FEDERAL COURT OF AUSTRALIA Aurora Developments Pty Ltd v Commissioner of Taxation (No. 2) [2011] FCA 1090 Citation: Aurora Developments Pty Ltd v Commissioner of Taxation (No. 2) [2011] FCA 1090 Parties: AURORA DEVELOPMENTS PTY LTD v COMMISSIONER OF TAXATION File number(s): QUD 252 of 2008 Judge: GREENWOOD J Date of judgment: 23 September 2011 Catchwords: TAXATION – consideration of challenges by the applicant to the imposition of an administrative penalty by the respondent under the provisions of the Taxation Administration Act 1953 (Cth) – consideration of whether the taxpayer and its agents have demonstrated that they took reasonable care in formulating a Business Activity Statement for the month ending 31 July 2004 – consideration of s 284-75 and s 284-215(2) of Schedule 1 to the Taxation Administration Act 1953 (Cth) – consideration of whether the power conferred upon the Commissioner to make an assessment of penalty is a power which falls within s 33(3) of the Acts Interpretation Act 1901 (Cth) Legislation: Taxation Administration Act 1953 (Cth), ss 284-10, 284-15, 284-25, 284-75, 284-75(1), 284-80, 284-85, 284-90, 284-215(2), 298-10, 298-15, 298-30, of Schedule 1 Acts Interpretation Act 1901 (Cth), s 33(3) Cases cited: Aurora Developments Pty Ltd v Commissioner of Taxation [2011] FCA 232 – cited and quoted Kajewski v Federal Commissioner of Taxation [2003] FCA 258; (2003) 52 ATR 455 - cited North Ryde RSL v Commissioner of Taxation [2002] FCA 313; (2002) 121 FCR 1 – cited MLC Ltd v Commissioner of Taxation [2002] FCA 1491; (2002) 126 FCR 37 – cited Aurora Developments Pty Ltd v Commissioner of Taxation [2011] FCA 244 – cited and quoted Flaherty v Secretary, Department of Health and Ageing and Others [2010] FCAFC 67; (2010) 184 FCR 564 – cited R v Ng (2002) 5 VR 257 - cited Azevedo v Secretary Department of Primary Industries and Energy [1992] FCA 106; (1992) 35 FCR 284 - cited Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd (1979) 41 FLR 338 - cited Heslehurst v Government of New Zealand [2002] FCA 429; (2002) 117 FCR 104 - cited Re Brian Lawlor Automotive Pty Ltd and Collector of Customs (NSW) (1978) 1 ALD 167 – cited Date of hearing: 24 September 2009, 25 September 2009, 6 October 2009 and 7 October 2009 Date of last submissions: 4 April 2011 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 120 Counsel for the Applicant: Mr P Bickford and Mr I Erskine Solicitor for the Applicant: Q5, Mr M Quinn Counsel for the Respondent: Mr B O'Donnell QC and Ms M Brennan Solicitor for the Respondent: McInnes Wilson Lawyers IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 252 of 2008 BETWEEN: AURORA DEVELOPMENTS PTY LTD Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: GREENWOOD J DATE OF ORDER: 23 SEPTEMBER 2011 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The application is dismissed. 2. The respondent is directed to submit draft forms of order within seven days for further consideration by the Court. 3. Having regard to the terms of the Test Case Funding Deed, there be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 252 of 2008 BETWEEN: AURORA DEVELOPMENTS PTY LTD Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: GREENWOOD J DATE: 23 SEPTEMBER 2011 PLACE: BRISBANE REASONS FOR JUDGMENT Background 1 On 7 November 2006, the respondent issued a Notice of Assessment to the applicant of an administrative penalty of $708,008.10 in respect of contended tax shortfalls caused by contended false or misleading statements with respect to particular acquisitions, the sale of units described as the "Portofino Units" and the omission from the relevant Business Activity Statement of Goods and Services Tax payable on the transaction the subject of the proceedings in matter QUD 251 of 2008 (the "principal proceeding") which was the subject of the judgment in Aurora Developments Pty Ltd v Commissioner of Taxation [2011] FCA 232; (2011) 192 FCR 519 ("Aurora Developments v Commissioner of Taxation"). 2 The respondent (the "Commissioner") provided reasons for the decision to impose an administrative penalty upon the applicant, on 15 November 2006: see JEA-3 (Notice of Assessment dated 7 November 2006, Exhibit A, Document 23) and JEA-4 (Reasons for Decisions dated 15 November 2006, Exhibit A, Document 24) to the affidavit of John Edward Atkinson filed 18 August 2009 (Exhibit A, Document 20). 3 The applicant ("Aurora") filed a Notice of Objection to the Commissioner's assessment (Exhibit A, Document 66). 4 On 20 June 2008, the Commissioner issued an objection decision by which the Commissioner partly allowed Aurora's objection with the result that the administrative penalty was reduced by $126,090.85. 5 Between 20 June 2008 and the trial of this action which was heard together with the principal proceeding the parties engaged in negotiations and a mediation process with the result that all administrative penalty issues were resolved but for the question of whether the Commissioner had properly imposed a penalty of 25% of a tax shortfall for the tax period 1 July 2004 to 31 July 2004. The tax shortfall was said to arise out of a taxable supply constituted by the sale by Aurora of particular lands to Australand Land and Housing No. 5 (Hope Island) Pty Ltd, Australand Land and Housing No. 7 (Hope Island) Pty Ltd and Australand Land and Housing No. 8 (Hope Island) Pty Ltd (all described as "Australand"). Each of these entities is related to a company called Australand Limited. 6 These reasons in this proceeding concern Aurora's appeal from the Commissioner's appealable objection decision on penalty and are to be read together with the reasons for judgment in Aurora Developments v Commissioner of Taxation. 7 Aurora appeals to the Federal Court in respect of the Commissioner's appealable objection decision pursuant to s 14ZZ(c) of the Taxation Administration Act 1953 (Cth) (the "Act"). In such proceedings, Aurora has the burden of proving that the assessment is excessive: s 14ZZO. The penalty scheme 8 The administrative penalty scheme is contained in Division 284 of Schedule 1 to the Act. Schedule 1 is given the force of law by s 3AA(1) of the Act and an expression in Schedule 1 has the same meaning as that expression bears in the Income Tax Assessment Act 1997 (Cth) (the "1997 Act"): s 3AA(2) of the Act. 9 The Commissioner assessed Aurora to an administrative penalty under s 284-75(1) of Schedule 1 to the Act (all further references to sections of Schedule 1 will omit any reference to Schedule 1 itself). That section provides, relevantly, that Aurora is liable to an administrative penalty if it or its agent makes a statement to the Commissioner (or to an entity that is exercising powers or performing functions under a taxation law); the statement is false or misleading in a material particular whether because of things in it or omitted from it; and, Aurora has a shortfall amount as a result of the statement. 10 The Commissioner determined that Aurora had made a statement to the Commissioner by way of its Business Activity Statements lodged for the tax periods 1 May 2002 to 30 June 2002; 1 December 2002 to 31 December 2002; and, 1 July 2004 to 31 August 2004. Only the last of those periods remains relevant to these proceedings. The Commissioner further determined that the Business Activity Statements were false or misleading within the meaning of s 284-75(1)(b) because Aurora had failed to declare a taxable supply in those statements for the above periods and the statements were false or misleading in a material particular because the statements affected the net amount of tax payable thus giving rise to a "shortfall amount". The Commissioner then determined the contended "shortfall amount" arising as a result of the materially misleading Business Activity Statements. 11 Section 284-80(1) provides, relevantly, that Aurora has a shortfall amount if an item in the table within that subsection applies to it. The shortfall amount is the amount by which the relevant liability (or the payment or credit) is less than or more than it would otherwise have been. Item 1 in the table provides, relevantly, that Aurora has a shortfall amount if its tax-related liability for an accounting period (in this case, 1 July 2004 to 31 July 2004) is less than it would be if the statement (contained within the Business Activity Statement whether by admission or omission) were not false or misleading. 12 The amount of the penalty to be imposed is to be worked out in accordance with s 284-85 which starts out with an amount constituting the "base penalty amount" calculated in accordance with s 284-90. The base penalty amount takes account of the characterisation of the conduct of the taxpayer and does so by reference to various items in the table set out in s 284-90(1). For example, if the shortfall amount or part of it results from intentional disregard of a taxation law by the taxpayer or its agent, the amount of the base penalty is 75% of the shortfall amount. If the shortfall amount (or part of it) results from recklessness, the base penalty amount is 50%. Relevantly in this case, Item 3 provides that if the shortfall amount or part of it results from a failure by Aurora or its agent "to take reasonable care to comply with a taxation law", the amount of the base penalty is 25% of Aurora's shortfall amount. 