Sarroff v Deputy Commissioner of Taxation

In *Sarroff v Deputy Commissioner of Taxation* [1997] NSWCA 275, the New South Wales Court of Appeal considered an appeal by Mr Sarroff against a decision of the Deputy Commissioner of Taxation. The dispute concerned the Commissioner's assessment of additional tax payable by Mr Sarroff under section 226 of the *Income Tax Assessment Act 1936* (Cth) (the Act) for alleged avoidance of tax.

The primary legal issue before the Court was whether Mr Sarroff had engaged in tax avoidance within the meaning of section 226 of the Act. This required the Court to determine if Mr Sarroff had entered into a scheme or transaction for the purpose of avoiding his liability to pay income tax, and if so, whether the Commissioner had correctly applied the provisions of section 226 in assessing additional tax.

The Court of Appeal, in its reasoning, analysed the nature of the scheme entered into by Mr Sarroff and the evidence presented regarding his intentions. It applied the principles established in tax avoidance cases, focusing on the purpose of the taxpayer in entering into the transaction. The Court found that Mr Sarroff had indeed entered into a scheme with the dominant purpose of avoiding tax, and therefore the Commissioner was entitled to impose additional tax under section 226. The appeal was accordingly dismissed.