Court of Appeal (ACT)|2011-07-28

Commissioner for ACT Revenue v Dataflex Pty Ltd and ACT Civil Administrative Tribunal [2011] ACTCA 14 (28 July 2011)

COMMISSIONER FOR ACT REVENUE v DATAFLEX PTY LTD AND ACT CIVIL AND ADMINISTRATIVE TRIBUNAL

[2011] ACTCA 14 (28 July 2011)

TAXATION - payroll tax liability - penalty for non-compliance - reduction in penalty tax - meaning of "investigation" in s 32 of the Taxation Administration Act 1999 (ACT) - "investigation" should bear its natural or ordinary meaning - s 32 does not apply

STATUTORY INTERPRETATION - s 32 is to be interpreted by ascertaining the intention of the parliament - approaches taken in other jurisdictions to ascertain the meaning of "investigation" are irrelevant - neither the context nor purpose of the legislation calls for a narrower meaning to "investigation" - "investigation" should bear its ordinary or natural meaning

TAXATION - whether penalty for non-compliance should be reduced under s 33 - investigation had not yet begun before voluntary disclosure - penalty should be reduced under s 33

WORDS AND PHRASES - "investigation" - "relating to" - "is to be carried out"

ACT Civil and Administrative Tribunal Act 2008 (ACT) s 86 (1)

Supreme Court Act 1933 (ACT) s 370 (1) (G)

Taxation Administration Act 1999 (ACT) Div 5.2, 9.2 ss 31, 32, 33, 71, 74, 82, 83, 85, 86, 87, 90

Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355

CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384

Saeed v Minister for Immigration and Citizenship [2010] HCA 23; (2010) 241 CLR 252

Nominal Defendant v GLG Australia Pty Ltd [2006] HCA 11; (2006) 228 CLR 529

McGraw-Hinds (Aust) Pty Ltd v Smith [1979] HCA 19; (1979) 144 CLR 633

Clyne v Deputy Commissioner of Taxation [1981] HCA 40; (1981) 150 CLR 1

Cody v JH Nelson Pty Ltd [1947] HCA 17; (1947) 74 CLR 629

Health Insurance Commission v Freeman [1998] FCA 1340; (1998) 88 FCR 544

Freeman v Health Insurance Commission [2000] FCA 54; (2000) 97 FCR 249

O'Grady v Northern Queensland Company Ltd [1990] HCA 16; (1990) 169 CLR 356

Australian Communications Network Pty Ltd v Australian Competition and Consumer Commission [2005] FCAFC 221; (2005) 146 FCR 413

Craies WF, Craies on Statute Law (7th ed, Sweet & Maxwell, 1971)

Greenberg D, Craies on Legislation (9th ed, Sweet & Maxwell, 2008)

Penfold H, "Legislative Drafting and Statutory Interpretation" in Gotsis T (ed), Statutory Interpretation: Principles and Pragmatism for a New Age (Judicial Commission of New South Wales, 2007)

ON APPEAL FROM THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Court of Appeal of the Australian Capital Territory

IN THE SUPREME COURT OF THE ) No ACTCA 43 of 2010

BETWEEN: COMMISSIONER FOR ACT REVENUE

1. The parties bring in short minutes of order giving effect to these reasons.

1. This appeal is concerned with the proper construction of s 32 of the Taxation Administration Act 1999 (ACT) ("Administration Act"), which provides for a substantial reduction in penalty tax in certain circumstances.

2. The first respondent ("Dataflex") failed to pay, or register to pay, payroll tax when it was required by law to do so and therefore became liable to pay penalty tax. The appellant ("the commissioner") imposed the standard penalty of 25%, allowing for no reduction. Dataflex objected to the commissioner's decision but its objection was disallowed.

3. Dataflex applied to the second respondent ("the tribunal") for a review of the decision. In its application it contended that the amount of penalty tax should have been reduced by 80% in accordance with s 32. Section 32 provides for a reduction of this magnitude where the taxpayer discloses sufficient information to the commissioner to enable the nature and amount of the default to be assessed and the disclosure occurs before the commissioner informs the taxpayer that "an investigation relating to the taxpayer is to be carried out". In this case the issue was not with the sufficiency of the disclosure but with its timing. Dataflex said the commissioner had not informed it that an investigation relating to it was to be carried out.

