Collie v Commissioner of Taxation

Federal Court of Australia (Full Court)|2024-12-19|Before: Needham JJ

THE COURT ORDERS THAT:

The appeal be allowed.
The decision of the Administrative Appeals Tribunal dated 12 March 2024 be set aside.
The proceeding be remitted to the Administrative Review Tribunal for the hearing and determination of the question of whether the applicant obtained a tax benefit pursuant to Part IVA of the Income Tax Assessment Act 1936 (Cth) for each of the 1997 to 2001 income years, and any consequential effects on penalties.
On or before 4.00pm on 31 January 2025, the applicant is to file and serve written submissions not exceeding three pages on the question of costs.
On or before 4.00pm on 7 February 2025, the respondent is to file and serve responsive written submissions not exceeding three pages on the question of the costs.
The question of the costs of the appeal will be determined on the papers. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT THE COURT:

Introduction

By an amended notice of appeal, the applicant, Mr Collie, appeals pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) from the decision of the Administrative Appeals Tribunal in Collie v Commissioner of Taxation [2024] AATA 440 delivered on 12 March 2024, after a hearing that took place in October 2021.

The facts

Many of the background factual matters are set out in the Tribunal's reasons and were not disputed at the hearing of the appeal.
Mr Collie is a solicitor. He commenced his own law practice in 1977, in Victoria.
During the late 1980s and the 1990s Mr Collie "became embroiled in litigation" with, among others, the Australian Taxation Office (ATO), and the Australia and New Zealand Banking Group (ANZ Bank).
At one point during the litigation, the ATO obtained judgment against Mr Collie in the sum of over $23 million, although the proceeding was ultimately settled (on terms including no further action and payment of own costs).
The ANZ Bank also separately claimed an amount in excess of $6 million against Mr Collie and his wife in 1996 under personal guarantees.
Because of this, Mr Collie was exposed to a significant risk of adverse outcomes, both as to liability and costs.
In December 1992, Mr Collie moved from Victoria to Queensland. At that time, Mr Hart was a principal of the law firm Cleary Hoare, and he and the other principals of the firm conducted their practice through the Cleary Hoare Practice Trust (CH Practice Trust or CHPT).
In the same month, Mr Hart and his fellow principals established Comlaw Consultants Pty Ltd, the Comlaw Trust and the Canowindra Trust. The Canowindra Trust, a unit trust of which Lake Morundah Pty Ltd was the trustee, was a 50 percent unitholder in the Comlaw Trust.
Mr Collie became a director of Comlaw Consultants in October 1993.
Mr Collie was admitted to practise as a solicitor in Queensland in 1995. Until 1 December 2002, when Mr Collie became a principal of the CH Practice Trust, his only connection with Cleary Hoare was as a director of Comlaw Consultants, Cleary Hoare Corporate Pty Ltd (CHC) and other associated entities. He neither generated income for Cleary Hoare, nor derived any fees for any of the services he provided to Cleary Hoare, except through the Comlaw Consultants and CHC companies and trusts.
Between 1993 and 1996 the Comlaw Trust carried on a business of facilitating tax planning arrangements and products.
These tax planning arrangements included facilitating the acquisition of entities with substantial tax losses in return for a fee.
In 1995, Mr Hart began developing what was referred to as "the New Venture Income scheme", or NVI scheme. In the income year ended 30 June 1996, the tax planning arrangements promoted to clients included the NVI scheme for the first time.
On 30 June 1996 the Comlaw Trust ceased conducting business, and on 19 September 1996 the principals of Cleary Hoare and Mr Collie established CHC and the CHC Discretionary Trust, which carried on a similar business to Comlaw Consultants.
As part of the arrangements made to implement the NVI scheme, between May 1994 and March 2000 the principals of the CH Practice Trust and Mr Collie established a number of Income Earning Trusts, or IETs, including relevantly the Annesley Trust (May 1994), the CHC Discretionary Trust (September 1996), the LM Income Trust (May 1997), and various others.
During the 1997 to 2001 income years the CHC Discretionary Trust, in conjunction with the other IETs, carried on the business of marketing and facilitating tax planning arrangements. The income from those activities was returned by the IETs and processed through the NVI scheme.
In summary, each IET scheme filtered IET income through a sequence of trusts to either a company that had available current or carried forward losses, or a tax-exempt entity, and through that company or entity to other entities. Ultimately, the money flowed back to entities connected with the principals of Cleary Hoare and Mr Collie.
In Mr Collie's case, the Commissioner said that those entities included at least Balaclava Park Pty Ltd, Tarragunda Pastoral Co Pty Ltd as trustee for the Tarragunda Trading Trust (Tarragunda Trading Trust) and/or Woodbury Park Pty Ltd as trustee for the Woodbury Farm Trust (Woodbury Farm Trust). (The Tribunal also found that Aberford Pty Ltd as trustee for the Aberford Trust (Aberford Trust) received payments from the IETs).
On 16 February 2006, the Commissioner issued Part IVA Determinations to Mr Collie under s 177F(1)(a) of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936).
The Commissioner further determined under s 177F(2) that the amount should be included by virtue of s 97 of the ITAA 1936.
On 17 February 2006, the Commissioner issued notices of assessment for the years ended 30 June 1997 to 1999 and notices of amended assessment for the years ended 30 June 2000 and 2001 assessing Mr Collie personally in relation to a proportion of the taxable income of the IETs for each of the 1997 to 2001 income years.
The proportion of taxable income was calculated for each income year based on the percentage of cash paid to entities associated with Mr Collie, compared to the total cash paid to those entities and the principals of the CH Practice Trust. The Commissioner also imposed a 50 percent penalty. Mr Collie objected to the assessments, the Commissioner disallowed his objections, and he appealed to the Tribunal from the disallowance.
In its review of the Commissioner's disallowance, the Tribunal found that the Commissioner's calculations of the tax benefit were erroneous and adjusted the amounts assessed, as follows: Year Disputed tax benefit/adjustment (increase) to assessable income IET income Tribunal found attributable to Mr Collie 1997 $414,462 $414,172 1998 $1,079,190 $1,043,846 1999 $1,273,216 $1,246,877 2000 $2,920,703 $2,229,087 2001 $1,443,525 $983,261 2002 $415,000 Total $7,546,096 $5,917,243

