FEDERAL COURT OF AUSTRALIA

Halls v Commissioner of Taxation [2014] FCA 775

THE COURT ORDERS THAT:

1.    The Commissioner of Taxation be substituted for the Australian Tax Office as the respondent to this proceeding.

2.    The proceeding be dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

INTRODUCTION

1    On 2 July 2014, Mr Jeremy Halls issued a proceeding in this Court against the Australian Tax Office seeking relief under s 39B of the Judiciary Act 1903 (Cth) and ss 5 and 6 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (“ADJR Act”). The “decision” or proposed “decision” which is challenged by Mr Halls relates to an interim audit report prepared and issued by the Australian Taxation Office (“ATO”).

2    The correct respondent to this proceeding is the Commissioner of Taxation (“the Commissioner”), and I will make an order that the Commissioner be substituted for the Australian Tax Office as the respondent to this proceeding.

3    Mr Halls prepared and lodged Business Activity Statements and he was selected for a GST (Goods and Services Tax) and FTC (Fuel Tax Credits) audit for the tax periods from 1 July 2011 to 30 September 2013. In the course of the audit, Mr Halls was interviewed by two officers from the ATO on 25 November 2013. The ATO prepared an interim report. In that report, the authors identify six issues and set out the “Decision” and “Reasons for Decision” with respect to each issue. The report also contains a summary of adjustments proposed to be made to the applicant’s Business Activity Statements as a result of the interim audit and statements with respect to penalty.

4    By letter from the ATO dated 4 June 2014, under the heading “Advice of the interim findings of our fuel tax credit and GST audit”, Mr Halls was provided with a copy of the ATO’s interim report of its audit of his business. Mr Halls was given the opportunity to provide any comments or additional information before the ATO finalised its audit. He was told what would happen once the ATO had finalised the audit. He was told that he would be sent a letter outlining the audit result and the ATO’s “final position with the proposed adjustments and notices of assessment for any adjustments made to [his] activity statements”.

5    In his originating application, Mr Halls seeks a declaration that the interim findings are ultra vires and injunctions restraining the respondent from proceeding to a final decision on the audit or issuing any further notices in the exercise of its powers. He also seeks an injunction restraining the ATO from using any information obtained in the audit investigation.

6    Mr Halls is not represented and he appeared before me in person. The grounds in his originating application are diffuse and difficult to understand. He claims that the interim findings are inconsistent with the relevant Acts and Rulings and that the authors of the interim audit report failed to consider all of the circumstances. He claims that the authors mischaracterised certain house renovations that fell within the audit and that the audit was not conducted properly. There is a complaint that the authors misunderstood what documents Mr Halls could be required to provide. In his summary of argument on the present application, Mr Halls goes further and, among other things, he asserts that the authors of the interim audit report were biased and made unreasonable and unnecessary requests of him in terms of the information to be provided and the time within which it was to be provided.

7    It was not clear from Mr Halls’ originating application and affidavit whether he sought interim or interlocutory relief, so I had the matter called on at short notice. The Commissioner appeared and opposed the granting of interlocutory relief. He went further and indicated that he would file a notice of objection to competency and issue an application seeking summary dismissal of the proceeding. I adjourned the application for interim relief to 10 July 2014.

8    On 8 July 2014, the Commissioner filed a notice of objection to competency in the following terms:

1.    The Court’s jurisdiction under ss 5 and 6 of the ADJR Act has not been enlivened because the interim findings sought to be reviewed are not a decision or decisions to which the ADJR Act applies within the meaning of s 3 of that Act in that:

1.1.    the interim findings are not a decision made, proposed to be made, or required to be made under an enactment; or alternatively

1.2.    the interim findings form part of the process of making, or leading up to the making of, assessments of tax under the A New Tax System (Goods and Services Tax) Act 1999 and/or the Fuel Tax Act 2006 and fall within paragraph (e) of Schedule 1 to the ADJR Act.

9    On the same day, the Commissioner filed an interlocutory application supported by affidavit whereby he sought the following orders:

1.    That the name of the Respondent be amended to ‘Commissioner of Taxation.’

2.    That the Court give judgment for the Respondent in relation to the whole of the proceeding pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) and Rule 26.01 of the Federal Court Rules 2011 on the ground that the Applicant has no reasonable prospect of successfully prosecuting the proceeding.

