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  • Significant cases

    Table 4.5 lists significant cases decided by the Courts and Administrative Appeals Tribunal in 2012–13 and describes the main issues of each case and the outcome or status at 30 June 2013. Significant cases reported are those with the potential for ongoing impact on the tax system.

    The Commissioner has released decision impact statements in a number of these cases. To view a decision impact statement on a particular case visit ato.gov.au

    Income tax cases – Part IVA

    These cases raised issues under the general anti-avoidance rule in the income tax law (Part IVA of the Income Tax Assessment Act 1936). Some of these cases also raised other issues, as identified below.

    Table 4.5 Significant cases, 2012–13

    Matter

    Issue

    Outcome

    Macquarie Bank Limited v Commissioner of Taxation [2013] FCAFC 13

    This was the Commissioner's appeal to the Full Federal Court from the decision of the Federal Court [2011] FCA 1076 as to whether Part IVA applied to the use of consolidated group structures to reduce the cost base of an asset prior to disposal, thereby reducing a capital gain.

    This case raises important questions about the ability of Part IVA to apply to schemes involving a consolidated group.

    The Full Federal Court found in favour of the taxpayers on 27 February 2013.

    As at 30 June 2013, the Commissioner's application for special leave had not been heard. Special leave was subsequently refused.

    Mills v Commissioner of Taxation [2012] HCA 51

    This was the taxpayer's appeal to the High Court from a decision of the Full Federal Court [2011] FCAFC 158 as to whether imputation benefits were available to holders of hybrid stapled securities issued by a bank and in particular whether the general anti-avoidance provisions applied.

    The High Court found in favour of the taxpayer on 14 November 2012.

    The Court held that the bank's main purpose was to raise Tier 1 capital, which involved the bank franking its distributions.

    Income tax cases – relating to trusts

     

    Greenhatch v Commissioner of Taxation [2013] HCATrans 104

    This was the taxpayer's application for special leave to appeal to the High Court from a decision of the Full Federal Court [2012] FCAFC 84 as to whether the taxpayer was entitled to claim a deduction for a personal contribution made to a self-managed superannuation fund.

    The case turned on the extent to which the share of a trust's net income assessed to the taxpayer was attributable to a capital gain made by the trust.

    The High Court refused special leave on 10 May 2013 on the basis that there was insufficient reason to doubt the correctness of the Full Federal Court's decision.

    The Full Court had held that the percentage used to determine the share of net income assessed to the taxpayer was also to be used to determine the part of the share that was attributable to the gain.

    SCCASP Holdings Pty Ltd as trustee for the H&R Super Fund v Commissioner of Taxation [2013] FCAFC 45

    This was the taxpayer's appeal to the Full Federal Court from a decision of the Federal Court [2012] FCA 1052 that concerned whether a capital gain made by a family trust was subject to 'special income' rules, in particular whether, in order to be 'income derived' from a discretionary trust, it must be actually received.

    The Full Federal Court found in favour of the Commissioner on 10 May 2013.

    The taxpayer is seeking special leave to appeal to the High Court.

    As at 30 June 2013, the special leave application had not been heard.

    Yazbek v Commissioner of Taxation [2013] FCA 39

    This was the taxpayer's appeal to the Federal Court from the decision of the AAT [2012] AATA 477 as to whether the taxpayer was a beneficiary of a trust estate in the relevant income year, notwithstanding that he was merely a discretionary object of the trust, and did not receive any income from the trust in the relevant year.

    The Federal Court found in favour of the Commissioner on 31 January 2013.

    The Court held that the legislative expression 'beneficiary of a trust estate at any time' included a person named as a discretionary object of a trust during a relevant income year, notwithstanding that they did not receive income from the trust in that year.

    Other income tax cases

     

    Consolidated Media Holdings Ltd v Commissioner of Taxation [2012] HCA 55; [2012] HCATrans 186

    This was the Commissioner's application for special leave to appeal to the High Court from a decision of the Full Federal Court [2012] FCAFC 36 regarding whether the taxpayer was able to reduce a capital gain by classifying consideration received in respect of a share buy-back as a dividend.

    The High Court granted special leave and in the appeal found in favour of the Commissioner on 5 December 2012.

    The Court held that the consideration received by the taxpayer was sourced from a share capital account. Therefore, none of the consideration received was a dividend.

    Mitsui & Co (Australia) Ltd v Commissioner of Taxation [2012] FCAFC 109

    This was the taxpayer's appeal to the Full Federal Court from a decision of the Federal Court [2011] FCA 1423 as to whether the acquisition of an interest in a production licence under the Petroleum (Submerged Lands Act 1967 (Cth) involves a single asset or two separate) depreciating assets.

    The Full Federal Court found in favour of the Commissioner on 14 August 2012.

    The Court held that the amount paid for a production licence cannot be apportioned between a 'production' component and an 'exploration' component, to bring forward an immediate deduction for the exploration component.

