Disposition
60 This case, in substance, turns upon whether the Commissioner can properly use s. 8AAZN to resolve his problem of recovering refunds of tax paid pursuant to the claiming of refundable tax offsets prior to 1 July 2013 which have been subsequently found to have been excessive. In other words, can it be used in addition to the specific power of recovery now conferred by s. 172A of the 1936 Act? That problem exists only in respect of the period following the repeal of Subdiv. 67-L of the Transitional Act. It also exists here because the taxpayer had substantial losses in the 2013 year of income; the Commissioner could not recover the tax refund by the issue of an amended assessment.
61 A number of observations should be made.
62 First, the taxpayer expressly conceded that it was not entitled, as a matter of the application of the I.R.D. Act and Div. 355 of the 1997 Act to the facts as they existed in the 2013 year of income, to the R & D refundable tax offset it claimed in its return for that year. It nonetheless seeks to keep the tax refund. It does so, not because of some underlying principle or policy which might support that outcome. Rather, it simply seeks to take advantage of the drafting deficiencies in s. 166 before it was amended. In my view, a taxpayer is entitled to take such a point against the state and thereby reap a windfall gain, if the provisions permit it to do so.
63 Secondly, at least during the 2013 year of income, the ordinary way in which the Commissioner might seek to recover a tax debt was to sue on the basis of the issue of an assessment or amended assessment which created that liability (although see also s. 8AAZH below). The presence of s. 350-10 in Sch. 1 of the T.A.A. (formerly expressed in s. 177 of the 1936 Act) facilitated that means of recovery. For reasons already given, it was not possible here for the Commissioner to amend the taxpayer's assessment in the 2013 year of income to recover the tax refund.
64 Thirdly, the inability to recover the tax refund paid here to the taxpayer through the process of assessment or amended assessment was more generally resolved by Parliament passing the 2013 Amending Act, which did two things:
(a) it substituted s. 166 with a new provision which permits the Commissioner to make an assessment of the total of a taxpayer's tax offset refunds (or that the taxpayer can get no such refunds). This change, however, had only prospective effect from the 2014 year of income. According to the 2013 Revised Explanatory Memorandum, this was due to the need to make changes to the A.T.O.'s "systems"; and
(b) it introduced Subdiv. 67-L into the Transitional Act to deal specifically with the claiming of refundable tax offsets for the 2012-13 year of income. The Commissioner never exercised the powers conferred upon him by this Subdivision prior to its repeal in 2019.
The Commissioner's reliance upon s. 8AAZN should be considered in that statutory context.
65 Fourthly, I respectfully accept the taxpayer's submission that the presence of the phrase "by mistake" requires the presence of a mistake which is the activating cause of the overpayment for it to be an "administrative overpayment" as defined by s. 8AAZN. Inferentially, it must be a mistake made by or imputed to the Commissioner. That is because he is the person who has made the relevant overpayment.
66 Fifthly, s. 8AAZN is found within Pt. IIB of the T.A.A. Whilst perhaps not exclusively devoted to the creation and maintenance of R.B.A.s, in substance, that is the context in which s. 8AAZN is to be construed. Indeed, at para. 1.122 of the 1999 Explanatory Memorandum, s. 8AAZN is described as a consequential amendment which was "necessary to support the introduction of RBAs". In that respect, it is noteworthy that Pt. IIB creates a power of recovery which is additional to the process of assessment and amended assessment. It is contained in s. 8AAZH which is in the following terms:
Liability for RBA deficit debt
(1) If there is an RBA deficit debt on an RBA at the end of a day, the tax debtor is liable to pay to the Commonwealth the amount of the debt. The amount is due and payable at the end of that day.
Note: For provisions about collection and recovery of the amount, see Part 4-15 in Schedule 1.
(2) If there are several tax debtors, their liability for the debt is of the same kind as their liability for the tax debts that were allocated to the RBA.
Example: If the tax debtors are jointly and severally liable for the tax debts that were allocated to the RBA, they will also be jointly and severally liable for the RBA deficit debt.
