ACT payroll tax: disclosure of liability before notice, Commissioner's appeal dismissed
The ACT Supreme Court has dismissed the Commissioner for ACT Revenue's appeal and upheld a decision by the ACT Civil and Administrative Tribunal. The Tribunal had held that a taxpayer, a computer hardware supplier, was entitled to an 80% reduction in a 25% penalty for a payroll tax default under s 32 of the Taxation Administration Act 1999 (ACT) (TA Act).
The Commissioner had issued to the taxpayer, after sending a letter with questionnaire regarding payroll tax, a payroll tax assessment plus interest and 25% penalty. The Tribunal had held that the Commissioner's letter was not a formal written notice informing it of an investigation per s 82(1) of the TA Act, and that the taxpayer did disclose to the Commissioner sufficient information to enable the nature and extent of the tax default to be determined.
On appeal, the ACT Supreme Court noted the Tribunal member stated the only issue raised was the application of s 32. It dismissed the Commissioner's submission that the Tribunal failed in a question of law to accord to "investigation" its natural and ordinary meaning. The Commissioner submitted that s 82 of the TA Act is in aid of an "investigation" necessarily already commenced, and that the letter should be viewed as a notice of intent to commence an investigation engaging s 33 but not s 32.
The Court stated that s 32 applies even if the taxpayer becomes aware, though not informed, of investigation - once they are informed, s 33 is engaged. The Court further stated that if the letter evidenced an "investigation" already commenced, then it denied both s 32 and 33. The Court highlighted that the Commissioner conceded that the taxpayer was entitled to a rebate under s 33, and stated this implied a contention that the letter was a notice of an investigation "relating to the taxpayer" that was to be carried out but had not yet begun. The Court said the "most telling argument against" the Commissioner's contention is that if a letter was circulated to all taxpayers yet to comply, it automatically rendered s 32 and 33 inapplicable, indicating "not even" the Commissioner was of the view that sending the inquiry letter was or was part of an investigation.
The Court, agreeing with the Tribunal's reasons for decision, stated the letter with questionnaire could not be reasonably interpreted as other than a request for information, and was not a formal notice.