Valid timely NOPA a prerequisite to deemed acceptance
2011 case note – decision confirms a valid timely NOPA is a prerequisite to deemed acceptance – notice of proposed adjustment, ultra vires.
There was no acceptance of the disputant's late Notice of Proposed Adjustment ("NOPA") because a valid timely NOPA is a prerequisite to deemed acceptance and the Commissioner had not agreed to accept the disputant's late NOPA.
Impact of decision
The decision is confirmation that a valid timely NOPA is a prerequisite to deemed acceptance even if the Commissioner does not reject a late NOPA with a compliant Notice of Response ("NOR") within the applicable response period.
The disputant claimed that the Taxation Review Authority should reduce her tax liability in accordance with her NOPA, which she acknowledged had been filed out of time. The disputant claimed that she had been invited by the Commissioner to file a late NOPA.
The disputant's late NOPA had been rejected by the Commissioner as being out of time. Accordingly he did not issue a NOR.
Judge Barber dismissed the disputant's challenge and confirmed the Commissioner's assessments.
Is a valid timely NOPA a prerequisite to deemed acceptance?
Judge Barber held that a valid timely NOPA is a prerequisite to deemed acceptance under section 89H(2) of the Tax Administration Act 1994 ("TAA")
His Honour held that if an invalid late NOPA were sufficient to result in deemed acceptance under section 89H(2) of the TAA then the time limits, which are a design feature of the disputes process, would be significantly undermined and meaningless.
Did the Commissioner agree to accept the late NOPA?
Judge Barber held that the Commissioner did not agree to accept the disputant's late NOPA.
His Honour further held that it was unlikely that the Commissioner's consent could have been given because such consent needed to be based on the existence of an exceptional circumstance. No such circumstance was discussed or outlined. His Honour held that for an extension of time to be effective it needed to be clear and firm, preferably in writing, based on reason and set in credible circumstances.
Assuming the Commissioner agreed to accept a late NOPA from the disputant was such an acceptance ultra vires?
Judge Barber held that the Commissioner did not agree to accept a late NOPA from the disputant so this issue did not need to be addressed. Nevertheless, His Honour held that the Commissioner is only entitled to accept a late NOPA if the requirements of section 89K of the TAA are satisfied. If the Commissioner were to accept the disputant's late NOPA without satisfying himself that an exceptional circumstance had prevented the disputant from issuing her NOPA within the applicable response period, then the Commissioner would be acting ultra vires.
Income Tax Act 1994, Income Tax Act 2004, Income Tax Act 2007 and Tax Administration Act 1994