COMMISSIONER APPEALS THE DECISION OF THE COURT THAT A MISTAKEN BALANCE IS CONSIDERED AS A SURPLUS
Federal Commissioner of Taxation v Travelex Limited [2021] HCA 8 (10 March 2021)
This is an appeal by the Tax Commissioner contending that a mistaken balance in the Running Balance Account (RBA) is considered as a surplus which is subject to interest.
Facts:
The Taxation Administration Act 1953 ("the TAA") enables the Commissioner of Taxation to establish a "Running Balance Account" ("RBA") for a taxpayer. The Commissioner can allocate to RBA amounts due to the Commonwealth under taxation laws and must allocate to an RBA certain amounts that the Commissioner must pay to the taxpayer under taxation laws. The resulting balance can be either an "RBA deficit debt", which the taxpayer must pay to the Commonwealth, or an "RBA surplus", which the Commissioner must pay to the taxpayer.
The dispute began about a decade ago when the Commissioner was obliged to pay interest to Travelex under the Taxation (Interest on Overpayments and Early Payments) Act 1983 ("the TIOEP Act") on an amount which the Commissioner in fact treated as an RBA surplus and in fact paid to Travelex in the aftermath of the decision of this Court in Travelex Ltd v Federal Commissioner of Taxation ("Travelex [No 1]"). In the course of litigation, the dispute has evolved into a dispute about whether the amount which the Commissioner in fact treated as an RBA surplus was in law an RBA surplus and, in consequence, about whether the Commissioner was obliged to pay interest at all.
Travelex [No 1] established that certain supplies made by Travelex were GST free. The consequence was that Travelex was entitled under the A New Tax System (Goods and Services Tax) Act 1999 ("the GST Act") to input tax credits for associated creditable acquisitions. The applicable form of the GST Act and of associated provisions concerning collection and administration in Ch 3 of Sch 1 to the TAA is as those Acts stood before the Indirect Tax Laws Amendment (Assessment) Act 2012 introduced the current system of self-assessment on 1 July 2012.
After Travelex [No 1] was decided, Travelex eventually wrote to the Commissioner in June 2012 requesting the Commissioner to amend Travelex's GST return for the November 2009 tax period to increase the amount claimed for input tax credits for creditable acquisitions by $149,020.
Travelex commenced a proceeding against the Commissioner seeking declaratory and injunctive relief to resolve the dispute about the date from which the commonly assumed obligation to pay interest under the TIOEP Act arose. His Honour resolved the dispute about the commencement date for the payment of interest in favour of Travelex, granting a declaration and an injunction having the effect of requiring the Commissioner to pay interest on the amount of $149,020 to Travelex under the TIOEP Act from 31 December 2009. In reasoning to that result, however, Wigney J held that neither the GST Act nor the associated provisions concerning collection and administration in Ch 3 of Sch 1 to the TAA as they stood before 1 July 2012 gave a taxpayer or the Commissioner authority to amend a GST return
The Commissioner appealed to the Full Court of the Federal Court. The Commissioner's grounds of appeal included that the holding that Travelex and the Commissioner lacked statutory authority to amend a GST return ought to have led Wigney J to reject the agreed "fact" in the SOAF that the amount of $149,020 which the Commissioner had on 28 June 2012 allocated to Travelex's RBA constituted an RBA surplus, with the consequence that his Honour erred in concluding that the Commissioner was obliged to pay interest on that amount to Travelex under the TIOEP Act at all.
The Full Court was unanimous in accepting as correct the holding of Wigney J that neither Travelex nor the Commissioner had statutory authority to amend Travelex's GST return for the November 2009 tax period.
The Commissioner appeals that this Court erred in concluding that a mistaken balance in an RBA is efficacious in law to constitute an RBA surplus and ought to have found, as did Derrington J, that the purported allocation by the Commissioner of the amount of $149,020 to Travelex's RBA did not result in an RBA surplus with the consequence that the Commissioner had no obligation to pay interest under the TIOEP Act.
Issue: Did the court err in concluding that a mistaken balance in the RBA constitutes an RBA surplus?
Law:
- Taxation Administration Act 1953 SS.8AAZA, 8AAZC(1), 8AAZD(1), 8AAZH, 8AAZI, 8AAZL(1), 8AAZLF
Analysis:
An "RBA surplus", which the Commissioner must refund if not allocated or applied, is defined to mean a balance in an RBA in favour of the entity that is "based on" two factors. On the debit side are "primary tax debts that have been allocated to the RBA". On the credit side are "payments made in respect of current or anticipated primary tax debts of the entity, and credits to which the entity is entitled under a taxation law, that have been allocated to the RBA"
The statutory identification of the factors on which a balance in an RBA must be based in order to result in an RBA surplus or an RBA deficit debt is important. The efficacy of an allocation to result in an RBA surplus or an RBA deficit debt is not expressed to depend on the "belief" or "satisfaction" or "opinion" of the Commissioner. The efficacy of an allocation to result in an RBA surplus or an RBA deficit debt rather depends on the amount allocated answering the objective description of either an amount due to the Commonwealth under a taxation law, a payment made in respect of a current or anticipated amount due to the Commonwealth under a taxation law, or an amount that the Commissioner must pay to a taxpayer under a taxation law.
The obligations of the Commissioner to refund RBA surpluses and of the taxpayer to pay RBA deficit debts are secondary or auxiliary obligations discharge of which facilitates the efficient performance of the underlying primary payment obligations of the Commissioner and of the taxpayer under those taxation laws. Erroneous balances in RBAs simply do not engage those secondary or auxiliary obligations. Confirming that position, the TAA makes production by the Commissioner of an RBA statement no more than "prima facie evidence that the amounts and particulars in the statement are correct"
Hence, no RBA surplus has arisen in relation to the tax period (within the meaning of A New Tax System (Goods and Services Tax) Act 1999) of Travelex Limited for the month of November 2009 and no interest is presently payable by the Commissioner of Taxation of the Commonwealth of Australia to Travelex Limited under the provisions of the Taxation (Interest on Overpayments and Early Payments) Act 1983 (Cth) in respect of that tax period
Conclusion: The Commissioner's sole ground of appeal is accordingly upheld.
