Hojlund v Chief Commissioner of State Revenue

Jurisdiction

1. As the Refusal to Extend Time Decision has been the subject of an objection and the applicants are dissatisfied with the respondent's determination of that objection, the Tribunal has jurisdiction to review the Refusal to Extend Time Decision, pursuant to s 96(1)(a) of the TA Act, s 28 of the Civil and Administrative Tribunal Act 2013 and s 9 of the Administrative Decisions Review Act 1997 ("ADR Act").
2. In conducting that review, the Tribunal is required to determine the correct and preferable decision having regard to the materials before it and the applicable law: s 63 of the ADR Act.
3. The material before the Tribunal comprises the application for review; a bundle of documents filed by the respondent pursuant to s 58 of the ADR Act; and written submissions on behalf of the applicants and the respondent.
4. The applicable law includes the TA Act and the Duties Act and the case law relevant to the operation of particular sections of those Acts.

TA Act

1. The salient provisions of the TA Act are: 8 General power to make assessment (1) The Chief Commissioner may make an assessment of the tax liability of a taxpayer. … 9 Reassessment (1) The Chief Commissioner may make one or more reassessments of a tax liability of a taxpayer. (2) A reassessment of a tax liability is to be made in accordance with the legal interpretations and assessment practices generally applied by the Chief Commissioner in relation to matters of that kind at the time the tax liability arose except to the extent that any departure from those interpretations and practices is required by a change in the law (whether legislative or non-legislative) made after that time. (3) The Chief Commissioner cannot make a reassessment of a tax liability more than 5 years after the initial assessment of the liability, unless: (a) the reassessment is to adjust tax to give effect to a decision on an objection or review as to the initial assessment, or (b) at the time the initial assessment or a reassessment was made, all the facts and circumstances affecting the liability under the relevant taxation law of the person in respect of whom the assessment or reassessment was made were not fully and truly disclosed to the Chief Commissioner and, as a result, the tax liability was assessed at a lower amount than the Chief Commissioner would otherwise have assessed it, or (c) the reassessment is authorised to be made more than 5 years after the initial assessment by another taxation law, or (d) the reassessment is made as a consequence of an application by a taxpayer, being an application made within 5 years after the initial assessment of the liability, and the reassessment reduces the tax liability. …

86 Objections (1) A taxpayer who is dissatisfied with: (a) an assessment that is shown in a notice of assessment served on the taxpayer, or (b) any other decision (within the meaning of the Administrative Decisions Review Act 1997) of the Chief Commissioner under a taxation law, may lodge a written objection with the Chief Commissioner. …

89 Time for lodging objection (1) An objection must be lodged with the Chief Commissioner not later than 60 days after the date of service of the notice of the assessment or the date on which the decision referred to in section 86 (1) (b) is served on the taxpayer, except as provided by section 90. (2) An objection is taken to have been lodged with the Chief Commissioner when it is served on the Chief Commissioner. 90 Objections lodged out of time (1) The Chief Commissioner may permit a person to lodge an objection after the 60-day period. (2) The person seeking to so lodge the objection must state fully and in detail, and in writing, the circumstances concerning and the reasons for the failure to lodge the objection within the 60-day period. (3) The Chief Commissioner may grant permission unconditionally or subject to conditions or may refuse permission. ... 96 Review by Civil and Administrative Tribunal (1) A taxpayer may apply to the Civil and Administrative Tribunal for an administrative review under the Administrative Decisions Review Act 1997 of a decision of the Chief Commissioner that has been the subject of an objection under Division 1 if: (a) the taxpayer is dissatisfied with the Chief Commissioner's determination of the taxpayer's objection, or … 100 Provisions relating to applications for review … (3) The applicant has the onus of proving the applicant's case in an application for review. 101 Powers of court or tribunal on review (1) The court or tribunal dealing with the application for review may do any one or more of the following: (a) confirm or revoke the assessment or other decision to which the application relates, (b) make an assessment or other decision in place of the assessment or other decision to which the application relates, … (d) remit the matter to the Chief Commissioner for determination in accordance with its finding or decision, (e) make any further order as to costs or otherwise as it thinks fit.

