Whitehaven Coal Mining Limited v Chief Commissioner of State Revenue

Medium Neutral Citation: Whitehaven Coal Mining Limited v Chief Commissioner of State Revenue [2025] NSWSC 488

Hearing dates: 30 April – 1 May 2025

Date of orders: 16 May 2025

Decision date: 16 May 2025

Jurisdiction: Equity - Revenue List

Before: Hammerschlag CJ in Eq

Decision: (1) Pursuant to s 25 of the Taxation Administration Act 1996 (NSW), remit the premium component of interest on the Assessment Notices issued to the Plaintiffs for the period up until 1 November 2022.
(2) Pursuant to s 33 of the Taxation Administration Act 1996 (NSW), remit the 25% penalty tax imposed by the Assessment Notices issued to the Plaintiffs for the period up until 1 November 2022.
(3) Appeal otherwise dismissed.

Catchwords: TAXES AND DUTIES – Mining Act 1992 (NSW) ss 282(1), 283, 287(1), 287A, 289, 291, 291A – Taxation Administration Act 1996 (NSW) (TA Act) ss 3, 5B, 9, 14, 17, 21, 25, 26, 33, 97, 101 – Plaintiffs are members of a corporate group and are miners and sellers of coal, and hold mining leases – Under the Mining Act, the holders of such leases are liable to pay royalty to the Crown on publicly owned minerals recovered by them – Application for review of decision of the Chief Commissioner of State Revenue to disallow (in part) Assessment Notices for royalty under the Mining Act plus interest and penalty tax – Whether the giving by the Chief Commissioner of a “confirmation” on a Royalty Online Service (ROS) for the making of royalty returns is the making of an assessment of the tax liability of a taxpayer with the consequence that the Assessment Notices were reassessments to which a five year limitation period under the TA Act applies – HELD: the “confirmation” is not a making by the Chief Commissioner of an assessment of the tax liability of the Plaintiffs – Where the Plaintiffs submitted royalty returns on the basis of an intra-group arrangement (the Return Arrangement) which permitted the making of negative royalty returns and set-off within the group against positive returns of members of the group – Royalty was returned and paid on this basis with the knowledge and cooperation of senior members of the government department then responsible for the administration of the royalty system and was subject to audits which were passed – The Return Arrangement is not permissible under the Mining Act as a basis for rendering royalty returns – Whether the only assessments that were permissible for the Chief Commissioner to make was a nil one because the Crown waived the right to claim royalty on any other basis or was party to a binding agreement with the Plaintiffs not to do so or was estopped from claiming royalty on another basis – HELD: waiver, even if available, not established, binding agreement not established, and estoppel not available and, in any event, not established
LIMITATION OF ACTIONS – Limitation Act 1969 (NSW) ss 10(3)(a), 14(1)(d) – The Limitation Act s 10(3)(a) does not apply to an action by the Crown for the recovery of a tax – Whether the royalty payable to the Chief Commissioner is a tax – HELD: it is
INTEREST AND PENALTY TAX – Whether the Court should remit market interest, the premium component of interest and penalty tax imposed by the Assessment Notices – HELD: it should until 1 November 2022, when the Assessment Notices were issued and which have not been paid by the Plaintiffs, because the Return Arrangement was fully disclosed, implemented with the cooperation of a government department and audited, the Plaintiffs took reasonable steps to comply with their tax obligations, an audit which called it into question and which led to the issue of Assessment Notices took four years to complete and the Plaintiffs’ case was not unreasonably brought or unarguable – However, from the date of the Assessment Notices the Plaintiffs fell into wilful default because they did not pay on them

Legislation Cited: Interpretation Act 1987 (NSW) s 8(b)
Limitation Act 1969 (NSW) ss 10(1) and (3)(a), 14(1)(d), 63(1)
Mining Act 1992 (NSW) ss 282(1), 283, 287(1), 287A, 289, 291, 291A
State Revenue and Other Legislation Amendment (Budget Measures) Act 2014 (NSW)
Supreme Court Act 1970 (NSW)
Taxation Administration Act 1996 (NSW) ss 3, 5B, 9, 14, 17, 21, 25, 26, 33, 97, 101
Mining Regulation 2016 (NSW)

Cases Cited: Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445; [2022] HCA 38
Attorney-General of New South Wales v Collector of Customs for New South Wales (1908) 5 CLR 818; [1908] HCA 28
Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19; (2004) 56 ATR 82
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46
Federal Commissioner of Taxation v Wade (1951) 84 CLR 105; [1951] HCA 66
Fyna Projects Pty Ltd v Chief Commissioner of State Revenue [2018] NSWCA 331
Golden Age and Hannas the Rocks Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 249
R v Deputy Federal Commissioner of Taxation for South Australia; Ex parte Hooper (1926) 37 CLR 368; [1926] HCA 3
Winston-Smith v Chief Commissioner of State Revenue (NSW) [2018] NSWSC 773; (2018) 108 ATR 63

Texts Cited: Keane, Estoppel by Conduct and Election (3rd ed, 2023)
Macquarie Dictionary, online ed, accessed 14 May 2025

