In this case a backpacker (Maximillian Clemens) was found to be non-resident despite travelling and working around Australia for more than half of the year (183 days). This was because his usual place of abode was found to be in Germany, rather than Australia. The judge determined that for Mr Clemens to claim tax residency status in Australia, before leaving home he was required to completely abandon his parents' German residence, and upon arrival in Australia, to reside in a dwelling of some quality and permanence.
Deputy President of the AAT R Deutsch:
"In my view it is not possible to have two or more usual places of abode at the same time. Where there are two competing places of abode it needs to be assessed based on all the available facts as to which one is “usual”. "
(p 37)
"Nonetheless this Tribunal concludes that during the whole of the year ended 30 June 2013, the Applicants’ usual place of abode was his parents' house in Germany. " (p 40)
"While the Parliamentary intentions are not always relevant to examine it is worth noting that the various qualifications to the 183 day rule were enacted by Parliament “in order that there may be no danger of treating as residents persons who are purely visitors”: Explanatory Notes on Amendments contained in the Income Tax Assessment Bill 1930 to amend the Income Tax Assessment Act 1922-29, page 11. Thus, overseas visitors on holidays or working in Australia who are in Australia for more than 183 days would not be residents during their stay under this test, as they would usually have a usual place of abode elsewhere and would not have an intention of taking up residence in Australia." (p 48)
"This lends support to the conclusions I have reached. It is only if the Applicant had completely abandoned his usual place of abode overseas in Germany during the year ended 30 June 2013 that the result might be otherwise." (p 49)
http://www.austlii.edu.au/au/cases/cth/AATA/2015/124.html
Thursday, June 18, 2015
Sunday, June 14, 2015
John Holland Group Pty Ltd vs Federal Commissioner of Taxation [2015] FCAFC 82
A long long time ago, in a galaxy far far away, a man named Mr Lunney attempted to deduct the cost of his train tickets to and from work each day from his assessable income for tax purposes, and was disallowed by the High Court because these costs amounted to "living expenses". The majority of the High Court ruled that once Mr Lunney reached his company's place of work, further travel expenses incurred on that day between different places of work was deductible as it directly related to the production of his assessable income.
The question posed in this case amounts to weather or not a rail maintenance worker can claim that his work 'begins at Perth airport', and hence can deduct the cost of plane tickets to and from work-sites. If so, the ITAA 1997 provides that John Holland Group can deduct the cost of plane tickets which would be deductible in the hands of an employee. The income of John Holland Group employees amounts to consideration paid to him for work performed according to a contract with John Holland Group, which specifies that he begins getting paid on arrival at Perth airport. Was this enough to convince the Full Federal Court that gaining his assessable income included flying to a work-site? Yes.
"The cost of travel for which Mr Lunney claimed a deduction, and which the court did not allow, was not the travel from the company’s office at No. 11 Darling Harbour to the various ports to carry out his work, but from his domestic residence in Narraweena to his employer’s office at No. 11 Darling Harbour. Counsel for John Holland Group and John Holland contended that the equivalent outgoing in this case (which the employees would not be able to deduct) would be the cost of travelling from the employees’ individual residences to Perth airport, but that the employees’ arrival at Perth airport was equivalent to the arrival of Mr Lunney at the office of his employer at No. 11 Darling Harbour. In other words that arrival by the employees at Perth airport was the employees’ arrival at work from which they then travelled to Geraldton to undertake other tasks. The employees were submitted to be “in” their employment from the moment of their arrival at Perth airport and were not travelling “to” their employment at Geraldton. In contrast, the Commissioner contended that the employees were employed, and paid, to undertake activities at Geraldton and that their employment did not include their travel from Perth airport to Geraldton." (p 53)
"Travelling from Perth airport to Geraldton was part of the employment of those employees. Each of the employees commenced their “rostered on” duties on arrival at Perth airport and took the flights because they were directed to do so and were required to do so as part of their employment obligations. The terms of employment of the “workforce” employees provided that the employees commenced their “rostered on” employment duties from their time of arrival at Perth airport." (p 58)
"In my view, there is no reason why Perth Airport should not be a point at which the employees duties and remuneration for performance of those duties both commences and ceases. The contract of employment so provides. The fact that Perth Airport is not an area or premises owned or leased by John Holland, is irrelevant. In this respect, there is no difference between Perth Airport and No 11 Darling Harbour." (p 44)
