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The Full Court of the Federal Court (Jessup, Robertson and Davies JJ) has dismissed the taxpayer's appeal from the decision of Middleton J in IOOF Holdings Limited v FCT [2013] FCA 1189. Middleton J had, in turn, dismissed the taxpayer's appeal from a decision of the AAT ([2013] AATA 239).

The AAT held that the taxpayer's right to a deduction in respect of rights to future income under the consolidation regime was removed by retrospective legislation enacted in 2012 ("the 2012 Amending Act"), specifically, because it did not have a favourable private ruling issued to it before 31 March 2011, as required by item 51 of the 2012 Amending Act if it was to have no application to the taxpayer.

The taxpayer applied for a private ruling on 30 December 2010 (a request that the Commissioner said was received by the ATO on 10 January 2011). The ruling was never issued and the taxpayer activated the procedures allowing an objection to the failure to rule, the deeming of an objection decision disallowing the objection and a review application to the AAT, all of which were provided for in the Taxation Administration Act 1953. The taxpayer contended that it was entitled to the private ruling it sought and an order from the AAT pursuant to s 43(6) of the AAT Act that that private ruling take effect from a date prior to 31 March 2011.

That the 2012 Amending Act would be retrospective and that only taxpayers with rulings issued before 31 March 2011 would not be affected by it was announced by the Assistant Treasurer and Minister for Financial Services and Superannuation on 25 November 2011.

Before the AAT, the taxpayer relied on the provisions of s 7(2) of the Acts Interpretation Act 1901 which, broadly, preserved "rights" which had accrued under an Act before its amendment by a later Act. The operation of s 7(2) was, however, subject to a contrary intention within the meaning of s 2 of the Acts Interpretation Act 1901.

On the finding that the taxpayer's rights were exhausted by the retrospective legislation, the AAT answered No to the following question:

"For the purposes of undertaking its review of the Respondent’s deemed disallowance of the Applicant’s objection against the Respondent’s failure to make a private ruling concerning its claim for a deduction under section 716-405 in Part 3-90 of the Income Tax Assessment Act 1997 (Cth) (1997 Act), is it open to the Tribunal to apply the provisions of Part 3-90 of the 1997 Act before the amendments contained in the Tax Laws Amendment (2012 Measures No 2) Act 2012 (Cth) (2012 Amending Act)?"

For the purposes of his judgment, Middleton J assumed that the taxpayer had an "accrued right" to a ruling based on the taxing rules operative before 31 March 2011. The question then arose as to whether a contrary intention was clearly disclosed by the 2012 Amending Act to displace the continuation of that accrued right. In Middleton J's view "the legislature by the 2012 Amending Act has made its intentions clear beyond doubt in setting out the taxation to be imposed". Middleton J dismissed the taxpayer's appeal.

On appeal to the Full Court, the three judges unanimously dismissed the taxpayer's appeal, but Jessup J did so for different reasons to the others.

Jessup J held that s 7(2) of the Acts Interpretation Act 1901 could not apply, since any rights that the taxpayer had arose under the Taxation Administration Act 1953, not the ITAA 1997. It was the latter Act that the 2012 Amending Act amended, not the former Act.

Robertson J noted "the limited provision in item 51 saving the effect of certain private rulings, that is those issued before 31 March 2011" [para 124]. His Honour continued: "As the primary judge said at [37], the presence of item 51 does not reveal, as suggested by IOOF, a 'legislative intent to preserve the rights of taxpayers who applied for private rulings'. To the contrary, the legislative intention was to preserve the rights of taxpayers who had been issued with a private ruling before 31 March 2011 and, I would add, not otherwise."

On this basis, Robertson J held that although IOOF did have an "accrued procedural right", it did not have a "[accrued] substantive right" to the application of the the tax law to its situation. Specifically, "there was no accrued right to a ruling so as to bind the Commissioner to the law in the form it took before the 2012 Act since a private ruling is only binding up to a change in the law and, apart from a statutory provision providing otherwise, a ruling and therefore an application for a ruling or any accrued rights thereunder does not survive a change in the law" [para 125].

Robertson J concluded: " IOOF does not have an accrued right to have the law applied as it was before the 2012 Act. Absent a specific legislative provision, such as item 51, a ruling, let alone an application for a ruling, does not have the effect or character of a right to the application of substantive law (a relevant provision) which could endure or accrue beyond amendment or repeal of the relevant provision ruled my opinion it would not be open to the Tribunal, for the purposes of undertaking its review of the Commissioner’s deemed disallowance of IOOF’s objection, to apply the provisions of Part 3-90 of the 1997 Act before the amendments contained in the 2012 Act" [paras 127-128].

Davies J also held that IOOF did not have an accrued right for the purposes of s 7(2) of the Acts Interpretation Act 1901 to have its ruling application determined in accordance with the law as it stood prior to amendment by the 2012 Amending Act, because the rights that IOOF "acquired through making its ruling request, and exercising its statutory rights of objection and review, were only ever rights to have the ruling request determined in accordance with the law as it is in force from time to time" [para 143]. Specifically, the exception in item 51 did not apply.

IOOF Holdings Limited v FCT [2014] FCAFC 91 (Full Federal Court; Jessup, Robertson and Davies JJ; 24 July 2014).

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