Background
In May of this year the Full Court of the Federal Court of Australia handed down its decision in Pintarich v Deputy Commissioner of Taxation [2018] FCAFC 79. The case centred on the issue of when a decision is determined to have been made.
Issue
The taxpayer, Mr Pintarich, (Taxpayer) at November 2014 had an assessed tax liability for the four year period spanning 2010 to 2013 of $1,156,787.72 (Assessed Tax Liability). Relevantly, the Assessed Tax Liability included a General Interest Charge (GIC) component of approximately $335,000. On 8 December 2014 a letter (December 2014 Letter) from the Australian Taxation Office (ATO) was sent to the Taxpayer that was argued to purport to remit a significant portion of the GIC liability provided the primary tax debt was paid before March 2015. The Taxpayer paid the amount set out in the December 2014 Letter and assumed the GIC liability had been remitted. The ATO later advised the Taxpayer that the portion of the December 2014 Letter that purported to remit the GIC had been included in error. Ultimately only a portion of the GIC was remitted. The Taxpayer unsuccessfully appealed the decision to the Federal Court of Australia and then to the Full Court of the Federal Court of Australia.
Facts
As at 10 November 2014 the Deputy Commissioner, following a number of assessments, sent the Taxpayer a statement of account particularising the Assessed Tax Liability. Relevantly, the Assessed Tax Liability included GIC of approximately $335,000.
The Taxpayer (through his accountant) applied for, amongst other things, remission of the GIC component of the Assessed Tax Liability.
A delegate of the Deputy Commissioner (Delegate), following a conversation with the Taxpayer, caused the December 2014 Letter to be sent to the Taxpayer. The Delegate keyed information into a computer-based ‘template bulk issue letter’ which caused the December 2014 Letter to be generated. The December 2014 Letter included the following:
“Thank you for your recent promise to pay your outstanding account. We agree to accept a lump sum payment of $839,115.43 on or by 30 January 2015.
This payout figure is inclusive of an estimated general interest charge (GIC) amount calculated to 30 January 2015 [our emphasis].”
The amount specified in the letter was slightly greater than the Taxpayer’s primary tax liability and significantly less than his total liability for primary tax and GIC.
The Taxpayer paid the sum of $839,115.43 to the ATO on 30 January 2015.
The dispute crystallised following the Taxpayer receiving further statements of account from the ATO which did not account for the remission of the GIC. On 13 May 2016 a Deputy Commissioner of Taxation wrote to the taxpayer to advise that:
- His request for full remission of GIC had been denied; and
- Limited remission of GIC was granted.
Having been unsuccessful in his appeal under the Administrative Decisions (Judicial Review) Act 1977 (Cth) in the Federal Court, the Taxpayer then appealed to the Full Court on the following grounds:
- Having regard to the fact that the purported decision to remit GIC was manifested in writing by letter from the ATO to the Taxpayer dated 8 December 2014, the learned trial judge erred in concluding that subjective evidence given by the purported decision maker ought to be determinative in concluding that no remission decision had been made; and
- The learned trial judge ought to have decided that, having regard to the content of the letter and the circumstances in which it was received, the letter manifested a decision by the ATO to remit the GIC.
The Deputy Commissioner contended that no decision on the application for remission of GIC was made at the time of the December 2014 Letter and the decision of the court below was correct.
The disputed facts were essentially limited to the concluding comments made by the Delegate to the Taxpayer at the end of a telephone conversation on 4/5 December 2012. The Delegate contended that he said to the Taxpayer words to the effect that the ATO required that the primary tax debt owing be paid in full “whilst we consider the remission of general interest charge”. The Taxpayer contended that the Delegate told him that “if you make sure you can pay it by February 2015 then it will all be over and done with” (our emphasis).
The Delegate admitted that he had caused the December 2014 Letter to be issued. He however was unable to explain how the first sentence in the second paragraph (underlined above) had come to be included. The Delegate gave evidence that he had “keyed in” certain information into a computer-based “template bulk issue letter”. This process had generated the document. He had not read the letter before it was despatched. He deposed that what was said in the first two lines of the paragraph did “not accord with the conversations” he had with the Taxpayer and his accountant. Critically, the Delegate gave evidence, which the primary judge accepted, that he had not, at any time, made any decision under section 8AAG Taxation Administration Act 1953 (TAA) to remit any GIC owing by the taxpayer.
The primary judge found that:
- At the time that the December 2014 Letter was issued the Delegate had not undertaken a process of deliberation, assessment or analysis with a view to deciding whether or not to grant the taxpayer’s application for remission of GIC;
- The December 2014 Letter did not purport to be the communication of a decision on the application to remit GIC; and
- Even if the December 2014 Letter were construed in the way contended for by the Taxpayer, the surrounding circumstances did not evidence the making of a decision to remit the GIC by the Delegate.
Moshinsky and Derrington JJ (with Kerr J dissenting) found that, in order for there to be a decision to remit GIC under section 8AAG of the TAA, there needed to be both a mental process of reaching a conclusion and an objective or overt manifestation of that conclusion.1 On the basis of the findings of the primary judge (that were not challenged on appeal) there was no mental process of reaching a conclusion concerning the remission of GIC when the December 2014 Letter was sent. Accordingly, the Taxpayer’s appeal was unsuccessful.
Takeaways
From an insolvency perspective, both legal and accounting advisers are often faced with the task of advising clients on issues surrounding unpaid primary tax debts and GIC liabilities. The remission of GIC, whether wholly or partially, in many cases may be the difference between a client being solvent or insolvent.
This situation could also cause insolvency practitioners difficulties adjudicating on proofs of debt containing a GIC component that may have previously been purported to have been remitted.
Through the prism of today’s practices, the decision in Pintarich may be considered novel and this was, in fact, an observation the court of appeal itself made. However, on reflection that may not be strictly correct. With the emergence of document management software and AI Programs intended to ease the administrative burden or indeed make some administrative decisions, this situation may become more commonplace, especially during the technological transition stage.
The case serves as a reminder that insolvency advisers need to remain vigilant, maintain detailed records and to some extent expect the unexpected.
Written by Kyle Somann-Crawford, Partner, in our Hobart office.
Publication Editor: Grant Whatley.
1 Semunigus v Minister for Immigration and Multicultural Affairs (2000) 96 FCR 533 (Semunigus).