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Page 1 Written Tax Advocacy: State Taxes 1 Introduction 1.1 Introduction My high school English teacher considered I was illiterate. Armed with a 1961 grammar book, 1 he attempted to teach me spelling, punctuation, grammar, logic and style and drilled me in word confusion and misuse. When graduating, his sage advice was to ‘write simply son lest people realise you can’t write’. In pursing simpler writing, I have adopted much of the approach to legal writing in S.D. Stark, Writing to Win: The Legal Writer. 2 G.T. Pagone’s, Tax Effective Writing 3 discusses written advocacy theory in Federal tax matters from an Australian perspective. There is little published on written advocacy theory in State taxes matters. The preparation of technical information responses, objections and penalty and interest submissions can be deceptively complex, because of the different jurisdiction legislative framework, the different administrative practices of the different State and Territory revenue offices and limited administrative practice statements and technical publications and services. DCTR Richards 4 will co-present a separate paper on non-technical considerations and informal approaches that practitioners might use to advance their client’s interests when interacting with the revenue offices. This paper discusses my tips, traps and examples for preparing more effective State taxes written advocacy including: writing style lessons from S.D. Stark and G.T. Pagone and others; the importance of addressing: legislative authority, administrative practice and tax policy; and the differences between assessments, decisions, determinations and exercise of discretion; preparing objections; 1 T.E. Berry, The Most Common Mistakes in English Usage, Pitman, 1961 – still my most prized reference book. 2 S.D. Stark, Writing to Win: The Legal Writer, Main Street Books, 1999; (2 nd ed), Three Rivers Press, 2012. 3 G.T. Pagone, Tax Effective Writing, The Federation Press, 2013. 4 J. Richards, Session 5: Dear Commissioner, The Tax Institute (National), 14th Annual States’ Taxation Conference, 24 July 2014.

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Page 1

Written Tax Advocacy: State Taxes

1 Introduction

1.1 Introduction

My high school English teacher considered I was illiterate. Armed with a 1961 grammar book,1 he attempted to teach me spelling, punctuation, grammar, logic and style and drilled me in word confusion and misuse. When graduating, his sage advice was to ‘write simply son lest people realise you can’t write’.

In pursing simpler writing, I have adopted much of the approach to legal writing in S.D. Stark, Writing to Win: The Legal Writer.2 G.T. Pagone’s, Tax Effective Writing3

discusses written advocacy theory in Federal tax matters from an Australian perspective. There is little published on written advocacy theory in State taxes matters.

The preparation of technical information responses, objections and penalty and interest submissions can be deceptively complex, because of the different jurisdiction legislative framework, the different administrative practices of the different State and Territory revenue offices and limited administrative practice statements and technical publications and services.

DCTR Richards4 will co-present a separate paper on non-technical considerations and informal approaches that practitioners might use to advance their client’s interests when interacting with the revenue offices.

This paper discusses my tips, traps and examples for preparing more effective State taxes written advocacy including:

writing style lessons from S.D. Stark and G.T. Pagone and others;

the importance of addressing:

legislative authority, administrative practice and tax policy; and

the differences between assessments, decisions, determinations and exercise of discretion;

preparing objections;

1 T.E. Berry, The Most Common Mistakes in English Usage, Pitman, 1961

– still my most prized reference book.

2 S.D. Stark, Writing to Win: The Legal Writer, Main Street Books, 1999;

(2nd ed), Three Rivers Press, 2012.

3 G.T. Pagone, Tax Effective Writing, The Federation Press, 2013.

4 J. Richards, Session 5: Dear Commissioner, The Tax Institute (National),

14th Annual States’ Taxation Conference, 24 July 2014.

Page 2

preparing penalty and interest submissions.

The examples are based on my home jurisdiction, Victoria.

This paper is based on a paper for Federal taxes written advocacy and has been adapted for State taxes matters.5

1.2 Summary

With all good written advocacy, the objective is to ensure the writing is expressed clearly, concisely and persuasively. My golden rules are:

(a) Understand, address and managing the bureaucratic structures, systems and tendencies and administration practices of the revenue offices.

(b) Applying a consistent methodology within the tax advocacy team will improve efficiencies and quality of written advocacy.

(c) Write for the benefit of the client, the intended and successive reader and within legislative and procedural constraints.

(d) Effective tax advocacy should address legislative power, judicial interpretation, the revenue office administrative practice and tax policy to resolve ‘disputed and disputable issues’.

(e) Identify the relevant legislative power to ensure there is a disputable issue and the correct procedure is adopted and expressly engage that power.

(f) Extra care is required in communicating with the revenue office, the courts and the tribunals, because penalties for material misstatements and omissions are visited upon the taxpayer and the adviser.

(g) Select and include only the facts and documents that relate directly to the legal reasons (i.e. the ‘taxable facts’). Additional facts or documents are as likely to lose as win the case.

(h) Use the CRAC method of technical drafting, because the method directs the reader by stating the conclusion first, avoids lengthy quotations and emphasises the taxpayer's position rather than the revenue office's position.

(i) Use the method of drafting by formulating arguments by interweaving the statutory words with relevant facts in respect of each element of the claim and prepare specific rather than exhaustive and compendious claims.

(j) An objection is the first step in the litigation process as it defines and, in some jurisdictions, potentially confines any legal proceedings. The quality and style of the objection should reflect that it is a fundamental part of legal proceedings.

(k) The objective of a penalty submission is to establish the taxable facts, the appropriate base penalty amount, the entitlement to a reduction for voluntary

5 R. Jorgensen, Tax Advocacy - Writing to Win, The Tax Institute (Vic), 29

August 2013.

Page 3

disclosure and to a discretionary remission by reference to the revenue office’s administrative practice.

(l) The objective of an interest remission request is to establish the taxable facts and the entitlement to a total or partial remission by reference to the revenue office’s administrative practice.

1.3 Approach to dealing with the revenue offices

Understanding, addressing and managing the bureaucratic structures, systems and tendencies, the bureaucrat personality and the legacy and administration practices of the revenue offices will improve the engagement by the revenue officers and the effectiveness of written advocacy.

Proactive engagement with the revenue offices is appropriate, unless there is an appreciable risk of criminal prosecution in which case a more circumspect approach may be best.6

DCTR Richards7 summarises a number of suggestions provided by the revenue offices to improve the persuasiveness and effectiveness of written submissions including:

(a) Technical content:

(i) read and quote relevant legislation succinctly;

(ii) recognise that each State and Territory has different legislation with real policy and legislative approaches;

(iii) have a good understanding and evidence the satisfaction of the general law;

(iv) address published rulings, practices and information requirements;

(v) ensure the submissions are supported by evidence to discharge the taxpayer’s onus of proof;

(vi) express the commercial motivation and objectives of the transaction to provide context;

(vii) provide a copy of the instructions to a valuer to support the value provided;

(b) Tone of communications:

(i) avoid alleging bad faith or bias without grounds;

(ii) show proper respect to the revenue officers;

6 W. B. Zichy-Woinarski QC, Giving Criminal Law Advice to the Tax Client,

(2001) 30 AT Rev 206; V. A. Morfuni, Criminal Law Risks for the Tax

Adviser, (2002) 31 AT Rev 4.

7 J. Richards, Session 5: Dear Commissioner, ibid.

Page 4

(iii) objections should be simple and succinct and not drafted like court pleadings;

(c) Processes:

(i) engage the proper escalation and priority policies to ensure urgent matters are expedited;

(ii) lodge through appropriate channels;

(iii) satisfy the document and information lodgement requirements;

(iv) observe time limits; and

(v) ensure that documents lodged are accurately executed and dated.

I endorse these suggestions, and present my views on how to achieve these objectives.

Keating has critiqued the ATO bureaucracy and suggests practical approaches and methods to effectively interact with the ATO.8 Keating’s suggestions can be implemented in dealing with the revenue offices.

Keating advocates early and proactive engagement with case officers. Advisers should actively educate case officers and present correspondence and arguments consistently with revenue office procedures to effectively progress the taxpayer’s position.

