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THE REVIEW PROCESSES UNDER THE ADMINISTRATIVE DECISIONS (JUDICIAL REVIEW) ACT 1977 (CTH) - JURISDICTIONAL ISSUES IN THE INCOME TAX ARENA
By Michael Blissenden
This article deals with the threshold issues concerning judicial review of day to day decision making of the Federal Commissioner of Taxation. In particular, the focus is on what is meant by a decision in the context of the Administrative Decisions (Judicial Review) Act. The article then proceeds to evaluate whether such decisions have been made under an enactment, namely the Income Tax Assessment Act 1936 (Cth). An analysis is then made as to the appropriate course of action for taxpayers and their advisers.
This article will focus on jurisdictional threshold questions of review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("AD(JR)A") concerning tax decisions made by the Federal Commissioner of Taxation ("Commissioner"). Actions and determinations made by the Commissioner can range from oral or written advice[1] concerning a taxpayer's liability to the formal process of issuing a disallowance of an objection to an assessment. This article will focus on those actions and determinations that relate to processes as part of general tax administration. Decisions leading up to and forming part of the assessment or objection process will not be covered and are specifically excluded from review by Sch 1, para (e) of the AD(JR)A.[2]
The AD(JR)A provides for review, by proceedings in the Federal Court, of decisions of an administrative character made under an enactment. There are a number of aspects that need to be evaluated when examining the actions and conduct of individual officers of the Commissioner, to determine the scope of the AD(JR)A.
It is critical that a "decision", as defined by s 3 has been made by an authorised officer of the Commissioner. As such it needs to be a decision of an administrative character made, proposed to be made, or required to be made other than a decision set out in Sch 1 of the Act. In interpreting what constitutes the making of a decision, s 3(2) of the AD(JR)A specifies that it includes the making of orders, the giving of certificates and consents and more generally the doing or refusing to do any other act or thing. From a federal tax perspective, it is important to determine whether the actions by the Commissioner or authorised officers represent a decision for the purposes of the AD(JR)A.
If such actions cannot be considered to be a decision to which the AD(JR)A applies, then there is no right of review under ss 5 to 7 of the Act.[3] If such actions do constitute a decision, then the administrative action is justiciable. If that is the case and the aggrieved person has standing and satisfies one of the grounds of review, then the remedies of the Act will be available. An aggrieved person will also be able to obtain reasons from the administrator as to the basis for the decision.[4] To obtain an insight to the nature of reviewability of decisions it is necessary to examine the leading administrative law cases.
The leading High Court pronouncement as to what constitutes a "decision" for the AD(JR)A purposes is Australian Broadcasting Tribunal v Bond.[5] The court held that a determination by an administrator would be a reviewable decision if it is a decision that is required or authorised by a statute, which is final or operative and determinative. However, a conclusion reached in a course of reasoning leading to an ultimate decision will not be a reviewable decision unless the statute itself provides that the intermediate decision is a decision under an enactment.
Mason CJ stated that:
... a reviewable decision is one for which provision is made by or under a statute. That will generally, but not always, entail a decision, which is final or operative and determinative, at least in a practical sense, of the issue of fact falling for consideration. A ... decision would not ordinarily amount to a reviewable decision, unless the statute provided for the making of a finding or ruling on that point so that the decision ... is under an enactment. Another essential qual-ity of a reviewable decision is that it be a substantive determination.[6]
The Court also held that where an administrator reaches a conclusion along the way to an ultimate decision, then generally this will not be a decision under an enactment. However, where the statute
itself provides for this finding or ruling then although it is an intermediate decision, it will be a decision under an enactment. It is necessary to evaluate the manner in which the Court reached these conclusions.
Mason CJ noted that there were competing policy considerations in relation to this issue.[7] On the one hand, the underlying rationale of the AD(JR)A is to provide an avenue for those persons aggrieved by administrative decision-making to achieve some redress. On the other hand, if the notion of "decision" is extended to encompass conclusions reached by administrators as part of the process leading to a final decision, this would lead to inefficiency in the administrative process. However, his Honour determined the matter by reference to the wording of the legislative framework of the AD(JR)A that a reviewable decision is one for which provision is made by or under a statute. In that regard, his Honour concluded that this view meant that procedural determinations by an administrator would not qualify as a decision under the AD(JR)A.[8] Applying this reasoning to the facts of the case, his Honour held that the Australian Broadcasting Tribunal's finding that the licensees were no longer fit and proper persons to hold their broadcasting licences under the Broadcasting Act 1942 (Cth) was a reviewable decision. Even though this decision was only a determination made on the way to the final decision to revoke, suspend or impose conditions on the licences, it was a decision in the sense that the statutory framework provided for that determination prior to the final action. On the other hand the Tribunal's conclusion that Mr Bond would not be found to be a fit and proper person to hold a licence was not a determination provided for by the legislative framework. Rather it was only a step in the overall reasoning by the Tribunal that the licensees were no longer fit and proper persons to hold licences.[9] This was so even though this determination was an essential part of the Tribunal's reasoning to support the determination concerning the licensees. In essence, a conclusion that a person controlling the licensee is not a fit and proper person was not a reviewable decision. [10]
This approach does appear to have a limiting effect on the ability of aggrieved persons to obtain review under the AD(JR)A. Findings of fact and conclusions drawn by an administrator which will lead to a final determination will not be characterised as a reviewable decision as such conclusions are only part of the process leading to the ultimate determination. It is this ultimate determination that is provided for and authorised by the legislative framework in which the administrator operates. Where the legislative framework provides for those conclusions or findings of fact, then there will be a reviewable decision. On that basis, it is necessary to appreciate the legislative parameters in which an administrator operates so as to formulate a considered view that a reviewable decision has been made.
