Scope of decision in Richardson
50 The central tenet of the Appellants' case is based on the following sentence from Evatt J's reasons in Richardson v Federal Commissioner of Taxation [1932] HCA 67; (1932) 48 CLR 192 at 212, taken out of context: "'One income, one taxpayer, one tax' is the general scheme of the Act". That sentence needs to be read in the context in which it was made.
51 Richardson concerned a taxpayer, Mr Richardson, who had failed to include in his returns assessable income from operations by a person who was found to be a nominee of that taxpayer. The nominee had returned that income as his own and tax had been paid on that income, albeit at a rate much lower than if that income had been assessed to Mr Richardson. The Commissioner issued amended assessments to Mr Richardson and had neither cancelled nor amended the assessment issued to the nominee. Nor had the Commissioner refunded the tax paid on the nominee's assessment. The Commissioner did not take into account any of the payments made to him in respect of the nominee's assessment in calculating the taxable income of the taxpayer, or in determining the amount of tax to be paid by the taxpayer, or in determining the amount of additional tax (now called administrative penalty), or otherwise reducing the total amount payable by the taxpayer.
52 At first instance, Starke J ordered a reduction in the total amount of each assessment by a sum equal to the tax already paid by the nominee on the ground that, having treated the person conducting the operations from which the income arose as a mere nominee or dummy for the taxpayer, the Commissioner was bound to act consistently and treat all of the nominee's acts on the same basis. These acts included the payment of tax (which, as it happened, had been found on the facts to be payments funded by Mr Richardson). The consequence was that, on Starke J's reasoning, in determining the amount due to be paid by Mr Richardson, credit was to be given for the amount paid by his nominee. In the course of his reasons, Starke J stated (as reproduced in Richardson at 201) that "[t]he Income Tax Acts do not authorize the Commissioner to take income tax twice over in respect of the same source for the same period of time".
53 On appeal to the Full High Court, the taxpayer contended that Starke J had given credit for the tax paid by Mr Richardson's nominee at the wrong stage of computation - the credit should have been given in the process of calculating Mr Richardson's income tax shortfall, with the consequence that the amount on which additional tax was payable should have been lower, rather than taking the payment into account in determining the total balance owing to the Commissioner. On appeal, the taxpayer also contended that the assessment to him was not authorised by the Income Tax Assessment Acts 1922-1930 (Cth) because the assessments against the nominee assessing the profits of the operations stood unamended.
54 In addressing the taxpayer's contention that the assessment was not authorised, Evatt J said (at 211) (emphasis added):
[It] is based upon the general principle that the Act does not intend the same income to be assessed and taxed more than once, and that [the nominee]'s amended assessment is incontrovertible evidence of an intention to reach both him and Richardson in respect of Richardson's profits from the hotel. But we are not concerned with [the nominee]'s rights, if any, against the Commissioner, and it would be curious if, despite Richardson's "fraud upon the revenue" (as Starke J. calls it), he could establish the invalidity of the assessment upon him by production of the assessment arrived at in error through his own misrepresentation.
The general principle invoked need not be questioned. But it cannot be stated, without qualification, that the administration of the Act must be such that tax can never be leviable against two separate individuals in respect of the same income. "One income, one taxpayer, one tax" is the general scheme of the Act. But where A, acting in collusion with B, has returned part of B's income as his own and has been enabled by B to pay the tax assessed in respect of such income, with the result that B is successful in a fraud, I think that it is hopeless for B to claim that he is exempted from his liabilities under the Act unless and until A's assessment is altered and a refund made. Whatever rights A may have to obtain his refund, B cannot say, either that an altered assessment upon him in respect of what is admittedly his own income is unlawful, or that the liability [to additional tax] under sec. 67, which springs from his own default, is somehow suspended.
55 In separate reasons, Dixon J (at 206) considered the general rule to be that:
[N]o person may, after obtaining an advantage by the assertion of rights in relation to another and while retaining it, set up and rely upon other rights against the same person, inconsistent with the existence of those already asserted.
56 Dixon J concluded that the Commissioner could include the income that had been returned by the nominee in the assessments of Mr Richardson without first altering the assessment of the nominee. Dixon J said (at 207) (emphasis added):
Upon the state of facts which must be taken to be true the taxpayer alone was exposed to tax in respect of the income in question. The nominee's liability arose only upon a false state of facts. No doubt, when and if the Commissioner arrived at the clear conclusion that to ensure the completeness and accuracy of the nominee's assessments the exclusion of the income he returned was requisite, it became his duty to exercise his power under sec. 37. But it was not unnatural that he should delay relieving one of two persons whom he considered culpable until the liability of the other was established. The questions which may arise out of such situations are no doubt attended with difficulty. For this reason it is not desirable to enter upon them more at large than is necessary for the decision of this appeal. It is enough to say that there is nothing in the character of the power given in sec. 37 or in the nature of the power of assessment which requires the formal alteration of the nominee's assessments before the alteration of the assessment of the taxpayer.
