Metricon Qld Pty Ltd v Chief Commissioner of State Revenue

Judgment 1HIS HONOUR: On 27 June 2013 I made an order by consent pursuant to r 28.2 of the Uniform Civil Procedure Rules that the following question be determined separately and in advance of any other questions in the proceedings, namely: "Whether the assessment notified by the 2010 land tax assessment notice (ID 1566119952) (showing the amount of the reassessment) issued on 9 August 2012 is invalid and beyond the power conferred by s 9 of the Taxation Administration Act 1996 ('TAA') for the defendant to make a reassessment solely on account that the initial assessment for the 2010 land tax year, being land tax assessment notice (ID 1538278886), issued on 8 December 2010 was already the subject of a review under Pt 10 of the TAA?" 2On 8 December 2010 the Chief Commissioner of State Revenue ("the Commissioner") wrote to the solicitors for the plaintiff enclosing a land tax assessment notice for the 2009 and 2010 tax years. For the 2010 tax year the plaintiff was assessed to be liable to pay land tax of $532,135.70 based on 73 parcels of aggregated land having a taxable value of $27,920,867. The notice of assessment stated that three parcels of land, namely two parcels of land at Terranora and a parcel of land at Banora Point, were exempt from land tax. In the covering letter accompanying the notice of assessment the Office of State Revenue advised that those three parcels of land had been accepted as being the subject of the "primary production exemption" (in s 10AA of the Land Tax Management Act 1956) from February 2009, or, in one case, from 28 July 2009. The Office of State Revenue advised that five other properties did not qualify for the primary production exemption. 3The notice of assessment also included an assessment for land tax for the 2009 tax year. None of the properties was assessed as being exempt from land tax for that year. 4On 3 February 2011 the plaintiff lodged an objection to the 2009 and 2010 land tax assessment notice. The plaintiff contended that all eight properties were exempt from land tax pursuant to s 10AA of the Land Tax Management Act for the 2009 and 2010 years. On 29 May 2012 the Chief Commissioner disallowed the objection. 5On 25 July 2012 the plaintiff filed an application in the Administrative Decisions Tribunal pursuant to s 96 of the Taxation Administration Act 1996 for the review of the decision of the Chief Commissioner that had been the subject of the objection. The application for review described the decision to be reviewed as that made on 29 May 2012, that is, the decision to disallow the objection. That was an error. 6On 9 August 2012 the Chief Commissioner wrote to the plaintiff enclosing a land tax assessment notice covering the 2010 to 2012 tax years. In relation to the 2010 tax year, the notice of assessment was a reassessment. The three properties that formerly had been assessed as being exempt from land tax were instead assessed as being liable for land tax. The result was that the plaintiff was assessed for land tax for the 2010 tax year on land having a taxable value of $67,469,601. It was assessed as being liable for land tax for the 2010 year in the sum of $1,323,110.40. The notice of assessment stated that it replaced the previous notification and that the reason for the new assessment was "exemption/concession change for land item". 7On 26 September 2012 the plaintiff lodged an objection to the land tax assessment for the 2010, 2011 and 2012 tax years. In the objection the plaintiff contended that the eight properties were exempt from land tax in respect of each of the tax years 2010, 2011 and 2012 because they were used for primary production and otherwise satisfied the requirements of s 10AA of the Land Tax Management Act. 8On 18 April 2013 the plaintiff filed a summons in this Court seeking orders that the assessments for each of the 2010, 2011 and 2012 tax years be revoked and that the matter be remitted to the Chief Commissioner for determination in accordance with the Court's finding or decision. That was an application pursuant to s 97 of the Taxation Administration Act for review of the Chief Commissioner's decision that had been the subject of the objection. In its Appeal Statement in support of the summons the plaintiff contended, amongst other things, that the 2010 assessment was invalid because the Chief Commissioner could not amend an assessment that was already the subject of a review under Pt 10 of the Taxation Administration Act. That is the question now to be determined. 9In support of that contention, Dr Sorensen, who appeared for the plaintiff, relied on the decision of Lee J in St George Leagues Club Ltd v Commissioner of Land Tax [1983] 2 NSWLR 399. He submitted that there were close similarities between the provisions of the Land Tax Management Act 1956 concerning assessments, reassessments, objections and appeals as it stood at the time of that decision and the current provisions of the Taxation Administration Act. He submitted that in the St George Leagues Club case Lee J found that it was not open to the Commissioner to exercise the statutory powers affecting an assessment, once a statutory appeal had been initiated. By parity of reasoning, the same was true of Div 2 of Pt 10 of the Taxation Administration Act. Dr Sorensen submitted that the intent of Div 2 of Pt 10 of the Taxation Administration Act was that once an application for review was made to the Administrative Decisions Tribunal or to the Supreme Court, it was for the tribunal or court to determine whether the assessment was to be confirmed, revoked or replaced by an assessment made by the tribunal or the court and it was not open to the Chief Commissioner to issue a reassessment, except if the matter was remitted to the Chief Commissioner for determination in accordance with the finding or decision of the court or tribunal, or to give effect to such a decision (Taxation Administration Act, ss 101(1)(d) and 102(1)). 