CONSIDERATION
47 There is no doubt that assessments have been made by the Commissioner which are neither tentative nor provisional. No foundation has been laid by the applicant in its pleading of any 'deliberate' acting in breach of a statutory prohibition. Nor is there any evidence of any deliberate intention to breach the provisions of the private ruling regime. There is no evidence to suggest that the assessments have been made in actual bad faith or through conscious maladministration. On this basis, no error has been shown in the process of assessment going to jurisdiction.
48 However, the applicant contends that s 170BB of the 1936 Tax Act and s 357-60 of Sch 1 of the TAA impose upon the Commissioner an imperative duty or inviolable limitation or restraint with respect to the issue of assessments contrary to a private ruling, such that a failure to comply with the provisions constitutes jurisdictional error.
49 Neither ss 166 or 169 referred to above, nor s 166A (deemed assessment), s 167 (default assessment) or s 168 (special assessment) of the 1936 Tax Act, expressly qualify the power or duty to assess by reference to any "duty", "limitation" or "restraint" in the private ruling regime. In addition, no provision of the private ruling regime expressly imposes a duty, limitation or restraint on the ability of the Commissioner to issue an assessment. It is difficult to see how there could be any implication of such duty, limitation or restraint.
50 Nor is there any inconsistency with the private ruling regime and the general power and duty of the Commissioner to make an assessment. In making an assessment, the Commissioner will need to consider any relevant private ruling and apply that ruling according to its terms. On this basis there is clearly power to make an assessment, contrary to the position agitated in McDonald v Commissioner of Business Franchises (1992) 175 CLR 472. In McDonald, the High Court specifically referred to s 177(1) of the 1936 Tax Act, and the power to make an assessment under that as continuing (at 477). In this way, the notice of assessment attracts the operation of s 177(1) even though a condition governing the exercise of the power is disputed.
51 Even if a duty, limitation or restraint could be identified by implication, it would then be necessary to consider whether "it was a purpose of the legislation that an act done in breach of the [duty, limitation or restraint] should be invalid": Project Blue Sky Inc v Australian Broadcasting Corporation (1998) 194 CLR 355 at [93]. In determining this question of legislative purpose, "regard must be had to 'the language of the relevant provision and the scope and object of the whole statute'": Blue Sky at [93].
52 The operation of s 175 of the 1936 Tax Act in the context of the continuing power and duty of the Commissioner to make assessments is of significance in considering this question of invalidity. As the High Court in Futuris stated, s 175 must be read with s 177(1) (at [24]). Further, the terms of s 175 themselves are unqualified and widely expressed. They apply to "any assessment" and protect such an assessment from non-compliance with "any" of the provisions of the tax legislation. As we have indicated, no provision in the private ruling regime or elsewhere qualifies the width of s 175 insofar as it applies to assessments issued to a taxpayer in receipt of a private ruling. It follows that in the absence of jurisdictional error of the type identified by the High Court in Futuris, any failure by the Commissioner to comply with a provision of the tax legislation (including the private ruling regime provisions) when issuing an assessment does not thereby render the assessment invalid.
53 This approach to the relationship between s 175 of the 1936 Tax Act and the private ruling regime is reinforced by the availability of Pt IVC proceedings under the TAA in which compliance with a private ruling can be raised for consideration.
54 In order to succeed in Pt IVC proceedings, a taxpayer is required to demonstrate that an assessment was "excessive": s 14ZZK(b)(i) of the TAA. An assessment will be excessive where, for instance, the assessment imposes a substantive liability on a taxpayer in excess of that to which it may be lawfully subjected.
