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The ATO has published a Decision Impact Statement in respect of the decision of the Federal Court in Denlay v FCT [2013] FCA 307; 2013 ATC 20-382.

The case concerned the Commissioner's decisions to issue notices under s 260-5 of Schedule 1 to the Taxation Administration Act 1953 (TAA) to garnishee amounts held in the taxpayers' superannuation funds.

The Court decided that the decision-maker had failed to take into account the following relevant considerations when exercising the power under s 260-5 of the TAA:

(i) the effect which the s 260-5 notices might have on the taxpayers' ability to further prosecute the taxation appeals;
(ii) the 'provenance' of the stay orders granted in the Supreme Court of Queensland;
(iii) the merits of the taxation appeals.

The Court found that the decision to issue each of the s 260-5 notices was so unreasonable that no decision-maker, acting reasonably, could have made the same decision.

The Court quashed the Commissioner's decisions to issue the s 260-5 notices and subsequently ordered that the monies obtained under the notices be refunded to the superannuation fund accounts.

Notwithstanding these findings, the Decision Impact Statement states:

"ATO officers will continue to apply the stated policy in PS LA 2011/18 at paragraph 112:

'Where a tax debtor is appealing to a tribunal or court against the assessments that raised the debt, the Commissioner will consider whether a garnishee would significantly prejudice the tax debtor's rights in pursuing those appeals.'

ATO officers will also take into account the daily living expenses of taxpayers.

Section 260-5 confers a general discretion on the Commissioner to consider 'those things that the legislation requires to be taken into account and ignores any prohibited consideration, the grounds of failing to take into account a relevant consideration, or taking into account an irrelevant consideration , ...' per Healy J in Elias v FCT [2002] FCA 845. See also Aronson & Dyer Judicial Review of Administrative Action 2nd Ed. 2000 at 225.

The discretion under s 260-5 is unconfined by the terms of the statute, and the decision-maker is not bound to take a particular matter into account unless an implication to that effect is to be found in the subject matter, scope and purpose of the statute: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 40."


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