Keating’s tips include escalating matters vertically and horizontally to the legal services, technical advice and review and policy and legislation divisions of the revenue office should the engagement with the case officer be stalled or be effectively exhausted. A new revenue officer’s perspective may alter the taxpayer’s prospects.

DCTR Richards provides details of revenue office escalation processes.

Keating’s most practical tip is to provide a separate one page issue statement (‘The ABC P/L Issue’) to assist the case officer and focus each other revenue officer that will deal with the matter on the central issue, lest they are lost in or overwhelmed by the complexity and volume of material collated by the revenue office and the taxpayer.

2 Writing Style Lessons

2.1 Introduction

With all good written advocacy the objective is to ensure the writing is expressed clearly, concisely and persuasively. Ultimately, one is always drafting from the client perspective, because the client must understand and approve the statements being made to the revenue office.

Choose a good drafting book and a good grammar book and apply the principles consistently to form your own style and ensure consistency.

8 M. Keating, Facing the Dragon in His Lair, The Taxation Institute

(National), 14 March 2013.

Page 5

Applying a consistent methodology within the tax advocacy team will improve efficiencies and quality of written advocacy. A consistent style will assist in efficiently collating team member’s work without major rewriting, reproducing the argument through each successive stage of position paper response, objection, tribunal review, and court appeals and easily reusing arguments on other client engagements.

2.2 General drafting

Pagone advocates writing for the benefit of the intended and successive reader within legislative and procedural constraints.9

An author should frame issues and lead the reader by word selection and sequence, sentence structure and punctuation, style and technique and factual context. Intuitive persuasion techniques such as anchoring facts, rhetoric, repetition, simile, metaphor, analogy and antithesis should be used appropriately to avoid counterproductive perceptions of manipulation or distortion.

Attention should be paid to physical presentation, legibility, simplicity and readability, because each affects persuasiveness.

My tips and traps include:

Use the words in the legislation or administrative document not synonyms. Synonyms are not your friend. While making the writing more interesting and less repetitious, synonyms confuse and subtly distort the relevant legislative meaning and tests. The potential difference between ‘beneficial ownership’ and ‘equitable ownership’ has occupied significant time.10 ‘Continually’11 owning an asset will not satisfy the requirement of ‘continuously’ owning an asset.12 Much litigation occurs over the meaning of one or two words.13

Grammar and correct English usage is important. ‘Knowing your right’ is not the same as ‘knowing you’re right’. Asserting that the Commissioner’s exercise of discretion has miscarried, because the Commissioner was ‘disinterested’14 (which should be the case) rather than ‘uninterested’ does not properly reflect the alleged breach of duty.

Check and re-check your work and word processing software autocorrect. I was very embarrassed when a letter recommending the ‘Directors do the following things to fortify their position:…’ was sent autocorrected that the ‘Directors do the following things to fornicate their position:…’. Perhaps the autocorrect was prophetic?

Arranging thoughts in logical order (while obvious) improves simplicity and readability. Repetition in writing often indicates a lack of clarity of the thought or incorrect order of presentation.

9 G.T. Pagone, Tax Effective Writing, ibid, Chapter 1.

10 Sec. 7(4) DA 2000 (VIC) ‘beneficial ownership’, ‘change in beneficial

ownership’; R. Speed, Beneficial Ownership, (1997) 26 AT Rev 34; N.

Wiley, Is the sole unit holder in a unit trust the “owner” of the trust assets?,

(2005) 34 AT Rev 29; J. Page, CPT Custodian and the effect of trust

recoupment rights on the taxation of beneficiaries, (2011) 40 AT Rev 165.

11 ‘Continually’ means with occasional interruption while ‘continuously’

means without interruption.

12 Sec. 55, 55A, 59 & 61 LTA 2005 (VIC): Deferral or exemption of land tax

on residential land if ‘continuously used and occupied as a principal place

of residence’ for at least 6 months in various circumstances.

13 Sec. 76 DA 2000 (VIC); ‘beneficial entitlement’ of units in a land rich unit

trust; CSR (VIC) v Landrow Properties P/L [2010] VSCA 197; CSR (VIC) v

Challenger Listed Investments Ltd [2011] VSCA 272; Regis Investments

P/L v CSR (VIC) [2012] VSC 115.

14 ‘Disinterested’ means not influenced by self-interest while ‘uninterested’

means not interested.

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Write in the active voice for the taxpayer’s asserted case as it is more persuasive and readable and in the passive voice when addressing contrary arguments.

Sentences and paragraphs should be short, concise and contain a single idea to assist comprehension. This structure makes it easier to redact or sever and strike out material.15

Minimise cross-referencing, as it decreases readability, by improving the structural logic of the document (e.g. more specific qualifying submissions follow the previous general submissions).

Definitions should be intuitive. In particular:

(a) do not define obvious terms (e.g. ‘Mr John Smith (Mr Smith)’);

(b) do not define words inconsistently with their ordinary or technical meaning;

(c) use definitions that make sense (e.g. ‘Jones Family Trust (Jones FT)’ not ‘(JFT)’ as this does not assist in readability when there are many abbreviations);

(d) use an acronym where possible, because it is more readable than an initialism;16 and

(e) use definitions that do not have a common meaning which can be confused (e.g. ‘Jones P/L (Company)’ leads to odd drafting such as ‘the Company is a company’) and increases errors with capitalisation, which create ambiguity.

Avoid euphemisms – He ‘passed’ is not as clear as he ‘died’.

Be careful with pronouns to avoid mismatch with the subject’s gender or uncertainty regarding which ‘she’ is the subject of the sentence. Repeat nouns (e.g. Ms Jones) to avoid and replace the use of the pronouns ‘he, she, or it’.

Use tables to summarise information and formulas for calculations rather than wording and include examples or notes to explain the operation or argument.

Remove emotive wording and false intensifiers, because they detract or distract from the force of the argument and are prone to annoy, rather than persuade, an educated reader. Arguments are seldom so incontrovertible as to justify the use of adverbs such as ‘obviously’, ‘clearly’, and ‘undoubtedly’.

2.3 Technical drafting

Technical and legal drafting suffer from verboseness, legalese, synonymous phrasing, redundancies, and precedent inconsistencies. Reducing these vices improve written advocacy. Eradicating these vices is impossible because they are inherent in legislation, administrative practice publications and other authorities used in technical writing. Be alert to these vices.

15 e.g. Rule 23.02 Supreme Court (General Civil Procedure) Rules 2005

(VIC).

16 An acronym is an abbreviation that forms a phrase or word when spoken

while an initialism is itself pronounced letter by letter (e.g. NATO and

OECD).

Page 7

Extra care is required in communicating with the revenue offices, the courts and the tribunals, because penalties for material misstatements and omissions may be visited upon by the taxpayer and the adviser.17 ACT, NSW and NT impose a positive obligation to advise the revenue office of tax liabilities.18 NT, QLD and VIC impose positive obligations to correct certain historical misstatements when identified.19

The taxpayer bears the onus of proof.20 The taxpayer must establish the correct tax treatment, not merely establish that the Commissioner’s reasoning is incorrect.21

Effective tax advocacy should address legislative power, judicial interpretation, the revenue office administrative practice and tax policy to resolve ‘disputed and disputable problems’, as applied to the facts of the matter within the context of other areas of law and commerce.22

My tips and traps include:

Written advocacy should focus on asserting the taxpayer’s case which will practically respond to the revenue office. Take the impetus away from the revenue office by not just responding to the revenue office position.

Identify the relevant legislative power to ensure there is a disputable issue and the correct procedure is adopted and expressly engage that power.23

For example, the distinction between an assessment, a determination,24 a decision25 and the exercise of discretion26 may be important in identifying the dispute and relevant grounds of review and the remedy sought. Judicial review is arguably limited to decisions and not determinations.27

17 sec. 337-339 Criminal Code 2002 (ACT); sec. 55-56 TAA 1996 (NSW);

sec. 82 TAA 2007 (NT); sec. 122-123 TAA 2001 (QLD); sec. 55-56 TAA

1996 (SA); sec. 104 TAA 1997 (TAS); sec. 57-58 TAA 1997 (VIC); sec. 107

TAA 2003 (WA); NB: WA does not include an offence for omitting

information.