The Tribunal found that the 50 percent penalty imposed by the Commissioner should be recalculated by reference to the reduced tax benefit, but did not otherwise adjust it.

Relevant provisions of the ITAA 1936

Part IVA of the ITAA 1936 applies where a taxpayer participates in a "scheme" as defined in s 177A of the ITAA 1936 in order to obtain a "tax benefit", as defined in s 177C of the ITAA 1936, where the scheme was entered into for the dominant purpose of obtaining the tax benefit.
In this case, Mr Collie did not dispute the Commissioner's contention before the Tribunal that the alleged schemes were schemes as defined in s 177A of the ITAA 1936, and he advanced no submissions on the question of dominant purpose.
Mr Collie's contention before the Tribunal was that he had not obtained a tax benefit, or alternatively, such tax benefit as he did obtain was less than that contended for by the Commissioner.
Section 177F(1)(a) of the ITAA 1936 provides that: (1) Where this Part applies to a scheme in connection with which a tax benefit has been obtained, or would but for this section be obtained, the Commissioner may: (a) in the case of a tax benefit that is referable to an amount not being included in the assessable income of the taxpayer of a year of income - determine that the whole or a part of that amount shall be included in the assessable income of the taxpayer of that year of income;
Section 177C(1)(a) of the ITAA 1936 provides that for a tax benefit to be obtained by a taxpayer in connection with a scheme there must be: … an amount not being included in the assessable income of the taxpayer of a year of income where that amount would have been included, or might reasonably be expected to have been included, in the assessable income of the taxpayer of that year of income if the scheme had not been entered into or carried out.
The question posited by s 177C(1)(a) was a critical issue in dispute before the Tribunal. As we explain below, the Tribunal did not pose - and unsurprisingly therefore did not answer - that question.

