The Crest Hotel v Chief Commissioner of State Revenue

Consideration

The facts clearly establish that the Chief Commissioner on 12 August 2013 issued an annual assessment for the period 1 July 2012 to 30 June 2013 to the Applicant. The assessment indicated that a refund of $60,191.26 was due to the Applicant. This was subsequently paid to the Applicant on 3 October 2013.
It is not in dispute that the Chief Commissioner had, in error, treated the Applicant as the hotelier for the whole relevant period. It is also not in dispute that the previous owner was Benchmark Hotels Pty Ltd for the period 1 July 2012 to 17 December 2012. The Applicant's licensee was the hotelier from 18 December 2012 to 30 June 2013.
The Chief Commissioner also, in error, paid the full refund amount to both the previous owner and the Applicant.
The short question that arises is whether the Chief Commissioner was in these circumstances entitled to proceed under s 10(3) of the Act to make an apportionment and seek refunds from both parties.
In order to deal with this issue it is necessary to consider the effect of the assessment issued to the Applicant which, the facts disclose, has not been amended or otherwise dealt with by the Chief Commissioner.
The Chief Commissioner has advanced a number of contentions to support the action taken in this matter to proceed to apportion the refund under s 10(3) of the Act. These contentions may be summarised: that the assessment issued to the Applicant on 12 August 2013 disclosed a 'zero liability'; that in making the apportionment, the Chief Commissioner is 'not disturbing the assessment' in particular the 'liability, the amount of tax payable and previously paid are unchanged'; that s 10(3) of the Act operates independently of sections 8(1) and 9 of the Taxation Administration Act 1996 (the TA Act); that the refund apportionment does not depend on an assessment; and that gaming machine tax liability is not dependent on there being a notice of assessment (AJ Holdings (NSW) Pty Limited v Chief Commissioner of State Revenue [2014] NSWCATAP 40 at [84]).
Dealing first with the Chief Commissioner's powers to issue assessments. Pursuant to s 9(3) of the Act, the Chief Commissioner is directed to assess or reassess, under Part 3 of the TA Act.
The Chief Commissioner's general power to make assessments is stated in s 8 of the TA Act which is in the following terms: 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.
The Chief Commissioner also has power to issue, subject to certain conditions, one or more reassessments of a tax liability of a taxpayer under s 9 of the TA Act.
The Chief Commissioner is, in addition, given a power under s 13 of the TA Act to 'withdraw an assessment (being an assessment for which a notice has been issued) at any time within 5 years after the date of issue of the notice, whether or not the tax specified in the assessment has been paid'.
Section 8(2) of the TA Act permits the Chief Commissioner to make an assessment disclosing no liability in a particular case. This power is quite crucial because, in the absence of this provision, the Chief Commissioner would be restricted to issue only assessments which disclose a tax liability (see FCT v Ryan [2000] 201 CLR 109; (2000) 43 ATR 694; 2000 ATC 4079 - the majority of the High Court in Ryan held that a notice disclosing a 'zero' amount of tax liability was not an assessment because 'zero' was not a positive amount).
It is also a well established principle of Commonwealth taxation law that an assessment stating no tax was payable or a refund was due, because tax instalments had been paid or some other tax offset or rebate was available, remains a valid notice of assessment. (Foster v Federal Commissioner of Taxation (1951) 82 CLR 606; Webb v Deputy Commissioner of Taxation (1993) 27 ATR 459; Spassked Pty Ltd v Federal Commissioner 2003 ATC 4184, [2003] FCA 84 and (2003) 52 ATR 337. In my opinion, this principle would equally apply to an assessment made by the Chief Commissioner under his powers found in Part 3 of the TA Act.
It is also important to note, as observed by the High Court (Knox CJ, Isaacs and Rich JJ) in R v Deputy Federal Commissioner (SA); Ex parte Hooper (1926) 37 CLR 368 per Isaacs J at 373- An "assessment" is not a piece of paper: it is an official act or operation; it is the Commissioner's ascertainment, on consideration of all relevant circumstances, including sometimes his own opinion, of the amount of tax chargeable to a given taxpayer.
The Chief Commissioner also contended that under the Act the 'liability is not dependent on there being a notice of assessment' and that 'refund apportionment does not depend on an assessment'. These contentions ignore the scheme of the Act. A notice of assessment is not required because tax is paid by quarterly instalments pursuant to s 7 of the Act. But s 9 of the Act requires the Chief Commissioner to assess or reassess under Part 3 of the TA Act. Further, any adjustment made under s 10 of the Act is treated as an assessment - s 10(2) speaks of 'the amount of tax assessed' pursuant to the adjustment exercise. A refund of an amount can only arise if the amount of tax assessed to be payable is less than the amount paid by the hotelier for the tax year concerned. The Chief Commissioner may refund the difference in accordance with Part 4 of the TA Act. Finally, s 10(3) provides that where the tax for the tax year concerned was paid by more than one hotelier, any credit or refund of tax may be apportioned among those hoteliers. But this provision only operates where there has been an assessment, which discloses either a credit or refund.
But in this matter the assessment issued to the Applicant on 12 August 2013 was made by the Chief Commissioner pursuant to the general power given to the Chief Commissioner under s 8 of the TA Act. It was the Applicant's liability that was determined under the assessment issued to the Applicant. The assessment also disclosed that the Applicant was entitled to a refund of $60,191.26, which was subsequently paid to the Applicant. The refund was calculated when making the assessment under s 8 of the TA Act. The refund provisions found in Part 4 of the TA Act were applicable to the refund.
The above observations lead me to the conclusion that the Chief Commissioner's arguments and contentions have no merit and should be rejected.
