CAMERON BRAE PTY LTD v FC of TJudges:
Full Federal Court, Melbourne
MEDIA NEUTRAL CITATION:
 FCAFC 135
Stone and Allsop JJ
1. We have had the advantage of reading in draft the reasons for judgment of Jessup J. His Honour's reasons relieve us of the burden of describing the factual background and context of the resolution of the issues and permit us to express our views assuming the background that he has identified. Though we are in agreement with parts of his Honour's reasons, we are unable to agree with his conclusion that the appeal should be allowed.
The issues for consideration
2. Taking the appeal and the notice of contention together, there are four broad issues for resolution:
- (a) whether the IS & PL Superannuation fund (the "Fund") is a superannuation fund for the purpose of s 82AAE of the Income Tax Assessment Act 1936 (Cth) (to which we will refer as the "Tax Act" when referring to its consolidated form, from time to time);
- (b) whether the $500,000 paid by the appellant to the Fund was "for the purpose of making provision for superannuation benefits for an eligible employee" of the appellant;
- (c) whether, if no deduction is allowable under s 82AAE of the Tax Act, the payment was deductible under s 8-1 of the Income Tax Assessment Act 1997 (Cth) (the "1997 Act"); and
- (d) whether the appellant was properly liable to penalty tax under s 226K of the Tax Act.
The approach to interpretation
3. The resolution of issues (a) and (b) rests on the proper interpretation of the phrases "superannuation fund" and "for the purpose of making provision for superannuation benefits for an eligible employee" in s 82AAE. The task of interpreting these provision is to be carried out by reference to the history and context of the legislation:
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR at 408;
Newcastle City Council v GIO General Ltd (1997) 191 CLR at 112;
Network Ten Pty Ltd v TCN Channel Nine Pty Limited (2004) 218 CLR 273 at - and the cases otherwise cited in
Braverus Maritime Inc v Port Kembla Coal Terminal Ltd (2005) 148 FCR at . In the context of revenue statutes (not implying any different approach), see
Jeffrey James Prebble Pty Limited v Commissioner of Taxation 2003 ATC 4770; (2003) 131 FCR at - and
HP Mercantile Pty Limited v Commissioner of Taxation 2005 ATC 4571; (2005) 143 FCR 553. The context here includes the statutory history of the provisions in question, as well as any other statute that can be viewed as part of that context. Of course, at the heart of the task is the giving of close attention to the text and structure of the relevant provisions as the words used by Parliament.
4. We agree with Jessup J that the Fund was a superannuation fund for the purposes of s 82AAE of the Tax Act. That agreement involves a rejection of the respondent Commissioner's submissions that the ordinary meaning of the phrase "superannuation fund" excludes a fund set up solely for superannuation purposes, but in which a trustee has the power to choose which members of the fund receive superannuation benefits and in what amount. We disagree with Jessup J about the purpose of the payment here. That disagreement is founded upon what we see as the content of the phrase "of making provision for superannuation benefits for an eligible employee" in s 82AAE. We see that phrase as requiring the payment to make provision for, in the sense of provide, individual personal benefits, for an existing employee or employees. Where the decision to provide such benefits is at the discretion of the trustee, both in relation to making a payment and in deciding who is to be the beneficiary of such payment, merely augmenting the funds under the control of the trustee is not sufficient to provide individual personal benefits for an existing employee or employees.
5. Given that our view is that there is no deduction available under s 82AAE, it is necessary to deal with s 8-1 of the 1997 Act. (There was no debate about the availability of s 8-1 as a basis for deductibility in these circumstances.) In our view, there is also no deduction available under s 8-1. Although we are prepared to accept that the payment was an outgoing satisfying s 8-1(1), we consider that the payment was an outgoing of capital for the purposes of s 8-1(2).
The relevant provisions
6. Section 82AAE was in the following terms (having since been repealed):
"A deduction is allowable under this Subdivision in respect of an amount paid by a taxpayer as a contribution to a non-complying superannuation fund (as defined by subsection 267(1)) for the purpose of making provision for superannuation benefits for an eligible employee other than such an employee who is an exempt visitor to Australia for the purposes of section 517 in relation to the year of income in which the amount is paid."
7. Section 8-1 of the 1997 Act is in the following terms:
- "(1) You can deduct from your assessable income any loss or outgoing to the extent that:
- (a) it is incurred in gaining or producing your assessable income; or
- (b) it is necessarily incurred in carrying on a * business for the purpose of gaining or producing your assessable income.
- (2) However, you cannot deduct a loss or outgoing under this section to the extent that:
- (a) it is a loss or outgoing of capital, or of a capital nature; or
- (b) it is a loss or outgoing of a private or domestic nature; or
- (c) it is incurred in relation to gaining or producing your * exempt income; or
- (d) a provision of this Act prevents you from deducting it.
- (3) A loss or outgoing that you can deduct under this section is called a general deduction."
The history and context of s 82AAE
8. The resolution of both issues (a) and (b) is assisted by an understanding of the background and context of s 82AAE. In
Harris v Commissioner of Taxation 2002 ATC 4659; (2002) 125 FCR at  - , the Full Court, in dealing with a different issue of construction, discussed the statutory context and legislative history of ss 82AAE and 82AAA of the Tax Act. The same issue and the same history were discussed in Prebble 131 FCR at -. The issue in Harris and Prebble was whether the same person could be both the contributing taxpayer (seeking the tax deduction) and also the eligible employee. The Full Court in Harris answered that question in the negative, finding that there was required to be a relationship between two parties (the employer or a party in its stead) and the employee. The Full Court in Prebble applied Harris (Hill and Hely JJ on the basis that Harris was not clearly wrong and Spender J on the basis that it was correct). Special leave in Prebble was refused on the basis that there was insufficient prospects of success in demonstrating error in Harris or in how Prebble treated Harris.
