Thinking | 27 April 2021

Talking Tax – Issue 197

By Adam Dimac

In this issue of Talking Tax, we consider the Full Federal Court case of Commissioner of Taxation v Apted, where it was found that the Commissioner could not narrow the scope of a discretionary power through the publication of extrinsic guidance material.

We also consider whether an automatic overpayment of a tax refund by the ATO is recoverable in Commissioner of Taxation v Auctus Resources Pty Ltd, and whether land rented to a third party by the Melbourne University was subject to land tax in University of Melbourne v Commissioner of State Revenue (Vic).

Lastly, we provide updates on the ATO’s new independent audit review program and its new data-matching program with the Department of Home Affairs.

Case law

JobKeeper applicant saved by Federal Court having been granted additional time to reactivate ABN

In Commissioner of Taxation v Apted [2021] FCAFC 45 (24 March 2021), the Full Federal Court found in favour of the taxpayer, holding that the AAT did not err in exercising a discretion which would allow the JobKeeper applicant (Mr Apted) to hold an ABN after 12 March 2020 for the purpose of qualifying for the JobKeeper scheme.

Importantly, the Court held that the Commissioner of Taxation (Commissioner) could not alter the nature of a discretionary power by issuing public guidance as to when the discretion may be exercised.

It remains to be seen whether this decision will have a broader impact for the Commissioner in respect of public guidance purporting to dictate when a discretionary power afforded by statute will be exercised (such as those relating to the remission of administrative penalties and interest).

Overpayment of tax refund is recoverable

The Full Federal Court in Commissioner of Taxation v Auctus Resources Pty Ltd [2021] FCAFC 39 (19 March 2021) unanimously held that a tax refund arising from an automatic research and development (R&D) tax offset paid by mistake was recoverable under s 8AAZN of the Tax Administration Act 1953 (Cth) (Administration Act).

This case highlights the importance of interpreting legislation literally, affording primacy to the natural and ordinary meaning of words.

ATO independent audit review program extended to small business

Following a successful pilot program, the ATO has now formally introduced an independent audit review program for small businesses, under which the taxpayer will be provided with an opportunity to resolve issues in dispute before proceeding to the objection process.

This program is similar in many respects to independent review programs which have been available to larger taxpayers for some time.

The finalisation of an audit will ordinarily lead the crystallisation of a tax debt for a taxpayer, notwithstanding any subsequent objection or dispute, which can cause a myriad of commercial issues. Adding a further layer of review before the objection process is a welcome introduction for small business taxpayers, and it is expected that many will take up the opportunity if it is available.

Who is eligible?

Small business taxpayers with a turnover less than $10 million may be eligible to access the independent review panel in relation to disputes concerning:

  • income tax;
  • GST;
  • excise;
  • luxury car tax;
  • wine equalisation tax; and
  • fuel credits.

A full list of eligibility criteria, including circumstances in which an independent review will not be available, is set out on the ATO’s website.

How to access the independent audit review

When an audit is close to finalisation, taxpayers will be contacted by their ATO audit case officer to confirm that they are eligible for an independent review. The final audit letter issued by the ATO audit team (often referred to as an audit position paper) will be accompanied by a written offer for independent review.

A request for an independent review must then be made within 14 days of the final audit letter.

What to expect at the independent review

An independent officer who has not previously been involved in the audit matter will review the audit material, including the ATO audit position and taxpayer’s position. A case conference will then be arranged (generally within three weeks of the review request) between the taxpayer and the audit team in order to confirm agreed facts, and narrow the issues in dispute.

After the case conference, the ATO independent reviewer will provide written recommendations on each issue in dispute, and the audit team will finalise the audit in line with those recommendations.

No new facts, materials and evidence will be considered, however the independent reviewer may request additional material to understand an issue in dispute.

Participation in the independent review process does not affect a taxpayer’s objection rights under Part IVC of the Taxation Administration Act 1953.

Melbourne University accommodated with charity defence in land tax appeal win

The Supreme Court of Victoria in University of Melbourne v Commissioner of State Revenue (Vic) [2021] VSC 156 has decided in favour of the University of Melbourne, holding that the University was not subject to land tax on land that it rented to a third-party company for student accommodation.

In its decision, the Supreme Court applied a broad statutory interpretation to the relevant provisions, and held that the lease to the third party and the subsequent use of the property for profit (by the third party) did not prevent the relevant charitable exemption from applying.

The ATO teams up with the Department of Home Affairs in new data-matching program

The ATO will now access data from the Department of Home Affairs on the movements of passengers from 2016-17 to 2022-23 financial years, in an attempt to ensure greater compliance with taxation and superannuation laws.

The data collected will include:

  • full name;
  • personal identifier;
  • date of birth;
  • gender;
  • arrival date;
  • departure date;
  • passport; and
  • migration status type.

The ATO has flagged that it estimates it will obtain approximately 670,000 records under this program, and that it intends on using the data to identify ineligible tax and superannuation claims and develop administrative strategies to improve voluntary compliance.

Contact

Adam Dimac

Adam is an experienced tax lawyer, advising on a range of matters, including Division 7A, CGT and corporate restructuring.

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