The Full Federal Court has unanimously dismissed an appeal by the taxpayer, who owed the Commissioner more than $28.6m, in relation to the Commissioner’s decision to re-issue a third party garnishee notice under s 260-5 of Taxation Administration Act 1953 that only required a third party debtor to pay 20% of the $10m it owed to the taxpayer to the Commissioner (instead of 100% under the original notice).
The taxpayer argued that despite the reduction (which had been authorised to allow the taxpayer to continue trading), the Commissioner should have reduced the amount to 10% and in not doing so, he had failed to take into account relevant considerations to the extent that his decision was so “unreasonable” to make it invalid.
However, in upholding the decision at first instance in Queensland Maintenance Services Pty Ltd v FCT & Anor [2011] FCA 1443, the Full Court found that the Commissioner’s “choice of 20% as the relevant percentage was conspicuously moderate in the circumstances, and was both rational and reasonable in the light of the facts with which he was confronted”.
In particular, the Court noted that this percentage would allow the taxpayer to continue trading and to pay its creditors (by way of receiving the remaining 80% owed to it by the third party debtor), while at the same time enabling it meet its on-going GIC liability on the debt owed to the Commissioner and to pay off some of this principal debt.
(Queensland Maintenance Services Pty Ltd v FCT [2012] FCAFC 152, Full Federal Court, Lander, Jessup and Foster JJ, 2 November 2012.)
[LTN 215, 6/11]