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15 Oct 14 Section 14ZYA notice cannot be withdrawn - McGrouther

The Federal Court (Edmonds J) has held that a notice under s 14ZYA(2) of the Taxation Administration Act 1953 ("TAA") cannot be withdrawn by the taxpayer, so as to avoid a deemed disallowance of a taxation objection under s 14ZYA(3).

Section 14ZYA provides, so far as relevant, that if the Commissioner has not made an objection decision by the end of 60 days after the lodgment of a taxation objection by a taxpayer, the taxpayer may give the Commissioner a written notice requiring the Commissioner to make an objection decision. If the Commissioner has not made an objection decision by the end of the period of 60 days after being given the notice, then, at the end of that period, the Commissioner is taken to have made a decision under subsection 14ZY(1) to disallow the taxation objection.

The taxpayers had lodged a number of objections against assessments issued by the Commissioner. In the circumstances permitted by s 14ZYA, the taxpayers gave the Commissioner a notice under s 14ZYA(2). The taxpayers subsequently purported to withdraw the notice in return for the Commissioner agreeing to defer a s 264 ITAA 1936 examination of one of the taxpayers whilst the validity of the examination was tested in judicial proceedings ("the Judicial Proceedings").

Before the Judicial Proceedings were heard, the taxpayers wrote to the Commissioner advising that they were of the view that s 14ZYA notices cannot validly be withdrawn and foreshadowed the commencement of proceedings under Part IVC of the TAA. The taxpayers then instituted an appeal to the Federal Court against the alleged disallowance by the Commissioner of the objections ("the Current Proceedings"). The taxpayers contended that the disallowance of their objections occurred as a result of the operation of s 14ZYA(3) of the TAA, while the Commissioner contended that he was not deemed to have made an objection decision pursuant to s 14ZYA(3) of the TAA because notices given by the taxpayers pursuant to s 14ZYA(2) of the TAA were withdrawn. On this basis, the Commissioner applied to have the proceedings struck out for want of jurisdiction or dismissed as incompetent.

The reason for the Commissioner's application was noted by Edmonds J at para 28 as follows:

"The only reason the Commissioner has brought this interlocutory application is to try and preserve for himself the opportunity to examine the first applicant pursuant to the s 264 notice, or pursuant to a new s 264 notice if the existing one is held to be invalid, free of any risk of being in contempt of Court."

After considering the parties' submissions, Edmonds J concluded at para 54 as follows:

"I am of the view that s 14ZYA is not to be construed as containing an implied power or right, on the part of the person giving the s 14ZYA notice, to withdraw or revoke it."

The Commissioner's application for dismissal was itself dismissed. However, an application by the Commissioner for an order for the Current Proceedings to be stayed for a period of 60 days following the final judgment in the Judicial Proceedings was adjourned for a further hearing before Edmonds J.

McGrouther v FCT [2014] FCA 1102 (Federal Court, Edmonds J, 14 October 2014).


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