"From the time the John Holland employees, both Workforce and Staff, checked in at Perth Airport they were travelling in the course of their employment, subject to the directions of John Holland and being paid for it. That situation subsisted until they disembarked the plane at Perth Airport at the end of their rostered-on work time. At no time during that period were they travelling to work; they were travelling on work and the cost of doing so under the statutory hypothesis in s 52(1) FBTAA would be an allowable deduction to them under s 81 of the ITAA 1997." (p 45)
"The case under consideration in Lunney was of “ordinary people” paying fares “to enable them to go day by day to their regular place of employment or business and back to their homes”; it was not about the specific demands occasioned by employment that required, as part of the employment, travel to a remote place. The employees in this case are required to travel as part of their employment to a remote location. Accordingly, the appeal should be allowed." (p 64)
http://www.austlii.edu.au/au/cases/cth/FCAFC/2015/82.html
The question posed in this case amounts to weather or not a rail maintenance worker can claim that his work 'begins at Perth airport', and hence can deduct the cost of plane tickets to and from work-sites. If so, the ITAA 1997 provides that John Holland Group can deduct the cost of plane tickets which would be deductible in the hands of an employee. The income of John Holland Group employees amounts to consideration paid to him for work performed according to a contract with John Holland Group, which specifies that he begins getting paid on arrival at Perth airport. Was this enough to convince the Full Federal Court that gaining his assessable income included flying to a work-site? Yes.
"The cost of travel for which Mr Lunney claimed a deduction, and which the court did not allow, was not the travel from the company’s office at No. 11 Darling Harbour to the various ports to carry out his work, but from his domestic residence in Narraweena to his employer’s office at No. 11 Darling Harbour. Counsel for John Holland Group and John Holland contended that the equivalent outgoing in this case (which the employees would not be able to deduct) would be the cost of travelling from the employees’ individual residences to Perth airport, but that the employees’ arrival at Perth airport was equivalent to the arrival of Mr Lunney at the office of his employer at No. 11 Darling Harbour. In other words that arrival by the employees at Perth airport was the employees’ arrival at work from which they then travelled to Geraldton to undertake other tasks. The employees were submitted to be “in” their employment from the moment of their arrival at Perth airport and were not travelling “to” their employment at Geraldton. In contrast, the Commissioner contended that the employees were employed, and paid, to undertake activities at Geraldton and that their employment did not include their travel from Perth airport to Geraldton." (p 53)
"Travelling from Perth airport to Geraldton was part of the employment of those employees. Each of the employees commenced their “rostered on” duties on arrival at Perth airport and took the flights because they were directed to do so and were required to do so as part of their employment obligations. The terms of employment of the “workforce” employees provided that the employees commenced their “rostered on” employment duties from their time of arrival at Perth airport." (p 58)
"In my view, there is no reason why Perth Airport should not be a point at which the employees duties and remuneration for performance of those duties both commences and ceases. The contract of employment so provides. The fact that Perth Airport is not an area or premises owned or leased by John Holland, is irrelevant. In this respect, there is no difference between Perth Airport and No 11 Darling Harbour." (p 44)
"From the time the John Holland employees, both Workforce and Staff, checked in at Perth Airport they were travelling in the course of their employment, subject to the directions of John Holland and being paid for it. That situation subsisted until they disembarked the plane at Perth Airport at the end of their rostered-on work time. At no time during that period were they travelling to work; they were travelling on work and the cost of doing so under the statutory hypothesis in s 52(1) FBTAA would be an allowable deduction to them under s 81 of the ITAA 1997." (p 45)
"The case under consideration in Lunney was of “ordinary people” paying fares “to enable them to go day by day to their regular place of employment or business and back to their homes”; it was not about the specific demands occasioned by employment that required, as part of the employment, travel to a remote place. The employees in this case are required to travel as part of their employment to a remote location. Accordingly, the appeal should be allowed." (p 64)
http://www.austlii.edu.au/au/cases/cth/FCAFC/2015/82.html
Tuesday, June 9, 2015
Falk vs Commissioner of Taxation
In this case the tribunal ruled that the character of a transaction is more important than any particular name it happens to be given when determining its nature under the income tax assessment act(s).
