Go to top of page

Appendix 5: Strategic litigation

For the 2020–21 financial year, 62% of reported litigation outcomes under Part IVC of the Taxation Administration Act 1953 wholly supported the ATO’s position or assessments. Of the litigation decisions under Part IVC, the remaining 38% supported the taxpayer’s position in whole or in part. These percentages include a small number of outcomes under the Administrative Decision (Judicial Review) Act 1977 or the Judiciary Act 1903, but exclude cases funded by the ATO under the Test Case Litigation Program.

The following table lists significant cases decided by the courts and the Administrative Appeals Tribunal (AAT) in 2020–21. The main issues of each case are listed, as well as the outcome or status as at 30 June 2021. The significant cases reported are those with the potential for ongoing impact on the tax system.

Those marked with an asterisk (*) were funded by the ATO under the Test Case Litigation Program 2020–21. For more information about the test case funding program, see ato.gov.au/testcaselitigationprog.

The Commissioner has released decision impact statements in a number of these cases. These are available at ato.gov.au/decisionimpactstatements.

Significant cases, 2020–21

Matter

Issue

Outcome

Income tax cases – trusts

Carter & ors v Commissioner of Taxation [2020] FCAFC 150

Whether disclaimers executed by default beneficiaries of a discretionary trust were effective and, if so, whether the disclaimers operated retrospectively for taxation purposes.

The Full Court upheld the taxpayers’ appeal.

The High Court has granted the Commissioner special leave to appeal.

Peter Greensill Family Co Pty Ltd (as trustee) v Commissioner of Taxation; Nicholas Martin & anor v Commissioner of Taxation [2021] FCAFC 99

Whether a capital gain assessed to the trustee of a resident trust is disregarded under Division 855. In particular, where the trustee makes a non-resident beneficiary presently or specifically entitled to the whole or a portion of the gain that is taken into account in working out the trust’s net income.

The Full Federal Court dismissed the taxpayers’ appeal.

Income tax cases – other

*Addy v Commissioner of Taxation [2020] FCAFC 135

Whether the taxpayer, who entered Australia on a Working Holiday Visa, was a resident of Australia for tax purposes and if she was, whether her liability to tax at the rates imposed on holders of working holiday visas offends the Non-‍discrimination Article in the Australia-‍United Kingdom Double Tax Agreement.

The Full Federal Court allowed the Commissioner’s appeal.

The High Court subsequently granted the taxpayer special leave to appeal. The appeal was heard on 24 June 2021.

*Commissioner of Taxation v Douglas; Commissioner of Taxation v Burns; Commissioner of Taxation v Walker [2020] FCAFC 220

Whether the recipients of superannuation invalidity benefits should be taxed on those benefits as superannuation income stream benefits or as superannuation lump sums.

The Full Federal Court dismissed two appeals and allowed another, in three cases appealed by the Commissioner.

Neither the taxpayer nor the Commissioner sought special leave to appeal to the High Court.

*Commissioner of Taxation v Fortunatow & anor [2020] FCAFC 139

Whether the taxpayer satisfied the ‘unrelated clients test’ under the personal services income provisions.

The Full Federal Court allowed the Commissioner’s appeal.

The High Court subsequently refused the taxpayer’s special leave application.

*Commissioner of Taxation v Glencore Investment Pty Ltd [2020] FCAFC 187

Whether dealings between Swiss-‍based Glencore International AG and an Australian subsidiary, in relation to the sale and purchase of copper concentrate in the 2007 to 2009 years, breached transfer pricing rules. The Full Federal Court delivered a judgment mostly unfavourable to the Commissioner.

The Full Federal Court handed down a decision largely favourable to the taxpayer.

The High Court refused the Commissioner’s application for special leave to appeal.

Commissioner of Taxation v Healius Ltd [2020] FCAFC 173

Whether lump sum payments made to health practitioners to cease trading from their own premises and commence working exclusively from a medical centre operated by Healius, were capital in nature and therefore not deductible.

The Full Federal Court allowed the Commissioner’s appeal.

The High Court refused the taxpayer’s subsequent special leave application.

*Eichmann v Commissioner of Taxation [2020] FCAFC 155

Whether a private ruling issued by the Commissioner correctly concluded the taxpayer was not entitled to CGT relief on the sale of certain land, as the land was not an ‘active asset’ for the purposes of the small business CGT concessions.