ATC 4940The parties, in particular the respondent, provided a comprehensive body of earlier statutory provisions and secondary materials. We have had careful regard to that material and, in particular, the Income Tax Assessment Act 1915 (Cth), (the "1915 Act"), ss 11 and 18; the Income Tax Assessment Act 1922 (Cth) the "1922 Act", ss 14 and 23(1)(j); the Income Tax Assessment Act 1936 (Cth) (to which we will refer as the "1936 Act" when referring to the Act passed in that year), ss 23(j), 66 and 78(1)(b); the Income Tax Assessment Act 1941 (Cth) (the "1941 Act"), ss 12 and 13 which amended ss 66 and 78(1) of the Tax Act; the Income Tax Assessment Act 1944 (Cth) (the "1944 Act"), s 7 which inserted a new s 66 into the Tax Act; the Income Tax and Social Services Contribution Assessment Act (No 3) 1952 (Cth) (the "1952 Act"), s 11 which amended s 66 and inserted s 23(ja) of the Tax Act; the Income Tax and Social Services Contribution Assessment Act 1961 (Cth) (the "1961 Act") , s 11 which inserted the first definition of "superannuation fund" into the Commonwealth tax legislation by inserting s 121B into the Tax Act; the Report of the Commonwealth Committee on Taxation (the "Ligertwood Committee"), in particular chapter 22 concerning superannuation funds; the Income Tax and Social Services Contribution Assessment Act (No 3) 1964 (Cth) (the "1964 Act"), s 6 which inserted which inserted s 23F and amended s 23 of the Act and s 18 which inserted Subdivision AA containing ss 82AAA to 82AAR, replacing ss 66 and 79 of the Tax Act, and thereby giving statutory form to many of the recommendations of the Ligertwood Committee; the Income Tax Assessment Act 1965 (Cth) (the "1965 Act"), which introduced into s 6(1) of the Tax Act a definition of the phrase "superannuation benefits"; the Taxation Laws Amendment Act (No 4) 1987 (Cth) (the "1987 Act"), which repealed s 23F, introduced s 23FC and introduced an inclusive definition of "superannuation fund" into s 6(1) of the Tax Act; the Taxation Laws Amendment Act (No 2) 1989 (Cth) (the "1989 Act"), which introduced Part IX into the Tax Act, entitled "Taxation of Superannuation Business and Related Business", and Schedule 1 which, amongst other things, amended s 82AAA, repealed ss 82AAB to 82AAP and replaced them with a new s 82AAC; the Occupational Superannuation (Reasonable Benefit Limits) Amendment Act 1990 (Cth) (the "1990 Act"); the Taxation Laws Amendment Act (No 2) 1992 (Cth) (the "First 1992 Act"); the Taxation Laws Amendment (Superannuation) Act 1992 (Cth) (the "Second 1992 Act"); and the Taxation Laws Amendment Act (No 4) 1994 (the "1994 Act"), which amended s 82AAC and introduced s 82AAE.
10. A minute, provision by provision, analysis of that history would be unhelpful and opaque in an attempt to explain our reasons. Thus, we propose to extract what we see as the general propositions relevant to understanding and interpreting s 82AAE as it appeared in the Tax Act in the year of income.
11. First, the provisions covering deductions were concerned with the existing employees of an employer. This was so even if the payment was for the benefit of the general body of employees: see especially the 1944 Act and s 66 discussed in Harris 125 FCR at -. The identified individual person who is an employee can also be seen in the 1990 Act, the First 1992 Act and the Second 1992 Act. The definitions of "eligible employee" and "employee" in s 82AAA also make that clear:
" 'eligible employee' , in relation to a taxpayer means -
- (a) in the case of a taxpayer whether a company or a person other than a company -
- (i) an employee of the taxpayer;
- (ii) an employee of a company in which the taxpayer has a controlling interest; or
- (iii) an employee of a company in which the taxpayer is the beneficial owner of shares but in which the taxpayer does not have a controlling interest (not being an employee who is associated with the taxpayer or who, or a relative of whom, has set apart or paid, or entered into a contract, agreement or arrangement under which he is, or will or may be, required to set apart or pay, amounts as or to a fund for the purpose of providing superannuation benefits for, or for a relative of, the taxpayer); and
- (b) in the case of a taxpayer being a company -
- (i) an employee of a person that has a controlling interest in the taxpayer; or
ATC 4941(ii) an employee of a company in which a controlling interest is held by a person who also has a controlling interest in the taxpayer;
'employee' means a person who is employed by a taxpayer and -
- (a) is engaged in producing assessable income of the taxpayer; or
- (b) is a resident of Australia and is engaged in the business of the taxpayer."
12. Secondly, the contributions that were deductible provided for "individual personal benefits, pensions or retiring allowances" to such employees. This notion of individual personal benefits to existing people reinforces the notion of present and real benefits, as opposed to possible or expected benefits.
13. Thirdly, the contributions that were deductible provided such individual personal benefits to such existing employees. Various phrases were used: "to provide" (see the 1915 Act, s 18(j); the 1922 Act, s 23(1)(j); the 1936 Act and the Tax Act, ss 66 and 78(1)(b)); "the provision of" (see the 1941 Act, as it amended the Tax Act, ss 66 and 78(1); and the 1944 Act, in particular the form of s 66(2) of the Tax Act introduced thereby); and "make provision for" (see the 1952 Act and the form of s 66(1) introduced thereby; the 1964 Act and the form of ss 82AAC, 82AAD, 82AAE, 82AAM introduced thereby; the 1989 Act and s 82AAC introduced thereby; and the 1994 Act and s 82AAE introduced thereby). All the relevant deduction provisions can be seen as involving an element of purpose. In the earlier provisions, the purposes can be seen as immanent within the infinitive "to provide". For example, "sums set aside or paid by an employer of labour as or to a fund to provide individual personal benefits etc": the 1915 Act, s 18 (j); "So much of any sum set apart or paid by the taxpayer ... as or to a fund to provide individual personal benefits etc": the 1936 Act, s 66. In 1964, the phrase "for the purpose of making provision for superannuation benefits" was introduced: the 1964 Act, ss 82 AAC, 82AAD, 82AAE and 82AAM. This constant element of purpose was accompanied by the element that the payment, or setting aside, of sums would itself create the right to receive the superannuation benefits, which, of course, were defined as "individual personal benefits, pensions or retiring allowances". It is in the nature of superannuation that the physical receipt of funds by the employee would be in the future. Thus, the word "benefits" incorporates or involves the notion of the right to the benefit which will mature in due course. However, implicit in all the provisions is that the payment or setting aside that was deductible provided, that is "furnished or supplied" (see The Macquarie Dictionary Revised Ed 1985 p 1367) rights to receive the superannuation benefits, which benefits were always described or defined as "individual personal benefits, pensions or retiring allowances". Although the phrase "make provision for" might be seen as having a somewhat wider meaning of "making arrangements for supplying" (see also The Macquarie Dictionary Revised Ed 1985 p1367) we would not read the phrase so widely here. As we read the provisions to which we have referred, the references "provide" or "provision" in all the relevant provisions carried with them the notion of supplying or furnishing the right to superannuation benefits by the payment.