The submissions made to the Tribunal

The principal submission advanced by Mr Collie before the Tribunal was that he had not obtained any relevant tax benefit within the meaning of s 177C of the ITAA 1936.
Mr Collie gave the following evidence in his affidavit sworn on 7 August 2020: 178 Given the deductible carry forward losses referred to in Tables 2, 5 and 7 above, the losses available as at 30 June 1997 were as per Table 8 below. Table 8: Losses available to Trusts associated with me as at 30 June 1997 Trust Losses($) Starlight Unit Trust (499,412) Woodbury Farm Trust (214,906) Tarragunda Trading Trust (353,887) Total (1,068,205)

179 The losses referred to in Table 8 were claimed as allowable deductions against trust income as follows: a Starlights Unit Trust (with an adjustment in deductible revenue losses from $499,412 to $506,100): i. In FY 2005, the NBOC Trust (a unitholder in the No Bolt Unit trust) distributed $590,344 to the EHS Unit Trust (a hybrid unit trust) which in tum distributed that amount to the Starlights Unit Trust (Tab 29). ii After allowing for its carried forward losses, the Starlights Unit Trust distributed the balance ($84,244) to the Starlights Holding Trust with that amount then distributed to Equipment Hire Systems Pty Ltd with income tax at the company rate of 30% ($25,273) assessed and paid (Tab 29). b Tarragunda Trading Trust (with deductible revenue losses as at 30 June 2001 of $307,355 utilised as follows): i as noted in Table 8 above, carry forward losses at 30 June 1997 were $353,887 reducing to $307,335 as at 30 June 2001 culminating in a profit of $6169 as set out in the tax agent's letter of 12 September 2005 (Tab 21); ii the profit of $113, 107 returned for financial year 2000 included interest income of $28,302 as explained in my letter to the ATO dated 30 September 2008 (Tab 21); iii the "details of the returns" for FY s 2000 - 2005 provided by AGS under cover of an email dated 30 July 2020 are incomplete or wrong in that they are no more than the "ST AC" capture of data as purportedly input from the returns as lodged with at least the following errors: (A) the 2000 to 2002 documents do not show any income, expenses or carry forward losses; (B) the 2003 document shows income of $47,428 (which accords with the tax agent's summary at Tab 21) and carry forward losses $426,447; (C) the 2004 document shows income of$191,772 (which accords with the tax agent's summary at Tab 21) and carry forward losses of $234,675; and (D) the 2005 document shows a loss of $15,075 and carry forward losses of $34,906. c. Woodbury Farm Trust (with an increase in deductible revenue losses by 30 June 2004 from $214,906 to $220,483): i In FY 2003, the BP Practice Trust distributed $228,715 to Woodbury Farm Trust which had 2003 farm trading losses and expenses resulting in a net loss of $4,577 and carry forward losses of $220,483 (Tab 30). ii In FY 2004, the BP Practice Trust distributed $146, 105 to the Woodbury Farm Trust leaving carry forward losses of $74,514 (Tab 30). iii In FY 2005, the BP Practice Trust distributed $48,946 to the Woodbury Farm Trust resulting in carry forward losses of $25,755 (Tab 30). iv In FY 2006, the BP Practice Trust distributed $97,432 to the Woodbury Farm Trust thereby exhausting all losses (Tab 30). 180 I believe that none of the returns referred to in paragraph 179 were the subject of any follow-up query by the ATO including the many lodged as special returns required pursuant to s. 162 of ITAA 1936. (Original emphasis.)