67 Where a taxpayer makes an incorrect claim for a deduction or offset, or fails to include an amount of assessable income in its return, the error is capable of correction by assessment and the Commissioner may collect the tax thereby arising by suing on that assessment or by relying upon s. 8AAZH. In the case of an incorrectly paid refund arising from an excessive claim for a tax offset, there is now an express power conferred on the Commissioner to amend the taxpayer's assessment and an express power, conferred by s. 172A of the 1936 Act, to recover the overpayment as a debt due to the Commonwealth. In that specific statutory context, and in my view, the type of "mistake" which s. 8AAZN is directed at, is not an incorrect claim made in a return about a deduction, offset or amount of assessable income.
68 More particularly here, s. 8AAZN is not apt to permit the Commissioner to recover the tax refund paid to the taxpayer, given the existence of former Subdiv. 67-L of the Transitional Act and current s. 172A of the 1936 Act. The Commissioner should have used the mechanism created by that former Subdivision to recover the tax refund. No explanation was given to the Court as to why he had not done so. In that respect, during the period of its operation I do not, with great respect, accept that the principle from Anthony Horden would not have applied to read down s. 8AAZN if it had been necessary to do so. The Commissioner conceded that it was a "specific regime". In that respect, whether that regime did or did not confer a "power" on the Commissioner, the principle that specific positive words used in a provision may justify a field of exclusive operation is well known: Minister for Immigration and Multicultural and Indigenous Affairs v. Nystrom (2006) 228 C.L.R. 566.
69 I also do not, with great respect, accept the taxpayer's proposition that a notice issued pursuant to Subdiv. 67-L would have done no more than specify the amount of a tax offset refund and would not have authorised recovery of an incorrectly claimed refund. It is true that such a notice is not an assessment; it is also true that it is not listed as a tax-related liability in s. 250-10 of Sch. 1 to the T.A.A. But the presence of a conclusive evidence provision in s. 67-130 would have no work to do, if the Commissioner could not recover an overpaid refund in accordance with the issue of a notice pursuant to s. 67-100. If it were necessary to do so, in such circumstances, the existence of a statutory power of recovery would be implied.
70 There is otherwise strength in the Commissioner's contention that the ambit of s. 8AAZN should not be affected by the temporary presence of Subdiv. 67-L, which was enacted years after Pt. IIB of the T.A.A. In Prebble v. Commissioner of Taxation (2003) 131 F.C.R. 130 both parties sought to interpret a provision of the 1936 Act, which had been introduced in 1964, by reference to other provisions and amendments enacted subsequently. Hill and Hely JJ. decided that these other provisions and amendments were of no assistance. At 142 [52] their Honours said:
It is impossible to see that these amendments could affect the interpretation of sections which were unaffected by the amendments. … At most they might indicate Parliament's understanding of the law as at the time of the amendments, which could be right or wrong.
71 However, in 2013 Parliament plainly considered that it needed to enact Subdiv. 67-L to permit, amongst other things, the recovery of incorrectly claimed refundable tax offsets. On this occasion, for the reasons contained in this judgment, Parliament's understanding of the law was correct.
72 Finally, if the Commissioner is correct in his broad interpretation of s. 8AAZN, current s. 172A(2) would be rendered otiose - a result which would directly conflict with the well-established principle of statutory construction articulated in Project Blue Sky Inc v. Australian Broadcasting Authority (1998) 194 C.L.R. 355 at 382 [71].
73 It follows that, in my view, the type of "mistake" s. 8AAZN is directed at are mistakes made in the administration of an R.B.A. They would include, for example, a payment to the wrong person; a payment arising from a misallocation of tax debts; or a payment arising from computer error. Such errors, essentially administrative or procedural in nature, may be corrected by the Commissioner issuing a notice under s. 8AAZN. Whether it is, or is not, open now for the Commissioner to recover the tax refund using common law restitutionary principles is not a matter about which I need to express any view.
74 Sixthly, in reaching that conclusion, I have not been influenced by the choice of the word "administrative" in the defined term "administrative overpayment". In Esso Australia Resources Pty Ltd v. Federal Commissioner of Taxation (2011) 199 F.C.R. 226, the Full Court of this Court considered whether the use of the word "marketable" in the defined term "marketable petroleum commodity", as found in the Petroleum Resource Rent Tax Assessment Act 1987 (Cth.), could influence the meaning of that definition. The taxpayer contended that it could not. That contention was summarised at 256 [100] as follows:
The burden of the co-venturers' argument is that the manner in which the expression "marketable petroleum commodity" had been defined means that the petroleum products in question did not need to be "marketable", that is, readily saleable. Because the definition has this consequence, it is illegitimate to have regard to the word "marketable" in construing the definition.
