Powerpoint presentation of paper presented on 19 February 2016.

1. RECENT CASES
Joanne Dunne, CTA
MinterEllison

2. Outline of presentation
 Statistical analysis of the 2015 cases – win/loss,
an historical review of overall success percentage,
per Judge review
 The award for persistence in 2015
 Some Australian income tax cases of note from Some Australian income tax cases of note from
2015
 Very briefly, two foreign cases in 2015
̶ C of IR v Trustpower Limited [2015] NZCA 253
̶ MNR v BP Canada Energy Company [2015] FC
714

3. The statistics from the
2015 cases

4. Basis for statistical analysis
 Survey of High Court, Full Federal Court and Federal
Court tax cases for the period Jan 2015 – end Dec 2015:
 Excludes procedural and basic debt collection cases
(winding up orders etc)
 Excludes all AAT cases
 Excludes High Court special leave casesg p
 Excludes State tax cases
 Overall win/loss statistics include all types of federal tax ie
income tax, GST, FBT, PRRT (etc, etc)
 Where a judgment is in part for ATO and in part for
taxpayer 0.5 allocated

5. Court Total cases ATO win Taxpayer win
High Court 3 2 1
Full Federal
Court
17 14 3
Statistical analysis – Overall
win/loss
Federal
Court
31 23 8
TOTAL 51 39 12
% Success
overall
76.5% 23.5%

6. Court Total cases
ATO success
rate
Taxpayer
success rate
2011 24 50% 50%
2012 30 60% 40%
Tracking the success rate %
2011 - 2015
2013 31 74.5% 25.5%
2014 35 73% 27%
2015 51 76.5% 23.5%

7. What do these statistics mean?
Just like last year, celebrations at the
ATO

8. Judge
Total
cases
ATO win Taxpayer win
Collier J 1 1 -
Davies J 3 2 1
Edelman J 1 1 -
Statistical analysis - overall cases:
Federal Court Judges
Edelman J 1 1
Edmonds J 2 1.5 0.5
Greenwood J 2 0.5 1.5
Griffiths J 3 3 -
Jessup J 1 1 -
Logan J 2 - 2
Mansfield J 1 1 -
Pagone J 3 3 -

9. Judge
Total
cases
ATO win Taxpayer win
Perram J 2 1 1
Perry J 3 3 -
Rares J 1 - 1
Statistical analysis - overall cases:
Federal Court Judges
Robertson J 2 2 -
Siopis J 1 1 -
White J 2 2 -
Wigney J 1 - 1
TOTAL 31 23 8

10. Judge
Total cases where
part of Full Court
ATO win Taxpayer win
Allsop CJ 3 2 1
Besanko J 1 1
Davies J 5 5**
Edelman J 1 1
Ed d J 4 3 1
Statistical analysis – overall cases:
Judges sitting as Full Federal Court
Edmonds J 4 3 1
Foster J 1 1
Gilmour J 1 1
Gleeson J 1 1
Gordon J 1 1
Greenwood J 2 1 1
Jessup J 1 1
Jagot J 1 1
Kenny J 4 3 1

11. Judge
Total cases where
part of Full Court
ATO win Taxpayer win
Logan J 3 2 1
Middleton J 1 1
Mortimer J 2 1 1
Murphy J 1 1
Statistical analysis – overall cases:
Judges sitting as Full Federal Court
Pagone J 11 8** 3* dissent in Blank
Perram J 2 2
Roberston J 4 3 1
Siopis J 2 2
Wigney J 2 2
Yates J 1 1
** while there was dissent from Justices Pagone and Davies in Channel Pastoral, the dissent
would still have led to a result in favour of the ATO

12. Award for persistence: 2015 cases
 Andrew Morton Garrett
̶ Mr Garrett’s efforts will likely win nothing else
but he gets this year’s award for
persistence (vexatiously so)
Honourable mentions
 2014 winner, Peter Paalvast
 2013 winner Hua Wang Bank Berhad
 The LHRC litigation

13. Australian income tax
cases

14. ElecNet – what is a “unit trust”?
 Private ruling unsuccessfully sought that the Electricity
Industry Severance Scheme (EISS) was a ‘unit trust’,
‘public unit trust’, ‘resident unit trust’, ‘eligible unit trust’
and not a ‘corporate unit trust’ - the taxpayer (trustee)
appealed
 At issue was whether the section 102M definition of
‘unit’ and ‘unitholder’ in relation to a prescribed trust
estate could be relied upon when determining if there is
a ‘unit trust’ for the purposes of all of Div 6C ITAA36
 Also at issue was whether a ‘unit trust’ required a
beneficial interest in all of the trust’s property
 Justice Davies in the Federal Court: section 102M
definitions were relevant, beneficial interest in any trust
property required by the definition of ‘unit’

