Deputy Federal Commissioner of Taxation v Stranger

The Deputy Federal Commissioner of Taxation appealed to the High Court of Australia from a decision of the Court of Bankruptcy. The dispute concerned the extent of priority granted to unpaid income tax assessments under section 84(1)(h) of the *Bankruptcy Act 1924-1932* in the distribution of a bankrupt's estate. The Commissioner sought to establish priority for income tax assessed for multiple years, while the trustee of the bankrupt's deed of arrangement limited the priority to the amount of the assessment for the final year preceding the deed's execution.

The central legal issue before the High Court was the interpretation of the phrase "not exceeding in the whole one year's assessment" within section 84(1)(h). Specifically, the court had to determine whether, when multiple years of income tax assessments were unpaid, the priority extended to the total of all unpaid assessments, or was limited to the amount of a single year's assessment, and if so, which year's assessment. The court was also required to consider whether the Commissioner or the trustee had a right to select which year's assessment would receive priority.

The High Court, by majority, held that the priority conferred by section 84(1)(h) extended to all assessed income tax, but the total amount receiving priority could not exceed the amount of the largest single year's assessment. The court reasoned that the phrase "one year's assessment" referred to a single assessment, and the limitation "not exceeding in the whole" meant that if there were assessments for more than one year, the priority was capped at the highest amount assessed for any one of those years. The court found that this interpretation was consistent with the wording of the section and supported by English case law. The appeal was allowed, and the decision of the Court of Bankruptcy was reversed.