The Full Federal Court allowed the taxpayer’s appeal.

Mussalli & ors v Commissioner of Taxation [2021] FCAFC 71

Whether amounts labelled as ‘prepaid rent’ and paid when entering into franchise agreements were on capital account and therefore not deductible because the payments secured the advantage of extinguishing an obligation to pay a higher percentage rent.

The Full Court dismissed the taxpayers’ appeal.

The taxpayer has sought special leave to appeal to the High Court.

Shell Energy Holdings Australia Ltd v Commissioner of Taxation [2021] FCA 496

Whether Shell was entitled to an immediate write-off for an increase in its stake in a natural gas project.

The Federal Court handed down a decision largely favourable to the taxpayer.

The Commissioner has appealed to the Full Court.

Watson as trustee for the Murrindindi Bushfire Class Action Settlement Fund v Commissioner of Taxation [2020] FCAFC 92

Whether expenditure incurred in the course of the trustee’s duties as Scheme Administrator of the Murrindindi Bushfire Class Action Settlement Fund was deductible against interest income earned on the settlement funds.

The High Court refused the taxpayer’s special leave application.

Promoter penalty cases

Commissioner of Taxation v Bogiatto (No 2) [2021] FCA 98

Whether the respondent and several associated companies contravened the promoter penalty legislation by promoting R&D incentive schemes to his clients.

The Federal Court found that the respondent had contravened the promoter penalty legislation, imposing a penalty totalling $22.68 million.

The respondent did not appeal to the Federal Court.

Commissioner of Taxation v Rowntree (No 3) [2021] FCA 306

Whether the respondent and two others contravened the promoter penalty legislation by promoting tax exploitation schemes involving the sale of not presently existing REDD (reducing emissions from deforestation and forest degradation) credits.

The Federal Court found that the respondent had contravened the promoter penalty legislation, imposing a penalty totalling $7.75 million.

The respondent has appealed to the Full Court.

JobKeeper and Cash Flow Boost cases

*Commissioner of Taxation v Apted [2021] FCAFC 45

Whether the applicant held an ABN on 12 March 2020 and, specifically, whether the backdating of the ABN falls within the statutory requirement of holding an ABN on 12 March 2020 in determining the taxpayer’s eligibility to JobKeeper payments.

The Full Federal Court held that the applicant did not have an ABN on 12 March 2020 but dismissed the Commissioner’s appeal on the basis that the AAT had the power to review the Commissioner’s decision to refuse the applicant further time to get an ABN. The Full Court also decided that the AAT did not err in deciding to allow the further time to get an ABN.

*Slatter Building Group Pty Ltd v Commissioner of Taxation [2021] AATA 456

Whether the applicant satisfies the eligibility criteria for the ‘cash flow boost’ payment in circumstances where the taxpayer was incorporated in January 2020. The ‘controlling mind’ had previously operated as a sole trader.

The AAT found the applicant was not entitled to the cash flow boost.

VNBM v Commissioner of Taxation [2021] AATA 1626

Whether the applicant failed to satisfy the eligibility criteria for the first ‘cash flow boost’ payment on the basis that he entered into a scheme of paying a one-‍off large wage payment for a single week for the dominant purpose of being entitled to the payment.

The Administrative Appeals Tribunal held the applicant was not entitled to the cash flow boost.

Taxation administration cases

Advanced Holdings Pty Ltd & ors v Commissioner of Taxation [2020] FCAFC 157

Whether amended income tax and penalty assessments were invalid, including on the basis that the Commissioner relied upon materials wrongfully seized under a search warrant in the making of those assessments.

The Full Federal Court refused the taxpayer leave to appeal against the Federal Court’s decision to grant summary judgment.

Commissioner of Taxation v Auctus Resources Pty Ltd [2021] FCAFC 39

Whether the Commissioner could recover as an ‘administrative overpayment’ a research and development (R&D) tax offset refund paid to a taxpayer who self-assessed its activities capable as being registered as R&D activities when the taxpayer was not in fact entitled to the offset.

The Full Federal Court allowed the Commissioner’s appeal.