The Australian Capital Territory (ACT) government labelled a payment given to an employee in respect of legal costs incurred during a dispute between himself and the government as an 'act of grace' payment, but the tribunal ruled that the transaction was clearly made on the condition of Mr Falk dropping all claims against the ACT government in regard to those costs. A payment made on such conditions is difficult be construed as an 'act of grace'. A payment made in compensation of legal costs can only be considered 'ex gratia' (an act of grace) if there is no legal liability on behalf of the payee to make the payment - whereas the key distinction in this case was that the taxpayer dropped current legal proceedings against the ACT government in return for the payment.
The case rested upon the definition of the word 'indemnity', and also, what particular characteristics of a payment constitute the label 'ex gratia'. The tribunal held that payments of indemnification are made in respect of losses that have already occurred (as opposed to losses that 'may' occur). In regard to ex gratia payments, the tribunal suggested that compensation for legal costs offered after legal proceedings have commenced do not bear the character of an 'act of grace'.
The ruling drew upon a long debate about the word "indemnify".
"There is no general principle that an amount received as compensation for, or reimbursement of, a deductible expense is assessable income. The proposition that a general principle of that kind exists was rejected by the High Court in Commissioner of Taxation v Rowe [1997] HCA 16." (p 41)
"Finally, in relation to the ordinary meaning of ‘indemnity’ reaching to indemnification in respect of losses already incurred in the context of legal costs, we note the following statement of the High Court (Mason CJ, Brennan, Deane, Dawson and McHugh JJ) in Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 at 410:
"It has not been doubted since 1278, when the Statute of Gloucester (6 Edw.I c.1.) introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation."" (p 54)
"For those reasons the Tribunal will proceed on the basis that the views of Walters J in Goldsbrough Mort correctly state the law. That however is the beginning of the required analysis, not its end. In Batchelor, Edmonds and Pagone JJ stated that it is the character of a receipt which determines whether what the taxpayer has received may relevantly bear the description as being ‘by way of insurance or indemnity’.[30] An ex gratia payment does not fit that language. In a passage the Tribunal adopts, their Honours said at [13]:
"It may be accepted that the words “by way of insurance or indemnity” are, and are intended to be, wide, but they must be applied as intended. Generally speaking a payment will not be regarded as an indemnity (whether the word is taken alone or in combination in the composite phrase “by way of insurance or indemnity”) unless the entitlement to its receipt precedes the event in respect of which it is paid. An ex gratia payment, for example, is not apt to be regarded as indemnification of a loss or outgoing notwithstanding that its receipt may be said, from the point of view of economic equivalence, to compensate the recipient for a loss which had been suffered or an outgoing which had been incurred. Similarly, a refund would not ordinarily be regarded as an indemnification notwithstanding that its receipt may be said to have rendered a taxpayer harmless, from an economic point of view, for an antecedent loss or outgoing."" (p 55-56)
"The reasoning of the plurality in Batchelor therefore requires the Tribunal to determine the character of the receipt Dr Falk received. Neither its form nor its economic equivalence can be determinative of its character." (p 58)
"(If if was found) that the device of an act of grace payment was required only to comply with ACT internal procedures. We would find that the payment was made (adopting the language of the Chief Solicitor) ‘in return for [Dr Falk] withdrawing his application to the AIRC for costs and providing a release of the Territory in relation to the AIRC and associated costs’." (p 80)
"An ex gratia payment necessarily must be a payment made for reasons not compelled by law but that does not require its maker to be credulous or indifferent to his or her interests and a potential double recovery." (p 84)
The case is here [2015] AATA 392: http://www.austlii.edu.au/au/cases/cth/AATA/2015/392.html
The Australian Capital Territory (ACT) government labelled a payment given to an employee in respect of legal costs incurred during a dispute between himself and the government as an 'act of grace' payment, but the tribunal ruled that the transaction was clearly made on the condition of Mr Falk dropping all claims against the ACT government in regard to those costs. A payment made on such conditions is difficult be construed as an 'act of grace'. A payment made in compensation of legal costs can only be considered 'ex gratia' (an act of grace) if there is no legal liability on behalf of the payee to make the payment - whereas the key distinction in this case was that the taxpayer dropped current legal proceedings against the ACT government in return for the payment.