13 The Commissioner contends that Aurora's Business Activity Statement for the period 1 July 2004 to 31 July 2004 was false or misleading because it failed to disclose a taxable supply attracting a liability to tax by reason of the operation of A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the "GST Act") arising out of the sale of Aurora's land to Australand. Had that taxable supply been properly disclosed a tax liability would have arisen and the tax shortfall by reason of non-disclosure constituted $2,151,851.00. 14 The base penalty in respect of that tax shortfall calculated at 25% pursuant to Item 3 of s 284-90(1) is $537,962.75. 15 That is the amount that is now in issue in these proceedings. 16 A "statement" is "… a statement made orally, in a document or in any other way (including electronically) for a purpose connected with a taxation law": s 284-20. Division 284 also applies to a statement made in an approved form by the taxpayer's agent as if it had been made by the taxpayer: s 284-25. Both the Act and the GST Act fall within the definition of a "taxation law": s 995-1 of the 1997 Act. A Business Activity Statement is clearly a "statement" (and a document) made for a purpose connected with a taxation law. 17 Section 284-75 is, in part, in these terms: SECTION 284-75 LIABILITY TO PENALTY 284-75(1) You are liable to an administrative penalty if: (a) you or your agent makes a statement to the Commissioner or to an entity that is exercising powers or performing functions under a taxation law; and (b) the statement is false or misleading in a material particular, whether because of things in it or omitted from it; and (c) you have a shortfall amount as a result of the statement 284-75(2) You are liable to an administrative penalty if: (a) you or your agent makes a statement to the Commissioner or to an entity that is exercising powers or performing functions under an income tax law; and (b) in the statement, you or your agent treated an income tax law as applying to a matter or identical matters in a particular way that was not reasonably arguable; and (c) you have a shortfall amount as a result of the statement; and (d) items 4, 5 or 6 of the table in subsection 284-90(1) applies to you. [emphasis added] 18 The relevant subsection within s 284-75 for the purposes of these proceedings is s 284-75(1). That subsection is concerned with materially false or misleading statements made to the Commissioner in respect of a taxation law within the meaning of s 995-1(1) of the 1997 Act. Section 284-75(2) is concerned with the making of statements to the Commissioner by the taxpayer or its agent concerning the application of an income tax law in a particular way that is "not reasonably arguable" (subject to the conjunction of the other integers). 19 The question to be determined in these proceedings is whether, for the purposes of s 284-75(1), the taxpayer can demonstrate that s 284-215(2) is engaged having regard to whether the taxpayer and its agents took reasonable care in making the relevant statement. 20 Aurora completed its July Business Activity Statement on the footing that the sale of the Aurora lands to Australand was a GST-free supply for the purposes of s 9-30, Division 38 and s 38-325 of the GST Act. In the principal judgment, the Court found that Aurora made a taxable supply for the purposes of s 9-5 of the GST Act and that the supply was not GST-free. 21 Accordingly, the taxable supply gave rise to a tax liability and a tax shortfall of $2,151,851.00. 22 The liability to an administrative penalty arising under s 284-75(1) in the circumstances earlier mentioned is subject to, relevantly, an exception contained in s 284-215(2). That subsection provides that for the purposes of determining whether Aurora is liable to an administrative penalty, Aurora does not have a shortfall amount as a result of a statement that is false or misleading in a material particular to the extent that Aurora and its agent (if any) "took reasonable care in making the statement". It follows that if Aurora and its agents took reasonable care in the formulation of the Business Activity Statement for the period 1 July 2004 to 31 July 2004, no shortfall amount arises (at least for the purposes of calculating an administrative penalty) upon which an Item 3 base penalty amount can be calculated and thus there is no penalty at 25% of the shortfall amount which otherwise arises. 23 The central question then is did Aurora and its agents take reasonable care in making or formulating the Business Activity Statement for the period 1 July 2004 to 31 July 2004 recognising that the settlement of the transaction for the sale of the Aurora lands to Australand took place on 2 July 2004. The grounds of challenge 24 In these proceedings Aurora challenges the Commissioner's objection decision on three grounds. First, the penalty assessment is void on the footing that it was made in excess of jurisdiction because the Commissioner failed to have express regard to s 284-215(2) of the Act which operates as a pre-condition to the exercise of the assessment power, and the Commissioner failed to take into account a relevant consideration, namely, the operation of s 284-215(2). 25 Secondly, the penalty assessment is incorrect. 26 Thirdly, because the penalty was incorrect, in part at least, having regard to the concessions made by the Commissioner arising out of the objection process and the concessions made in the mediation, the Commissioner was required to set aside the assessment in its entirety as there is no power to partly amend the penalty assessment. 27 As to the first ground, it should be noted immediately that Aurora abandoned any notion of jurisdictional error by its submissions in reply of 5 October 2009 at [5] (on the footing of any contended jurisdictional pre-condition) and in the course of oral submissions, counsel for Aurora conceded, that nor could the contention of a failure to have regard to s 284-215(2) be pressed, having regard to the Commissioner's reasons: T 293, lns 5 to 11. 28 Plainly enough, in considering and ultimately determining the quantum of Aurora's base penalty amount for the purposes of s 284-90 of the Act, the Commissioner extensively had regard to the question of whether Aurora and its agents took reasonable care in making the relevant Business Activity Statement. The Commissioner considered, on the facts before him, that reasonable care had not been made out by Aurora. Although Aurora contended that it had enlisted the services of professional advisers when interpreting what it described as a complex area of taxation law relating to the "going concern" provisions of the GST Act, the Commissioner observed that "no evidence of the advice [had] been provided" and further observed that "… the Tax Office has not been provided with any third party advice and/or instructions provided to that party. It is therefore not possible to determine the nature and relevance of the advice that you have relied upon". The Commissioner concluded that by Aurora "… failing to satisfactorily demonstrate that you sought to resolve this issue", Aurora had not exercised reasonable care in the preparation of the Business Activity Statement for the month ended 31 July 2004. 29 The second ground of appeal contains two notions. The first is that there is no tax shortfall because the sale of the lands by Aurora to Australand involved the supply of a going concern to Australand for the purposes of s 38-325 of the GST Act and thus the supply was GST-free. The second notion is that even if the supply is not GST free, the penalty assessment is incorrect because, for the purposes of determining a liability to an administrative penalty, no shortfall amount arises as Aurora and its agents took reasonable care in making the Business Activity Statement. 30 As to the first notion, the supply was a taxable supply and was not GST-free. 31 As to the second, the real question then is whether Aurora and its agents took reasonable care in making the Business Activity Statement for the month ended 31 July 2004. 32 A consideration of that question in these proceedings engages some of the principles identified by Drummond J in Kajewski v Federal Commissioner of Taxation [2003] FCA 258; (2003) 52 ATR 455 at [5] to [15]. The questions alive on the appeal having regard to this ground involve both questions of fact and law; the scope of the appeal is properly described as "wide"; the taxpayer bears the burden of proving that the assessment is excessive and that the decision under challenge should not have been made or should have been made differently; and, an appeal under s 14ZZ(c) bears some of the characteristics of an appeal by way of a hearing de novo in that the taxpayer has an extensive, though not unqualified, right to put additional evidence before the Court. 