Through counsel's written closing submissions, Mr Collie made the following submissions to the Tribunal: 74 Mr. Collie submits that, on the material before the Tribunal, there is no reasonable hypothesis that, absent the Schemes, any income would have been appointed to, or otherwise distributed to him, and that, absent the NVI it is not reasonable to predict that the income in the income earning trusts would, by some means or other, have been included in his assessable income as alleged by the Commissioner. 75 Mr. Collie's particularly bitter history with the Commissioner, his litigation with the ANZ Bank, [and] his litigation with the Australian Securities Commission … are all matters of objective fact that the Tribunal ought rely on to reject any notion that someone in Mr. Collie's position would, absent the schemes, have distributed income in a manner that it came back to him. Paragraph 71 of Exhibit A1, after reference to the earlier litigation, summarizes the position in this way [the evidence was then set out]. … 76 The Commissioner did not direct a single question to Mr. Collie about this evidence. 77 Mr. Collie's counterfactual is set out in Exhibit A1 (in paragraphs [230] to [234]). In short, he posits that, absent NVI Schemes and consistently with the distribution of trust income in earlier years, any income would have been distributed to take account of the considerable losses available from earlier years and, once they had been absorbed, to corporate trustees who would have paid the corporate tax rate on that income. 78 Mr. Collie's contentions are supported by the evidence in Exhibit A1 from paragraph [169] to [199] which details the use of trading losses in previous years and the distribution in the 2002 year where the recipient, Bond Park Pty Ltd paid tax on the income at the corporate tax rate. As to the latter point, and despite it being 'not accepted' by the Commissioner, Mr. Collie has produced the documents that demonstrate the correctness of his contention. Again, not a single question was directed to Mr. Collie about these matters. 79 Contrary to the contentions made by the Commissioner in relation to the 1997 year, and the equivalent paragraphs in relation to 1998, 1999, 2000 and 2001 income years, Mr. Collie submits that the evidence demonstrates: … e that, absent NVI, and consistent with the distribution of trust income in the income years 1994 to 1996, shares of each of the 1997 income of the, the CHC Discretionary Trust, the Annesley Trust and the LM Income Trust would have been distributed to the Canowindra Trust, and after applying available trust losses, ultimately to Starlights Unit Trust which had carried forward losses as at 30 June 1997 totalling $499,412, being less than half the quantum of available trust losses as at that date; … i that the availability of significant carry forward deductible losses (including those accepted by the Commissioner) and the opportunity to provide a means of repaying substantial loans relying on distributions from the Canowindra Trust in financial years 1994 to 1996 as summarized in Table 6, on page 40 of Exhibit A1, (thereby resulting in a material change in the financial position of those creditor entities) evidences a dominant purpose other than obtaining a tax benefit for himself or for anyone else; … k that in the income years after the cessation of the NVI, all of the losses referred to in table 8 were availed of by Trust entities associated with Mr. Collie without any query or concern being raised by the Commissioner … (Footnotes omitted.)