The High Court decision in Bond could be described as a watershed judgment that now provides the benchmark when attempting to determine whether actions by an administrator will be classified as a reviewable decision. Subsequent cases have focussed on the element as to whether the actions can be characterised as a decision which is substantive, final and operative. However, this does not mean that there will be a conclusion of non-justiciability. Rather the focus shifts to whether the actions by the administrator constitute conduct engaged in for the purpose of making a decision, which is justiciable under ss 3(5) and 6 of the AD(JR)A.
In NSW Land Council v ATSIC,[11] Hill J stated:
In my view, and consistently with what the Chief Justice said in Bond, the conduct that then is reviewable is the procedure that the decision-maker engages in for the purpose of making the relevant decision. This has two implications for the present case. The first is that it is necessary, before there can be review of conduct under s 6(1) of the ADJR Act, that there be able to be identified decisions of the relevant kind, not yet made, in circumstances where the tribunal has embarked upon, or proposes to embark upon, the decision-making process leading up to the mak-ing of these decisions. The second matter is that the review must be concerned with the procedure adopted by the decision-maker as the decision-making process leading up to the making of the relevant decision, the making of a decision in the course of the process not being, conformably with Bond, relevant conduct.[12]
Hill J identifies two critical features as to reviewability of conduct. It is necessary that one is able to identify decisions, not yet made, in circumstances where the administrator has embarked upon the decision-making process leading up to the making of those decisions. It is then necessary for reviewability to identify that it is the procedure adopted by the decision-maker as the decision-making process leading up to the making of the relevant decision. Thus conduct is referable to action taken, rather than a decision made, for the purpose of making a reviewable decision. Conduct is essentially procedural and not substantive in character.
The foregoing paints a picture as to the manner in which the decision-making process of an administrator may be reviewed under ss 3 and 6 of the AD(JR)A. How this applies to the Commissioner in day to day administration is a developing area of taxation law and is explored in more detail below.
The Commissioner has been given the responsibility of administering the tax system[13]. This means that the Australian Tax Office ("ATO") has the responsibility to "collect the revenue that is correctly payable under the law."[14] It is important to note that the ATO accepts that it is only entitled to collect the correct amount of revenue under the legislative framework of the Income Tax Assessment Acts. Accordingly, any action, conduct or decision-making that is undertaken or implemented should be in response to that underlying principle. In undertaking this administrative task of collecting revenue, ATO office staff are required to deal with numerous enquiries concerning the application and interpretation of the income tax laws. Responses by staff could range from oral advice and information to detailed formal responses such as private rulings. Furthermore, with an emphasis on a self-assessment regime and voluntary compliance, an important administrative function would include ensuring that taxpayers understand their rights and obligations. In this regard it would be expected that there would be more interaction between the ATO and taxpayers concerning relevant obligations and rights under the income tax legislation. Obligations under the tax law would normally be highlighted by the ATO but it should also be part of the general administration function to keep taxpayers informed as to their respective rights. This includes outlining rights relating to remedial action available for defective administration and could be made available through The Taxpayers' Charter ("the Charter"). Where a taxpayer fails to act in accordance with their obligations it would be expected that the ATO would utilise specific powers in conjunction with the general administration power.[15]
The Charter, effective from 1 July 1997, provides a summary of the legal rights that exist for a taxpayer as well as setting out the standards that can be expected from the ATO. Those standards cover aspects such as the taxpayer being treated fairly and reasonably and to provide advice and information that can be relied upon. Taxpayers would expect that taxation officers would comply with the standards. If that does not happen then taxpayers would be able to bring this to the attention of the relevant officers and request that appropriate action be taken to remedy the situation. In this way, taxpayers may be able to resolve any disputes that arise from ATO decision making in an informal manner.
The above discussion illustrates the complex web that constitutes tax administration. From the perspective of seeking judicial review, it is necessary to apply the rules established in administrative law and in particular the guiding principles of Bond to the day to day decision-making of officers of the ATO.
In Australian Wool Testing Authority Ltd v FC of T,[16] the Federal Court was required to rule on an objection to the competency of an application for judicial review. The applicant taxpayer had been exempt from income tax under s 23(jd) of the ITAA36 until that provision was repealed with effect from 1 July 1990. The applicant sought clarification from the Commissioner in November 1989 as to its income tax status and requested exemption under s 23(h) of the ITAA36. The Commissioner responded by letter, advising the taxpayer that it was considered to be exempt and was not required to lodge returns unless specifically requested to do so. However, the Commissioner subsequently informed the taxpayer, also by letter, that the earlier advice was withdrawn and that it was not exempt from tax. The taxpayer sought a review of this decision.[17]
The Commissioner objected to the application for review on the basis that the letters only expressed opinions concerning tax status and were not decisions in the sense required for purposes of the AD(JR)A. Interestingly, the Commissioner also argued that even if there was a decision under an enactment it was excluded by reason that it formed part of the process leading to an assessment and excluded by virtue of Sch 1, para (e).
