In a highly technical procedural case, the AAT has accepted that it was clearly bound by a Declaration made by the Federal Court (Gordon J) on 17 October 2013 to the effect that the AAT did not have the power to review the Commissioner’s objection decisions in relation to amended assessments issued to the taxpayers and the imposition of penalties. However, the AAT said that in giving no reasons for the making of the Declaration (which was made with the consent of the parties), it was left with the problem of how it was now to deal with the remitted matter, and how it was to deal with any similar situation in the future.
The husband and wife taxpayers in this case were beneficiaries of a family trust. The taxpayers had lodged their objections before the issue of the relevant amended assessments for primary tax following letters sent to them by the Tax Office advising them that the amended assessments were soon to be issued for undeclared income from the trust.
With regard to the first matter, the AAT concluded that the Court must have found some jurisdictional error in relation to the application for review of the objection decisions and that as a result, it had to treat that part of its decision relating to its review of the objection decisions as not having been made and therefore its power to implement that Declaration as not having been exhausted. It therefore concluded that it was required to set aside that part of each objection decision that related to the assessment of income tax and substitute a decision that the Commissioner not take any action under the objection process unless and until the taxpayers objects against the assessments in the appropriate manner.
However, the AAT then found that in terms of s 43 of the Administrative Appeals Tribunal Act 1975, it did not have the power to direct the Commissioner in the exercise of his powers and that in these circumstances, it should set aside that part of its decision that concluded it had the power to review the objection decisions and adjourn the matter until the taxpayers lodged fresh objections and the Commissioner made fresh objection decisions.
In relation to the second matter of the Federal Court making decisions by consent on appeals without giving reasons, the AAT was quite critical of the process for a range of reasons particularly in light of various authorities (including High Court decisions) – albeit, emphasising that if it had been given reasons of any sort, it would not “have dreamt of” criticising the Declaration, whether it agreed with the reasons or not. In doing so, the AAT said that one of its main criticisms was that the absence of reasons meant it was left to more or less guess as to how it was to implement the Declaration or conclude that it did not have any express power to deal with it at all.
(AAT Case [2013] AATA 834, Re Walters and FCT, AAT, Ref No 2012/4900, Forgie DP, 22 November 2013.)
[LTN 229, 26/11/13]