In Stojic v Deputy Commissioner of Taxation [2018] FCA 483 the Federal Court rejected an application to review a decision of the Commissioner of Taxation (Commissioner) to decline to exercise his discretion under section 255-15(1) of Schedule 1 to the Taxation Administration Act 1953 (Act) to permit the Taxpayer to pay a tax-related liability by instalments. 

In Stojic v Deputy Commissioner of Taxation [2018] FCA 483 the Federal Court rejected an application to review a decision of the Commissioner of Taxation (Commissioner) to decline to exercise his discretion under section 255-15(1) of Schedule 1 to the Taxation Administration Act 1953 (Act) to permit the Taxpayer to pay a tax-related liability by instalments. 

The Taxpayer was the sole director and secretary of a company (Company) since its registration. Following an audit of the Company’s activity statements, the Commissioner commenced enforcement action against the Company to secure payment of outstanding tax liabilities. The Commissioner entered into a payment arrangement with the Company in April 2016, which the Company defaulted on.

In addition to its enforcement action against the Company, the Commissioner sought to recover the Company’s taxrelated liabilities from the Taxpayer and commenced enforcement proceedings against the Taxpayer. While these were afoot, the Taxpayer proposed two payment arrangements for the payment of the liabilities. Both of these were rejected by the Commissioner.

The Taxpayer brought this application on the following three grounds: a denial of procedural fairness, the taking into account of an irrelevant consideration and the rigid adherence to a policy. For the reasons below, the Court held against the Taxpayer on all three grounds. 

Denial of procedural fairness 

In deciding to reject the proposed payment arrangement, the Commissioner took into account the fact that no security was offered by the Taxpayer but did not inform the Taxpayer that this was to be a relevant consideration. The Taxpayer contended that this constituted a breach of the rules of natural justice. The Court held that the Commissioner was entitled to take this matter into consideration in making his decision and had no obligation as a matter of procedural fairness to inform the Taxpayer that this would be a relevant factor.

The Court also noted that the Commissioner, in refusing to accept a proposed payment arrangement, stated ‘We are unable to consider another payment plan offer and can only consider full payment’. The Court held that this statement is incorrect and should not have been made, but did not mislead the Taxpayer. The Court noted that if the statement had caused the Taxpayer to incorrectly believe that he was unable to make further proposed payment arrangements, the Commissioner may have breached its obligation of procedural fairness.

Taking into account an irrelevant consideration 

In rejecting the Taxpayer’s proposed payment arrangements, the Commissioner took into account the compliance history of the Company with its payment arrangement. 

The Court held that the Commissioner may take into account any factor which he believes might bear on whether an instalment arrangement should be accepted and that this could include the compliance history of the Company. In making this decision, the Court noted that an individual’s capacity to pay may be affected by the financial position of a company they run their business through.

Rigid adherence to policy

The Taxpayer argued that the Commissioner failed to give ‘proper and genuine’ regard to the merits of the proposed payment arrangement. He claimed that the Commissioner had refused to agree to the arrangement due to an incorrect belief that he was bound to do so because the Taxpayer had not proffered a ‘preferred security’. 

The Court found that the Commissioner had not taken this view but if he had, such a view would be incorrect. The Court held that the Commissioner had simply sought to convey that the proposed arrangement may have been acceptable if security had been offered.