M W McIntosh Pty Limited v Commissioner of Taxation

MANSFIELD J 1 I have had the benefit of reading in draft the reasons for judgment of Stone and Edmonds JJ. I am grateful to Edmonds J for setting out the background to the appeal, its legislative context, and the submissions of the parties. I respectfully adopt his Honour's description of those matters. 2 I also agree with their Honours that the appeal should be dismissed. In my judgment, for the reasons given by Edmonds J (with which Stone J also agrees) the Commissioner of Taxation has no power to extend the period for making a choice to consolidate a consolidatable group by giving the Commissioner an approved form as provided in s 703-50(1) of the Income Tax Assessment Act 1997 (Cth). That period is fixed by s 703-50(3). 3 I share the view of Stone J, for the reasons her Honour gives, that it is not necessary on this appeal to decide whether s 388-55(1) of Sch 1 to the Taxation Administration Act 1953 (Cth) applies only to a time specified for the mandatory giving of an approved form, or whether it also may extend to circumstances where giving an approved form is voluntary, for the purpose of obtaining, or being eligible for, a right or benefit, but linked with a period within which that is to be done. 4 The appeal must be dismissed. The parties are agreed that no order for costs would be sought. I certify that the preceding four (4) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT STONE J 5 I have had the benefit of reading, in draft, the reasons for judgment of Edmonds J. I agree that the appeal must be dismissed for the reasons given by his Honour in respect of the second issue set out in [74] et seq. I would like however to make some observations in relation to the first issue identified by his Honour.

The first issue 6 In my view it is not necessary in this appeal to decide whether s 388-55(1) of Schedule 1 to the Taxation Administration Act 1953 (Cth) applies only to a time period laid down for the mandatory giving of an approved form or whether it also extends to the circumstances where giving an approved form is voluntary, albeit for the purpose of obtaining, or being eligible for, a right or benefit. Irrespective of the answer to that question, for reasons given by Edmonds J, I find that the Commissioner has no power to extend the period for making a choice to consolidate a consolidatable group by giving the Commissioner an approved form as provided in s 703-50(1). 7 I agree with Edmonds J that the decision of the High Court in Australian Paper Manufacturers Limited v CIL Inc (1981) 148 CLR 551 is not binding on this point because of the very different statutory context of the provision considered by the High Court in that case. I also accept that s 388-55(1) applies to provisions which impose an obligation to give an approved form to the Commissioner or another entity. The Commissioner's submissions that the section applies only in such circumstances go beyond what is necessary to decide this matter and do not sufficiently take account of the fact that the language of s 388-55(1) is, prima facie, unqualified. 8 If the apparently unqualified power to extend time for giving an approved form to the Commissioner or another entity is not to apply to a particular time limit it is necessary, in my view, to consider not only the language and context of s 388-55(1) but also the language and context of the provision imposing the time limit. Both provisions must be considered in order to achieve the result that best gives effect "to the purpose and language of those provisions while maintaining the unity of all the statutory provisions"; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 382. 9 It may be that a power to defer the time for giving an approved form is only necessary to alleviate excess rigidity and injustice where there is an obligation to give the approved form. Whether this policy would ever require the extension of a time limit which has the potential to deprive a person of an opportunity to gain a right or privilege can only be determined after considering the particular circumstances and the provision imposing the time limit. For present purposes, it is sufficient that, for reasons given by Edmonds J, the language and structure of s 703-50 indicate that the Commissioner has no power to extend the period in s 703-50(3). 10 The appeal must therefore be dismissed. I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

INTRODUCTION 11 This is an appeal from a single judge of this Court dismissing an application for various forms of relief, including a declaration that the respondent ('the Commissioner') is empowered under s 388-55(1) of Sch 1 to the Taxation Administration Act 1953 (Cth) ('the Administration Act') to defer the time within which a notification of choice, conferred by s 703-50 of the Income Tax Assessment Act 1997 (Cth) ('the 1997 Act'), to consolidate a consolidatable group is required to be given to the Commissioner by the first appellant ('McIntosh').

BACKGROUND 12 While the primary judge's reasons do not contain any factual or legislative background to the issues raised for consideration, I think it is important that these be put on the record to provide a context in which those issues arise; neither background is in dispute. 13 On 24 October 2005, income tax returns for each of McIntosh and the second appellant ('Indioc'), a wholly owned subsidiary of McIntosh, for the year ended 30 June 2004 were lodged with the Commissioner. 14 Without having made a choice to consolidate for that year, McIntosh purported to transfer losses to Indioc pursuant to Div 170 of the 1997 Act. 15 Effective 24 October 2002, Div 170 was amended by the New Business Tax System (Consolidation) Act (No. 1) 2002 (Cth) ('the Consolidation Act') and transitional provisions were put in place. Before 24 October 2002, subdiv 170-A of the 1997 Act had provided for the transfer of a tax loss to another company that was a member of the same wholly-owned group (see s 80G of the Income Tax Assessment Act 1936 (Cth) ('the 1936 Act') for years of income prior to the year ended 30 June 1998). 16 Under the transitional provisions in items 37 and 38 of Sch 3 to the Consolidation Act, companies that had not consolidated under the new Part 3-90 of the 1997 Act could continue to transfer losses under Div 170 of the 1997 Act in its unamended form. However, the transitional arrangements ended for income years starting after 30 June 2003. 17 By letter dated 2 March 2006 following a review, the Commissioner requested information from Indioc relating to its inclusion of a loss of $756,279 from 'a subsidiary member [sic] of a consolidated group'. The Commissioner had no record of lodgement of a notification of consolidation form. 18 On 30 March 2006, McIntosh applied to the Commissioner under s 388-55 of Sch 1 to the Administration Act for a deferral of the time within which it might give the Commissioner an approved form making a choice to consolidate as at 1 July 2003. 19 On 26 September 2006, the Commissioner refused to allow a deferral of time but, following proceedings in this Court (No. NSD 614 of 2007), on 25 July 2007 this decision was by consent set aside and remitted to the Commissioner for determination according to law. 20 By letter dated 21 December 2007, the Commissioner informed McIntosh that he considered that he had no discretion under s 703-50 of the 1997 Act or s 388-55 of Sch 1 to the Administration Act to grant a deferral of time to lodge the approved form required by s 703-50(1) once the date for lodgement of that form had passed. Further, the letter stated that, even if the Commissioner had power to grant a deferral under s 388-55, he would not grant a deferral. A statement of reasons for the Commissioner's decision was subsequently provided to McIntosh under cover of a letter dated 21 January 2008.