3.    That the Applicant pay the Respondent’s costs of an incidental to this interlocutory application and of the proceedings generally.

10    On 8 July 2014, Mr Halls filed an interlocutory application seeking various interlocutory orders. It is not necessary for me to set out the details.

11    On 11 July 2014, I heard submissions on the objection to competency and the application for summary dismissal. Mr Halls’ claim for interim or interlocutory relief need not be considered if his claims are incompetent or not reasonably arguable.

The claim under the adjr act

12    The Commissioner submits that the findings challenged by the applicant are interim in nature and that the application is incompetent insofar as it is based on either s 5 or s 6 of the ADJR Act.

13    Section 3A of the Taxation Administration Act 1953 (Cth) (“TAA”) provides that the Commissioner has the general administration of the Act. That is the source of the Commissioner’s power to undertake an audit of, for example, a taxpayer’s GST and fuel tax obligations. Division 356 of Schedule 1 of the TAA gives the Commissioner the general administration of indirect tax laws. Such laws are defined in s 995-1 of the Income Tax Assessment Act 1997 (Cth) to mean, among other laws, the “GST law” and the “fuel tax law”.

14    There is no legislative requirement or provision for the making of an interim audit report, and the audit process is not otherwise provided for in legislation (Robinswood Pty Ltd v Federal Commissioner of Taxation and Another (1998) 55 ALD 717, at 725-726 per R D Nicholson J).

15    Sections 105-5 and 105-25 of Schedule 1 of the TAA give the Commissioner the power to make an assessment or amended assessment of the GST or fuel tax payable by a taxpayer with respect to tax periods and fuel tax return periods commencing before 1 July 2012. I should add that different sections apply to periods commencing on or after that date, but the effect of those sections relevant to this proceeding is the same. Section 353-10 of Schedule 1 of the TAA gives the Commissioner the power to obtain information from a taxpayer for the purpose of the administration of a GST law or fuel tax law.

16    A taxpayer who is dissatisfied with an assessment under s 105-5 or s 105-25 may object in the manner set out in Part IVC of the TAA (s 105-40 of Schedule 1). Part IVC provides for a process of review in relation to a taxation assessment and that, in turn, may lead to review by the Administrative Appeals Tribunal or an appeal to this Court. A pending application for review or a pending appeal under Part IVC does not suspend the obligation to pay the tax referred to in the assessment (ss 14ZZM and 14ZZR of the TAA). A notice of assessment of an assessable amount, including GST and fuel tax, is conclusive evidence that the assessment was properly made and, except in proceedings under Part IVC, that the amounts and particulars of the assessment are correct (s 350-10 of Schedule 1).

17    Section 5 of the ADJR Act is engaged where there is “a decision to which [the] Act applies” and, by reason of s 3, a decision to which the Act applies is “a decision of an administrative character made, or proposed to be made, or required to be made”, relevantly, “under an enactment”.

18    In Meredith v Federal Commissioner of Taxation and Others (2001) 64 ALD 120 (“Meredith”), French J (as his Honour then was) considered whether two decisions, constituted by resolving to take action to issue a determination under Part IVA of the Income Tax Assessment Act 1936 (Cth), but not the determination itself, were reviewable under the ADJR Act. French J held that they were not. The reason was that they were not made under an enactment. The decisions did not have the necessary quality of the exercise of some power or discretion, or the discharge of some obligation conferred or imposed by statute. For the purposes of the ADJR Act, they were not “decisions”. French J also dismissed the claim for certiorari under s 39B of the Judiciary Act, saying that the law could not quash or set aside what people think or intend, even if their thoughts or intentions are the precursors of statutory action.

19    If one looks at the process in this case (both as carried out and foreshadowed) as a continuum, the interim findings have not even progressed to the stage of the “decisions” in Meredith. The interim findings may be changed before the audit report is finalised. Once finalised, there might then be a “decision” in the Meredith sense to make a determination or an amended assessment based on the final audit report. The interim findings, although authorised in a general way by s 3 of the TAA, are not made under or pursuant to a statutory power (PFTF Stock Pty Ltd v Deputy Commissioner of Taxation (2010) 116 ALD 80, at 83, [16]-[17] per Emmett J). Furthermore, they lack any element of conclusiveness, and they are not final or operative in the way that acts which constitute decisions under the ADJR Act are usually required to be (Australian Broadcasting Tribunal v Bond and Others (1990) 170 CLR 321 (“Bond”), at 336-337 per Mason CJ).

