Allen v Federal Commissioner of Taxation

In the case of Allen v Federal Commissioner of Taxation, the taxpayers, as trustees of the Super Fund, challenged the disallowance of their objection against the amended assessment and penalty assessment imposed by the Commissioner of Taxation. The taxpayers argued that the Commissioner incorrectly assessed the distribution from the Fixed Trust as "special income" and incorrectly imposed a penalty assessment under section 284-75 of the Taxation Administration Act 1953 (Cth). The legal issues before the court were whether the term "income" in section 273(7) of the Income Tax Assessment Act 1936 (Cth) referred to assessable income, and if the penalty assessment was correctly imposed.

The court considered the context and purpose of section 273(7) and concluded that the term "income" was meant to encompass assessable income by virtue of the income tax legislation. The court noted that there was room for a real and rational difference of opinion on this question, and that the taxpayers' position was reasonably arguable given the heavily disadvantageous consequences of accepting the Commissioner's view.

The court allowed the taxpayers' appeal on the question of penalty, set aside the penalty assessment dated 15 November 2006, and ordered the Commissioner to recalculate the general interest charge. The court also ordered that the taxpayers pay three-quarters of the Commissioner's costs of the appeal, to be taxed.

The final orders of the court were as follows:

1. The taxpayers' appeal be allowed on the question of penalty only.
2. The penalty assessment dated 15 November 2006 be set aside.
3. The Commissioner recalculate the general interest charge on the amount of the penalty.
4. The taxpayers pay three-quarters of the Commissioner's costs of the appeal and that it be taxed.