The Tribunal's reasons

At [16] of its reasons, the Tribunal identified (by reference to the litigation in which he had been "embroiled" in the mid-1990s) "the core of [Mr Collie]'s case" as being "the proposition that in his circumstances it could not reasonably be expected that any income would be appointed to him or that he would own any assets of value beneficially".
Having set out at considerable length a description of the Part IVA schemes alleged by the Commissioner, the Tribunal turned to the question of whether Mr Collie had obtained a tax benefit at [88] of its reasons. It set out there a number of extensive and well known passages from the judgment of Edmonds J in Federal Commissioner of Taxation v Ashwick (Qld) No 127 Pty Ltd (2011) 192 FCR 325 and a number of passages from the judgment of the Full Court in Hart v Federal Commissioner of Taxation (2018) 261 FCR 406, which referred also to the judgment of the Full Court in RCI Pty Ltd v Federal Commissioner of Taxation [2011] FCAFC 104; (2011) 84 ATR 785. The Tribunal then continued: 93 It is clear that the applicant can point to a context involving undisputed facts which provide a contextual foundation for the asserted need to take steps directed to asset protection goals. The applicant says that someone in that position would participate for good reason in a scheme that ensured that money and wealth never came to him personally. One can readily see that that is a subjective response to what are rather unusual circumstances. This is said to be a case of more than a mere or bald assertion that steps were taken to service asset protection goals. Consequently, on the applicant's case, it can be said that the contextual corroboration principle noted in the Ashwick and RCI decisions are met in leading to the proposition that because it cannot be predicated that the applicant as an individual would have received the taxable amounts, it cannot be said that he had a tax benefit susceptible to cancellation under Part IVA. 94 Absent the outcome in Hart, these propositions might have some force. 95 The relevant test is not subjective. The necessary enquiry is an objective one and the question to be asked is whether it could reasonably be expected objectively that the taxable income would have found its way back to the applicant. In circumstances where the profits of the enterprise that are sheltered from tax through the scheme were profits from a business enterprise relying on the applicant's acumen and knowledge objectively it is not unreasonable to expect that some or all of that profit would have come back to the applicant. In the circumstances that hypothesis is regarded as sufficiently reliable to be reasonable. It is clear that the scheme articulated by the Commissioner was intended to leave the income of the businesses whose success was the product at least in part of the applicant's efforts and acumen were intended to be completely sheltered from tax liability in anybody's hands. The applicant is undoubtedly one of the group whose exposure to income tax liability was sheltered by the scheme. 96 The applicant contends that the income would have been distributed to loss vehicles or to companies. There is no evidence that there were sufficient loss vehicles available to achieve that contention. The losses that were available in other entities revealed by the evidence were used by 2002, presumably sheltering other income, and a distribution to a corporate beneficiary the applicant points to occurred in a later year. When these schemes were entered into and carried out, there was nothing revealed to support the reliability of the contention. 97 In circumstances where the applicant cannot definitively show that a different taxpayer would have included the relevant amounts in their assessable income, rather there is speculation of loss vehicles and companies in a manner similar to what was before the Court in Hart and the entities with losses that the applicant identifies as entities that would have received the income because they had losses had received other income and absorbed those losses by 2002 shows that there is no guarantee that those entities would have received the tax benefit income in the present circumstances because they were recipients of income from other sources and their losses were otherwise used in periods close to the periods of the applicant's assessments. 98 In Hart's case both the trial judge and the Full Court were concerned with effectively the same propositions being advanced by the applicant in the present proceedings. Hart had endured economic misfortune in the form of a bankruptcy, Hart was involved in developing and marketing or promoting tax avoidance and minimisation arrangements and could naturally have attracted the attention of the ATO. It was asserted that asset protection motivated the arrangements entered into and the arrangements made for entities connected with Hart to receive and then deal with income that had its origins in the CHPT and in the IET consulting businesses associated with the CHPT practice or the principals of that practice. 99 In Hart the Court concluded that there was a tax benefit and that the assertions as to other taxpayers being the logical recipients of those taxable amounts were insufficient to establish that Mr Hart did not enjoy the tax benefit. Further the Court observed that in circumstances where it is said to be not possible to predict the recipient of the taxable amounts by way of the alternative postulate makes it more difficult for a taxpayer to contend reliably, or sufficiently reliably, that the taxpayer would not have received those taxable amounts. 100 The Full Court endorsed these propositions. 101 The present circumstances do not involve any material difference to those of Hart. 102 Far from being clearly wrong, it can be predicted with sufficient reliability so as to meet the reasonable expectation threshold that the architect of a scheme designed to: (a) deal with the taxable income representing the profits of business activities that were materially influenced if not produced by the architect's intellectual capital and personal effort; and (b) achieve outcomes such that: (i) those profits do not suffer tax liability; and (ii) it is not possible to predict who but for the scheme would be the recipient of those taxable profits; would be the recipient of that taxable income apart from the scheme having been entered into or carried out. Expressed slightly differently, given these design features, it is not unreasonable, and to the contrary it is reasonable, to expect that the architect would otherwise be the recipient of the relevant taxable income. The Full Court's observations in Hart at [88] bear this out. (Footnotes omitted.)
That is the sum total of any relevant consideration of the parties' competing submissions.

