Taxation Law - Appeals To The Federal Court

By: Frank Egan - LAC Lawyers
Appeals to the Federal Court require a written application which sets out brief details of the objection decision and must be filed with the relevant Federal Court Registry.

The application must also be accompanied by the prescribed fee applicable to all applications to the Federal Court. This is currently $606.00 for individuals and $1,453.00 for corporations for each objection decision.

The taxpayer must also serve a sealed copy of the application on the Commissioner, as Respondent, at the Office of the Australian Government Solicitor in the state or territory in which the application was filed.

Within 28 days of serving a sealed copy of the application on the Commissioner, the Australian Taxation Office will provide the taxpayer with a Notice of Appearance, a copy of the documents filed with the Federal Court, and a statement of the facts, issues and contentions regarded by the Commissioner as relevant to the appeal.

The Federal Court will then call a Directions Hearing which must be called at least five weeks after the taxpayer’s application was filed.

Once the Federal Court is satisfied that the Commissioner has provided all relevant documents, appeals are then set down for hearing. The taxpayer must pay a setting down fee of $1,211.00 for individuals and $2,422.00 for corporations when a date is fixed for the hearing of the appeal. There is also a daily hearing fee of $483.00 for individuals and $969.00 for corporations.

The Federal Court is able to overturn a decision of the Commissioner of Taxation. However, the Federal Court cannot interfere with any discretion exercised by the Commissioner. It can only refer the matter back to the Commissioner for further assessment.

The Federal Court is able to award costs either against the Commissioner of Taxation if the taxpayer is successful, or against the taxpayer if the Commissioner is successful. In either case, the proportion of costs awarded will generally be between 50% and 60% of the actual costs incurred by the successful party. However, if the Federal Court were to conclude that the behaviour of either the taxpayer or the Commissioner warranted sanction because of the way in which the case had been brought or conducted, a higher proportion of costs (known as solicitor/client costs) may be awarded.

A taxpayer should seek legal advice as to the choice of whether to seek review in the AAT or appeal in the Federal Court may involve taxpayers seeking legal advice. Whilst the Federal Court is the more appropriate forum for objections which are highly technical or which involve complex propositions of taxation law, the court costs are high. Taxpayers generally retain barristers and solicitors to conduct their appeals. The AAT, on the other hand, is cheaper to commence and pursue reviews and places an emphasis upon consensual resolution of disputes. However, AAT members may be less experienced than Federal Court judges in hearing highly complex disputes which involve difficult propositions of taxation law or in managing pre-trial processes to ensure a speedy hearing.

Taxpayers do have further appeals both from the AAT or from the Federal Court.

Whether disputing Private Rulings or taxation assessments, taxpayers maximise their chance of success by utilizing the services of lawyers who are familiar with taxation law and the arguing of objections.

Finally, taxpayers should remember that the Australian Taxation Office will impose a General Interest Charge (GIC) which is currently 13.19% on all outstanding taxation assessments from the date that the assessment was made. The lodging of a review at the AAT or appeal to the Federal Court does not stop this GIC from accumulating. Taxpayers should seek legal advice as to whether to pay either the whole or a part of the disputed taxation notwithstanding commencing the review or appeal. While this will have financial consequences on the taxpayer, the payment will prevent further GIC from accruing. The cost of funding the payment will be less than the GIC. If the taxpayer is successful in the review or appeal, and the amount of the assessment has already been paid, the Commissioner of Taxation is not obliged to refund interest on the refunded taxation payments.

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Frank Egan is the Chief Executive Officer of LAC Lawyers Sydney and has over 27 years of experience as a lawyer.