The case rested upon the definition of the word 'indemnity', and also, what particular characteristics of a payment constitute the label 'ex gratia'. The tribunal held that payments of indemnification are made in respect of losses that have already occurred (as opposed to losses that 'may' occur). In regard to ex gratia payments, the tribunal suggested that compensation for legal costs offered after legal proceedings have commenced do not bear the character of an 'act of grace'.
The ruling drew upon a long debate about the word "indemnify".
"There is no general principle that an amount received as compensation for, or reimbursement of, a deductible expense is assessable income. The proposition that a general principle of that kind exists was rejected by the High Court in Commissioner of Taxation v Rowe [1997] HCA 16." (p 41)
"Finally, in relation to the ordinary meaning of ‘indemnity’ reaching to indemnification in respect of losses already incurred in the context of legal costs, we note the following statement of the High Court (Mason CJ, Brennan, Deane, Dawson and McHugh JJ) in Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 at 410:
"It has not been doubted since 1278, when the Statute of Gloucester (6 Edw.I c.1.) introduced the notion of costs to the common law, that costs are awarded by way of indemnity (or, more accurately, partial indemnity) for professional legal costs actually incurred in the conduct of litigation."" (p 54)
"For those reasons the Tribunal will proceed on the basis that the views of Walters J in Goldsbrough Mort correctly state the law. That however is the beginning of the required analysis, not its end. In Batchelor, Edmonds and Pagone JJ stated that it is the character of a receipt which determines whether what the taxpayer has received may relevantly bear the description as being ‘by way of insurance or indemnity’.[30] An ex gratia payment does not fit that language. In a passage the Tribunal adopts, their Honours said at [13]:
"It may be accepted that the words “by way of insurance or indemnity” are, and are intended to be, wide, but they must be applied as intended. Generally speaking a payment will not be regarded as an indemnity (whether the word is taken alone or in combination in the composite phrase “by way of insurance or indemnity”) unless the entitlement to its receipt precedes the event in respect of which it is paid. An ex gratia payment, for example, is not apt to be regarded as indemnification of a loss or outgoing notwithstanding that its receipt may be said, from the point of view of economic equivalence, to compensate the recipient for a loss which had been suffered or an outgoing which had been incurred. Similarly, a refund would not ordinarily be regarded as an indemnification notwithstanding that its receipt may be said to have rendered a taxpayer harmless, from an economic point of view, for an antecedent loss or outgoing."" (p 55-56)
"The reasoning of the plurality in Batchelor therefore requires the Tribunal to determine the character of the receipt Dr Falk received. Neither its form nor its economic equivalence can be determinative of its character." (p 58)
"(If if was found) that the device of an act of grace payment was required only to comply with ACT internal procedures. We would find that the payment was made (adopting the language of the Chief Solicitor) ‘in return for [Dr Falk] withdrawing his application to the AIRC for costs and providing a release of the Territory in relation to the AIRC and associated costs’." (p 80)
"An ex gratia payment necessarily must be a payment made for reasons not compelled by law but that does not require its maker to be credulous or indifferent to his or her interests and a potential double recovery." (p 84)
The case is here [2015] AATA 392: http://www.austlii.edu.au/au/cases/cth/AATA/2015/392.html
Wednesday, June 3, 2015
Garrett vs Commissioner of Taxation
Harassing the Commissioner of Taxation
The federal court has dismissed the case of one Mr Garrett for the ninth time this year, this time for being a "vexatious litigant". In his submission, the Commissioner of Taxation (the respondent) put forward 30 previous cases whereby Mr Garrett had lodged similarly passionate litigation, in support of a claim that Mr Garrett is abusing the court process to harass or cause delay for a wrongful purpose.