33 In reaching his decision about whether Aurora and its agents had taken reasonable care, the Commissioner had regard to para 67 of Practice Statement Law Administration PS LA 2006/2 (PS LA 2006/2) which provides: If an entity is uncertain about the tax treatment of an item, reasonable care requires the entity to make reasonable enquiries to resolve the issue. Reasonable enquiries would generally include consulting a tax agent, contacting the Tax Office or consulting a Tax Office publication or other authoritative reference in an effort to satisfy the entity about the appropriate tax treatment of the item. However, a failure to provide adequate information when seeking advice, a failure to provide reasonable instructions to a tax advisor, or unreasonable reliance on a tax advisor or on wrong advice may still expose the entity to a penalty for lack of reasonable care. 34 At [33] of its submissions, Aurora says this: [Aurora] took care to engage legal and accounting advisors in relation to its GST affairs. That amounts to taking reasonable care to comply with its taxation obligations within s 284-90 and Schedule 1 of the [Act] and reasonable care in making taxation statements to the ATO within s 284-215(2) in Schedule 1 to the [Act]. 35 The Commissioner at [16] of his submissions says this: The reasonable care test is objective taking into account the taxpayer's and agent's personal circumstances. The test requires a taxpayer and its agent to take the care that a reasonable, ordinary person would take in all the circumstances of the taxpayer, to fulfil the taxpayer's tax obligations. The taxpayer's or agent's knowledge, experience, education and skill are relevant circumstances. So too are the magnitude of the risk and the gravity of its consequences. 36 The Commissioner's submissions at [16] are broadly consistent with the position adopted by the Commissioner in his reasons of 20 June 2008 in support of the objection decision at p 18 (Exhibit A, Document 67 at p 1598) adopting what were then elements of para 27 of Draft Miscellaneous Tax Ruling MT2008/D1 (MT2008/D1) which, in turn, was broadly consistent with observations contained in the Revised Explanatory Memorandum to A New Tax System (Tax Administration) Bill (No. 2) 2000 (Cth) (the "2000 Bill") at para 1.69. The reasonable care test 37 Division 284 was introduced into Schedule 1 of the Act by operation of s 4 and Schedule 1, Item 2 of A New Tax System (Tax Administration) Act (No. 2) 2000 (Cth) (Act 91 of 2000) ("the 2000 Act"). The Revised Explanatory Memorandum to the 2000 Bill contains these observations at para 1.67 to 1.79 which, in expanded form, reflect the elements of the Commissioner's submission as to the proper approach to a reasonable care test and the notion of reasonable care: 1.67 The reasonable care test requires a taxpayer to exercise the care that a reasonable person would be likely to have exercised in the circumstances of the taxpayer to fulfil the taxpayer's tax obligations. Taxpayers must take reasonable care not only in the preparation of their tax returns, but throughout the year on matters that may impact on their tax obligations, for example, record keeping. A shortfall amount may be caused not only by the taxpayer being careless in making (or not making) taxation statements, but also by careless acts or omissions of the taxpayer which lie behind the statements that are (or are not) made. Whether a taxpayer has behaved reasonably will depend on all the facts of each case. 1.68 The test looks to whether a person, in all the circumstances of the taxpayer, would have foreseen as a reasonable probability or likelihood the prospect that the act or failure to act would result in a shortfall amount. It is not a question of whether the taxpayer actually foresaw the probable impact of the act or failure to act, but whether a person in the same circumstances of the taxpayer would have foreseen it. The test does not depend on the actual intentions of the taxpayer. 1.69 Reasonable care requires a taxpayer to make a reasonable attempt to comply with the provisions of a taxation law. The effort required is one commensurate with all the taxpayer's circumstances, including the taxpayer's knowledge, education, experience and skill. 1.70 The reasonable care test is not intended to be overly onerous for taxpayers. For most taxpayers, an earnest effort to follow TaxPack instructions would usually be sufficient to pass the test. For example, if a taxpayer made a claim for a deduction without being able to substantiate the deduction in accordance with the substantiation provisions, then this would tend to indicate that the taxpayer had not taken reasonable care about the claim, since TaxPack emphasises the requirement to be able to substantiate work-related expenses. 1.71 On the other hand, if the taxpayer who could not meet the substantiation requirements was able to show that he or she did not know and could not reasonably be expected to have known of the substantiation requirements, and had in fact incurred the relevant expenditure which would be deductible but for the substantiation requirement, the taxpayer would not be liable for penalty. Whether penalty is attracted will depend on the circumstances of the case. 1.72 For business taxpayers, reasonable care would require the putting into place of an appropriate record-keeping system and other procedures to ensure that the income and expenditure of the business is properly recorded and classified for tax purposes. The fact that an employee of the business makes a careless error would not necessarily mean that the business taxpayer is subject to penalty. For example, a penalty would not apply where the taxpayer can show that its procedures are designed to prevent such errors from occurring. What is reasonable will depend, among other things, on the nature and size of the business, but could include, for example, internal audits, sample checks of claims made, adequate training of accounting staff and instruction manuals for staff. What is reasonable care? 1.73 On questions of interpretation, reasonable care requires a taxpayer to come to conclusions that would be reasonable for an ordinary person to come to in the circumstances of the taxpayer. If the taxpayer is uncertain about the correct treatment of a tax-related matter, reasonable care requires that taxpayer to make reasonable enquiries to resolve the issue. Reasonable enquiry would include the taxpayer consulting someone or some text like an ATO publication or other reference in an effort to satisfy the taxpayer about the proper tax treatment of the matter. The taxpayer would need to have reasonable grounds for believing the source consulted reflected the true tax position in respect of the matter. A mere reading of a provision of the relevant tax law which the taxpayer believed to be relevant might not constitute reasonable enquiry unless the taxpayer had reasonable grounds for believing that he or she had understood the requirements of the law. For example, a wrong interpretation of a statutory provision that is clear and unambiguous would tend to suggest that the taxpayer did not exercise reasonable care. The ultimate consideration would be the honest efforts of the taxpayer, as displayed by the actions of the taxpayer in the context of the taxpayer's circumstances, to ascertain the proper tax position. 1.74 The taking of a position with respect to a tax matter that is frivolous, or which lacks a reasonable basis, would be a strong indication of a lack of reasonable care. 1.75 A taxpayer who prepares his or her own return or BAS would usually be taken to have exercised reasonable care if in doing so the taxpayer relies upon the advice of a registered tax agent, accountant or lawyer or other person whom the taxpayer could reasonably expect to provide competent advice on the relevant matter. On the other hand, where such advice is not followed this would usually mean that the taxpayer did not exercise reasonable care. 1.76 If a taxpayer seeks to rely upon the wrong advice, and the taxpayer's skill and education was such that the taxpayer could reasonably be expected to have known or suspected that the advice was wrong, the taxpayer would risk penalty. A taxpayer would also risk penalty if the taxpayer was careless in presenting all of the relevant facts to the adviser and this had materially affected the advice on which the taxpayer sought to rely. 1.77 Where a taxpayer uses a registered tax agent or other person to help prepare and lodge a BAS or tax return, the taxpayer will be vicariously liable for any penalties caused by the agent providing information that results in a shortfall amount. This includes the tax agent not taking reasonable care. The standard expected of a tax agent will be much higher than the standard expected of the client. 1.78 A taxpayer who relies upon the advice from a third party of a fact that is material to the preparation of the taxpayer's return (e.g. a bank providing a statement of the amount of interest earned by the taxpayer) will not usually be liable for penalty if the advice is wrong, as taxpayers are ordinarily entitled to rely on such advice. However, if the taxpayer knew, or could reasonably be expected to have known or suspected that the advice was wrong, the taxpayer would risk penalty. For example, a group company may not have exercised reasonable care in claiming a deduction for a group loss transferred to it, if the company could reasonably be expected to have known or suspected (e.g. because of common management and control of the transferor and transferee companies) that the deduction giving rise to the loss was not properly allowable to the transferor company. 