Since the establishment of the Administrative Appeals Tribunal in the 1970s, merits review in Australian law has had some consistent features. One has been that the merits review tribunal will stand “in the shoes” of the decision maker whose decision is under review. Namely, it has the power to exercise all the powers and discretions of that decision maker. The power also applies to the Administrative Review Tribunal, which replaced the Administrative Appeals Tribunal in 2024.
However, in taxation law, the merits review tribunal is limited in its capacity to consider new grounds of objection and corresponding evidence not raised before the original decision maker. While this might appear inconsistent with the modern expectation that a merits review tribunal will stand “in the shoes” of an underlying decision maker, the incongruity is not as significant as it may appear.
The objection limitation
The Taxation Administration Act 1953 provides a taxpayer with the right to object to a tax decision by appealing to the Federal Court of Australia, or by requesting a review at the Administrative Review Tribunal. The process for pursuing an objection is set out in Part IVC. It is also the subject of a rulinga r issued by the Commissioner of Taxation in 2011.
Section 14ZZK of the Taxation Administration Act 1953 sets out the objection limitation, which says:
[o]n an application for review of a reviewable objection decision:
(a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates
The history of the objection limitation
In one sense, it is generally presumed that when there is no clear statutory indication to the contrary, a merits review tribunal stands “in the shoes” of the decision maker whose decision it reviews. The objection limitation is thus simply an expression by Parliament of an intention to depart from that presumption.
On another view, the objection limitation stands in tension with the notion that a merits review tribunal stands “in the shoes” of the underlying decision maker.
However, section 14ZZK should not be understood as having been legislated in the face of that modern understanding. It remains in substance the same objection limitation as was legislated in the early years of the Commonwealth taxation system, when the Commonwealth Parliament inserted into the Income Tax Assessment Act 1915 text providing that a taxpayer “shall be limited on the hearing of his appeal to the grounds stated in his objection”. No secondary materials explain the provenance of the original objection limitation.
In 1934, the Royal Commission on Taxation defended the objection limitation:
930. The taxpayer is conversant with the whole of the facts. The Commissioner on the other hand is dependent on the taxpayer to supply him with these facts. We are assured that every facility is given to the taxpayer to discuss his case with the Commissioner before the time specified for lodging a notice of objection. It is then open to the taxpayer to discuss with the representatives of the Department any new aspects of the case or facts that may have come to his notice, and, in that event, the Department may settle the objection, without recourse to the Court. If the taxpayer neglects to avail himself of these opportunities, we think it is not unreasonable that he should be limited to the grounds stated in his objection. [Emphasis in original]
Notwithstanding this endorsement, the objection limitation was criticised in the 1961 Ligertwood Review, which said that “in some cases [it] may cause injustice” for a taxpayer to be “bound for all time by the grounds of his objection”.
In 1975, the Asprey Review said it was “highly unsatisfactory and unfair to the taxpayer” that no new ground of review could be raised.
The objection limitation was maintained when the responsibilities of Boards of Review were transferred to the Administrative Appeals Tribunal, with one relevant significant change: the limitation was made subject to contrary order. This followed a recommendation of the Administrative Review Council, which noted “[c]onsiderable criticism” of the objection limitation.
The objection limitation is, thus, a holdover from the early years of Australia’s federal income tax system, not a modern legislative change aimed at limiting merits review rights.
The objection limitation in operation
Even as the objection limitation has persisted as a feature of Australian taxation law, its effect has been softened.
For decades, it has been recognised that adherence to technical legal form is not a prerequisite for making an effective objection. The Taxation Ruling 2011/5 has confirmed that no legal technicality in drafting is required.
The objection limitation has been softened by vesting the discretion to consider grounds of review not previously raised. The Full Federal Court has confirmed that this power to waive the objection limitation, and to permit additional grounds of objection to be raised on merits review, is broad.
Beyond this, there is, of course, nothing to stop a taxpayer bringing before the Administrative Review Tribunal new evidence in support of grounds of objection which were raised with the Commissioner. In this respect the tribunal indeed stands ‘in the shoes’ of the Commissioner: it can consider such evidence.
Is the objection limitation justified?
At the time of the passage of the original objection limitation, the Income Tax Assessment Act 1915 was less than 30 pages long. The Income Tax Assessment Acts now total more than 7,500 pages between them. There has also been a proliferation of other tax legislation over the decades.
Insofar as the justification for the objection limitation rested on the fact that a taxpayer was “conversant with the whole of the facts”, this might have overtaken by the overwhelming complexity of tax law.
While the objection limitation has been softened since it was first legislated, it is not difficult to imagine circumstances where it might do administrative injustice. Complex and consequential questions are commonly the subject of merits review. The establishment of the Administrative Review Tribunal provides an occasion for consideration of whether the objection limitation remains justified.
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