75 The Full Court accepted that contention at 257 [102]-[103] as follows:
The principle contended for by the co-venturers does, however, appear to be the established law of this country. "It would be quite circular to construe the words of a definition by reference to the term defined": Owners of Shin Kobe Maru v Empire Shipping Co Inc (1994) 181 CLR 404 at 419 (Shin Kobe Maru). For that proposition the High Court cited Wacal Developments Pty Ltd v Realty Developments Pty Ltd (1978) 140 CLR 503 (Wacal). It is true that in Wacal Gibbs J declined to allow the term defined in that case - "instalment contract" - to be used as aid to the construction of the associated definition ("[w]ith all respect it is impermissible to construe a definition by reference to the term defined" (at 507)). But it may be doubted whether Wacal established anything so broad as the larger proposition that the term defined may not be used to resolve antecedent ambiguity in the definition. At least two members of the bench in Wacal thought that there was no ambiguity in the definition at all which required resolution. Stephen J thought that "[n]o doctrine of interpretation justifies, in the present circumstances, any departure from what I regard as the ordinary meaning of the legislature's words" (at 513) and Murphy J thought that there "hardly seems to be any room for ambiguity" (at 522). It is difficult to discern from Wacal a ratio decidendi that requires abstention from the reference to the term defined as a device for resolving ambiguity in a definition for the case did not present that issue.
Nevertheless, Shin Kobe Maru does seem to establish that principle. There the question was whether the expression "a claim … relating to … ownership" in s 4(2)(a) of the Admiralty Act 1988 (Cth) extended to a claim to enforce an agreement that ownership in a vessel be transferred to a third party. The term defined was "proprietary maritime claim". The passage already cited from Shin Kobe Maru shows that the Court held that the word "proprietary" could not be used as an interpretative aid in construing the definition (at 419). That would seem to close the question in Australia.
76 Nonetheless, given the statutory context, and given the passages I have referred to from the 1999 Explanatory Memorandum, the type of mistake covered by s. 8AAZN is likely to be procedural in nature arising out of some error in the maintenance of a taxpayer's R.B.A.
77 Seventhly, I am unable, very respectfully, to agree with the Commissioner's submission that the "mistake" which activated the overpayment was the wrong claim made by the taxpayer for a refundable tax offset. For the reasons I have already expressed, that is not the type of "mistake" with which s. 8AAZN is concerned. Nor is it a mistake made by the Commissioner.
78 Eighthly, my conclusion is, to some extent, supported by the temporal limitations on the Commissioner's power of assessment in s. 355-710. Leaving aside the law applicable to the 2013 year of income, presently the Commissioner's power to recover a refund arising from an incorrectly claimed tax offset would appear to be premised on the issue by him of an assessment or amended assessment which reduces that claimed tax offset. This is the effect of s. 172A (set out above). If the Commissioner's submission here concerning the scope of operation of s. 8AAZN were to be accepted, the temporal limitation contained in s. 355-710, and engaged by s. 172A, could be entirely avoided.
79 Ninthly, I do not very respectfully think that Lyons J.'s observations in Price compel any contrary conclusion. As I have already pointed out, that was a case where the Commissioner sought summary judgment and where the taxpayer had failed to make any appearance. Moreover, his Honour did not have the benefit of the submissions made to me by Counsel for the taxpayer.
80 Tenthly, I do not think that s. 27L of the I.R.D. Act justifies a different conclusion. Section 27L is a deeming provision. It operates concordantly with s. 355-705 of the 1997 Act to effect, amongst other things, a conclusion about the operation of Div. 355 to a taxpayer. But it cannot alter the taxable facts as they existed at the time the tax refund was paid in 2014. If at that time the taxpayer, as a fact, was not paid the tax refund by mistake, s. 27L cannot operate to reverse that reality.