Category: Principal judgment

Parties: Whitehaven Coal Mining Limited (First Plaintiff)
Narrabri Coal Pty Ltd (Second Plaintiff)
Namoi Mining Pty Ltd (Third Plaintiff)
Creek Resources Pty Ltd (Fourth Plaintiff)
Aston Coal 2 Pty Ltd (Fifth Plaintiff)
Chief Commissioner of State Revenue (First Defendant)
State of New South Wales (Second Defendant)

Representation: Counsel:
DFC Thomas SC and D Hume (Plaintiffs)
P Herzfeld SC and S Kanagaratnam (First Defendant)
Submitting Appearance (Second Defendant)
Solicitors:
McCullough Robertson Lawyers (Plaintiffs)
Crown Solicitor’s Office (First Defendant)

File Number(s): 2023/00240301

Publication restriction: Nil

JUDGMENT

Introduction

1. The five plaintiff companies are, or have been, miners and sellers of coal. They each hold one or more mining leases under the Mining Act 1992 (NSW). Under the Mining Act, holders of such leases have to render monthly returns and pay royalty to the Crown on publicly owned minerals recovered by the holder under the lease.

2. This application is brought under s 97 [1] of the Taxation Administration Act 1996 (NSW) (the TA Act) by the plaintiffs (the Plaintiff****s or the Taxpayers) to review decisions of the first defendant (the Chief Commissioner) to disallow (in part) their objections to Mineral Royalty Assessment Notices issued by the Chief Commissioner on 2 November 2022 (the A****ssessment Notice****s). The objections were in part upheld by the Chief Commissioner remitting a portion of premium interest and penalties imposed on the Plaintiffs.

The Facts

3. The facts are not in dispute. What follows is derived from affidavit evidence from both parties (none of which was challenged) and documents in Court Books exceeding 5000 pages.

The Return Arrangement

4. The Plaintiffs are subsidiaries whose ultimate holding company is Whitehaven Coal Limited (Whitehaven Coal).

5. From 2007 until sometime in 2019, the Plaintiffs had an intra-group arrangement for selling coal and paying royalties (the Return Arrangement).

6. The first plaintiff, Whitehaven Coal Mining Limited (Whitehaven), held the mining licences for the Canyon Colliery, as well as the Rocglen and Tarrawonga mines. Whitehaven merits specific mention because of the internal corporate arrangements within the group, referred to more fully below.

7. Canyon, however, was no longer producing coal and was under care and maintenance. The other Plaintiffs operated active mines. They sold the coal they recovered almost exclusively to Whitehaven, which on sold it to arm’s length buyers.

8. The price Whitehaven paid for the coal was often higher than that for which it sold it. Deductions available to it in the calculation of royalties resulted in “negative” royalty returns. Royalty returns were made on a group consolidated basis rather than an individual leaseholder basis, as required by the Mining Act. Whitehaven’s negative returns from Canyon were offset against royalties owed to the Crown by the other Plaintiffs and owed by Whitehaven itself from the Rocglen and Tarrawonga mines, resulting in a reduction of royalties payable by all of them.

9. Royalty returns on this basis did not comply with the Mining Act. It is not suggested otherwise. Concepts of “negative” royalty returns and netting off such returns against positive ones of some other leaseholder or against royalties payable by the returner from some other mine are foreign to the Mining Act. Additionally, royalty returns are required to be made and paid on a monthly basis. The Return Arrangement worked on an annual basis.

10. At all times relevant to this dispute until 1 July 2015, the administration of the State’s royalty system was under the aegis of the Department of Trade and Investment, Regional Infrastructure and Services, sometimes referred to colloquially as the Mining Department (the Department). However, with effect from 1 July 2015, administration of that system was moved to the Office of State Revenue (OSR).

11. It is not in issue that prior to the transfer to OSR, the Plaintiffs lodged royalty returns using the Return Arrangement and that they did so with the knowledge and cooperation of senior officers within the Department. Indeed, returns prepared on that basis were audited by the Department and passed muster. Those senior officers genuinely held the view that the royalty Return Arrangement was permissible under the .

The Royalty Online Service (ROS)

12. From 1 July 2015, OSR introduced the Royalty Online Service (ROS), an online application by which an authorised person can lodge directly with OSR, and pay, a mineral royalty return. OSR issued a publicly available ROS User Guide.

13. ROS is designed to calculate automatically the royalty amount payable on minerals recovered by a leaseholder, using inputs supplied by the leaseholder and formulas embedded in ROS. The calculation process is based on royalty rates prescribed under the Mining Act, the Mining Regulations and a Ministerial Determination, referred to below.

14. The proper legal characterisation of the functionalities of ROS is a central aspect of this controversy, as will be seen later.