Consideration

Despite the Commissioner's attempt to support the Tribunal's reasons on appeal, they are manifestly insufficient, and the relevant issues will need to be re-heard.
The starting point is s 43(2B) of the AAT Act. It provides: "Where the Tribunal gives in writing the reasons for its decision, those reasons shall include its findings on material questions of fact and a reference to the evidence or other material on which those findings were based".
In Copperart Pty Ltd v Commissioner of Taxation (1993) ALD 377; (1993) 26 ATR 327 Hill J said: The failure of the tribunal to make findings of material facts constitutes a breach of s 43(2B) … and an error of law, justifying the setting aside of the tribunal's decision and the remission of the matter to the tribunal for reconsideration ... The obligation under s 43(2B) is not satisfied by a statement of the tribunal's conclusion of fact. The parties are entitled to know what evidence the tribunal accepted and what evidence it took into account. Likewise, the parties are entitled to know what evidence the tribunal rejected. Without this knowledge the parties will have but an incomplete idea of the tribunal's process of reasoning and a lessened respect for the tribunal's decision-making process. Apart from the fact that the failure of the tribunal to make findings of fact constitutes an error of law entitling the applicant to succeed in its appeal, the failure to make those findings makes it difficult for me to set out what the relevant facts are upon which the appeal itself turns … (Citations omitted.)
In Statham v Federal Commissioner of Taxation [1988] FCA 463; (1988) 20 ATR 228 at 230, Woodward, Lockhart and Hartigan JJ said: It is timely for this court to state that it is the duty of the tribunal, when reviewing the Commissioner's disallowance of objections under the Act, to make clear and full findings on material questions of fact, referring to the evidence or other material on which those findings were based: see Administrative Appeals Tribunal Act 1975 (Cth) s 43(2B). That duty must be performed by the tribunal, although the court does not hold the tribunal's reasons for decision to a standard of perfection … Not least of the reasons for requiring the tribunal to reach adequate findings of fact is the difficulty of the court determining an appeal on a question of law under s 44 of the Administrative Appeals Tribunal Act where such findings have not been or not adequately been made. (Citations omitted.)
As Rares and Robertson JJ said in Minister for Immigration and Border Protection v Maioha (2018) 267 FCR 643 at [45], "[w]hat is required is the reality of consideration by the decision-maker. On judicial review the Court must therefore assess, in a qualitative way, whether the decision-maker has as a matter of substance had regard to the representations put".
And as Jenkinson J explained in Dennis Willcox v Federal Commissioner of Taxation (1988) 79 ALR 267 at 277 (Woodward and Foster JJ agreeing) a failure by the Tribunal to carry out its duty to consider and determine each question of law and fact relevant to the determination or the failure to carry out the duty imposed by s 43(2) of the AAT Act produces "a miscarriage of justice by preventing this court from affording the parties a determination whether the tribunal's decision was vitiated by error of law".
In our view, there was a wholesale failure of the Tribunal to have regard to material evidence, to weigh in the balance competing submissions, and to provide adequate reasons for any of its conclusions.