4. The tribunal found in favour of Dataflex. The commissioner appealed but the primary judge dismissed the appeal.

5. The question for this Court is whether his Honour fell into error.

6. Dataflex is a supplier of computer hardware. The company grew in size and came to exceed the statutory threshold for payment of payroll tax under the Payroll Tax Act 1987 (ACT) ("Payroll Tax Act"). Liability first accrued for the period 1 April 2005 to 30 June 2005 and payroll tax returns should have been lodged for that period and for all periods since then. Nevertheless, payroll tax was not paid and Dataflex did not register to pay it. In the meantime, the ACT Revenue Office began an investigation into all employers who pay or are liable to pay wages in the ACT.

7. On 13 December 2007 Paul Amalos, an authorised officer of the ACT Revenue Office, wrote to Dataflex:

Dear Sir/Madam

RE: ACT PAYROLL TAX

The ACT Revenue Office is currently conducting an investigation of all employers who pay or are liable to pay wages in the ACT. This investigation is being undertaken to determine whether the employers have an existing or previous liability to payroll tax under the provisions of the ACT Payroll Tax Act 1987.

A search of the ACT Revenue Office database shows that Data Flex Pty Ltd has not lodged returns or paid payroll tax in the ACT. In order to determine whether Data Flex Pty Ltd has a payroll tax liability and to assist this Office with our investigation, you are requested to complete and return the enclosed questionnaire. To assist you in this, a brochure, 'Payroll Tax in the ACT' is enclosed for your information.

Your return of the completed questionnaire and a copy of Data Flex Pty Ltd's 2005/2006 (or most recent) Statement of Financial Performance (Profit and Loss Statement) within 28 days from the date of this letter would be appreciated.

Please note that giving false or misleading information is a serious offence.

Should you have any questions regarding this matter, I can be contacted on ...

Yours faithfully ...

8. The attached questionnaire incorporated a "privacy statement" which relevantly included the following assertions:

The information requested in this form is required by the ACT Revenue Office to determine your ACT payroll tax liability ... Failure to provide the requested information may result in the issue of a formal notice under section 82 of the Taxation Administration Act 1999.

9. On 6 December 2007 Bates & Pickering, external accountants for Dataflex, had been preparing to register the company for payroll tax. However, it was not until 19 December 2007, six days after the letter from the ACT Revenue office, that Bates & Pickering replied, enclosing applications to register for payroll tax and payroll tax reconciliations for the financial years ending 30 June 2006 and 30 June 2007 for Dataflex and two other companies.

10. On 20 December 2007 Mr Amalos sought particulars from Dataflex of wages for July-November 2007. The same day Dataflex emailed that information to Mr Amalos.

11. On 14 January 2008 a Notice of Assessment of Payroll Tax was issued for Dataflex requiring it to pay $196,305.78 in tax, $49,076.45 in penalty tax and $17,686.40 in interest. The amount of penalty tax amounted to 25% of the principal.

12. On 17 January 2008 Bates & Pickering, on behalf of Dataflex, lodged an objection to the penalty imposed. They contended that the 25% penalty was "unfair and unjust" and asked for the penalties to be remitted. They wrote:

As external accountants we completed the Company's 2007 financial statements on the 6th of December 2007 and as part of our review we advised the client to register for Payroll Tax. The client requested us to prepare this application on their behalf on that same date. We were in the process of preparing it when the client received a Payroll Tax questionnaire letter from ACT Revenue [presumably the letter of 13 December 2007]. They advised us of this and we contacted your office to liaise with him in relation to the lodgement of documents we were finalising...

We request that you consider the remission of penalties as the client had taken steps to apply for voluntary registration and the workload in our office in the lead up to Christmas prevented us from doing it any earlier than 19 December 2007. If the amount cannot be remitted in full we ask for a substantial reduction in the penalty rate.

13. On 24 February 2009 a delegate of the commissioner disallowed the objection. On 26 February 2009 Mr Pickering asked for reasons.

14. On 18 March 2009, before it received the statement of reasons, Dataflex applied to the tribunal for a review of the decision. The application relied on the same matters set out in the letter from Bates & Pickering of 17 January 2008. In her statement of reasons, issued on 26 March 2009, the delegate accepted that the taxpayer had intended to apply for voluntary registration and was in the process of doing so, but said that that was not a ground under the Payroll Tax Act to reduce the penalty tax payable.