14. Fourthly, these propositions, especially the second and third, can be seen to be confirmed and underpinned by the express requirement, until the 1989 Act removed it, that the rights to receive the benefits be "fully secured": see the 1915 Act, s 18(j); the 1922 Act, s 23(1)(j); the 1936 Act and the Tax Act, ss 66 and 78(1); the 1964 Act, s 82AAC. In relation to the notion of "fully secured" being referable to the right to receive the benefits, see
Federal Commissioner of Taxation v The Northern Timber and Hardware Company Proprietary Limited (1960) 103 CLR at 657.
15. The notion of provision of benefit to existing employees was recognised in the judgments in the Full Court in
Raymor Contractors Pty Limited v Federal Commissioner of Taxation 91 ATC 4259; (1991) 21 ATR 1410, a case dealing with years of income from 1974 to 1977. Davies J (with whom Wilcox J agreed) said, at 1412 and 1413:
"In s 82AAC(1), the word 'purpose' required that the sum set apart or paid in the year of income effected a contribution
ATC 4942towards superannuation benefits for or for a dependant of an eligible employee. The term did not look primarily to the subjective factors actuating the setting aside or payment of the sum claimed. Thus, in the ordinary case, it was sufficient to found a deduction that a superannuation fund had been established solely for the provision of superannuation benefits for employees and their dependants, that the fund had been maintained for that purpose, that a sum appropriate, having regard to the provisions of s 82AAE and 82AAM, had been set aside or paid into the fund for the fund's purposes and that the rights of the employees and dependants to receive benefits from the fund were fully secured. If such were the case, it was not pertinent that the sum was set apart and paid into the fund not out of beneficence but out of a duty imposed by law or by an industrial award and not of consequence that the employer had taken into account in establishing and maintaining the fund that incidental benefits such as taxation benefits or the borrowing of sums from the fund at a low rate of interest could be obtained.
Subdiv AA of Div 3 was very much concerned with the relationship between the sum set apart or paid and an individual employee or employees. Section 82AAC(1) uses the expressions 'an eligible employee' and 'the employee'. Section 82AAE specifies the amounts allowable in respect of the amount set aside or paid 'for the purpose of making provision for superannuation benefits for, or for dependants of, any one employee'. These provisions, which reflect the concept in s 66 of the former, namely 'individual personal benefits', are concerned to ensure that moneys are set aside or paid for the purpose of providing benefits for individual employees who have rights in the fund and that those rights are fully secured. It is not necessary that an employer should turn his attention to the particular circumstances of each employee when making a contribution for it is sufficient that the contribution is made for the purpose of benefiting all or identifiable members of the fund . If no allocation has been made, the Commissioner may determine a sum deemed to be 'the part of the amount set apart or paid in respect of a particular employee' It is not, however, sufficient that the employer has in mind that the moneys in the superannuation fund will ultimately go to the benefit, not of the general members of the fund, but of a remaining employee or employees such as a managing director/principal shareholder. Funds which are managed for such an ultimate end are not funds maintained for the benefit of the employees in respect of whom the contributions have, in the formal sense, been set apart or paid into the fund."
16. Hill J in the same case, agreeing in the result, said the following at 1425:
"Second, to the extent that Spender J may be thought to have suggested that a payment by way of contribution to a superannuation fund was not deductible unless in the year of income that payment was allocated by the contributor amongst the relevant employees, so wide a proposition could not be accepted. Many fund deeds require the employer contributor to pay an amount, actuarially calculated to be sufficient to fund the totality of benefits payable by the fund. In such case no particular amount may be paid in respect of a particular employee although it would be possible on an actuarial basis to calculate how much of the total payment was referable to a particular employee.
There is no reason why the words "an eligible employee' in s 82AAC might not be read in the plural as well as in the singular. So read, it would be sufficient if a taxpayer, for the purpose of making provision for superannuation benefits for eligible employees, paid an amount in the year of income. If the amount were undifferentiated, in that sense, as the Act stood in 1977, s 82AAM would operate to enable the Commissioner to determine the allocation. The terms of that section reinforce the view that s 82AAC is capable of operation when an amount is paid without allocation to a fund in which benefits are to be provided for
ATC 4943more than one employee. Section 82AAM provides as follows:"
'Where a taxpayer sets apart or pays an amount as or to a fund for the purpose of making provision for superannuation benefits for, or for dependants of, more than one employee but does not specify the part of the amount set apart or paid in respect of a particular employee, that part shall, for the purposes of this Subdivision, be deemed to be such amount as the Commissioner determines.'
17. The fact that, as Hill J discussed, s 82AAM at the relevant time provided for the Commissioner to determine an allocation for the purposes of the section by deeming an amount to have been set apart or paid in respect of a particular employee does not undermine the need for the payment to create present and real, as opposed to possible or expected benefits. Rather, this fact and the fact that an amount might be paid to a fund but not allocated at the time of payment or the time of the consideration of deductibility reinforce this need. As Hill J said in the first of the paragraphs quoted above, the addition of funds to a pool to fund the defined benefits of the employees was deductible. Deductibility was not limited to contributions to funds in which employees had accounts and was not denied to contributions to defined benefits funds. These propositions do not mean however, that a payment to a fund which effects no existing benefit to an employee is deductible. We will return to this issue in dealing with issue 2 below.
18. In addition to appreciating these propositions, it is important to understand the structure of the relevant changes made by, and after, the 1989 Act, including, in particular, the 1994 Act.
