The High Court has allowed one appeal, partly allowed a second appeal, and dismissed two appeals from a decision of the Full Federal Court on the taxation of franked distributions from trusts. In 2006 to 2008, the trustee (Thomas Nominees Pty Ltd) of a trust (the Thomas Investment Trust), received franked distributions within the meaning of div 207. Division 207 of pt 3-6 of the Income Tax Assessment Act 1997 (Cth) lays out the tax implications of trust income that includes franked distributions. In those years, the trustee passed resolutions that sought to distribute the franking credits between the trust’s beneficiaries separately from, and in different proportions to, the income that comprised the franked distributions (see details at ff). The trustee referred to this as the ‘Bifurcation Assumption’, and lodged tax returns on the basis that this was legally effective under div 207. In 2010, the Queensland Supreme Court issued ‘directions’ to the Trustee that those resolutions did give effect to the Bifurcation Assumption, and that this was legally effective under div 207.
Two of the beneficiaries (the taxpayers) filed appeals in the Federal Court under pt IVC of the Taxation Administration Act 1953 (Cth), arguing that the Bifurcation Assumption was not legally effective under div 207 (see at ff). The central issue before the High Court was whether the FCAFC was bound by the directions given by the QSC and its holding that the Bifurcation Assumption was in line with div 207, and, if the FCAFC was not so bound, how div 207 should apply to the trustee’s resolutions.
The High Court (Kiefel CJ, Bell, Keane, Nettle, Gordon and Edelman JJ, and Gageler J) unanimously held that the FCAFC erred in holding that it was bound to follow the QSC ruling. The FCAFC ‘misunderstood and misapplied’ the central case on directions, Continue reading
The High Court has allowed an appeal against a decision of the Full Federal Court on notification of hearing requirements in refugee application hearings and the task of appellate courts in reviewing decisions that are purportedly ‘legally unreasonable’. Under s 426A of the Migration Act 1958 (Cth), where an applicant is invited to appear before the Tribunal but does not do so, the Tribunal ‘may’ make a decision on the review without taking further action to enable the applicant’s appearance before it. After the Minister refused the respondents protection visa applications, the respondents filed an application for review by the Refugee Review Tribunal but did not respond to the Tribunal’s requests for more information or attend a scheduled hearing. The Tribunal’s communications were sent only by post, and not also by phone or email, even after the non-response from the respondents. The FCAFC held that the Tribunal acted unreasonably in failing to attempt to contact the respondents by phone or email. The FCAFC also held that the Minister had failed to show that the primary judge’s evaluation of that unreasonableness involved any appealable error of law or fact analogous to the error that must be established in relation to discretionary judgments, as described in House v The King  HCA 40.
The High Court unanimously allowed the appeal in four judgments, holding that the House principles had no application in this appeal, that the Tribunal did not act unreasonably in failing to take further action to contact the respondents, and that the FCAFC should have so decided. Kiefel CJ, Gageler J and Edelman J each agreed with the orders proposed by Nettle and Gordon JJ.
Nettle and Gordon JJ held that the FCAFC’s approach and decision were incorrect: the ‘only question’ for the FCAFC and the High Court was whether the Tribunal’s exercise of its s 426A power was beyond its power for being legally unreasonable: it was not (at ). Turning first to the nature of the court’s task in assessing whether a decision is legally unreasonable, Continue reading