Major taxation matters
AGS taxation lawyers worked on a number of major matters this year, delivering significant results for the Australian Taxation Office (ATO).
Commissioner of Taxation v Ludekens  FCAFC 100 (29 August 2013)
The Commissioner had applied to the Federal Court for civil penalties against several respondents for contraventions of the ‘promoter penalty’ provisions of Div 290 of Sch 1 to the Taxation Administration Act 1953. Division 290 provides for civil penalties to be imposed in relation to 2 types of conduct: first, conduct by an entity that results in that, or another, entity being a promoter of a tax exploitation scheme; and secondly, conduct that results in a scheme that has been promoted on the basis of conformity with a product ruling being implemented in a way that is materially different from that described in the product ruling. In the Ludekens case, the Commissioner alleged that both kinds of conduct had taken place.
At first instance, the Commissioner was unsuccessful. On appeal to the Full Federal Court, the Commissioner succeeded in the claim that relevant respondents were promoters of a tax exploitation scheme. The Full Federal Court’s construction of key provisions of Div 290 provides clarity and certainty about the operation of the provisions. The respondents’ application for special leave to appeal to the High Court was heard but refused. The matter will be reheard by Middleton J in respect of the quantum of penalties to be imposed.
AGS was actively involved in the investigation stage, assisting the ATO investigators with interviewing witnesses, preparing witness statements and marshalling evidence to be adduced in court. We have since acted in all stages of the proceedings.
Key AGS lawyers working on this matter were Ross McClure (Senior Executive Lawyer), Sue-Anne Thompson (Senior Lawyer) and Andrew Blunt (Lawyer).
Macquarie Bank Limited v Commissioner of Taxation  FCAFC 119 (24 October 2013)
The applicants sought urgent judicial review of the Commissioner’s ‘refusal’ to apply a changed view of the law regarding Offshore Banking Unit expense allocation solely on a prospective basis. The applicants relied on an ATO practice statement issued for the guidance of staff in the wake of a report by the Inspector-General of Taxation into so-called ‘U-turns’. The applicants claimed that the practice statement required the Commissioner to investigate whether ATO actions or advice had led taxpayers to conduct themselves on the basis that the law applied in a particular way and, if so, to apply any changed view of the law on a prospective basis only. They alleged that the Commissioner’s auditors had failed to properly investigate whether banks were allocating expenses in accordance with earlier ATO advice. The Commissioner objected to the competency of the judicial review application on the ground that the ‘decision’ was not one made under an enactment, and applied for summary dismissal of the balance of the proceedings.
At first instance, Edmonds J upheld the objection to competency and the Commissioner’s submissions as to the proper construction of the practice statement, and dismissed the proceeding. Following an expedited hearing by a Full Court, leave to appeal was refused. AGS managed the matter both at first instance and in the Full Court under very tightly compressed timetables. Preparation included providing discovery of documents covering a 15-year period, and dealing with numerous associated issues. As well as handling the litigation, AGS advised and assisted ATO instructing officers in responding to a range of internal and external sensitivities. Catherine Leslie (Special Counsel Tax Litigation) played a key role in this matter.
Commissioner of Taxation v Barossa Vines Ltd  FCA 20 (3 February 2014)
The Commissioner applied to the Federal Court for civil penalties against 5 respondents for contraventions of the ‘promoter penalty’ provisions of Div 290 of Sch 1 to the Taxation Administration Act 1953. The Commissioner alleged that the respondents had engaged in conduct that resulted in ‘a scheme … [being] … promoted on the basis of conformity with a product ruling [while] being implemented in a way that is materially different from that described in the product ruling’.
AGS was involved in gathering key evidence which ultimately helped resolve the matter. The Court directed the parties to engage in mediation, which was conducted with AGS and counsel. The parties reached agreement on civil penalties to be imposed and the Court imposed penalties as agreed. Barossa Vines Pty Ltd was ordered to pay to the Commonwealth a civil penalty of $625,000 and the 4 individual respondents were each ordered to pay a civil penalty to the Commonwealth of $125,000.
AGS lawyers Dusan Uglesic (Senior Executive Lawyer) and Claire Deegan (Lawyer) played key roles in this matter.
Hua Wang Bank Berhad
AGS acted for the Commissioner in a number of proceedings involving Hua Wang Bank Berhad, a company apparently acting as a bank under Western Samoan laws. The Commissioner and other Commonwealth agencies undertook investigations under Project Wickenby into a number of individuals, regarding transactions involving the Hua Wang Bank Berhad. Those investigations resulted in the Commissioner raising income tax assessments against Chemical Trustee Limited and related entities for liabilities exceeding $54 million. Debt recovery and tax appeal proceedings followed. In the debt recovery proceedings the Commissioner obtained freezing orders, preventing the disposal of assets. The tax appeal proceedings were substantial. In the tax appeal proceedings alone, 15 judgments deciding interlocutory disputes were published.
AGS responded quickly to the numerous interlocutory applications filed in the proceedings, often with very short notice. We assisted counsel and the ATO to review large volumes of evidence, indexing it and reviewing it for relevance and for material that could be used in cross-examination, then prepared a comprehensive tender bundle that became the primary source of evidence at the hearing. We also interviewed a number of third party witnesses close to the hearing to obtain important evidence in reply.
Emma Whan (Senior Lawyer) led the AGS team in this matter.
ATS Pacific Pty Ltd v Commissioner of Taxation  FCAFC 33 (27 March 2014)
This matter involved the application of the GST laws to holiday package tours in Australia which were sold to non-residents. At issue was the proper characterisation of the supply by Australian travel agents or tour operators to non-resident travel agents or tour operators in booking or arranging accommodation, goods and services for the non-resident tourists who were customers of the non-resident travel agents. At first instance, AGS played an important role in settling the Commissioner’s evidence and settling an agreed statement of facts. The Federal Court at first instance allowed the taxpayer’s objections in part. On appeal, the Full Federal Court dismissed the taxpayer’s appeal and allowed the Commissioner’s cross-appeal. The Full Court concluded that a ‘taxable supply’ was made by ATS to the non-residents’ travel agents, being a promise by ATS that it would ensure that, when the tourists came to Australia, they would be provided with the accommodation and other goods and services they had paid for.
Jane Lye (Senior Executive Lawyer and Director of AGS Brisbane) played a key role in this matter.
Deputy Commissioner of Taxation v Oswal (No 2)  FCA 463 (9 May 2014)
A number of cases came before the courts in Perth concerning controversial Indian fertiliser tycoon Mr Pankaj Oswal and his wife, Mrs Radhika Oswal. The Deputy Commissioner obtained a judgment in the amount of $186,321,790 against Mrs Radhika Oswal for unpaid taxes and related amounts. The Deputy Commissioner also obtained freezing orders, precluding Mrs Oswal from removing, dealing with, or diminishing the value of her assets in Australia up to the unencumbered value of the judgment sum, other than to pay the judgment debt. In the above judgment, an application by Mrs Oswal to substantially amend the freezing orders in her favour was refused.
AGS has been actively involved in advising the ATO on issues relating to the recovery of the Oswals’ tax debts since the Oswals left Australia in late 2010. During 2013–14, we acted for the Deputy Commissioner in the proceedings dealing with the judgment and the freezing orders.
Tim Burrows (Senior Executive Lawyer) played a key role in this matter.
This is an extract from the 2013–14 AGS annual report