Duties Act

1. Section 62A of the Duties Act, as at 2 December 2013, provided: 62A Transfers to self managed superannuation funds (1) Duty of $50 is chargeable on a transfer of, or an agreement to transfer, dutiable property from a person (the transferor) to the trustee of a self managed superannuation fund but only if: (a) the transferor is the only member of the superannuation fund or the property is to be held by the trustee solely for the benefit of the transferor, and (b) the property is to be used solely for the purpose of providing a retirement benefit to the transferor. … (3A) Property is held solely for the benefit of a transferor if: (a) the property is held specifically for the benefit of the transferor, as a member of the superannuation fund, and (b) the property (or proceeds of sale of the property) cannot be pooled with property held for another member of the superannuation fund, and (c) no other member of the superannuation fund can obtain an interest in the property (or the proceeds of sale of the property). (4) This section does not apply in respect of a transfer of, or an agreement to transfer, dutiable property if, as a result of the transfer, the superannuation fund will cease to be a complying superannuation fund. (5) A superannuation fund that has not been confirmed as a complying superannuation fund may be treated as a complying superannuation fund for the purposes of this section only if the trustee is satisfied, at the time a liability for duty arises, that the fund will be confirmed as a complying superannuation fund. (6) A superannuation fund is confirmed as a complying superannuation fund when the Regulator first gives a notice to the trustee under section 40 of the Superannuation Industry (Supervision) Act 1993 of the Commonwealth stating that the fund is a complying superannuation fund. (7) The Chief Commissioner may assess or reassess the duty chargeable in respect of a transfer or agreement to transfer if the Chief Commissioner is not satisfied that the superannuation fund was a complying superannuation fund at the time the liability for duty arose.

The discretion to extend time for lodging an objection

1. The effect of s 89 of the TA Act in the present proceeding is that, except as provided by s 90 of the TA Act, the applicants were required to lodge any objection to the Initial Assessment within 60 days of 2 December 2013.
2. Section 90 of the TA Act provides the respondent with a discretion to permit the applicants to lodge an objection after that 60 day period. The applicants bear the onus of satisfying the Tribunal that the discretion should be exercised so as to allow the Initial Assessment Objection to be lodged out of time.
3. In Brown v Federal Commissioner of Taxation [1999] FCA 563; 99 ATC 4516; 42 ATR 118, Hill J considered in some detail the discretion to extend time to treat a late objection as one lodged within time found in s 14ZW (2) of the Taxation Administration Act 1953 (Cth), a section analogous to s 90 of the TA Act. Having done so, his Honour summarised the position at [58] and [59] as follows: [58] In summary when a taxpayer seeks an extension of time in which to lodge an objection the following matters will require consideration: 1. The taxpayer's explanation for the delay in lodging an objection against the assessment within the time stipulated by Parliament. 2. The circumstances attendant upon that delay. 3. Whether the objection is one which, on its face, is frivolous or which in law must fail, or, to the extent that this is indeed a different test, is one in which the taxpayer has no arguable case. This matter will be considered by reference to the objection itself and such other material as the taxpayer puts before the Commissioner. It will seldom, if ever, require the decision maker to consider matters such as credit or endeavour to reconcile the evidence which the taxpayer choses to rely upon with other factual material in the possession of the Commissioner. No doubt the stronger the case the more likely that the discretion would be exercised in favour of a taxpayer even where the explanation for delay was thought not to be strong. Whether the converse is also the case need not here be considered. 4. Such other matters as the circumstances of the particular case make relevant, including, if prejudice to the Commissioner be asserted, such prejudice as is shown to arise. [59] What is required is the balancing of the delay; the explanation for it; the circumstances which gave rise to it and such prejudice if any as may be shown to exist to the Commissioner against the prejudice which may arise to a taxpayer who has by reason of the failure to object in time lost the right to a review of the assessment. In this balancing process the Commissioner or the Tribunal on a review will be guided by what the justice of the case requires. The balancing process should be approached on the basis that while Parliament has stipulated a time in which objections are required to be lodged it has entrusted to the Commissioner a power to extend that time in appropriate circumstances. The decision maker should not lose sight of the fact that s14ZW is an ameliorating provision designed to avoid injustice.
4. The parties have made submissions which address each of the matters identified by Hill J as requiring consideration. Those submissions are summarised below.