As Edmonds, Gilmour and Logan JJ explained in RCI at [125]: 125 For Pt IVA to apply, s 177D(a) requires that the taxpayer has obtained, or would but for s 177F obtain, a tax benefit in connection with a scheme. Section 177C(1) relevantly provides that a reference in Pt IVA to the obtaining by a taxpayer of a tax benefit in connection with a scheme shall be read as a reference to: (a) an amount not being included in the assessable income of the taxpayer of a year of income where that amount would have been included, or might reasonably be expected to have been included, in the assessable income of the taxpayer of that year of income if the scheme had not been entered into or carried out. … 127 In FCT v Peabody (1994) 181 CLR 359 at 382…, the High Court made it clear that the existence of a tax benefit is to be established as an objective fact and is not a matter of the Commissioner's opinion or satisfaction that there is a tax benefit. Moreover, where (at CLR 385…) the High Court said: A reasonable expectation requires more than a possibility. It involves a prediction as to events which would have taken place if the relevant scheme had not been entered into or carried out and the prediction must be sufficiently reliable for it to be regarded as reasonable: see Dunn v Shapowloff [1978] 2 NSWLR 235 at 249, per Mahoney JA. The reference to "prediction" can be read as a prediction based on objective inquiry and determination. 128 It is trite that a taxpayer in this court bears the onus of proving that an assessment is excessive: s 14ZZO(b)(i) of the Taxation Administration Act 1953 (Cth). It follows that it is the taxpayer who bears the onus to establish that a tax benefit is excessive. It might do that by establishing that there is no tax benefit or by establishing that it is less than that determined by the Commissioner …
As their Honours explained at [130], "the issue is not whether the Commissioner puts forward a reasonable counterfactual or not; it is a question of the court determining objectively, and on all of the evidence, including inferences open on the evidence, as well as the apparent logic of events, what would have or might reasonably be expected to have occurred if the scheme had not been entered into …" (emphasis added.)
In this case, it was incumbent on the Tribunal to ask and answer that question by reference to the competing evidence and submissions which were before it. As is readily apparent from the Tribunal's reasoning set out at [42] above, it did neither.
That is sufficient reason for the appeal to be allowed.
But Mr Collie's contention that the Tribunal was wrong to consider itself bound by the decision of the Full Court in Hart must also be accepted. It is axiomatic that each case is to be decided on its facts, and on any view, the facts in Mr Collie's case were not the same - or anywhere near the same - as in Hart's case. Quite apart from anything else, as Mr Collie submitted:
Mr Hart received cash from the NVI Scheme, and Mr Collie did not;
Mr Collie denied that he ever received any payments personally from any of the relevant entities in any of the relevant years of income, and no payment was ever applied to his benefit by any of the relevant entities in any of the relevant years; and
there was a factual basis for Mr Collie's contention that he would not have received any IET income, or funds representing such income.
Mr Collie's contention that the Tribunal erred in law because it applied the wrong test for the purpose of s 177C of the ITAA 1936 is also to be accepted. The Tribunal's assertion at [97] of its reasons that it was necessary for Mr Collie "definitively [to] show that a different taxpayer would have included the relevant amounts in their assessable income …" is obviously wrong. That is not what the section says and nothing in Hart, or any other case, supports the proposition. Yet the reasons make it tolerably clear that that is exactly what the Tribunal understood the lengthy passages extracted from Ashwick and Hart to amount to.
There was also a ground of appeal relating to the preposterous delay in the Tribunal delivering its decision, some two and a half years after the hearing took place. We are not persuaded, however, that any of the errors in the reasons of the Tribunal may be inferred to be a product of the delay. As Gleeson CJ said in NAIS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 228 CLR 470 at [5], "[u]ndue delay in decision-making, whether by courts or administrative bodies, is always to be deplored. However, that comfortable generalisation does little to advance the task of legal analysis when it becomes necessary to examine the consequences of delay. The circumstances in which delay, of itself, will vitiate proceedings, or a decision, are rare".

