09 Nov 2018 Regarding Senior Tax Counsel’s Report ‘Pintarich – a case that should never have been run!’
Andrew Mills, ATO Second Commissioner, Law Design & Practice comments:
I note in your TaxVine column of 19 October 2018 you commented on the decision in Pintarich “A case that should never have been run”. The column focussed heavily on the letters issued by the ATO to the taxpayer on 8 December 2014 and 18 August 2015. Unfortunately, it did not quite mention all the circumstances that arose in that matter. I think the additional facts cast a somewhat different light on this case and explain why the ATO chose to defend the taxpayer’s litigation while at the same time attempting to settle the matter on a number of occasions.
On 5 December 2014, an ATO officer and the taxpayer agreed that the full amount of outstanding primary tax of 4 years should be paid by 30 January 2015 whilst the ATO considered the remission of the GIC. The letter that was the focus in the case issued three days later on 8 December 2014 in response to a request for the lump sum arrangement and payment slips from the taxpayer’s agent. That letter referred to an amount of primary tax and GIC that had been calculated from the date of the latter to the expected date of payment (that GIC being almost $18,000). What has not been well articulated in TaxVine is the additional interaction with both the taxpayer and the agent before and after the letter in question. These interactions included numerous conversations on 2, 4 and 5 December in the lead up to the agreement for the primary tax to be paid. The discussions on 23 December 2014 and 9 December 2014 were also consistent with the GIC remission still being considered. Whilst reserving his position to maintain a decision to remit had occurred, the taxpayer still went on to lodge two subsequent GIC remission requests in respect of the main GIC in contention which amounted to some $344,000. Those remission requests were reviewed by different ATO officers who both determined the full remission of GIC was not justified, the last decision was communicated in a letter on 13 May 2016. Also to note, following the letter on 8 December 2014, four additional statement of accounts issued between then and 5 February 2015, showed no GIC had been remitted.
In respect of the letter itself the primary judge considered that only a “strained reading” of the 8 December 2014 letter would support the taxpayer’s contentions. Later, the majority of the full Federal Court recognised that the 8 December 2014 letter “… did not expressly deal with the application to remit GIC and the letter was susceptible of more than one interpretation.”
It is accepted that a taxpayer should be able to rely on the accuracy and the clarity of any communication with the ATO whether written or verbal. However, documents and communications should be considered in the context of what else is occurring. On this occasion, it would seem that the taxpayer has been somewhat opportunistic, having had numerous additional communications and two separate reviews on the GIC. It would seem that “the legal niceties of whether or not a decision had been made” (to quote TaxVine) were points the taxpayer was making as much as the ATO was defending.
Taxpayers can rely on the accuracy and clarity of communication with the ATO.
To this end, the ATO remains committed to continually improving the clarity and useability of all correspondence. As part of an ongoing continuous improvement process, and to reduce the likelihood of similar issues arising arise in the future, we have removed the unclear language in the specific template used in this matter, and replaced it with language that is more appropriate for all circumstances when this template is issued.
The ATO shall be issuing a Decision Impact Statement shortly.
MEMBER 362 writes:
Just read Bob’s comments on the Pintarich case, and I agree with these comments. The irony of course is that an ATO reviewer/auditor would see this as a gross lack of corporate tax governance allowing a letter like that go out.