Mr Garrett has been issued with a bankruptcy notice (of which the Commissioner is presumably a party to) that is before other courts.
The judgement of Davies J contains some interesting remarks.
Referring to earlier dismissals of Mr Garrett's litigation:
"Pagone J ordered that Mr Garrett be prohibited from instituting in his own name... in the institution of any proceedings in any registry of the Federal Court against the Commissioner, any second Commissioner of Taxation, any Deputy Commissioner of Taxation, any person who is or was employed in the Australian Taxation Office as an “APS employee” within the meaning of the Public Service Act 1999 (Cth) or any agent or advisor of the Commissioner, without the leave of the Court." (p 9)
On the substance of earlier litigation:
"Beach J dismissed both applications, finding that Mr Garrett had not demonstrated any error in those decisions and there was no substance in any of the 48 proposed grounds of appeal in each matter, and that Mr Garrett had not shown that he would suffer any substantial injustice if leave were refused, even if the decisions were incorrect. " (p 15)
On the claims from Mr Garrett in the present proceeding - demanding the Commissioner be refused his lawful ability to amend a return:
"Mr Garrett’s claim for an order that a notice of assessment “stand” is fundamentally misconceived. The notice of assessment in question is the notice of assessment of income tax issued to Mr Garrett for the year ended 30 June 2014 based on the income tax return that Mr Garrett lodged for that year. By seeking that order, Mr Garrett seeks to prevent the Commissioner from exercising his power of amendment under s 170 of the Income Tax Assessment Act 1936 Act (Cth)... the Court would not interfere to prevent the Commissioner from performing his duty to reassess Mr Garrett’s liability in accordance with his duty to apply the law and to assess Mr Garrett to the correct amount of liability imposed by the Income Tax Assessment Acts... "
On Mr Garrett's serious allegations of professional misconduct:
"Mr Garrett was previously criticised for making serious assertions without support. In Garrett v Macks [2006] FCA 601, Lander J said at [14]:
These claims in their bald form should never have been made. They make the most serious allegations against a number of people, three of whom are officers of this Court, two of whom are professional persons who act as liquidators and trustees and are, therefore, responsible in that manner to this Court, and one of whom, of course, is a senior public officer, being the Deputy Commissioner of Taxation. Mr Garrett has made no effort in any way to support the allegations made in the proceeding. It was put by Mr Evans, by way of evidence, but really by way of submission in paragraph 19 of his affidavit, that the allegations are scandalous. I agree."
On suing the Commissioner for not complying with the taxpayer charter:
"The pleading in the present case is yet another illustration of Mr Garrett’s practice to make serious allegations of impropriety against other persons in unsupported and bald form. The final order sought that the respondents are able to be sued under the provisions of the Taxpayers’ Charter is not relief that is available at law. Accordingly, the application is bound to fail." (p 17)
The proceeding was dismissed.
