Ciappina v Ciappina

[1983] FCA 95

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C A T C H W O R D S

Income tax - Appeal t o Supreme Court from decislon of

Board of Review - Applicat ion f o r leave to appeal from

dec is ion of Supreme Court - Question of law of general

importance on which no direct authority of an appe l l a t e

I

_. cour t - Whether leave should be granted - Income Tax Assess-

ment Act 1936, sec. 196(5).

Lombardo v. Federal Commissioner of Taxation 79 A . T . C . 4079

Federal Commissiouer of Taxation v. Nixon 79 A.T.C. 4512

Federal Commissioner of Taxation v. Forsyth 79 A . T . C . 4577

No. ACT G 1 5 of 1983

Commissioner of Taxation v. John Langford Knight

CORAM:	Neaves J.
PLACE	Canberra
-	DATE :	2 4 May 1983

IN THE FEDERAL COLTRT OF AUSTRALIA	-
AUSTRALIAN CAPITAZ. TEKRITORY

No. A.C.T. G15 of 1983

DISTRICT REGISTRY

GENERAL DIVISION

BETWEEN : COMMISSIONER OF TAXATION

Applicant

- AND : JOHN LANGFORD KNIGHT -

Respondent

O R D E R

JTJDGE MAKING ORDER:	Neaves J
DATE OF ORDER:	1 2 May, 1983
WERE MADE:	Canberra

THE COURT ORDERS THAT:

1. Upon the Commissioner of Taxation undertaking

through his counsel to pay the respondent's reasonable

costs on a party and party basis of the appeal

irrespective of the result (such c o s t s not to include

any increased costs attributable to any cross-appeal

that may be lodged on behalf of the respondent),

leave be granted to the Commissioner of Taxation tu

appeal fromthat part of the judgment and order of

the Supreme Court oT the Australian Capital Territory

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given and made on 4 EIarch 1983 dismissing the

Commissioner's appeal from a decision of Board of

Review No. 1 and holding that the respondent's

objection to the inclusion of an amount of $1,385.00

as assessable income of the respondent f o r the year

1976-77 pursuant to the provisions o f section 26(d)

of the Income Tax Assessment Act 1936 be upheld.

2. The Commissioner of Taxation pay the respofident's

costs of this application.

I N TIiE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY

No. A.C.T. G15 of 1983

DISTRICT REGISTRY

GENERAL D I V I S I O N

BETWEEN : THE COMMISSIONER OF TAXATION

Applicant

-

AND:	JOHN LANGFORD KNIGHT	-
-

Respondent

- REASONS FOR JUDGMENT

NEAVES J:

This i s an appl icat ion by t h e Connnissioner of

Taxation for leave t o appeal from so much of a dec is ion

of the Supreme Court of the Austral ian Capi ta l Terr i tory

given on 4 March 1983 ( see 83 A.T.C. 4096) as dismissed

the Comissioner 's appeal from t h a t p a r t o f a dec is ion

of Board of Review No. 1 as determined that an amount of

$1,385.00 was not properly included in the assessable

income o f the respondent for the year ended 30 June 1977.

T h e appl ica t ion i s made pursuant to sub-section 1 9 6 ( 5 )

of the Income Tax Assessment Act 1936.

1.

.

The matter proceeded before the Supreme Court

on agreed Eacts which are in a shor t compass. The r e s -

pondent, who had been a permanent o f f i ce r o f t he Aus t r a l i an

P u b l i c S e r v i c e , r e t i r e d on 4 March 1977 on the grounds of

i n v a l i d i t y . Consequent upon h is re t i rement the respondent

became e n t i t l e d t o c e r t a i n b e n e f i t s under the Superannuation

- Act 1976. In t he even t s which happened, including the making

of an elect ion under sub-sect ion 68(1) of that Act , those

en t i t l ements cons is ted of a pension equal to a percentage

of h i s f i n a l a n n u a l r a t e of salary (an expression def ined

i n s u b s e c t i o n 3 ( 1 ) ) and what i s descr ibed in the A c t a s

a "lump sum benefit" payable i n accordance with section 6 8 .