20    The interim audit findings do not constitute a decision under an enactment for the purposes of the ADJR Act.

21    There is an alternative basis for concluding that the ADJR Act does not apply to the interim audit findings. Even if they do constitute a decision (contrary to my earlier conclusion), they fall within the definition in Schedule 1 of decisions to which the Act does not apply. In particular, they fall within paragraph (e) in Schedule 1, which is in the following terms:

(e)    decisions making, or forming part of the process of making, or leading up to the making of, assessments or calculations of tax, charge or duty, or decisions disallowing objections to assessments or calculations of tax, charge or duty, or decisions amending, or refusing to amend, assessments or calculations of tax, charge or duty, under any of the following Acts:

A New Tax System (Goods and Services Tax) Act 1999

A New Tax System (Luxury Car Tax) Act 1999

A New Tax System (Wine Equalisation Tax) Act 1999

Customs Act 1901

Customs Tariff Act 1995

Excise Act 1901

Fringe Benefits Tax Assessment Act 1986

Fuel Tax Act 2006

Income Tax Assessment Act 1936

Income Tax Assessment Act 1997

Minerals Resource Rent Tax Act 2012

Petroleum Resource Rent Tax Assessment Act 1987

Superannuation Guarantee (Administration) Act 1992

Taxation Administration Act 1953, but only so far as the decisions are made under Part 2-35, 3-10, 3-15 or 4-1 in Schedule 1 to that Act

Training Guarantee (Administration) Act 1990

Trust Recoupment Tax Assessment Act 1985;

22    As counsel for the Commissioner submitted, they are either (or both) part of the process of making, or leading up to the making, of assessments or calculations of tax under the A New Tax System (Goods and Services Tax) Act 1999 (Cth) and Fuel Tax Act 2006 (Cth), or the making of assessments under the identified parts of the TAA (see Meredith at 128, [27] per French J).

23    I turn to consider s 6 of the ADJR Act, which extends the scope of the Act to cases where a person has engaged, is engaging, or proposes to engage, “in conduct for the purpose of making a decision to which [the] Act applies”. There are at least two reasons why s 6 is not engaged in the circumstances. First, the interim findings are not “conduct” as that word has been interpreted (Bond, at 341-343 per Mason CJ). At best for the applicant, they are unreviewable decisions. Secondly, there is not, by reason of paragraph (e) of Schedule 1, a decision to which the ADJR Act applies within s 6.

24    The allegations in the respondent’s notice of objection to competency are made out and the claim made under the ADJR Act must be dismissed.

the claim under s 39B of the Judiciary act

25    I am satisfied that the applicant has no reasonable prospect of successfully prosecuting the proceeding under s 39B of the Judiciary Act within s 31A of the Federal Court of Australia Act 1976 (Cth). There is no decision for the purposes of the relief which might be granted under s 39B of the Judiciary Act. The findings are interim findings and there is nothing to quash or set aside. This case is similar to the first purported decision in Meredith and, with respect, the following observations of French J in Meredith apply equally in this case (at 127, [21]):

The so-called decision is at best the formation of an opinion or intention which is not provided for in the Act. It has no statutory significance. It is therefore not amenable to being quashed or set aside which is the only relief claimed pursuant to s 39B of the Judiciary Act. The law cannot quash or set aside what people think or intend even if their thoughts or intentions are the precursors of statutory action. In so far as relief is claimed under s 39B of the Judiciary Act the claim is, in my opinion, manifestly untenable and should, in respect of this “decision” be dismissed.

26    The respondent’s further contention that there are no allegations of the type of error which might attract relief under s 39B of the Judiciary Act is also correct (The King v Hickman and Others; Ex parte Fox and Another (1945) 70 CLR 598, at 615; Kirk and Another v Industrial Court of New South Wales and Another (2010) 239 CLR 531, at 581, [100] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ).

conclusion

27    The applicant’s claim, insofar as it is a claim under the ADJR Act, is not competent, and, insofar as it is a claim under the Judiciary Act, it lacks a reasonable prospect of success.

28    In the circumstances, the applicant’s claim must be dismissed. I will hear the parties as to costs.

Associate:

Dated:    25 July 2014