Commissioner of Taxation v Peabody

The Commissioner of Taxation applied to the High Court of Australia for special leave to appeal a decision of the Full Federal Court. The dispute concerned the application of Part IVA of the *Income Tax Assessment Act 1936* (Cth), Australia's general anti-avoidance provision. The Commissioner contended that the Federal Court had erred in its interpretation of Part IVA, arguing that the court's approach to identifying a "scheme" and determining whether a "tax benefit" was obtained was incorrect.

The primary legal issues before the High Court were whether, when considering an assessment under Part IVA, a court is restricted to examining only the specific scheme identified by the Commissioner, even if that scheme comprises multiple steps, some of which might appear irrelevant to the overall objective. Additionally, the Court was asked to consider the correct interpretation of the phrase "reasonably be expected" in the context of determining whether a tax benefit was obtained, specifically whether it requires a probability of "more probable than not." The Commissioner argued that these were important questions of statutory interpretation that had not been previously considered by the High Court and warranted the grant of special leave.

The Commissioner's argument was that the Federal Court had incorrectly limited its consideration to the scheme as identified and had erred in its approach to the "reasonably be expected" test. The respondent, Ms. Peabody, argued that special leave should not be granted because the Commissioner could not succeed given the unchallenged findings of fact. These findings established that a company, for legitimate reasons of obtaining low-cost finance, had to be the purchaser of certain shares in its own right, meaning it could not reasonably be expected that the trustee of the Peabody family trust would have acquired and re-sold those shares.

The High Court granted special leave to appeal.