15. The penalty tax provisions appear in Div 5.2 of the Administration Act.

16. Liability to pay penalty tax arises whenever there is a tax default, that is, whenever a taxpayer fails to pay the whole or part of the tax, the taxpayer is liable to pay under a tax law: Administration Act, s 30(1) and Dictionary.

17. Subject to Div 5.2 the amount of penalty tax payable in relation to a tax default is 25% of the amount of unpaid tax: Administration Act, s 31(1). That figure may increase in certain circumstances or be reduced to nil in others, but it is common ground that none of those circumstances applies in this case.

32 Reduction in penalty tax for voluntary disclosure

The amount of penalty tax determined under section 31 is reduced by 80% if, before the commissioner informs the taxpayer that an investigation relating to the taxpayer is to be carried out, the taxpayer discloses to the commissioner, in writing, sufficient information to enable the nature and extent of the tax default to be determined.

33 Reduction in penalty tax for disclosure before investigation

The amount of penalty tax determined under section 31 is reduced by 20% if, after the commissioner informs the taxpayer that an investigation relating to the taxpayer is to be carried out and before it is begun, the taxpayer discloses to the commissioner, in writing, sufficient information to enable the nature and extent of the tax default to be determined.

20. The tribunal and the primary judge both considered that the references to "investigation" in ss 32 and 33 were references to an investigation of the kind described in s 82, which appears in Div 9.2, the heading of which is "Powers of investigation".

Power to require information, instruments or records or attendance for examination

(1) The commissioner may, for a purpose related to the administration or enforcement of a tax law, by written notice served on a person, require the person

(a) to provide to the commissioner (either orally or in writing) information that is described in the notice; or

(b) to attend and give evidence before the commissioner or an authorised officer; or

(c) to produce to the commissioner a record or other document described in the notice that is in the person's custody or control.

(2) If a notice to a person under subsection (1) is made to determine that person's tax liability, the notice must state that the requirement is made for that purpose, but the commissioner is not otherwise required to identify a person in relation to whom any information, evidence, record or other document is required under this section.

(3) The commissioner -

(a) may specify whether information or evidence to be provided or given under this section must be given orally or in writing; and

(b) may require any information or evidence given in writing to be in the form of, or verified by, a statutory declaration; and

(c) may require any information or evidence given orally to be given on oath or affirmation.

(4) A person must not, without reasonable excuse, fail -

(a) to comply with the requirements of a notice under this section within the period specified in the notice or any further period allowed by the commissioner; or

(b) to comply with any other requirement of the commissioner about the giving of evidence or how information or evidence is to be provided or given under this section.

Maximum penalty: 50 penalty units.

(5) A person required to attend before an authorised officer to give oral evidence must be paid expenses in accordance with the scale of allowances determined under section 139.

(6) Subsection (5) does not apply to a person, or a representative of a person, giving evidence in relation to the person's own tax liability.

22. The remainder of Div 9.2 deals with other powers to assist an investigation. Section 83 confers power on an authorised officer for the administration or enforcement of tax laws to enter and inspect premises, examine and seize documents, among other things. Section 84 gives a magistrate the power to issue search warrants on the application of the commissioner. Sections 85 and 86 relate to the use of documents, records and goods produced or seized and give the commissioner the power to retain them. Section 87 removes the privilege against self-incrimination for a person questioned when required under s 71 or s 82. Section 88 makes it an offence in certain circumstances for a person without reasonable excuse to fail to comply with a requirement of an authorised officer under the Division. Finally, s 90 gives the commissioner the power to inspect and copy any public record kept under an Act or other territory law without paying the usual fee.

23. The obligation to pay payroll tax in this case was imposed by the Payroll Tax Act (now replaced by the Payroll Tax Act 2011 (ACT), effective from 1 July 2011). It imposes a threshold above which employers paying wages for services rendered or performed in, or partly in, the ACT must pay payroll tax. The Payroll Tax Act was amended by the Revenue Legislation Amendment Act 2006 (ACT) to require employers to register their ACT payroll tax liability once the total of all taxable wages paid or payable in Australia exceeds the ACT threshold. At the relevant time the taxable threshold was just under $105,000 per month.