19. The 1989 Act introduced Part IX into the Tax Act - "Taxation of Superannuation Business and Related Business". Part IX introduced the distinction between a complying and a non-complying superannuation fund. As was said in Harris 125 FCR at :
"The 1989 Act introduced a new Pt IX, 'Taxation of Superannuation Business and Related Business'. Within Pt IX, s 267 introduced a distinction between a 'complying superannuation fund' (being a fund the subject of a notice under either ss 12 or 13 of the Occupational Superannuation Standards Act 1987 (Cth)) and a 'non-complying superannuation fund' (being a fund that was a superannuation fund, but not a complying superannuation fund). Complying superannuation funds were taxed at a concessional 15 per cent rate (and had various other tax advantages). A non-complying fund was taxed at the top marginal rate of tax. Contributions to superannuation funds were liable to tax in the hands of the fund trustee. Pursuant to s 274(1)(a)(i), taxable contributions to an 'eligible entity' (which included both a complying and non-complying superannuation fund (s 267(1)) included 'an amount in respect of which a deduction is allowable ... under section 82AAC to the person making the payment' and, pursuant to s 274(1)(a)(ii), 'a contribution made by a person (in this section called the "contributor") to obtain superannuation benefits for the contributor or, in the event of the death of the contributor, for dependants of the contributor'. Section 274(2) made particular provision for contributions to which s 274(1)(a)(ii) applied. (There were further amendments to s 274 in 1989, by virtue of which s 274(1)(a)(ii) became s 274(1)(b): see Taxation Laws Amendment (Superannuation) Act 1989 (Cth), s 48. An effect of this change was that only amounts paid to a complying superannuation fund to obtain superannuation benefits for the contributor or his or her dependants were taxable contributions. Section 274(1)(b) subsequently became s 274(1)(b)(i): see s 3 of the Superannuation Guarantee (Consequential Amendments) Act 1992 (Cth) and the Schedule to that Act. Like s 274(1)(b), that section was limited in its application to complying superannuation funds.) As the Commissioner observed, broadly speaking, the effect of the 1989 amendments was to render all superannuation funds liable to income tax in the hands of their trustees. The liability extended to all contributions that were
ATC 4944deductible to the contributor under ss 82AAC and 82AAT."
(Section 82AAT was in Subdivision AB of Division 3 of Part III dealing with contribution to superannuation funds by (non-employer) eligible persons for himself or herself (and his or her dependants.)
20. The 1989 Act, which for the first time provided for the taxation of superannuation funds, removed the deductibility for merely setting apart of funds by the taxpayer. For deductibility, the payment was required to be made to a superannuation fund. As part of these changes, the requirement for the benefits to be fully secured was removed. This requirement can be seen as unnecessary if contributions were required to be made to a superannuation fund of the kind defined in s 6(1) of the Tax Act after the amendments in the 1987 Act and in the 1990 Act. The Explanatory Memorandum stated that the denial of deductibility for superannuation contributions merely set aside, but not paid to a superannuation fund was tied to removing limits on the deductibility of contributions and assessing super funds on contributions. It stated that "only amounts paid into funds, and thus subject to contributions tax, will be deductible". The 1989 Act also removed the limits on deductibility of superannuation contribution made by the employers on behalf of employees.
21. The 1990 Act introduced reasonable benefit limits and s 82AAC was amended by adding subsections (2) and (3) which limited any deduction under subsection (1) to two funds in respect of one employee. This was raised to three funds in 1992 by the First 1992 Act if one of the funds was a government fund established before 1 July 1990. Later in 1992, s 82AAC was amended by Second 1992 Act to introduce age-based limits on deductions for contributions to superannuation funds, rather than restriction on the number of funds. Sections 82AAC (2) and (2A) were omitted and replaced by s 82AAC(2) to 82AAC(2H). The continued focus upon the relationship of the contribution to existing employees (and implicitly the furnishing or supplying of relevant benefits to them by the relevant payment) can be seen in the terms of s 82AAC(2) when read with s 82AAC(1). Section 82AAC(2) was in the following terms after the Second 1992 Act:
"Subject to subsection (2D) (which deals with elective deduction limits), the total of the deductions allowable under subsection (1) for contributions made by a taxpayer, or by a taxpayer and one or more associates of the taxpayer, in a year of income in respect of a particular employee must not exceed the employee's deduction limit for the year of income (worked out under subsection (2A))."
22. The 1994 Act provided for deductions to complying superannuation funds (by replacing "eligible" with "complying" in s 82AAC(1)(b)). Section 82AAE was inserted in the terms set out above, being its form in the relevant years of income here.
23. The 1994 Act not only introduced s 82AAE, but it also made amendments to the definition of fringe benefit in the Fringe Benefits Tax Assessment Act 1986 (Cth) (the "FBT Act"), s 136(1)(j). Before these amendments by the 1994 Act, fringe benefits did not include any benefit under paragraphs (f) to (p) of the definition of "fringe benefit" in the FBT Act, s 136(1). Paragraph (j) of s 136(1) was in the following terms:
"a benefit constituted by -
- (i) the making of a payment of money to; or
- (ii) the setting apart of money as,
a superannuation fund;"
The phrase "superannuation fund" was defined in s 136(1) as:
- "(a) an eligible superannuation fund within the meaning of Part IX of the [Tax Act], or
- (b) a scheme for the payment of benefits upon retirement or death, being a scheme constituted by or under a law of the Commonwealth or of a State or Territory."
24. The 1994 Act replaced this form of paragraph (j) with the following:
- "(j) a benefit constituted by:
- (i) the making of a payment of money to a superannuation fund (as defined by subsection 6(1) of the Income Tax Assessment Act 1936) that the person making the payment had reasonable grounds for believing was a complying superannuation fund (as defined by subsection 267(1) of the Income Tax Assessment Act 1936); or
ATC 4945(ii) the making of a payment of money to a non-resident superannuation fund (within the meaning of section 6E of the Income Tax Assessment Act 1936) in respect of a person who is an exempt visitor to Australia for the purposes of section 517 of that Act in relation to the year of income in which the payment is made;"
25. It is important to understand the intended symmetrical operation of the FBT Act and "fringe benefit", on the one hand, with s 82AAE of the Tax Act, on the other. This symmetry was a consequence of changes made to both the Tax Act and the FBT Act by the 1994 Act. These changes introduced ss 82AAD and 82AAE into the Tax Act and amended the definition of "fringe benefit" in s 136(1)(j) of the FBT Act. This symmetry was explained in [7.99]-[7.101] of the Explanatory Memorandum to the Taxation Laws Amendment Bill (No 4) 1994, as follows:
"What changes will be made to employer contributions?
- 7.99 Employers will continue to be entitled to deductions for superannuation contributions only under Subdivision AA of Division 3 of Part III of the ITAA [item 40 ]. However, the deduction limits in section 82AAC will be restricted to contributions paid to a complying superannuation fund [item 38] or to a non-complying superannuation fund provided that the taxpayer making the contribution had reasonable grounds for believing that the fund was a complying fund [item 39 - new subsection 82AAD].
- 7.100 Any contributions paid by an employer to a non-resident superannuation fund in relation to an eligible employee who is an exempt visitor for the purposes of section 517 of the ITAA will not be allowable as a deduction [item 39 - new subsection 82AAE] . Such contributions will not be fringe benefits and therefore will not be subject to tax under the FBTAA [item 2 - new subparagraph (j)(ii) of the definition of fringe benefit in subsection 136(1) of the FBTAA].
