Australia: case law update
23 October 2012
Posted by: SAIT Technical
By TaxVine (Tax Institute Australia)
GIC amounts deductible in years to which they were referable - Nash
The AAT has set aside the Commissioner's objection decision relating to the disallowance of deductions for GIC and held that the taxpayer was entitled to deductions for the GIC accrued amounts for each year to which the GIC was referable (2003 to 2008). In so doing, the AAT rejected the Commissioner's argument that the deduction was only allowable in the year in which the GIC notices were issued (2008).
The AAT said, at para 14:
"It is clear from much of the available case law that a loss or outgoing may be incurred in one income year, even if the amount is not actually paid until a subsequent year: see W Neville and Co Ltd v FCT  HCA 9; (1937) 56 CLR 290; New Zealand Flax Investments Ltd v FCT  HCA 60; (1938) 61 CLR 179 and FCT v James Flood Pty Ltd  HCA 65; (1953) 88 CLR 492."
And, at para 17:
"According to the statutory framework, the GIC expense is incurred at the time at which the GIC became due and payable by the operation of the relevant tax legislation. From that point, the liability is real and existing and is not merely impending, threatened or expected. It is a requirement of the relevant statute and requires no further imposition or acceptance by the [taxpayer] or the [Commissioner]..."
Nash and FCT  AATA 719 (AAT; Professor Deutsch DP; 17 October 2012).
Decision Impact Statement - LVR (WA) Pty Ltd
The ATO has issued a Decision Impact Statement in relation to the decision of the Full Federal Court in LVR (WA) Pty Ltd and Anor v AAT and FCT  FCAFC 90.
The case concerned the dismissal of applications for the taxpayer's failure to comply with directions; AAT's failure to take into account a relevant consideration; copying of submissions without attribution; and model litigant obligations.
Specifically, the question was whether the AAT had, in dismissing the applications, taken into account an affidavit the taxpayers had filed in the AAT proceedings several days before the dismissal hearing.
At first instance in the Federal Court - see LVR (WA) Pty Ltd v AAT  FCA 1146 - Gilmour J dismissed the judicial review application on the basis that the AAT had in fact taken into account the affidavit in question.
It was common ground in the Full Federal Court that approximately 95% of the AAT's reasons had been copied from the written submissions of the Commissioner, without attribution. For the AAT decision, go here
The Full Federal Court held that the AAT had failed to take into account a relevant consideration, namely, the affidavit lodged on behalf of the taxpayers, in coming to its decision to dismiss the applications.
As there had been a failure to take into account a relevant consideration by the AAT, the Full Federal Court expressly did not decide whether the copying without attribution amounted to a constructive failure by the AAT to exercise jurisdiction. The Full Federal Court, however, was critical of the extensive unattributed copying by the AAT and also critical of the parties and their counsel in not drawing the extent and context of the copying to the judge's attention.
The Full Federal Court noted that, if counsel for the taxpayers failed to fully explain the position to Gilmour J, counsel for the Commissioner should have done so to make sure that the judge understood the full circumstances surrounding the AAT's reasons for decision.
The Full Federal Court discussed the nature of the model litigant obligation and the obligations of counsel representing federal government agencies.
The Decision Impact Statement states:
"The Full Federal Court did not find that the Commissioner breached his model litigant obligation. The Court, however, referred at length to the nature and extent of the model litigant obligation, which is binding on federal government agencies and their counsel. The Commissioner will continue to strive to meet every aspect of the model litigant obligation in all matters, and before all courts and tribunals. In particular, he will consider what action should be taken in any matters where verbatim copying issues arise. The Commissioner has reviewed all current appeals to the Federal Court from decisions of the AAT in light of the Full Federal Court judgment."