Tax & ATO News Australia

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High Court Case helps determine questions of facts vs. questions of law in AAT hearings

The ATO has recently released a decision impact statement on a High Court tax case that SMH Tax Lawyers won last year, Commissioner of Taxation v Crown Insurance Limited.

The ATO concluded that this case has no precedential value and is confined to its facts (which begs the question as to why they wasted tax payers money and that of our client pursuing the matter through to the High Court and losing), but we respectfully disagree.

Quite aside from clarifying issues regarding the source of overseas income, this case was very important in helping to determine what matters are questions of facts (and therefore not able to be appealed to the Federal Court after an Administrative Appeals Tribunal decision) and what are questions of law (and therefore can be appealed).

This question is at the heart of very many appeals from the AAT.

It also emphasises how important it is to present the facts in a clear, concise and compelling matter in AAT hearings. If you do not get the facts right in AAT hearings (which the vast majority of taxpayers do not), then your chances of losing are very high and your chances of successfully appealing are negligible.

At SMH Tax Lawyers one of our most critical specialist roles is helping our clients present the facts properly. This is something we are uniquely placed to assist with as lawyers with specialist litigation and tax experience and the resources to work with our clients in forensically examining complicated facts which can cover many years, and often many countries.

With this assistance, our clients have achieved highly successful results in tax litigation matters against the ATO.

Posted in: Tax & ATO News Australia at 24 January 14

Crown Insurance Services Limited wins in High Court against ATO

A long running fight between one of my clients and the ATO has had its final battle in the High Court on 6 June 2013.

Crown Insurance Services Limited, an offshore insurance company, succeeded in the High Court on 6 June 2013 in an application brought by the ATO to appeal against a Full Federal Court decision regarding the source of Crown Insurance's income. The ATO had lost in the Full Federal Court following an appeal from its loss in the Administrative Appeals Tribunal. A significant amount of tax was at stake in a case which could have had major ramifications for overseas companies which have dealings with Australian companies.

The ATO's case was that because Crown Insurance dealt with related Australian companies, which made their income from Australia, Crown Insurance's income was indirectly derived from Australian sources.

In running their appeals, the ATO ignored several High Court and other authorities over many years.

The ATO also argued that there should be a change of law on the determination of appeals from lower courts and tribunals. Appeals from the AAT must be on a question of law and the ATO argued for a significant extension in the jurisdiction of the Federal Court to hear appeals. The ATO was attempting to overturn long standing decisions including Pozzolanic Enterprises Pty Ltd v Collector of Customs and Collector of Customs v Agfa Gevaert. The effect of such a change of law would be to complicate appeals from the AAT and potentially turn all such appeals into a virtual re-hearing of the original decision. This would add greatly to the already considerable cost of litigation in Australia.

Our client is immensely relieved at the win, but frustrated that the ATO has taken such a long time and wasted so much money fighting appeals that seemed doomed to failure from the outset.

Posted in: Tax & ATO News Australia at 07 June 13

ATO loses 3 major cases in 2011

Despite propaganda from the Acting Commissioner of Taxation to the contrary, the Australian Taxation Office copped a battering in a number of cases towards the end of 2011.

The ATO lost in three major tax cases last year – Commissioner of Taxation v Clark[2011] HCATrans 236and The Commissioner of Taxation of the Commonwealth of Australia v Multiflex Pty Ltd[2011] HCATrans 344,which both went to the High Court - and Crown Insurance Services Limited and Commissioner of Taxation[2011] AATA 847, which SMH Tax Lawyers ran on behalf of an offshore insurance company.

All three cases involved the ATO following very narrow, technical arguments and subsequently losing.

In Clark, the ATO tried to overturn a 1990 High Court decision in relation to whether changes to a trust create a new trust estate. In Crown Insurance, the ATO went even further and tried to overturn a 1932 High Court decision.

The ATO’s strange interpretation of its model litigant obligations was obvious in the Multiflex case. Multiflex was one of a number of large businesses where the ATO was refusing to refund the Goods and Services Tax owing to the taxpayer, notwithstanding, that this was money the ATO was required by legislation to refund – no different to an income tax refund.

While the ATO was deciding whether to challenge the GST refund, it felt that the money was better in the government’s coffers, rather than with the taxpayers. At each level of appeal, the Courts held that the ATO was wrong and had to repay the money, but it was not until a hearing before the High Court of Australia, that the ATO finally conceded it had to pay the money back. The financial distress which was caused to the taxpayers in the meantime was, no doubt, considerable.

Unfortunately, the ATO has a history of using litigation in tax disputes to try and force an outcome. Although the ATO has unlimited resources and the onus of proof on its side, occasionally taxpayers are prepared to fight for their rights through the courts.

An article in this Saturday’s edition of The Australian newspaper will feature one such taxpayer, who is a client of ours. Check it out if you get a chance.

Posted in: Tax & ATO News Australia at 13 January 12

Hi Ben, The 1938 High Court decision (not 1932, sorry) referred to is Tariff Reinsurance Limited v Commissioner of Taxes (Vic) (1938) 59 CLR 194. Feel free to email me directly to discuss further. Where are you studying? Kind regards David Hughes
Comment by David Hughes lodged 05 March 12

I'm doing a tax law case analysis on the Crown case for university and was wondering which case you were referring to when you say: "In Crown Insurance, the ATO went even further and tried to overturn a 1932 High Court decision." I look forward to hearing from you shortly and would appreciate any wisdom you could impart regarding this case. Thank you very much for your time. Regards, Ben Singleton
Comment by Ben Singleton lodged 26 April 12