The amount of the lump sum benef i t was subsequently calcu-

la ted to be $38,023.54 hut this calculat ion was no t made

until some time i n 1978. Pending the f inal calculat ion

o f t h i s amount, an in te r im payment of $27 ,707 .69 was made

to the respondent during the year ended 30 June 1977.

The balance, namely a sum of $10,315.85, was paid OE 15

December 1978.

The Commissioner, relying upon paragraph (d) of

sec t ion 26 of the Income Tax Assessment Act 1936 included

in the r e sponden t ' s a s ses sab le income for the year ended

30 June 1977, the sum of $1,355.00 being 5% of the sum of

$27 ,707 .69 t o which I have r e fe r r ed . The respondent lodged

a not ice of ob jec t ion which was disallowed. The dec is ioc

upon the objec t ion was a t the respondent ' s reques t re€er red

t o a Board of Review which, by majority, upheld the respond-

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e n t ' s c l a i m t h a t t h e sum of $1,385.00 was no t p rope r ly

inc luded i n h i s a s ses sab le income. The Commissioner

appealed to the Supreme Court of t he Aus t r a l i an C a p i t a l

Te r r i t o ry	and	that Court dismissed	the	Commissioner's
appeal.

So f a r a s ma te r i a l , s ec t ion 26 (d ) i n Eorce a t

the re levant da te opera ted to br ing in to the assessable

income of a taxpayer Eive per centum of the capital

amount of any allowance where t h a t amount was p a i d i n a

lump sum i n consequence of retirement from, or the term-

i n a t i o n o f , any o f f i ce o r employment, and whether so pa id

v o l u n t a r i l y , by agreement o r by compulsion of law. The

provis ion was subsequently amended but not in any respect

ma te r i a l t o t he cons ide ra t ion of the present appl icat ion.

The quest ion i s whether, on the undisputed fac ts and upon

the proper cons t ruc t ion of t he r e l evan t s t a tu to ry p rov i s ion ,

t h e payment to the respondent in the year of income of t h e

amount of $ 2 7 , 7 0 7 . 6 9 , no t be ing the to t a l sum payable to

him by way of allowance i n consequence of his re t i rement

from h i s employment, i s properly described as having been

p a i d i n a lump sum. It i s c l e a r t h a t if tha t ques t ion is

answered i n t h e a f f i r m a t i v e , t h e o t h e r c o n d i t i o n s oE t h e

appl ica t ion of sec t ion 2 6 ( d ) a r e f u l f i l l e d . I n t h e d e c i s i o n

from which i t i s sought to appeal the Supreme Court took the

view tha t the phrase "pa id in a lump sum" as used in sec t ion

2 6 ( d ) " r e f e r s t o t h e 57hole o f t he cap i t a l amount r e f e r r e d

t o e a r l i e r i n t h e s e c t i o n and hence i n t h i s c a s e t o t h e

3.

sum of $ 3 8 , 0 2 3 . 5 4 , the capitalized or total value of the

allowance paid to Slr. Knight consequent upon his retire-

ment" ( 8 3 A.T.C. at pp. 4 1 0 2 - 3 ) .

The approach which a single Judge oE this Court

should take in considering a question of the kind which

now arises €or my decision has been discussed by Toohey	J.
in Lombardo v. Federal Commissioner oE Taxation 7 9 A.T.C.
4 0 7 9 , by Lockhart J. in Federal Commissioner of Taxation

v. Nixon, 7 9 A.T.C. 4512 and by Northrop J. in Federal

Commissioner of Taxation v. Forsyth, 7 9 A.T.G. 4 5 7 7 .

Counsel for the Commissioner submitted that

there is a substantial or real question to be answered

or. the appeal. He conceded that the amount involved in

the appeal was small and that the specific facts of the

present case were unlikely to recur in the future because

they arose out of a situation of transition from the

superannuation scheme for Australian Public Servants

embodied in the Superannuation Act 1922 to that enacted

in the Superannuation Act 1 9 7 6 . However, counsel relied

upon the fact that some 19 other cases raising the same .

question as arises in this case are pending and awaiting

the final resolution of the present matter (see, for

example, Federal Commissioner of Taxation v. Curtin

8 0 A.T.D. 4 6 5 4 ) . He also relied on the circumstance that

a similar question could arise under any private super-

annuation scheme where an amount to which an employee

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is entitled in consequence oE retirement from, or

termination of, his employment could be made by more

than one payment.

