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07 May 07 Lack of proper service led to invalidity of garnishee notices - Shail

The Federal Court (Middleton J) has held that a notice of assessment, which had been "left" at the taxpayer's post office box, but not posted to that post office box, was not properly served as provided by reg 40(1) of the Income Tax Regulations 1936. Accordingly, garnishee notices issued under s 260-5 of Schedule 1 to the Tax Administration Act 1953 and served on third parties on the date of purported service of the notice of assessment, were invalid.

The Court had earlier rejected (on factual grounds) the taxpayer's submission that the notice of assessment was invalid because it had been made with a lack of bona fides (because it was tentative or provisional, or because no genuine attempt had been made to ascertain the taxpayer's taxable income) or for an improper purpose (to support the issue of the garnishee notices).

As a result of earlier interlocutory relief, the moneys owed by the third parties to the taxpayer had been paid into Court pending the outcome of these proceedings. The Court noted that the notice of assessment had since been properly served on the taxpayers, with a debt currently due and payable. The Court sought further submissions from the parties as to what orders should be made, suggesting that the taxpayer's victory in this case may be well and truly pyrrhic: Shail v FCT [2007] FCA 655 (Federal Court, Middleton J, 4 May 2007).

For a copy of the decision, go here

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