Delay

1. The applicants submitted that: 1. the delay in lodging an objection was due to the applicants' lack of awareness of their entitlement to a concession under the Duties Act; 2. the transfer of the property was carried out by a licensed conveyancer and not a legal practitioner. The respondent had incorrectly assumed that the applicants had received incorrect professional advice and relied upon that as a reason for refusing to extend time.
2. The respondent submitted that: 1. the delay, being a period of more than 6 years, is significant; 2. the applicants' submission that they were unaware of the availability of the concession is an insufficient explanation because: 1. the onus is on taxpayers to make enquiries as to their liability for duty, citing Gupta v Chief Commissioner of State Revenue [2006] NSWADT 187 at [33] and Giunta v Chief Commissioner of State Revenue [2005] NSWADT 19; (2005) 59 ATR 249; 2. ignorance of a relevant limitation period is a "somewhat lame" excuse, citing Kourtesis v Chief Commissioner of State Revenue [2007] NSWADT 64 at [14]; 1. the applicants cannot approbate and reprobate with respect to the advice received with respect to the transfer by on the one hand relying upon it as a reason for the delay and on the other hand stating that the professionals engaged were not qualified to give advice with respect to the transfer. Critically, the applicants did not seek to challenge that advice until more than five years after the Initial Assessment.

Is the objection frivolous or doomed to fail; or is there an arguable case?

1. The respondent submitted that the objection is doomed to fail because even if the respondent were minded to allow the objection, the respondent does not have power to make a reassessment. The steps in the respondent's argument are: 1. the five year period after the initial assessment expired in late 2018, well before the applicants' attempts in 2020 to seek a reassessment; 2. s 9(1) of the TA Act enables the respondent to make a reassessment; 3. the respondent's power to do so is limited by s 9(3) of the TA Act which prohibits the respondent from making a reassessment more than five years after the initial assessment unless one or more of the exceptions in s 9(3)(a)-(d) is engaged; 4. none of those exceptions is engaged and in particular: 1. s 9(3)(a) does not apply because: 1. it only applies where there has otherwise been compliance with the objection and review process in Pt 10 of the TA Act and with the five year time limit imposed by s 9(3); 2. the word "objection" in s 9(3)(a) should be read as being limited to an objection made under s 86 of the TA Act; 3. the Initial Assessment Objection is not an objection made under s 86 of the TA Act because it was lodged out of time and no extension of time has been granted, citing Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 18 at [37]; 4. if s 9(3)(a) applied to an objection lodged after more than five years since the initial assessment, then the requirement in s 9(3)(d) that any application must be made within five years of the initial assessment would be redundant; 5. there has also been no "review" of the Initial Assessment; and 1. ss 9(3)(b), (c) and (d) are not enlivened in the circumstances of this proceeding.
2. The applicants submitted that: 1. the respondent is able to reassess duty outside the five year period after the initial assessment if one of the exceptions in s 9(3) applies; 2. s 9(3)(a) operates in the present case because it allows the respondent to make a reassessment after five years if such adjustment is to give effect to a decision on an objection as to the initial assessment.

Prejudice to the respondent

1. The applicant submitted that notwithstanding the time constraints set out in the TA Act, the respondent has not been prejudiced in any way by the delay.
2. The respondent acknowledged that he does not assert any particular prejudice or unfairness, but submitted that the extent of the delay is relevant having regard to the need for finality with respect to the respondent carrying out his duties under taxation laws, citing Case No VT 93/16 (1993) 26 ATR 1203 at [26].

Other factors

1. The applicant submitted that the respondent knew or should have known, via its agent, that the transfer of the property was to a self-managed superannuation fund and thus the respondent should have applied the concession. I do not take this matter into consideration as there is an insufficient evidentiary basis for it before the Tribunal.

