High Court clarifies when Commissioner’s Notice of Response is due following s 89K decision
The CIR's Notice of Response was filed within 2 months of the decision by the TRA that the CIR should have accepted the Doug Vesey Trust’s NOPA out of time pursuant to s 89K of the TAA.
The Commissioner of Inland Revenue's ("the Commissioner") Notice of Response ("NOR") was filed within two months of the decision by the Taxation Review Authority ("the TRA") that the Commissioner should have accepted the Doug Vesey Trust's ("the Trust") Notice of Proposed Adjustment ("NOPA") out of time pursuant to s 89K of the Tax Administration Act 1994 ("the TAA"). In her judgment, Peters J upheld the finding of the TAA that the Commissioner's NOR was filed in time and there was no deemed acceptance of the Trust's NOPA.
The judgment makes it clear that both prior to and subsequent to the amendments to ss 89AB and 89AC of the TAA, the Commissioner's NOR is not required until two months after the conclusion of s 89K challenge proceedings. There is no valid NOPA until the hearing authority determines that the Commissioner should have accepted a taxpayer's NOPA out of time. The Commissioner is not required to issue a "protective" NOR in these circumstances.
The judgment also clarifies that, pursuant to s 138P(2), where the disputable decision is not an assessment, the hearing authority's powers are limited to directing the Commissioner to alter her decision, i.e. in this case to issue a s 89K(1) notice.
A GST return was filed by the Trust on 5 November 2008 for the period ended 31 October 2008, claiming a refund of $625,000.
On 16 April 2013, the Commissioner issued a Notice of Assessment ("NOA") in respect of that return. She assessed the refund due for the period as "nil".
In order to be within the four month response period the Trust was required to issue a NOPA in response by 16 August 2013. A NOPA was not issued until 30 March 2015 but was accompanied with a request under s 89K that the Commissioner accept the NOPA out of time.
By letter dated 29 April 2015, the Commissioner notified the Trust that she refused to accept the NOPA and that, as a consequence, the Trust was deemed to have accepted the Commissioner's NOA.
In May 2016 the TRA held that the Commissioner ought to have not refused the Trust's late NOPA and set aside the Commissioner's refusal. The Commissioner then issued a NOR within two months of the TRA's decision.
This led to the second hearing before the TRA, and ultimately to this appeal. The Trust contended that the Commissioner's NOR was out of time and, by s 89H(2), the Commissioner was deemed to have accepted the Trust's NOPA and must refund the GST claimed.
Amendments to ss 89AB and 89AC of the TAA came into force on 24 February 2016 ("the amendments"). In the decision under appeal the TRA held the amendments applied and were determinative of the issues. The appellant contends they did not apply.
The appellant's NOPA was of no effect when it was issued on 30 March 2015 (s 89D(5), TAA).
Section 138P(2) permits the TRA, if it upholds a challenge, to direct the Commissioner to alter her decision – for example to direct the Commissioner to issue a s 89K(1) notice – and the Commissioner must do so. Accordingly, even on a successful challenge under s 89K(6), the most the TRA may do is direct the Commissioner to issue a s 89K(1) notice. Her Honour held that the notice will be in the same terms and the same effect as one given by the Commissioner of her own volition. That is, it is that notice which renders the late-filed document effective and it does not matter that the notice may be issued under a direction from the TRA or the High Court. Therefore, a late filed document becomes effective when the 89K(1) notice is issued and that the time starts to run against the Commissioner from then and not before.
Her Honour held that there is no relevant statutory provision which suggests that the
Commissioner should issue a NOR "just in case" a taxpayer brings a successful challenge to her refusal. She added that there is no good reason to require the Commissioner to devote resources to issuing a NOR that might not be required and that there was no prejudice to a disputant in allowing the challenge procedure to run its course before requiring the Commissioner to take a further step.
The applicable response period for the Commissioner's NOR did not start to run prior to the TAA's decision in May 2016, and was issued in time.
Did the amendments apply?
The Judge held that although the words of s 89AC(b) do not reflect the procedure in s 138P(2),the meaning is clear enough. Time starts to run from the date the TRA upholds the challenge or the Commissioner concedes.
The Judge did not accept the appellant's arguments that as the Trust's dispute commenced before the amendments were passed, that they did not apply. She held that the commencement section of the legislation and the commencement provisions for other amendments to Part 4A of the TAA, make it clear that the amendments were to be applied to all, as yet, undetermined disputes.
Goods and Services Tax Act 1985
Tax Administration Act 1994 – ss 89AB, 89AC, 89D(5), 89H(2), 89K, 138P
Taxation Review Authorities Act 1994 – s 26A
Interpretation Act 1999 – ss 7, 18