Northrop J was of the view that the first letter by the Commissioner did disclose a decision for purposes of the AD(JR)A. The advice that the taxpayer need not lodge returns of income unless requested was of a substantive character. Further the second letter which revoked the earlier decision was also of a substantive nature. His Honour concluded that as the taxpayer was deprived of the benefit that had been conferred upon it by the earlier letter, the advice could be classified as a decision. The difficulty with Northrop J's conclusion is that the advice provided by the Commissioner in the relevant letters did not actually determine the tax liability of the taxpayer. Instead the letters provided an opinion as to the current position which may subsequently change, even before the end of the financial period. On that basis, and in light of Bond, it could be argued that the advice by the Commissioner in the letters was only a step in the process of eventually determining the tax liability of the taxpayer and not a decision for AD(JR)A purposes.
The judgment of Northrop J does highlight that the notion of a "decision" and how it applies to the daily tax decision making of the Commissioner is a difficult task. Subsequent court judgments have also demonstrated difficulty in distinguishing between procedural actions by the Commissioner and decisions that are of a substantive determination for AD(JR)A purposes. For instance in Strictly Stainless Pty Ltd v DFC of T,[18] Davies J held that a refusal by the Commissioner to agree in relation to settlement proposals for a taxpayer's tax liability was not a decision for the purposes of the AD(JR)A.
Furthermore, in Hutchins v DFC of T,[19] the Full Federal Court held that a decision by the Commissioner to vote against a motion that the creditors of the taxpayer accept a compromise deal was not a decision for AD(JR)A purposes as it was not of a substantive nature. The taxpayer had sought a motion for a special resolution that creditors accept a composition of the taxpayer's debts. The Commissioner was one of the taxpayer's creditors and a decision was made that the Commonwealth would vote against the motion and accordingly the motion failed to be carried. The taxpayer sought judicial review.
In relation to whether there was a decision in the sense described by Mason CJ in Bond, Black CJ held that the determination by the Commissioner was not reviewable under the AD(JR)A as it was not of a substantive nature. His Honour stated that "the decision to vote did not, of itself, determine anything. It was in the nature of a step along the way to the resolution of the body of creditors who attended the meeting in person, by attorney or by proxy"[20]. Lockhart J was also of the view that there was "nothing final, or operative, or determinative, about the respondent's decision. Of itself, the decision neither conferred nor denied any benefit to the appellant (taxpayer), or to anybody else."[21] His Honour also made the point that it was the creditor's meeting that would determine the outcome of the proposal and not the decision by the Commissioner to oppose the motion. In that sense, the manner in which the Commissioner was to vote was only a part of the overall voting process. Furthermore, his Honour also made it clear that the approach taken by the Commissioner was reflective of the process of recovering tax owing by the taxpayer to the Commonwealth. On the other hand, Spender J concluded that "if the decision to vote in a particular way at a Part X meeting is a decision made under an enactment, it is determinative of that matter under the enactment."[22] The essence of this approach would appear to be that if it could be ascertained that the decision was made under an enactment, the decision is of its very nature a substantive determination.
This case provides some insight to the approach that needs to be taken to determine the nature of a "decision" for tax decision-making. It would seem that there is a fine yet definite line to determine when a decision is final, operative or determinative. Decisions that are part of the overall process of tax administration and are reflective of the responsibilities of the Commissioner in administering the tax system may not fall within this categorisation. Instead such decisions will be seen to be a step in the process of determining substantive determinations such as formulating tax liability or instituting recovery of tax proceedings.
A review of other case law indicates that this area is a fertile ground for litigation between the Commissioner and aggrieved taxpayers. In Independent Holdings Ltd v DFC of T,[23] Spender J was required to examine a judicial review application by a taxpayer in relation to an intended use by the Commissioner of the assessment power in s 166 of the ITAA36. The Commissioner had written to the taxpayer stating that he intended to raise assessments or amended assessments against the taxpayer on a certain basis relating to the taxpayer's tax liability. The taxpayer sought review under the AD(JR)A asserting a number of claims relating to the ability of the Commissioner to issue the assessments. The Deputy Commissioner objected to the Federal Court hearing the matter on the basis that there was no decision made under an enactment. Alternatively, if there was a decision made under an enactment it was excluded by virtue of Sch 1, para (e). Spender J referred to Bond and with little difficulty determined that there had been a decision made under an enactment.[24] His Honour held that "the making of an assessment by the Commissioner is expressly provided for by s 166 of the Act, and is accurately described as a decision under an enactment."[25] However, even though the making of an assessment is authorised by s 166 of the ITAA36, this in itself was not being challenged. Rather it was the threat of the issue of an amended assessment that the taxpayer sought to restrain. That decision is a step in the direction of a final determination, namely the issue of the amended assessment. It is not clear that this is a decision in the sense considered as the reviewable decision contemplated by Bond.