57 The third member of the Court, McTiernan J, stated that he agreed that the appeal and cross‑appeal should be dismissed (at 215). Inferentially, his Honour agreed with the reasons given by each of Dixon J and Evatt J.
58 Against this background, the following observations may be made:
(1) The statement that income tax legislation does not intend the same income to be assessed and taxed more than once is not to be accepted without qualification. There is no blanket rule that more than one taxpayer cannot be assessed to tax upon the same income. Two persons can, in this way, have included in their individual assessments the same income for the same year. This proposition was affirmed in Deputy Commissioner of Taxation v Richard Walter Pty Ltd [1995] HCA 23; (1995) 183 CLR 168 per Mason CJ at 188, Brennan J at 200-2, Deane and Gaudron JJ at 214, Dawson J at 216-7, Toohey J at 228-9 and McHugh J at 237-8. To the extent that the Appellants' case is premised on the existence of such a rule, their contention is inconsistent with authority.
(2) The reference to the "same income" needs to be understood in the context of the facts before the Court. Richardson concerned a situation in which assessments were issued to two persons in respect of income that had been found to be the income of one person, Mr Richardson. The tax paid by the nominee was tax paid by Mr Richardson. Mr Richardson's income could not be assessed both to Mr Richardson and to his nominee.
(3) It is well-established that the Commissioner may issue alternative assessments to different taxpayers in respect of the same amount. The position was accurately encapsulated by the Full Court in Federal Commissioner of Taxation v Stokes (1996) 72 FCR 160, in which it was held that the mere existence of two assessments issued against different taxpayers, by which the same amount was included in the assessable income of each, did not compel the conclusion that the assessments were tentative (in the sense used by the High Court in Federal Commissioner of Taxation v S Hoffnung & Co Ltd [1928] HCA 49; (1928) 42 CLR 39) and thus incapable of constituting valid assessments.
(4) Even in a case where the income derived by one person has been included in assessments issued to another, the power of the Commissioner to issue an assessment to the person who in fact derived the income is not predicated on the Commissioner first refunding or reducing the assessments issued to the other.
(5) Income from the "same source" can sometimes be assessed to more than one taxpayer. The obvious example is profits generated by operations conducted by a company. Those profits are taxable to the company and, absent imputation, taxable again upon distribution to a shareholder. To the extent that the assessments to Mr Hyder are supported by an application of Div 7A, those assessments are not alternatives to or inconsistent with the assessments issued to SEPL.
59 Although accepting that the Commissioner had power to issue alternative assessments, the Appellants contended in their written submissions that it was a "disputed but undecided" fact as to whether SEPL's assessment was truly an "alternative assessment" in the sense of being an assessment that the Commissioner was bona fide uncertain was correct. The Appellants relied upon statements in the ATO position paper, correspondence from the ATO debt collection officers, correspondence from the ATO officers dealing with the Appellants' objections and the Statements of Reasons in relation to the decisions not to defer collection or defer the due date for payment. However, by the conclusion of the hearing, the Appellants had withdrawn that submission.
60 The withdrawal was correctly made. The contention that the Commissioner was not bona fide uncertain as to the correctness of the SEPL assessment is contrary to the findings of the primary judge concerning the Commissioner's position in the Pt IVC proceedings. It is apparent from that summary that the primary judge accepted that the SEPL assessment was an alternative to the assessment issued to the Trustee (PJ at [139]-[144]). So much was also stated by the Commissioner at para 18 of his decision on the Trustee's objection to its 2015 assessment. There is no basis for suggesting that the contentions put by the Commissioner in the Pt IVC proceedings were not bona fide. Furthermore, the Appellants by their own contentions, accepted that the assessments issued to the Trustee and Mr Hyder were valid and accordingly must be taken to have accepted that those assessments were issued bona fide.
61 For the above reasons, to the extent that the Appellants contend that the scheme of the income tax legislation is that the Commissioner cannot lawfully issue assessments to more than one taxpayer in respect of income from the same source, that contention is rejected. So too is the contention that the Commissioner was precluded from issuing assessments to Mr Hyder or the Trustee without first withdrawing the assessment issued to SEPL.