For the Commissioner it was also submitted that

the question was one of general importance on which there

is no direct authority of an appellate court. Counsel

drew attention to the use of similar language, namely the

words “paid to a taxpayer in a lump sum in consequence of

the retirement of the taxpayer ... from any office or

employment“ in sections 26AC and 26AD of the Act which

bring to charge amounts received on retirement or temina-

tion of employment in lieu of annual leave and long service

leave respectively. Reference was also made to section

158C of the Act.

The Conmissioner through his counseL undertook,

in the event of leave to appeal being granted, to pay the

respondent’s reasonable costs on a party and party basis

of the appeal irrespective of the result. It was made

clear, however, that this undertaking did not extend to

any increased costs attributable to any cross-appeal that

might be lodged on behalf of the respondent in respect of

matters dealt with adversely to the respondent by	he
Supreme Court.

Counsel for the respondent submitted that leave

to appeal should not be granted. He pointed out, correctly,

that the existence of a question of law is not of itself

enough to warrant the grant ing of tha t l eave . He sub-

mi t t ed tha t all t h a t t h e Commissioner had shown was t h a t

there was a qllestiorl of law and that there were no other

c i rcumstances suf f ic ien t to warran t the gran t ing of leave .

The respondent had, he said, been successful i n the Board

of Review and i n t h e Supreme Court of the Australian

Cap i t a l Te r r i t o ry . He s t r e s sed the small amount involved

no t on ly in the in s t an t ca se bu t a l so in the 19 o ther

c a s e s t o which t h e Commissioner had r e f e r r e d as awaiting

the outcome of the present proceedings and to the circum-

s t a n c e t h a t t h e s i t u a t i o n which gave r ise t o t h e problem

i n r e l a t i o n t o A u s t r a l i a n p u b l i c s e r v a n t s r e t i r i n g a t o r

about the t ime of the t ransi t ion from one superannuation

scheme to another was no t l i ke ly to r ecu r . F i n a l l y , he

submit ted that i f the construccior l of sect ion 26(d ) adopted

by t h e Supreme Court of the Aus t ra l ian Capi ta l Ter r i to ry was

not acceptab le , the Act could be amended to obviate prospec-

t i v e l y any problem t G which the dec is ion g ives r i se .

While i t i s , i n ny view, no answer to the p re sen t

appl ica t ion t o s ay tha t t he Act can be amended t o overcome

any perceived problem for the future, there i s considerable

force in the o ther mat te rs upon which counsel for the

respondent re l ied. However, upon fu l l cons ide ra t ion o f t he

matter I have concluded that; t h i s i s a proper case for the

gran t ing of l eave to appea l . The ques t ion of l a w involved

i s an important one and there appears to be no c a s e i n

which an appellate court has had to consider the application

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of sect ion 2 6 ( d ) t o f a c t s s i m i l a r t o t h o s e o f the present

ca se . Fu r the r , t he ma t t e r s r e l i ed upon by the Commissioner

show tha t t he ques t ion i s o f su f f i c i en t ly gene ra l app l i ca t ion

to warran t the a t ten t ion of a Fu l l Court of th i s Cour t .

Accordingly, on the basis of the Commissioner's

undertaking concerning the costs of the appeal , leave is

g ran ted to the Commissioner to appeal from so much o f t h e

dec is ion of t h e Supreme Court of the Australian C a p i t a l

Ter r i to ry g iven on 4 March 1983 a s he ld tha t t he amount

of $1,385.00 was not properly included in the assessable

income of the respondent for the year ended 30 June 1977.

The Comissioner should pay the cos t s o f t h i s app l i ca t ion .

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I c e r t i f y t h a t th is and t h e sixc

preceding pages are a t r u e copy

of the Reasons f o r Judgment here in

of the Honourable Mr. J u s t i c e

Neaves .

I

Associate

Dated:	1 2 May	1983
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