Income Tax Assessment Act 1936

Last updated

Income Tax Assessment Act 1936
Coat of Arms of Australia.svg
Parliament of Australia
  • An Act to consolidate and amend the Law relating to the Imposition Assessment and Collection of a Tax upon Incomes.
Citation No. 27 of 1936 or No. 27, 1936 as amended
Territorial extent States and territories of Australia
Enacted by Australian House of Representatives
Royal assent 2 June 1936
Legislative history
Bill title Income Tax Assessment Bill 1935
Introduced by Richard G. Casey
Status: In force

The Income Tax Assessment Act 1936 (Cth) is an Act of the Parliament of Australia. It is one of the main statutes under which income tax is calculated. The Act is gradually being rewritten into the Income Tax Assessment Act 1997, and new matters are generally now added to the 1997 Act.

Contents

The reason for rewriting the act is that amendments over the years have made it thousands of pages long, and very complex. Amendments have also created subsection upon subsection.

The Act

Section 260

Section 260 was the initial general anti-avoidance provision in the act, present from its inception in 1936 and operative until 27 May 1981. The section held any contract

  1. altering the incidence of any income tax;
  2. relieving any person from liability to pay any income tax or make any return;
  3. defeating, evading, or avoiding any duty or liability imposed on any person by this Act; or
  4. preventing the operation of this Act in any respect;
to be void as against the Commissioner.

"Void against the commissioner" meant such a contract would be ignored for taxation determination, but was still enforcible by the parties against each other (the same as any other contract).

The section was present in essentially the same form in the Commonwealth Income Tax Assessment Act 1915 (and it seems in a prior act from 1895). The history of the section is principally the history of the interpretation of its wording by the courts. [1] The wording was notably broad; as early as 1921, Chief Justice Knox remarked on that (referring to the 1915 act), saying "The section, if construed literally, would extend to every transaction whether voluntary or for value which had the effect of reducing the income of any taxpayer." [2]

In consequence, the courts, of necessity, "read down" the section so it would not apply to every transaction, that obviously not being the legislature's intention.

In Newton v FCT (1958), on appeal to the Privy Council, a kind of "predication" test was described. Lord Denning in his judgement said:

you must be able to predicate – by looking at the overt acts by which it was implemented – that it was implemented in that particular way so as to avoid tax. If you cannot so predicate, but have to acknowledge that the transactions are capable of explanation by reference to ordinary business or family dealing ... then the arrangement does not come within the section. [3]

A somewhat different stream of interpretation was established in Keighery v FCT (1957) where a taxpayer who made a choice between alternatives explicitly offered by the legislation (in that case a public versus private company) did not come under section 260. [4] This was called the "choice principle" and it spawned Mullens v FCT (1976) which extended that to allow taxpayers to deliberately put themselves into circumstances described by the act (even if by unusual transactions) without coming under section 260. [5]

The Mullens case, and the subsequent Slutzkin [6] and Cridland (1977) decided from it, [7] were in a sense the demise of section 260. To the extent those schemes were regarded, in the mood of the time, as contrivances or outright avoidance, section 260 was failing in its apparent task. But the question of "avoidance" as opposed to taxpayers taking up concessions offered by the statute is not an easy one. [8] Earlier, in the Newton case (in the High Court in 1957), Justice Kitto had given his now often quoted warning about section 260: "Section 260 is a difficult provision, inherited from earlier legislation, and long overdue for reform by someone who will take the trouble to analyse his ideas and define his intentions with precision before putting pen to paper." [9]

That invitation for analysis and reform was not taken up until, it seems, court decisions started going in favour of the taxpayer, at which point the issues discussed in the Newton case were indeed considered in constructing the new Part IVA, replacing section 260 as of 27 May 1981.

Other provisions

Superseded provisions

See also

Related Research Articles

Tax noncompliance is a range of activities that are unfavorable to a government's tax system. This may include tax avoidance, which is tax reduction by legal means, and tax evasion which is the illegal non-payment of tax liabilities. The use of the term "noncompliance" is used differently by different authors. Its most general use describes non-compliant behaviors with respect to different institutional rules resulting in what Edgar L. Feige calls unobserved economies. Non-compliance with fiscal rules of taxation gives rise to unreported income and a tax gap that Feige estimates to be in the neighborhood of $500 billion annually for the United States.