24. Before the tribunal the commissioner submitted that Dataflex was not entitled to a reduction in penalty tax under s 32 of the Administration Act because the letter from the ACT Revenue Office dated 13 December 2007 indicated that an investigation had commenced.

25. The tribunal set aside the decision under review and determined that the amount of penalty tax due under s 31 be reduced by 80% pursuant to s 32. The tribunal said that an investigation takes place pursuant to s 82 but that no such investigation had taken place. The commissioner had argued that the letter of 13 December 2007 was a notice pursuant to s 82 (an argument eschewed on the appeal). But the tribunal held that the letter was no more than a request for information and did not amount to a notice within the terms of s 82. It said that certain formalities are required for such a notice. It said that the notice should refer to the power being invoked, should state that the named person is "required" to provide the information and stipulate a time frame in which to do so, and advise the person of the consequences of failing to comply with the notice.

26. The primary judge dismissed the appeal, adopting the tribunal's construction of the letter and of s 32 of the Administration Act.

27. His Honour said there was no reasonable way of interpreting the letter of 13 December 2007 other than as a request for information and not a notice pursuant to s 82. He referred to the comparable legislation in other Australian jurisdictions, noting that in NSW, Victoria and Tasmania, the legislature has chosen to define "investigation" in the same context so as to engage the compulsory processes equivalent to those contained in Div 9.2 of the Administration Act. He also referred to the South Australian provision which gave the taxpayer the benefit of a reduction in penalty tax if disclosure is made even during a tax audit. He concluded, in effect, that it was unlikely that the ACT Parliament would put in place what he described as "the most draconian regime in the Commonwealth". He said that "public policy and legislative consistency favours the view that the ACT regime is not intended to be less beneficial in relation to defaulting taxpayers than those in comparable states". He accepted that an investigation into the affairs of a taxpayer could be commenced without the engagement in the first instance of compulsory powers (such as those for which s 82 provides). But, he concluded, in effect, that "investigation" in ss 32 and 33 was limited to an investigation under s 82.

The most telling argument against the appellant's contention is that if a letter such as that of 13 December 2007 is circulated to all taxpayers who have not apparently complied, it automatically renders not only s 32 but also s 33 inapplicable. Each such taxpayer is thrown back upon the general power of discretionary remission which these sections were designed to limit (see Explanatory Memorandum p 3). Certainly, the ACT Revenue Office explanatory documents indicate to taxpayers that, at least in "most cases", the investigator will telephone the taxpayer "to let you know an investigation will be conducted". That indicates that not even the appellant was of the view that sending an enquiry letter to taxpayers is or is part of an investigation under the Act.

a. whether "investigation" in Div 5.2 of the Administration Act should be given its ordinary meaning, rather than be limited, as the primary judge held, to an "investigation" which involves the exercise of the compulsory powers found in Div 9.2 of the Administration Act;

b. if so, whether the letter of 13 December 2007 informed Dataflex that an investigation relating to it was to be carried out.

30. It is common ground that, if "investigation" in Div 5.2 is to be confined to an investigation involving the exercise of the powers in Div 9.2, no such investigation had occurred, in which case the appeal must fail. If, however, "investigation" is to be given its ordinary meaning and the letter informed Dataflex that an investigation relating to it was to be carried out, the appeal must be allowed.

31. The primary judge was wrong to construe the Administration Act by reference to inferences drawn from the terms of statutes in other jurisdictions.

32. The first issue is to be resolved by ascertaining in an objective sense the intention of the parliament. The starting point is the text itself (Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 ("Alcan") at [47]), although a decision on the meaning of the text begins with an examination of its context (Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 ("Project Blue Sky") at [69]). "Context" is used in its widest sense to include such things as the existing state of the law and the mischief the statute was intended to remedy: CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408. That means that it is proper to have regard at the outset to extrinsic materials and not merely if the language is ambiguous. But historical considerations and extrinsic materials cannot displace the clear meaning of the text: Alcan. These principles of the common law are also reflected in the Legislation Act 2001 (ACT) ("Legislation Act").