1.79 Arithmetic errors may indicate a failure to take reasonable care but are not conclusive. For business taxpayers, as indicated above, it would depend on the procedures in place to detect such errors. In other cases it may depend on the size, nature and frequency of error, or the circumstances of the taxpayer making the error, for example, if the taxpayer was under extreme stress at the time of preparing the return. 38 It follows as a matter of principle that the reasonable care test calls upon a taxpayer to exercise the care that a reasonable person would be likely to have exercised in the circumstances of the taxpayer in fulfilling the taxpayer's tax obligations. The test looks to whether such a person would have foreseen, as a reasonable probability or reasonable likelihood, the prospect that the action or step or the failure to act or take an affirmative step would result in a shortfall amount and in determining that question, a relevant factual enquiry is whether the taxpayer made the reasonable attempts a person in the position of the taxpayer ought to have taken so as to comply with the provisions of a taxation law. At para 1.75 of the Explanatory Memorandum, the observation is made that a taxpayer who prepares his or her own Business Activity Statement would usually be taken to have exercised reasonable care if the taxpayer relies upon the advice of an accountant or lawyer (or both) whom the taxpayer could reasonably expect to provide competent advice on the relevant matter in issue. 39 At para 1.76, the observation is made that a taxpayer would be at risk of a penalty if the taxpayer was careless (that is to say, did not act reasonably) in presenting all of the relevant facts to an adviser and such a failure materially affected the advice upon which the taxpayer sought to rely. Some further considerations 40 Although the facts of every case vary (and especially so in relation to factual questions of what may or may not be reasonable care in all of the contextual circumstances), two observations from the authorities might usefully be noted. First, in North Ryde RSL v Commissioner of Taxation [2002] FCA 313; (2002) 121 FCR 1, the Full Court (Spender, Finn and Merkel JJ) observed at [82] that save for the failure of the taxpayer to apply for a private ruling (which was found not to be the expression of a failure to take reasonable care) the Administrative Appeals Tribunal did not identify any other step that the taxpayer ought to have taken but did not take or any step it did take that it ought not to have taken. Therefore, one question to be answered in determining whether the taxpayer and its advisers took reasonable care is whether, on the facts, there are steps that the taxpayer ought to have taken but did not take or steps that it did take that it ought not to have taken. 41 Secondly, in MLC Ltd v Commissioner of Taxation [2002] FCA 1491; (2002) 126 FCR 37, Hill J in adopting observations in North Ryde RSL v Commissioner of Taxation, also observed at [53] that the taxpayer through its accountants had made an enquiry about the relevant matter in issue and had been told that the view it adopted (a view found to have been taken in good faith and highly arguable) was correct and such a view was a view held generally in the insurance industry. Hill J observed at [53] that "… a taxpayer who relies upon expert advice as here where the advice is held generally in the industry and does not conflict with any statement made by the Commissioner … is not required to obtain a ruling to guard against an allegation that the taxpayer has not exercised due care". 42 Although MLC Ltd v Commissioner of Taxation is, in the observation quoted, directed to the role that seeking or not seeking a ruling might play in determining whether the taxpayer has exercised due care, the election by the taxpayer to adopt a position in good faith based upon enquiries made within the relevant industry by the taxpayer's accountants, suggested that the taxpayer had exercised reasonable care in taking the view it took of the relevant matter. 43 The question of whether the provisions of the legislation are complex; whether complexity, in part, arises out of the difficulty of the application of an historical body of fact to those provisions; and, the arguability of the position adopted by the taxpayer in relation to those matters are, themselves, matters which remain relevant to the question of whether the taxpayer and its advisers acted reasonably in taking the steps they took or perhaps in failing to take steps they ought to have taken. A synopsis of the findings made in the principal judgment 44 In the principal judgment the following findings were made. 45 Aurora's development of its land began as a multi-faceted residential and care facility described as a retirement community development and changed through various phases as described at [221]. The content and characteristics of Aurora's "Adult Community" project were described by Mr Adamson in his evidence at [93] to [100] and were the subject of findings at [222]. 46 In or about the middle of 2003 and by the end of July 2003 Aurora withdrew from the Adult Community Development Project. Aurora (and Atmeygor, Sickle and AGG) withdrew in the sense that none of those companies proposed to continue with the project. Aurora cancelled all of the many sales contracts but for two of them (approximately 190 sales) and negotiated termination arrangements with respect to those two contracts. Aurora ceased all construction works. It removed existing construction works and all services to the apartment and house sites. All boardwalk supports were removed. Marketing ceased: [226] (and the findings made at [226] concerning the matters at [119], [125], [126], [129], [130] and [132]). 47 Australand required the construction works and infrastructure services to the apartment and house sites to be removed. The removal steps so required were not otherwise occurring. The removal of construction work and services was required as an aspect of Australand's acquisition under the purchase contract with Aurora of 2 October 2003. Australand made it plain that it did not want to take up the sales contracts and had no use for them. The sales contracts were cancelled either at Australand's request or because Australand did not want them: [227] and [228]. 48 Items (i), (viii), (ix) and (x) of Annexure C to the contract (given force by Special Condition 6.1) gave effect to the arrangement with Australand for the removal of construction work and infrastructure services as earlier discussed: [240]. 49 Although Australand also proposed to conduct a residential property development project on Aurora's land, it was a fundamentally different residential development that did not require any access to or use of the architectural plans for the structures the subject of the sales to the end users or access to the drawings for the structures to be built over the life of the many stages of the project: [254] and [95]. 50 By the date of the contract (2 October 2003), Aurora was no longer engaged in the development of the land according to the "Development Material", as that term is defined in the contract with Australand: [261]. 51 On 8 May 2003 shortly after Mr Claxton's Position Paper (described at [104] to [106]), all work on the Aurora land was suspended for a period of 30 days: [107]. Mr Gore, a Director of Aurora, had been contacted slightly earlier by agents for Mirvac Limited ("Mirvac") with a view to discussing the possible purchase by Mirvac of the Aurora lands together with adjoining land controlled by companies related to Aurora. Mirvac's proposal was unacceptable to Mr Gore and Mr Atkinson and the matter lapsed: [107] and [108]. 52 On 21 July 2003, Aurora, Atmeygor, Sickle and AGG entered into an Exclusivity Deed (Exhibit A, Document 12) with Australand under the terms of which Australand proposed to "investigate the economic feasibility of developing property" [112]. On 27 August 2003, Australand made an offer to purchase the collection of properties for $90M subject to the completion of due diligence to Australand's satisfaction by 25 September 2003 [113]. Australand's contract with Aurora provided for the acquisition of Aurora's lands for a consideration of $28,201,261.18: [10]. 53 In the period between 8 May 2003 and July 2003, Aurora elected to withdraw from its development project for the land; Aurora closed down the project and notified the purchasers of termination; and, took the steps described at [114]. The construction of the apartment buildings and houses set out on Plan C annexed to the primary judgment did not continue and the construction of services for those buildings such as sewerage, stormwater and electrical services all ceased. Mr Atkinson accepted that he had become aware that Australand was not interested in taking on the off-the-plan contracts that Aurora had made on the site: [115]. Australand wanted the Aurora Sales Office removed from the site and building construction undertaken to that date removed so as to put the land back to where it was before the work had been done. Aurora accepted in submissions that the removal of all existing building slabs and associated construction material; the removal of existing sewer, water, electrical and gas services; the removal of the sales office; and, the removal of all boardwalk supports, was not work required to be performed as part of the Aurora Adult Community Project Development Permits: [119]. 