    Goods and services tax cases

     

    A.P. Group Limited v Federal Commissioner of Taxation [2012] AATA 409 and [2012] AATA 617

    This was the taxpayer's application for review by the AAT of the Commissioner's objection decision that certain incentive payments of a type commonly made by motor vehicle manufacturers to dealers are consideration for taxable supplies and, therefore, subject to GST.

    The AAT found partly in favour of the Commissioner on 14 September 2012.

    The taxpayer appealed and the Commissioner cross-appealed the decision to the Full Federal Court.

    At 30 June 2013, the appeal had been heard and the decision reserved.

    ATS Pacific Pty Ltd v Commissioner of Taxation [2013] FCA 341

    This was the taxpayer's appeal to the Federal Court from the Commissioner's objection decision concerning whether supplies made by an inbound tour operator to a non-resident travel agent were supplies of arranging services (and thus GST-free) or supplies of the individual components of a tour package (and thus either subject to GST or input taxed).

    The Federal Court found partly in favour of the Commissioner on 15 April 2013.

    The taxpayer appealed to the Full Federal Court and the Commissioner has cross-appealed.

    As at 30 June 2013, the appeal had not been heard.

    Commissioner of Taxation v Qantas Airways Limited [2012] HCA 41

    This was the Commissioner's appeal to the High Court from a decision of the Full Federal Court [2011] FCAFC 113 that concerned whether an airline made a supply for consideration where the passenger did not take a booked flight, and fares paid by the passengers were either not refundable or no refund was claimed.

    The High Court found in favour of the Commissioner on 2 October 2012.

    The majority held that the fares were consideration for a supply, even though the flights were not taken, rejecting a submission that there could only be a supply for consideration where the 'essence or purpose' of the transaction was fulfilled.

    Commissioner of Taxation v Unit Trend Services Pty Ltd [2013] HCA 16 and[2012] HCATrans 361

    This was the Commissioner's application for special leave to appeal to the High Court from a decision of the Full Federal Court [2012] FCAFC 112 that concerned the application of the GST general anti-avoidance provisions to a scheme that sought to reduce the GST payable on sales of new residential premises.

    On 1 May 2013, the High Court granted special leave and allowed the Commissioner's appeal.

    The High Court held that the general anti-avoidance provision was not excluded from applying because the GST benefit was not attributable to a choice, election or agreement made by the taxpayer under the GST law. That exclusion only applies to the benefit provided for under the provision that allows the choice, election or agreement to be made.

    Petroleum resource rent tax cases

     

    Esso Australia Resources Pty Ltd v Commissioner of Taxation [2012] HCATrans 194

    This was the taxpayer's application for special leave to appeal to the High Court from a decision of the Full Federal Court [2012] FCAFC 5 as to whether the taxpayers were entitled to deductions for petroleum resource rent tax (PRRT) purposes for mutualised research expenditure and indivisible payments made under a contract to a related party.

    The High Court refused special leave on 17 August 2012.

    The Full Federal Court decision confirmed that taxpayers cannot deduct expenditure that is not incurred in carrying on or providing relevant PRRT project activities. However, the Court went further in noting that the taxpayer was not entitled to any deductible expenditure because the PRRT deduction provisions do not allow apportionment of mixed expenditure.

    The PRRT law has since been amended to allow for apportionment.

    ZZGN v Commissioner of Taxation [2013] AATA 351

    This was the taxpayer's application for review by the AAT of the Commissioner's objection decision that disallowed in part deductions claimed by the taxpayer relating to the petroleum resource rent tax (PRRT).

    The case concerned whether the amounts deducted were expenditure incurred in connection with exploration for petroleum.

    The AAT found mainly in favour of the Commissioner on 5 April 2013.

    The AAT held that 'exploration' for PRRT purposes takes its ordinary meaning. This contemplates the use of survey techniques to identify prospective oil or gas fields and includes the drilling of appraisal wells but does not extend to feasibility studies for future development and production.

    The AAT also held that 'in connection with' requires a reasonably direct relationship between the 'operations' for which expenditure has been incurred and 'exploration'.

    Fuel tax cases

     

    Linfox Australia Pty Ltd v Commissioner of Taxation [2012] AATA 517

    This was the taxpayer's application for review by the AAT of the Commissioner's objection decision that the taxpayer's fuel tax credit entitlements for fuel used in refrigerated transport trailers is reduced by the amount of the road user charge because the fuel is used for travelling on the road.

    The AAT found in favour of the taxpayer on 7 August 2012.

    The AAT held that the fuel was acquired and used for the purpose of refrigerating the cargo inside the refrigerated trailer and not for the purpose of travelling on the road.

    Taxation administration cases

     

    Binetter v Deputy Commissioner of Taxation [2013] HCATrans 32

    This was the taxpayer's application for special leave to appeal to the High Court from a decision of the Full Federal Court [2012] FCAFC 126 as to whether a taxpayer could decline to comply with a formal notice requiring production of information on the grounds of self-incrimination or improper purpose.

    The High Court refused the taxpayer's application for special leave on 15 February 2013.

    The decision confirmed that taxpayers cannot claim the privilege of self-incrimination to refuse to comply with such notices.

      Last modified: 03 Oct 2014QC 42604