10The starting point is not the decision in the St George Leagues Club case, but the relevant provisions of the Taxation Administration Act and the Land Tax Management Act. 11Sections 8 and 9 of the Taxation Administration Act provide: "8 General power to make assessment (1) The Chief Commissioner may make an assessment of the tax liability of a taxpayer. (2) An assessment of a tax liability may consist of a determination that there is not a particular tax liability. 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. (4) The initial assessment of a tax liability remains the initial assessment of the liability for the purposes of this Act even if it is withdrawn under section 13." 12Section 13 provides that the Chief Commissioner may withdraw an assessment for which a notice of assessment has been issued at any time within five years after the date of issue of the notice, whether or not the amount of tax specified in the assessment has been paid. 13Section 14 provides: "14 Notice of assessment, reassessment or withdrawal of assessment (1) The Chief Commissioner may issue a notice of assessment (showing the amount of the assessment). (2) If the Chief Commissioner has not issued a notice of assessment of the tax liability of a taxpayer, the Chief Commissioner must issue the notice if a request to do so is made by the taxpayer within 5 years after the liability arose. (3) If the Chief Commissioner makes a reassessment, the Chief Commissioner must issue a notice of assessment (showing the amount of the reassessment). (4) If the Chief Commissioner withdraws an assessment, the Chief Commissioner must issue a notice of withdrawal of assessment. (5) The notice is to be in a form approved by the Chief Commissioner." 14Section 119 provides: "119 Evidence of assessment Production of a notice of assessment, or of a document signed by the Chief Commissioner purporting to be a copy of a notice of assessment, is: (a) conclusive evidence of the due making of the assessment, and (b) conclusive evidence that the amount and all particulars of the assessment are correct, except in objection or review proceedings when it is prima facie evidence only." 15Consistently with s 119, s 16 provides that the validity of an assessment is not affected because a provision of a taxation law has not been complied with. 16Section 86 provides: "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 section 6 of the Administrative Decisions Tribunal Act 1997) of the Chief Commissioner under a taxation law, may lodge a written objection with the Chief Commissioner. (2) However, a taxpayer may not lodge such an objection in respect of the following: (a) an assessment made under section 12 (Compromise assessment) with the agreement of the taxpayer, (ab) a decision not to make an assessment under section 12, (b) the determination of an objection under this Part (including such part of any reassessment that gives effect to the determination of an objection that is allowed in whole or in part), (c) a decision to reassess the taxpayer's tax liability that does not have the effect of increasing that liability where the taxpayer seeks to lodge the objection more than 60 days after the date of service of the notice of the initial assessment, (d) a decision not to reassess the taxpayer's tax liability where the taxpayer seeks to lodge the objection more than 60 days after the date of service of the notice of the initial assessment. (3) The provisions of subsection (2) (c) and (d) do not preclude the lodgment of an objection that is sought to be lodged more than 60 days after the date of service of the notice of the initial assessment if the Chief Commissioner permits its lodgment. The provisions of section 90 (2)-(5) apply to any such objection in the same way as they apply to an objection referred to in section 90 (1)." 17In s 3 "assessment" is defined as follows: "assessment means an assessment made by the Chief Commissioner under Part 3 of the tax liability of a person under a taxation law, and includes: (a) a reassessment and a compromise assessment under Part 3, and (b) an assessment by the Supreme Court or the Administrative Decisions Tribunal on an application for a review." 18Section 87(2) provides that in the case of a reassessment the grounds for objection are "limited to the extent of the reassessment". 19Section 91 requires the Chief Commissioner to consider an objection and either allow the objection in whole or in part or disallow the objection. 