15. ROS works as follows:

16. entry is by log in, either for a single mine or multiple ones, with a username, client ID number and password. Either way, a “client list” screen opens and a list of clients and mines appears. This information is prepopulated on the system;

17. the client list screen enables the selection “Return” to be made, again, for a single operation or multiple operation return;

18. depending on the selection, a client return history screen opens, which, by way of saved edits, enables the relevant details for a return for a selected mining lease to be entered (such as production details, including tonnes and values for Purchases and Borrows and Opening and Closing stock). Where a tonnage amount is entered, a figure must be entered in a value column (which may be zero). When this information is entered and before “Save” is selected, other fields on the page are populated automatically with “Value of m**ineral for r**oyalty” and “Royalty d**ue”, both with dollar figures;

19. if “Save” is selected, a “Return s**ummary” appears which identifies the mining lease, the “Quantity” and the “V**alue” of the coal recovered and the amount of “Royalty”;

20. the page has a “Next” selection which, if accepted, makes provision for the following declaration to be given by the leaseholder by selecting a tick box:

I declare the information contained herein is complete and accurate. I am authorised to make this declaration on behalf of the holder(s) and lodge electronically. By sending these details to OSR, you acknowledge that the information provided is true and correct in every particular

6. once this is given, “Submit” can be selected to submit the return. A loading circle may appear. Once the return is accepted, a screen appears with the heading “Confirmation” with a dedicated “Reference number” and the words “Royalty amount due” with a dollar figure. Payment options are displayed;
7. payment can be made online.

Events Leading up to this Dispute

16. Mr Stuart Bradley Smith (Smith) has since March 2015 been employed by Whitehaven Coal as Treasury, Revenue & Infrastructure Accountant or Revenue Accounting Manager. He had discussions with officers in the Department, in particular Mr Matthew Gagan (Gagan), about royalty returns rendered using the Return Arrangement. They had some dealings in relation to the 2015 royalty return, which had been prepared using the Return Arrangement. There was no suggestion of non-compliance with the Mining Act. To the contrary, in a letter dated 24 August 2015, to Smith from Gagan, Gagan referred to adjustments to the Canyon return which were due to final realised adjustment prices in intercompany sales.

17. Until 2016, the efficacy or propriety of the Return Arrangement was not queried by OSR.

18. A sea change was, however, in the offing.

19. The precise circumstances which preceded the change are not revealed in any meaningful way by the evidence. What is clear, however, is that OSR took a different view, as it turns out, a correct one, on the acceptability of the Return Arrangement as a basis for rendering royalty returns.

20. An email dated 2 December 2015, from the OSR Assistant Director, Operations, Business Taxes to the Director, Industry Coordination Royalty and Advisory Services in the Department, referred to a “big question” around negative coal value and “credit returns”.

21. On 17 October 2016, Whitehaven paid royalties using the Return Arrangement. Net Werris Creek/Rocglen and Canyon amounts were combined and paid into the Werris Creek account. [2]

22. An undated Department Information Brief for the Deputy Secretary Resources & Energy (but which must, from its contents have been brought into existence later than 23 November 2016), records that OSR had proposed a review of mineral royalties focusing on the calculation and payment of royalties where certain industry practices were not supported by law. A number of these were identified including, relevantly:

Royalty returns showing the value of coal to be less than zero (based on allowable deductions exceeding the sale value of coal in a royalty period).

Negative coal values in one royalty period being treated as an allowable deduction in the following royalty period (ie the negative value is transferred to the next royalty period as a credit).

Transfer of credits between leaseholders (this relates to one significant coal business which has a number of subsidiary leaseholders).

23. It is not necessary to traverse intra-departmental communications, save to mention that the new direction which OSR was taking caused some consternation in the Department, no doubt due in part to the fact that the Return Arrangement had been in place and accepted for a not inconsiderable period.

24. Smith recalls telephone discussions with Gagan, prior to 28 February 2017, in which Gagan conveyed a negative view held by OSR on negative returns. One difficulty which OSR apparently saw with the Return Arrangement was that Canyon was not actually a producing colliery and presumably, therefore, could have no legitimate role to play in affecting the outcome of Whitehaven’s royalty payment obligations.

25. Smith and Gagan met on about 24 February 2017. After the meeting, Smith emailed Gagan:

Hi Matt,

Further to our meeting earlier this week, we discussed the possibility of 2 options for processing Royalty returns going forward that would stop the issues you advised of lodging negative returns and processing amounts in Canyon which is under care & maintenance. These options were;

1. Tr all amounts in Canyon to another 100% Whitehaven owned mine (Werris Creek).

2. Push to all mines, inclusive of JV owned mines, realised customer pricing irrespective of JV sales agreements in place.

Through discussions internally, we can confirm we are able to proceed with option 1 above and effectively net off the Royalty cost in Werris Creek with the monthly credit in Canyon.

Option 2 is not possible, primarily based off of the requirements of the JV agreements in Maules Creek, Narrabri and Tarrawonga.

Can you please advise status of option 1 and confirm this is the preferred method by the OSR to resolve above issues? Also, please advise if I need to lodge amendments for the first 7 months of FY17.

Alternatively, and this will not resolve the issue of the negative returns, but is it possible to establish a new Royalty liable entity being Whitehaven Coal Trading (even though it doesn’t hold a mining lease?)

Regards,

Stuart Smith

Treasury & Revenue Accountant

Whitehaven Coal Limited

…

26. On 28 February 2017, Gagan responded to Smith and Mr Adam Pont, an analytics consultant with Whitehaven Coal (the Gagan email), stating:

Hi Stuart

In reference to your email above & what we discussed last week, I’d suggest that running everything through a 100% Whitehaven mine (Werris Creek) is the only option then to go with. This will also require any stocks remaining under Canyon to be transferred to Werris Creek.