54 Settlement of Aurora's purchase occurred on 2 July 2004. 55 Although I have isolated a number of the material findings from the principal judgment, the entirety of the principal judgment is to be read in conjunction with these reasons as already mentioned. The engagement by Aurora of legal and accounting advisers in relation to the application of the going concern provisions of the GST Act 56 In the context of these findings of fact, Aurora says that in making its Business Activity Statement for the month ended 31 July 2004 it took care to engage legal and accounting advisers in relation to its GST affairs and in doing so it took reasonable care to comply with its taxation obligations for the purposes of Division 284 of the Act. 57 The documents relied upon by Aurora to make that contention good are these. 58 On 1 May 2003, chartered accountants and business advisers called PKF gave written advice to the lawyers acting for Aurora, Professional Edge Legal ("PEL") in relation to the possible sale of the Aurora lands (and the lands of the Sickle, Atmeygor and AGG entities) to Mirvac and a company called Jadalyn Pty Ltd concerning the "… potential application of the GST-free going concern provisions of the [GST Act] on the proposed sale of the relevant Sale Lots … to Mirvac" (Exhibit A, Document 21). The buyers are jointly called Mirvac in the letter of advice. 59 In that letter, the person described as "the writer, Mark Dixon" sets out the instructions given by Ms Frances Julius of PEL to PKF which include these matters; all sale lots will be acquired by Mirvac for future residential development; although Mirvac is ready to proceed to contract, Mirvac is keen to delay settlement until at least a further 18 months; in the intervening period, up to settlement, [Aurora] will continue development works either pursuant to existing Development and/or Operational Works Approvals, or in accordance with new approvals to be obtained from the Gold Coast City Council; notwithstanding any potential change in approvals relating to the site, the development works to be completed or underway, at settlement, would not be significantly different from that currently forecasted (as at 1 May 2003) should works continue in accordance with pre-existing approvals; the development proposed by Mirvac and that currently undertaken by [Aurora] is comparable in size and in terms of its expected duration and accordingly the fundamental civil works required, given the dynamics of the site, are the same [emphasis added]; the sale lots owned by Aurora have all been the subject of earthworks activity with building commencing on lot 138; and all contracts that have been entered into with potential buyers to date also relate only to these sale lots [emphasis added]. 60 In the Executive Summary, the author observes that provided the requirements for a going concern are satisfied, the sale of the sale lots held by Aurora (and Atmeygor) on which development activities are progressing could be supplied as GST-free going concerns. At p 384 of Document 21, PKF observes that having regard to the discussion set out in the letter of advice, PKF is confident that the activities expected to be prevalent on the sale lots held by Aurora (and Atmeygor and AGG) at the date of settlement of the sale contract would "at the very least amount to 'an adventure or concern in the nature of trade'" and in that respect, PKF notes that the land "although vacant [would] be in a partly developed state"; the development would proceed over a number of years by various stages; and "earthworks have been conducted on the Aurora-land and limited building activities have commenced on one of the lots (land marked as B3 on Annexure A)". 61 On the question of whether all things necessary for the continued operation of an enterprise might be transferred to Mirvac, PKF observes at p 386: Consequently, to the extent that [Aurora and the other landowner entities] supply to Mirvac all of the things necessary for the continued operation of an enterprise, the supplies collectively made under the relevant arrangements could be GST-free under the GST-free going concern provisions of the GST Act. In this respect, [Aurora and the other entities] could, in our view, transfer all relevant documentation, contracts, approvals, etc, relating to the development of their respective portions of land, along with the property, to Mirvac. This would enable Mirvac to carry on the development enterprises, if it so chooses. 62 Further at p 386, PKF observes that: "[f]rom the information provided, we understand that [Aurora and the other entities] will continue their respective identified enterprises of property development activities on the land until the day of the supply, ie settlement date" [emphasis added]. 63 The letter of advice attaches a plan identifying the various lands in question including, of course, the lands to be transferred by Aurora. 64 A proper reading of Document 21 demonstrates that PKF was asked to provide advice to the lawyers acting for Aurora on the question of whether the s 38-325 going concern provisions of the Act would have any application in the circumstances of the development being undertaken by Aurora, and to be undertaken by Aurora until the date of settlement with Mirvac, upon the footing that the enterprise comprising the development of the lands as identified in the letter would be transferred to Mirvac. 65 On 17 July 2003, PKF wrote a letter to Mr Adamson which referred to a discussion between Frances Julius of PEL and Mr Vorster of PKF regarding particular issues raised by Mr Claxton in his memorandum of 2 May 2003. In the PKF letter of 17 July 2003 (Exhibit A, Document 106) the author sets out a series of questions arising out of the Claxton memorandum, together with a response to those questions. One of the questions was whether the supplier of a going concern is required under the Act to carry on the same enterprise throughout the agreement to supply the going concern. The view expressed was that s 38-325 merely requires the supplier to supply all of the things that are necessary for the continued operation of any enterprise and not necessarily that enterprise which is being carried on by the supplier at the time of the supply. That view also raises the question of what is the relevant time of the supply. The advice further expresses the view that the enterprise contemplated for the purposes of s 38-325 is that which is identified by the two parties when the arrangement is entered into and it is this enterprise that is to be carried on by the supplier until the day of the supply. 66 The third question concerned whether the supply of a going concern might be jeopardised if earthworks are completed to a certain stage prior to settlement (as agreed between the parties), but no further construction takes place after the specified stage has been reached. In responding to that question, PKF had regard to Goods and Services Tax Ruling GSTR 2002/5, para 150. That ruling provides that a supplier is unable to supply all of the things that are necessary for the continued operation of an enterprise unless the relevant enterprise is not only being carried on but is also operating and where an enterprise engaged in an activity ceases to carry on that activity (and the assets are in the course of being sold off), the enterprise is being "carried on", but is "not operating". 67 Thus, PKF concluded that it would be prudent to ensure that earthworks were carried on until the day of the supply, "ie the date of settlement", although PKF suggested that it might be possible to argue that if the development activities ceased, the activities "remaining" might still constitute an enterprise "in operation". 68 The fourth question was whether a property developer can argue that although no work is physically in progress, the enterprise might still be "actually being conducted". In response, PKF observed that the relevant notion is whether the entity is "carrying on an enterprise" and not whether it might be regarded as "conducting an enterprise". PKF observed that, in its view, having regard to s 195 of the GST Act (concerning an inclusive definition of "carrying on an enterprise") although no work is physically in progress an enterprise might still be carried on during the commencement or termination of an enterprise. Some further observations were made about the obligations of the Commissioner in certain circumstances. 