33. To the extent that the primary judge departed from these principles, his Honour fell into error.

34. Dataflex sought to uphold both the decision and the reasoning of the primary judge. It submitted that "context" was wide enough to include the circumstance that, according to the explanatory memorandum, the Bill resulted from four years of consultation with the State Revenue Offices of NSW, Victoria, South Australia and Tasmania, one of the purposes of which was to produce taxation administration legislation which "wherever practicable, [was] consistent across the participating jurisdictions". Whilst a purposive construction of the words is required, limited assistance can be derived from a statement such as this. Statements about legislative intention made, for example in explanatory memoranda, cannot overcome the need to carefully consider the words of the statute in order to discern its meaning. The legislative intention is to be divined through the text itself: Saeed v Minister for Immigration and Citizenship [2010] HCA 23; (2010) 241 CLR 252 ("Saeed") at [31]. The ultimate question is not what parliament intended to do, but what it in fact did: Saeed at [74]. See also Harrison v Melhem [2008] NSWCA 67; (2008) 72 NSWLR 380. What Kirby J said in Nominal Defendant v GLG Australia Pty Ltd [2006] HCA 11; (2006) 228 CLR 529 at [82] with respect to the utility of parliamentary speeches applies also to explanatory memoranda:

This Court has repeatedly insisted that the Second Reading and other speeches in Parliament may only be used to throw light on the meaning of legislative words, to the extent that such speeches are sustained by the legislative text as subsequently adopted. It is in the nature of parliamentary speeches that they commonly lack the precision of statutory language. They can sometimes be motivated by forensic and political factors. They occasionally stray into hyperbole. The rule of law requires that this Court give effect to the purpose of Parliament expressed in the law made by or under an enactment. It is not part of a court's function, as such, to give effect to parliamentary speeches, ministerial media releases or other informal statements unless, validly, they have the specific endorsement of a parliamentary enactment. Saying this is not to discourage the proper use of such materials. It is simply to insist on the primacy of the enacted law.

35. This is not a case of uniform legislation, like the Corporations Law, where the same words appear in the statutes of the various Australian jurisdictions. There are other examples of legislation enacted across the country where the objects are the same, but the statutory language used to achieve them is different (such as the tort law reform measures introduced after the Ipp inquiry). Political compromises will often mean that what is said in an explanatory memorandum is not always realised. It is well to recognise the limitations in the preparation of explanatory memoranda: See Penfold H, "Legislative Drafting and Statutory Interpretation" in Gotsis T (ed), Statutory Interpretation: Principles and Pragmatism for a New Age (Judicial Commission of New South Wales, 2007). In any case the purpose here, according to the explanatory memorandum, was consistency, not uniformity. It is a moot point whether the approach adopted in the ACT is in fact inconsistent with the approaches of the other jurisdictions. All offer reductions for voluntary disclosure. What is more, the passage upon which Dataflex relies is not especially illuminating and says nothing about the particular provision in issue in this appeal. Another difficulty with Dataflex's argument is that for some unexplained reason the ACT did not expressly seek to confine the meaning of "investigation" to an investigation involving the use of the commissioner's compulsory powers as NSW, Victoria and Tasmania have done.

36. Consequently, the extrinsic material throws no light on the first issue and the approaches taken by other jurisdictions are irrelevant.

37. Is there anything about the text of the Payroll Tax Act that leads one to the conclusion that "investigation" should have the meaning the primary judge ascribed to it and for which Dataflex contends?

38. Dataflex emphasised the truism that the Act must be read as a whole, referred to other references to "investigation" in Div 9.2, and drew attention to the heading of the Division and to the terms of s 126(1) of the Legislation Act, which provides that headings to a Division are part of an Act. But the heading and the use of the term elsewhere in Div 9.2 provide no assistance in determining the meaning to be attached to "investigation" in Div 5.2. Dataflex relied on the principle of construction that, where the same word or phrase appears in the one statute, it is presumed to have the same meaning throughout unless expressly, or by implication from its context, the statute provides otherwise: McGraw-Hinds (Aust) Pty Ltd v Smith [1979] HCA 19; (1979) 144 CLR 633 ("McGraw-Hinds") at 643. After all, the Act must be interpreted as far as possible in a harmonious way: Project Blue Sky at [70].