20Sections 96 and 97 provide that a taxpayer may apply to the Administrative Decisions Tribunal or to the Supreme Court for a review of a decision of the Chief Commissioner that has been the subject of an objection under Div 1 of Pt 10 if the taxpayer is dissatisfied with the Chief Commissioner's determination of the taxpayer's objection, or if 90 days have passed since the taxpayer's objection was served on the Chief Commissioner and the Chief Commissioner has not determined the objection. Section 91(2) provides that the Chief Commissioner may determine an objection that is the subject of an application for review under Div 2 (that is, ss 96 or 97) at any time before the hearing of the application for review commences. Section 99 requires that an application for review following a determination by the Chief Commissioner of an objection must be made not later than 60 days after the date of issue of the notice of the Chief Commissioner's determination of the objection. That period can be extended. By reason of s 100(2) neither the taxpayer's case nor the Chief Commissioner's case on an application for review is limited to the grounds of the objection. 21Section 101(1) provides: "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, (c) make an order for payment to the Chief Commissioner of any amount of tax that is assessed as being payable but has not been paid, (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." 22The plaintiff contends that there is an implied limitation on the Chief Commissioner's power under s 9 to make one or more reassessments of a tax liability of a taxpayer and the power cannot be exercised where an application for review of a decision that has been the subject of the objection is made to the Administrative Decisions Tribunal or to the Supreme Court. 23There is an express limitation in s 9(3) as to the time by which the Chief Commissioner can make a reassessment of a tax liability after the initial assessment. Section 9(2) regulates how a reassessment of a tax liability is to be made. These are the only express qualifications to the Chief Commissioner's power to reassess. If the limitation contended for were intended, it could be expected that it would be made expressly. 24No such limitation could be implied unless the exercise of the power under s 9 to make a reassessment would compromise review proceedings brought in the tribunal or the court following the disallowance of an objection to an initial assessment, or a failure to make an initial assessment within the time prescribed. 25The exercise of the Chief Commissioner's power to make a reassessment should not compromise review proceedings. If the reassessment is that the taxpayer's liability is increased, the taxpayer has the right to object and if the objection is unsuccessful, to apply for the review of the reassessment. That is this case. The applications for the review of the initial assessment and the reassessment can be heard together. There can be some administrative dislocations where one application for review is made to the tribunal and the other is made to the court. In this case, those administrative difficulties are to be addressed by the earlier application to the tribunal being withdrawn for the purposes of the court's dealing with the matter, provided that the tribunal approves that course pursuant to s 97(2). Any such procedural complications are the result of a dual system for review and do not imply any limitation on the power of the Chief Commissioner to make a reassessment pursuant to s 9. 26The Chief Commissioner's decision that is the subject of review under s 96 or s 97 is the decision that was the subject of objection, not the decision on the objection (Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [28] and [53]; B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; (2008) 74 NSWLR 481 at [123], 506). The court or tribunal reviewing the initial decision conducts a de novo review that is not limited to the materials before the Chief Commissioner. The parties are not bound by the grounds of objection or reasons for decision on the objection. The taxpayer is not required to show that the Chief Commissioner had erred on the materials before the Chief Commissioner, or that the exercise of any discretion by the Chief Commissioner was vitiated by a mistake of law, or failure to have regard to a consideration to which regard was required to be had, or by having regard to extraneous considerations (Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] HCA 41; (2011) 245 CLR 446 at [13]-[22], 452-455). On the de novo review the court or tribunal is not confined to confirming or revoking the assessment. It can make an assessment in place of the Chief Commissioner's assessment, and can make an order for payment of any amount of tax that is assessed as being payable but has not been paid, including tax that is assessed by the court or tribunal as being payable (Taxation Administration Act, ss 3, 101(1)(b) and (c)). 27Accordingly, the issues raised by a notice of reassessment could be ventilated in the proceedings for the review of the Chief Commissioner's decision to make the initial assessment, even if the times for objection to the reassessment and the making of a decision on the objection were still running, and that process had not run its course. A reassessment is an amendment of the initial reassessment, not an independent and additional assessment (Federal Commissioner of Taxation v S Hoffnung & Co Ltd (1928) 42 CLR 39 at 54; White Industries Australia Pty Ltd v Federal Commissioner of Taxation [2003] FCA 599; (2003) 129 FCR 276 at [30], 282-283). The decision of the court or tribunal on the review of the original assessment will conclusively determine (subject to appeal) the taxpayer's liability (W & A McArthur Ltd v Federal Commissioner of Taxation (1930) 45 CLR 1 at 10). Accordingly, the decision of the court or tribunal on review of the initial assessment will also determine the matters arising under a notice of reassessment. The issue of a notice of reassessment will not stultify the proceedings. All that will be required is that the issues raised by the reassessment be dealt with in the review proceedings. 