can be done without cost to the estate), even if its exercise is sought only for the purpose of vindicating a claim or interest personal to the bankrupt.
I am not saying anything, one way or the other, about the merits of Ms Pitman’s position – that is simply impossible to glean from my reading of this decision.
(Pitman v CofT [2021] FCAFC 230, Full Federal Court, Allsop CJ, Davies and Bromwich JJ, 16 December 2021.) [LTN 244, 17/12/21]
[Tax Month – December 2021 – Previous 2021] 3.1.22