In Knuckey v FC of T,[26] the applicant was a registered tax agent. The Commissioner, as part of the Work Related Expenses Audit Program, selected the tax agent for purposes of reviewing a number of his clients income tax returns. The tax agent sought review of this decision under the AD(JR)A. The Commissioner contended that the decision was not a reviewable decision as it was not a "decision under an enactment". Sundberg J noted that "the Act does not confer any specific power on the Commissioner to establish the program or to include people within it."[27] In that regard it was necessary to examine the general administration power in s 8 of the ITAA36. His Honour referred to Hutchins and to the majority judgment concerning whether there was a "decision under an enactment". Applying that approach, his Honour concluded that the decision to establish the program was authorised by the Act but only in a very general manner by s 8.[28] Accordingly, it was determined that s 8 did not make provision for the decision to establish the program and include the tax agent. However, it would seem from the judgment that there is an acceptance without discussion that there was a "decision" in the sense contemplated by the High Court in Bond. The action taken by the Commissioner related to establishing a program as part of the ATO's audit methodology and in doing so would eventually identify any inconsistencies. That may then lead to a substantive determination relating to the tax liability of certain taxpayers. It seems that the Court was prepared to accept that the establishment of the program was a decision for AD(JR)A purposes and the question for judgment related to whether it was "under an enactment."
The distinction between "decision" and "under an enactment" was explored in more detail in Schokker (No 2) v FC of T.[29] The aggrieved applicant asserted that certain ATO staff had breached the secrecy provisions of the ITAA36. The Commissioner declined to institute proceedings against the staff members and the applicant sought judicial review under the AD(JR)A. The Commissioner contended that there was no "decision" made pursuant to s 3(1) or if there was such a decision it was not made "under an enactment". The applicant argued that the decision was made pursuant to s 61(2) of the Public Service Act 1922 (Cth) and therefore was made under an enactment. It was also argued that the decision was made pursuant to an instrument being the Public Service Disciplinary Handbook. On that basis, the decision was made under an enactment for s 3(1) purposes. Nicholson J examined the arguments for the Commissioner which were directed to distinguishing between substantiated and unsubstantiated allegations in the course of determining whether to refer the matters for prosecution. His Honour referred to Bond and concluded that the statements in the letters to the applicant do in fact portray a determination not to proceed with any action and are not merely stating the existing position. His Honour was then required to identify whether the decision was of a substantive nature as contemplated by the High Court in Bond. The Commissioner argued that this was not the case because it was the Australian Federal Police who had the final power as to conduct a criminal prosecution. On that basis, the Commissioner argued that the advice in the letters were only a step in the direction of the final determination, namely the final decision to prosecute or not to prosecute. Nicholson J rejected this assertion and he concluded that the decision was not interim in nature. The advice not to proceed brought the matter to an end and in that sense was a decision of a substantive nature. This judgement appears to have applied the principles of Bond in a clear and concise manner. It also indicates the potential for a fine distinction to be drawn between actions and conduct that may or may not represent a "decision" for AD(JR)A purposes.
In Century Yuasa Batteries Pty Ltd v FC of T,[30] the taxpayer became aware of possible withholding tax obligations in relation to a credit facility to a non-resident. The taxpayer made a voluntary disclosure to the Commissioner and paid a certain amount as an estimate of the withholding tax payable on the interest to the non-resident. The Commissioner wrote to the taxpayer advising of the withholding tax liability and demanding payment of an additional amount. The taxpayer paid the full amount but later sought judicial review of the Commissioner's decision to demand payment of the withholding tax. It was asserted by the taxpayer that the demand by the Commissioner had practical consequences in that the taxpayer would be exposed to additional penalty payments if the Commissioner was correct and the taxpayer had refused to pay in the interim. Cooper J rejected this submission and stated:
Nor does the demand have any practical effect on the applicant. If the demand is not met by the applicant because of an erroneous view that it is not liable to make the payment, any liability for additional tax for late payment arises from the operation of the ITAA and not in consequence of any reviewable decision of the Commissioner.[31]
Further his Honour held that the decision to recover an amount equal to the withholding tax and the demand for payment was not in itself a substantive determination in the sense contemplated by Bond. Accordingly, the Court held that there was no reviewable decision. In coming to this conclusion the Court also noted that the ITAA36 did not make provision for the Commissioner to make a determination of the applicant's liability. The Court did not distinguish between "decision" and "under an enactment" in coming to a conclusion that the decision was not a reviewable decision for the purposes of the AD(JR)A. [32]
In Robinswood Pty Ltd v FC of T, [33] the Court was concerned with a number of alleged decisions and or alleged conduct on the part of the Commissioner. The taxpayer was a member of a group of companies which was audited by the Commissioner. Subsequently, assessments were issued for penalty tax on the basis that the taxpayer was an employer who had refused or failed to deduct the proper amounts from the salary of employees. The taxpayer objected but this objection remained unresolved. The taxpayer then took action for judicial review. The Commissioner advised the taxpayer that it was not a group employer and that the objections were no longer valid and sought to dismiss the action. The taxpayer asserted that there were many decisions made in the course of the audit that were reviewable decisions for AD(JR)A purposes.
