Commissioner of Taxation of the Commonwealth of Australia v MacArthur [2003] FCA 903

FEDERAL COURT OF AUSTRALIA

Commissioner of Taxation of the Commonwealth of Australia v MacArthur [2003] FCA 903

TAXES AND DUTIES – appeal from Administrative Appeals Tribunal – where taxpayer completes work in company solely owned by himself and wife – where taxpayer had past association with contractor – where entered into contracts – where Commissioner re-assessed on basis of Part IVA of Income Tax Assessment Act 1936 (Cth) – whether tax benefit obtained by taxpayer – whether benefit obtained in connection with a scheme – whether error of law.

Administrative Appeals Tribunal Act 1975 (Cth) s 44 Income Tax Assessment Act 1936 (Cth) ss 177A, 177C, 177C(1), 177C(1)(a), 177D, 177F(1)

Federal Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404 applied THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA v PHILLIP GEORGE MACARTHUR Q 181 OF 2002 DOWSETT J 28 AUGUST 2003 BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q 181 OF 2002

BETWEEN: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

APPLICANT

AND: PHILLIP GEORGE MACARTHUR

RESPONDENT

JUDGE: DOWSETT J

DATE OF ORDER: 28 AUGUST 2003

WHERE MADE: BRISBANE

THE COURT ORDERS THAT: 1. The appeal be allowed. 2. The matter be remitted to the Administrative Appeals Tribunal for further consideration. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q181 OF 2002

BETWEEN: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

APPLICANT

AND: PHILLIP GEORGE MACARTHUR

RESPONDENT

JUDGE: DOWSETT J

DATE: 28 AUGUST 2003

PLACE: BRISBANE

REASONS FOR JUDGMENT

GENERAL 1 On 29 October 2002, the Administrative Appeals Tribunal (the "Tribunal") set aside certain decisions of the Commissioner of Taxation (the "Commissioner") disallowing objections by the respondent (the "taxpayer") against re-assessments issued by the Commissioner for the 1995/96, 1996/97 and 1997/98 tax years. Pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (the "AAT Act") an appeal lies to this Court on a question of law. The Commissioner appeals against the Tribunal's decision. 2 The taxpayer is a civil engineer. During the tax years in question he was employed by a company, MacArthur Project Management Pty Ltd (the "company"), of which company the taxpayer and his wife were the sole shareholders. The taxpayer's wife was also employed by the company. During those years, the company entered into contracts with the Main Roads Department for the provision by the company of professional services to be supplied by the taxpayer. I set out below the findings made by the Tribunal at par 7 of its reasons (AB 656-658). In the reasons the taxpayer is referred to as the "applicant". I have amended the following extract to identify him as the "taxpayer" in order to achieve consistency with the rest of my reasons, a practice I will follow throughout my reasons where appropriate.