18 sec. 10 TAA 1999 (ACT); sec. 10 TAA 1996 (NSW); sec. 24 TAA 2007

(NT).

19 sec. 24 TAA 2007 (NT) CG-GEN.005 (NT); sec. 28 TAA 2001 (QLD);

sec. 104A LTA 2005 (VIC).

20 sec. 101 TAA 1999 (ACT); sec. 88 & 100 TAA 1996 (NSW); sec. 112 &

116 TAA 2007 (NT); sec. 66, 70A & 73 TAA 2001 (QLD); sec. 85 & 97 TAA

1996 (SA); sec. 81 & 91 TAA 1997 (TAS); sec. 98 & 110 TAA 1997 (VIC);

sec. 37 TAA 2003 (WA).

21 By analogy with the statutory equivalents sec. 175 & 177 TAA 1953: FCT

v Rigoli [2013] FCA 784; FCT v Dalco [1990] HCA 3.

22 M. Gordon, Trends in tax advice and litigation – what to do when it all

turns on a word or two, (2009) 38 AT Rev 2002.

23 A purported objection was not valid because it was not fully and in detail:

Trustees for Andrew Garrett Family Trust No. 3 v FCT [2013] AATA 395;

an objection lodged before the issue of the assessment was valid: Walters

v FCT [2013] AATA 151 (but why have the argument).

24 A determination is the process of ascertaining the existence of facts,

conditions or rights necessary for the revenue office to act: WE Carpenter

Holdings P/L v FCT (2008) 237 CLR 198.

25 A decision is the exercise of power to choose how to act and whether or

not to act: Giris P/L v FCT (1969) 119 CLR 365; Duggan v FCT (1972) 129

CLR 365.

26 An exercise of discretion is to dispense with or relieve a tax burden:

Challenger Listed Investments Ltd v CSR (VIC) [2010] VSC 464: just and

reasonable land rich dispensation sec. 85 DA 2000 (VIC); CSR (VIC) v

Anderson [2004] VSC 152: principal place of residence period of absence

extension.

27 The distinction often distracts from the task of identifying the powers

conferred on the revenue office: WE Carpenter Holdings P/L v FC T (2008)

237 CLR 198 at [31].

Page 8

Some decisions are not susceptible to challenge,28 are subject to internal review only29 or are subject to direct appeal court or tribunal.30

Explaining to the client the delay in making a further application or having to make an application to extend time for making the wrong application is embarrassing.

Specifically refer to the revenue office administrative practice that is relied upon to establish the entitlement to the action sought and to the administrative power and precedent for the revenue officer’s action. Make the revenue officer’s life easier by leading the revenue officer through each step to the conclusion.

For example:

The CSR (VIC) should remit interest to nil for the period between 1 September 2010 and 31 December 2011 while considering the information response by the taxpayer.

The CSR (VIC) is empowered to remit interest31 to nil for the period the CSR (VIC) has been unable to provide the taxpayer with a decision to the information response within the 90 day published service performance levels.32

By letter dated 1 July 2010, the taxpayer responded to the CSR (VIC)’s information request dated 1 June 2010. The CSR (VIC) did not reply to the information request response until the CSR (VIC) issued the position paper dated 31 December 2011. The CSR (VIC) did not action the information request within 90 days of receipt of the information request response, so the taxpayer should not be liable for interest during the subsequent period of consideration by the CSR (VIC).

The communication should clearly state the orders, remedies or action sought. Great technical arguments may be ineffective if the revenue office is left at large to select the result.

The communication should not inadvertently waive client confidentiality or client legal privileges by referring to the substance and import of any tax advice.33

Where possible, use medium neutral citation for cases (e.g. [2002] HCA 43; [2007] VSCA 73, [2011] VSC 104; [2008] VCAT 999), unless the official citation is required, because the citation identifies the level of tribunal or court and are assessable by the client and other advisers on AustLii

2.4 Facts

Gordon considers that ‘[w]ithout the proper identification of the taxable facts and a proper assessment of whether you can prove those taxable facts, the process of applying the statute to the acts will inevitably lead to the wrong result’. Advisers must identify and prove the ‘taxable facts’, which are the facts relevant to the disputed and

28 e.g. sec. 86 TAA 1996 (NSW); sec. 107 TAA 2007 (NT); sec. 63 TAA

2001 (QLD); sec. 22 TAA 1997 (TAS); sec. 20A TAA 2003 (WA) decisions

for compromise assessments; sec. 75 TAA 2001 (QLD) non-reviewable

decisions; sec. 82 TAA 1996 (SA) penalty and interest remission and other

non- reviewable decisions; sec. 97 TAA 1997 (VIC) certain land valuation

and GAIC decisions; sec. TAA 2003 (WA) non- reviewable decisions.

29 e.g. sec. 100 & Sch. 2 TAA 1999 (ACT) interest remission, instalment

payment arrangements & extension of time for objections.

30 e.g. sec. 34 TAA 2003 (WA) instalment payment arrangements and other

directly reviewable decisions.

31 Sec. 28 TAA 1997 (VIC).

32 TAA.007 (VIC) pg. 9.

33 J. Momsen, Common law legal professional privilege – implied waiver,

(2001) 30 AT Rev 153.

Page 9

disputable issues. Often disputes are about facts not interpretation. Proving the facts often resolves the dispute. 34

Stark particularly appeals to my procedural tendencies by stating clear rules such as the ‘15 rules of writing facts in litigation’, the ‘16 rules in writing arguments’ and the ‘6 rules for writing [submissions]’.

Stark considers facts can be categorised and structured as:

a summary paragraph to provide context for the facts to follow;

a procedural history;

a statutory history;

a statement of the case;

a chronology;

supporting facts; and

distinguished or justified contrary facts.

The categories serve different purposes and should not be combined.

The chronology places facts in time order, so when stating the supporting facts lead with the strongest facts rather than in chronological order. Lead with the ‘highlight reels’.

The arguments and supporting story will determine the relevant facts. 35 Any facts not corroborated by documents are excluded. Address contrary facts to avoid an inference of covering it up and deemphasise contrary facts by using the passive voice, addressing it briefly and without colour and at the end of the facts. Concede the fact, if necessary, to maintain credibility.

Stark considers it appropriate to include in the facts what did not happen, the absence of which precludes the operation of a provision or grounds a defence.

Stark also recommends the writer to:

(a) include relevant quotations, which constitute facts or gives authenticity to the facts;

(b) avoid repetition of facts, which lessens impact and, if expressed differently, creates ambiguity;

(c) confine all facts to the facts section so they are not introduced in other sections where the fact may be overlooked; and

(d) exclude legal reasons and conclusions from contaminating other sections.

34 M. Gordon, Trends in tax advice and litigation – what to do when it all

turns on a word or two, ibid, 222.

35 S.D. Stark, Writing to Win: The Legal Writer, (2nd ed), ibid, Chapter 6.

Page 10

My tips and traps include:

In the chronology section, put dates first so the chronology is clear. When dates are mixed in the text, the chronology is difficult to easily discern.

Select and include only the facts and documents that relate directly to the legal reasons (i.e. the ‘taxable facts’). Additional facts or documents are as likely to lose as win the case.

Reference each fact to a document or witness statement evidence by a footnote rather than in the text (e.g. clause 5.1 Trust Deed) so that the focus remains on the facts. If you do not have a corroborating evidence reference, investigate to find one or delete the fact.

2.5 CRAC Method

Stark advocates the CRAC method - (C)onclusion, (R)ule, (A)nalyisis, (C)ases - for argument writing.

Structure the argument by stating the conclusion (C), then a brief statement of the supporting rule (R), then analyse the facts (A) and then cite cases and authorities (C).

This is different to the orthodox IRAC method taught in law school - (I)ssues, (R)ule, (A)nalyisis, (C)onclusion - where the reader must wade through much text before the conclusion is revealed.

A simplified example is:

(C) No duty is chargeable on the transfer of 8 Station Street dated 30 June 2014 from Mr Jones (as apparent purchaser) to Mr and Mrs Smyth (the real purchasers).