LEGISLATIVE CONTEXT 21 The relevant provisions of Sch 1 to the Administration Act are contained in Div 388 of Part 5-25 of that Schedule. Part 5-25 of the Schedule is headed: 'Record-keeping and other obligations of taxpayers'; while Div 388 is headed: 'Requirements about giving material to the Commissioner'. 22 Section 388-50 provides: (1) A return, notice, statement, application or other document under a *taxation law is in the approved form if, and only if: (a) it is in the form approved in writing by the Commissioner for that kind of return, notice, statement, application or other document; and (b) it contains a declaration signed by a person or persons as the form requires (see section 388-75); and (c) it contains the information that the form requires, and any further information, statement or document as the Commissioner requires, whether in the form or otherwise; and (d) for a return, notice, statement, application or document that is required to be given to the Commissioner - it is given in the manner that the Commissioner requires (which may include electronically). (1A) Despite subsection (1), a document that satisfies paragraphs (1)(a), (b) and (d) but not paragraph (1)(c) is also in the approved form if it contains the information required by the Commissioner. The Commissioner must specify the requirement in writing. (2) The Commissioner may combine in the same *approved form more than one return, notice, statement, application or other document. (3) The Commissioner may approve a different *approved form for different entities. 23 Section 388-55 provides: (1) The Commissioner may defer the time within which an *approved form is required to be given to the Commissioner or to another entity. (2) A deferral under subsection (1) does not defer the time for payment of any amount to the Commissioner. Note: Section 255‑10 allows the Commissioner to defer the time for payment of an amount of a tax‑related liability. 24 The relevant provisions of the 1997 Act are contained in Div 703 of Part 3-90 of the 1997 Act. Section 703-50 relevantly provides: (1) A company may make a choice in the *approved form given to the Commissioner within the period described in subsection (3) that a *consolidatable group is taken to be consolidated on and after a day that is specified in the choice and is after 30 June 2002, if the company was the *head company of the group on the day specified. Choice is irrevocable (2) The choice cannot be revoked, and the specification of the day cannot be amended, after the choice is made under subsection (1). Period for giving choice to Commissioner (3) The period for giving the choice to the Commissioner: (a) starts at the start of the day specified in the choice; and (b) ends at the end of: (i) the day on which the company gives the Commissioner its *income tax return for the income year during which the day specified in the choice occurs; or (ii) the last day in the period within which the company would be required to give the Commissioner such a return if it were required to give the Commissioner such a return. Choice has no effect after consolidated group ceases to exist (4) The choice does not have effect after the *consolidated group that came into existence because of the choice ceases to exist. To avoid doubt, this subsection does not prevent the choice from: (a) being made by the company at a time when it is not a head company; or (b) having effect in relation to a time before the consolidated group ceased to exist, even if that time is before the choice is made. Choice does not have effect if it contains wrong information (5) The choice does not have effect (and is taken not to have had effect) if the Commissioner is satisfied that the choice contains information that is incorrect in a material particular. Commissioner may give effect to choice despite wrong information (6) Subsection (5) does not prevent the choice from having effect (and being taken to have had effect) if the Commissioner gives the company written notice that the choice has effect despite the incorrect information. Note: Subsection (6) does not let the Commissioner make the choice effective if it did not have effect because it was not made in accordance with subsection (1). This could have happened if: (a) the choice was not in the approved form (for example because it did not include information the Commissioner required (whether in the form or otherwise)); or (b) the choice was not given to the Commissioner within the period described in subsection (3); or (c) the company was not the head company of a consolidatable group on the day specified in the choice.

