Pearson v Commissioner of Taxation [2006] FCAFC 111

FEDERAL COURT OF AUSTRALIA

Pearson v Commissioner of Taxation [2006] FCAFC 111

TAXES AND DUTIES – income tax and related legislation – trust income – whether beneficiary presently entitled – where immediate beneficiary is the trustee of another trust estate – self-executing provisions – contrast with provisions which are not self-executing – relevance of rule in Saunders v Vautier – where additional tax imposed on ultimate beneficiary – remission thereof. Income Tax Assessment Act 1936 (Cth) s 95 Federal Commissioner of Taxation v Whiting (1943) 68 CLR 199 cited CPT Custodian Pty Limited (previously trading as Sandhurst Nominees (Vic) Ltd) v Commissioner of State Revenue (2005) 221 ALR 196 considered Harmer & Ors v Commissioner of Taxation (1991) 173 CLR 264 applied Taylor v Federal Commissioner of Taxation (1970) 119 CLR 444 cited Totledge Pty Ltd v Federal Commissioner of Taxation (1980) 31 ALR 657 cited Federal Commissioner of Taxation v Totledge Pty Ltd (1982) 60 FLR 149 cited JANETTE ANN PEARSON v COMMISSIONER OF TAXATION QUD 345 OF 2005 QUD 346 OF 2005 QUD 347 OF 2005 DOWSETT, ALLSOP AND EDMONDS JJ 5 JULY 2006 SYDNEY (HEARD IN BRISBANE) IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY QUD 345 OF 2005

QUD 346 OF 2005

QUD 347 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: JANETTE ANN PEARSON

Appellant

AND: COMMISSIONER OF TAXATION

Respondent

JUDGES: DOWSETT, ALLSOP AND EDMONDS JJ

DATE OF ORDER: 5 JULY 2006

WHERE MADE: SYDNEY (HEARD IN BRISBANE)

THE COURT ORDERS THAT:

1. The appellant's appeals be allowed in part. 2. In QUD 345 of 2005: (a) The orders of the primary judge in QUD 264 of 1999 be set aside. (b) The Objection Decision dated 9 September 1999 be varied to the extent that the appellant's taxable income for the income year ended 30 June 1992 be determined at $539,050 less any amount included in the said amount of $539,050 which is attributable to the net income of the Corplan Financial Group Unit Trust (the excluded amount) and that any additional tax imposed under s 223 (repealed) of the Income Tax Assessment Act 1936 (Cth) (the ITAA) referrable to the excluded amount be remitted. (c) The appeal against the appealable Objection Decision be remitted to the primary judge to determine whether the remaining additional tax imposed under s 223 (repealed) of the Act should be further remitted in whole or in part. (d) The respondent pay 50 per cent of the appellant's costs of the proceeding before the primary judge and of the appeal therefrom. 3. In QUD 346 and 347 of 2005 the appeals against the appealable Objection Decisions be remitted to the primary judge to determine whether the additional tax imposed under s 226H of the ITAA and the further additional tax imposed under s 226X of the ITAA should be remitted in whole or in part. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.