Nicholson J stated that the contentions of the parties overlapped on the question of whether there were "decisions" and whether such decisions were "made under an enactment" and accordingly it was to be assumed that the alleged decisions and conduct were decisions for AD(JR)A purposes. On that basis his Honour proceeded to examine whether the decisions were made under an enactment.[34] To a certain extent, this approach does not assist in attempting to evaluate the necessary requirements between a "decision" and "made under an enactment". This is particularly so when attempting to evaluate and categorise actions by the Commissioner which are only steps in the direction of exercising powers under the ITAA36 in a determinative manner.
In Golden City Car and Truck Centre Pty Ltd and Anor v FC of T,[35] Cooper J was required to rule on the competency of an application by an aggrieved taxpayer. The Commissioner had audited the taxation affairs of the taxpayer and issued amended assessments. The taxpayer objected to the assessments and the Commissioner then instituted proceedings to recover the unpaid income tax. The taxpayer sought review of those proceedings under the AD(JR)A. His Honour rejected the claim and stated that “the decision to sue is itself but one step in the recovery process. There is nothing in the decision which is final or determinative or which removes a benefit or exposes the applicants to a detriment which they are not already subject to.”[36] This view is consistent with Hutchins and reinforces the position that once the tax became due and payable, the taxpayer was exposed to having judgment entered against it. That was a step in the direction of recovering the outstanding tax.
The requirement that the decision be "under an enactment" also needs examination. In Lewins v Australian National University,[37] a senior lecturer employed by the university applied for a promotion pursuant to a statement of procedures. The Promotions Committee did not recommend the promotion and the senior lecturer sought a statement of reasons under s 13 of the AD(JR)A. The University refused and the applicant commenced proceedings seeking a review. Lee J noted that it was not in issue that the decision of the Promotions Committee was an ultimate or operative determination that bore the character of a decision for the purposes of the AD(JR)A[38]. The decision by the committee not to recommend promotion was an ultimate act by the university. Rather the issue related to whether the decision could be said to have been made "under an enactment". The university contended that the decision not to promote was as a consequence of the contractual arrangement with the applicant.
His Honour referred to Bond and the requirement that it is necessary that the decision be one which the statute requires or authorises. Further, "if it is said that a decision has been made under an instrument made under an enactment, there must be sufficient proximity between the decision and the instrument, and the instrument and the enactment, to allow it to be said that the decision and the instrument have been made under the instrument and the Act respectively."[39] In the circumstances of the case, the Court concluded that the statement of policy procedures in relation to the promotion process was an instrument made under the Australian National University Act 1992 (Cth). On that basis the decision not to promote was a decision made under an enactment.
A review of court cases dealing with the concept "under an enactment" in the tax arena reveals a distinct embracing of the administrative law decisions and in particular the Bond decision. In Brownsville Nominees Pty Ltd v FC of T,[40] the taxpayer sought judicial review under s 7 of the AD(JR)A for an order directing the Commissioner to make a decision under s 170(6) of the ITAA36 as to whether amended assessments should issue in relation to outstanding matters between the parties which had not reached external review stage under the objection and appeal provisions. It appeared that the Commissioner was considering whether to issue amended assessments to the taxpayer in light of other judicial authority. The taxpayer sought the judicial review on the basis that if an application had been made within the time frame of s 170(6), the Commissioner was then required to make a decision whether to issue amended assessments. Northrop J noted that s 170(6) preserved the power of the Commissioner to make an amended assessment so as to reduce the tax liability of a taxpayer.[41]However, this in itself did not create a duty upon the Commissioner to actually issue the amended assessment which is a necessary connection for s 7 of the AD(JR)A. This was to be contrasted with the since repealed s 200B of the ITAA36 where the Commissioner was under a statutory obligation to issue the amended assessment within a certain time period. In that case, the Commissioner would be making a decision under an enactment. The essence of this judgment is that where a decision made by the Commissioner is provided for by a statutory provision of the ITAA36, it will then be considered to be a decision "made under an enactment."[42]
In Australian Wool, Northrop J held that a letter to a taxpayer relieving them of the need to lodge returns was a decision "made under an enactment" namely s 8 of the ITAA36. His Honour considered that "the express provisions of s 8 of the Assessment Act, by implication at the very least, should be construed as conferring upon the Commissioner a power to make a decision that the income of particular persons is exempt income under s 23 and thus relieving those persons from the obligations of lodging a return of income."[43]His Honour was of the view that there is no need to communicate relief from lodging a return through the mechanics of s 161 of the ITAA36.