The case [2015] FCA 485: http://www.austlii.edu.au/au/cases/cth/FCA/2015/485.html
The federal court has dismissed the case of one Mr Garrett for the ninth time this year, this time for being a "vexatious litigant". In his submission, the Commissioner of Taxation (the respondent) put forward 30 previous cases whereby Mr Garrett had lodged similarly passionate litigation, in support of a claim that Mr Garrett is abusing the court process to harass or cause delay for a wrongful purpose.
Mr Garrett has been issued with a bankruptcy notice (of which the Commissioner is presumably a party to) that is before other courts.
The judgement of Davies J contains some interesting remarks.
Referring to earlier dismissals of Mr Garrett's litigation:
"Pagone J ordered that Mr Garrett be prohibited from instituting in his own name... in the institution of any proceedings in any registry of the Federal Court against the Commissioner, any second Commissioner of Taxation, any Deputy Commissioner of Taxation, any person who is or was employed in the Australian Taxation Office as an “APS employee” within the meaning of the Public Service Act 1999 (Cth) or any agent or advisor of the Commissioner, without the leave of the Court." (p 9)
On the substance of earlier litigation:
"Beach J dismissed both applications, finding that Mr Garrett had not demonstrated any error in those decisions and there was no substance in any of the 48 proposed grounds of appeal in each matter, and that Mr Garrett had not shown that he would suffer any substantial injustice if leave were refused, even if the decisions were incorrect. " (p 15)
On the claims from Mr Garrett in the present proceeding - demanding the Commissioner be refused his lawful ability to amend a return:
"Mr Garrett’s claim for an order that a notice of assessment “stand” is fundamentally misconceived. The notice of assessment in question is the notice of assessment of income tax issued to Mr Garrett for the year ended 30 June 2014 based on the income tax return that Mr Garrett lodged for that year. By seeking that order, Mr Garrett seeks to prevent the Commissioner from exercising his power of amendment under s 170 of the Income Tax Assessment Act 1936 Act (Cth)... the Court would not interfere to prevent the Commissioner from performing his duty to reassess Mr Garrett’s liability in accordance with his duty to apply the law and to assess Mr Garrett to the correct amount of liability imposed by the Income Tax Assessment Acts... "
On Mr Garrett's serious allegations of professional misconduct:
"Mr Garrett was previously criticised for making serious assertions without support. In Garrett v Macks [2006] FCA 601, Lander J said at [14]:
These claims in their bald form should never have been made. They make the most serious allegations against a number of people, three of whom are officers of this Court, two of whom are professional persons who act as liquidators and trustees and are, therefore, responsible in that manner to this Court, and one of whom, of course, is a senior public officer, being the Deputy Commissioner of Taxation. Mr Garrett has made no effort in any way to support the allegations made in the proceeding. It was put by Mr Evans, by way of evidence, but really by way of submission in paragraph 19 of his affidavit, that the allegations are scandalous. I agree."
On suing the Commissioner for not complying with the taxpayer charter:
"The pleading in the present case is yet another illustration of Mr Garrett’s practice to make serious allegations of impropriety against other persons in unsupported and bald form. The final order sought that the respondents are able to be sued under the provisions of the Taxpayers’ Charter is not relief that is available at law. Accordingly, the application is bound to fail." (p 17)
The proceeding was dismissed.
The case [2015] FCA 485: http://www.austlii.edu.au/au/cases/cth/FCA/2015/485.html
Tuesday, June 2, 2015
Coshott vs Commissioner of Taxation
In September 2014, the Administrative Appeals Tribunal held that a payment of $350,000 to Mrs Coshott as consideration to release Mr Vardas from all claims against him, was encapsulated by capital gain tax (CGT) event C2 - the disposal of an intangible asset.
If the tribunal found the existence of a CGT event, Mrs Coshott claimed that any arising gain should be offset by legal costs incurred during the dispute in question. The tribunal refused to consider the intricate details of the CGT asset's cost base because in their view her record keeping was unsatisfactory, and hence could not be used to reduce a capital gain.
In May 2015 the full federal court ruled that the tribunal failed to discharge its review function and that the matter should be remitted to the tribunal for a proper review of the cost base.
