Tasty Chicks Pty Limited & Ors v Chief Commissioner of State Revenue [2011] HCA 41

Date of judgement 5 October 2011 Proceeding No. S218 of 2011
Judge(s) French CJ, Gummow, Crennan, Kiefel and Bell JJ
Court or Tribunal High Court of Australia
Legislation cited Pay-roll Tax Act 1971, Pt 4A
Supreme Court Act 1970, ss.19(2), 75A
Taxation Administration Act 1996, ss.97, 101
Catchwords Payroll tax – grouping and "de-grouping"
Administrative law – nature of appeal and nature of review – whether need to find error in discretionary decision of Chief Commissioner before review by Supreme Court
Original jurisdiction upon statutory "appeal" and "review" in respect of administrative decision – Nature, power and duties of court in exercise of that jurisdiction
Cases cited Affinity Health Ltd v Chief Commissioner of State Revenue [2005] NSWSC 663; 205 ATC 4637

Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353; [1949] HCA 26

Brandy v Human Rights and Equal Opportunity Commission [1995] HCA 10; (1995) 183 CLR 245 at 261; [1995] HCA 10

Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2010] NSWCA 326

Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; (2010) 241 CLR 390 at 399

Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; (2010) 241 CLR 390 at 399-400; [2010] HCA 32

Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; (2010) 240 CLR 611 at 623, 639; [2010] HCA 16

Osland v Secretary to Department of Justice [No 2] [2010] HCA 24; (2010) 241 CLR 320 at 331-332; [2010] HCA 24

Pasini v United Mexican States [2002] HCA 3; (2002) 209 CLR 246 at 253-254; [2002] HCA 3

Summary

In 2009 the appellants in these proceedings succeeded in an appeal to the Supreme Court against certain payroll tax grouping decisions of the Chief Commissioner State Revenue. Gzell J upheld the appeal against the Chief Commissioner’s decisions to group the appellant for periods prior to 1 July 2003, and granted exclusions from grouping from 1 July 2003 to 30 June 2007.

In 2010 the Court of Appeal overturned the exclusion decisions of Gzell J on the basis that the decision to degroup was not open to the Court on the evidence before it. The Court of Appeal held that the only question that should have been decided was whether the Chief Commissioner’s failure to be satisfied that the appellants should be degrouped was based on an error of law. The Court of Appeal reinstated the assessments of the Chief Commissioner for the relevant years.

The High Court allowed the appeal on the basis that the Supreme Court had the same powers of review under section 101 of the Taxation Administration Act as the Administrative Decisions Tribunal, and had not erred by exercising the powers of the Chief Commissioner in granting exclusions. The High Court ordered that the matter be remitted to the Court of Appeal for further hearing in light of the determination by the High Court of the nature of the review.

Background

The Chief Commissioner issued payroll tax assessments for the years ended 30 June 2002 to 30 June 2007 based upon the grouping of M & J Souris, Tasty Chicks Pty Limited, Angelo Transport Pty Limited, Souris Holdings Pty Ltd (the appellants) and two other companies. Tasty Chicks and Angelo Transport sought to be excluded from the group by invoking the Chief Commissioner's discretion.

Proceedings were commenced in the Supreme Court by the taxpayers under s.97 of the Taxation Administration Act 1996 ("TAA"). There were three legislative periods in question:

  1. 1 July 2001 to 30 June 2003 ("the First Period");

  2. 1 July 2003 to 30 June 2005 ("the Second Period"); and

  3. 1 July 2005 to 30 June 2007 ("the Third Period").

Gzell J held as follows:

  1. In respect of the First Period, the Chief Commissioner was not entitled to apply the grouping provisions, and accordingly, his Honour did not consider the de-grouping provisions.

  2. In respect of the Second and Third Periods (where the taxpayers had not challenged the grouping decisions), his Honour was entitled to re-exercise the discretion under the de-grouping provisions and to substitute his own opinion for that of the Chief Commissioner, following his earlier decision in Affinity Health Ltd v Chief Commissioner of State Revenue [2005] NSWSC 663; 205 ATC 4637. His Honour decided that Angelo Transport and Tasty Chicks should be excluded from the group.

