Federal Court dismisses taxpayer’s challenge against interim GST audit report

In Halls v Commissioner of Taxation [2014] FCA 775 the Federal Court dismissed an application by the taxpayer challenging an interim GST audit report of the Commissioner under s 39B of the Judiciary Act 1903 and ss 5 and 6 of the Administrative Decisions (Judicial Review) Act 1977. The taxpayer sought a declaration that the interim findings were ultra vires, an injunction restraining the Commissioner from proceeding to a final position on the audit or issuing any further notices in the exercise of its powers and an injunction restraining the Commissioner from using any information obtained in the audit investigation.

The Federal Court found that the claim under the ADJR Act was incompetent for the following reasons:

  • the interim audit findings did not constitute a “decision” under the Act. The Court observed that there was no legislative requirement or provision for the making of an interim audit report, and the audit process is not otherwise provided for in legislation;
  • if the findings did constitute a “decision”, it fell within Schedule 1 of the Act outlining decisions to which the Act did not apply, which included decisions making, or forming part of the process of making, or leading up to the making of, assessments or calculations of tax, charge or duty, or decisions disallowing objections to assessments or calculations of tax, charge or duty, or decisions amending, or refusing to amend, assessments or calculations of tax, charge or duty, under the GST Act.

The Court also found that the claim under s 39B of the Judiciary Act had no reasonable prospect of success The findings were interim findings and there was nothing to quash or set aside. The Court referred to the following observations of French J (as his Honour then was) in Meredith v Federal Commissioner of Taxation and Others [2001] FCA 1135 at [21]):

The so-called decision is at best the formation of an opinion or intention which is not provided for in the Act. It has no statutory significance. It is therefore not amenable to being quashed or set aside which is the only relief claimed pursuant to s 39B of the Judiciary Act. The law cannot quash or set aside what people think or intend even if their thoughts or intentions are the precursors of statutory action. In so far as relief is claimed under s 39B of the Judiciary Actthe claim is, in my opinion, manifestly untenable and should, in respect of this “decision” be dismissed.

The decision shows that during a GST audit (indeed any audit by the Commissioner), being an administrative process, the taxpayer has limited recourse to the Courts. If an assessment does issue, the taxpayer can avail him or herself of the review rights in Part IVC of the Taxation Administration Act.

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