- 7.101 Any other contributions paid by an employer for eligible employees to a non-complying superannuation fund will be deductible. The amount of the deduction will not be limited to the amounts specified in section 82AAC [item 39 - new subsection 82AAE] . However, these contributions will be fringe benefits and subject to tax under the FBTAA [item 2]. "
[emphasis in original]
26. The intended symmetry was that if a deduction was available, fringe benefits tax was payable; if a deduction was not available, fringe benefits tax was not payable. No such express link about the operation of each Act was stated. But the intended symmetrical operation can, however, be seen as part of the context in which s 82AAE is construed and interpreted (cf Prebble 131 FCR at 143 ).
27. The background leading up to the changes made in the 1994 Act, and these changes themselves, in particular the relationship between the intended operation of s 82AAE and the FBT Act reveal (as Davies J said in Raymor Contractors 21 ATR at 1412 and 1413 in relation to the then s 82AAC) that for the payment to be deductible there was a requirement of a relationship between an employer and existing (and identifiable) employee and the purpose of the provision of funds was to be the effecting of the rights to the relevant kind of benefits to such employee or employees. These matters go to informing the content of the relevant purpose of the payment (or setting aside in earlier provisions) which has always been present, whether by express use of the word "purpose" or by the immanent content of the infinitive "to provide".
Issue 1: Was the Fund a "superannuation fund" for the purposes of s 82AAE?
28. Subject to the qualifications and comments expressed below, we agree with Jessup J, that the Fund was a "superannuation fund".
29. The first definition of the phrase "superannuation fund" in the tax legislation appeared in the 1961 Act by the insertion of s 121B into the Tax Act. It was variously amended in the 1964 Act (see s 23F introduced into the Tax Act thereby), the 1987 Act (see s 23FC introduced into the Tax Act thereby), the Occupational Superannuation Standards Act 1987 (Cth) (the "OSS Act"), s 3(1), the 1989 Act (see the definitions in ss 6(1) and 267(1) of
ATC 4946the Tax Act introduced thereby) and the 1994 Act (see the new definition in s 6(1) of the Tax Act).
30. The relevant definition here is in s 6(1) of the Tax Act, as follows:
"'superannuation fund' means
- (a) a scheme for the payment of superannuation benefits upon retirement or death; or
- (b) a superannuation fund within the definition of 'superannuation fund' in section 10 of the Superannuation Industry (Supervision) Act 1993;"
31. The relevant definition of "superannuation fund" in s 10 of the Superannuation Industry (Supervision) Act 1993 (Cth) (the "SIS Act") is as follows:
"'superannuation fund' means
- (a) a fund that:
- (i) is an indefinitely continuing fund; and
- (ii) is a provident, benefit, superannuation or retirement fund; or
- (b) a public sector superannuation scheme;"
32. It is sufficient for present purposes to conclude that the Fund satisfied paragraph (a) of the definition of the phrase in s 6(1) of the Tax Act. No argument took place on the meaning of the phrase "indefinitely continuing fund" for paragraph (a)(i) in the definition in the SIS Act, s 10. In these circumstances, we would reserve consideration of the meaning of that phrase, save to say that the ordinary meaning of the word "indefinite" is "without distinct limitation of being or character; indeterminate, vague, undefined; of indetermined extent, amount or number": The Shorter Oxford English Dictionary on Historical Principles (Oxford 1973) vol 1 p 1053. One can readily understand the argument that a trust such as the present satisfied such a definition.
33. The argument of the respondent that there was required to be in the fund a fixed or secured body of benefits (in effect vested in interest), not subject to the discretionary power of a trustee for their grant, finds no foundation in either the ordinary meaning of the phrase "superannuation fund" or in the cases. There is no reason why a fund set up by an employer into which contributions were placed to benefit its employees and their dependants by providing at the discretion of a trustee superannuation benefits to the most needy of the employees would not meet the general notion of a fund for retirement benefits or the contents of paragraph (a) of the definition in s 6(1) of the Tax Act. If the terms of such a trust were that no other purpose could be effected but the payment of superannuation benefits to such of the class of employees as the trustee decided, we see no reason why the trust would not answer the description of a superannuation fund. The only difference here is there is no express criterion of need. But the essential point is the same: the terms of the trust were limited to providing superannuation benefits: cf
Mahony v Commissioner of Taxation (1965) 39 ALJR 62 of 63 (per Owen J at first instance).
34. None of the cases supports the proposition that the ordinary meaning of the phrase "superannuation fund" excludes a fund governed by the terms of a trust under which the trustee has a discretion as to the identity of the recipient of the benefits. The cases referred to in argument,
Scott v Commissioner of Taxation (1966) 40 ALJR 265;
Mahony v Commissioner of Taxation (1968) 41 ALJR 232;
Compton v Commissioner of Taxation (1966) 116 CLR 233;
Driclad Pty Limited v Commissioner of Taxation (1968) 121 CLR 45;
Walstern Pty Limited v Commissioner of Taxation 2003 ATC 5076; (2003) 138 FCR 1; and
Winchombe Carson Ltd v Commissioner of Taxation (NSW) (1938) 5 ATD 69, permit the confident conclusion that a trust is only a superannuation fund if its sole purpose is for the payment of superannuation benefits. The circumstances in which it was held that that was not so and where benefits might be seen to be illusory and not real were cases where the deed permitted persons to benefit other than by way of superannuation or where the conduct of the affairs in connection with the fund made it apparent that purposes other than superannuation were engaged. These cases do not deny the possibility of the trustees of a "superannuation fund" having the kind of discretion held by the trustee here. Indeed, the comments of Owen J in Mahony 39 ALJR at 63 contemplate that very thing.
35. The answer to this question does not, however, answer the next question about the
ATC 4947purpose for which the payment is made by the taxpayer as a contribution. The fact that the phrase "superannuation fund" is wide enough to encompass a discretionary arrangement such as is present here does not conclude the issue that a payment by way of contribution to it satisfies the balance of s 82AAE.
Issue 2: Was the payment of $500,000 to the Fund a contribution for the purpose of making provision for superannuation benefits for an eligible employee?
36. It seems to us plain from the material before the primary judge that the purpose of Mr Hazlett senior and Mr Currie was that the payment was to enable the trustee of the fund at some future time to provide or make provision for superannuation benefits in accordance with the trust deed to one or other of Mr Hazlett or his son, Andrew.