15. ElecNet – what is a “unit trust”?
 Full Court: allowed Commissioner’s appeal:
̶ Taxpayer’s construct of ‘unit trust’ too wide;
Commissioner’s too narrow
̶ It is relevant to consider the definition of ‘unit’ in sec 102M
– broader approach of Davies J correct
̶ Core feature of a ‘unit trust’ is there needs to be a
beneficial interest which was capable of being ‘unitised’ in
any of the income/property of the trust (not all) – Davies J
approach correct
̶ However, a very close examination of Trust Deed is
required
̶ On the facts, the discretions available to the Trustee under
the Deed militated against there being the required
beneficial interests that could be unitised

16. Orica – Part IVA
OEH OUSSI
(1) $
(2)
RPS(4) on-
lend funds
OFL
Consolidated group
Australia US
(3) Loan funds
to OFL in
return for
interest
received
from
OUSSI

17. Orica – Part IVA
 ‘Purpose’
̶ Scheme was the means adopted by Orica
̶ Spotless applied: ‘shape or form’ of transaction
adopted indicated the presence of a dominant
purpose to achieve the consolidated after tax benefits
equal to the interest deductionsequal to the interest deductions
̶ Citigroup cited: scheme only made sense because of
the Australian tax deductions – Orica Group’s pre-
existing tax losses not relevant
̶ Insufficient evidence to suggest OUSSI would have
otherwise funded externally, evidence shows that
option was rejected – issue is what the purpose of the
option Orica did choose was
 Penalties

18. Liquidator cases
 High Court confirmation provided in Australian
Building Systems (in liq): unless there is an
assessment, a liquidator is not required by sec 254 of
the ITAA36 to retain money to meet future tax liabilities
(in that case, from a CGT event)
 Watch for a future test case in relation to the issue in
Bell Group (in liq)
̶ a garnishee notice was issued by the Commissioner to
NAB over post-liquidation tax liabilities in respect of a
settlement sum
̶ question of notice validity – sec 254(1)(d) ITAA36 vs
section 468(4) Corporations Act – and application of
Bruton Holdings High Court decision

19. Cases to look out for in 2016
 Full Federal Court appeals:
̶ Chevron
̶ Tech Mahindra
̶ Financial Synergy Holdings
 Will Orica be appealed?Will Orica be appealed?
 Will Blank get to the High Court?

20. Foreign tax casesForeign tax cases

21. The usual plug of NZ as a tourism
destination – only 3 hours away

22. NZ: Trustpower
 Deductibility of expenditure to obtain resource consents
– whether feasibility expenditure – capital/revenue
 Unchallenged company evidence that the expenditure
was incurred as part of a business process of
considering whether to “build or buy” extra electricity
capacity – operational expenditure
 Extraordinary Court of Appeal holdings went beyond the
Commissioner’s argument and overturned lower Court
factual findings
 Expenditure capital in nature
 ‘Feasibility’ expenditure tag meaningless
 Expenditure not in course of carrying on business

23. Canada: BP Canada Energy Co
 Taxpayer ‘uncertain tax positions’ - access to
accountant papers sought - MNR ‘fishing expedition’
 Tax accrual working papers sought (under the
equivalent to sec 264) relating to contingent liabilities –
MNR did not generally access these in accordance with
policy
 Taxpayer argued access to such papers would be a
‘compulsory self-audit’ and, using the self-assessment
system as a shield, provided an interesting analogy
 Federal Court held the material sought was compellable;
the MNR policy was not a bar to seeking this material –
similar holdings would occur in Australia

24. Questions /comments

25. Thank you
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26. © Joanne Dunne, MinterEllison 2016
Disclaimer: The material and opinions in this paper are those of the author and not those of The Tax Institute. The Tax
Institute did not review the contents of this presentation and does not have any view as to its accuracy The material andInstitute did not review the contents of this presentation and does not have any view as to its accuracy. The material and
opinions in the paper should not be used or treated as professional advice and readers should rely on their own enquiries
in making any decisions concerning their own interests.