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29 Jan 14 Decision Impact Statement - Macquarie Bank

The ATO has published a Decision Impact Statement in relation to the decision of the Full Court of the Federal Court in Macquarie Bank v FCT [2013] FCAFC 119.

The Decision Impact Statement outlines the ATO's response to this case which concerned whether the primary judge erred in holding that the applicants had no reasonable prospect of obtaining a declaration that the Commissioner had not made a decision in accordance with Law Administration Practice Statement PS LA 2011/27. The Practice Statement sets out the matters the Commissioner should consider when determining whether the ATO view of the law (being different from an earlier view of the law) should only be applied prospectively. In this case, the applicants argued that the Commissioner, in deciding to apply a changed view of the law retrospectively, had failed to adhere to the requirements of the Practice Statement.

The Full Court concluded that the primary judge was correct in dismissing the application summarily on the grounds that in "light of the limited scope of operation" of the Practice Statement, the final relief sought by the applicants "either does not lie or has no utility".

The Full Court went on to observe that the applicants' case must fail because the applicants had no basis upon which they could seek to enforce adherence to the Practice Statement. That is, the primary judge was correct to conclude that the Practice Statement did not, and could not, bind the Commissioner when seeking to raise an assessment or a re-assessment.

The power of general administration given to the Commissioner by provisions such as s 8 of the ITAA 1936 does not permit the Commissioner to dispense with the operation of the law. The Full Court found that the general power of administration is not "a discretion to modify, or which modifies, the liability to tax imposed by the statute". Having formed the view that the statute imposes a liability contrary to some view he may have held previously, the Commissioner has a duty to apply the law as he understands it to be.

The Full Court also said this at paragraph [12]:

"The learned primary judge held that the practice statement had not purported to bind the Commissioner because references in the practice statement to taking action or compliance action were to be read as referring to circumstances where there are resource allocation decisions to be made: [71]. Whether or not that construction of the practice statement is correct, what is clear from the terms of the practice statement is that the Commissioner was conscious of his obligation to comply with the law (see practice statement at [20]) and that he could not use "the powers of general administration to accept non-compliance with the law (see practice statement at [21] and, in particular, to footnote [14]). ... Whatever the consequence of an alleged failure by the Commissioner to follow an earlier statement or position, it is not to bind him in law to act contrary to the provisions of the statute. To the extent that a reading of the practice statement suggests otherwise it should be withdrawn and rewritten."

The Decision Impact Statement states that in "light of the Full Court's comments that a reading of the Practice Statement could suggest otherwise [that is, that the Commissioner could be bound to act contrary to the provisions of the law], we will review the wording of the Practice Statement with a view to identifying any changes that should be made to clarify its intended operation. Any such changes are not expected to alter the practical operation of the Practice Statement."


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