• Test case funding program

    Table 7.6 lists cases funded under the test case litigation program, 2010-11.

    TABLE 7.6: Test case litigation, 2010-11

    Case

    Issue

    Outcome, clarification obtained and status

    Aid/Watch Incorporated v Commissioner of Taxation [2010 [HCA] 42]

    Test case funding agreed between the parties by way of a test case funding deed.

    This was the taxpayer's appeal from a decision of the Full Federal Court [2009] FCAFC 128. The issue was whether the taxpayer is a charitable institution engaged primarily in activities that seek to influence government policy in relation to the nature, extent, and means of delivery of overseas aid.

    The High Court found in favour of the taxpayer on 1 December 2010.

    The High Court held that the taxpayer was a charitable institution and there is no general doctrine excluding political objects from charitable purposes. This case arguably widens what constitutes a charitable purpose.

    On 10 May 2011, the Government announced that it would introduce a statutory definition of 'charity', taking account of recent judicial decisions (including the Aid/Watch case).

    ATO Reference 10/6930

    Test case funding agreed between the parties by way of a test case funding deed.

    The issue is whether the taxpayer can claim a deduction for a personal contribution made to a complying superannuation fund.

    This case turns on the extent to which the share of a trust's net income assessed to him is attributable to a capital gain.

    At 30 June 2011, this matter had been heard and the decision reserved.

    ATO reference 10/7892

    Test case funding agreed between the parties by way of a test case funding deed.

    The issue is whether income replacement payments under an income protection policy are attributable to employment activities where they are triggered by incidents outside of the work environment.

    At 30 June 2011, the matter had not been set down for hearing.

    Commissioner of Taxation of the Commonwealth of Australia v Graham Bargwanna & Melinda Bargwanna as trustees of the Kalos Metron Charitable Trust

    Funding approved in accordance with High Court funding policy and provided by way of a cost order against the Commissioner.

    This is the Commissioner's application for special leave to appeal to the High Court from the judgment of the Full Federal Court [2011] FCAFC 18. The issue is whether a fund established for charitable purposes should be refused endorsement as an income tax exempt entity on the basis that the fund was not applied for the purposes for which it was established.

    The Full Federal Court allowed the appeal even though part of the fund was applied for the benefit of the trustees and the person who was responsible for administering the fund.

    At 30 June 2011, the application for special leave had not been heard.

    Commissioner of Taxation v Byrne Hotels Qld Pty Ltd

    Funding provided by way of a cost order against the Commissioner in accordance with the policy to generally fund appeals by the Commissioner against adverse Administrative Appeals Tribunal decisions.

    This is the Commissioner's appeal against the decision of the Administrative Appeals Tribunal [2010] AATA 455. The issue is whether, for the purposes of the small business capital gains tax concessions, the costs of sale of the taxpayer's assets were included as liabilities in determining whether the taxpayer satisfied the maximum net asset value test.

    The case challenges the Commissioner's view that the term 'liabilities' does not include contingent liabilities.

    At 30 June 2011, the appeal had been heard and the decision was reserved.

    Commissioner of Taxation v David Clark

    Commissioner of Taxation v Helen Clark

    Funding approved in accordance with High Court funding policy and provided by way of a cost order against the Commissioner.

    This is the Commissioner's application for special leave to appeal to the High Court from the decision of the Full Federal Court [2011] FCAFC 5. The issue is whether there was sufficient continuity in the trust, given changes in beneficial ownership, so that carry-forward net capital losses incurred before the changes could be applied to reduce a capital gain made after the changes.

    For more information about the Full Federal Court decision, refer to the summary of significant litigation decisions.

    At 30 June 2011, the application for special leave had not been heard.

    Commissioner of Taxation v H [2010] FCAFC 128

    Funding provided by way of a cost order against the Commissioner in accordance with the policy to generally fund appeals by the Commissioner against adverse Administrative Appeals Tribunal decisions.

    This was the Commissioner's appeal from the decision of the Administrative Appeals Tribunal [2010] AATA 78. The issue was whether income tax assessed under an amended assessment is a present legal obligation for the year in which the amended assessment is made, or for the year to which it relates, and whether income tax is a present legal obligation at the end of the income year. A similar issue arose in relation to general interest charge payable.

    These issues are relevant to determining whether a company has a distributable surplus, which affects whether amounts are treated as dividends and assessed to shareholders in the company.

    The Full Federal Court found in favour of the taxpayer on 20 October 2010.

    The Full Federal Court held that the obligation to pay tax is a 'present legal obligation' for the year in which the amended assessment is made, or for the year to which it relates, and that general interest charge remains a 'present legal obligation' on each day on which the tax that should have been paid remains unpaid. The decision potentially broadens the liabilities taken into account in calculating a company's distributable surplus, and therefore may reduce income tax payable by shareholders.

