The Commissioner of Taxation (Commissioner) has power pursuant to section 255-15(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA) to permit a taxpayer to pay off its tax debts by instalments in accordance with a payment arrangement. The recent Federal Court decision of Stojic v Deputy Commissioner of Taxation  FCA 483 (Stojic), which dismissed an application by the sole director and shareholder of the taxpayer company to review a decision by the Commissioner to decline to exercise that power, provides two important lessons.
Firstly, when negotiating a payment arrangement, it is important to propose an arrangement that can reasonably be met by the taxpayer. The applicant in Stojic had negotiated an earlier payment arrangement on behalf of the taxpayer company which had been accepted by the Commissioner. However, after payment of the first instalment, the taxpayer company did not make any further payments thereby breaching the terms of the arrangement agreed to.
If the terms of the earlier payment arrangement had been negotiated differently, and the company had successfully met its obligations under this arrangement, it would not have been subject to further enforcement action to recover the outstanding tax-related liability by the Commissioner nor been forced to attempt to negotiate a new payment plan in a lengthy dispute with the Commissioner.
The usual pathway for a taxpayer dissatisfied with an assessment, determination or decision made, or notice given, by the Commissioner is the objection, review, and appeal process under Part IVC of the TAA. The second lesson from Stojic is that it demonstrates the difficulty experienced by taxpayers in successfully objecting, reviewing, or appealing a decision by the Commissioner other than under Part IVC of the TAA.
The provisions of Part IVC only apply if a provision of the Tax Acts allows a person to object in the manner set out in Part IVC. Section 255-15(1)of the TAA is not one of those provisions. As the taxpayer could not review the decision under Part IVC of the TAA, the applicant unsuccessfully sought judicial review under the Administrative Decisions (Judicial Review) Act 1977.
Once a taxpayer defaults on a payment arrangement, its options are limited when it comes to negotiating a new arrangement. This is because an unfavourable decision by the Commissioner cannot be objected to under Part IVC of the TAA. Stojic demonstrates that when it comes to negotiating a payment arrangement, it is better to under promise and over deliver.
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