THE APPROACH OF THE PRIMARY JUDGE 25 In declining the declaratory relief sought by the appellants referred to in [11] above, the primary judge approached the task of determining the ultimate issue by identifying two issues of construction. 26 The first concerned the construction of s 388-55(1), specifically whether the words 'the time within which an approved form is required to be given' are limited to a provision which requires the giving of an approved form in fulfilment of an obligation, or whether it extends to a provision which 'is either permissive of the doing of an act or else confers a benefit or right as a result of doing it, being in either case linked with a period within which it is to be done': Australian Paper Manufacturers Limited v CIL Inc (1981) 148 CLR 551 at 557 per Stephen J, Mason and Wilson JJ agreeing. 27 At [57] of his reasons, his Honour concluded on this issue in the following terms: I am unable to find anything in the Administration Act or s 388-55 of Schedule 1 in particular, which would allow the leading judgment of the majority in the Paper Manufacturers case to be distinguished. Unconstrained by authority, I would have preferred the reasoning of Brennan J. However, having concluded that 'defer' where used in s 388-55 simply means 'extend', I cannot see how 'required to be given' as used in s 388-55 could be limited to those cases where an obligation to 'give' has gone unfulfilled and the giver has been put at risk. 28 The second issue of construction identified by his Honour, which only arises if his Honour's conclusion on the first issue is correct, is whether s 703-50 evinces or manifests an intention that the 'period for giving the choice' is fixed and not to be extended by the exercise of a general power such as that contained in s 388-55(1) of Sch 1 to the Administration Act to 'defer' the time within which the approved form may be given to the Commissioner under s 703-50. 29 At [67] of his reasons, his Honour concluded on this issue in the following terms: [T]he general power to defer the time within which an approved form is required to be given to the Commissioner, contained in s 388-55(1) of Schedule 1 to the Administration Act, has no application to the period described in s 703-50(3) of the 1997 Act. The legislature did not intend that the clearly defined 'period for giving the choice to the Commissioner' could be extended by the exercise of such a general power.

THE APPEAL TO THIS COURT 30 The first issue was the subject of a notice of contention by the Commissioner while the second issue was at the forefront of the appellants' grounds of appeal. 31 Given his Honour's conclusion on the second issue, his Honour declined to embark upon a review of the Commissioner's decision to refuse an extension of time under s 388-55. Nevertheless, the appellants contended, on the hearing of the appeal, that the Commissioner's decision was infected with legal errors in that it took into account irrelevant considerations and failed to take into account relevant considerations. On the view I take of the two issues of construction, it is unnecessary to undertake a review of the Commissioner's decision to refuse an extension of time under s 388-55.

The Appellants 32 The appellants submitted that the primary judge correctly considered himself bound by the decision in Australian Paper Manufacturers. They further submitted that despite his Honour's apparent preference for a contrary view (at [14] and [39]), the construction preferred by the majority in Australian Paper Manufacturers is, and even if that decision were not binding would be, the correct construction having regard to the context and purpose of the provision. 33 The appellants submitted that the context and purpose is that s 388-55 is concerned with extension of time to give an approved form. Syntactically, the word 'required' qualifies the time for giving the form, not the giving of the form. If the requirement was not one as to the time for giving - if there was not a requirement that the form be given by a particular time - there would be no need for the power to defer time. Whether the giving of the form is mandatory or optional is irrelevant to the purpose of the provision, which is to relieve from the consequences of not acting in a timely fashion.

The Commissioner 34 The Commissioner contended that properly construed, the words of s 388-55(1), 'the time within which an approved form is required to be given', are, to use the words of the primary judge at [14] of his reasons, 'directed at the fulfilment of an obligation, non-compliance with which will put the giver at risk' under a penalty provision. The primary judge was in error in holding that he was bound to apply Australian Paper Manufacturers in a different statutory context. 35 According to the Commissioner, this construction is supported by the correspondence between the language of s 388-55 and the penalty provisions. Thus s 286-75(1) of Sch 1 to the Administration Act provides that a person is liable to an administrative penalty if (relevantly): (a) you are required under a *taxation law to give a return, notice, statement or other document to the Commissioner in the approved form by a particular day, and (b) you do not give the return, notice, statement or document to the Commissioner in the approved form by that day. 36 The fact that the words in ss 388-50, 388-55 and 286-75 should be construed consistently is, the Commissioner submitted, supported strongly by the fact that both Div 388 and the uniform administrative penalty regime, including s 286-75, were introduced by the same Act (being the A New Tax System (Tax Administration) Act (No. 2) 2000 (Cth) with effect from 1 July 2000) and were complementary. In this regard, para [1.11] of the Explanatory Memorandum (Senate), under the heading 'Background', explained: The implementation of the new tax system has introduced a number of new tax obligations. Taxpayers will be required to provide information about different types of taxes in the one approved form (a BAS). There needs to be a common penalty applying to understatements of these different taxes and overclaiming credits, as well as a common penalty for failing to notify the Commissioner of these debts by lodging a BAS. These obligations are self-reporting and, for some taxpayers, are required to be carried out electronically. The existing penalties framework was not designed to operate in this environment. 37 The Commissioner pointed out that, while there are now approved forms for which there is no obligation to lodge imposed upon taxpayers (e.g. the notice of choice to consolidate), Div 388 was initially introduced to streamline the giving of information for which there was an obligation. 38 Having regard to these considerations, the Commissioner submitted that s 388-55 creates a mechanism for allowing an extension of time to be granted in circumstances where a person would otherwise be under an obligation to give the approved form by a particular time and non-compliance would attract a penalty. On this construction, s 388-55 has no application in its own terms to s 703-50. There is manifestly no obligation upon corporations to consolidate. Whether, and if so, when, a choice is made is entirely a matter for the head company.