    The Commissioner applied for special leave to appeal to the High Court but later withdrew the application.

    This matter is finalised.

    Commissioner of Taxation v Eduard Sent

    Funding provided by way of a cost order against the Commissioner in accordance with the policy to generally fund appeals by the Commissioner against adverse Administrative Appeals Tribunal decisions.

    This is the Commissioner's appeal to the Federal Court from the decision in the Administrative Appeals Tribunal [2011] AATA 198. The issue is whether a payment to an 'executive share trust' on behalf of a chief executive officer was derived by him as ordinary income.

    At 30 June 2011, the appeal had not been heard.

    Commissioner of Taxation v Tricare Group Pty Ltd

    Funding provided by way of a cost order against the Commissioner in accordance with the policy to generally fund appeals by the Commissioner against adverse Administrative Appeals Tribunal decisions.

    This is the Commissioner's appeal to the Federal Court from the decision in Administrative Appeals Tribunal [2011] AATA 298. The issue is whether payments made by a purchaser of retirement village to residents who terminated their leases are deductible.

    The Administrative Appeals Tribunal held that 'Share Of Capital Appreciation Payments' made by the purchaser to retirement village residents who terminated their leases were deductible and not capital in nature.

    At 30 June 2011, this matter had not been heard.

    Wentworth District Capital Ltd v Commissioner of Taxation [2010] FCA 862

    Commissioner of Taxation v Wentworth District Capital Limited [2011] FCAFC 42

    Test case funding agreed between the parties by way of a test case funding deed

    Funding was approved for the Full Federal Court appeal in accordance with the policy to generally extend funding to appeals previously funded.

    The issue was whether a community bank is exempt from income tax as an association established for community service purposes.

    The Federal Court found in favour of the taxpayer on 13 August 2010 and the Full Federal Court found in favour of the taxpayer on 28 March 2011.

    The Full Federal Court held that the taxpayer was exempt from income tax because its main or dominant purpose was a community service. This potentially widens the scope for endorsement of bodies as community service organisations.

    The matter is finalised.

    Commissioner of Taxation v White [2010] FCA 730

    Funding provided by way of a cost order against the Commissioner in accordance with the policy to generally fund appeals by the Commissioner against adverse Administrative Appeals Tribunal decisions.

    This was the Commissioner's appeal from the Administrative Appeals Tribunal [2009] AATA 869. The issue was whether the full amount contributed to an employee incentive share trust plan on behalf of the taxpayer should be included in his assessable income and whether there were any grounds for remission of penalty.

    The Federal Court found in favour of the Commissioner on 14 July 2010.

    The Court found that contributions made to an employee incentive share trust by the taxpayer's employers at his direction, or on his behalf, are assessable to him.

    The taxpayer did not appeal the decision.

    Aurora Developments Pty Ltd v Commissioner of Taxation [2011] FCA 232

    Test case funding agreed between the parties by way of a test case funding deed.

    This was the taxpayer's appeal to the Federal Court from a decision on objection. The issue was whether a supply of land was the supply of a going concern and whether the day of supply is the date on which the contract is entered into or the date of completion (settlement) of the contract.

    The question of the date of supply has been a contentious issue.

    The Federal Court found in favour of the Commissioner on 18 March 2011.

    The Court held that the sale of a residential property development site by the taxpayer was not a GST-free supply of a going concern because the taxpayer had abandoned its development project on the land, and, therefore, was no longer carrying on its project enterprise in respect of that land.

    At 30 June 2011, this matter is not finalised.

    The Commissioner of Taxation of the Commonwealth of Australia v Gloxinia Investments Limited as Trustee for Gloxinia Unit Trust [2010] HCATrans 255

    Funding approved in accordance with High Court funding policy and provided by way of a cost order against the Commissioner.

    This was the Commissioner's application for special leave to appeal to the High Court against the decision of the Full Federal Court [2010] FCAFC 46. The issue was whether sales of residential premises to third parties are taxable supplies of new residential premises, where the premises have been constructed in association with a development lease arrangement with a local government council.

    As reported in the Annual Report 2009-10, the majority of the Full Federal Court held that the sales to third parties did not constitute the sale of new residential premises.

    The High Court refused to grant special leave on 1 October 2010.

    On 27 January 2011, the Government announced that it will amend the GST Act in light of this decision to achieve a different policy outcome.

    Commissioner of Taxation v Luxottica Retail Australia Pty Ltd [2011] FCAFC 20

    Test case funding agreed between the parties by way of a test case funding deed.

    Funding was approved for the Full Federal Court appeal in accordance with the policy to generally extend funding to appeals previously funded.

