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11 Feb 2010
Appeal Status

Application to commence challenge proceeding under section 138D of the Tax Administration Act 1994

2010 case note – lack of knowledge of dispute process, facts of this case and circumstances surrounding the issues constituted exceptional circumstance.

TRA Decision 05/2010


Lack of knowledge by the agents of the taxpayers as to the next step in the dispute process, on the facts of this case, and in the circumstances surrounding the issues constituted exceptional circumstance.

Impact of decision

This decision is largely confined to its own facts. It is doubtful whether this could be a precedent for a more liberal approach to interpretation of section 138D (2) of the Tax Administration Act 1994 ("TAA").


On 4 July 2001 the Commissioner issued a Notice of Proposed Adjustment ("NOPA") under section 89F of the TAA to the taxpayers, rejecting a GST claim for payments to a subcontractor.

The taxpayers' Notice of Response ("NOR") of 3 September 2001 simply asserted that payments were made.

On 4 September 2001 the Commissioner rejected their NOR on the grounds that it did not provide sufficient details to constitute a valid NOR.

On 23 October 2001 the Commissioner issued notices of assessments according to the adjustments as per his NOPA.

On 22 March 2007 the taxpayers applied for judicial review of the Commissioner's decision rejecting their NOR.

At the hearing in the High Court, Woodhouse J held that the taxpayers' NOR was valid and the Commissioner had no power under the dispute process to reject the taxpayers' NOR.

The Commissioner appealed to the Court of Appeal which held that Woodhouse J was wrong in granting the judicial review even though he was right on the point that the Commissioner had no power to reject the NOR. The proper course of action for the taxpayers was to proceed to challenge the assessments before the Taxation Review Authority ("TRA") and not by way of judicial review.

On 8 September 2009, the taxpayers filed their Notice of Claim with the TRA, which was treated as an application under section 138D of the TAA for commencement of a challenge out of time.


Judge Barber at paragraph [25] held that the knowledge of what to do next in the tax dispute was not clear at the time. It required the Court of Appeal to clarify the way forward. Such knowledge as to what to do next was not within the accepted standard of the professional conduct of the agents of the taxpayers. There were therefore exceptional circumstances under section 138D(2).

Section 138D of the Tax Administration Act 1994