Looking at the recent case Rosgoe Pty Ltd v Commissioner of Taxation (2015) reveals more minute details about the process of appealing to the commissioner. We also see the importance of ensuring that all information is accurate when supplied to the Commissioner of taxation.
Case outline
The ‘property’ in this case is the two properties (both neighbouring each other) purchased by Rosgoe Pty Ltd (Rosgoe). Rosgoe purchased this with intentions of selling the property through a joint venture.
Ultimately, Rosgoe sold this property at a profit after unsuccessful attempts to secure funding and failure to negotiate a joint venture with Indigo (another large property developer). In pursuit of a private ruling regarding proceeds of sale, Rosgoe applied for a private ruling to the Commissioner of taxation who mentioned that the property may not be used as trading stock as Rosgoe had only listed it as a capital asset. This lead Rosgoe to appeal to the Administrative Appeals Tribunal (AAT). The AAT were in agreeance with the commissioner’s decision but contrasted the commissioner’s finding by stating that Rosgoe was undertaking a business of property development as there was always intention of development and profit-making from the beginning.
Case Outcomes:
Rosgoe then appealed to the Federal court who outlined the following (Austlii.edu.au):
- The AAT acted outside its jurisdiction by suggesting that the taxpayer had conducted a business of property development, as this was not a fact identified by the ruling;
- The AAT made a further alternative finding of fact in stating that in any case the taxpayer had a profit-making purpose ‘from the outset’;
- The AAT did not have jurisdiction to ‘remedy’ fact-finding deficiencies;
On the facts set out in the ruling, the profit was not ordinary income as it was not part of the taxpayer’s profit-making scheme; and the taxpayer’s appeal was competent because it specified at least one question of law that invoked the Court’s jurisdiction, being whether the AAT was permitted to make the findings of fact it did.
Furthermore, an interesting thing to note is that the taxpayer’s (Rosgoe) appeal was found competent as it raised questions of whether the AAT was authorised to conduct such findings of the fact as it did. Nevertheless, the Federal Court set aside the AAT’s decision as they believed that the AAT should have first and foremost held the Commissioner’s ruling was in error (consistent with their findings of Rosgoe as a property developer).
The taxpayer was successful in the final appeal. This occurred because the Commissioner is bound by the facts that are presented to him originally. This was made evident, as the commissioner mentioned to Rosgoe that “you were unable to secure funding and decided to abandon your intention to carry on a development business and develop the Property. Nowhere in your description of the “arrangement” does the Commissioner record that Rosgoe carried on a business”. Consequently, the ATT could not/cannot travel beyond these facts or make findings of the facts.
The case provides as a perfect example as to why thorough and precise facts must be provided in appeals to the Commissioner. The outcomes of the case are an interesting way to understand the role that the Commissioner of taxation plays in law making processes.
For any queries of questions about taxation you can get in touch with the Fortis Accounting Partners team on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