(R) No duty is chargeable on the transfer of dutiable property from an apparent purchaser to the real purchaser where the dutiable property was vested in the apparent purchaser on trust for the real purchaser who provided the money for the purchase of the dutiable property.36

(A) On 1 July 2010, Mr Jones acquired 8 Station Street as bare trustee. Mr and Mrs Smyth provided the deposit37 and financed the balance of the purchase price.38 Mr and Mrs Jones made all loan repayments.39 The parents of Mrs Smyth guaranteed the loan.40 The title to 8 Station Street has remained unchanged.41 On 30 June 2014, Mr Jones transferred 8 Station Street to Mr and Mrs Smyth as equal tenants-in-common.42

(C) The real purchaser must acquire the property as bare trustee.43 A bare resulting trust arises where a person or persons purchases property with the proceeds of another or others without presumption of advancement.44 The real purchaser must provide all the purchase money.45 The provision of a guarantee by the

36 Sec. 34(1)(b) DA 2000 (VIC).

37 Refer to bank statement dated 1 July 2010.

38 Refer Loan Deed dated 1 July 2010.

39 Refer to band statements 1 July 2010 to 30 June 2014.

40 Refer to guarantee of Mrs Smyth’s parents.

41 Refer certificate of title CT Vol. 123456 Fol. 789.

42 Refer transfer of title dated 30 June 2014.

43 Apostolou v CSR (Vic) [2008] VCAT 310.

44 Calverley v Green (1984) 155 CLR 242 at 246-247; Lim v CSR (VIC)

[2012] VCAT 1469.

45 Shergold v CSR (Vic) [2006] VCAT 694; Berkers v CSR (Vic) [2004]

VCAT 2022.

Page 11

parents of Mrs Smyth is not any form of disqualifying collateral consideration.46 The title to 8 Station Street47 has remained unchanged.48 The transfer must be to all of the real purchasers.49 The transfer described the consideration as ‘an entitlement in equity’.50

The CRAC method directs the reader by stating the conclusion first, avoids lengthy quotations and emphasises the taxpayer's position rather than the revenue office's position.

I dislike the IRAC method because of its unwieldy format. My preference is for the CRAC method over alternates51 as more appropriate for tax practice.

My tips and traps include:

The CRAC method is a very effective method of conveying arguments.

Each (C)onclusion can be copied to a Summary section on the overview of the matter. The direct repetition makes it easy for the reader to identify the detailed analysis that relates to the Summary. This approach avoids the Summary being inconsistent with or creating ambiguity because it is expressed differently to the detailed analysis.

Do not overuse quotations. Extensive slab quoting is laborious to read, contains irrelevant material and distracts from a focus on the propositions.

If a quote is used, extract …the essence of the quote …in no more than three sentences.

Quote the leading case and footnote no more than three supporting authorities with paragraph references to the relevant quotes that are analogous with the current matter or the current tribunal or court. If the issue assumes greater importance during the dispute, the additional supporting quotations are easy to find and rely upon.

Refer to the proposition in the authority in the body of the writing and footnote the reference. If the reference must be in the body of the writing, put it at the end of the sentence or paragraph.

Publishing the reference in the body of the writing forces the reader to skim the referencing and may result in the reader skimming the important propositions between referencing.

Unless the authority is central to the dispute, most authorities should be analysed in one sentence.

Referring to particular judges in the citation does not progress the argument and should be avoided, unless the reputation of the judge is being used persuasively in contrast to a

46 Amira v CSR (Vic) [2005] VCAT 228.

47 Refer certificate of title CT Vol. 123456 Fol. 789.

48 Refer certificate of title CT Vol. 123456 Fol. 789.

49 Gleeson v CSR (Vic) [2009] VSC 464.

50 Evidentiary Requirements Manual (VIC).

51 MIRAT (Material Facts, Issues, Rules, Application, Tentative

Conclusion), IDAR (Issues, Doctrine, Application, Result), CREAC

(Conclusion, Rules, Explanation, Application, Conclusion), TREACC

(Topic, Rule, Explanation, Analysis, Counterarguments, Conclusion),

CRuPAC (Conclusion, Rule, Proof, Analysis, Conclusion), IPAAC (Issue,

Principle, Authority, Application, Conclusion) and ILAC (Issue, Law,

Application, Conclusion) to identify a few.

Page 12

contrary opinion of another judge, commentator or revenue office administrative publication.

Compare the readability of:

(a) The CSR (VIC) failed to correctly apply the exemption in sec. 82(2) DA 2000 (VIC) by substituting a ‘no anomalous or abnormal’ test for the statutory ‘just and reasonable’ test.52

(b) The CSR (VIC) failed to correctly apply the exemption in sec. 82(2) DA 2000 (VIC) by substituting a ‘no anomalous or abnormal’ test for the statutory ‘just and reasonable’ test: Challenger Listed Investments Ltd v CSR (VIC) [2010] VSC 464; CSR (VIC) v STIC Australia P/L [2010] VSC 608.

(c) In Challenger Listed Investments Ltd v CSR (VIC) [2010] VSC 464 and CSR (VIC) v STIC Australia P/L [2010] VSC 608 the court held that the CSR (VIC) failed to correctly apply the exemption in sec. 82(2) DA 2000 (VIC) by substituting a ‘no anomalous or abnormal’ test for the statutory ‘just and reasonable’ test.

3 Example Advocacy Types

3.1 Introduction

Advisers will often deal with internal reviews and objections and penalty and interest submissions without the involvement of a tax barrister or tax controversy specialist.

Below I have referenced relevant publications to consider when dealing with internal reviews and objections and penalty and interest remissions. I have provided a short summary of these areas of law to provide context. I have concentrated on providing some comments on uncertainties and some style examples of my preferred approach.

3.2 Internal reviews and objections

The drafting approach for an internal review and an objection is essentially similar.

A method of drafting propounded by Pagone is to formulate the grounds and reasons by interweaving the statutory words with relevant facts in respect of each element of the claim that the assessment is excessive. Pagone advocates for specific rather than exhaustive and compendious grounds. 53

The grounds for the objection must be in writing and stated fully and in detail.54 In the ACT a fee is payable.55 The legislative review and objection procedure is the only method to challenge the assessment once validly made.56

52 Challenger Listed Investments Ltd v CSR (VIC) [2010] VSC 464; CSR

(VIC) v STIC Australia P/L [2010] VSC 608.

53 G.T. Pagone, Tax Effective Writing, ibid, Chapter 3.

54 sec. 101 TAA 1999 (ACT); sec. 87 TAA 1996 (NSW) Objection & External

Review Factsheet; sec. 110 TAA 2007 (NT) CG-GEN-003 (NT); sec. 65

TAA 2001 (QLD) TAA.1.6 (QLD); sec. 83 TAA 1996 (SA); sec. 80 TAA 1997

(TAS) Objections, reviews and appeals Guidelines (TAS); sec. 97 TAA

1997 (VIC); sec. 35 TAA 2003 (WA).

55 $67 GEN.005 (ACT).

56 Cuming Campbell Investments P/L v CSR (VIC) (1938) 60 CLR 741; CSR

(WA) v Bayswater Hire Cars P/L 89 ATC 5298; O’Sullivan & Ors v CSR

(QLD) (1984) 1 Qd R 212; Corfu Clothing Co P/L v CSR (SA) 88 ATC 4081.

Page 13

The grounds of objection should not be technically, narrowly or rigidly57 construed and any ambiguity is to be resolved in favour of the taxpayer.58 Vague or general grounds, such as the assessment is excessive or the assessed amount is not taxable,59 do not constitute a valid objection.

In the ACT, NSW, the NT, SA and WA any appeal is not limited to the grounds of the objection.60 In QLD, TAS, and VIC any appeal is limited to the grounds of the objection, unless otherwise ordered by the tribunal or court.61

DCTR Richards suggests objections should be simple and succinct and not drafted like court pleadings. While I agree, I consider there is a necessary degree of formality required in jurisdictions where the appeal is limited to the grounds of the objection. In these jurisdictions, the reframing of informally expressed objections into tribunal or court pleadings may raise issues of whether the grounds have altered requiring leave to amend the grounds of review or appeal. Accordingly, there is a tendency to include a compendious ground to preserve possible objection rights.

