Choosing the appropriate forum to commence proceedings under Part IVC of the Taxation Administration Act 1953 (Cth)

15 December 2020
Commercial Law, Insolvency & Tax

Our recent article, ‘Challenging your tax assessments’ referred to Part IVC of the Taxation Administration Act 1953 (Cth). Under this law, a taxpayer who is dissatisfied with the Commissioner of Taxation’s objection decision may seek a review of that decision before the Administrative Appeals Tribunal (AAT) or appeal it before the Federal Court of Australia (Federal Court) within 60 days of receipt of the objection decision.

However, how does a taxpayer determine whether to commence proceedings in the AAT or the Federal Court?  We set out below some factors that a taxpayer may consider in making their decision. 

AATFederal Court
Adverse costs ordersThe AAT has no general power to make orders for an unsuccessful party to pay the other party’s costs of the proceedings (subject to certain exceptions).The Federal Court has wide powers to make orders in relation to costs, including that the unsuccessful party to pay the other party’s costs of the proceedings.
Decision-making powerThe AAT has the power to consider the merits of the objection decision made by the original decision-maker (i.e. the Commissioner of Taxation).
The AAT therefore has the power to substitute its own decision for the decision of the Commissioner of Taxation. That is, the AAT may:
– affirm the objection decision;
– vary the objection decision;
– set aside the objection decision and substitute a new decision; or
– remit the objection decision to the Commissioner of Taxation for reconsideration.
The Federal Court does not have powers to consider the merits of the objection decision made by the Commissioner of Taxation.
The Court has the power to decide on the facts in dispute whether the objection decision is excessive or otherwise incorrect.
It is then a matter for the Commissioner of Taxation to apply the Court’s decision accordingly.
Binding precedentThe decisions of the AAT take effect as a substitute to the powers conferred on the Commissioner of Taxation in making his objection decision.
A judge is not strictly bound to follow a decision of the AAT.
Tribunal Members are not bound to follow other AAT decisions, but in practice they usually do for consistency and sound administration.
The Federal Court’s decision is binding on decision-makers and the AAT.
Tribunal members are bound to follow a decision of the Federal Court.
Extension ApplicationsThe AAT may extend the time for a person/entity to commence proceedings by making an “Application for Review of Decision” if the AAT is satisfied that it is reasonable in all the circumstances to do so.
The person/entity in question must apply to the AAT for an extension of time in writing.
The Federal Court has no power to grant an extension of time to appeal an objection decision.
FeesAs at 23 November 2020, the AAT’s standard application fee for commencing proceedings by lodging an “Application for Review of Decision” is $952.
There are also certain circumstances under which a lower fee may be payable. For example:
– you are under financial hardship;
– the amount in dispute is less than $5,000; or
– the decision in question is a small business taxation decision.
As at 23 November 2020, the Federal Court’s fees for commencing proceedings by filing a “Notice of appeal against appealable objection decision under section 14ZZ Taxation Administration Act 1953” are:
$4,190 for a corporation; or
$1,440 for all other applicants.
FormalityThe AAT is a relatively less formal forum.
Proceedings are heard before a Tribunal Member.
The Federal Court is a more formal forum.
Proceedings are heard before a judge. In many cases, judges will sit as a Tribunal Member in the AAT.
Confidentialityn the AAT, there is an automatic right conferred on the applicant to request a hearing in private.Although the Federal Court may use its discretion to grant a private hearing, there is no such automatic right.
Rules of EvidenceThe AAT has a more flexible and relaxed approach to the rules of evidence.The Federal Court strictly applies the rules of evidence.
Expedited hearing list for urgent mattersThe AAT does not have an expedited hearing list for urgent matters.The Federal Court has robust procedures for expediting proceedings if required.

Our team at Lionheart Lawyers is experienced in commencing proceedings under Part IVC of the Taxation Administration Act 1953 (Cth) in both the AAT and Federal Court. Please contact us If you have any questions about the forum in which you should commence Part IVC proceedings.

Important Disclaimer: The material contained in this publication is of general nature only and is based on the law as of the date of publication. It is not, nor is intended to be legal advice. If you require further information on the content of this publication, please contact our office on 9299 0112.

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