37. The primary judge stated the following at :
"In these circumstances, I find that the purpose of Cameron Brae in making the contribution of $500,000 to the IS & PL Fund was to enable David Hazlett, and, if David Hazlett chose, Andrew Hazlett, to take money out of the company as what would be called superannuation benefits, it being recognised that David Hazlett's benefits under the existing CBP Fund could not be increased in a tax effective way. It follows that the contribution was not made for the sole purpose of providing superannuation benefits for eligible employees within the meaning of s 82AAE"
38. This is to be understood by reference to what the primary judge said at , as follows:
"I am reinforced in this conclusion by several further circumstances. In the first place, there is no evidence that the directors of Cameron Brae gave any consideration, before making the contribution, to what would be an appropriate benefit to be provided to either David or Andrew Hazlett by way of superannuation, if and when he qualified for it. It has to be borne in mind that, in 1998, David Hazlett was already aged 52 years and had, as Mr Currie has deposed, an existing entitlement on retirement to approximately $1 million from the CBP Fund. I accept that a permissible motive for making contributions to a superannuation fund may be the attraction and retention of suitable employees. It was therefore legitimate for the directors to structure a generous superannuation benefit for Andrew Hazlett in the event that he was "up to the task" of succeeding his father as managing director of Cameron Brae. However, for the reasons explained above, by nominating Andrew solely as a Discretionary Class member, the directors did not assure him of any superannuation benefit even if the succession plan were implemented as hoped. Nor was any attempt made to apportion the contribution to reward successful or improved performance or effort or fidelity by either David or Andrew Hazlett as contemplated by par 1(c) of the directors' resolution reproduced at  above."
39. The conclusion of the primary judge in  is to a degree inconsistent with what we think was plain as to purpose from the material, that is that the payment was to enable the trustee, some time in the future, to provide or make provision for superannuation benefits. Nevertheless, we conclude, for somewhat different reasons to the primary judge, that there was no relevant purpose.
40. The central questions are the meaning of s 82AAE, and whether what might be said to have been the superannuation-related purpose of those involved was a purpose contemplated by s 82AAE.
41. The arguments of the respondent Commissioner in this respect were put most clearly in the written submissions filed, with leave, after the completion of the hearing. In these submissions, attention was focused upon the requirement, for deductibility, of the provision (in the sense of furnishing or supplying) of superannuation benefits (in the sense we have discussed) to individual existing employees as an attribute of this part of s 82AAE, rather than as an attribute of a "superannuation fund" as defined.
42. The history of the provisions to which we have referred makes clear that deductions for payments in respect of employee superannuation have been available in a variety of statutory contexts, but always in circumstances where individual personal
ATC 4948benefits, pensions or retiring allowances were provided to, that is furnished or supplied to, existing employees of the taxpayer employer with rights to such benefits by the payment. This can be seen from the earliest provisions dealing with the requirement of benefits being secured:
Metropolitan Gas Company v Federal Commissioner of Taxation (1932) 47 CLR at 631. The need for the employees to be existing was always present. The payment was from an employer for the benefit of an existing employee. The right to receive the benefit was to be secured.
43. The purpose of the taxpayer cannot satisfy s 82AAE if the result of the payment is not such as "makes provision for superannuation benefits for an eligible employee". In our view, the payment here did not do so. The requirement of s 82AAE was that the purpose of the payment be to make provision for, that is to furnish or supply, personal benefits, pensions or retiring allowances for an existing employee or employees. The payment by Cameron Brae to the trustee of the Fund did not do so. No superannuation benefit (involving the necessary notion of the right to a benefit) was provided by the payment. As Discretionary Members of the Fund, each of Mr David and Mr Andrew Hazlett had an entitlement to have his position considered by the trustee for the payment of benefits upon the occurrence of a qualifying event. The payment to the Fund, however, provided no benefit to either, apart, of course, from the creation of a fund from which value may flow, if the trustee, in the future, exercised its discretion. Mr Hazlett and Mr Currie no doubt had the expectation (indeed, no doubt, a confident expectation) that there would be an exercise of discretion for either Mr David or Mr Andrew Hazlett. But the right to the exercise of any such discretion to one or the other was not in the trust deed; and the right of either to receive superannuation benefits was not in the trust deed.
44. The history of the legislation and the terms of s 82AAE require that a purpose of the payment be to make provision for individual personal benefits for existing people. There is thus required to be a relationship between the payment and the effecting or furnishing or supplying of the relevant benefit. Putting a trustee in funds to make it possible for a wide discretion to be exercised in favour of one or other of existing employees is not the same as a contribution that makes provision for superannuation benefits (involving the right to receive such benefits) for the existing employees. It is making provision for the possibility in the future of superannuation benefits being provided to someone whom one cannot identify and who, on the terms of the trust deed and given the width of the class, may not presently be an employee of the taxpayer.
45. Even if the surrounding facts and the deed allowed one to assume that one or other of Mr David Hazlett and Mr Andrew Hazlett would obtain a benefit when the trustee exercised the discretion, the payment did not, itself, make provision for a superannuation benefit in the relevant sense. So, absent an argument based on some misunderstanding of the effect of the trust deed (of which there was no suggestion), the purpose of the payment was not for the making provision for relevant benefits. This approach is not only consistent with the historical development of the legislation it is also consistent with the terms and operation of cognate legislation, the FBT Act, amended by the 1994 Act which inserted s 82AAE.
46. If the purpose of the payment in s 82AAE is to make provision for, that is provide for, individual personal benefits for existing and identifiable employees, a harmony and symmetry in operation is brought about between s 82AAE and the FBT Act. It is plain from the Explanatory Memorandum that some symmetry was intended. It can be easily appreciated that what was not intended was that a deduction would be available, but no fringe benefits tax be payable. Hill J in Walstern 138 FCR at  and Hill J and Hely J in Prebble 131 FCR at  referred to this symmetry.
47. The intention of Parliament as construed by this Court was that the FBT Act applied only when a benefit is provided to an identified employee: see
Essenbourne Pty Limited v Commissioner of Taxation 2002 ATC 5201; (2002) 51 ATR at ; Walstern at ; and
Commissioner of Taxation v Indooroopilly Children Services (Qld) Pty Limited 2007 ATC 4236; (2007) 158 FCR at -. The primary judge concluded, following
ATC 4949Essenbourne and Walstern, that no benefit had been provided here to an identifiable employee. The appeal by the Commissioner against that conclusion was abandoned in the light of the Full Court's opinion in Indooroopilly.
