Lochtenberg and Commissioner of Taxation (Taxation)

This matter concerned an appeal by Mr Lochtenberg against objection decisions made by the Commissioner of Taxation regarding income tax assessments for the years ended 30 June 2007, 2008, and 2009, and a shortfall interest charge (SIC) for the 2007 income year. The dispute centred on whether an amount received by Mr Lochtenberg upon termination of his employment with the Glencore Group, which represented deferred compensation for services rendered both in Australia and Switzerland, was assessable as ordinary income in Australia, and whether it qualified for exemption as foreign earnings. The case was heard by Ms G Lazanas, Senior Member, of the Administrative Appeals Tribunal.

The primary legal issues before the Tribunal were whether the amount received by Mr Lochtenberg constituted ordinary income derived while he was a resident of Australia, and if so, whether it was exempt from Australian income tax under provisions relating to foreign earnings derived from foreign service. A secondary issue concerned the appropriateness of further remission of the shortfall interest charge imposed by the Commissioner. Mr Lochtenberg bore the onus of proving that the Commissioner's assessments were excessive and that the decision regarding the SIC was incorrect.

The Tribunal found that the amount received by Mr Lochtenberg represented deferred compensation for services and was therefore assessable as ordinary income. It reasoned that the division of the payment into Australian and Swiss components for Swiss tax purposes did not alter its character for Australian income tax purposes. The Tribunal affirmed the objection decision regarding the income tax assessments for the relevant years. However, in relation to the SIC for the 2007 income year, the Tribunal set aside the Commissioner's decision and substituted it with a decision allowing remission to the base rate, taking into account the considerable delay between the lodgement of the tax return and the amended assessment, and Mr Lochtenberg's full cooperation.