At the end of the year, if I can obtain from you the Whitehaven reconciliation across the entities, as this will provide me with workings of each of your operations.

I can’t speak for OSR, other than saying OSR do not want returns run through operations where the mine itself is not producing coal.

I’d suggest you make amendments to the earlier FY17 returns. This will provide for a “cleaner” annual return for Canyon & Werris Creek. To make these amendments, you will need to speak to Zena at OSR to have your prior returns opened for amendment. Zena’s number is 02 XXXX XXXX.

If you have any queries please let me know.

Regards

Matt Gagan | Senior Advisory Officer (Royalties)

27. Zena is Ms Zena Wiringi (Wiringi), the senior OSR official who was primarily responsible for the development and implementation of ROS.

28. For a while, at least, it seems the Return Arrangement was still used for the preparation of returns.

29. Thus, on 7 August 2017, Wiringi emailed Smith:

Could you please forward your reconciliation of the Whitehaven Collieries for 2016-17:

Please ensure that your reconciliation includes:

130733438 Whitehaven

130733482 Werris Creek

130733537 Tarrawonga

130733581 Rocglen open Cut

130733559 Narrabri

133621620 Maules Creek

30. On the same day, Smith responded, relevantly, with the information requested, preceded by the following:

Hi Zena,

Hope you are well.

Please see attached work papers for reconciliations on all of Whitehaven collieries 2016-17 Royalty Returns.

See below summary of final true up payments/ refunds across the group.

The Narrabri refund will be offset with the July Royalties payment on 21/8/17.

The Canyon/ Werrris Creek amounts were combined and a net payment of $3,665.63 was made last week.

Just briefly, we amended mid-year our treatment of Canyon colliery Royalty recognition to show all profit on sale of coal to be recognised at Werris Creek level (Canyon doesn’t produce any coal). This has lead to the large refund/ payable positions between both collieries.

…

31. In July 2018, OSR initiated an audit of the royalties paid by the Plaintiffs for the income years 2015 to 2019 (Relevant Period).

32. The use of negative returns for Canyon ceased in mid 2019.

33. On 17 March 2020, an OSR officer sent the following email to Smith, relevantly:

…

2. For the Canyon lease, would you kindly advise the reasoning that returns are lodged under this lease and whether any approvals have been provided as to this practice. We briefly discussed this at the onset of this audit and as previously mentioned we would be examining the systems and returns side of things following the conclusion of the legacy and other issues.

…

34. Following the audit, on 2 November 2022 (that is over four years after the audit had been initiated) the Chief Commissioner issued the Plaintiffs with a series of Mineral Royalty Assessment Notices, totalling $12,250,906.81 for primary tax. Of this, the Plaintiffs have paid $1,597,134.41, leaving a balance of $10,653,772.40 unpaid.

35. The Assessment Notices include (as at 28 April 2025) according to the Chief Commissioner during the hearing:

| Market interest | $1,667,385.82 | | Premium interest (8% per annum) | $5,882,453.80 | | Penalty tax (25%) | $1,319,936.86 | | T****otal | $8,869,776.48 |

36. On 21 December 2022, the Plaintiffs objected to the Assessment Notices.

37. By Notice of Determination dated 30 May 2023 (the Determination), [3] the Chief Commissioner partly allowed the objections, remitting premium interest and penalty tax imposed by the Assessment Notices for the period up until 28 February 2017 (being the date of the Gagan email), respectively, premium interest $467,791.97 and penalty tax $2,491,932.07.

38. On 13 June 2023, the Chief Commissioner issued the Plaintiffs with further Mineral Royalty Assessment Notices reflecting the outcome of the objections (the further Assessment Notices).

39. The Plaintiff commenced these proceedings by Summons sued out of the Court on 28 July 2023.

40. I had the benefit of written submissions and oral argument. I have taken account of all arguments, but will not restate them.

The legislative landscape

41. It is appropriate at this point to identify the applicable statutory provisions.

The Mining Act

42. References below to sections are, unless otherwise stated or the context indicates differently, to sections of the Mining Act.

43. Section 282(1) says:

282 Liability to pay royalty—publicly owned minerals

(1) The holder of a mining lease is liable to pay royalty to the Crown on publicly owned minerals recovered by the holder under the lease.

44. Section 283, together with the Mining Regulation 2016 (NSW) (the Regulations), stipulates the rates of royalty.

45. Section 287(1) says:

287 Exemption from royalty

(1) If the Minister, on application by the holder of a mining lease, is satisfied that the value of publicly owned minerals recovered as a result of mining operations carried on during a royalty period was less than the appropriate amount, no royalty is payable to the Crown under this Act in respect of those minerals.

…

46. Section 287A says:

287A Waiver of payment of additional royalty for coal

(1) The Minister may, by order in writing made with the concurrence of the Treasurer, waive all or part of the payment by the holder of a mining lease of royalty at the additional rate prescribed in respect of coal under section 283 (1) (b).

(2) The order may be made only if the Minister is satisfied that it is necessary for the financial viability of the mine, or mines, to which the mining lease relates, having regard to such matters as the Minister considers appropriate.

…

47. By s 289(1), the leaseholder must lodge monthly mineral royalty returns with the Chief Commissioner. Royalty is payable within 21 days of the beginning of each month: s 291(1)(a) and Regulations cl 77(4).