Appealing from the tribunal to the federal court must be done so on a question of law, which in this case was: "whether a failure to maintain adequate records in accordance with s 121-20 of the Income Tax Assessment Act 1997 (Cth) necessarily constitutes a failure to meet the onus of proof imposed on the taxpayer under s 14ZZK of the Taxation Administration Act 1953 (Cth)".
The question posed will provide an interesting debate in the tribunal when it is heard again later this year.
Highlights from the judgment
"It may be that there was a degree of lack of clarity in the full identification of the costs by way of overlap and otherwise, but this did not relieve the Tribunal of a responsibility to examine and consider the material that had been put before it, and to deal with that matter in its reasons, including whether the material established at least a minimum figure for costs. " (p 9)
"With the utmost respect to the Tribunal, on the basis of that material, we consider that there is a prima facie failure to discharge its review function in relation to the assessment of the incidental costs incurred by the taxpayer in the second element of the costs base of a CGT event, that is, in the determining a cost base." (p 8)
"It is unnecessary to delay today’s matter by dealing with the propositions involved in Mr Lloyd’s submissions. There are other questions of law that could be posed, and the question as to whether that is a question of jurisdiction in the conditional sense, or a question of power, is a question for another day and another case. One could equally identify a question here as to whether, on the material placed before the Tribunal, and in the light of the reasons of the Tribunal, the Tribunal can be seen to have lawfully exercised its function of review." (p 5)
The cases are here:
Full Federal Court [2015] FCAFC 71: http://www.austlii.edu.au/au/cases/cth/FCAFC/2015/71.html
Administrative Appeals Tribunal [2014] AATA 622: http://www.austlii.edu.au/au/cases/cth/AATA/2014/622.html
If the tribunal found the existence of a CGT event, Mrs Coshott claimed that any arising gain should be offset by legal costs incurred during the dispute in question. The tribunal refused to consider the intricate details of the CGT asset's cost base because in their view her record keeping was unsatisfactory, and hence could not be used to reduce a capital gain.
In May 2015 the full federal court ruled that the tribunal failed to discharge its review function and that the matter should be remitted to the tribunal for a proper review of the cost base.
Appealing from the tribunal to the federal court must be done so on a question of law, which in this case was: "whether a failure to maintain adequate records in accordance with s 121-20 of the Income Tax Assessment Act 1997 (Cth) necessarily constitutes a failure to meet the onus of proof imposed on the taxpayer under s 14ZZK of the Taxation Administration Act 1953 (Cth)".
The question posed will provide an interesting debate in the tribunal when it is heard again later this year.
Highlights from the judgment
"It may be that there was a degree of lack of clarity in the full identification of the costs by way of overlap and otherwise, but this did not relieve the Tribunal of a responsibility to examine and consider the material that had been put before it, and to deal with that matter in its reasons, including whether the material established at least a minimum figure for costs. " (p 9)
"With the utmost respect to the Tribunal, on the basis of that material, we consider that there is a prima facie failure to discharge its review function in relation to the assessment of the incidental costs incurred by the taxpayer in the second element of the costs base of a CGT event, that is, in the determining a cost base." (p 8)
"It is unnecessary to delay today’s matter by dealing with the propositions involved in Mr Lloyd’s submissions. There are other questions of law that could be posed, and the question as to whether that is a question of jurisdiction in the conditional sense, or a question of power, is a question for another day and another case. One could equally identify a question here as to whether, on the material placed before the Tribunal, and in the light of the reasons of the Tribunal, the Tribunal can be seen to have lawfully exercised its function of review." (p 5)
The cases are here:
Full Federal Court [2015] FCAFC 71: http://www.austlii.edu.au/au/cases/cth/FCAFC/2015/71.html
Administrative Appeals Tribunal [2014] AATA 622: http://www.austlii.edu.au/au/cases/cth/AATA/2014/622.html
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