39. There are, however, a number of problems with this submission.

40. First, it presupposes that "investigation" in Div 5.2 must mean an "investigation" of the kind for which Div 9.2 provides. But if investigation carries its ordinary meaning in Div 5.2 it will bear the same meaning in Div 9.2 without doing any violence to the statutory language.

41. Secondly, the presumption is a weak one. See Clyne v Deputy Commissioner of Taxation [1981] HCA 40; (1981) 150 CLR 1 at 10. In McGraw-Hinds, itself, the presumption was not applied. In the very passage upon which Dataflex relied, Gibbs J pointed out that it is well recognised that a word may be used in two different senses in the same section of the one Act, referring to the authorities cited in Craies WF, Craies on Statute Law (7th ed, Sweet & Maxwell, 1971) p 169.

42. Thirdly, there is a competing presumption here. Where a word in a statute is not a technical one but has an ordinary colloquial meaning, the general principle is that it should be given that meaning unless a different meaning is apparent from the context. See Greenberg D, Craies on Legislation (9th ed, Sweet & Maxwell, 2008) p 691; Cody v JH Nelson Pty Ltd [1947] HCA 17; (1947) 74 CLR 629 at 647-648.

43. In this case, the context does not call for a narrower meaning. If that were the legislative intention, then it is difficult to see why the parliament did not expressly limit the meaning, for example, to an investigation within the meaning of s 82, in the same way that some of the State parliaments did.

44. Fourthly, "investigation" is not defined anywhere in the Administration Act. The powers of investigation in Div 9.2 of the Administration Act (which includes s 82) are not exhaustive. The commissioner's powers are wide. Section 74 provides that the commissioner has the general administration of the Administration Act and the other tax laws and "may do all the things that are necessary or convenient to give effect to this Act and the other tax laws". That must include an investigation into whether a taxpayer is complying with a tax law. It is undoubtedly convenient for the commissioner to carry out as much of an investigation into the affairs of a taxpayer as he or she can without invoking the compulsory powers in Div 9.2.

45. Fifth, ss 32 and 33 speak of the commissioner informing the taxpayer, not providing notice to the taxpayer, which is the language of s 82.

46. Dataflex submitted that the use of the future tense supports the limited construction of "investigation" because it presupposes that the commissioner will commonly inform the taxpayer that an investigation is to be carried out.

47. We agree that the sections appear to indicate that generally the commissioner will inform the taxpayer that an investigation will be carried out before the commissioner embarks on one. Nevertheless, there is no requirement that the commissioner does so and in some, if not many, cases there will be good reason not to. Counsel for Dataflex accepted that the commissioner had the power to conduct a covert investigation.

48. The clear purpose of the legislative scheme in Div 5.2 is to encourage compliance with the tax laws and to penalise non-compliance. The clear purpose of ss 32 and 33 is to encourage voluntary disclosure to avoid the cost and administrative burden of an investigation into a taxpayer's affairs. The earlier the disclosure is made, the greater the savings will be and so too the higher the reduction in penalty.

49. Nothing about the purpose of the scheme favours the narrow construction of "investigation" in these sections. Indeed, there is force in the commissioner's submission that to confine the meaning in that way would be at odds with the legislative purpose. In our view "investigation" in ss 32 and 33 should bear its ordinary or natural meaning of "the act or process of searching or inquiring in order to ascertain facts": Health Insurance Commission v Freeman [1998] FCA 1340; (1998) 88 FCR 544 at 552; Freeman v Health Insurance Commission [2000] FCA 54; (2000) 97 FCR 249 at [20].

50. It follows that the primary judge erred in preferring the narrow construction.

51. The next question is whether Dataflex disclosed to the commissioner in writing sufficient information to enable the nature and extent of the tax default to be determined before the commissioner informed it that "an investigation relating to [Dataflex] is to be carried out". There are two parts to this question: whether the commissioner was informing Dataflex about an investigation that actually related to it and, if so, whether such an investigation was to be carried out at the time the letter was written.

52. For one thing to relate to another there must be a relevant or material relationship between the two, a connection or link sufficient for the purposes of the particular legislation: O'Grady v Northern Queensland Company Ltd [1990] HCA 16; (1990) 169 CLR 356 at 367, 376; Australian Communications Network Pty Ltd v Australian Competition and Consumer Commission [2005] FCAFC 221; (2005) 146 FCR 413 at [26]- [29].