48. By s 289(2), a return is to include the information prescribed by the Regulations, and any other information the Chief Commissioner requires, for the purposes of the assessment and recovery of royalty.

49. The formula by which the value of the coal recovered by a leaseholder is calculated is set forth in a Ministerial Determination dated 31 December 2008: s 283(5). The precise terms of the Ministerial Determination have no role to play here. The application of the formula results in a figure for the value of coal upon which royalty is to be calculated.

50. Section 291A(1) says:

291A Assessment and recovery of royalties

(1) Royalty payable under this Act is a tax for the purposes of the Taxation Administration Act 1996.

Note—

The Taxation Administration Act 1996 applies to the assessment and recovery of royalty.

The TA Act

51. Under the TA Act, the scheme for the payment of royalty is administered by the Chief Commissioner.

52. The following are the pertinent sections.

3 Definitions

(1) In this Act—

tax means a tax, duty, contribution or levy under a taxation law, and includes—

(a) interest and penalty tax under Part 5, and

…

(b) any other amount paid or payable by a taxpayer to the Chief Commissioner under a taxation law.

5B Application of Act to royalties

(1) For the purpose of the administration and enforcement of legislative schemes for the payment of royalties to the Crown, the following provisions are taken to be taxation laws—

(a) Part 14 of the Mining Act 1992, [4]

…

(2) Royalty is taken to be a tax for the purposes of this Act.

(3) In this section—

royalty means royalty payable under—

(a) the Mining Act 1992, or

…

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.

(3) For the avoidance of doubt, an assessment of tax liability is taken to have been made when the Chief Commissioner calculates the tax liability of a taxpayer based on a return under the Payroll Tax Act 2007 or any other Act prescribed by the regulations for the purposes of this subsection (whether or not the Chief Commissioner issues a notice of assessment as a result of that calculation or otherwise notifies the taxpayer of the calculation).

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 an 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, 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.

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.

17 Acceptance of money or return not necessarily an assessment

The acceptance of money by the Chief Commissioner paid in connection with the lodging of a return or other document, or the acceptance of a return or other document, is not, only because of the acceptance, an assessment.

21 Interest in respect of tax defaults

(1) If a tax default occurs, the taxpayer is liable to pay interest on the amount of tax unpaid calculated on a daily basis from the end of the last day for payment until the day it is paid at the interest rate from time to time applying under this Division.

(2) Interest is payable under this section in respect of a tax default that consists of a failure to pay—

(a) penalty tax under Division 2, or

(b) a penalty imposed under section 106KA.

(3) Interest is not payable in respect of a failure to pay interest under this division.

25 Remission of interest

(1) The Chief Commissioner may remit interest.

(2) The Chief Commissioner may issue guidelines setting out how interest must be remitted under this division.

(3) If guidelines are issued, interest must be remitted only in accordance with the guidelines.

(4) The imposition or remission of penalty tax is not relevant to the imposition or remission of interest.

26 Penalty tax in respect of certain tax defaults

(1) If a tax default occurs, the taxpayer is liable to pay penalty tax in addition to the amount of tax unpaid.

(2) Penalty tax imposed under this Division is in addition to interest.

(3) Penalty tax is not payable in respect of a tax default that consists of a failure to pay—

(a) interest under Division 1, or

(b) penalty tax previously imposed under this division, or

(c) a penalty imposed under section 106KA.

97 Review by Supreme Court

(1) A taxpayer may apply to the Supreme Court for a review of a decision of the Chief Commissioner that has been the subject of an objection under Division 1 if—

(a) the taxpayer is dissatisfied with the Chief Commissioner’s determination of the taxpayer’s objection, or

(4) A review by the Supreme Court is taken to be an appeal for the purposes of the Supreme Court Act 1970 and the regulations and rules made under that Act, except as otherwise provided by that Act or those regulations or rules.

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,

The Limitation Act 1969

53. The following are the pertinent sections of the Limitation Act 1969 (NSW):

10 The Crown

(1) Subject to subsections (3) and (4), this Act binds the Crown and the Crown has the benefit of this Act.

…

(3) This Act does not apply to an action by the Crown—

(a) for the recovery of a tax or duty or of interest on a tax or duty, or

14 General

(1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims—

…

(d) a cause of action to recover money recoverable by virtue of an enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture.

63 Debt, damages etc

(1) Subject to subsection (2), on the expiration of a limitation period fixed by or under this Act for a cause of action to recover any debt damages or other money, the right and title of the person formerly having the cause of action to the debt damages or other money is, as against the person against whom the cause of action formerly lay and as against the person’s successors, extinguished.

Appeal Ground 1

54. This appeal ground has two limbs.

55. First, the Plaintiffs argue that particular Assessment Notices are statute barred under the TA Act. Second, they argue that particular Assessment Notices are statute barred under the Limitation Act.

First Limb - TA Act

56. Under s 9(3) of the TA Act, the Chief Commissioner cannot make a reassessment of a tax liability more than five years after the initial assessment of the liability unless certain specified criteria are present. It is not suggested that any of those criteria are present.