However, Northrop J appears to be placing a greater emphasis on the role of s 8 of the ITAA36 than is warranted.[44] It is s 161 of the ITAA36 that provides the statutory provision for determining the requirements for lodging a return and a decision as to the need to lodge or not arises under that provision and not s 8 of the ITAA36. In Independent Holdings, Spender J was quite content to assert that "the making of an assessment by the Commissioner is expressly provided for by s 166 of the ITAA36, and is accurately described as "a decision under an enactment."[45]There would appear to be no dispute that where the Commissioner raises an assessment then there has been a "decision under an enactment" namely the assessment power in ss 166, 167 or 170. However, in the circumstances of that case, there was no assessment raised. Rather, there was only an indication that the Commissioner was intending to raise assessments against the taxpayer on the basis that the taxpayer had assumed the tax liability of another taxpayer under the Co-Operatives Act 1997 (SA). In short, the threatened action was only a step in the process of eventually raising those assessments.
A more detailed analysis of what constitutes "under an enactment" and particularly in light of the Bond decision can be found in the Full Federal Court judgment in Hutchins. The majority view of Black CJ and Spender J was that the combination of ss 8 and 208 of the ITAA36 provided the authorisation for the Commissioner to take what action was necessary to recover tax which was due and payable. On that basis, the steps taken by the Commissioner to vote at a creditors' meeting were authorised by those provisions. However, this did not mean that the statutory provisions made provision for the decision to vote at the creditors' meeting. Accordingly, the decision was too remote and non-specific and was not a "decision under an enactment." The action taken by the Commissioner and the manner of voting at the creditors' meeting was not a decision made by or under a statute, namely the ITAA36. Lockhart J disagreed with this approach and concluded that the decision to vote answered the description of a decision of an administrative character made under an enactment.[46] His Honour, however, held that the decision was not reviewable as it was considered that there was nothing final or determinative about the decision to vote against the motion at the creditors' meeting. The actual vote by the Commissioner was only part of the overall vote by the creditors with that vote determining whether the motion passed or failed.
Subsequent case law has developed along the lines explored in Hutchins. In Century Yuasa, the Court, as discussed above, was required to determine whether a demand by the Commissioner to pay withholding tax was reviewable. Cooper J was of the view that s 221YR of the ITAA36 (power to sue for the money as a debt due to the Commonwealth) and s 8 of the ITAA36 did not of themselves give force or effect to the decision to demand payment of "a sum of money which the Commissioner claims is payable under the ITAA and as such is not a decision made under an enactment."[47]His Honour cited Hutchins as authority for this position.
In Ruddy v DFC of T,[48] Kiefel J was concerned with whether the decision of the Commissioner to institute proceedings was a reviewable decision under the AD(JR)A. The applicant was a director of a company that entered into an agreement with the Commissioner as to the payment of outstanding tax. The company failed to pay by the due date and the Commissioner commenced recovery proceedings in the District Court. It was noted that under s 221R of the ITAA36, the amount was a debt due to the Commonwealth which could be sued for and recovered. Her Honour noted that s 221R does not expressly refer to a decision that proceedings be brought although the section authorises such action.[49] Her Honour, however, was of the view that the decision to sue for recovery "was not a decision on an important substantive issue which was the essence of an ultimate decision which would have far reaching consequences."[50] It was considered that the decision to sue did not determine anything. The fact that the applicant's credit standing may have been affected and that there may be exposure to judgment did not substantially flow from the decision to sue. Accordingly, the decision by the Commissioner was not reviewable as the decision was not made "under an enactment."
In Schokker, the Commissioner asserted that a decision made for the better administration of an Act is not made under an enactment relying upon the principles set in Bond and Hutchins. As discussed above the case related to the decision by the Commissioner not to prosecute ATO officers for alleged breaches of the privacy sections of the ITAA36. Nicholson J held that the decision fell within the general administration conferred by the Public Service Act 1922 (Cth) and that the decision was authorised but not provided for by the Act in the sense described in Bond.[51] His Honour also concluded that the disciplinary handbook was not an "instrument" (as defined for the purposes of "enactment") as the terms of that handbook did not seek to affect legal rights but rather to provide guidance for administrators. On that basis and in line with the judgment in Lewins, the decision was not made under an instrument and consequently not under an enactment for AD(JR)A purposes.
In Robinswood, the Court was concerned with the issue of whether a number of decisions made by the Commissioner during the course of an audit were reviewable decisions. Nicholson J noted that it was necessary to examine the particular decisions made in the course of the audit and determine whether such decisions can be characterised as final and determinative in nature.[52]This approach is in accordance with Bond and indicates the continuing impact of that High Court judgment in the tax arena. Applying that principle to the particular facts, his Honour concluded that a number of the decisions and conduct were referable to the general administration power and a number were able to be classified as decisions that were made under an enactment, namely the ITAA36.
In the course of his judgment, Nicholson J referred to the case of Knuckey which dealt with the scope of reviewability of decisions made under s 8 of the ITAA36. In that case, the applicant was a registered tax agent whom became subject to the Commissioner's work related expenses audit program. The applicant claimed that this decision, which was alleged to adversely affect the ability to earn income, was made for an improper purpose. The applicant contended that the action by the Commissioner was designed to discipline or educate tax agents. The Commissioner contended that the decision was not made under an enactment and was only made pursuant to the general administration power. Sundberg J followed the majority view in Hutchins to conclude that the action by the Commissioner was authorised by the ITAA36 but only in a general manner. His Honour held that the connection between the decision and s 8 "was too remote for it to be said that the former makes provision for the latter."[53]
In Golden City,[54] as discussed above, the applicant sought to review a number of decisions relating to the taxpayer company's tax instalment program. Cooper J noted that the Commissioner had determined to apply money towards the payment of tax alleged to be outstanding. His Honour concluded that the decision was reflective of the general administration power of the Commissioner and was not made under an enactment. In doing so, his Honour followed the Hutchins decision.
