High Court allows the Commissioner’s appeal in Travelex No.2

In Federal Commissioner of Taxation v Travelex Limited [2021] HCA 8 the High Court has unanimously allowed the appeal brought by the Commissioner against the decision of the Full Federal Court in Commissioner of Taxation v Travelex Limited [2020] FCAFC 10. This is the second case to reach the High Court, with the first being handed down in 2010 – Travelex v Commissioner of Taxation [2010] HCA 33. The issue in the first case was whether certain supplies of foreign currency by Travelex were GST-free or input taxed. The issue in the second case was, having been successful in the first case, whether Travelex was entitled to interest on subsequent refunds paid by the Commissioner on account of an entitlement to additional input tax credits.

The appeal involved the operation of the “Running Balance Account” provisions in Part IIB of the Taxation Administration Act 1953 (TAA) and whether Travelex was entitled to interest under the Taxation (Interest on Overpayments and Early Payments) Act 1983 (TIOEP Act) on an amount which the Commissioner in fact treated as an “RBA surplus” and and in fact paid to Travelex in the aftermath of the first High Court decision (“Travelex No.1”). The High Court observed that in the course of litigation, the dispute had 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.

It should be noted that the case arose under the “self-actuating” provisions that applied to the GST before the introduction of the self-assessment regime on 1 July 2012.

The High Court set out the facts as follows:

  • Travelex No.1 was decided in September 2010. Before the decision, Travelex had on 16 December 2009 notified the Commissioner in a GST return forming part of its Business Activity Statement for its November 2009 tax period of a positive net amount for that period of $37,751. Travelex had soon afterwards paid that positive net amount to the Commissioner.
  • After Travelex No. was decided, Travelex 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.
  • Proceeding on the assumption that it was then permissible to amend a GST return, the Commissioner complied with Travelex’s request. On 28 June 2012, the Commissioner credited the RBA he had established for Travelex by an amount of $149,020 by reference to a “transaction” described in an entry made that day in the RBA as “amended self-assessed amount for the period ended 30 Nov 09”. The date assigned to the entry then made in the RBA was 16 December 2009. On 3 July 2012, the Commissioner sent Travelex a document entitled “Confirmation of revised activity statement for the period 01/11/2009 to 30/11/2009”. The document stated that “the total amount of your activity statement has been changed from $37751Dr to $111269Cr”. Three days later, the Commissioner paid an amount of $149,020 to Travelex by electronic funds transfer.
  • Having treated the amount of $149,020 so paid as RBA surplus which he was obliged to pay and did pay to Travelex under the TAA, the Commissioner did not initially dispute that he was obliged to pay interest on the amount under the TIOEP Act. The scope of the dispute between the Commissioner and Travelex was initially limited to the date from which that commonly assumed obligation to pay interest arose. The Commissioner took the view that interest was payable from 17 July 2012. Travelex took the view that interest was payable from 1 January 2010.
  • Travelex commenced a proceeding against the Commissioner in the original jurisdiction conferred on the Federal Court by s 39B(1) of the Judiciary Act 1903 (Cth) 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. The Commissioner and Travelex agreed on a Statement of Agreed Facts (“SOAF”) in the proceeding. The SOAF stated as a “fact” that the Commissioner had on 28 June 2012 allocated the amount of $149,020 to Travelex’s RBA with an “effective date” of 16 December 2009. The SOAF also stated as a “fact” that the amount of $149,020 so allocated constituted an RBA surplus.

At first instance, Wigney J resolved the dispute in favour of Travelex. In doing so, his Honour held that neither the GST Act nor the associated provisions in the TAA (as they stood before the introduction of the self-assessment regime on 1 July 2012) gave a taxpayer or the Commissioner authority to amend a GST return. On appeal, the Commissioner’s grounds included 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 High Court observed that the correctness of the holding is no longer in dispute and the Full Court divided as to the consequence of that lack of authority. Derrington J agreed with the Commissioner, finding that because the amount then allocated failed to reflect any underlying entitlement of Travelex to a refund of a net amount under the GST Act, the allocation by the Commissioner of the negative amount of $149,020 to Travelex’s RBA on 28 June 2012 was incapable of resulting in an RBA surplus. The net amount for the November 2009 tax period remained in law the positive amount of $37,751 of which Travelex had notified the Commissioner in its GST return on 16 December 2009 and which it had paid. Steward J (Kenny J agreed) took the view that the fact that the Commissioner on 28 June 2012 allocated the amount of $149,020 to Travelex’s RBA with an effective date of 16 December 2009 was enough to result in the amount having the legal status of an RBA surplus as at 16 December 2009. The foundation for that view was an understanding that Pt IIB of the TAA operated to give “the balance recorded in an RBA legal efficacy, even though the balance may be mistaken”.

The sole ground of appeal was that which divided the Full Court and the High Court found that the answer accords with that given by Derrington J. In coming to this conclusion, the High Court made the following observations (at [29]):

  • The overall result is that a balance recorded in an RBA must be refunded by the Commissioner as an RBA surplus or paid to the Commissioner as an RBA deficit debt only if the balance is the product of allocations of amounts which accurately reflect obligations of the Commissioner and of the taxpayer under taxation laws.
  • An allocation that the Commissioner in fact makes to an RBA of an amount the Commissioner is not legally obliged to pay to a taxpayer under a taxation law cannot result in an RBA surplus any more than an allocation in fact of an amount not legally due to the Commonwealth under a taxation law can result in an RBA deficit debt.

The High Court also dismissed the Notice of Contention filed by Travelex to the effect that the Full Court should have found that the Commissioner had, on or around 28 June 2012, made an assessment of a negative net amount for the November 2009 tax period of $111,269 (being $149,020 less $37,751). The High Court described an “assessment” as a deliberative process directed to, and culminating in, the giving of a notice of assessment, which constitutes conclusive evidence that the amounts and particulars in the assessment are correct except in so far as the assessment might be challenged on a review or appeal under Pt IVC of the TAA.

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