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03 Oct 2011
Appeal Status
Not appealed

Commissioner's decision to decline instalment arrangement upheld

2011 case note – CIR's decision to decline instalment arrangement upheld - judicial review, Court's discretion.

Priscilla Anne Kea v Commissioner of Inland Revenue


The Court held that it would have been wrong for it to grant a remedy to the plaintiff (even if a reviewable error had been made) because the plaintiff misrepresented her position and the facts upon which the instalment arrangement proposal relied were no longer applicable. The Court further held that the Commissioner had taken into account relevant factors and that his decision to decline the plaintiff's instalment arrangement proposal was not unreasonable or irrational.

Impact of decision

This case considers the limits of the Commissioner's discretion under section 177B(2) of the Tax Administration Act 1994 ("TAA") and the relationship of the relief provisions with sections 6 and 6A of the TAA.


The plaintiff made an application for judicial review of the Commissioner's decision to decline her instalment arrangement proposal of 17 December 2010. The plaintiff had already made a number of earlier proposals and those proposals had been declined.

The plaintiff had received a total income of $791,932 over an eight-year period from 31 March 2003 to 31 March 2010. During that period she filed tax returns. However, she only paid a total amount of tax of $2,303.

On 24 November 2010 the Court issued a bankruptcy notice to the plaintiff and by 13 December 2010 the plaintiff had committed an act of bankruptcy. The bankruptcy proceedings were adjourned until the outcome of the judicial review proceeding.


Court's discretion to refuse relief

Justice Ronald Young held that two factors identified by the Commissioner overwhelmingly establish that it would have been wrong for the Court to grant a remedy to the plaintiff even if a reviewable error had been made:

  • Firstly, the plaintiff did not mention in her proposal or in response to any of the Commissioner's enquiries that her December 2010 contract (upon which her proposal to pay instalments was based) was for two months only. His Honour held that this was a material misrepresentation.
  • Secondly, the provision of relief would not serve a useful purpose because the facts upon which the plaintiff's 17 December 2010 proposal was made were no longer applicable.

Considering irrelevant matters

His Honour held that the factors which the Commissioner took into account in his decision-making were relevant, authorised by the TAA and despite submissions by the plaintiff to the contrary, came within the broad ground set out in section 177B(2)(a) of the TAA. In particular, his Honour held that the Commissioner was entitled to conclude that agreeing to the plaintiff's proposal would not "maximise the recovery of outstanding tax" as the plaintiff could not be relied upon to make good her promises to pay the instalments.

In any event, his Honour rejected the plaintiff's submission that section 177B(2) is a code and that the Commissioner can only reject a proposal for an instalment arrangement on the four grounds identified. His Honour held that the language of section 177B(2) is empowering rather than restrictive or prohibiting. It provides that the Commissioner "may decline to enter into an instalment arrangement if ... to do so would not maximise the recovery of outstanding tax from the taxpayer". Accordingly, his Honour held that the broader taxation obligations on the Commissioner pursuant to sections 6 and 6A were still relevant and should not be set aside.


His Honour rejected the plaintiff's claim that the decision of the Commissioner was unreasonable or irrational. His Honour noted that the Commissioner had accurately marshalled the relevant facts and that the conclusions reached were open on those facts. In particular, the plaintiff's history provided ample evidence upon which the Commissioner was entitled to reject the plaintiff's proposal because it would not maximise the recovery of outstanding tax where the plaintiff was not reliable and her proposal was unlikely to be realised. Furthermore, his Honour held that it was a relevant factor for the Commissioner to take into account the need to promote voluntary compliance with tax obligations. His Honour held that the plaintiff had flouted her tax obligations and continued to do so.

Factual errors

His Honour also rejected the plaintiff's criticisms that the Commissioner had made certain factual errors which the plaintiff alleged were "symptomatic" of the Commissioner's approach when dealing with her. Rather, his Honour held that the Commissioner had been extremely patient in giving the plaintiff years of opportunity to pay her tax.

Judicature Amendment Act 1972, Tax Administration Act 1994