Disposition

Senior counsel for Mr Collie maintained in oral address that Mr Collie in the appeal sought orders that his applications for review of the Commissioner's objection decisions be allowed in full, the objection decisions be set aside, and Mr Collie's objections be allowed in full. As the presiding judge said at the hearing, that was an ambitious submission. As an appellate court, we could not possibly arrive at a final result in the absence of full and clear factual findings by the Tribunal. See Skiwing Pty Ltd v Trust Company of Australia [2006] NSWCA 276 at [32], [34] (Spigelman CJ); and cf TechnologyOne Ltd v Roohizadegan [2021] FCAFC 137; (2021) 309 IR 262 at [179] (Rangiah, White and O'Callaghan JJ); Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430 at 444 (Mason P); Keith v Gal [2013] NSWCA 339 at [151]-[154] (Gleeson JA).
The appropriate orders are that the appeal be allowed, and the proceeding be remitted to the Administrative Review Tribunal (ART).
The only order that the Tribunal made was that "[t]he objection decisions under review are set aside and remitted to the Commissioner to be remade in accordance with these reasons".
The order was in those terms because Mr Collie had been partially successful in his review of the Commissioner's objection decision before the Tribunal. It concluded that the Commissioner's calculations of the tax benefit were erroneous, reducing the amount for each of the 1997 to 2001 income years, and that the 50 percent penalty should also be recalculated by reference to its adjusted benefit amounts.
The parties agreed that if the outcome of this appeal was to be remittal, the remitter will oblige the ART to consider the questions afresh. The hearing is not to be a continuation of the hearing which has already occurred before the Tribunal. That means that no party will be bound by how they conducted their case before the Tribunal and that, subject to the views of the ART, either party would be permitted to adduce further evidence or make further submissions.
As Gray J (with whom Keely J agreed) said in Blackman v Commissioner of Taxation (1993) 43 FCR 449 at 455: The obligation of the tribunal to find facts is not diminished where there has been a successful appeal to the Federal Court of Australia under s 44 of the Administrative Appeals Tribunal Act. If the court allows the appeal, sets aside the decision of the tribunal, and remits the case to be heard and decided again, the tribunal retains its responsibility to find the facts. If, as is usually the case, the remitted matter is heard and decided by a tribunal differently constituted from the tribunal whose decision was the subject of the successful appeal, the differently constituted tribunal will have to find facts. In the exercise of its powers, and subject to the submissions of the parties, the tribunal may decide to act on the finding of fact made by the earlier tribunal, or some of them. It may decide, as the learned senior member did in the present case, to rely upon evidence which was before the earlier tribunal. It may decide that the proper course is to receive all or some evidence afresh. The parties might agree that some or all of the findings of fact previously made are to be treated as findings of fact by the tribunal. The order of the court may limit the ambit of the issues with which the tribunal is to deal upon a case being remitted. The order of Jenkinson J in the present case cannot be construed as containing such a limitation. The course which the tribunal takes in relation to any case will depend on the circumstances of that case, but it will be the responsibility of the tribunal which ultimately decides the case to determine for itself the facts.
In our view, in this case there would be much to be said for the preparation of new submissions tailored to the issues that are to be addressed, because of the sheer volume of the material before the Tribunal that dealt with a range of questions about which there is no longer any controversy. But, for the reasons given by Gray J in Blackman, that is a matter for the ART member to whom the matter is remitted.
The Commissioner sought an order similar to that made in Gomeroi People v Santos NSW Pty Ltd (No 2) (2024) 303 FCR 255 ("The matter is to be determined by the Tribunal without further evidence, subject only to proper cause being shown for the adducing of further evidence and the Tribunal being satisfied it is appropriate to permit further evidence to be adduced"). We are not inclined to make such an order here, because we would not seek to fetter the ART, or the parties, by imposing what in this case would be an arbitrary presumption.
The parties agreed during the course of oral address that in the event Mr Collie's appeal was allowed, the scope of the remitter should be limited to the question of whether Mr Collie obtained a tax benefit in each relevant year of income, being those ended 30 June 1997, 1998, 1999, 2000 and 2001.
The remittal order will be made in those terms.
As to costs, the parties agreed that they should be permitted to file short written submissions. We will accordingly make an order for the filing of such submissions.
We said in our reasons in Grant that it is a truly lamentable state of affairs that after two decades, we are back at the point where critical issues in dispute between the parties are to be referred to the Tribunal. As regrettable as that is, as we explain above, we are left with no choice in the matter. I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices O'Callaghan McEvoy and Needham.

At a glance

Court

Decision date

Before

Source

Judgment (10 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (17)

Cited By (1)