28The fact that the taxpayer is entitled to object to the Chief Commissioner's decision to make the reassessment and to have that objection considered and determined by the Chief Commissioner may mean that review proceedings from the initial assessment may have to be adjourned to allow that to be done. That is because there is one assessment and the decision of the court or tribunal will be determinative, subject to appeal. But there is no reason the taxpayer could not waive its right to have its objection to a reassessment considered and determined by the Chief Commissioner. Both parties could advance before the court or tribunal in the proceedings for review of the initial assessment the arguments that would be raised in the objection to the reassessment and the decision on that objection. 29The position is even clearer if the Chief Commissioner decided to make a reassessment that reduced the taxpayer's liability whilst review proceedings were pending. Assume a case where the Chief Commissioner had initially assessed the tax liability of the taxpayer to be $100,000. The taxpayer asserted that it had no tax liability, but the Chief Commissioner wholly rejected the objection. An application for review was made to the tribunal or to the court. On further consideration the Chief Commissioner considered that the true tax liability of the taxpayer was not $100,000 but $50,000, but the taxpayer adhered to its contention that there was no liability. No doubt on the hearing of the application for review, the contest between the parties would be whether the taxpayer's liability was $50,000 or nil or some other figure, presumably not more than $50,000. But in the meantime, if the Chief Commissioner did not have the power to make a reassessment and issue a notice showing the amount of the reassessment because review proceedings were pending, pursuant to ss 103(1) and 119 of the Taxation Administration Act, the notice of the initial assessment would be conclusive evidence (except in the review proceedings) that the assessment was correct, notwithstanding the pendency of the application for review. The taxpayer might be wound up in insolvency on the basis that it could not dispute a liability of $100,000 even though that was no longer the Chief Commissioner's position. 30For these reasons, I do not consider that there is anything in the Taxation Administration Act from which a limitation is to be implied on the power of the Chief Commissioner to make a reassessment pursuant to s 9 of that Act because review proceedings are pending. 31The purpose of the Taxation Administration Act is to make general provision with respect to the administration and enforcement of the other taxation laws (s 7(1)). I was not referred to anything in any other taxation law, apart from the Land Tax Management Act that would be relevant to the extent of the Chief Commissioner's power under s 9. Section 9AA of the Land Tax Management Act bears on that question. Subsection 9(4) of the Land Tax Management Act provides that the land value of land, in relation to a land tax year, is the value entered in the Register of Land Values kept under s 14CC of the Valuation of Land Act 1916 as the land value of the land as at 1 July in the previous year. Land tax is levied on the taxable value of all land in New South Wales owned by the taxpayer (s 7). The taxable value of that land is the total sum of the average value of each parcel of that land. The average value is to be calculated in accordance with s 9AA, on the basis of the land value of the land (s 9(2) and (3)). Pursuant to s 9AA(1) the average value of a parcel of land is the average of the land value of the land in relation to the year for which the average value is being ascertained and the land value in the two preceding land tax years. The land values are those that are entered on the Register. Those values can be adjusted pursuant to the Valuation of Land Act 1916 as the result of revaluations of land made by the Valuer-General. 32Section 9AA(10) of the Land Tax Management Act provides: "9AA Average value of land ... (10) If the land value of land in relation to a land tax year is altered (whether as a result of being reascertained or on objection or appeal or for the correction of a clerical error or misdescription), the average value of the land must be reascertained on the basis of the altered land value." 33The effect of this provision is that the Chief Commissioner may be required to make a reassessment of the land tax payable in relation to a land tax year after an initial assessment has been made by reason of a subsequent revaluation of land made by the Valuer-General. This is inimical to the suggested limitation on the power of the Chief Commissioner to make a reassessment if review proceedings are pending.