Singapore Telecom Australia Investments Pty Ltd v Commissioner of Taxation (No 2)

Singapore Telecom Australia Investments Pty Ltd v Commissioner of Taxation (No 2) involved the Commissioner of Taxation challenging transfer pricing arrangements. The Federal Court was required to determine the appropriate form of final orders and the basis for assessing costs. The central issue regarding the form of final orders was whether a carried forward loss should be taken into account for the year ending 31 March 2011, potentially reducing the applicant’s taxable income. The Commissioner argued that the appeal against the objection decisions dated 27 September 2019 should be dismissed, while the applicant contended that the appeal should be allowed in part for the year ending 31 March 2011. The court considered the Commissioner’s calculations and models, noting that the applicant’s appeal should be dismissed for the years ending 31 March 2012 and 31 March 2013, but allowed in part for the year ending 31 March 2011.

The second issue concerned the basis for assessing costs. The Commissioner sought an indemnity basis for costs incurred after 19 July 2021, relying on an offer to compromise and a Calderbank offer. The applicant opposed this, arguing for a party and party basis for those costs. The court acknowledged that the Commissioner was substantially successful and entitled to an order for costs in his favour but determined that the costs incurred after 19 July 2021 should be assessed on a party and party basis. The court found that, for the period up to 19 July 2021, the costs should be assessed on a party and party basis as agreed or taxed.

The court's reasoning was grounded in the principles of cost assessment and the nature of the offers made. It considered the failure of the applicant to accept the offers and the timing of those offers relative to the proceedings. The court concluded that the form of final orders should reflect the dismissal of the appeal for two years but allow it in part for the third year due to the carried forward loss. The costs were to be assessed on a party and party basis, except for the period after 19 July 2021, which was to be assessed as agreed or taxed. This balanced the successful outcome for the Commissioner with the procedural context of the case.