55 Justice Taylor in McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 at 282 made the following observations dealing with the concept of "excessive":
… The form of words chosen, and particularly the word "excessive", presents some difficulty. For the appellant it is said that to show that the assessment is not, in the circumstances, authorised at all is not to show that it is "excessive". That expression, it is said, is limited to questions relating to the quantum of the assessment and does not extend further. But again it may be said that in many cases where amended assessments have been made under s. 170 (2) the questions will frequently be the same. But whether or not this is so the word "excessive" is capable of a much wider meaning than that ascribed to it by the appellant's argument and there is no reason for thinking that an assessment, made in purported but not justifiable exercise of a statutory power, may not properly be described as excessive; it purports to impose a specified liability and, upon appeal, the claim of the appellant is that he is not liable to pay any part of it. Whether the particular ground upon which he seeks to escape or reduce the liability merely touches the accuracy of the assessment or assails its validity as an assessment, he is, in the words of s. 185, "dissatisfied with" the assessment because it purports to impose upon him a liability in excess of that to which he may lawfully be subjected and I can see no reason why, in either case, his complaint may not be accurately described as a complaint that his assessment is excessive. (Own emphasis).
56 These observations of Taylor J were specifically approved in FJ Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 375 by Mason and Wilson JJ (Stephen and Aickin JJ concurred). These observations were not disapproved of in Futuris.
57 Therefore, that the applicant can proceed to have heard its arguments in the Pt IVC proceedings, and if successful in arguing that the Ruling should be applied, will demonstrate that the 2006 Assessment is excessive.
58 Putting aside the above analysis, we also consider that the applicant has a threshold difficulty to overcome in order to demonstrate invalidity and jurisdictional error. It seems that the applicant accepts that there is a factual issue to be determined whether the private ruling applies in the circumstances of the application. That factual issue is whether the activities of the applicant have materially changed from 2006 from those that existed at the time the Ruling was issued, so that the arrangement or scheme has not been implemented in the way set out in the Ruling.
59 A private ruling is not intended to bind the Commissioner where the factual position in a particular income year differs from that on which the ruling was based.
60 Both under s 170BB of the 1936 Tax Act and s 357-60 of Sch 1 to the TAA, a private ruling can only bind the Commissioner in respect of the arrangement ruled upon, or where the taxpayer relies upon the ruling by acting in accordance with it. If, in a subsequent period after the private ruling the taxpayer enters into different arrangements, or does not act in accordance with the ruling because of changed circumstances, then the Ruling does not bind the Commissioner. The taxpayer still obtains the protection afforded by the private ruling regime, but only to the extent the taxpayer implements the scheme or arrangements the subject of the ruling. This is not only consistent with the text of the legislation, but also with the Explanatory Memorandum which accompanied the Tax Laws Amendment (Improvements to Self Assessment) Act (No 2) 2005. In the Explanatory Memorandum, it was explained that if the scheme was not implemented in the way set out in a ruling, such ruling would not bind the Commissioner.
61 The arguments which the Commissioner intends to make in Pt IVC proceedings will not only concern the proper construction of the private ruling regime provisions but will also involve an analysis, on the evidence, of the extent to which the applicant's activities have changed in the period between the date the Ruling was issued and the income years to which the assessments relate. No such evidence has been properly adduced by either party in the current proceedings nor was that the way the applicant sought to progress this application before the Court. Whether or not those arguments are correct will be determined in the Pt IVC proceedings.
62 It cannot be said, without a factual investigation, that when the assessment is viewed alongside the Ruling, the assessment is inconsistent with it and is made in breach of s 170BB of the 1936 Tax Act or s 357-60 of Sch 1 to the TAA. It may eventuate, upon an adjudication before the AAT, that there has been a relevant change of circumstances, and the Ruling will not be applicable. It cannot now be concluded that the Commissioner is bound by the Ruling not to make any assessment under s 166 where the Commissioner in good faith contends the Ruling does not apply because of a relevant change of circumstances.
63 We make one final observation as to the relief claimed by the applicant. As we have observed, there are existing Pt IVC proceedings on foot in the AAT in relation to the 2006 Assessment. The pending of those proceedings would normally mean no declaratory relief should be made in relation to the 2006 Assessment: see Futuris at [48]. However, in view of the reasons given above, we do not need to discuss further the appropriateness of the relief sought by the applicant.