57. The Plaintiffs argue that:

58. each “confirmation” from ROS between 1 July 2015 and 1 November 2017, was the exercise by the Chief Commissioner of his power under s 8 of the TA Act to make an assessment of the tax liability of the Plaintiffs;

59. under s 9(3), the Chief Commissioner cannot make a reassessment of a liability more than five years after the date of the initial assessment (ie. the “confirmation”);

60. by 2 November 2022 (ie. the date of the Assessment Notices), more than five years had elapsed after each “confirmation” given on ROS before 2 November 2017;

61. each “confirmation” was the making, by the Chief Commissioner, of an assessment of the Plaintiffs’ tax liability with the result that each of the Assessment Notices constituted the making by the Chief Commissioner of a reassessment of each such liability;

62. consequently, the reassessment, being more than five years after the initial assessment, was impermissible.

63. This ground turns entirely on whether the “confirmation” provided by ROS was an exercise by the Chief Commissioner of his power under s 8(1) to make an assessment of the tax liability of the Plaintiffs.

64. The principled approach to be taken in answering the question is not in dispute. It was articulated by Isaacs J in R v Deputy Federal Commissioner of Taxation for South Australia; Ex parte Hooper (1926) 37 CLR 368 at 373; [1926] HCA 3 [5] as follows:

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. When he has completed his ascertainment of the amount, he sends by post a notification thereof called ‘a notice of assessment’. [6]

60. The test is objective.

61. Each side sought to take the Court to design and other documentation created during the development of ROS which articulates, in different ways, what the aspirations and outcome expectations were of the system design. I consider that this material trespassed into the subjective and regard cannot properly be had to it for present purposes. In any event, the documents are equivocal. What ROS does and is intended to do is to be divined from an assessment of ROS itself.

62. Viewed objectively, a “confirmation” in ROS is not the Chief Commissioner’s ascertainment, on consideration of all relevant circumstances, of the amount of tax chargeable to the Plaintiffs.

63. The operation of ROS cannot validly be equated with the ascertainment by the Chief Commissioner on consideration of all relevant circumstances of the amount of tax chargeable. Its operation leaves no room for any consideration by the Chief Commissioner of any circumstances, or the formation and application of any opinion.

64. A “confirmation” is no more than one that information provided by the taxpayer, and declared by it to be accurate, has been duly received for incorporation into the formulaic process of deriving a royalty figure by the application of that information to the pertinent royalty rate.

65. ROS facilitates the making of a return and the payment by the taxpayer of the amount so derived, facilitating discharge by the taxpayer of obligations which have already arisen.

66. ROS is a system of self-assessment by the taxpayer, not one whereby the Chief Commissioner makes assessments or reassessments.

67. Consistently with this, s 17 of the TA Act makes clear that the acceptance of a return is not, by itself, an assessment.

68. The first limb of ground 1 fails.

Second Limb - Limitation Act

69. This ground was not articulated in the Summons or the Plaintiffs’ Appeal Statement. The Chief Commissioner did not, however, object to it being argued.

70. The Plaintiffs argue that:

71. the limitation period, in s 14(1)(d) of the Limitation Act, of six years from the date the cause of action first accrues, applies to the Chief Commissioner’s right to recover royalty because it is a cause of action to recover money recoverable by virtue of an enactment ie. the Mining Act;

72. the cause of action first accrued when the Plaintiffs’ monthly obligation to pay royalty arose (which was not later than the date the relevant return was lodged);

73. an action to recover that royalty ceased to be maintainable on the expiry of six years from the date of the relevant return and, by s 63(1) of the Limitation Act, the cause of action became extinguished at that time;

74. the only lawful assessment the Chief Commissioner could then make with respect to those royalty, was a nil one;

75. the Chief Commissioner issued the Assessment Notices on 2 November 2022;

76. by then, all royalty obligations which had accrued by 1 November 2016 had been extinguished.

77. The Plaintiffs identify, by way of a schedule to the Summons, all royalties which had been the subject of a “confirmation” on ROS, prior to 1 November 2016.

78. This limb too is unsustainable.

79. It rests on the premise that the operation of the Limitation Act is not excluded by s 10(3)(a) of that Act, because an action by the Crown to recover royalty payable under the Mining Act and recoverable under the TA Act (which deems a royalty to be a tax), is not a tax within the meaning of s 10(3)(a) of the Limitation Act.

80. Whether royalty is recoverable under the Mining Act or the TA Act or both, plainly it is recoverable by virtue of an enactment. By s 8(b) of the Interpretation Act 1987 (NSW) the singular reference to an enactment includes a reference to the plural form.

81. The Limitation Act does not itself define the term tax. However, tax is not a word of “invariable signification indicating any exercise whatever of the power of taxation”. It is “not infrequently used to denote a species of imposition in contradistinction to duties, and to duties of various kinds”: Attorney-General of New South Wales v Collector of Customs for New South Wales (1908) 5 CLR 818 at 848; [1908] HCA 28. [7] I think that the term tax in its ordinary meaning wide enough to cover royalty payable to the Crown under the .

Appeal Ground 2

81. This ground rests on the “confirmation” under ROS being the making of an assessment by the Chief Commissioner.

82. On the assumption that this is so, the Plaintiffs argue that:

83. the reassessments constituted by the Assessment Notices were required under s 9(2) of the TA Act 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;

84. those reassessments did not comply with this requirement because they were not in accordance with the Return Arrangement.

