Mulherin v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (NSD 1384 of 2012)
Judgment date: 23 October 2013
Date published: 28 June 2012

Summary of decision:
The taxpayer was an Australian citizen who qualified as a medical professional in Australia, completed his post-graduate study in the United Kingdom and practised medicine in Hong Kong. He then returned to Australia where he set up a series of off-shore trusts and entities through a Liechtenstein Foundation managed and controlled by the taxpayer who was the sole income and economic beneficiary of the Foundation. Records obtained by the Commissioner of the Foundation, trusts and entities and their respective bank statements evidenced considerable undisclosed income and assets. The Commissioner issued assessments for the years 1999-2007 inclusive. The taxpayer's objections were disallowed in substance, although errors in quantum allowed. The taxpayer appealed from his unfavourable AAT decision denying he was presently entitled to income of the Foundation, which the taxpayer conceded was an Australian resident trust estate under subsection 95(2) of Income Tax Assessment Act 1936 (ITAA 1936).

Overview of facts:
The taxpayer sought to bring his appeal under rule 33.15 of the Federal Court Rules on a purported question of law he had not raised in the notice of appeal. The taxpayer alleged he was not presently entitled to the income of the Foundation and that subsection 95(2) of the ITAA 1936 was not engaged. The taxpayer also appeal on the basis that if he was presently entitled, he had discharged his onus of proof and established the assessments were excessive. The taxpayer also appealed against the decision to provide his evidence by video-link or on commission on the basis it was a denial of procedural fairness, and against the AAT finding that he was an Australian resident for taxation purposes for the 2007 income year. | Issues decided by the court | Appeals from the AAT to the Federal Court are confined by the operation of Federal Court Rule 33.15 to a new question of law, and a mixed question of fact and law, or a question of fact will not ground the jurisdiction: Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321 applied. | As assertion of an error of law by the AAT is not to state a question of law to attract the appellate jurisdiction: Australian Telecommunications Corporation v Lambrogou (1990) 12 AAR 515 applied. | Questions of law must be engaged by the AAT in the reasons and decision, to ground the error of law: TNT Skypak International (Aust) Pty Ltd v FCT [1988] FCA 198. | The taxpayer's amended notice of appeal did not engage the jurisdiction of the Court in relation to the appeal question that the AAT erred in finding he was presently entitled under subsection 95(2) of the ITAA 1936. This was a finding of fact and law. Ground of appeal dismissed on the basis the ground was incompetent. | The AAT has not erred in finding the taxpayer failed to discharge his onus of proof, and had correctly applied subsection 167 of the ITAA 1936; Commissioner of Taxation v Dalco (1990) 168 CLR 614. The AAT decision to refuse the taxpayer to provide evidence by video-link was not a denial of procedural fairness and the finding that the taxpayer was an Australian resident for taxation purposes for the 2007 income year was a finding of fact and the appeal ground did not attract the jurisdiction of the Federal Court.

Issues decided:
Appeals from the AAT to the Federal Court are confined by the operation of Federal Court Rule 33.15 to a new question of law, and a mixed question of fact and law, or a question of fact will not ground the jurisdiction: Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321 applied. As assertion of an error of law by the AAT is not to state a question of law to attract the appellate jurisdiction: Australian Telecommunications Corporation v Lambrogou (1990) 12 AAR 515 applied. Questions of law must be engaged by the AAT in the reasons and decision, to ground the error of law: TNT Skypak International (Aust) Pty Ltd v FCT [1988] FCA 198. The taxpayer's amended notice of appeal did not engage the jurisdiction of the Court in relation to the appeal question that the AAT erred in finding he was presently entitled under subsection 95(2) of the ITAA 1936. This was a finding of fact and law. Ground of appeal dismissed on the basis the ground was incompetent. The AAT has not erred in finding the taxpayer failed to discharge his onus of proof, and had correctly applied subsection 167 of the ITAA 1936; Commissioner of Taxation v Dalco (1990) 168 CLR 614. The AAT decision to refuse the taxpayer to provide evidence by video-link was not a denial of procedural fairness and the finding that the taxpayer was an Australian resident for taxation purposes for the 2007 income year was a finding of fact and the appeal ground did not attract the jurisdiction of the Federal Court.

ATO view of decision:
The Commissioner considers the Court's application of the law to be consistent with current law and respectfully correct.

Administrative treatment:
Implications for ATO precedential documents (Public Rulings & Determinations etc) | Nil

Legislative references: ITAA 1936 95(2) ITAA 1936 167 Rule 33.15 of Federal Court Rules
Case references: Birdseye v Australian Securities and Investments Commission [2003] FCAFC 232 (2003) 38 AAR 55 (2003) 76 ALD 321 Australian Telecommunications Corporation v Lambrogou (1990) 12 AAR 515 TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation [1988] FCA 198 (1988) 19 ATR 1067 88 ATC 4279 Commissioner of Taxation v Dalco [1990] HCA 3 (1990) 168 CLR 614 (1990) 20 ATR 1370 90 ATC 4088
Subject references: Appeal from AAT to Full Federal Court Present entitlement Residency