For the reasons given, I would allow the appeal and set aside the Second Tribunal's decision. The matter should be remitted to the Administrative Review Tribunal for determination according to law. The taxpayer should pay the Commissioner's costs of the appeal.
[2]
I certify that the preceding one hundred and forty-five (145) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill.
Parties
Applicant/Plaintiff:
Commissioner of Taxation
Respondent/Defendant:
ACN 154 520 199 Pty Ltd
Legislation Cited (7)
Interpretation Act 1901
Tax Assessment Act 1936
Administration Act 1953
Court Rules 2011
Appeals Tribunal Act 1975
New Tax System (Goods and Services Tax) Act 1999
Review Tribunal Act 2024
Cases Cited (90)
ACN 154 520 199 Pty Ltd (In Liq) and Commissioner of Taxation (Taxation)[2019] AATA 5981
The starting point in considering the grounds of appeal is, as the Minister submitted, that the Tribunal's reasons must be read fairly and as a whole: Plaintiff M64/2015 v Minister for Immigration and Border Protection[2015] HCA 50; (2015) 258 CLR 173 at [59]-[60]. Thus, it is well established that the reasons of an administrative decision-maker "are not to be construed minutely and finely with an eye keenly attuned to the perception of error": Minister for Immigration and Ethnic Affairs v Wu Shan Liang(1996) 185 CLR 259 at 271-2 (Brennan CJ, Toohey, McHugh and Gummow JJ (quoting with approval Collector of Customs v Pozzolanic Enterprises Pty Ltd[1993] FCA 456; (1993) 43 FCR 280 at 287)). As such, "acommonsense and realistic approach should be taken to understanding the reasons as a whole to see what it was that the Tribunal was saying": Fang Wang v Minister for Immigration and Multicultural and Indigenous Affairs[2003] FCA 1044 at [14]-[15] (Allsop J (as his Honour then was)).
The Commissioner's first submission was that the Second Tribunal erred in failing to recognise that the transformation of the character of the gold and the transfer of its ownership to the taxpayer was not inconsistent with the creation of income tax credits for the taxpayer on its purchase of the adulterated gold.
The proposition that the Second Tribunal did not recognise that the transformation and transfer of ownership of the gold was not inconsistent with the creation of the income tax credits is a conclusion, for which the Commissioner has not provided any basis. Such a conclusion would not readily be reached as a matter of inference, particularly in view of the comprehensive nature of the Second Tribunal Decision: see Applicant WAEE v Minister for Immigration and Multicultural and Indigenous Affairs[2003] FCAFC 184; (2003) 236 FCR 593 at 604 to 605 [47] (French, Sackville and Hely JJ). Such a conclusion should not be drawn in the present case. It is unnecessary to consider whether such a conclusion, if drawn, would reveal an error of law.
The Commissioner's second submission was that the Second Tribunal erred in not undertaking an assessment of the importance of the creation of the input tax credits to the scheme and each part of it as "required" by Complete Success Solutions.
That submission is not accepted. The Second Tribunal did not fail to recognise the creation of entitlements in the taxpayer to input tax credits. The Second Tribunal expressly considered this aspect of the schemes, but was not persuaded that such entitlements were the principal effect of the schemes, deciding instead that the principal effect was the change of ownership of very high values of gold and subsequently the fraud on the Commissioner (T[172] and [176]). These findings of fact were well open to the Second Tribunal and the weight to be given to the entitlement to input tax credits when considering the principal effects of the schemes was a matter for the Second Tribunal.
The Commissioner's third submission was that on the facts, the creation of the input tax credits for the taxpayer upon the adulteration of the gold and the transfer of that gold to the taxpayer was the chief and critical effect of the schemes, and in particular the part of the schemes that consisted of the adulteration of gold by the Division 165 Supplying Entities and the transfer of that gold by them to the taxpayer for a GST inclusive price.
That submission does not raise a question of law, and is another invitation to this Court to engage with the merits of the Second Tribunal's decision. Again, such an invitation must be declined.
It is self-evident that an intended consequence of that part of the scheme was for the Division 165 Supplying Entities to secure consideration for the supply of scrap gold that included a 10% markup on the value of the gold metal. The GST Act or fiscal consequence was to 'create' a notional 'taxable supply' of gold metal. That, in turn, had the fiscal consequences of the Division 165 Supplying Entities incurring a GST liability and the taxpayer becoming entitled to input tax credits. It is also self-evident that without creating a notional 'taxable supply' the taxpayer would not have paid consideration that included a 10% markup on the value of the scrap gold and the Division 165 Supplying Entities would not have secured that consideration and the scheme would have been loss-making. It was within that factual and legal context that the Second Tribunal was called upon to address the statutory questions posed in s 165-5(1)(c).
