Deputy Commissioner of Taxation v Hakan Atmali; Deputy Commissioner of Taxation v Hasan Atmali

The Federal Court of Australia heard appeals by the Deputy Commissioner of Taxation (DTC) against decisions of the Administrative Appeals Tribunal (AAT) concerning the taxation of two taxpayers, Hakan Atmali and Hasan Atmali. The dispute centred on the AAT's findings that certain payments made by a company, Boral Limited, to the taxpayers were not assessable income. The DTC sought to have these AAT decisions set aside and remitted for redetermination.

The primary legal issue before the Federal Court was whether the AAT had erred in law by concluding that payments received by the taxpayers from Boral Limited, described as "compensation for loss of employment," were not assessable income under section 6-5 of the *Income Tax Assessment Act 1997* (Cth). This involved determining the character of the payments and whether they constituted ordinary income derived by the taxpayers.

Judge Raphael found that the AAT had made an error of law. The AAT had focused on the taxpayers' subjective expectations and the form of the payments rather than their objective character. The Court held that the payments, being made in consequence of the termination of employment and in lieu of notice, were in the nature of income and therefore assessable. The AAT's reasoning that the payments were compensation for a capital loss was found to be an incorrect application of legal principles.

Consequently, the Federal Court allowed the DTC's appeals, set aside the AAT's decisions, and remitted the matters to the AAT for redetermination in accordance with the Court's reasons.