The Appellants 39 The appellants submitted that the power in s 388-55 is one expressed in broad and general terms, the scope of which is tempered not by its language but by the discretion given to the Commissioner (to be exercised appropriately) not to exercise it. Nothing in its language suggests that it is inapplicable to any particular requirement, or to any category of requirement, that an approved form be given to the Commissioner within a prescribed time. 40 According to the appellants, such a power, being relieving in nature, is not to be read down, but is to be 'construed so as to give the fullest relief which the fair meaning of its language will allow' (Bull v Attorney-General (NSW) (1913) 17 CLR 370 per Isaacs J at 384), unless the context of the provision in relation to which it is invoked demands a narrower construction. 41 The appellants made reference to what was said by Gilmour J in Mitsui & Co Ltd v Hanwha (HK) Co Ltd (No. 2) (2007) 166 FCR 200 at [53] - [55] where his Honour referred to the criteria by reference to which the availability of a power to extend time in relation to a particular prescribed time limit fell to be assessed and to the relevant distinction identified by the High Court in Gordon v Tolcher (in liq) (2006) 231 CLR 334 at [37] in relation to s 588FF(3) of the Corporations Act 2001 (Cth), as being whether the provision in the section as to time was 'of the essence' or whether the provision in the section was to be 'characterised merely as a time stipulation of a procedural nature'. 42 The appellants submitted that nothing in s 703-50, or in the scheme of the provisions of Part 3-90, makes observance of the time limit in s 703-50(3) 'an integer or element', a 'condition' or 'of the essence' of the choice to consolidate. Having regard first to consideration of the text itself of its provisions, s 703-50 contains no such 'essential' element or 'condition'. The language is permissive, not mandatory or emphatic. 43 According to the appellants, in this regard, the language stands in contrast to that considered in the cases, from which the primary judge took guidance, concerning Part 5.4 of the Corporations Act and its earlier State equivalent (David Grant & Co Pty Limited (Receiver Appointed) v Westpac Banking Corporation (1995) 184 CLR 265 and Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation (2008) 232 CLR 314) where a general power to extend time was held not to apply to the specific time limits in that Part, because 'speed in the resolution of applications to wind up in insolvency is an important underlying policy' and it 'would be sharply at odds' with the 'emphasis which these provisions [in Part 5.4] give to the speedy resolution of an application' (Aussie Vic at [17] - [19]) to allow the general power to override the 'clear and emphatic language' (Texel Pty Ltd v Commonwealth Bank of Australia (1994) 2 VR 298 at 300) of the winding up provisions. There is in s 703-50, the appellants submitted, no equivalent to the condition in s 459G of the Corporations Act that an application 'may only be made within 21 days', nor of the scheme of tight time limits to secure 'speedy resolution' of the underlying issue of insolvency. 44 Nor, in the appellants' submission, is there any reason in policy to enact in or elicit from the legislation any scheme of tight time limits which would be subverted by the applicability of a general power to extend time for giving a form to the Commissioner. An election to consolidate is but one of many choices which may be made by a taxpayer for the purposes of the Assessment Acts, and a review of the legislation discloses that the legislative policy is that the time for making choices, while specified, may be extended: 1. Notices which are to be given to the Commissioner are ordinarily to be given within a prescribed time or such further time as the Commissioner may allow; 2. elections and choices which are to be made and kept in the taxpayer's records are ordinarily to be made within a prescribed time or such further time as the Commissioner may allow; 3. in particular, the many choices provided for by the capital gains provisions in Parts 3‑1 and 3-3 of the 1997 Act may be made by the lodgement date of the return for the year, or within a further time allowed by the Commissioner; 4. the consolidation provisions themselves contain provisions which allow choices to be made during a period extended by the Commissioner, or at any time. Examples were given of each. 45 The appellants observed that in many, if not most, of these provisions the prescribed time, which may be deferred by the Commissioner, is the time of giving the taxpayer's return. Thus, after the return is lodged a choice made by a taxpayer may alter the tax liability of the taxpayer, including a taxpayer which is, or could on election be, the head company of a consolidated group. 46 In the appellants' submission, these provisions not merely fail to amount to a legislative scheme which demands tight time limits and displaces (as a specific time scheme) the general extension power in s 388-55; to the contrary, they indicate that the general extension power is entirely consistent with the legislative scheme of the Act in general and Part 3-90 in particular. It is consistent with, and implied by, this scheme that the 'approved form' by which a consolidation choice is to be made is an approved form which, by reason of the imported operation of s 388-55, may be given within a time extended by the Commissioner. 47 According to the appellants, the considerations which led the court to conclude, in David Grant and Aussie Vic, that the general provisions permitting extensions of time were displaced by the particular statutory scheme are entirely absent from Part 3-90. There is no reason not to apply the remedial provision in s 388-55 to Part 3-90 and to the contrary, positive indications that it should be so applied. 48 Further, according to the appellants, the considerations averted to by the primary judge as suggesting otherwise arise, with respect, from a misunderstanding of or too close a concentration of the minutiae of the legislation, without regard to the legislative scheme as a whole: 1. The language of s 703-50 is not 'clear and emphatic' in the same way as that of Part 5.4 of the Corporations Act, and is not 'rendered nugatory' by allowing s 388-55 to have the meaning indicated by its plain words; 2. section 703-50(6), as its terms make clear, operates only as an exception to s 703-50(5), and not as an independent provision; it is not needed as a qualification on subs (3), that role being performed by s 388-55; 3. there is no nexus between the irrevocability of a choice and the provision of an extended time within which to make it; to the contrary, irrevocability is a good reason to allow an extension for more careful consideration. Many of the choices provided for by the legislation are irrevocable, and can be made within a time extended by the Commissioner, or an indefinite time; 4. that the choice made by the taxpayer is not 'guillotining' but simply a manifestation of self-assessment, the underlying structure of the legislation to which the making of choices by a taxpayer (rather than the exercise of discretions by the Commissioner) is integral. In this regard, his Honour's comment at [68] mistakes the self-assessment scheme and in particular the operation of s 166A of the 1936 Act; 5. the difference mentioned between the wording in s 703-50 and that in Div 719 is referable to the different circumstances in which a wholly-owned, and a MEC, consolidatable group comes into being, and is otherwise immaterial; 6. the task is to construe the Act, not the text of the explanatory memorandum: 'The words of the statute, not non-statutory words seeking to explain them, have paramount significance' (Nominal Defendant v GLG Australia Pty Ltd (2006) 228 CLR 529 at [22]; cf., Re Bolton; ex parte Beane (1987) 162 CLR 514 at 518). The explanatory memorandum makes it clear that the legislative intent was that the time for consolidating a group could be extended; 7. the absence of an unnecessary note is no foundation for a conclusion that the otherwise applicable provisions of s 388-55 are excluded. A note is an aid to interpretation of, not a substitute for, the section (Re News Corp Ltd (1987) 15 FCR 227 at 240). 49 In this analysis, according to the appellants, his Honour has, with respect, concentrated too closely on the wording of the legislation, without sufficient regard to its context and purpose, which must 'be considered in the first instance' (CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408). There is no rational policy purpose which would be served by permitting an extension of time within which to form a MEC consolidated group, but not to consolidate a wholly owned group. The policy of the legislation is, as both the removal of power to transfer losses between members of a consolidatable but unconsolidated group and the explanatory memorandum make clear, to encourage consolidation; that purpose is served by the construction contended for by the appellants and hindered by that adopted by the primary judge. 50 The appellants submitted that the correct approach to construction of ss 388-55 and 703-50, and their interaction, is that adopted by French J in BHP Billiton Direct Reduced Iron Pty Ltd v Deputy Federal Commissioner of Taxation (2007) 67 ATR 578 at [120], which is recited in [66] below. 51 Finally, the appellants submitted that the legislative purpose to 'promote business efficiency, as well as tax system integrity [by] encouraging wholly-owned groups to enter into the regime' provided for by Part 3-90 would be defeated rather than encouraged by a construction of ss 388-55 and 703-50 which strictly limited the opportunity for making a choice to consolidate.