In the proceeding before the Second Tribunal the parties conducted the dispute on the footing that the battleground lay in whether the requisite dominant purpose or principal effect ought to be found. The taxpayer contended that the dominant purpose of the Division 165 Supplying Entities was to obtain and dishonestly retain the benefit of the GST payable on the prices the taxpayer paid them for the scrap gold through collecting GST-informed consideration but not paying the GST liabilities to the Commonwealth. The Commissioner contended that the objective purpose of the Division 165 Supplying Entities could not be explained as evading a GST liability that would not exist but for the scheme. Rather, the scheme was directed at the taxpayer obtaining input tax credits without which it would not have paid GST-informed consideration for the scrap gold.
The Second Tribunal identified one of the issues that it had to address to answer the statutory questions as 'whether purposes of a supplier creating a taxable supply and therefore creating (or creating and not paying) a GST liability and for the recipient of the supply of a corresponding [input tax credit] entitlement are effectively different sides of the one coin, so to speak, such that they could not be regarded as a single composite purpose': T [158]. The Second Tribunal cited relevant passages from Full Court ACN, Federal Commissioner of Taxation v Ludekens[2013] FCAFC 100; 214 FCR 149 and Complete Success Solutions that set out the applicable 'composite purpose' principles. It also said that the comments in 'regarding the standing of facilitative steps towards an ulterior and ultimate goal inform the characterisation of steps in a linked chain of events' and cited certain passages from in support of that proposition: T [159]-[163]. After addressing each of the matters described in s 165-15 the Second Tribunal returned to the question of composite purpose and, in effect, concluded on the facts as found that the composite purpose analysis was inapplicable to the circumstances of the case before it: T [208]-[211].
The taxpayer contends that the supplementary notice of appeal fails to raise a question of law. The taxpayer submits that all the grounds of appeal pressed are complaints about findings of fact and do not identify any error in the Second Tribunal's understanding of the applicable legal principles or its application of those principles to the facts as found. Nonetheless, it was common ground that if the Second Tribunal were found to have applied the wrong legal test in answering the statutory questions in s 165-5(1)(c) that would amount to an error of law. It may also be accepted that it would be an error of law if the tribunal disregarded a material matter that the statute obliges the tribunal to take into account in the exercise of its review function: e.g., Minister for Aboriginal Affairs v Peko-Wallsend Ltd[1986] HCA 40; 162 CLR 24 at 39-40 (Mason J).
It is fair to observe that, before the Commissioner abandoned certain of the questions and grounds of appeal in the notice of appeal, there was a significant degree of entanglement in the Commissioner's notice of appeal and written submissions between questions of law and fact finding that tended to obscure the legal questions raised in the appeal. Nonetheless, it emerged during the course of the appeal that the principal question of law raised in the appeal is whether, in applying the facilitative purpose analysis drawn from Mills, the Second Tribunal misunderstood and misapplied the s 165-5(1)(c) 'dominant purpose' and 'principal effect' tests. Many of the other questions of law and grounds of appeal involve the Second Tribunal's application of the facilitative purpose analysis to the facts as found which the Commissioner contends are demonstrative of an erroneous application of the applicable legal tests.
In fairness to both the Commissioner and the taxpayer, where, as here, it is asserted that a decision-maker has misconstrued the relevant statute thereby misconceiving the nature of the function which the decision-maker performed, drawing the line between error in the application of the law to the facts as found and mere error in fact finding can be particularly difficult to discern. A similar problem arises in the context of judicial review in discerning jurisdictional error and mere error in the exercise of jurisdiction: e.g., Craig v South Australia[1995] HCA 58; 184 CLR 163 at 178 (Brennan, Deane, Toohey, Gaudron and McHugh JJ). It requires careful consideration of the reasons for decision, acknowledging that they should be read as a whole and fairly, and may require inference to be drawn from the reasons about the manner in which the decision-maker has performed the relevant statutory function: e.g., ; at 271-2 (Brennan CJ, Toohey, McHugh and Gummow JJ). For the reasons given later, in my view, misconstruction of s 165-5(1)(c) is discernible from the Second Tribunal's reasons for decision and, therefore, the appeal is 'on a question of law'. Disregard of mandatory relevant considerations is also evident.