48. It is an elementary canon of statutory interpretation that a Court will give meaning to a statutory provision in accordance with, rather than contrary to, the revealed purpose of the provision: see the Acts Interpretation Act 1901 (Cth), s 15AA. Here, the statutory history, the terms and structure of the 1994 Act and the Explanatory Memorandum to the Bill which led to the 1994 Act, make it apparent that s 82AAE was concerned with a purpose (as was the FBT Act, using different words) of making provision for, that is providing, by the payment, individual personal benefits (involving the notion of rights to those benefits) to existing employees. The payment, as a contribution, did not do so here. The purpose was limited and controlled accordingly. No FBT was payable; no deduction was available.
49. The primary judge was correct to conclude, therefore, that the purpose of the taxpayer was not one found in s 82AAE.
50. The conclusion that we have reached is not inconsistent with Walstern 138 FCR 1. In Walstern 138 FCR at  Hill J, said the following:
"There is another problem for Walstern under s 82AAE. At the time Walstern made the contribution there was no person who was a member of the fund. In law the trustee of the fund held the contribution upon resulting trust for Walstern pending nomination of an employee as member and ultimate acceptance of the person as member after payment of the qualifying contribution. It is true that a deduction would be allowable for a contribution to a fund where there were members of the fund, notwithstanding that at the time the contribution was made there had been no allocation among the members. That was decided in Raymor. But the present case goes beyond the issue of allocation which arose in Raymor. The fact is that unless and until any person became a member (and this did not happen until the later year of income) it simply was not correct to say that Walstern had made a contribution to a fund for the benefit of a person who was an eligible employee. It remained within the power of Walstern to have the contribution repaid to itself as owner in equity of the money, unless it took the further step of nominating a person as a member."
51. Hill J's comment about Raymor was directed to his reference in that case that there had been no allocation amongst existing employees. But as the passage in Hill J's judgment in Raymor reveals (see  above) the lack of allocation was discussed in the context of s 82AAM (a provision present in the Tax Act prior to its repeal in 1989) in the following terms:
"Where a taxpayer sets apart or pays an amount as or to a fund for the purpose of making provision for superannuation benefits for, or for dependants of, more than one employee but does not specify the part of the amount set apart or paid in respect of a particular employee, that part shall, for the purposes of this Subdivision, be deemed to be such amount as the Commissioner determines."
52. The premise of s 82AAM and of the first paragraph of the extract from the judgment of Hill J in Raymor, 21 ATR at 1425 quoted at  above was that the payment did furnish or supply, and so was for the purpose of furnishing or supplying, a superannuation benefit even if allocation or actuarial calculation was required to determine what was referable to a particular employee.
53. Although here, unlike the facts in Walstern, the payment was made to the Fund after the employees became members, nevertheless, since the payment provided or furnished no benefit to either of them, the same comment can be made as Hill J made in  of his reasons in Walstern 138 FCR at 19, "it simply was not correct to say that [Cameron Brae] had made a contribution to a fund for the benefit [in the sense of provision of a superannuation benefit] of a person who was an eligible employee." In Walstern, at the time the payment was made, there was no relevant employee member of the fund and Walstern could retrieve the money as the owner of it in equity. Here, although the relevant persons were members of the discretionary class at the time the funds left the taxpayer, Cameron Brae,
ATC 4950the payment made no provision for a relevant benefit, in the sense that we have discussed, to either of the two Hazletts.
54. It is unnecessary to seek to be exhaustive in the description of the irreducible minimum of the relevant benefit provided, or for which provision is made, by any particular payment under s 82AAE. It is sufficient for present purposes to appreciate that, on the terms of the Fund, the payment by Cameron Brae provided, or made provision for, no benefit to any existing eligible employee of Cameron Brae.
Issue 3: Was the payment deductible under s 8-1 of the 1997 Act?
55. The first question that arises in the satisfaction of s 8-1(1) of the 1997 Act is whether the payment was an outgoing to the extent that it was incurred in gaining or producing assessable income or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. The primary judge answered this in the negative.
56. There was no dispute on appeal that the primary judge correctly applied the test set out in the joint judgment of Deane and Fisher JJ in
Magna Alloys and Research Pty Limited v Commissioner of Taxation 80 ATC 4542; (1980) 33 ALR 213, as discussed by Hill J in Walstern 138 FCR at 19-20. Regard should also be had to the reasons of Hill J in
Hart v Commissioner of Taxation of the Commonwealth of Australia 2002 ATC 5193; (2002) 121 FCR at -.
57. The primary judge concluded that he was unable to impute to the appellant taxpayer objectively, or its directors subjectively, the view that the contribution was desirable or appropriate in the pursuit of the business ends of the appellant enterprise.
58. The primary judge's reasoning in this respect was as follows at -:
"In the present case, the purpose of Cameron Brae in making the payment to the IS & PL Fund, which has been identified as serving its business ends, was to attract Andrew Hazlett to become a full-time employee of the company and remain in its employ until he should succeed his father as managing director. It is therefore necessary to determine whether the contribution made in 1998 could, objectively, be reasonably seen at that time as desirable or appropriate in pursuit of that end. I have not been persuaded that the contribution in the form and amount in which it was made could reasonably be regarded, looking at the matter objectively, as likely to advance the business interests of Cameron Brae. Andrew Hazlett, at the time when the payment was made, was only 26 years of age and working as a part-time mechanic. He had apparently not revealed by then any conspicuous commercial or administrative acumen so that his father saw him as succeeding to the position of managing director only "if he was up to the task". Moreover, as David Hazlett frankly conceded in the passage from his affidavit reproduced at  above, he and Mr Allen conceived that the contribution would be made in such a way that the so-called superannuation benefit would accrue to David Hazlett "if things didn't work out with Andrew". Nor could it seriously be suggested that, in 1998, a provision of a further superannuation benefit was appropriate or desirable to preserve David Hazlett's continuing involvement in Cameron Brae's business.
A related consideration tends to the same conclusion, even if, contrary to my clear impression, the attraction and retention of Andrew Hazlett as a full-time employee were objectively capable of advancing Cameron Brae's business interests. That is the fact that, because the benefit under the IS & PL Fund was only available to him contingently on the exercise of an unfettered discretion, the contribution to the Fund, when viewed objectively, was not calculated to achieve the desired end. As already indicated at  above, as a Discretionary Member, Andrew Hazlett could be totally deprived of any payment out of the Fund by an adverse exercise of the Trustee's discretion even if Cameron Brae's avowed purpose of attracting and retaining his services were achieved by his succeeding his father as managing director."