The above cases require closer analysis. It would appear that the High Court decision in Bond has provided a platform from which examination of federal tax decision making can be undertaken. The nature and structure of a "decision" for AD(JR)A purposes as spelt out in Bond has developed the boundaries for what can be said to be a substantive and determinative decision for the purposes of the ITAA36. In that context, a conclusion reached as a step along the way leading to an ultimate decision would not amount to a reviewable decision. Applying that to case law in the tax arena there has been a range of "decision-making" by the Commissioner that has been targeted for judicial review by aggrieved taxpayers. Determinations made by the Commissioner such as the decision to vote in a particular manner at a creditors' meeting (Hutchins), decision to sue (Ruddy, Golden City), or to demand the payment of withholding tax (Century Yuasa) have been held not to be of a substantive nature in accordance with the principles outlined by Mason CJ in Bond. On the other hand a decision threatening to raise an assessment (Independent Holdings) or a determination not to prosecute tax officers for alleged privacy breaches (Schokker) have been held to be of a substantive and final nature and to fall within the context of what is a "decision" for AD(JR)A purposes.
In the context of whether the decision was made "under an enactment", the guiding light for tax purposes would appear to be the Full Federal Court decision in Hutchins. That court judgment has provided a detailed analysis of the nature of an administrative decision "under an enactment" from the position of the statutory framework of the ITAA36. It has also been referred to and applied in subsequent tax cases. The focus by the Court has been in relation to the notion that a relevant section of the governing legislation, usually the ITAA36, makes provision for the decision in question. A distinction is usually made between a decision that is authorised but only in a general sense and a decision that a legislative provision specifically makes provision for. In the context of the general administration power in s 8 of the ITAA36, the courts have determined that the legislative provision is too general in nature to support the contention that there has been a decision under an enactment. On that basis where the Commissioner makes a general determination concerning taxpayers or their advisers concerning the administration of the tax system, there will not be a reviewable decision (Knuckey). That may change where there is a legislative provision which not only authorises the determination but makes provision for the determination. A clear example would be where the Commissioner serves a s 264 notice or raises an assessment either under ss 166, 167 or 170 of the ITAA36 (Independent Holdings). The problem areas relate to where the Commissioner takes certain action or proposes certain conduct and that action or conduct is authorised by a combination of s 8 of the ITAA36 and another provision but is not expressly provided for in the legislative framework (Hutchins).
The basic underlying position adopted by the Commissioner during litigation is to assert that the Federal Court does not have jurisdiction to entertain the ADJR Action. The threshold question of whether or not there is a decision under an enactment appears to be a critical approach by the Commissioner. How does this then sit with the standards outlined in the Charter? The Charter makes it clear that taxpayers can expect the ATO to "be accountable for what we do". In the Explanatory Booklet "If you are not satisfied", the ATO has set out a section on the review of decisions under the AD(JR)A. It states:
The Federal Court under the AD(JR) Act may review a wide range of Tax Office decisions. The grounds for review of a decision include a breach of the rules of natural justice, an improper exercise of power or an error of law. The Federal Court can set aside the decision and refer it back to the Tax Office for further consideration. The Federal Court can also consider the situation where the Tax Office has failed to make a deci-sion and direct that the decision be made.[55]
It is clear that there is an acceptance of accountability and reviewability. The underlying philosophy of the Charter of treating taxpayers fairly and reasonably does provide a basis for resolution of disputes. Taxpayers should be able to remind, where necessary, ATO officers of the basic principles of the Charter and the expectation that the stated standards be followed. Likewise ATO officers would be in a position to inform taxpayers of their legal rights and the standards that can be expected.
However, there is little detail of the scope of available reviewability and this means that taxpayers and their advisers are required to examine other professional materials and references. Furthermore, there is no guiding response provided in rulings and determinations.
The case analysis above indicates that taxpayers and their advisers need to be cautious when considering seeking review of actions and determinations made by the Commissioner in day to day tax administration. The vexed issue of what constitutes a "decision" and whether that decision was "made under an enactment" will present a significant barrier to seeking judicial review under the AD(JR)A in the Federal Court. In many instances that hurdle may be quite difficult to overcome.
However, there are a number of other responses that a tax adviser could investigate Even though certain action undertaken by the Commissioner may not constitute a "decision made under an enactment", the matter should be raised with the Commissioner to see if informal review could be obtained. In particular, the Charter provides fertile ground for issues to be resolved between the parties. In this regard it should also be remembered that if court action were commenced, the Commissioner would act accordingly as a civil litigant. If the matter can be discussed between the parties without the need for litigation, the more informal approach may assist in the resolution of the issue.