An objection must be lodged within 60 days of the assessment or decision62 or within any later period allowed.63 Refusal to permit a late lodgement period may be non-reviewable,64 the subject of an objection65 or be internally reviewable and subject to objection.66

Tax must be paid before commencing the internal review or objection unless deferred by the revenue authority.67 Tax may be recovered pending resolution of the internal review or objection.68

Arguably, the courts may review an administrative private ruling by the revenue office under the general law.69

My tips and traps include:

In QLD, TAS and VIC where any appeal is limited to the grounds of objection, the objection is the first step in the litigation process as it defines and potentially confines any legal proceedings. The quality and style of the objection should reflect that it is a fundamental part of legal proceedings.

Where appropriate, the objection should dispute the antecedent determination or decision that affects the amount of the assessment as alternatives to disputing the assessment (e.g. the entitlement to payroll tax registration).

57 AL Campbell & Co P/L v FCT (1951) 82 CLR 452 at 461.

58 HR Lancey Shipping Co P/L v FCT (1951) 9 ATD 267 at 268; D v CSR

(Qld) (1940) 6 ATD 25.

59 (1952) 3 TBRD Case C26.

60 sec. 108B TAA 1999 (ACT); sec. 100 TAA 1996 (NSW); sec. 125 TAA

2007 (NT); sec. 96 TAA 1996 (SA); sec. TAA 1997 (TAS); sec. TAA 1997

(VIC).

61 sec. 70 & 71 TAA 2001 (QLD); sec. 90 TAA 1997 (TAS); sec. 109 TAA

1997 (VIC); CSR (VIC) v Snowy Hydro Ltd [2012] VSCA 221; Harry One

P/L v CSR (VIC) [2007] VSC 13; [2007] VSCA 73.

62 sec. 102 TAA 1999 (ACT); sec. 89 TAA 1996 (NSW); sec. 110 TAA 2007

(NT); sec. 65 TAA 2001 (QLD); sec. 86 TAA 1996 (SA); sec. 82 TAA 1997

(TAS); sec. 99 TAA 1997 (VIC); sec. 36 TAA 2003 (WA).

63 sec. 103 TAA 1999 (ACT); sec. 90 TAA 1996 (NSW); sec. 111 TAA 2007

(NT); sec. 87 TAA 2001 (QLD); sec. 87 TAA 1996 (SA); sec. 83 TAA 1997

(TAS); sec. 100 TAA 1997 (VIC) TAA.004 (VIC); sec. 86 TAA 2003 (WA).

64 sec. 65 TAA 2001 (QLD); sec. 87 TAA 1996 (SA); sec. 83TAA 1997

(TAS); sec. 100 TAA 1997 (VIC).

65 sec. 40 TAA 2003 (WA).

66 sec.107 & Sch. 1.2 TAA 1999 (ACT).

67 sec. 69 TAA 2001 (QLD); sec. 93 TAA 1996 (SA).

68 sec. 105 TAA 1999 (ACT); sec. 94 TAA 1996 (NSW); sec. 128 TAA 2007

(NT); sec. 45 TAA 2001 (QLD); sec. 91 TAA 1996 (SA); sec. 87 TAA 1997

(TAS); sec. 104 TAA 1997 (VIC); sec. 33 TAA 2003 (WA).

69 Triantifilis v CSR (NSW) 95 ATC 4655; Suncoast Milk P/L v CSR (QLD)

96 ATC 4914.

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Specifying the remedy is important.

The typical remedy for a determination or decision objection is to set aside the determination or decision. The typical remedies for a discretion objection are to set aside the exercise of the discretion or to set aside the exercise of the discretion and re-exercise the discretion in a particular way.

The typical remedies for an assessment objection are to set aside the assessment, to reduce the amount of assessment to nil or to a greater extent than that allowed by the revenue office.

The Assessment is excessive or not in accordance with law (or both) because:

(a) The assessment was unauthorised and is invalid and of no effect as an assessment pursuant to sec. 8 TAA 1997 (VIC) and the assessment should be set aside:

Reasons

(i) Submissions on fraud and unauthorised returns: Kakavas v FCT [2011] AATA 48; PSLA 2008/11]

(ii) [Submissions on assessment being guesswork, self-protective over-estimate, known to be false or provision: R v DCSR (WA); Briggs [1986] FCA 387; Darrell Lea Chocolate Shops P/L v FCT [1996] FCA 1939)]

(iii) [Submission on sec. 127 TAA 1997 (VIC) conclusive evidence not applying: R v Hickman (1945) 70 CLR 598 at 615; FCT v Futuris Corporation Ltd [2008] HCA 32 at [105]; CSR (VIC) v Gas Ban P/L (in liq) [2011] VSCA 89]

(iv) [Submission on reassessment being after 5 year initial or deemed assessment period sec. 9 & sec. 17 TAA 1997 (VIC); FCT v Ryan [2000] HCA 4 at [69]; Austin Distributors P/L v FCT (1964) 13 ATD 429]

(v) [Submission on assessment is contrary to settled interpretation of the law not currently on appeal: Urban Consolidation and Development P/L v CSR (Vic) [2010] VSC 49; FCT v Indooroopilly Children Services [2007] FCAFC 16]

(vi) [Submission on applying a legal interpretation on reassessment inconsistent with the legal interpretation and practice applied by the Commissioner at the time of the liability: ISTP Nominees P/L v CSR (NSW) [2003] NSWSC 34; Bailey v FCT [1977] HCA 11]

(vii) [Submissions on grounds]

(b) The determination by the CSR (VIC) that [income trust distributions by Administration P/L as trustee of the Administration Discretionary Trust to the beneficiaries constituted taxable wages pursuant to sec. 11 PTA 2007 (Vic)] was erroneous in fact and at law and the CSR (VIC) should set aside the determination:

Reasons

Page 15

(i) [Submissions on PTA.016 (VIC); Payroll Tax Bulletin PTX 1/11 (VIC) Opportunity for voluntary disclosure on employers using discretionary trusts to avoid payroll tax]

(ii) [Submissions on sec. 3AC PTA 1971 (NSW); PT.60 (NSW); Payroll Tax Factsheet July 2007 - A harmonised payroll tax system for NSW and Victoria page 4, Creation P/L v FCT [ 2002] AATA 1121 & Yalos Engineering P/L v FCT [2010] AATA 408]

(iii) [Submissions on grounds]

(c) The decision by the CSR (VIC) [to make an assessment under the TAA 1997 (VIC) that Administration P/L pursuant to sec. 69C DA 2000 (VIC)] was erroneous in fact and at law and the CSR (VIC) should set aside the decision:

Reasons

(i) [Submissions as to scope of the scheme: Re Perpetual Trustee Company (Canberra) Ltd v CSR (ACT) [1995] ATCAAT 113]

(ii) [Submissions as to merely incidental purpose and effect of scheme]

(iii) [Submissions on Franmarine Services (WA) P/L v CSR (WA) 90 ATC 4207; FCT v Unit Trend Services P/L [2013] HCA 16]

(iv) [Submissions on FCT v AXA Asia Pacific Holdings Ltd [2010] FCAFC 134; FCT v Trail Bros Steel & Plastics P/L [2010] FCAFC 94; FCT v Futuris Corporation Ltd [2012] FCAFC 32, RCI P/L v FCT [2011] FCAFC 104, News Australia Holdings Ltd v FCT [2010] FCAFC 78]

(v) [Submissions on fiscal nullity: CSR (Vic) Ashwick (Vic) No 4 P/L [1987] VR 986]

(vi) [Submissions on sham: Burbury v CSR (TAS) [1971] Tas SR 81]

(vii) [Submissions on grounds]

(d) The refusal by the CSR (VIC) to exercise of the discretion to [exclude Medical Practice 1 P/L and Medical Practice 2 P/L as members of a group with Administration P/L pursuant to sec. 79 PTA 2007 (VIC)] was erroneous in fact and at law and the CSR (VIC) should set aside the exercise of the discretion and [exercise the discretion to exclude Medical Practice 1 P/L and Medical Practice 2 P/L as members of a group with Administration P/L]:

Reasons

(i) [Submission on PTA.017 Grouping of professional practices and administration businesses]

(ii) [Submission on Tasty Chicks P/L v CSR (NSW) [2011] HCA 41; The Muir Electrical Co P/L v CSR (VIC) [2001] VSCA 86; Conte Mechanical and Electrical Services P/L v CSR (VIC) [2011] VSC 104]

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(iii) [Submissions on Hurlome P/L v CSR (ACT) 91 ATC 2053; Federal Capital Press of Australia v CSR (ACT) 95 ATC 2007; CSR (WA) v Scotford Cameron & Middleton P/L 81 ATC 4576]

3.3 Penalty remission requests

The objective of a penalty remission request is to establish the taxable facts, the appropriate base penalty amount, the entitlement to a reduction for voluntary disclosure and to a discretionary remission by reference to the revenue office’s administrative practice.

