Brown v Deputy Commissioner of Taxation

REASONS FOR JUDGMENT ON APPLICATION FOR EXTENSION OF TIME TO APPEAL AGAINST AAT DECISION 1 Ivan Brown is a Stipendiary Magistrate who has held that office under the Stipendiary Magistrates Act 1957 (WA) since 31 August 1987. He is a member of the superannuation scheme provided for in the Government Employees Superannuation Act 1987 (WA). That Act established the Government Employees Superannuation Fund (GESF) administered by the Government Employees Superannuation Board (GESB). The GESF is a constitutionally protected superannuation fund for the purposes of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 (Cth) (SCT Act) (see s 38 read with reg 177 and Pt 4 of Schedule 14 of the Income Tax Regulations 1936). 2 Mr Brown made contributions to the GESF in the year ended 30 June 1997 which were credited to it by the GESB. The GESB is a superannuation provider within the meaning of that term in s 38 of the SCT Act. It reported to the Deputy Commissioner of Taxation, under s 12 of the SCT Act, that surchargeable contributions for Mr Brown for the year ended 30 June 1997 were $25,488.37. 3 It is not in dispute that the Deputy Commissioner of Taxation determined Mr Brown's liability to surcharge under s 14 of the SCT Act by: (a) relying upon the notice of amended assessment of income tax for the income year ended 30 June 1997 issued on 1 May 1998 to the applicant assessing an amended taxable income of $127,544; (b) searching the information provided by superannuation providers under s 12 of the Act to identify all surchargeable contributions of the applicant; (c) relying upon the information provided under s 12 of the Act by the GESB that the applicant's surchargeable contributions in the GESF for the financial year ended 30 June 1997 were $25,488.37; (d) calculating the applicant's adjusted taxable income under s 14 of the Act as: $127,544.00 - amended taxable income +$25,488.37 - notified surchargeable contributions $153,032.37 - adjusted taxable income (e) calculating the surchargeable contributions of the applicant as $25,488.37 and the rate of surcharge that applies to the applicant at 15.00000% as the applicant's adjusted taxable income exceeded the surcharge threshold of $70,000 specified in s 10 of the Act; (f) issuing to the applicant a notice of assessment specifying the amount of $3,823.25 surcharge payable calculated as 15.00000% x $25,488.37. The Deputy Commissioner of Taxation issued to Mr Brown on 15 February 2000 notice of his assessment of Mr Brown's surcharge liability. 4 An objection to the assessment was lodged with the Deputy Commissioner of Taxation on 7 April 2000. No decision was made on the objection. On 5 February 2001, Mr Brown requested the Deputy Commissioner of Taxation to determine the objection. No notice of decision issued in response to that request. Thereafter the Deputy Commissioner of Taxation was taken, by s 14ZYA(3) of the Taxation Administration Act 1953 to have made a decision to disallow the objection. 5 Mr Brown then applied to the Administrative Appeals Tribunal (AAT) for review of the Deputy Commissioner of Taxation's deemed decision. The AAT affirmed the deemed decision on 21 May 2002. 6 The AAT defined three issues for determination by it: (a) Whether the SCT Act does not apply to Mr Brown because of s 7 of that Act which excludes its application "… to a person who is a member because he or she is a judge of a court of a State at the commencement of this Act". (b) Whether the assessment is flawed because the Deputy Commissioner of Taxation has not adhered to s 9(5) of the SCT Act. That subsection provides for the calculation of the actuarial benefit that accrued to the member together with the Administration Expenses and Risk Benefits provided in respect of the member. (c) Whether the "notional surchargeable contributions" as defined in s 9(5) was worked out by an eligible actuary in accordance with the methods set out in the Superannuation Contributions Ruling SCR 97/1. 7 The AAT rejected Mr Brown's contention that he was excluded from the SCT Act. It held, inter alia, that a stipendiary magistrate is not a judge for the purposes of s 7. 8 On the second, and it seems the third issue, the AAT had before it expert evidence relating to the calculation of the surchargeable contribution. It accepted that the GESB had not complied with s 9(5) of the SCT Act in reporting the surchargeable contributions relied upon to make the assessment. It concluded also that the formula set out in s 9(5) is flawed. Strict compliance with it would have produced an excessive assessment. 9 The AAT characterised Mr Brown as "not so much challenging the substantive liability for superannuation contributions tax but rather the mechanism by which that liability was derived". It found that the Deputy Commissioner of Taxation was entitled to rely on the GESB's statement of the member's surchargeable contribution. That assessment was not excessive. 10 On 17 June 2002, Mr Brown filed in this Court an application for an extension of time to file and serve a notice of appeal from the AAT's decision affirming the deemed decision to disallow his objection. The application was made on the basis that constitutional issues raised in Mr Brown's objection were identical to those raised in the High Court in an action brought by Austin J of the Supreme Court of New South Wales and Master Kings of the Victorian Supreme Court. 11 On 1 July 2002, I made orders in the following terms: "1. The time for the Applicant to file and serve a Notice of Appeal from the decision of the Administrative Appeals Tribunal given on 21 May 2002 is extended to 28 days after the delivery of judgment of Austin and King v The Commonwealth in the High Court. 2. There is liberty to apply generally. 