<span class="mw-page-title-main">Garfield Barwick</span> 7th Chief Justice of Australia and politician (1903–1997)

Sir Garfield Edward John Barwick was an Australian judge who was the seventh and longest serving Chief Justice of Australia, in office from 1964 to 1981. He had earlier been a Liberal Party politician, serving as a minister in the Menzies government from 1958 to 1964.

Australian constitutional law is the area of the law of Australia relating to the interpretation and application of the Constitution of Australia. Legal cases regarding Australian constitutional law are often handled by the High Court of Australia, the highest court in the Australian judicial system. Several major doctrines of Australian constitutional law have developed.

<span class="mw-page-title-main">John Toohey (judge)</span> Former justice of the High Court of Australia (1930–2015)

John Leslie Toohey, AC, QC was an Australian judge who was a Justice of the High Court of Australia from 1987 to 1998.

Dividend stripping is the practice of buying shares a short period before a dividend is declared, called cum-dividend, and then selling them when they go ex-dividend, when the previous owner is entitled to the dividend. On the day the company trades ex-dividend, theoretically the share price drops by the amount of the dividend.

The constitutional basis of taxation in Australia is predominantly found in sections 51(ii), 90, 53, 55, and 96, of the Constitution of Australia. Their interpretation by the High Court of Australia has been integral to the functioning and evolution of federalism in Australia.

<i>Cridland v Federal Commissioner of Taxation</i> Judgement of the High Court of Australia

Cridland v Federal Commissioner of Taxation, was a 1977 High Court of Australia case concerning a novel tax scheme whereby some 5,000 university students became primary producers for tax purposes, allowing them certain income averaging benefits. The Australian Taxation Office held this was tax avoidance, but the test case was decided in favour of the taxpayer, one of the students, Brian Cridland.

<i>Mullens v Federal Commissioner of Taxation</i> Judgement of the High Court of Australia

Mullens v Federal Commissioner of Taxation, was a 1976 High Court of Australia tax case concerning arrangements where stockbrokers Mullens & Co accessed tax deductions for monies subscribed to a petroleum exploration company. The Australian Taxation Office held the scheme was tax avoidance, but the court found for the taxpayer.

<i>R v Barger</i> Judgement of the High Court of Australia

R v Barger is a 1908 High Court of Australia case where the majority held that the taxation power could not be used by the Australian Parliament to indirectly regulate the working conditions of workers. In this case, an excise tariff was imposed on manufacturers, with an exemption being available for those who paid "fair and reasonable" wages to their employees.

<i>Fairfax v Commissioner of Taxation</i> Judgement of the High Court of Australia

Fairfax v Commissioner of Taxation is a High Court of Australia case that considered the scope of the taxation power in section 51(ii) of the Constitution.

<i>South Australia v Commonwealth</i>

South Australia v Commonwealth is a decision of the High Court of Australia that established the Commonwealth government's ability to impose a scheme of uniform income tax across the country and displace the State. It was a major contributor to Australia's vertical fiscal imbalance in the spending requirements and taxing abilities of the various levels of government, and was thus a watershed moment in the development of federalism in Australia.

<i>Victoria v Commonwealth</i> (1957)

Victoria v Commonwealth, is a High Court of Australia case that affirmed the Commonwealth government's ability to impose a scheme of uniform income tax, adding to Australia's vertical fiscal imbalance in the spending requirements and taxing abilities of the various levels of government.

<i>Slutzkin v Federal Commissioner of Taxation</i>

Slutzkin v Federal Commissioner of Taxation, was a High Court of Australia case concerning the tax position of company owners who sold to a dividend stripping operation. The Australian Taxation Office (ATO) claimed the proceeds should be treated as dividends, but the Court held they were a capital sum like an ordinary investment asset sale.

Federal Commissioner of Taxation v Peabody was a 1994 High Court of Australia tax case concerning certain transactions made by the Peabody family business. The Australian Taxation Office (ATO) sought to apply the Part IVA general anti-avoidance provisions of the Income Tax Assessment Act 1936.

