Deputy Commissioner of Taxation v Kinny

The applicant, the Deputy Commissioner of Taxation, sought special leave to appeal to the High Court of Australia from a decision of the Court of Appeal. The dispute concerned whether a taxpayer's liability for provisional tax in respect of a given income year was extinguished by the subsequent assessment of income tax for that same year. The Court of Appeal had reversed the decision of the trial judge, although the intermediate appellate court had differed on the precise point in time at which such a liability might be extinguished.

The central legal issue before the High Court was whether the liability for provisional tax, imposed by section 221YB of the relevant Act, is discharged solely by payment, or if it is extinguished by the assessment of income tax for the same year. The applicant argued that the Act provides only one method for discharging the liability for provisional tax, which is payment, and that the Court of Appeal's decision to the contrary was erroneous in principle. The applicant contended that there was a concurrent liability for both income tax and provisional tax in respect of the same year if the provisional tax remained unpaid, and that each must be discharged by payment.

The applicant's primary submission was that section 221YA(2) of the Act, which states that "income tax" or "tax" includes provisional tax for the purposes of sections 206, 207, 208, and 209, indicated that provisional tax was a distinct liability. The applicant further relied on section 207, which imposes additional tax where income tax remains unpaid after it becomes due and payable. The applicant argued that this demonstrated a system where provisional tax was a liability that must be met, and if the Commissioner held excess funds after applying them against an income tax liability, there was an obligation to refund the difference, indicating a complete system for ensuring obligations were met. The applicant characterised provisional tax as a liability "ancillary to income tax" but nonetheless a liability.