69 PKF then observed at p 2248 of Document 106 that: The requirement [in s 38-325(2)(a)] of the GST Act that all things necessary for the "… continued operation of an enterprise …" be transferred suggests that an enterprise must be in operation at the time of transfer for the purchaser in turn to be able to "continue" to operate the enterprise post the date of transfer. So although an enterprise could feasibly be carried on at the time of transfer (as discussed above), we do not believe that it could be transferred as a GST-free going concern pursuant to Section 38-325 if it did not also operate at that time. Consequently, if the query raised by Paul Claxton … refers to a situation where the enterprise is not being operated and the intention is to transfer the enterprise GST-free to a third party pursuant to Section 38-325 of the GST Act, then the property developer … would, in our view, not succeed. However, on the basis that "conducting" an enterprise equates to the technically defined term of "carrying on an enterprise" it is possible for a property developer to still be conducting an enterprise whilst the enterprise is in suspension for commercial reasons. [emphasis added] 70 At p 2250 of Document 106, a reference is made to questions h and i and to letters of advice given by PKF on 9 May 2003 and 6 June 2003. Those letters were not able to be produced by Aurora. 71 It can be seen from the letter of 17 July 2003 that PKF is addressing a number of contentious matters in relation to their professional view as to the notion of the characteristics of the enterprise to be supplied; the notion of the continued operation of any enterprise as compared with the enterprise carried on by the supplier at the time or day of supply; the notion of whether an enterprise is being carried on but not operating and what might constitute the elements of an enterprise "in operation"; and, the construction to be adopted in relation to s 38-325 in circumstances where an enterprise is "in suspension for commercial reasons". 72 On 11 September 2003, Mr Adamson sent a number of documents to Ms Julius and to PKF with a copy to Mr Claxton. The documents consisted of the draft contract for the sale of the Aurora lands; draft Special Conditions for the sale of the Aurora lands; a draft schedule of works; a plan of the Aurora lands being sold; a draft contract for the sale of the AGG land; draft Special Conditions for the sale of the AGG land; a draft schedule of works; a plan of the AGG lands being sold; and, a site plan of all landholdings being sold. Mr Adamson noted that instructions would be relayed to Ms Julius for the provision of urgent advice concerning the GST provisions of the Act. PKF was invited to discuss the issues with Ms Julius before embarking upon the completion of advice on the question. 73 The draft contract for sale of the Aurora land contained Special Conditions under the heading "Annexure 'A'" which described the "Development Material" in terms of all documentation prepared or compiled by or on behalf of the seller or obtained by it in relation to the development of the site and in particular, but without limiting the generality of the foregoing, the plans and engineering drawings; any reports, files and materials prepared on behalf of the seller; and any computer disks containing copies of plans or documents. Clause 4.2 of the Special Conditions defined the "Business" as the seller's enterprise of developing the land in accordance with the "Development Material" and by clause 4.3 the parties agreed that the supply under the arrangement involving the sale of the Business by the seller to Australand is a supply of a going concern for GST purposes. 74 By clause 4.3 the seller was bound to supply all things necessary to continue to operate the "Business" which, in turn, was defined in terms of developing the land in accordance with the "Development Material", which, engaged the general notion of development of the "Site" but also (without limitation of the generality) development according to the terms of all plans, engineering drawings, reports, files and materials prepared by or on behalf of the seller or obtained by it relating to the development of the site. 75 Clause 6.1 of Annexure A provides that the contract is subject to and conditional upon the seller completing the Annexure C works. Annexure C contemplates works, by clause (i), in these terms: "[d]emolish/remove existing sales office (excluding boardwalk)". Item (i) in the draft Special Conditions for Sale sent to PKF on 11 September 2003 is in the same terms as Item (i) in the Annexure C, Specification of Seller's Works, in the contract in its final form (see Part II, principal judgment at p 21). 76 Items (ii), (iii), (iv), (v), (vi) and (vii) of Annexure C in its final form in the contract are similar (although expanded in the final contract) to those same items in the draft sent to PKF. 77 Items (viii), (ix) and (x) in Annexure C in final form have no counterpart in the draft Annexure C description of the Seller's Works sent to PKF. Those items, in the final contract, provided for the removal of existing sewer, water, electrical, gas and stormwater reticulation infrastructure/services with site backfilled and levelled; the removal of all existing building slab and associated construction materials with the exception of existing piling works; and, the removal of all boardwalk supports. 78 Those matters became incorporated in the contract by reason of Australand's requirements as discussed earlier in terms of the findings in the principal judgment. The due diligence by Australand was to be completed by 25 September 2003. 79 On 12 September 2003, Ms Julius wrote to the directors of Aurora (Exhibit A, Document 108) referring to the email of 11 September 2003 enclosing the various documents and expressed the view that PEL was happy with the goods and services tax provisions in the draft agreements subject to a recommendation that the agreements be amended to ensure that the definition of "Development Material" incorporated "rights under existing contracts" and that clause 4.4 be amended to recite that the margin scheme would only apply in relation to the supply of real property. The letter enclosed a letter from PKF who assisted in "providing specialist GST advice in respect of this matter". The letter invited the directors to discuss any questions about the matter with Ms Julius. 80 The letter of advice from PKF is dated 12 September 2003 (Exhibit A, Document 107). 81 It refers to discussions on 11 September 2003 between Ms Julius, Mr Adamson, Mr Claxton and Mr Vorster (of PKF) concerning the draft sale agreements between Aurora and a buyer to be advised and AGG and a buyer to be advised. PKF recommended the amendment to the definition of "Development Material" as Ms Julius had mentioned so as to incorporate any rights under any existing contracts in relation to the development and a change to clause 4.4 in terms of the application of the GST margin scheme. 82 Further, PKF observed that: "We are satisfied that all the other amendments recommended by us in previous advices have been incorporated in the Sale Agreements". 83 At this moment in time, at least, the agreements continue to contemplate a business to be supplied engaging a definition in terms of "Development Material" by reference to the general development of the site taking account, specifically, of the particular plans, engineering drawings and other documents relating to the development activity reflected in Mr Claxton's memorandum. 84 On 23 September 2008, Mr Adamson sent an email to Ms Julius and PKF (Exhibit A, Document 113) in which Mr Adamson says that the solicitors for Australand had requested changes to the Special Conditions accompanying the Aurora Sale Contract. The highlighted changes so requested were attached to the email for the perusal of the recipients. Mr Adamson observed that once the parties had agreed to the changes, those changes would apply to the other contract Special Conditions for the remaining selling entities. Mr Adamson sought urgent advice in respect of the GST clause proposed by Australand (Special Condition 4) and whether other amendments proposed by Australand would have any impact upon GST treatment. Mr Adamson indicated that he would speak to the recipients about the matter shortly. 85 The highlighted changes involved a limitation to the inclusion recommended by PKF on 12 September 2003 in that "any rights" would be qualified by the words "(but no obligations)" so that the inclusion within the definition of "Development Material" would then read "any rights (but no obligations) under existing contracts in respect of the Land". Australand's lawyers also suggested the inclusion within the definition that term of the words "all architectural plans for improvements proposed to be constructed on the Land". Amendments were suggested to the GST clause itself. Clause 6 under the heading "Seller's Works" contained a notation: "[A separate construction clause is to be provided]". No list of Seller's Works was attached to the document and there was therefore nothing which would have put PKF expressly on notice that the final form of the contract might contain an Annexure C which might or would provide for the removal items at (viii), (ix) and (x) (as the Seller's Works) as they emerged in final form in the contract. 86 The contract between Aurora and Australand was entered into on 2 October 2003. 