3. Costs today reserved." The High Court gave judgment in the Austin and King cases on 5 February 2003 - Austin v The Commonwealth of Australia [2003] HCA 3. 12 On 4 March 2003, Mr Brown applied for a further extension of time on the basis that he had made a complaint to the Superannuation Complaints Tribunal. The gravamen of that complaint is that the GESB as his superannuation provider incorrectly calculated the amount of surchargeable contribution in his case. The complaint was made on 1 July 2002 pursuant to s 15CA of the Superannuation (Resolution of Complaints) Act 1993. It sought to have that Tribunal review the amount of surchargeable contribution notified by the GESB to the Deputy Commissioner of Taxation. 13 Despite being lodged on 1 July 2002, the complaint has not yet been determined. There appears to be a question whether the Superannuation Complaints Tribunal has jurisdiction to deal with the complaint. Mr Brown now says, in an affidavit in support of his application for a further extension of time: "11. I believe that the interests of justice would be best served if the Superannuation Complaints Tribunal was allowed to determine the jurisdiction issue before an appeal against the AAT decision is filed. If the said Tribunal does accept it has jurisdiction to determine my complaint under section 15CA of the SRC Act, I believe that it would also be in the interests of justice and fairness for the Tribunal to make a final decision in respect of my complaint before an appeal against the AAT decision is filed. 12. I further believe that if the tribunal upholds my complaint it will be unnecessary for me to proceed with an appeal in the Federal Court as the GESB will be ordered to undertake a fresh calculation of surchargeable contributions. In all these circumstances, and given that in the said Tribunal neither party is at risk of a costs order, I seek a further extension of time to file an appeal in this court ie until the said Tribunal finally determines my complaint against the GESB." 14 Mr Brown submitted that the pendency of proceedings in this Court could prevent the Tribunal from dealing with the complaint. In this respect he made reference to s 20 of the Superannuation (Resolution of Complaints) Act which provides: "20(1) The Tribunal cannot deal with a complaint if a proceeding has been begun in a court about the subject matter of the complaint and the proceeding has not been finally disposed of. (2) If, after a complaint has been made to the Tribunal, a proceeding is begun in a court about the subject matter of the complaint, the Tribunal cannot deal with the complaint until the proceeding is finally disposed of." I doubt that an appeal against an AAT decision in relation to an assessment could be classified as "… a proceeding about the subject matter of the complaint" which, in this case, is the superannuation provider's calculation of the surchargeable contribution. 15 The present position with respect to the Tribunal's attitude to its jurisdiction is set out in a letter to Mr Brown from a senior lawyer with the Tribunal, which letter is undated but was evidently received by Mr Brown in late October 2002. The writer of that letter asserted that the Tribunal did not have jurisdiction to deal with the complaint as it did not relate to the decision of a "superannuation provider" but rather to the decision of the actuary. The Tribunal it was said, had no jurisdiction to look at actuarial decisions. Mr Brown then wrote to the Chairperson of the Tribunal asserting that his complaint was directed at the decision of the GESB to set out the amount of $25,488.37 in its statement to the Australian Taxation Office. On 14 November 2002, Mr Brown was advised by the Tribunal that a substantial delay might occur in providing a response. He wrote to the Tribunal again on 3 January 2003 and advised that if the Tribunal determined that his complaint was not within its jurisdiction he would wish to test that decision, as well as the AAT decision, by way of an appeal on a question of law to the Federal Court. On 18 February 2003, he again wrote to the Tribunal and requested that a decision on the jurisdictional issue be made promptly. He pointed out that the extended time for his appeal to the Federal Court from the AAT decision expired on 4 March 2003. On 25 February 2003, he received a letter from the Tribunal dated 21 February 2003 in which he was notified that the Tribunal would consider the jurisdiction issue on 30 April 2003 at a review meeting. 16 The Tribunal's delay in resolving the threshold question of jurisdiction in this case is surprising. However the statutory time limit for the lodgment of applications for the review of AAT decisions is there to ensure that disputed decisions are resolved as soon as reasonably practicable. Mr Brown had already had the benefit of one substantial extension of time within which to bring his appeal. In my opinion that extension should not be further prolonged. The interlocutory steps that are necessary to bring this matter to trial will, however, take some time and it is highly unlikely that any trial will proceed before 30 April. If at that date the Tribunal has accepted jurisdiction then it may be that further directions can be made as to the trial dates which take account of the proceedings in the Tribunal. 17 In the meantime, in my opinion, a further extension of time is not justified beyond that which is necessary to allow Mr Brown to finalise his notice of appeal and lodge it in this Court. I propose therefore to order that the time for the applicant to file and serve a notice of appeal from the decision of the Administrative Appeals Tribunal made on 21 May 2002 be extended to 10 March 2003. I will delegate to the Registrar the usual interlocutory functions under O 53. Costs of the directions hearing will be in the cause.