The revenue offices impose the following base penalty amounts:70

State Beyond control

reasonable care

Late payment

Voluntary increasing by extent

of lateness

Involuntary increasing by extent

of lateness

No reasonable

care

No Reasonable care and no reasonable

excuse

Reckless Intentional disregard

Default assessment

ACT 0% 0% - - - 25% 50% - 75% -

NSW 0% 0% - - - 25% - - 75% -

NT 0%71 10% - - - 25% - - 75%72 -

QLD - - - - - 25%73 - 25%74 75% 75%

SA - 0%75 - - - 25% - - 75% -

TAS 0% 0% - - - 25% - - 75% -

VIC 0% 0% - - - 25% - - 75% -

WA 0%76 20% 0%-25% 5%-50% 100%

Unfortunately, some of the subtleties of the legislation have been lost in summarising the different culpability tests in a table. The table is a general comparative guide only.

The revenue office can increase the base penalty by 20% for culpable behaviour77 and reduce the base penalty by 80% for a voluntary disclosure made before an audit and 20% for a voluntary disclosure made during an audit.78

Care is required in drawing analogies with the Federal penalty legislation and authorities.

The State and Territory penalty regimes are approached on the basis that an automatic penalty is imposed in the event of a shortfall, with the possibility of an exemption if the taxpayer is able to satisfy the decision maker that the taxpayer and the taxpayer’s representatives took reasonable care etc. In contrast, under the Federal penalty regime, a penalty is not triggered until the decision maker is satisfied that there is both a shortfall and the level of culpability has been established.79

70 sec. 31 TAA 1999 (ACT); sec. 27 TAA 1996 (NSW); sec. 41 TAA 2007

(NT); sec. 58 TAA 2001 (QLD); sec. 31 TAA 1996 (SA); sec. 40 TAA 1997

(TAS); sec. 30 TAA 1997 (VIC); sec. 26 TAA 2003 (WA).

71 Must also have taken all reasonable steps to comply with the relevant

taxation law.

72 Increased to 95% if concealment.

73 TAA030.2.3 (QLD) administrative reduction.

74 TAA030.2.3 (QLD) administrative reduction.

75 Must also not be a deliberate tax default.

76 Reliance on WAOSR advice, 3rd party illegal activities or death or serious

illness: TAA.18.2 at [27].

77 sec. 34 TAA 1999 (ACT); sec. 30 TAA 1996 (NSW); sec. 41 TAA 2007

(NT); sec. 58 TAA 2001 (QLD); sec. 31 TAA 1996 (SA); sec. 42 TAA 1997

(TAS); sec. 32 TAA 1997 (VIC); sec. TAA 2003 (WA).

78 sec. 32 & 33 TAA 1999 (ACT); sec. 28 & 29 TAA 1996 (NSW); sec. 41

TAA 2007 (NT); TAA060.2.3 (QLD); sec. 31 TAA 1996 (SA); sec. 41 TAA

1997 (TAS); sec. 31 TAA 1997 (VIC).

79 Reeders v FCT [2001] AATA 933 at [16]; Hart v FCT [2003] FCAFC 105

at [44].

Page 17

The structure of a State and Territory penalty submission should arguably be structured differently to a Federal penalty submission, because it concentrates on remission rather than establishing a base penalty due to culpability.

The legislation provides grounds for a reduction in penalty if the preconditions are satisfied. The revenue office is also generally empowered to remit penalties.80

The factors to be considered in establishing the penalty and the entitlement to reduction or remission differ significantly between jurisdictions. However, the drafting approach addressing the relevant criteria for the jurisdiction can be consistently applied.

(a) The decision by the CSR (VIC) to not reduce the penalty tax to nil because the default occurred soley because of circumstances behond the control of the taxpayer (or a person acting on behalf of the taxpayer) not amounting to financial incapacity81 was erroneous in fact and at law and the CSR (VIC) should set aside the decision and re-exercise the decision to reduce the penalty tax to nil.

Reasons

(i) The default occurred soley because of circumstances beyond the control of the taxpayer.82

(A) [The delays were due to industrial action or natural disasters]

(B) [The default occurred due to fire, flood or other natural disasters]

(C) [The default occurred due to the unavailability of key personnel due to sudden resignation, ill health or death]

(D) [The default occurred due to computer system breakdown including 3rd party systems]

(E) [The default occurred due to a change to taxation laws resulting from the court decisions [NAME]]

(F) [The taxpayer took reasonable steps to avoid or mitigate default]

(G) [Submission on grounds]

(H) [Submissions on comparative case law treatment]

(ii) The default occurred solely because of circumstances beyond the control of a person acting on behalf of the taxpayer.

(A) [The delays were due to industrial action or natural disasters]

(B) [The default occurred due to fire, flood or other natural disasters]

80 sec. 37 TAA 1999 (ACT) GEN.006 (ACT); sec. 30 TAA 1996 (NSW); sec.

44 TAA 2007 (NT) CG-GEN-002 (NT); sec. 60 TAA 2001 (QLD)

TAA060.2.3 (QLD); sec. 34 TAA 1996 (SA); sec. 45 TAA 1997 (TAS) PUB-

GEN-2011-1 (TAS); sec. 35 TAA 1997 (VIC) TAA.007 & PTA.036 (VIC);

sec. 29 TAA 2003 (WA) TAA.18.2, TAA.19.1 & TAA.20.2 (WA).

81 Sec. 30(3)(b) TAA 1997 (VIC).

82 TAA.007 (VIC) at pg. 5.

Page 18

(C) [The default occurred due to the unavailability of key personnel due to sudden resignation, ill health or death]

(D) [The default occurred due to computer system breakdown including 3rd party systems]

(E) [The default occurred due to a change to taxation laws resulting from the court decisions [NAME]]

(F) [The person acting on behalf of the taxpayer took reasonable steps to avoid or mitigate the default]

(G) [There were no reasonable steps the taxpayer could have taken to avoid or mitigate the default by the person acting on behalf of the taxpayer]

(H) [Submissions on this ground]

(I) [Submissions on comparative case law treatment]

(b) The decision by the CSR (VIC) to not reduce the penalty tax to nil because the taxpayer (or a person acting on behalf of the taxpayer) has taken reasonable care was erroneous in fact and at law and the CSR (VIC) should set aside the decision and re-exercise the decision to reduce the penalty tax to nil:

(i) The taxpayer has taken reasonable care having regard to the taxpayer’s particular circumstances:83

Reasons

(A) The reasonable care test requires the taxpayer to exercise the care of a reasonable person in fulfilling the tax obligation and to make the reasonable attempts of the reasonable person to comply with the taxation law84 but does not connote the highest possible level of care or perfection.85

(B) [The taxpayer has kept complete and accurate records]86

(C) [The taxpayer has made diligent efforts to understand and comply with the relevant laws]

(D) [The taxpayer has sought expert advice on these uncertain or complex tax matters87 and has disclosed the tax advice.88]

(E) [The taxpayer has been honest and prompt in dealing with the VSRO]

83 TAA.007 (VIC) at pg. 4.

84 Aurora Developments P/L v FCT (No. 2) [2011] FCA 1090 [38]-[39].

85 Maloney v Cmmr Railways (NSW) (1978) (1978) 19 ALR 147 at 148.

86 Aurora Developments P/L v FCT (No 2) (2011) 196 FCR 457 at [38];

TAA.007 (VIC).