59. If we may respectfully say, there is force in the approach of the primary judge. In the light, however, of the family context of the business, it might be that the payment, when
ATC 4951understood in the light of the evidence, could be objectively viewed as an incentive for Mr Andrew Hazlett to stay on in the business. Although a father's wishes for his son intruded, there was a business, as well as a family. The wisdom, or otherwise, of that aim was one for the directors to assess. It is, however, unnecessary to express a final view on s 8-1(1), since, in our view, the payment was an outgoing of a capital nature. Thus s 8-1(2)(a) was not satisfied.
60. Central to the distinction between expenditure on capital account and expenditure on revenue account is the character of the advantage sought by the expenditure:
Hallstroms Proprietary Limited v Federal Commissioner of Taxation (1946) 72 CLR at 647;
Sun Newspapers v Federal Commissioner of Taxation (1938) 61 CLR at 359. In Sun Newspapers at 363, Dixon J identified three matters to be considered in drawing this distinction, namely,
"(a) the character of the advantage sought, ... (b) the manner in which it is to be used, relied upon or enjoyed ... and (c) the means adopted to obtain it; that is, by providing a periodical reward or outlay to cover its use or enjoyment for periods commensurate with the payment or by making a final provision or payment so as to secure future use or enjoyment."
Dixon J's approach to the distinction was approved by the Privy Council in
BP Australia Limited v Commissioner of Taxation (1965) 112 CLR at 394; and by the High Court in
GP International Pipecoaters Proprietary Limited v Commissioner of Taxation 90 ATC 4413; (1990) 170 CLR at 137;
Mount Isa Mines Limited v Commissioner of Taxation 92 ATC 4755; (1992) 176 CLR at 147-149; and
Commissioner of Taxation v Citylink Melbourne Ltd 2006 ATC 4404; (2006) 228 ALR at , , ,  and .
61. In GP International, at 137, the High Court commented that the character of the advantage sought is the "chief, if not the critical, factor in determining the character of what is paid". Further, as Dixon J said in Hallstroms Case 72 CLR at 648, the character of the outgoing:
"depends on what the expenditure is calculated to effect from a practical and business point of view, rather than upon the juristic classification of the legal rights, if any, secured, employed or exhausted in the process."
62. The appellant submitted that the payment was in the nature of remuneration. We cannot agree. The payment was not a recurring matter dealing with personnel. It was a one-off payment which was intended to act, in part, as an incentive for Mr Andrew Hazlett. It did so, however, in the way reflected in the board minute pursuant to which the payment was made, which stated as follows:
"The Chairman tabled and the Directors considered actuarial calculations (a copy of which is attached to these Minutes) prepared by Gosling Chapman on behalf of the Company in respect of the amount which should be contributed by the Company to The IS & PL Superannuation Fund ("the Fund") so as to provide a reasonable level of funds for superannuation benefits for Employees of the Company who are Discretionary Class Members of the Fund and the operation of the Fund. The Director UNANIMOUSLY RESOLVED to pay the sum of $500,000 to the Fund as a contribution by the Company pursuant to the terms and provisions of the trust deed of the Fund."
63. There was no suggestion in the evidence that this was one of a recurrent body of payments. The payment character of the advantage was in our view squarely within the words of Viscount Cave LC in
British Insulated and Helsby Cables Limited v Atherton  AC 213-214:
"...when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is a very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital. For this view there is already considerable authority. ..."
64. From the terms of the minute, the payment established the capacity to provide superannuation benefits under the terms of the
ATC 4952trust deed of the Fund. In that sense, it created the capital of a trust fund. It was a one-off payment, based on actuarial calculations as the base or capital fund on which the trustee's discretion could work and in respect of which the trustee's discretion could be engaged.
65. Thus, in our view, no deduction was available under s 8-1.
Issue 4: Was penalty tax payable?
66. The respondent imposed a penalty under s 226K of the Tax Act. Section 226K was relevantly in the following terms:
"Subject to this Part, if
- (a) a taxpayer has a tax shortfall for a year; and
- (b) the shortfall or part of it was caused by the taxpayer, in a taxation statement, treating an income tax law as applying in relation to a matter or identical matters in a particular way; and
- (c) the shortfall or part, as the case may be, so caused exceeded whichever is the higher of:
- (i) $10,000; or
- (ii) 1% of the taxpayer's return tax for that year; and
- (d) when the statement was made, it was not reasonably arguable that the way in which the application of the law was treated was correct;
the taxpayer is liable to pay, by way of penalty, additional tax equal to 25% of the amount of the shortfall or part."
67. In Walstern at 25-28 - Hill J dealt with the proper approach to s 226K in a way that was adopted by the Full Court in
Pridecraft Pty Limited v Commissioner of Taxation 2005 ATC 4001; (2004) 213 ALR at .
68. The primary judge's views that the taxpayer's position was not reasonably arguable depended upon his Honour's factual conclusions about purpose for s 82AAE and as to the outgoings nature for the purpose of s 8-1(1).
69. Our reasons depart somewhat from those of the primary judge as to why the purpose of the appellant did not conform to the requirements of s 82AAE. We share Jessup J's views that the primary judge's assessment of the purpose of the appellant was flawed when his Honour ascribed a "non-superannuation purpose" to the appellant. The purpose of the appellant was to provide $500,000 to the Fund and for such moneys to be dealt with according to the terms of the trust deed of the Fund. The purpose of the appellant was expressed in the board minute as one related to the subject of superannuation. Nevertheless, for the reasons we have given, the terms of the trust deed were not sufficient to convert that superannuation-related purpose into one satisfying s 82AAE.
70. In our view, the question of construction and interpretation of s 82AAE was reasonably open and arguable. No authority squarely covered it. The proper interpretation depended upon the construction of s 82AAE informed by a full appreciation of the statutory history. The argument about the applicability or satisfaction of s 82AAE was arguable. That question can be seen as subsuming s 8-1, if it were answered one way. If it be necessary to decide, we are also prepared to conclude that the issue as to the characterisation of the outgoing as capital or revenue was arguable. Whilst in our view it is clear that it was a payment of a capital nature, the question is open to debate in the sense of being arguable.
71. In these circumstances, we would allow the appeal on the question of penalty tax only. The orders that we would make are that within seven days the respondent file draft short minutes giving effect to these reasons and that within seven days thereafter the parties file submissions on costs and on any dispute as to the orders proposed by the respondent.