87 Settlement occurred on 2 July 2004. 88 On 28 June 2004, PKF wrote to Mr Heraghty of MacGillivrays Lawyers arising out of discussions between the author of the PKF letter and Mr Heraghty on 25 June 2004 concerning the application of the GST-free going concern provisions of the GST Act to the proposed sale of the Aurora land to Australand (Exhibit A, Document 22). The scope of the advice also addressed the application of the GST margin scheme provisions to the proposed sale "in the event that the use of the GST-free going concern provisions are challenged and defeated by the [ATO]"; the GST implications for the transaction if the use of the margin scheme is denied by the ATO; and, the effect on Adelaide Bank Ltd ("Adelaide Bank") if the ATO challenges and defeats the application of the GST-free going concern provisions and/or the margin scheme provisions sometime after the settlement date of 2 July 2004. 89 Mr Heraghty was the solicitor acting for the Adelaide Bank. 90 The essential transaction so far as it engaged the Adelaide Bank involved the Adelaide Bank lending money to AGG upon the security of a guarantee to be provided by Suncorp. The point of the advice from PKF to Mr Heraghty was "to persuade the Adelaide Bank that they could safely settle on the transaction and advance the funds" so that in lending $40M it "won't be at risk … of the ATO … knocking on its door wanting it to pay out the GST on the transaction … by serving a garnishee notice on the Adelaide Bank" (the evidence of Mr Atkinson at T 82, lns 2-5; T 83, lns 1 and 2 and lns 5-23). Mr Atkinson accepted at T 83, lns 25-29 that without the advice, the Adelaide Bank might not have advanced the funds ($40M) and that it was in Aurora's commercial interests that this advice be obtained by the Adelaide Bank from PKF. 91 At pp 392 and 393 of Document 22, PKF set out the instructions given to them upon which their advice was predicated. 92 At p 393, PKF observed that all sale lots would be acquired by Australand for future residential development and, at the fourth dot point, PKF observed (in terms very like the language of the advice from 1 May 2003) that preliminary discussions between [Aurora et al] and Australand: … indicated that although they [by which PKF mean Australand] were ready to proceed to contract immediately, they [Australand] were keen to delay settlement. In the intervening period, up to settlement, [Aurora et al] continued/will continue development works either pursuant to existing Development and/or Operational Works Approvals, or in accordance with new approvals obtained from the Gold Coast City Council. It was envisaged that new Approvals would have been sought by [Aurora et al] with respect to certain sites, given the development objectives of Australand. These are likely to be obtained prior to settlement (or has already been obtained). 93 This part of the advice is a little odd because the contract had been entered into on 2 October 2003 and there was therefore no question of parties being ready to proceed to contract immediately. Secondly, although there is a reference to the "intervening period" the advice is given on 28 June 2004 with settlement to occur on 2 July 2004 (four days later). Thirdly, that part of the letter talks about Aurora, Atmeygor, Sickle and AGG continuing to undertake development works in the period up to settlement yet the Special Condition 6 work had been completed, notice of completion had been given at the end of April and some issues had arisen between the parties about the adequacy of that work. 94 In the fifth dot point the author observes that the development works "anticipated to be either completed or underway as at settlement" would not be "significantly different from that currently forecasted should works continue in accordance with pre-existing Approvals". This factual matter, is largely due, the author says, to the fact that the "development proposed by Australand, and that currently undertaken by the Landowners [Aurora et al] is comparable in size and in terms of its expected duration" [emphasis added]. This language is reminiscent of the PKF letter dated 1 May 2003 concerning the Mirvac transaction. The author then says: "Accordingly, under either scenario, the fundamental civil works required, given the dynamics of the site, are the same". 95 These observations seem to suggest that the author contemplated that Aurora's residential development was largely comparable to that to be undertaken by Australand with the result that the fundamental civil works required for both were the same. 96 The PKF letter seems to be formulated on the footing that the author did not understand that Aurora had abandoned its development in favour of an en globo sale and that the removal works had been done, as previously discussed and the subject of the findings in the primary judgment, some of which are isolated in these reasons at [44] to [55]. 97 At p 393 of Document 22, the author notes that Australand is unlikely to commence works on all parcels of the acquired land, immediately after settlement, simultaneously and it is more likely that Australand will commence development works on various identified individual sites. The author also notes that the sale of lots owned by Aurora have all been the subject of earthworks activity with building having commenced on Lot 138. The author notes that "all contracts that have been entered into with potential buyers to date also relate only to these [s]ale [l]ots". 98 This also seems an odd observation because by that date the building and construction works had been removed from the site with the land returned to its pre-construction state and all contracts for all sale lots had been cancelled. 99 Like the earlier Mirvac letter, PKF sets out an Executive Summary and then an analysis of the elements of the legislation and relevant tax rulings. At p 398 of Document 22, the author concludes that: Having regard to the above, we are confident that the activities expected to be prevalent on the sale lots held by Aurora [and Atmeygor and AGG], as at the date of settlement of the sale contract [four days later], will at the very least amount to "an adventure or concern in the nature of trade". 100 In making that observation, the author notes nine particular matters. The first is that the sellers own the properties as part of their enterprises of "land and property development". The second relevant matter is that "although the sites will be vacant they will be in a partly developed state" [emphasis added]. This second observation seems to suggest continuity with Aurora's development. The third matter is that "the developments currently being conducted were anticipated to proceed over a number of years in response to an expected increase in demand" [emphasis added]. That observation may be consistent with an understanding that Aurora's development is continuing, or it may simply be that the author is anticipating that development of the land will continue to occur (according to Australand's formulation of it) over a number of years taking account of expected increases in demand. 101 In the context of a discussion of the things that might need to be established to demonstrate the continued operation of an enterprise, the author makes a series of observations at pp 399 and 400 of Document 22. At p 399, the author, in part at least, expresses a conclusion in these terms: Consequently, to the extent that [Aurora et al] supply to Australand all of the things necessary for the continued operation of an enterprise, the supplies collectively made under the relevant arrangements could be GST-free … [under] the GST Act. In this respect, [Aurora et al] could, in our view, transfer all relevant documentation, contracts, approvals, etc, relating to the development of their respective portions of land, along with the property, to Australand. This would enable Australand to carry on the development enterprises, if it so chooses. [emphasis added] 102 However, Aurora's development enterprise characterised by the development of the "Site" in accordance with the "Development Materials" was no longer in contemplation. It had been abandoned. The author of the PKF letter at this date also seems to assume that the sales contracts enabling it to carry on the development enterprises were on foot. 103 The author concludes that if all of the things talked about in the letter are done (characterised by ensuring continuity in Aurora's development enterprise) the GST position "would be relatively clear". The position might not have been clear to the author had it been made plain to the author that Aurora had abandoned its identified development project, cancelled all of the sales contracts for all of the lots, removed all of the construction work and removed all boardwalk supports. It is difficult to accept that the author of the PKF letter would not have regarded those matters as material to the integers to be considered in assessing the application of the going concern provisions of the GST Act to the material facts. 104 At p 400 of Document 22 the author of the PKF letter observes that "[f]rom the information provided, we understand that [Aurora et al] will continue their respective identified enterprises of property development activities on the land until the day of supply, ie settlement date [four days later]" [emphasis added]. 