Commissioner of Taxation v Huang (No 2) - Shortfall Penalty Remittal to ART

Original Word Document (97.5 KB) Federal Court of Australia

Commissioner of Taxation v Huang (No 2) [2026] FCA 482

| Appeal from: | Huang and Commissioner of Taxation (Taxation) [2024] AATA 397 |

| File number: | WAD 74 of 2024 |

| Judgment of: | FEUTRILL J |

| Date of judgment: | 21 April 202 6 |

| Catchwords: | TAXATION – administrative law – decision of the Administrative Appeals Tribunal that the Commissioner of Taxation’s objection decision be varied to allow the taxpayer’s objection to shortfall penalties set aside – decision of the Tribunal that Commissioner’s objection decision not be varied to affirm the Commissioner’s decision to disallow taxpayer’s objection to amended assessments stand as decision on review – Commissioner’s

decision to disallow respondent’s objections to Commissioner’s assessment of shortfall penalty remitted to Administrative Review Tribunal |

| Legislation: | Administrative Appeals Tribunal Act 1975 (Cth) s 44

Administrative Review Tribunal Act 2024 (Cth)

Administrative Review Tribunal (Consequential and Transitional Provisions No 1) Act 2024 (Cth) Sch 16, item 25

Taxation Administration Act 1953 (Cth) Sch 1; ss 298-20, 14ZZ, 14ZZK |

| Cases cited: | Commissioner of Taxation v Bazzo (No 2) [2024] FCA 560

Commissioner of Taxation v Huang [2025] FCA 1314

Commissioner of Taxation v Ross [2021] FCA 766; 174 ALD 77

Lim v Comcare [2019] FCAFC 104; 79 AAR 74

Minister for Immigration and Ethnic Affairs v Gungor (1982) 4 ALD 575

Morales v Minister for Immigration and Ethnic Affairs (1995) 60 FCR 550 |

| Division: | General Division |

| Registry: | Western Australia |

| National Practice Area: | Taxation |

| Number of paragraphs: | 8 |

| Date of last written submission: | 12 November 2025 (applicant) |

| Date of hearing: | Determined on the papers |

| Counsel for the Applicant: | Ms E Luck |

| Solicitor for the Applicant: | ATO Dispute Resolution |

| Counsel for the Respondent: | Mr TJ Poli |

| Solicitor for the Respondent: | Kings Park Legal |
ORDERS

| WAD 74 of 2024 |

| BETWEEN: | COMMISSIONER OF TAXATION

Applicant | |
| AND: | ZHAN SHAN HUANG

Respondent | |

| order made by: | FEUTRILL J |
| DATE OF ORDER: | 21 APRIL 202 6 |
THE COURT ORDERS THAT:

1. That part of the decision of the Administrative Appeals Tribunal made on 8 March 2024 to the effect that the objection decision of the applicant dated 23 November 2021 be varied to allow the respondent’s objection to the shortfall penalties be set aside.

2. That part of the decision of the Administrative Appeals Tribunal made on 8 March 2024 to the effect that the objection decision of the applicant not be varied so as to affirm the applicant’s decision to disallow the respondent’s objection to the amended assessments of income tax stand as the Tribunal’s decision on review under s 14ZZ(1)(a)(i) of the Taxation Administration Act 1953 (Cth).

3. The matter of the applicant’s decision to disallow the respondent’s objection to the applicant’s assessments of shortfall penalty be remitted to the Administrative Review Tribunal for determination according to law.

4. The Administrative Review Tribunal be directed that the matter remitted be heard and determined on the basis:

(a) of the facts found at paragraphs 3 to 24 and 68 to 76 of the reasons for the decision of the Administrative Appeals Tribunal made on 8 March 2024 and such further facts as the Administrative Review Tribunal may consider necessary to determine the matter remitted;

(b) of the evidence which was before the Administrative Appeals Tribunal on the previous hearing and such further evidence the Administrative Review Tribunal decides should be considered in making any further findings of fact considered necessary to determine the matter remitted;

(c) that, as a question of law, the respondent has the burden of proving that the assessments of shortfall penalty were excessive or otherwise incorrect and what the assessments should have been under s 14ZZK(b)(i) of the Taxation Administration Act 1953 (Cth); and

(d) that, as a question of law, upon the facts found at paragraphs 3 to 24 and 68 to 76 of the reasons for the decision of the Administrative Appeals Tribunal made on 8 March 2024 and the grounds stated in the respondent’s taxation objection for the purposes of s 14ZZK(a), the respondent failed to discharge his burden of proof under s 14ZZK(b)(i) of the Taxation Administration Act 1953 (Cth).

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

FEUTRILL J:

1 On 29 October 2025 orders were made allowing the Commissioner’s appeal from a decision of a Deputy President of the Administrative Appeals Tribunal and the question of what orders should be made upon allowing that appeal were reserved. Orders were also made directing the parties to file agreed or competing minutes of proposed orders and for short submissions in support and, subject to further order, determination of the question reserved be made without an oral hearing: Commissioner of Taxation v Huang [2025] FCA 1314. The Commissioner complied with the applicable orders. The taxpayer has not complied with the applicable orders or responded to communications from the Court relating to the question reserved. In the circumstances, it is presumed that the taxpayer does not want to be heard on the question. Therefore, orders will be made having regard to the Commissioner’s proposed orders and submissions.