The Commissioner 52 The Commissioner referred to Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69], McHugh, Gummow, Kirby and Hayne JJ and CIC Insurance Ltd at 408 per Brennan CJ, Dawson, Toohey and Gummow JJ for the uncontroversial proposition that the meaning of a statutory provision must be determined by reference to the context and purpose of the provisions in question. 53 The Commissioner submitted that the same principle applies where, as here, it is necessary to reconcile apparently conflicting provisions. As McHugh, Gummow, Kirby and Hayne JJ said in Project Blue Sky at [70]: Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court 'to determine which is the leading provision and which the subordinate provision, and which must give way to the other'. Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme. (Citations omitted.) 54 Thus, the Commissioner submitted, a general statutory discretion to defer time, such as s 388-55, will not confer power to extend time for compliance with a specific statutory requirement if to do so would be at odds with the purpose of the specific provision. Reference was made to Aussie Vic at [19]. 55 According to the Commissioner, it is not simply a question of determining whether, in a general sense, s 388-55 is intended to have a remedial or beneficial operation. That approach fails to engage in the process of reconciliation which is required in order to determine the relationship between ss 388-55 and 703-50. 56 The Commissioner pointed to what he called 'a number of compelling factors' as supporting the construction accepted by the primary judge as to the nature, scope and policy in respect of s 703-50: 1. First, s 703-50 is structured so that the making of the choice 'within the period described in subsection (3)' is part of the definition of the right to make a choice in subs (1), thereby suggesting that compliance with that requirement is an essential element in, or condition of, making an effective choice. If the Parliament had otherwise intended, those words could simply have been omitted from subs (1), leaving subs (3) to prescribe the period in precisely the same terms. In other words, the Commissioner's construction would give effective work to do to all of the words in s 703-50 while the appellants' construction would render those words otiose. In this regard, there is no compulsion upon a company to make a choice, and the language of s 703-50 may therefore be described as 'permissive' to this extent (appellants' submissions at [42] above). However, there is nothing permissive about the prescription of the period within which notification of a choice must be given, if a decision is made to consolidate as and from a particular date. 2. Second, 'the period described in subsection (3)' is not defined by reference to a period of time (e.g. 21 days) but by reference to events. Relevantly, that period 'ends at the end of' the day on which the head company gives the Commissioner its income tax return for the income year during which the day specified in the choice occurs, or was liable to do so. This suggests an intention to ensure that the making of the choice does not take place after those events. 3. Third, the reasons why the Parliament may have so intended are not difficult to perceive: (a) Significantly in this regard, s 703-50 does not merely provide for information to be given to the Commissioner. Rather, giving notification of a choice under that provision has immediate and irrevocable legal consequences by operation of s 703-50. Thus, by virtue of s 703-50(1), upon giving notification within the period described in subs (3) and otherwise complying with s 703-50, 'a consolidatable group is taken to be consolidated on and after a date specified in the choice'. (b) As a result, the making of a choice that complies with s 703-50 itself operates as the statutory trigger for the different tax treatment of the companies in the group. It has a substantive legal effect that permanently changes the rights and liabilities of the companies within the group for tax purposes. Specifically, by virtue of the single entity rule in s 701-1 of the 1997 Act, all of the wholly-owned subsidiary entities of a head company lose their individual income tax identities and are treated as part of the head company for the purpose of determining the income tax liability of the head company. The practical effect of the single entity rule is that, for the purposes of assessing the income tax position of the head company, the head company is taken to hold all the assets and liabilities of its subsidiaries and to enter into the transactions of its subsidiaries effective from the date specified in the choice. (c) Furthermore and consistently with this, under s 703-50(1), the choice operates prospectively in the sense that it operates only 'on and after a date specified in the choice'. This is consistent with the purposes of Part 3-90 of which s 703-50 forms a part, and in particular, to improve the efficiency and integrity of the taxation of groups of wholly-owned entities by (relevantly): • reducing compliance and general tax costs; and • assisting in the simplification of the tax system. It is also consistent with promoting certainty, being an object that is clearly evident in the requirement that a choice to consolidate cannot be revoked, nor the date on which consolidation took effect, changed. (d) By contrast, if a choice were permitted to be made after lodgement of the return for that tax year, there would be, necessarily, added complexity, uncertainty and cost for both the taxpayers and the