105 It seems clear from the observation at p 400 that the author was not fully informed about the election by Aurora (and the related entities) to withdraw from the development conception it had intended to implement and nor is the author apparently aware of the sequence of actual events relating to earthworks or the sequence of activities Aurora was actually undertaking or obligations it was actually discharging on or about 28 June 2004, on the cusp of settlement on 2 July 2004. 106 The PKF letter of 28 June 2004 was sought and obtained for the purpose of enabling the Adelaide Bank to engage in the lending transaction central to the transaction as described at [88] to [90]. The advice of 28 June 2004 was not directed to Aurora although, plainly enough, Aurora assisted in enabling PKF to provide its letter of advice to the lawyers for Adelaide Bank. In that sense, Aurora understood the advice PKF had given to MacGillivrays on behalf of the Adelaide Bank and Aurora knew that Adelaide Bank's engagement (and thus acceptance of the PKF advice) enabled settlement to occur. 107 Although I am entirely satisfied that officers of Aurora acted properly in their engagement with PKF in assisting in the provision of information upon which PKF relied in formulating the advice of 28 June 2004, it seems to me that material matters relating to Aurora's reliance upon advice formulated by PKF and PEL, and ultimately Aurora's reliance upon the PKF letter of 28 June 2004 (notwithstanding that it was directed to MacGillivrays on behalf of the Adelaide Bank), which ought to have been disclosed to PKF, were not disclosed. Those matters were the matters already mentioned concerning Aurora's election to withdraw from the identified development project, as discussed at [46] to [50] and [53] of these reasons together with the findings in the principal judgment. 108 I am satisfied that Aurora did not take reasonable care in the making of the Business Activity Statement for the month ending 31 July 2004 because it failed to take reasonable care in communicating to PKF the material matters I have mentioned and failed to obtain an advice from PKF directed to it specifically which addressed the question of whether the going concern provisions of the GST Act applied to all the facts material to that question, so as to enable a careful formulation of the Business Activity Statement to 31 July 2004. 109 The remaining question concerns the challenge to the power of the Commissioner to amend the penalty assessment. The short answer to the contention is this. Section 14ZY of the Act is in these terms: SECTION 14ZY COMMISSIONER TO DECIDE TAXATION OBJECTIONS 14ZY(1) If the taxation objection has been lodged with the Commissioner within the required period, the Commissioner must decide whether to: (a) allow it, wholly or in part; or (b) disallow it. 110 Section 14ZY seems to confer an express power to allow an objection in part which has the effect of varying or reducing the penalty assessment. The Commissioner took this step as a result of the objection process and the subsequent mediation. The Commissioner reduced the penalty assessment for the month ending 31 July 2004 by reducing the assessment by the measure of the 20% uplift upon the base penalty amount which had formed part of the assessment. Construing the language of s 14ZY according to its natural terms leads to the inevitable conclusion that the section confers a power upon the Commissioner to vary the penalty assessment. 111 The Court sought further submissions from the parties on questions raised at [4] to [6] in Aurora Developments Pty Ltd v Commissioner of Taxation [2011] FCA 244, in these terms: 4 One aspect of the question in relation to whether the Commissioner enjoys a power to amend an administrative penalty assessment once made may be the question of whether s 33(3) of the Acts Interpretation Act 1901 (Cth) confers such a power or has any relevant role to play in the determination of the scope of the Commissioner's powers conferred under the Administration Act. Section 33(3) provides: Where an Act confers a power to make, grant or issue any instrument (including rules, regulations or by-laws) the power shall, unless the contrary intention appears, be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend or vary any such instrument. [emphasis added] 5 A question might arise as to whether the imposition of an administrative penalty is effected by means of any instrument and whether s 33(3) is confined to legislative instruments or whether it extends to instruments by which administrative or executive decisions are made. That question seems to have been resolved by the decision of the Full Court of the Federal Court in Flaherty v Secretary, Department of Health and Ageing and Others [2010] FCAFC 67; (2010) 184 FCR 564 per Emmett, Rares and Nicholas JJ, by which the Court held at [61] that a notice in writing to cancel the approval of a pharmacist under s 98(3) of the National Health Act 1953 (Cth) was an instrument for the purposes of s 33(3). No submissions have been addressed by the parties as to the possible application of s 33(3) of the Acts Interpretation Act 1901 (Cth) in the assessment of the scope of the Commissioner's powers under the Administration Act. 6 Accordingly, I propose to direct the parties to file further submissions directed to that question (should they wish to do so) within 14 days. 112 Aurora elected not to put on any further submissions on this question. 113 The Commissioner filed further submissions. Section 33(3) of the Acts Interpretation Act 1901 (Cth) contemplates the conferral of a power to make, grant or issue any instrument and seeks to explain aspects of the scope of that power so conferred. It provides that the power (unless the contrary intention appears) shall be construed as including a power (exercisable in like manner and subject to any relevant conditions) to repeal, rescind, revoke, amend or vary any such instrument. 114 Power is conferred upon the Commissioner by s 298-10 of the Act to give notice of an entity's liability to pay an administrative penalty. An instrument, for the purposes of s 33(3) includes a legislative, executive or administrative instrument: R v Ng (2002) 5 VR 257; Azevedo v Secretary Department of Primary Industries and Energy [1992] FCA 106; (1992) 35 FCR 284 at 299 and 300; Flaherty v Secretary, Department of Health and Ageing and Others [2010] FCAFC 67; (2010) 184 FCR 564. However, s 33(3) does not apply to a power that might be exercised otherwise than by the making, grant or issuing of an instrument: Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd (1979) 41 FLR 338; Heslehurst v Government of New Zealand [2002] FCA 429; (2002) 117 FCR 104 at 111. The relevant power considered in Flaherty was found not to be a power to make, grant or issue an instrument but a statutory cancellation power coupled with an obligation to give notice in writing of the exercise of the statutory power. 115 Under the Act, the Commissioner is required to determine whether the taxpayer is liable to an administrative penalty under s 284-75; to determine under s 284-85 the amount of the penalty having regard to the Division 284 provisions (s 298-30) and, under s 298-10 to give written notice to the entity of the entity's liability to pay the penalty and the reasons why the entity is liable to pay that penalty. Under s 298-10, the Commissioner may discharge that obligation by giving notice and reasons "in any other notice he or she gives to the entity". Of course, if the Commissioner elects to remit all of the penalty, no reasons are required. 116 The Commissioner contends that the powers conferred under Division 284 to issue a notice of penalty assessment giving rise to an entity's rights to objection and in consequence review in the relevant forum, is not a power ancillary to the Commissioner's assessment of the entity's liability to pay a penalty. It is a power to issue an instrument having legal affect upon an entity's rights and obligations and is thus distinguishable from the power considered in Flaherty and Re Brian Lawlor Automotive Pty Ltd and Collector of Customs (NSW) (1978) 1 ALD 167. 117 I accept these contentions. 118 The power conferred upon the Commissioner under Division 284 includes a power to make, grant or issue an instrument for the purposes of s 33(3) and, subject to any contrary intention contained in the Act, s 33(3) has the effect of conferring a power to repeal, rescind, revoke, amend or vary any instrument consisting of a notice of assessment determining the amount of penalty and the due date for penalty (s 298-15). 119 However, the Act confers an express power in terms of s 14ZY which must be construed in the context of the Act generally including the Commissioner's general administration of the Act by operation of s 3A of the Act. 120 For all these reasons, the application is dismissed. I certify that the preceding one hundred and twenty (120) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood. Associate: Dated: 23 September 2011