Decision Impact Statement
Mount Pritchard v. Commissioner of Taxation
(2011) 169 FCR 549
 FCAFC 129
2011 ATC 20-288
Venue: Federal Court
Venue Reference No: NSD 85 of 2011
Judge Name: Edmonds, Middleton and Jagot JJ
Judgment date: 17 October 2011
Appeals on foot: No.
Favourable - application dismissed with costs
Administrative Treatment (Implication on current Public Rulings and Determinations)
Validity of assessments where made contrary to a private binding ruling
Outlines the ATO response to this case challenging the validity of assessments and seeking to require the Commissioner to assess in accordance with a private binding ruling that had been issued to the taxpayer.
Brief Summary of Facts
In February 2004, the Commissioner issued a private binding ruling to the taxpayer stating that the taxpayer would be exempt from income tax for the years of income ended 30 June 2003 to 30 June 2010.
The Commissioner ruled that the taxpayer was exempt from income tax because the arrangement as defined in the private ruling was a club established for the promotion of sport. Hence, Item 9.1(c) of section 50-54 of the Income Tax Assessment Act 1997 (ITAA 97) applied.
Subsequently, the Commissioner issued assessments to the taxpayer for the years ended 30 June 2006 and 30 June 2007, on the basis that the arrangement as defined in the private ruling was not the same arrangement that was actually carried out by the taxpayer. Accordingly, the Commissioner was not bound by the private ruling.
The taxpayer objected to the assessment for the year ended 30 June 2006 on the ground that the Commissioner was bound by the ruling and thus he did not have the power to make an assessment for the 2006 income year.
The Commissioner decided to disallow the objection in full on 5 March 2010. On 23 April 2010, the taxpayer applied to the Administrative Appeals Tribunal under Part IVC of the Tax Administration Act 1953 (TAA 53) for a review of the Commissioner's objection decision.
In the meantime, the applicant also applied to the Federal Court for judicial review of the Commissioner's decision, on the ground of jurisdictional error.
Issues decided by the Court
The Full Court held that no error has been shown in the process of assessment going to jurisdiction.
The Full Court also concluded that in the absence of jurisdictional error, failure by the Commissioner to comply with a provision of the tax legislation does not make an assessment invalid.
Further, where the taxpayer contends that the Commissioner is bound by a private ruling, the taxpayer can proceed to have heard its arguments in Part IVC proceedings, and if successful in arguing that the private ruling should be applied, will demonstrate that the 2006 assessment is excessive.
ATO view of Decision
The decision supports the proposition that a review or an appeal under Part IVC is the proper avenue for a taxpayer seeking review of an income tax assessment on the basis that it is excessive.
Implications for ATO precedential documents (Public Rulings & Determinations etc)
Implications for Law Administration Practice Statements
We invite you to advise us if you feel this decision has consequences we have not identified, or if a precedential decision such as a Public Ruling or an ATO ID requires reconsideration or amendment. Please forward your comments to the contact officer by the due date.
| Date Issued:
|| 5 September 2012
| Due Date:
|| 30 October 2012
| Contact officer:
|| Louise Clarke
| Email address:
|| (02) 9374 8754
|| (02) 62 16 1247
|| Australian Taxation Office
52 Goulburn Street
Sydney, NSW, 2000
Income Tax Assessment Act 1936
Income Tax Assessment Act 1997
Taxation Administration Act 1953
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