53. Despite its submissions to the contrary, we are satisfied that the letter informed Dataflex of an investigation relating to it. The letter was not generic in its terms. It referred specifically to the fact that Dataflex had not lodged returns or paid payroll tax in the ACT. It asked Dataflex to answer a questionnaire and to provide a copy of its profit and loss statement. The evident purpose was to see whether Dataflex was liable to pay payroll tax. This was a sufficient connection between the taxpayer and the investigation for the purposes of the Administration Act.

54. The commissioner submitted that the expression "is to be carried out" is not confined to a wholly future investigation, seeking to distinguish "is to be carried out" from "is to be commenced" and to equate it with "is to be completed". Absent the context, that is a possible interpretation of the expression. But in context that interpretation is not available. Otherwise, it is hard to see what work would be left for s 33. In our view, neither s 32 nor s 33 comes into operation after an investigation relating to the taxpayer has in fact started. That is not, however, the end of the matter.

55. Properly understood the letter referred to two investigations. One was a general investigation into the liability of all employers. That was not an investigation relating to Dataflex. It was an investigation that turned up information about Dataflex. The second was a specific investigation into whether Dataflex had a payroll tax liability. It was an investigation relating to Dataflex. In the light of what was uncovered in the general investigation, the commissioner was informing Dataflex that it was going to carry out an investigation into its liability - hence the request for information "in order to determine whether [Dataflex] has a payroll tax liability". This was the investigation to be carried out. That investigation had not yet begun. As the disclosures made by Dataflex post-dated this letter, they were not made at a time entitling it to the reduction in penalty tax for which s 32 provides.

56. Dataflex argued that if s 32 did not apply, then it should have the benefit of the reduction given by s 33.

57. The Court's powers on appeal are wide. Any appropriate order may be made: Supreme Court Act 1933 (ACT), s 37O(1)(b). Appeals from the tribunal are not limited to a question of law: ACT Civil and Administrative Tribunal Act 2008 (ACT), s 86(1). If s 33 applies, there is no reason why the Court could not allow the appeal but make orders which would see Dataflex secure the benefit of the 20% reduction for which s 33 provides.

58. Before the primary judge the commissioner conceded that Dataflex was entitled to a rebate under s 33. But before us the commissioner resiled from this position.

59. The remaining question is whether the disclosures were made by Dataflex before the investigation relating to it had begun. There is no evidence to suggest that the commissioner took any steps in relation to that investigation until after it received the documents from Bates & Pickering on 19 December 2007. The exchange of emails over the next two days indicates that an assessment was underway as a consequence of the information contained in the documents sent on 19 December, but the commissioner did not contend that the information that was supplied was not sufficient to enable the nature and extent of the default to be determined. In the circumstances we are satisfied that Dataflex made the relevant disclosures after the commissioner informed it that an investigation relating to it was to be carried out but before the investigation had begun. Dataflex is therefore entitled to a 20% reduction in the amount of penalty tax in accordance with the terms of s 33.

60. Consequently, the appeal should be allowed. As the commissioner put in issue in this Court (but not below) that s 33 applied, there should be no order as to costs.

61. The parties should bring in short minutes of order giving effect to these reasons.

I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

Counsel for the appellant: Mr Slater Q.C and Mr Walker

Solicitor for the appellant: ACT Government Solicitor

Counsel for the first respondent: Mr Kirk and Ms Burnett

Solicitor for the first respondent: Williams Love & Nicol

Solicitor for the second respondent: Registrar of the ACT Civil and Administrative Tribunal

Payroll Tax Act 1987(ACT)

Revenue Legislation Amendment Act 2006(ACT)

Civil and Administrative Tribunal Act 2008(ACT)

Administration Act 1999

Legislation Amendment Act 2006

Commissioner for ACT Revenue v Dataflex Pty Ltd and ACT Civil Administrative Tribunal [2011] ACTCA 14

At a glance

Court

Decision date

Source

Judgment (108 paragraphs)

Commissioner for ACT Revenue v Dataflex Pty Ltd and ACT Civil Administrative Tribunal [2011] ACTCA 14 (28 July 2011)

Parties

Legislation Cited (8)

Cases Cited (13)