However, on appeal by the Chief Commissioner to the Court of Appeal, it was held that:

  1. An appeal under s.97 of the TAA is an appeal in its "right and proper sense", that is, a right to redress error by the Chief Commissioner on the materials that were before him at the time, and is not a rehearing or a hearing de novo (Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd & Ors [2010] NSWCA 326 at [32]).

  2. It follows that the principles stated by Dixon J in Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 apply in appeals under s.97 from the exercise of powers and discretions which depend on the Chief Commissioner's state of mind. In such an appeal, the Court must consider whether the appellant has established that the Chief Commissioner erred on the materials that were before him (Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd & Ors [2010] NSWCA 326 at [33]).

  3. In respect of the First Period, the grouping could not be supported under s.16C(a) of the Pay-roll Tax Act 1971, but was justified under s.16C(b). Further, the Chief Commissioner's decision to refuse to de-group the taxpayers was affirmed.

  4. In respect of the Second and Third Periods, the findings by Gzell J that the businesses were carried on "substantially independently of the other members of the group" were not even open on the evidence before Gzell J. The Court agreed with the Chief Commissioner that the taxpayers ought not to be de-grouped.

In respect of all three legislative periods, the Court remarked that the real question was whether the Chief Commissioner's failure to be satisfied of the substantial independence was vitiated by errors of law, as referred to by Dixon J in Avon Downs.

Decision

The High Court of Australia allowed the appeal by the taxpayers and set aside the order of the Court of Appeal.

In construing the nature of a review under s.97 of the TAA, the Court considered it significant that:

  • Section 97(4) (which states that a review by the Supreme Court is taken to be an appeal for the purposes of the Supreme Court Act 1970, etc) engages ss.19(2) and 75A of the Supreme Court Act ([2011] HCA 41 at [15] and [16]); and

  • Section 75A(4) states that the Supreme Court Act "has effect subject to any Act" which in turn directs attention to ss.100 (in particular s.100(2) which states that the parties are not limited to the grounds of objection) and 101 of the TAA (in particular s.101(1)(b) which states that the court or tribunal may make an assessment or other decision in place of the one to which the application relates), and these are supplemented by s.75A(7) (the Supreme Court may receive further evidence) and s.75A(10) (the Supreme Court may make any assessments which ought to have been made) ([2011] HCA 41 at [13] and [17]).

The Court considered that the circumstances in Avon Downs could be distinguished from the present case because the taxpayer there had utilised its statutory right to request that the Commissioner treat its objection as an appeal and forward it to the High Court, and upon that appeal the taxpayer was limited to the grounds stated in the objection. This was to be contrasted with the other avenue available to the taxpayer which was a review by the Board of Review which had all the powers and functions of the Commissioner and its decisions upon a review were deemed to be assessments, determinations or decisions of the Commissioner. The Court agreed with Gzell J's observation that "the powers in the [TAA], s.101 are quite different from the powers of a court on appeal under the Income Tax Assessment Act 1936 (Cth) ([2011] HCA 41 at [19] and [20])."

The Court held that the powers on review are the same for the Supreme Court and the Administrative Decisions Tribunal, thereby agreeing with Gzell J. However, that conclusion is subject to the supplementation of the Supreme Court's powers by s.75A of the Supreme Court Act ([2011] HCA 41 at [20]).

Finally, the Court held that the Court of Appeal erred in its conclusion that the taxpayers were required to show that the Chief Commissioner had erred on the materials before him and to show that the exercise of a discretion by the Chief Commissioner was vitiated by error of law as referred to in Avon Downs ([2011] HCA 41 at [22]).

The Court ordered that the matter be remitted to the Court of Appeal for further hearing in light of the determination by the High Court of the nature of review. This is because a hearing on the merits of the grouping and de-grouping decisions was not within the scope of the grant of leave.

Link to decision

Tasty Chicks Pty Limited & Ors v Chief Commissioner of State Revenue

Last updated: 18 May 2016