(2004) 217 CLR 216
(1996) 186 CLR 404
(2003) 132 FCR 523
(2020) 270 CLR 494
(2000) 199 CLR 135
(1956) 96 CLR 47
(1980) 144 CLR 1
(1959) 101 CLR 298
(2012) 250 CLR 171
(2025) 99 ALJR 1378
(2016) 249 FCR 534
(1985) 7 FCR 302
(1997) 187 CLR 384
(2001) 207 CLR 235
(2012) 250 CLR 503
(2019) 269 CLR 370
(2019) 272 FCR 409
(2024) 305 FCR 189
(2013) 214 FCR 149
(2010) 186 FCR 410
(2015) 233 FCR 315
(1986) 162 CLR 24
(1996) 185 CLR 259
(2022) 275 CLR 582
(1987) 163 CLR 199
(1988) 82 ALR 175
(1987) 163 CLR 54
(2022) 289 FCR 175
(2015) 258 CLR 173
(2020) 282 FCR 455
(2003) 236 FCR 593
(2024) 98 ALJR 1245
(1985) 4 NSWLR 139
(1993) 43 FCR 280
(1991) 29 FCR 177
(1995) 184 CLR 163
(2003) 197 ALR 389
(2019) 264 CLR 421
(1956) 94 CLR 509
(2003) 215 CLR 563
(2003) 198 ALR 59
(1995) 59 FCR 6
(2001) 202 CLR 439
Mills
Mills
While it acknowledged that Ludekens and Complete Success Solutions stood for the proposition that 'a single purpose may be appropriately found in some circumstances', it considered that the analysis in Mills of a facilitative purpose of an ultimate purpose was more apposite to the circumstances of the case before it. Applying the Mills analysis to the facts as found it considered that 'creating taxable supplies that also produced GST-informed prices being paid and [input tax credit] entitlements to arise, was a necessary preliminary to an ulterior and ultimate goal' and concluded that 'any purpose in obtaining [input tax credits] in the present circumstances, assuming there was one, was a purpose properly regarded as central to the design of a scheme directed to achieving an ulterior and ultimate purpose, and therefore any purpose of obtaining [input tax credits] was incidental and not dominant': T [208]. Ultimately, the tribunal concluded that the dominant purpose of the Division 165 Supplying Entities was to execute 'their fraud' by obtaining and retaining GST-informed consideration: T [217].
The Second Tribunal's conclusions relating to principal effect are interspersed with its consideration of dominant purpose and the matters described in s 165-15. The tribunal expressed the view, in substance, that the principal effect of the scheme was to change the form of the gold metal, transfer it to the taxpayer and place the Division 165 Supplying Entities in the position in which they could retain the whole consideration and avoid paying GST liabilities: T [172], [176], [216].
In the course of addressing the matters described in s 165-15 the Second Tribunal dealt with the purpose or object of the GST Act and expressed the view that the GST Act had its intended effect on the arrangements that constituted the scheme and that it was the non-payment of GST liabilities that departed from the object of the GST Act: T [178]-[179].
The Second Tribunal was not prepared to make a positive finding that the taxpayer was an informed participant in the arrangements that constituted the scheme. But, it was also not prepared to make a positive finding that the taxpayer was not an informed participant: T [96]-[109]. The tribunal concluded that even if the taxpayer was an informed participant it would not have made any difference to the conclusions that the tribunal made regarding dominant purpose: T [219].
Ultimately, the Second Tribunal concluded that it would not be reasonable to conclude that any entity entered into the scheme or part of the scheme (wider or narrow) with the sole or dominant purpose of, or the principal effect of the scheme or part of the scheme (wide or narrow) was, the taxpayer obtaining input tax credits: T [226].
Minister for Immigration and Ethnic Affairs v Wu Shan Liang
Otherwise, Goodman J has set out the principles applicable to the identification of errors of law in fact finding. With the exception of characterisation of the statutory question of whether 'it is reasonable to conclude' posed in s 165-5(1)(c) as one of fact and that the words 'dominant' and 'principal' where used in that subsection have their normal meaning, I agree with his Honour's summary. On the view I take of the questions raised in the appeal, it is unnecessary to resolve this point of difference because the Second Tribunal applied the wrong legal test in reaching its conclusions on the s 165-5(1)(c) statutory questions. Nonetheless, it is necessary to explain the reasons for my not fully embracing his Honour's construction of s 165-5(1)(c).
Satisfaction of the requirements in s 165-5(1)(a) and s 165-5(1)(c) are necessary preconditions to the application of Div 165 and to the exercise of the Commissioner's powers under that division, including the power to negate a GST benefit under s 165-40. These preconditions are appropriately characterised as 'jurisdictional facts': see, e.g., Mills at [60]. Moreover, there is nothing to suggest that the question of whether 'it is reasonable to conclude' in s 165-5(1)(c) is founded on the Commissioner's opinion or state of satisfaction such that the relevant 'jurisdictional fact' is the Commissioner's state of mind.