87 CSR (Vic) v Snowy Hydro Ltd [2012] VSCA 145 at [170] - [171];

Challenger Listed Investments Ltd v CSR (Vic) (2010) 80 ATR at [32].

88 Pharmos Nominees P/L v CSR (SA) [2012] SASC 24 at [80]; Dyda P/L v

CSR (SA) [2013] SASC 156 at [188].

Page 19

(F) [The taxpayer has exercised reasonable care having regard to the taxpayer’s knowledge of tax legislation and the information available on the tax issue particularly in respect of new legislation enacted for less than 12 months]89

(G) [The law relating to the default is complex]

(H) [The taxpayer’s limited commercial experience contributed to the misapplication of the tax law]90

(I) [The standard accounting and commercial practices in the taxpayer’s field or business contributed to the misapplication of the tax law]91

(J) [The taxpayer’s particular subjective circumstances, age, health, background, knowledge, education contributed to the misapplication of the tax law]

(K) [The default was due to an isolated, honest or unintended mistake having regard to the taxpayer’s compliance history]92

(L) [The taxpayer relied upon a revenue ruling from the CSR (VIC) in good faith or sought and relied upon assistance from the VSRO93 although there is no obligation to obtain a private ruling]94

(M) [The taxpayer has relied upon third party information and it was not known or reasonably expected to be wrong]95

(N) [Submissions on the relative size of the tax shortfall]

(O) [Submissions on this ground]

(P) [Submissions on comparative case law treatment]

(ii) The person acting on behalf of the taxpayer has taken reasonable care having regard to the person’s particular circumstances:96

Reasons

(A) The reasonable care test requires the person acting on behalf of the taxpayer to exercise the care of a reasonable person with specialist or expert skills and knowledge in fulfilling the tax obligation and to make the reasonable attempts of the reasonable person with those specialist or expert skills and knowledge to comply with the taxation law.97

89 TAA.007 (VIC) pg. 4(a).

90 TAA.007 (VIC) pg. 4 (d).

91 TAA.007 (VIC) pg. 4 (d).

92 TAA.007 (VIC) pg. 4 (f)

93 The Smith Snackfood Company Ltd v CSR (NSW) [2012] NSWSC 998

at [96] - [100]; TAA.007 (VIC) pg. 4 (a).

94 MLC Ltd v FCT [2002] FCA 1491 at [53]; North Ryde RSL Community

Club v FCT [2002] FCAFC 74; TAA.007 (VIC) pg. 4 (a).

95 Walker v Hungerfords (1987) 49 SASR 93.

96 TAA.007 (VIC) at pg. 5.

97 Arnett v FCT (1998) 98 ATC 2137; Case 1/2002 [2002] AATA 291.

Page 20

(B) [The taxpayer has provided the person with proper records and instructions to permit the person to discharge the obligations to take reasonable care]98

(C) [The person has exercised reasonable care having regard to the field of practice, level of expertise, size, resourcing, degree of specialisation and client base of the person’s practice]99

(D) [The person has relied upon third party information and it was not known or reasonably expected to be wrong]100

(E) [Submissions on this ground]

(F) [Submissions on comparative case law treatment]

(c) The decision by the CSR (VIC) to increase the penalty tax to 75% because the default was caused wholly or partly by the intentional disregard by the taxpayer (or a person acting on behalf of the taxpayer) of a taxation law 101 was erroneous in fact and at law and the CSR (VIC) should set aside the decision:

(i) The tax default was not caused wholly or partly by the intentional disregard by the taxpayer of a taxation law:

Reasons

(A) The intentional disregard test requires a deliberate act or omission which cases the default. The actual subjective intent of the person is the critical consideration. The person must understand the effect of the relevant legislation and how it operates in respect of the person’s affairs and make a deliberate choice to ignore the law.102

(B) [The CSR (VIC) has not asserted and the taxpayer has not undertaken tax avoidance or evasion activities]

(C) [The taxpayer has not knowingly made false or misleading statements or records or omitted or concealed relevant facts or records]

(D) [The taxpayer has not ignored a private ruling103 or well established principle of tax law]

(E) [The taxpayer has not repeated defaults on the same or closely related matters]

(F) [The taxpayer has not knowingly failed to notify the CSR (VIC) in accordance with statutory requirements]

98 Sparks v FCT [2000] AATA 28.

99 Hart v FCT [2002] FCA 1559 at [26]; BRK (Bris) P/L v FCT [2001] FCA

164 at [77].

100 Walker v Hungerfords (1987) 49 SASR 93.

101 TAA.007 (VIC) at pg. 5.

102 Price Street professional Centre P/L v FCT [2007] FCA 345 at [43].

103 cf: North Ryde RSL Community Club v FCT [2002] FCAFC 74.

Page 21

(G) [Submissions on this ground]

(H) [Submissions on comparative case law treatment]

(ii) The tax default was not caused wholly or partly by the intentional disregard by the person acting on behalf of the taxpayer of a taxation law:

Reasons

(A) The intentional disregard test requires a deliberate act or omission which cases the default. The actual subjective intent of the person is the critical consideration. The person must understand the effect of the relevant legislation and how it operates in respect of the person’s affairs and make a deliberate choice to ignore the law.104

(B) [The CSR (VIC) has not asserted and the person has not undertaken tax avoidance or evasion activities]

(C) [The person has not knowingly made false or misleading statements or records or omitted or concealed relevant facts or records]

(D) [The person has not ignored a private ruling105 or well established principle of tax law]

(E) [The person has not repeated defaults on the same or closely related matters]

(F) [The person has not knowingly failed to notify the CSR (VIC) in accordance with statutory requirements]

(G) [Submissions on this ground]

(H) [Submissions on comparative case law treatment]

(d) The decision by the CSR (VIC) not to reduce the penalty tax pursuant to sec. 31 TAA 1997 (VIC) for voluntary disclosure was erroneous in facts and at law and the CSR (VIC) should set aside the exercise of the discretion and re-exercise the discretion to reduce the penalty tax by [80% or 20%]:

(i) [The taxpayer made a voluntary disclosure before an audit commenced so any penalty should be remitted by 80%]

(ii) [The Taxpayer made a voluntary disclosure after an audit commenced so any penalty should remitted by 20%]

(iii) [Submissions on this ground]

(iv) [Submissions on comparative case law treatment]

104 Weyers v FCT [2006] FCA 818 at [168]. 105 cf: North Ryde RSL Community Club v FCT [2002] FCAFC 74.

Page 22

(e) The decision by the CSR (VIC) to increase the penalty tax pursuant to sec. 32 TAA 1997 (VIC) for concealment was erroneous in facts and at law and the CSR (VIC) should set aside the exercise of the discretion:

(i) [The taxpayer did not deliberately damage or destroy records required to be kept under the taxation law relevant to the investigation]

(ii) [The Taxpayer did not without reasonable excuse refuse or fail to comply with or hinder a revenue officer under any Div. 2, Pt 9 investigation requirements]

(iii) [Submissions on this ground]

(iv) [Submissions on comparative case law treatment]

(f) The exercise of the discretion by the CSR (VIC) not to remit the penalty tax pursuant to sec. 35 TAA 1997 (VIC) in the circumstances was erroneous in facts and at law and the CSR (VIC) should set aside the exercise of the discretion and re-exercise the discretion to remit the penalty tax in whole or to a greater extent:

(i) [The taxpayer has voluntarily corrected the default]

(ii) [The VSRO contributed to the error or omission in the assessment]

(iii) [The law relating to the default is complex]

(iv) [The taxpayer is unsophisticated and has limited commercial experience]

(v) [The taxpayer otherwise has a good compliance history]

(vi) [Submission on Johnston v FCT [2011] AATA 20; Fardell v FCT [2011] AATA 725]

(vii) The premium rate of interest (or both) should be remitted to nil or to a greater extent because the imposition of premium interest does not achieve the purpose of encouraging compliance with the law and deterring non-compliance]

(viii) [Submissions on this ground]

(ix) [Submissions on comparative case law treatment]

3.4 Interest remission requests

The objective of an interest remission submission is to establish the taxable facts and the entitlement to a total reduction or partial remission by reference to the revenue office’s administrative practice.