Commissioner. It would be necessary to reconstruct the accounts, re-characterise transactions and re-calculate taxable income in order to accommodate the fact that consolidation took effect for a period when the affected entities had originally lodged returns on the basis that they had separate income tax identities. Unravelling the consequences of a choice to consolidate for earlier tax years for which tax returns have already been filed by a head company and its subsidiaries would, therefore, pose serious difficulties. Such difficulties would be heightened in cases where a belated choice was made that covered a period in which significant events had occurred on the basis that the group was not a consolidated group. For example, a subsidiary might have been acquired by another corporate group without the benefit of a tax sharing agreement and without the exit provisions being engaged. Yet no provision at all is made in the Act to address those kinds of difficulties. (e) Accordingly, the effect of construing s 388-55 so as to permit a head company to consolidate in respect of previous tax years for which returns have already been lodged is not merely to 'alter the tax liability of the taxpayer', as the appellants suggest. It is fundamentally to alter the tax liability of the group from individual liability to, in effect, the creation of a single taxpayer. 57 According to the Commissioner, these matters illustrate that there are compelling reasons as to why the Parliament would not intend that the period within which the choice might be made could be extended in the manner for which the appellants contend. 58 On the other hand, the Commissioner submitted, there is no apparent reason why Parliament should have intended to provide a mechanism for alleviating taxpayers from the consequence of a failure to make a choice available to them given that: 1. Each of the relevant dates for the purposes of the consolidation regime are dates within the tax-payer's control, namely, the date on which the choice is made and the date specified as the date on which the choice takes effect; 2. it remains open to a corporation to choose to consolidate in a later financial year; and 3. the purpose of the consolidation provisions is not to enable a taxpayer to obtain a benefit in a particular tax year as the choice, once made, is irrevocable and consolidation will not necessarily benefit the corporate group in each tax year. 59 The Commissioner observed that this construction is also supported by the note to s 703-50(6), as to which see [74] below. 60 Finally, the Commissioner pointed to the appellants' contention that the legislative purpose is 'as both the removal of power to transfer losses between members of a consolidatable but unconsolidated group and the explanatory memorandum make clear, to encourage consolidation'. The appellants suggest that this purpose would be defeated if the time for making the choice to consolidate is not able to be extended. The Commissioner pointed out, however, that, in order to promote business efficiency and certainty, the consolidation provisions in effect offer the choice to consolidate (carrying with it both detriments and benefits) prospectively. Wholly-owned groups who do not make the choice within the specified time may make the choice in a later income year. The fact that the losses cannot be transferred outside of consolidation does not mean that the carry forward losses are extinguished. The benefit of the carry forward tax losses remain, and become available in a later year, when the choice (if any) is made to consolidate. 61 The Commissioner submitted that the purposes of Div 388 of Sch 1 to the Administration Act in which s 388-55 is located do not suggest that it was intended to confer a discretion to alter the substantive operation of s 703-50, as opposed to merely affecting the time within which procedural steps and notifications might be taken under other provisions. Thus the object of the Division is to specify requirements that must be met by taxpayers in order to ensure the integrity and efficiency of giving material to the Commissioner. The Division defines when a return, notice, statement, application or other document under a taxation law is in the approved form: see 388-50. The approved form was introduced as a statutory tool for the Commissioner to obtain information from an entity about its tax obligations and financial affairs. 62 Moreover, the fact that s 388-55 may apply to a range of other statutory choices and forms, does not determine the question of whether it applies to s 703-50. In any event, most of the provisions to which the appellants refer, expressly confer a discretion to extend time or, for example, in the case of s 161 of the 1936 Act (which imposes the obligation to give the Commissioner a tax return) include a note referring to the Commissioner's general discretion to defer time in s 388¬55. The fact that there is no such express discretion conferred with respect to, or note included to, s 703-50 is a further indication that Parliament did not intend to confer power on the Commissioner to extend the time within which notification of a choice might be given. 63 The Commissioner observed that it is to be borne in mind that this does not mean that a corporation cannot seek an extension of time within which to make a choice by seeking an extension of time within which to file its return under s 161. That course is open to a head company that, for example, required further time to make a decision on whether or not to give notification of a choice under s 703-50 in a given tax year.