    This was the Commissioner's appeal from a decision of the Administrative Appeals Tribunal [2010] AATA 22. The issue was how consideration should be apportioned between the GST-free and taxable components of a supply of complete spectacles, where the price of the frames was discounted. The lenses were GST-free and the frames were taxable.

    The Full Federal Court found in favour of the taxpayer on 23 February 2011.

    The Full Federal Court held that the GST should be calculated on the discounted frame price. The decision recognises that the apportionment of consideration between elements of a supply will be specific to the facts of the case.

    This matter is finalised.

    Commissioner of Taxation of the Commonwealth of Australia v Secretary of the Department of Transport (Victoria) [2010] HCATrans 330

    Funding approved in accordance with High Court funding policy and provided by way of a cost order against the Commissioner.

    This was the Commissioner's application for special leave to appeal to the High Court from the decision of the Full Federal Court [2010] FCAFC 84. The issue was whether the Department was entitled to input tax credits for payments made to taxi operators under a program to subsidise the travel of disabled persons.

    The Full Federal Court decided that the Department was entitled to the input tax credits.

    The High Court refused to grant the Commissioner leave to appeal on 10 December 2010.

    Under the Full Federal Court's decision, government subsidy payments to service providers will more often be characterised as consideration for a separate taxable supply to the paying entity, with the consequence that the paying entity is entitled to an input tax credit.

    Sunchen Pty Ltd v Commissioner of Taxation [2010] FCAFC 138

    Test case funding agreed between the parties by way of a test case funding deed.

    Funding was approved for the Full Federal Court appeal in accordance with the policy to generally extend funding to appeals previously funded.

    This was the taxpayer's appeal from a decision of the Federal Court [2010] FCA 21. The issue was whether the sale of land, then occupied by a residential tenant to the taxpayer, a property developer, is a GST input taxed supply of 'residential premises' to be predominantly used for residential accommodation.

    The Full Federal Court found in favour of the Commissioner on 8 December 2010 holding that the question of whether residential premises are to be predominantly used for residential accommodation should be determined objectively by reference to the attributes of the property.

    This matter is finalised.

    ATO reference 11/3071

    Test case funding approved for eight applicants by way of a test case funding deed.

    The issue is whether members of a constitutionally protected superannuation fund are required to pay the superannuation charge.

    At 30 June 2011, the matter had not been set down for hearing.

    Commissioner of Taxation v Administrative Appeals Tribunal [2011] FCAFC 37

    Funding provided by way of a cost order against the Commissioner in accordance with the policy to generally fund appeals by the Commissioner against adverse Administrative Appeals Tribunal decisions.

    This was the Commissioner's appeal from the decision of the Administrative Appeals Tribunal [2010] AATA 573. The issue was whether the Administrative Appeals Tribunal has jurisdiction to review the Commissioner's decision to refuse to make a determination to disregard or reallocate excess superannuation contributions for the purposes of the excess contributions tax.

    The majority of the Full Federal Court found against the Commissioner on 17 March 2011.

    The Full Federal Court held that the Tribunal did not have jurisdiction. The decision limits the ability of some taxpayers to object to excess contributions tax assessments.

    This matter is finalised.

    Commissioner of Taxation v Newton [2010] FCA 1440

    Funding provided by way of a cost order against the Commissioner in accordance with the policy to generally fund appeals by the Commissioner against adverse Administrative Appeals Tribunal decisions.

    This was the Commissioner's appeal from a decision of the Administrative Appeals Tribunal [2010] AATA 475. The issue was whether workers were paid to do work wholly or principally of a domestic or private nature, such that they were excluded from the superannuation guarantee regime.

    The Federal Court found in favour of the Commissioner on 21 December 2011.

    Remitting the matter back to the Administrative Appeals Tribunal, the Court held that workers engaged by the taxpayer to provide services to her clients at their private homes are not excluded from the superannuation guarantee regime.

    The taxpayer appealed the decision to the Full Federal Court.

    At 30 June 2011, the appeal had not been heard.

    Deputy Commissioner of Taxation v Desley Soong

    Funding approved in accordance with High Court funding policy and provided by way of a cost order against the Commissioner.

    This is the Commissioner's application for special leave to appeal to the High Court from the decision of the NSW Court of Appeal [2011] NSWCA 26.

    The Court of Appeal found in favour of the taxpayer holding, contrary to their earlier decision in DC of T v Meredith [2007] NSWCA 354, that the Commissioner 'gave' the defendant the Director Penalty Notices on the date they were received, rather than the date they were posted.

    At 30 June 2011, the application for special leave had not been heard.

      Last modified: 31 Oct 2011QC 28036