Interest consists of a market rate and a fixed 8% premium rate.106

106 sec. 26 TAA 1999 (ACT); sec. 22 TAA 1996 (NSW); sec. 35 TAA 2007

(NT); sec. 26 TAA 1996 (SA); sec. 35 TAA 1997 (TAS); sec. 25 TAA 1997

(VIC); sec. TAA 2003 (WA).

Page 23

The market rate reimburses the revenue for the costs incurred for late payment of tax. The premium rate penalises late payment and deters non-compliance and using the revenue as a financier. The different objectives affect the grounds and rationale for reductions and remissions.107

The revenue office is empowered to remit interest.108 The ACT, the NT, QLD, and TAS restrict remissions of the market rate component to circumstances which are exceptional or justify remission.109 Remission of interest is a Commissioner reviewable or non-reviewable decision.110

(a) The CSR (VIC) should remit the market rate of interest to nil in respect of the default pursuant to sec. 28 TAA 1997 (VIC):

Reasons

(i) [The market rate of interest should be remitted to nil for the period of delay by the CSR (VIC) exceeding the 90 days published [objection] processing service standard]111

(ii) [The market rate of interest should be remitted to nil because of reliance by the taxpayer on a published general administrative practice of the CSR (VIC) which was followed in good faith and has been shown subsequently to be incorrect]112

(b) The CSR (VIC) should remit the premium rate of interest to nil in respect of the default pursuant to sec. 28 TAA 1997 (VIC):

Reasons

(i) [The premium rate of interest should be remitted to nil in the circumstances the CSR (VIC) has remitted the market rate of interest]113

(ii) [The premium rate of interest should be remitted to nil in the circumstances the CSR (VIC) has imposed penalty tax on the default]114

(c) The CSR (VIC) should remit the premium rate of interest to a greater extent in respect of the default pursuant to sec. 28 TAA 1997 (VIC):

Reasons

(i) [The premium rate of interest should be remitted to a greater extent in the circumstances because the taxpayer (or a person acting on behalf of the taxpayer) has taken reasonable care to comply with the taxation laws]115

107 GEN-009 (ACT); CG-GEN-002 (NT); TAA060.1.5 (QLD); sec. TAA 1996

(SA); PUB-GEN-2011-1; PTA036 (TAS); TAA.007 (VIC); sec. TAA 2003

(WA).

108 sec. 29 TAA 1999 (ACT); sec. 25 TAA 1996 (NSW); sec. 28 TAA 2007

(NT); sec. 60 TAA 2001 (QLD); sec. 29 TAA 1996 (SA); sec. 38 TAA 1997

(TAS); sec. 28 TAA 1997 (VIC) TAA.007 (VIC); sec. TAA 2003 (WA).

109 sec. 29 TAA 1999 (ACT); sec. 38 TAA 2007 (NT); TAA060.1.5 (QLD);

PUB-GEN-2001-1 (TAS); sec. TAA 2003 (WA).

110 sec. 29 TAA 1999 (ACT); sec. 29 TAA 2001 (QLD); sec. 29 TAA 1996

(SA); sec. TAA 2003 (WA).

111 TAA.007 (VIC) at pg. 9

112 TAA.007 (VIC) at pg. 9

113 TAA.007 (VIC) at pg. 9

114 TAA.007 (VIC) at pg. 9

115 TAA.007 (VIC) at pg. 9

Page 24

(ii) [The premium rate of interest should be remitted to a greater extent in the circumstances because the default occurred solely because of circumstances beyond the control of the taxpayer (or a person acting on behalf of the taxpayer)]

(iii) [The premium rate of interest should be remitted to a greater extent because the imposition of premium interest does not achieve the purpose of encouraging compliance with the law and deterring non-compliance]

(d) The CSR (VIC) should remit the market rate or the premium rate of interest (or both) to a greater extent in respect of the default pursuant to sec. 28 TAA 1997 (VIC):

Reasons

(i) [The market rate or the premium rate of interest (or both) should be remitted to nil or to a greater extent because of reliance on [Case Name] which was followed in good faith and resulted in the default]

(ii) [The market rate or the premium rate of interest (or both) should be remitted to nil or to a greater extent because of a retrospective change in legislation by [Legislation Name]]

(iii) [The market rate or the premium rate of interest (or both) should be remitted to nil or to a greater extent because of a change in circumstances of the taxpayer that was not known or could not have been known after lodgement of an otherwise correct return resulted in the default]

(iv) [The market rate or the premium rate of interest (or both) should be remitted to nil or to a greater extent because the complexity of the underlying issues involved in determining the default has caused delay]

(v) [The market rate or the premium rate of interest (or both) should be remitted to nil or to a greater extent because the taxpayer made a voluntary disclosure]

(vi) [The market rate or the premium rate of interest (or both) should be remitted to nil or to a greater extent in accordance with the specific remission incentive for [Payroll Tax Bulletin PTX 1/11 (VIC) Opportunity for voluntary disclosure on employers using discretionary trusts to avoid payroll tax]]

(vii) [The market rate or the premium rate of interest (or both) should be remitted to nil or to a greater extent because the taxpayer otherwise has a good compliance history]

(viii) [The market rate or the premium rate of interest (or both) should be remitted to nil or to a greater extent to ensure revenue neutrality because

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the taxpayer incorrectly paid the relevant tax in [Jurisdiction] before the due date]116

(ix) [Submissions on RVO Enterprises P/L v CSR (NSW) [2004] NSWADT 64 t [29]]

(x) [Submissions on relevant grounds]

4 Conclusion

With all good written advocacy, the objective is to ensure the writing is expressed clearly, concisely and persuasively.

Effective written advocacy is arguably an art and a subjective preference for style.

Applying a consistent methodology within the tax advocacy team will improve efficiencies and quality of written advocacy. Again, the selection of drafting methodology is a subjective preference for style.

More effective written advocacy should improve the persuasiveness of the client’s case and the prospects of achieving the desired result.

Any spelling and grammar errors in the paper evidence my continued illiteracy.

And, thank you Michael Woolford for your sage advice.

Copyright: ©2014 Rigby Cooke Lawyers Liability limited by a scheme approved under Professional Standards Legislation. This publication contains comments of a general nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional advice. No responsibility can be accepted by Rigby Cooke Lawyers or the authors for loss occasioned to any person doing anything as a result of any material in this publication.

116 PTA.036 (VIC) at pg. 3.

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5 Glossary

ACTRO Australian Capital Territory Revenue Office

ATO Australian Taxation Office

CA 2001 Corporations Act 2001

DA 2000 (VIC) the Duties Act 2000 (VIC)

LTA 2005 (VIC) the Land Tax Act 2005 (VIC)

NSWOSR New South Wales Office of State Revenue

NTRO Northern Territory Revenue Office

PTA 1971 (NSW) Payroll Tax Act 1971 (NSW)

PTA 2007 (VIC) Payroll Tax Act 2007 (VIC)

QLDOSR Queensland Office of State Revenue

SA Revenue Revenue SA

TAA 1953 Taxation Administration Act 1953 (CTH)

TAA 1996 (NSW) Taxation Administration Act 1999 (NSW)

TAA 1996 (SA) Taxation Administration Act 1996 (SA)

TAA 1997 (TAS) Taxation Administration Act 1997 (TAS)

TAA 1997 (VIC) Taxation Administration Act 1997 (VIC)

TAA 1999 (ACT) Taxation Administration Act 1999 (ACT)

TAA 2001 (QLD) Taxation Administration Act 2001 (QLD)

TAA 2003 (WA) Taxation Administration Act 2003 (WA)

TAA 2007 (NT) Taxation Administration Act 2007 (NT)

TASSRO Tasmanian State Revenue Office

VSRO Victorian State Revenue Office

WAOSR Western Australia Office of State Revenue