The First Issue 64 The issue of whether s 388-55(1) of Sch 1 to the Administration Act is confined in its application to a provision which requires the giving of an approved form in fulfilment of an obligation or whether it extends to a provision which 'is either permissive of the doing of an act or else confers a benefit or right as a result of doing it, being in either case limited with a period within which it is to be done' is, in my view, to be determined by reference to the legislative policy identified in its enactment and the adoption of a construction, the application of which serves that policy, rather than by reference to the conclusion reached in respect of a provision, albeit in the same terms, in a totally different statutory context. In short, and with respect, I cannot agree with the primary judge at [57] of his reasons that he was bound by the decision of the majority in the Paper Manufacturers case: see [27] above. 65 In speaking of the nature and purpose of the discretion to extend time under s 170-50(2)(d) of the 1997 Act in BHP Billiton Direct Reduced Iron Pty Ltd, French J at [109] said: [109] Where the law imposes time limits, whether they bar or extinguish causes of action or rights to seek review or whether they require applications to administrative decision-makers or steps taken by such decision-makers to be done within a particular time, excessive rigidity in their application can lead to absurdity and injustice. There are many examples of statutory discretions to extend time to avoid such mischief. 66 At [120] his Honour said: [120] The imposition by s 170-50 of the ITAA 1997 of a time limit for making a transfer agreement is intended to secure the general purpose of expeditious administration of the taxation system. It falls into the general class of time limit imposed on steps under administrative processes, for that purpose. That is not to understate its significance and the importance of adherence to it. If the time limit were to be too readily extended, it could become ineffectual and defeat the statutory purpose. It is nevertheless secondary or ancillary to the principal purpose of the section. It is a tool of good administration and should not be allowed to defeat the overall policy of permitting intra-group transfer of losses. 67 Finally, at [122] his Honour said: [122] The discretion to extend time to make a transfer agreement under s 170-50 is conferred to ensure that the policy objective of the section is not defeated by inappropriate application of the time limit. Reference to the avoidance of absurdity or injustice may describe a broad normative criterion for the application of the discretion. There is a risk, however, that such terms invite visceral judgments. A more principled approach will have regard to factors relevant to the statutory purposes to which the transfer provision and the time limit are directed. His Honour then went on to consider relevant factors in the exercise of the discretion. 68 What his Honour had to say concerning the purpose of a provision such as s 170-50 has to be understood in the context of the following: 1. He was dealing with a provision which expressly provided for an extension of time beyond that mandated by the provision itself; and 2. it concerned a specific provision dealing with the transfer of a loss from a loss company to an income company; that provision set the statutory framework within which the policy or purpose of the power to extend was to be determined. 69 In the present case, s 388-55(1) is a general power to defer the time within which an approved form is to be given and the policy or purpose which its enactment serves, is to be identified independently of any specific provision which provides a time or period by or within which an approved form is to be given. According to more modern approaches to statutory interpretation, one looks to statutory context in the first instance, not merely at some later stage when ambiguity might be thought to arise: CIC Insurance Ltd at 408. 70 The relevant statutory context in the present case is Division 388 of Sch 1 to the Administration Act which was inserted into Sch 1 by Act No. 91 of 2000 and those other provisions inserted into Sch 1 by the same legislation, which includes Division 286 - Penalties for failing to lodge documents on time. In that statutory context, the general power to defer time within which an approved form is required to be given to the Commissioner …' can be seen as providing a 'tool of good administration', to use the words of French J, to be used to avoid or alleviate the consequences of excessive rigidity in the application of time limits by way of 'absurdity and injustice', to embrace again the words of French J. 71 That policy or purpose would be served where failure to comply with time limits would otherwise incur a liability to administrative penalty under s 286-75(1) of Sch 1 to the Administration Act or otherwise detrimentally affect or impact on existing rights or privileges. It is far more difficult to see how that policy or purpose is served when no liability to penalty or loss of existing rights would arise for failure to comply with time limits, such as where the requirement is not cast in the terms of an obligation but rather is permissive, even where the failure or omission to act within the time prescribed results in the loss of an opportunity to gain a right or privilege. In these latter situations, the administrator does not need 'a tool of good administration' to avoid or alleviate adverse consequences flowing from the excessive rigidity of time limits because there are no such consequences. This is best illustrated in the context of the analysis of the second issue of construction below. 72 For the foregoing reasons, I am of the view s 388-55(1) of Sch 1 to the Administration Act is confined in its application to a provision which requires the giving of an approved form in fulfilment of an obligation and does not extend to a provision which is permissive, at least where the failure or omission to act within the time limit does not adversely impact on existing rights or privileges. 73 This conclusion would be enough to dispose of the appeal but in the event I am wrong on this first issue of construction and in deference to the submission that both parties made both before the primary judge and on the hearing of the appeal on the second issue of construction, I set out below my analysis of that issue.