85. Very little time was devoted by either side to this ground of appeal, no doubt because if a “confirmation” is not the making of an assessment the ground cannot be upheld and if it is, nothing is added. It is not strictly necessary for me to deal with the additional component of asserted non-compliance with s 9(2), given my finding that the confirmations were not assessments.

86. It seems to me, however, that the ground has the additional insuperable difficulty that the evidence does not establish that the Chief Commissioner (as opposed to the Department) ever had a legal interpretation or assessment practice which supported the Return Arrangement.

Appeal Ground 3

85. The thrust of this ground is that the Chief Commissioner, in making assessments, was bound to follow the Return Arrangement approach, with the consequence that the only assessment open to him to make was a nil one. The Plaintiffs put that the State adopted, agreed to and acquiesced in the Return Arrangement which:

86. was an intentional act done with knowledge whereby the State abandoned the right to claim royalty under s 282, by acting in a manner inconsistent with that right, constituting an irrevocable waiver of it (and bringing about a corresponding release of the Plaintiffs’ obligation to pay);

87. brought about a binding contract that the Plaintiffs would pay royalty on the basis of a figure calculated in accordance with the Return Arrangement; or

88. gave rise to a common assumption between them that royalty would be calculated in accordance with the Return Arrangement, upon which assumption the Plaintiffs relied to their detriment, with the consequence that in making any assessment, the Chief Commissioner is estopped from departing from the Return Arrangement (meaning, as I understand it, that he can assess royalty only as if the Return Arrangement is a legitimate basis for doing so).

89. Each component of this ground is unsustainable.

Waiver

87. In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46 at [30], which concerned an alleged waiver of legal professional privilege, the High Court said that according to its strict legal connotation, waiver is an intentional act done with knowledge whereby a person abandons a right (or privilege) by acting in a manner inconsistent with that right (or privilege). This is the sense in which this ground ostensibly seeks to employ the concept.

88. More recently, in Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445; [2022] HCA 38, the High Court considered the doctrine of waiver in a contractual context. The Court considered that there should still be recognised cases of irrevocable waiver not falling within the doctrines of election or estoppel. As the Court said at [28], the term waiver is used in many different senses, perhaps the most common of which is to describe an unequivocal decision by a party, communicated to the other party, not to insist upon a right or not to exercise a power.

89. At [59]-[60] the Court referred to two relevant categories, where a person’s rights are extinguished as a result of their conduct, which have sometimes been referred to as waiver. These are, first, where a person completes the exercise of a legal power to extinguish a right or set of rights, and, second, where a person takes a course of action which is inconsistent with the continued existence of the right or set of rights or the person pursues that course of action until all alternative rights arising from the course of action are wholly satisfied. An accurate description of both categories is extinguishment of rights. Manifestly, this case is not within these categories or any analogue of them.

90. I have significant doubt that there is any room in the present statutory context for the application of any common law doctrine of waiver (especially irrevocable waiver), as articulated by the Plaintiffs, not least of all because the Mining Act contains provisions which give the Minister a circumscribed power to waive payment: s 287A(1). But if there is, the Plaintiffs have not brought themselves within it because no conduct of the Chief Commissioner himself, or on his behalf, was inconsistent with the exercise, according to law, of the power under the TA Act to make an assessment or reassessment of the tax liability of a taxpayer for the payment of royalty under the Mining Act. [8]

91. At most (and I doubt even this, because of the statutory obligation on a party to pay royalty), the Department had a choice between enforcing a right to recover royalty in accordance with the Mining Act or not doing so. Not doing so is not acting in a manner inconsistent with enforcing the right to recover what is lawfully due by the taxpayer.

Agreement

92. Little or no argument was directed on behalf of the Plaintiffs to this ground.

93. The Plaintiffs did not establish any binding agreement on the terms of the Return Arrangement. They did not establish that either the Department or the Plaintiffs had any intention to create binding legal relations, between the Plaintiffs and the State, on the terms of the Return Arrangement. There were no promises, let alone mutual promises, given. The Return Arrangement was merely the calculation method adopted for the discharge of the Plaintiffs’ obligation to pay royalty. No cognisable consideration was given by either party.

Estoppel

94. This ground faces the insuperable hurdle that an estoppel will not prevail against the operation of a statute and in particular, for public policy reasons, revenue legislation: Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 at 117; [1951] HCA 66; Keane, Estoppel by Conduct and Election (3rd ed, 2023) at [16-022]-[16-023].

95. The presence of ss 287(1) and 287A(1), which permit the Minister in prescribed circumstances to exempt a person from paying royalty or to waive payment, are powerful indications that the public policy which precludes estoppel in the face of a statute applies here.

96. But in any event, the Plaintiffs did not establish that they acted in any cognisable way to their detriment on the basis of the Return Arrangement. The Return Arrangement had the effect of benefitting them, by reducing the royalty for which they were legally liable. In argument, they identified their detriment as being exposed to interest and penalties. But they have had the benefit of underpaying their taxes and retaining the underpayment for years. They did not establish that any interest or penalties they must pay is greater than the benefit they got and keep.