Although the expression 'jurisdictional fact' is used to describe necessary preconditions to the jurisdiction or power of a decision-maker, the applicable statutory criteria need not only involve facts to answer the description of a jurisdictional fact. It is frequently the case that 'jurisdictional facts' involve 'a complex of elements': Enfield City Corporation v Development Assessment Commission[2000] HCA 5; 199 CLR 135 at [28] (Gleeson CJ, Gummow, Kirby and Hayne JJ). Jurisdictional facts may also be purely factual in content. But, whatever the content, 'jurisdictional fact review proceeds on the basis that it is a jurisdictional error of law for someone to exercise public power in the absence of a jurisdictional fact': Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002[2003] HCA 30; 198 ALR 59 at [54], [59] (McHugh and Gummow JJ). In the context of jurisdictional fact review, a court is entitled to determine the facts for itself and receive evidence even if that evidence was not before the original decision-maker, and the court can give such weight to the original decision as to the existence of the jurisdictional fact the court sees fit: EHF17 v Minister for Immigration and Border Protection[2019] FCA 1681; 272 FCR 409 at [64] (Derrington J) and the authorities there cited.
In Haritosv Federal Commissioner of Taxation[2015] FCAFC 92; 233 FCR 315 (at [202]) the Court observed that 'one of the functions of s 44 is to ensure that the tribunal stays within its jurisdiction. An appeal that raises jurisdictional error is an appeal on a question of law under s 44.'. Given that in circumstances of judicial review for jurisdictional error the Court may determine for itself the existence or non-existence of a jurisdictional fact, it may be that the Court is not deprived of authority to determine the existence or non-existence of a jurisdictional fact, as an appeal on a question of law, for the purposes of s 44 of the AAT Act: see, e.g., Rana v Repatriation Commission[2011] FCAFC 124; 126 ALD 1 at [20].
In this appeal the Court was not invited to determine for itself on the facts as found or on the evidence if 'it was reasonable to conclude' that there was either the s 165-5(1)(c) 'dominant purpose' or 'principal effect'. Therefore, the question of whether it has authority to do so in an appeal under s 44 from a decision of the tribunal under Pt IVC of the Taxation Administration Act does not directly arise for determination. However, I do not the regard the Full Court's observation in Complete Success Solutions (at [66]-[67]), citing Commissioner of Taxation vZoffanies[2003] FCAFC 236; 132 FCR 523 (at [66], [92]-[94]), to the effect that the statutory task under s 165-5(1)(c) and s 165-15 'requires the drawing of conclusions of fact and an ultimate conclusion about dominant purpose and principal effect, also being a conclusion of fact' as inconsistent with characterisation of the ultimate conclusion of fact as a 'jurisdictional fact'.
In any event, whatever were the nature of the matters described in s 177D(b) of the 1936 Income Tax Assessment Act, the matters described in s 165-15 are not all necessarily pure questions of fact. The purpose or object of the GST Act or any relevant provision of that Act and the effect that the GST Act would have in relation to the scheme apart from Div 165 are both matters that invoke questions of law: s 165-15(1)(c), s 165(1)(f). Section 165-15(1)(b) requires consideration of the form and substance of the scheme including the legal rights and obligations involved in the scheme. Depending on the circumstances, the manner in which the scheme was entered into or carried out, changes in financial positions, consequences for the avoider or any connected entity, the nature of the connection between the avoider and any connected entity, the circumstances surrounding the scheme and other relevant circumstances could also involve consideration of legal rights and obligations. Therefore, the jurisdictional fact described in s 165-5(1)(c) is a complex of elements rendering the description of the ultimate conclusion the section calls for a conclusion of 'fact' something of a misnomer.
For the foregoing reasons, I prefer not to express a definitive view on the extent to which the statement of the Full Court in Complete Success Solutions at [66] should be qualified in the manner the Commissioner submits. However, in whatever manner the statutory question posed in s 165-5(1)(c) is characterised, the meaning of the provision is a question of law and I do not consider that the expressions 'it is reasonable to conclude' or 'dominant purpose' or 'principal effect' are used according to their common understanding such that the 'special considerations' referred to in Vetter v Lake Macquarie City Council[2001] HCA 12; 202 CLR 439 apply. That is, I do not accept that both the meaning of these expressions and the application of them are questions of fact: Vetter at [24]-[27] (Gleeson CJ, Gummow and Callinan JJ) and the authorities there cited.
As explained shortly, the ordinary meaning of 'dominant purpose' and 'principal effect' is affected by the statutory context and object and purpose of the GST Act and Div 165. Although 'dominant' and 'principal' are used according to the ordinary meaning of those words, they are not separate or individual 'facts' as components of the statutory inquiry. The words operate to qualify 'purpose' and 'effect' each of which are not used according to the ordinary meaning of the words but have particular meanings of statutory significance for the statutory questions posed in s 165-5(1)(c).