The Second Issue 74 The issue of whether s 703-50 of the 1997 Act evinces or manifests an intention that the 'period for giving the choice' is fixed and not to be extended by the exercise of a general power such as that contained in s 388-55(1) of Sch 1 to the Administration Act, may well be resolved by reference to the language or text of each provision. If such reference does not provide the resolution because of inherent conflict, then recourse to the principles enunciated in Project Blue Sky in the reasons (at [70]) of McHugh, Gummow, Kirby and Hayne JJ in the extract at [53] above rise to the surface as a means of resolution. 75 Section 703-50 lays down the mechanism by which a company, which is the head company of a consolidatable group, can choose to form a consolidated group. If such a company decides to make the choice - it is truly a choice free of any mandate or obligation - then it must specify a day from which the group will be consolidated and that day must post-date 30 June 2002 (s 703-50(1)); and the choice must be made in the approved form given to the Commissioner within the period specified in s 703-50(3). That period starts at the start of the day specified in the choice and ends, relevantly, at the end of the day on which the company gives the Commissioner its income tax return for the income year during which the day specified in the choice occurs. 76 By way of illustration, on 15 December 2003 a head company chooses to form a consolidated group from 1 July 2003 (the start date) and lodges a consolidated return for the year ended 30 June 2004 on 15 November 2004 (the end date). This would be an effective choice because: 1. The start date post-dates 30 June 2003; and 2. The choice is given on 15 December 2003 which is within the period between the start date and the end date. 77 It is not possible for a head company to give the Commissioner an approved form making a choice before the start date or after the end date. In the present case, the period within which a choice may be given for a start date of 1 July 2003 has expired; it expired on 24 October 2005 when McIntosh lodged its income tax return for the year ended 30 June 2004. 78 Even if McIntosh was to be given an extension of time beyond the date of lodgement of its return of income for the year ended 30 June 2004 in which to make a choice to consolidate from 1 July 2003, that extension would not facilitate an effective choice unless McIntosh was also entitled, which it is not, to lodge an amended return for the year ended 30 June 2004 as the head company of a consolidated group. 79 The fact that an extension of time alone would not facilitate an effective choice to consolidate from 1 July 2003 suggests that the period for giving the choice in s 703-50(3) is fixed and not to be extended by the exercise of a general power such as that contained in s 388-55(1) of Sch 1 to the Administration Act. 80 In short, the section proceeds on the unspoken premise that the income tax return lodged by the head company for the year of income in which the specified day occurs will be a consolidated return. So understood, there is no need for a facility or mechanism to extend the period within which the choice must be made. The section does not contemplate, nor does it accommodate, a situation where, as here, the return lodged by the head company for the year of income in which the proposed specified day occurs is a 'stand alone' return for the head company. 81 Those reasons aside, there are, in my view, a number of features or aspects of the language or text of s 703-50, its statutory context within Part 3-90 of the 1997 Act and its role as the mechanism by which a head company chooses to consolidate a consolidatable group from a specified day which, if not individually then viewed holistically, evince or manifest a legislative purpose or intention that the period within which the choice is to be made is fixed and not susceptible to extension by the exercise of a general power of the kind to be found in s 388-55(1). Some of these aspects or features are obvious, some are not. 82 First, the fact that a head company does not make an effective choice to consolidate from a specified day because the prescribed period within which the choice must be made has expired, does not preclude the company from choosing a subsequent day provided the choice is made within the prescribed period for the chosen day. 83 Second, the day on which the choice is made and the start date and the end date of the prescribed period within which the choice must be made for a filing head company are days within the taxpayer's control. Moreover, the end date of the period can be effectively extended beyond the Gazettal notice date by obtaining an extension of time for filing a return for the year of income in which the chosen day or proposed chosen day occurs: see note to s 161(1) of the 1936 Act in [84] below. 84 The lack of any mechanism within s 703-50 itself for extension of the period and the absence of any note of the kind found after s 161(1) of the 1936 Act, namely: Note: The Commissioner may defer the time for giving the return; see section 388-55 in Schedule 1 to the Taxation Administration Act 1953. 85 Subsection 703-50(6) allows the Commissioner to give notice that a choice has effect notwithstanding the inclusion of incorrect information. However, the note to that subsection makes it clear that the Commissioner has no discretion under that subsection to give effect to a purported choice given either before the day specified in the choice (s 703-50(3)(a)) or after the day on which the income tax return was given or due (s 703-50(3)(b)). That, in turn, the Commissioner submitted, strongly suggests that there was no intention to confer on the Commissioner a discretion under s 388-55 to give effect to a purported choice to that effect in circumstances where that would have the same result. I agree with this submission. 86 For the foregoing reasons, I am of the view that the appeal should be dismissed. We were informed at the outset of the hearing of the appeal that this proceeding is brought under the Commissioner's test case funding system and that we need not be concerned with costs. In those circumstances, there will be no order as to costs. I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds.

Associate: Dated: 28 July 2009 Counsel for the First and Second Appellants: Mr AH Slater QC with Mr IS Young

Solicitor for the First and Second Appellants: Robert Richards and Associates

Counsel for the Respondent: Dr M Perry QC with Mr AJ O'Brien

Solicitor for the Respondent: Australian Government Solicitor