97. Moreover, the Chief Commissioner remitted premium interest and penalties up to 28 February 2017 thereby assuaging any detriment to that point, and by this judgment there will be further remission of both. Whatever minimum equity to which the Plaintiffs would have been entitled had they established an estoppel, they certainly have got. As will be seen below, I have extended the operative date to 2 November 2022. This may mean that no penalty tax is payable on any of the Assessment Notices.

Appeal Ground 4

98. The Plaintiffs challenge the imposition by the Chief Commissioner of market interest, the premium component of interest and penalty tax.

99. The Court has a wide discretion [9] to remit interest and penalties: Chief Commissioner of State Revenue v Incise Technologies Pty Ltd [2004] NSWADTAP 19; (2004) 56 ATR 82 at [62] and [79].

100. There is no warrant to remit market interest, which compensates the Chief Commissioner for not having had the benefit of payment from the time it was due.

101. However, the premium component of interest (currently, 8% per annum) is penal as, self-evidently, is penalty tax. They are a penalty for default and deter taxpayers from tax defaults including delaying payment of duty due: Golden Age and Hannas the Rocks Pty Ltd v Chief Commissioner of State Revenue [2024] NSWSC 249 at [101]-[102].

102. In all the circumstances, I have formed a view different to that of the Chief Commissioner on this issue with respect to the date to which the end date of the period to which the remission should apply. Each of the following considerations is significant in its own right. The combination is compelling.

103. First, as the Chief Commissioner himself concluded in the Determination, the Plaintiffs provided all relevant information and fully cooperated with respect to their lodgement practices and, in so doing, had taken reasonable steps to comply with the law.

104. Second, this appeal is not without its complexity. While the Plaintiffs have lost on the question of tax liability and some of their arguments were not particularly strong, their position was not manifestly unreasonable or unarguable.

105. Third, the existence of the Return Arrangement was ultimately, and properly, given the state of the evidence, not contested by the Chief Commissioner. That arrangement had been on foot and acted upon for years and a department of government charged with the administration of the royalty system for most of the time not only saw nothing wrong with it, but audited it, a process from which the Plaintiffs emerged unscathed. After the Gagan email, the Return Arrangement continued with the Werris Creek amendment to which no objection by the Department was conveyed. By its email of 17 March 2020, OSR itself sought clarification and foreshadowed a review. I do not consider that, fairly viewed, the Gagan email was sufficiently clear a communication to the Plaintiffs that the Return Arrangement would not be countenanced in any form. Indeed, the OSR’s own audit of the issue took four years.

106. Fourth, on any view, a period of four years for an audit of the efficacy of an arrangement which was previously fully disclosed, audited and implemented with the cooperation of the Department is a very long time. I do not consider that the imposition of premium interest and penalties on the Plaintiffs for the period of the audit which can be best (or worst) described as one of uncertainty, is warranted.

Conclusion

109. I make the following orders:

110. Pursuant to s 25 of the Tax**ation Administration Act 1996 (NSW), remit the premium component of interest on the Assessment Notices issued to the Plaintiffs for the period up until 1 November 2022.

111. Pursuant to s 33 of the Tax**ation Administration Act 1996 (NSW), remit the 25% penalty tax imposed by the Assessment Notices issued to the Plaintiffs for the period up until 1 November 2022.

112. The appeal is otherwise dismissed.

113. The parties are to bring in short minutes reflecting this outcome, including any figures necessary to be included to bring about finality.

114. Any party wishing to make a submission on costs is to provide a brief written submission, not exceeding two pages, to the opposing side and email it to my Associate by 23 May 2025. Any party wishing to respond must do so in the same way by 28 May 2025. Unless I inform the parties otherwise, I will deal with costs on the papers. The exhibits are to be returned.

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Endnotes

By s 97(4) of the TA Act a review by this Court is taken to be an appeal for the purposes of the Supreme Court Act 1970 (NSW).

Werris Creek is a mine operated by the fourth plaintiff, Creek Resources Pty Ltd.

Under s 93 of the TA Act

The part is headed Royalty and spans ss 282 to 292.

This passage was, more recently, applied by the Court of Appeal in Fyna Projects Pty Ltd v Chief Commissioner of State Revenue [2018] NSWCA 331 at [21].

By contrast with the taxation legislation under consideration in R v Deputy Federal Commissioner of Taxation for South Australia; Ex parte Hooper (1926) 37 CLR 368; [1926] HCA 3, the making, or not, of an assessment under the TA Act is entirely at the discretion of the Chief Commissioner. The obligation to pay mining royalties arises under the Mining Act, without any assessment being made. The difference is immaterial for present purposes.

See too, the Macquarie Dictionary, online ed, accessed 14 May 2025 which defines tax to include “1. a compulsory monetary contribution demanded by a government for its support and levied on incomes, property, goods purchased, etc. 2. a burdensome charge, obligation, duty, or demand.”

That power was conferred by amendments to the Mining Act and TA Act which came into force 1 July 2014: State Revenue and Other Legislation Amendment (Budget Measures) Act 2014 (NSW).

In exercising it, I have had regard to CPN024 Interest and Penalty Tax Guidelines issued by the Chief Commissioner under ss 25 and 33A of the TA Act.