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06 Nov 12 Commissioner’s “garnishee” notice valid – Queensland Maintenance Services Pty Ltd

A decision by the Commissioner to withdraw a notice under s 260-5 of Sch 1 to the TAA, which required the recipient of the notice to pay to the Commissioner 100% of moneys due to the taxpayer, and to replace it with a new notice requiring the recipient to pay to the Commissioner only 20% of the moneys due, has been upheld on administrative law grounds, as not demonstrating Wednesbury unreasonableness. The Full Court of the Federal Court unanimously dismissed the taxpayer’s appeal from the decision of Collier J in Queensland Maintenance Services Pty Ltd v FCT [2011] FCA 1443.

Goodstart Childcare Ltd operated childcare centres. Under contract to Goodstart, the taxpayer provided maintenance, cleaning and renovation services for those centres. Following audits of the taxpayer’s affairs, the Commissioner issued amended assessments to the taxpayer. Together, these assessments involved more than $28.6m. The assessments led to notices under s 260-5 of Sch 1 to the TAA being issued to Goodstart.

The initial notice required Goodstart to pay to the Commissioner the sum of $10,093,860.20 out of moneys which it owed or might later owe to the taxpayer, or, if those moneys were less than that sum, the whole of those moneys. The moneys were to be paid in monthly instalments. Following representations by the taxpayer, the Commissioner withdrew that notice, and issued a new notice requiring Goodstart to pay only 20% of each monthly payment which fell due to the taxpayer. It appeared that those payments would be enough to pay the interest that was accruing on the taxation debt, and to partially reduce that debt.

The taxpayer challenged the decision to issue the second notice, on the ground that the decision was so unreasonable “that no reasonable person could have justified it”: Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1947] EWCA Civ 1; [1948] 1 KB 223.

The Full Court agreed with Collier J that the Commissioner was required to have regard to the impact of his decision to issue the notice on the business of the taxpayer, and that it was clear that the primary issue influencing the Commissioner in respect of the percentage payable by Goodstart was the financial impact of the notice on the taxpayer, arising from the fact that approximately 90% of its income was derived from Goodstart. The withdrawal of the original notice, and the substantial reduction in the amount payable by Goodstart, came about because of the Commissioner’s consideration of the financial hardship which might otherwise have been experienced by the taxpayer, and the belief that the reduction in the amount covered by the notice would permit the taxpayer to continue to operate its business.

The decision to fix the required payment at 20% fell comfortably within the range of reasonable outcomes under s 260-5. The taxpayer’s challenge on the Wednesbury ground could not succeed.

The Full Court also refused the taxpayer leave to argue on appeal two new grounds that had not been raised before Collier J. They were:

  • that the s 260-5 notice was invalid because it did not comply with the requirements of s 260-5(5) and was ambiguous, and
  • that there was no evidence or other material to justify the decision to issue the notice: s 5(1)(h) of the Administrative Decisions (Judicial Review) Act 1977 (Cth).

Queensland Maintenance Services Pty Ltd v FCT [2012] FCAFC 152 (Lander, Jessup and Foster JJ, 2 November 2012).


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