In the Explanatory Booklet "If you are not satisfied", the ATO notes that "at your request, we will review any of our decisions or actions affecting you and try to resolve any problems quickly and informally. If you want us to do this, you should contact the person handling your case or the ATO where the decision was made or action was undertaken".[56]It is quite clear that the ATO has, in this booklet, provided an undertaking to informally review decisions or actions affecting a taxpayer. On that basis, a taxpayer has an expectation that if the ATO is requested to do so, it will review the matter. Importantly, the reference to decisions or actions will encompass that conduct which does not specifically fall within the notion of a "decision" and provides an avenue for informal review. This available option should not be underestimated in the overall context of the role and importance of the Charter. The ATO further acknowledges that this type of review is in addition to rights under the law, which may, in the end, extend to judicial review in the Federal Court.
Michael Blissenden holds BA, LLB, LLM and Dip in Tax Law degrees. Michael has been working and teaching in the tax arena for the past 17 years. His current role is as a tax academic with ATAX at the University of New South Wales where he teaches at both the undergraduate and post graduate levels. His main interests lie in the area of tax administration and international tax. He is also the co-ordinator of professional training activities con-ducted by ATAX for tax professionals
[1] As distinct from the release of binding rulings, which now includes binding oral rulings.
[2] The scope of that exclusion is dealt with by V Morabito and S Barkoczy, “Restricting the Judicial Review of Income Tax Assessments: The scope and purpose of Schedule 1 (e) of the Administrative Decisions (Judicial Review) Act 1977 (Cth)” [1999] SydLawRw 2; (1999) 21 Sydney Law Review 36.
[3] Raccuia and Another v DFC of T 84 ATC 4873.
[4] AD(JR)A, s 13. This may be useful to the aggrieved person prior to seeking review under s 5.
[5] (1990) 170 CLR 321. ("Bond")
[6] Ibid 337. Brennan and Deane JJ concurred with the judgment of the Chief Justice.
[7] Ibid 336.
[8] This view is narrower than the view expressed by the Full Federal Court in Lamb v Moss [1983] FCA 254; (1983) 76 FLR 296. However, the High Court view prevails.
[9] (1990) 170 CLR 321, 339.
[10] NSW Aboriginal Land Council v Aboriginal and Torres Strait Islander Commission (1995) 131 ALR 559, 567 (per Hill J) notes that the Australian Broadcasting Tribunal at the time had not then made a determination to actually revoke any licence.
[12] Ibid 570.
[13] Income Tax Assessment Act 1936 (Cth), s 8 ("ITAA36").
[14] Australian Tax Office, The Taxpayer's Charter (July 1997).
[15] See the information gathering powers of ITAA36, ss 263 and 264.
[16] 90 ATC 4896; [1990] FCA 361; (1990) 26 FCR 171 ("Australian Wool").
[17] The Court was not concerned with whether the taxpayer was exempt under s 23(h) but rather with whether there was a reviewable decision made under an enactment - namely the advice dealing with tax status.
[18] Unreported, 5 November 1993.
[19] 96 ATC 4372 ("Hutchins").
[20] Ibid 4376.
[21] Ibid 4379.
[22] Ibid 4381. His Honour did however hold that the decision was not a "decision made under an enactment".
[23] 92 ATC 4599 ("Independent Holdings").
[24] Ibid 4603.
[25] Spender J however concluded that the decision was an excluded decision under Sch 1, para (e) of the AD(JR)A as the decision sought to be restrained was a decision leading up to the making of an assessment.
[26] 97 ATC 4911 ("Knuckey").
[27] Ibid 4917.
[28] Ibid 4918.
[29] 98 ATC 4263 ("Schokker").
[30] 97 ATC 4299 ("Century Yuasa").
[31] Ibid 4309.
[32] On appeal the Full Federal Court only dealt with the substantive issue of the withholding tax: FCT v Century Yuasa Batteries Pty Ltd 98 ATC 4380.
[33] 98 ATC 4442 ("Robinswood").
[34] The result of that analysis is dealt with below.
[35] 99 ATC 4131 ("Golden City").
[36] Ibid 4135.
[37] (1995) 133 ALR 452 ("Lewins").
[38] Ibid 460.
[39] Ibid 461.
[40] 88 ATC 4513.
[41] Ibid 4516-4517.
[42] That decision may be excluded by Sch 1, para (e) of the AD(JR)A.
[43] 90 ATC 4896, 4902.
[44] The Full Federal Court decision in Hutchins rejected the view that s 8 could support a decision under an enactment.
[45] 92 ATC 4599, 4603.
[46] 96 ATC 4372, 4379.
[47] 97 ATC 4299, 4309.
[48] 98 ATC 4369 ("Ruddy").
[49] Ibid 4372.
[50] Ibid 4373.
[51] 98 ATC 4263, 4271-4272.
[52] 98 ATC 4442, 4450.
[53] 97 ATC 4911, 4918.
[54] 99 ATC 4131.
[55] Australian Tax Office, If you are not satisfied, Explanatory Booklet 8, (1997) 16.
[56] Ibid 6.
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