FC of T v SPOTLESS SERVICES LIMITED & ANOR

Judges: Brennan CJ
Dawson J
Toohey J
Gaudron J
Gummow J
Kirby J

McHugh J

Court:
Full High Court

Judgment date: 3 December 1996

---

McHugh J

I agree that these appeals should be allowed.

The appeals turn on the application of the very general words of Pt IVA of the Income Tax Assessment Act 1936 (Cth) to a very special set of facts. They are set out in the joint judgment of Brennan CJ, Dawson, Toohey, Gaudron, Gummow and Kirby JJ. Upon those facts, this case is far removed from the ordinary case of a taxpayer switching an investment from one which had no tax advantages to one from which it would or might obtain tax

---

ATC 5212

benefits. ``Scheme'' is defined widely for the purposes of Pt IVA and includes any ``action, course of action or course of conduct''. ^[31] s 177A(1)(b). The unilateral act of a taxpayer may therefore constitute a ``scheme'' for the purpose of that Part. ^[32] s 177A(3). However, Pt IVA does not authorise the Commissioner to make a determination under par (a) of s 177F(1) merely because a taxpayer has arranged its business or investments in a way that derives a tax benefit. More is required before the Commissioner of Taxation can lawfully make a determination under that paragraph. First, the scheme must be examined in the light of the eight matters set out in par (b) of s 177D. Second, that examination must give rise to the objective conclusion that the taxpayer or some other person entered into or carried out the scheme or a part of the scheme for the sole or dominant purpose of enabling the taxpayer or the taxpayer and some other person to obtain a tax benefit in connection with the scheme. That conclusion will seldom, if ever, be drawn if no more appears than that a change of business or investment has produced a tax benefit for the taxpayer.

The facts of the present case show much more than a switch of investments resulting in a tax benefit. The elaborate nature of the scheme and its attendant circumstances lead inevitably to the conclusion that the scheme was not merely tax driven but that its dominant purpose was to enable the taxpayer to obtain a tax benefit by participating in the scheme. That being so, the appeals must be allowed.

ORDER

In each appeal, the order is:

• 1. Appeal allowed with costs.
• 2. Set aside the order of the Full Court of the Federal Court of Australia and in lieu thereof order:
  • (a) Appeal to the Full Court allowed with costs.
  • (b) Set aside the orders of Lockhart J and in lieu thereof order that the taxpayer's appeal be dismissed with costs.