Patterson v Federal Commissioner of Taxation

The appeal concerned John Hunter Patterson and William Leslie Prendergast, as executors and trustees of the estate of Percy Landale, deceased, against an assessment for Federal income tax for the financial year 1932-1933. The dispute arose from the Commissioner of Taxation's assessment of income derived by the deceased during the year ended 31st December 1931, following Landale's death on 26th June 1932. The executors contended that they were not liable for this tax, arguing that the assessment was incorrect, ineffective, or unenforceable. The case was stated for the opinion of the Full Court of the High Court of Australia.

The primary legal issue before the court was whether the executors and trustees of the deceased taxpayer were liable to be assessed for income tax for the financial year 1932-1933 in respect of income derived by the deceased after 31st December 1930. This involved interpreting section 62 of the *Income Tax Assessment Act 1922-1932*, particularly the meaning of "accounting period" in the context of a taxpayer who died during a financial year, and whether the taxing Act, passed after the taxpayer's death, could impose liability on the estate for income earned prior to the Act's passage.

The High Court, following its decision in *Aitken v. Federal Commissioner of Taxation*, held that the executors were liable. The court determined that the "accounting period" referred to in section 62(4) meant the recurring period for which the Commissioner had accepted returns, which in this case was the year ending 31st December. Therefore, the end of the accounting period immediately preceding the taxpayer's death was 31st December 1931, not 31st December 1930. Consequently, section 62(1) applied, granting the Commissioner the same powers to assess and recover tax from the executors as he would have had against the deceased if alive, covering income derived up to the date of death. The court found no double liability, as the liability imposed on the executors was the same as the deceased would have faced. The court also noted that while the executors' liability was representative, it extended only to the assets of the deceased coming into their hands.

The Full Court answered the question in the case in the affirmative, finding the appellants liable to be assessed for income tax for the financial year 1932-1933 in respect of income derived by the deceased during the year ended 31st December 1931. The costs of the case were to be costs in the appeal, and the matter was remitted to Evatt J.