Exercise of the discretion

1. I am conscious that the Tribunal should not approach the exercise of the discretion with a presumption that an extension is only available in exceptional circumstances, rather all of the circumstances of the particular case should be weighed in the balance: see Brown at [47]. Further, the exercise of the discretion should be approached on the basis that while the legislature has stipulated a time by which objections are required to be lodged, it has entrusted the respondent (and on review the Tribunal) with a power to extend time in appropriate circumstances and that s 90 is an ameliorating provision designed to avoid injustice: see Brown at [59].
2. I take into account the following matters in the exercise of the discretion.
3. First, the delay is lengthy and this a matter which counts against a favourable exercise of the discretion. However, this must be weighed against the other matters discussed below.
4. Secondly, the applicants have a cogent explanation for the delay. They were unaware of the availability of the concession and it was not brought to their attention by the conveyancer who acted for them on the transfer. As noted above, the respondent has submitted that the applicants had the benefit of professional advice, however on the evidence before the Tribunal, the only advice on the question of the duty payable on the transfer came from the licensed conveyancer.
5. There is also no evidence suggesting that the applicants made a conscious decision not to object. Prior to June 2020, the applicants had no reason to challenge the Initial Assessment. However, when the applicants became aware of the potential availability of the concession, they acted expeditiously.
6. In considering the sufficiency of the explanation, each case must turn on its particular facts and there is little assistance to be derived from other cases, such as Gupta, Giunta and Kourtesis which were cited by the respondent.
7. For example, the respondent relied upon Kourtesis for the view taken in that case that ignorance of the relevant limitation period was a "somewhat lame" excuse, but the Tribunal in the same paragraph went on to describe Mr Kourtesis as a sophisticated purchaser of property and stated that "A man of his experience and education might be expected to know that in matters of this nature there are always relevant time periods". There is no evidence that the applicants share the level of sophistication enjoyed by Mr Kourtesis and thus no basis to conclude that the applicants' explanation is in any way "lame". It is noteworthy that, in any event, the Tribunal in that case granted an extension of time to Mr Kourtesis.
8. Thirdly the applicants have a case which is arguable. It is neither frivolous nor doomed to fail.
9. Section 62A of the Duties Act provides for a concessional rate of duty where a property is transferred to the trustees a self-managed superannuation fund provided that s 62A(1)(a) and (b) are satisfied. The proposition that the concessional rate applies to the transfer seems clearly arguable. The threshold for an arguable case is low: see Brown at [24].
10. The respondent did not contend otherwise and instead relied solely upon the submission that he would lack power to make a reassessment. I do not accept that submission.
11. It is clear that the Initial Assessment Objection was made more than 5 years after the Initial Assessment. It follows that no reassessment is possible unless one of the exceptions in s 9(3)(a) of the TA Act is enlivened. The only such exception in play is s 9(3)(a), which relevantly allows the respondent to make a reassessment notwithstanding that more than five years has passed since the initial assessment if "the reassessment is to adjust tax to give effect to a decision on an objection … as to the initial assessment".
12. In my view, the exception in s 9(3)(a) is available, for the following reasons: 1. first, if the outcome of this proceeding were to be an order with the effect of extending time for the lodgement of the Initial Assessment Objection, then the Initial Assessment Objection would, by virtue of that order, be a valid objection. The respondent's argument rests on an invalid premise, namely that even if time were to be extended, the objection would not be a valid objection because it was lodged out of time; 2. secondly, the respondent's reliance upon Paspaley as supporting its construction is misplaced. In that case, the objections were out of time and whilst an extension of time had been sought this had been refused and, critically, no objection had been made to the refusal decision. Thus, the objections were irremediably out of time. The present case is quite different as objection has been taken to the refusal decision and an order extending time might be made; 3. thirdly, there is no requirement within the text of s 9(3)(a) that the objection have been lodged within five years of the initial assessment. In contrast, s 9(3)(d) requires that any "application" be lodged within that five year period. This suggests a legislative intention that objections could be lodged at any time and not just within the 5 year period starting with the initial assessment. Of course, such objections are not objections for the purposes of ss 86 or 97 of the TA Act absent an extension of time: Paspaley.
13. Fourthly, the applicants would be prejudiced if an extension of time were not to be granted. They would be denied the opportunity to have the Initial Assessment reconsidered by the respondent (or later the Tribunal or the Court) and this may be conducive to injustice: see Brown at [49].
14. Fifthly, I am not satisfied that the respondent would be prejudiced by the grant of an extension of time. The respondent did not identify any particular prejudice and as Hill J noted in Brown at [51], absent evidence that the effluxion of time may have adversely affected the respondent's ability to defend the Initial Assessment it is difficult to conceive of any prejudice other than administrative inconvenience. However, as his Honour then noted the respondent is entitled to collect duty under an assessment regardless of whether there is an objection and is "obliged to collect [duty] in accordance with a correct assessment, that is to say, to collect the correct amount of [duty], no more and no less." In those circumstances, administrative inconvenience is of little moment. Similarly, the desirability of finality is of little weight in the context of a discretion to extend time under an ameliorative provision.
15. Taking into account all of the above matters, the justice of the case requires that the applicants be permitted to lodge the Initial Assessment Objection out of time.

Orders

1. The orders of the Tribunal are: 1. The decision of the respondent made on or about 19 August 2020 to refuse the applicants permission to lodge their objection dated 10 August 2020 is revoked. 2. Pursuant to s 90 of the Taxation Administration Act, the applicants have permission to lodge their objection dated 10 August 2020. 3. The respondent is to deal with the objection dated 10 August 2020 as if it had been lodged within 60 days of 2 December 2013.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 May 2021