<i>Pape v Commissioner of Taxation</i> Judgement of the High Court of Australia

Pape v Commissioner of Taxation is an Australian court case concerning the constitutional validity of the Tax Bonus for Working Australians Act 2009 (Cth) which sought to give one-off payments of up to $900 to Australian taxpayers. The decision of the High Court of Australia was announced on 3 April 2009, with its full reasons released on 7 July 2009.

<i>New South Wales v Commonwealth</i> (1915)

New South Wales v Commonwealth, commonly known as the Wheat case, or more recently as the Inter-State Commission case, is a landmark Australian judgment of the High Court made in 1915 regarding judicial separation of power. It was also a leading case on the freedom of interstate trade and commerce that is guaranteed by section 92 of the Constitution.

Section 99 of the Constitution of Australia, is one of several important non-discrimination provisions that govern actions of the Commonwealth and the various States.

Section 90 of the Constitution of Australia prohibits the States from imposing customs duties and excise duties. The section bars the States from imposing any tax that would be considered to be of a customs or excise nature. While customs duties are easy to determine, the status of excise, as summarised in Ha v New South Wales, is that it consists of "taxes on the production, manufacture, sale or distribution of goods, whether of foreign or domestic origin." This effectively means that States are unable to impose sales taxes.

<i>Deakin v Webb</i>

Deakin v Webb was one of a series of cases concerning whether the States could tax the income of a Commonwealth officer. The High Court of Australia overruled a decision of the Supreme Court of Victoria, holding that the States could not tax the income of a Commonwealth officer. This resulted in conflict with the Privy Council that was ultimately resolved by the passage of Commonwealth law in 1907 to permit the States to tax the income of a Commonwealth officer. The constitutional foundation of the decision was overturned by the subsequent decision of the High Court in the 1920 Engineers' Case.

<i>Baxter v Commissioners of Taxation</i> (NSW) Australian tax case

Baxter v Commissioners of Taxation (NSW), and Flint v Webb, were the last of a series of cases concerning whether the States could tax the income of a Commonwealth officer which had resulted in conflict between the High Court and the Privy Council. The two cases were heard together, however two separate judgments were issued with Baxter v Commissioners of Taxation (NSW) addressing the substantive issues, and Flint v Webb addressing the applications for a certificate to appeal to the Privy Council. The judgement of Griffith CJ in Flint v Webb suggested two ways in which that conflict could be resolved. Both suggestions were adopted by the Commonwealth Parliament by legislation that permitted the States to tax the income of a Commonwealth officer, and gave the High Court exclusive appellate jurisdiction on such constitutional questions. The constitutional foundation of the decision was overturned by the subsequent decision of the High Court in the 1920 Engineers' case.

References

  1. ↑ Pagone GT. "Part IVA: The General Anti-Avoidance Provisions in Australian Taxation Law]".{{cite journal}}: Cite journal requires |journal= (help) [2003] Melbourne University Law Review 30.
  2. ↑ Deputy Federal Commissioner of Taxation v Purcell [1921] HCA 59 , (1921) 29 CLR 464 (12 August 1921), High Court.
  3. ↑ Newton v Federal Commissioner of Taxation [1958] UKPC 14 , [1958] AC 450; [1958] UKPCHCA 1 , (1958) 98 CLR 1(7 July 1958), Privy Council (on appeal fromAustralia).
  4. ↑ W P Keighery Pty Ltd v Federal Commissioner of Taxation [1957] HCA 2 , (1957) 100 CLR 66(19 December 1957), High Court.
  5. ↑ Mullens v Federal Commissioner of Taxation [1976] HCA 47 , (1976) 135 CLR 290(9 September 1976), High Court.
  6. ↑ Slutzkin v Federal Commissioner of Taxation [1977] HCA 9 , (1977) 140 CLR 314(25 February 1977), High Court.
  7. ↑ Cridland v Federal Commissioner of Taxation [1977] HCA 61 , (1977) 140 CLR 330(30 November 1977), High Court.
  8. ↑ Thinking about Tax Avoidance, by Ivan Potas, Australian Institute of Criminology, Trends and Issues in Crime and Criminal Justice number 43, August 1993, ISBN   0-642-19553-6, ISSN 0817-8542[ dead link ]
  9. ↑ Federal Commissioner of Taxation v Newton [1957] HCA 99 , (1957) 96 CLR 577(31 May 1957), High Court at p 597.


This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.