The High Court subsequently refused the taxpayer’s special leave application.

Commissioner of Taxation v Bosanac (No 7) [2021] FCA 249

Whether the taxpayer had an equitable interest in his former matrimonial house in circumstances where both spouses contributed equally to the purchase of the house through joint loans.

The Federal Court dismissed the Commissioner’s appeal.

The Commissioner has appealed to the Full Court.

*Commissioner of Taxation v Lane [2020] FCAFC 184

This case concerns the proper allocation of funds recovered by a bankruptcy trustee as an unfair preference and confirmed that the priority payment regime, including the right to priority of employees owed superannuation, did apply to the proceeds of sale of trust assets.

The Full Court partially allowed the Commissioner’s appeal.

Neither the taxpayer nor the Commissioner sought special leave to appeal to the High Court.

Commissioner of Taxation v Travelex Limited [2021] HCA 8

Whether an entry in a Running Balance Account (RBA) that resulted from a process that did not have a basis in law could give rise to an RBA surplus.

The High Court allowed the Commissioner’s appeal.

CUB Australia Holding Pty Ltd v Commissioner of Taxation [2021] FCA 43

Whether a notice issued under the Commissioner’s formal information gathering powers requiring the taxpayer to provide particulars of documents sought by the Commissioner that were subject to claims to legal professional privilege is valid. If the notice is valid, the taxpayer seeks declarations that the titles of the documents are privileged.

The Federal Court dismissed the taxpayer’s appeal, holding the notice was valid.

The taxpayer has subsequently appealed to the Full Federal Court.

Deputy Commissioner of Taxation v Shi, Zu Neng [2021] HCA 22

Whether the Commissioner was correctly given access to an affidavit the taxpayer had filed disclosing his asset position on the grounds it may tend to incriminate him as having committed an offence in Australia. The affidavit had been filed pursuant to a direction of the court made ancillary to the granting of freezing orders.

The Full Federal Court handed down an adverse decision for the Commissioner.

The High Court subsequently granted special leave to appeal. The appeal was heard on 14 April 2021.

Huang v Deputy Commissioner of Taxation [2020] FCAFC 141

Whether the rules impose a mandatory jurisdictional precondition or requirement on an applicant seeking a worldwide freezing order to prove a realistic possibility that any judgment obtained can be enforced against assets of the defendant (located in each of the foreign jurisdictions to which the freezing order would relate).

The Full Federal Court allowed the taxpayer’s appeal, holding there is such a requirement.

The High Court has granted the Deputy Commissioner special leave to appeal.

Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26

Whether Rawson Finances, through its authorised officers and associates and appointed Israeli experts, gave false and misleading evidence in tribunal and court proceedings.

The Federal Court allowed the taxpayer’s appeal.

The Commissioner has applied to the court to set aside or quash the decision in the prior proceedings. The Commissioner’s appeal was heard on 14–21 September 2020.

Goods and services tax cases

ACN 154 520 199 Pty Ltd (in‍ liq) v Commissioner of Taxation [2020] FCAFC 190

Whether the taxpayer got GST benefits from a scheme to which the GST general anti-avoidance rules (GAAR) provision applies.

The Full Federal Court ordered the matter be remitted back to the AAT for determination according to law of whether the GAAR applies.

The High Court subsequently refused the Commissioner’s application for special leave to appeal the finding of the Full Federal Court that the taxpayer had been denied procedural fairness.

Crown Melbourne Ltd & anor v Commissioner of Taxation [2020] FCA 1295

Whether commissions and rebates paid to and received by junket tour operators (JTOs) under contractual agreements entered into between the JTOs and the casinos were to be taken into account in calculating the taxpayers’ global GST amounts.

The Federal Court allowed the taxpayers’ appeal.

The Commissioner’s appeal to the Full Federal Court was heard on 17 May 2021.

Fringe benefits tax cases

Virgin Australia Airlines Pty Ltd & anor v Commissioner of Taxation [2021] FCA 523

Whether airlines employees who predominantly perform duties on an aircraft have no primary place of employment, or the aircraft was the primary place of employment, for the purposes of determining car parking fringe benefits.

The Federal Court allowed the taxpayer’s appeal.

The Commissioner has appealed to the Full Court.

Navigation

Return to List of appendixes.