2 In Huang (No 1) I concluded that the taxpayer was required to discharge the burden of proof described in s 14ZZK(b)(i) with respect to the Commissioner’s assessments of shortfall penalty and that, on the facts found in the AAT’s reasons for decision and on the taxpayer’s stated grounds of objection, the AAT was bound to conclude that the taxpayer had failed to discharge his burden of proving that the assessments of shortfall penalty were excessive or otherwise incorrect and what the assessments should have been: Huang (No 1) at [51]-[67], [78]. In paragraphs [68] to [76] of the AAT’s reasons for decision findings of fact were made from which the AAT concluded that the taxpayer had failed to discharge his burden of proof under s 14ZZK(b)(i) with respect to the Commissioner’s amended assessments of income tax. The AAT also made other uncontroversial findings of background facts in paragraphs [3] to [24] of the reasons. These were the relevant findings of fact from which the AAT was bound to conclude that the taxpayer had also failed to discharge his burden of proof with respect to his objection to the assessments of shortfall penalty.

3 In Huang (No 1) I accepted that it was appropriate that an order be made that had the effect of setting aside that part of the AAT’s decision regarding review of the Commissioner’s objection decisions on the assessments of shortfall penalty. I also expressed the view that it was appropriate to make a declaration or order to the effect that the taxpayer was required to discharge the burden of proof under s 14ZZK(b)(i) and, on the facts as found, he failed to discharge that burden with respect to the Commissioner’s assessments of shortfall penalty. However, I was of the view that the issue of whether the shortfall penalties should be remitted under s 298-20 of Sch 1 of the Taxation Administration Act should be remitted to the Administrative Review Tribunal. The question reserved was the precise form of orders to give effect to those reasons: Huang (No 1) at [88].

4 As mentioned in Huang (No 1), there is authority for the proposition that, before the Administrative Appeals Tribunal Act 1975 (Cth) was repealed, the Court had power to set aside a decision of the AAT under s 44(4) and s 44(5) of that Act in part and remit that part of the decision to the AAT for determination according to law: Commissioner of Taxation v Bazzo (No 2) [2024] FCA 560 at [3]-4. As the appeal was commenced, but not completed, before repeal of the AAT Act, anything that could have been done by, or in relation to the AAT, before the commencement of the Administrative Review Tribunal Act 2024 (Cth) may be done in relation to the ART: Administrative Review Tribunal (Consequential and Transitional Provisions No 1) Act 2024 (Cth), Sch 16 Item 25. Therefore, the power of the Court to make orders of the kind that were available under s 44(4) and s 44(5) of the AAT Act have been preserved and may be made on allowing the appeal.

5 While the power of the Court to make appropriate orders under s 44(4) of the AAT Act was broad it was constrained by the nature of the appeal (questions of law) and nexus to the legal issues on appeal (orders by reason of its decision). Hence, the appropriateness of any order was circumscribed by and necessary to reflect the nature of its decision on any question of law. Moreover, having set aside a decision of the AAT, the Court had no express power to substitute what it considered to be the correct decision unless such an order was appropriate by reason of the Court’s decision on a question of law in the context of the particular proceedings: Morales v Minister for Immigration and Ethnic Affairs (1995) 60 FCR 550 at 560-561 (Sackville J); Minister for Immigration and Ethnic Affairs v Gungor (1982) 4 ALD 575 at 585 (Sheppard J, Fisher J agreeing). Within that framework, if there were circumstances which admitted of only one possible outcome it would be futile to remit matters for rehearing and an order could be made to allow an application or affirm a decision under review: Commissioner of Taxation v Ross [2021] FCA 766; 174 ALD 77 at [335]-337. Further, if the Court concludes that a decision is the product of legal error, it can make an order remitting all or part of it for rehearing according to law, it can make orders dictating the manner in which any rehearing is to be conducted, including how the tribunal ought to deal with existing or fresh evidence, and it can make orders confining the scope of the matter thought to warrant rehearing: Lim v Comcare [2019] FCAFC 104; 79 AAR 74 at [32]-34.

6 The AAT’s conclusion regarding the taxpayer’s failure to discharge his burden of proving that the amended assessments of income tax were excessive or incorrect and what the amount of the assessments should have been was not challenged in the appeal and was manifestly correct as a question of law. In these circumstances, it would be futile to remit determination of that matter to the ART. Thus, the AAT decision not to disturb the Commissioner’s decision to disallow the taxpayer’s objection to the amended assessments of income tax should be affirmed.

7 Although I concluded in Huang (No 1) that the AAT made an error of law in failing to conclude that the taxpayer had failed to discharge his burden of proof with respect to the Commissioner’s assessments of shortfall penalty, because the AAT considered it unnecessary to determine another ground for the taxpayer’s objection to those assessments, it cannot be said that a consequence of that error of law is that the Commissioner’s decision to disallow the objection admits of only one possible outcome. Therefore, it is not futile to remit that ‘matter’ to the ART for determination. However, the matter on remittal should be heard and determined on the basis that the ART is bound by the questions of law raised and determined in the appeal. A rehearing of those questions is not warranted.

8 It follows that an order should be made to set aside that part of the AAT’s decision to allow the taxpayer’s objection to the assessments of shortfall penalty. That part of the AAT’s decision that had the effect of affirming the Commissioner’s decision to disallow the taxpayer’s objection should stand and not be remitted for reconsideration. The matter of the taxpayer’s objection to the assessments of shortfall penalty should be remitted to the ART for determination according to law, but confined to the issue of whether the assessments should be remitted under s 298-20 of Sch 1. Orders directing the ART to apply the answers to the questions of law as found in the appeal is an appropriate way of so confining the issue. Otherwise, with respect to the issue for determination on remitter the ART should be free to make such further findings of fact as it considers necessary. Otherwise, it is not appropriate to place any limit on the scope of the evidence to which the ART may have regard in making those findings. Questions of the practice and procedure and whether a party should be permitted to re-open that party’s case should be left to the discretion of the ART.

| I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill. |
Associate:

Dated: 21 April 202 6