Thinking | 3 November 2017
Talking Tax – Issue 101
Land tax refunds permitted without objection
In North West Melbourne Recycling Pty Ltd v Commissioner of State Revenue  VSC 647 (27 October 2017) Justice Croft found in favour of the Taxpayer and held the Taxpayer was entitled to a refund of land tax for the years 2011 to 2014 (Relevant Period) pursuant to Part 4 (Refunds of Tax) of the Taxation Administration Act 1997 (TAA) for all land tax paid under the Land Tax Act 2005 (LTA), notwithstanding that the Taxpayer did not object to the assessments.
This case demonstrates that, where the Commissioner assesses land using a taxable value which is clearly in error, the Taxpayer has relief under the TAA which permits a refund for an overpayment of land tax.
In this case, the Taxpayer paid the amount of land tax as assessed by the Commissioner which included an amount based on an incorrect taxable value of the land in Epping as part of the City of Whittlesea (Subject Land). As such, the Taxpayer made an application for a refund of all or part of the amounts of land tax paid.
The Commissioner’s assessments of $244,486.87 for the Relevant Period were based on City of Whittlesea valuations of the Subject Land which were incorrect. It was agreed that at all relevant times the taxable value of the Subject Land was $1.00. The Taxpayer argued that the land tax was correctly imposed, however, that the taxable value of the land under the LTA was ‘negligible’.
The issue for the court was whether the Taxpayer was entitled to a refund of overpaid land tax pursuant to Part 4 of the TAA for all or part of the overpaid land tax for the Relevant Period.
Section 19 of the TAA provides a mechanism for a Taxpayer that claims to be entitled to a refund of tax, to lodge an application for refund of the payment with the Commissioner within five years of the payment being made.
Further, an application for a refund cannot be made if the Commissioner has previously served a notice of assessment of the tax liability of the Taxpayer in respect of the matter in respect of which the payment was made to the Commissioner. An exception to this rule is that it does not apply to an application for a refund of land tax paid or purportedly paid under the LTA.
Under section 97(3) of the TAA, a Taxpayer cannot object to an assessment of land tax on any ground relating to the value of the land if the assessment is based on a valuation by a valuation authority and that valuation was not made for or on behalf of the Commissioner. As such, the Taxpayer could not object to the assessment of land tax and tax paid based on the incorrect land tax valuation used by the Commissioner. Separately, the Taxpayer sought relief through a direct refund application.
The Commissioner submitted that, based on the fact that there were existing land tax assessments on foot, these would bar a refund under section 19(1) of the TAA.
His Honour formed the view that Part 4 of the TAA was designed to permit an enquiry into whether a Taxpayer was entitled to a refund. It clearly authorises the bringing of proceedings to compel the payment of the refund of tax in the event that the Commissioner refuses to refund the tax.
As such, the Taxpayer was entitled to a full refund of land tax for the Relevant Period as the initial imposed taxable value of the land was incorrect.
Commissioner of Taxation Annual Report 2016-17
The Commissioner has released the ATO’s annual report. This report is used to inform parliament, stakeholders and the community about how the tax and superannuation systems have been administered. The ATO deems the implementation of the Tax Avoidance and Black Economy Taskforces and their early engagement and alternative dispute resolution are some of the 2016-17 highlights:
- Established on 1 July 2016, the Tax Avoidance Taskforce raised $4 billion of additional liabilities against a handful of large businesses and multinationals.
- To target the Black Economy, during 2016–17, the ATO contacted more than 11,000 small businesses and are engaged with more to demonstrate how the ATO can help them run their businesses.
- The ATO’s early engagement and alternative dispute resolution resulted in a 61% reduction in the number of appeals to the Administrative Appeals Tribunal since 2013–14; from 922 in 2013–14 to 357 appeals in 2016–17.
State Revenue Office updates
State Revenue Office Annual Review 2016-17
The Commissioner of State Revenue has release the SRO’s annual review. This review provides information on how the SRO is delivering services against benchmarks for stakeholders and the community. The SRO reported that it has exceeded its revenue target by $50 million and has conducted over 10,000 investigations.
We recently covered opinions and comments in relation to this review at the H&W Tax briefing. For further comments in relation to this please contact us.
State Revenue Office (SRO) Application of Private Ruling Updated
The Commissioner has recently published a new version to the Revenue Ruling GEN-009v2 General information on private rulings (Ruling) to clarify the circumstances in which a Taxpayer can request a private ruling and outlines the requirements for the issue of a private ruling.
The Ruling discusses the application requirements, factors for consideration, procedures, the application and effect of the ruling and circumstances where the Commissioner may withdraw a private ruling. The Ruling demonstrates that the Commissioner is broadening the circumstances in which he may make a private ruling. The new version of the Ruling has the following additions:
- it clarifies that a private ruling can be issued in respect of a provision where the Commissioner has power to exercise a discretion and not simply where there is a legislative interpretative issue
- it clarifies circumstances where it is not appropriate for the Commissioner to issue a private ruling, including when ‘the Taxpayer has not provided all of the information requested by the SRO within a reasonable time’
- it emphasises that the evidentiary onus is on Taxpayer, including that the onus is on the Taxpayer to monitor the continuing validity of the ruling and for the Taxpayer or their representative to provide all material information in the first instance and to monitor all communications from the SRO which advise of legislative amendments, judicial decisions and policy changes and
- where the conduct of the Taxpayer or its agent is speculative in nature, it clarifies that the Commissioner will reserve the right to not issue a private ruling.
Legislation and policy updates
Tax compliance in a digital economy
On 27 October 2017, partners in the digital transformation of Australia's taxation and payment systems met with the House of Representatives Committee on Tax and Revenue in Canberra.
The hearing was one of the last for the Committee's inquiry into taxpayer engagement with Australia's tax system.
Prior to the meeting last week, Chair of the Committee Mr Kevin Hogan MP said that ‘the digital revolution is changing the way we communicate information, conduct business and provide government services.’ MP Hogan also said the ATO’s greatest challenge is to ensure ‘tax engagement easier, faster and more secure, despite the new opportunities the digital economy also provides for tax avoidance’. The transcript is yet to be released.
We heard from Ben Spargo of the ATO at our Hall & Wilcox tax updates this week who discussed the impact that technology and artificial intelligence is having on the tax industry and indicated that the ATO are working on ways to use technology to make tax compliance easier and more efficient for both taxpayers and the ATO.
Revenue legislation amendment Bill introduced
On 30 October 2017, the Revenue Legislation Amendment Bill 2017 (No 2) (ACT) (Bill) was introduced into the ACT. The Bill aims to improve the clarity and quality of tax legislation, harmonise the legislation with other jurisdictions and assist in the administration of the barrier free conveyance model.
According to the explanatory memorandum, the purpose of the Bill is to make a number of minor consequential amendments to ensure that the new barrier free rules introduced under the Revenue Legislation Amendment Act 2017 (ACT) will not apply to certain dutiable transactions.
Specifically, the Bill proposes to amend the Duties Act 1999 (ACT) by inserting a table prescribing the timeframes for payment of duty on various dutiable transactions and thereby clarifying that the grant of a dutiable lease is dutiable on the grant of the lease and not on its registration.
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