The Applicant has correctly contended that in the absence of any further assessment action by the Chief Commissioner, the only assessment issued for the annual liability of the relevant period determined a refund of the full amount as payable to the Applicant. But the facts disclose that the Chief Commissioner erred in treating the Applicant as the sole hotelier when ascertaining the liability for the relevant period. The Applicant was in those circumstances not entitled to the full amount of the refund.
When the Chief Commissioner discovered that he had erred in paying the full refund to the Applicant and also a similar amount to the previous hotelier, the Chief Commissioner purported to act under s 10(3) to make an apportionment of the refund.
The proper course of action, in my opinion, required the withdrawal of the assessment issued to the Applicant under s 13 of the TA Act or the issue of a reassessment of the liability of the Applicant under s 9 of the TA Act. In addition, the Chief Commissioner was required to apportion the liability for tax as between the two hoteliers under s 11 of the Act. Only after having taken these steps, the Chief Commissioner was in a position to make any apportionment of the refund under s 10(3).
Accordingly, having regard to all the relevant facts, the relevant statutory provisions and case law, the correct and preferable decision is to remit this matter to the Chief Commissioner to take assessing action as identified above before making any apportionment of the refund between the parties.
Because of the view I take on the contentions made by the Chief Commissioner in relation to the assessment issued to the Applicant, it is really unnecessary for me to deal with the apportionment action taken by the Chief Commissioner. In passing, I will however make some short observations.
Section 10(3) gives the Chief Commissioner a wide discretion without any prescription. Discretions of this kind can be challenged only in very narrow circumstances as explained by Mason J in Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 at 40 - In the context of judicial review on the ground of taking into account irrelevant considerations, this Court has held that, where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except in so far as there may be found in the subject matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard. …. By analogy, where the ground of review is that a relevant consideration has not been taken into account and the discretion is unconfined by the terms of the statute, the court will not find that the decision-maker is bound to take a particular matter into account unless an implication that he is bound to do so is to be found in the subject matter, scope and purpose of the Act.
More recently the Court of Appeal (Beazley P, Basten JA and Macfarlan JA) in Lo v Chief Commissioner of State Revenue [2013] NSWCA 180 per Basten JA at [9]-[11] sought to further clarify the kind of review available in cases where such a discretion is exercised - …. The term "relevant considerations" is widely misunderstood: as used in leading authorities, such as Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; 162 CLR 24 at 39 (Mason J) it refers to a matter which the decision-maker is bound to take into account. The obligation may derive from the express terms of the power-conferring statute or may be implied from its subject matter, scope and purpose. A preferable term would be "mandatory consideration". Further, a matter traditionally described as an "irrelevant consideration is one which is prohibited because, having regard to the subject matter, scope and purpose of the power being exercised, it can be seen to reflect an extraneous or improper purpose or to render the decision arbitrary or capricious. Between these two categories is usually a wide range of permissible considerations which the decision-maker may weigh or disregard without committing an error of law. 10 The next concept is that of "taking into account". It covers a spectrum of conduct. If a decision-maker who gives reasons for a decision makes no reference to a particular matter, it may be inferred that he or she disregarded it, either deliberately or through inadvertence. In either case, if it were a mandatory consideration, there would be an error of law. If, however, the matter is referred to there may still be a basis for review. In some cases, it is asserted that there has been a failure to give "proper, genuine and realistic consideration", to a particular matter. That is best understood as a complaint of failure "to give adequate weight to a relevant fact of great importance": see Peko-Wallend at 41 (Mason J). The other side of this complaint is giving "excessive weight to a relevant factor of no great importance". Dealing with these circumstances, Mason J continued: "The preferred ground on which this is done, however is not the failure to take into account relevant considerations or taking into account irrelevant considerations, but that the decision is 'manifestly unreasonable'. This ground of review was considered by Lord Greene in Wednesbury Corporation, in which his Lordship said that it would only be made out if it were shown that the decision was so unreasonable that no reasonable person could have come to it." 11 Mason J left the matter with a warning that a court "should proceed with caution when reviewing an administrative decision on the ground that it does not give proper weight to relevant factors, lest it exceed its supervisory role by reviewing the decision on its merits": at 42. This concern was reiterated by the High Court in Minister for Immigration and Citizenship v SZJSS [2010] HCA 48; 243 CLR 164 at [30] and by this Court in Allianz Australia Insurance Ltd v Cervantes [2012] NSWCA 244 at [15]-[24], in my judgment with which McColl and Macfarlan JJA agreed.
In this matter, the Applicant has not produced any evidence to demonstrate that the Chief Commissioner failed to take into account any 'mandatory consideration' or took into account any 'irrelevant consideration' in making the apportionment on the basis of the annual profit method. The Applicant has merely sought to argue that there were alternative approaches to determine the apportionment available to the Chief Commissioner, which would have produced a better outcome for the Applicant. The Chief Commissioner is given an extremely wide power under s 10(3) of the Act to conduct the apportionment 'in such manner as the Chief Commissioner considers appropriate'. The choice of the approach taken by the Chief Commissioner, the annual profit basis, is in my opinion well within the 'the subject matter, scope and purpose' of the Act.

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