31:
289:
The pamphlets described an annual payment of $ 50 to be made by subscribers, but only if and when they saved at least that much tax. It also pointed out there was no way anyone could be forced to make such a payment, it would rely on the honesty of participants. No such amounts were actually paid.
376:
The justices were in no doubt though that a transaction like
Cridland had entered into was not normal for a university student, and was only explicable for attracting the income averaging provisions, but such considerations could not override the fact that the transaction was one to which specific
331:
Cridland argued that this latter "choice principle" applied, that becoming the beneficiary of a trust was a choice allowed by section 157; and if the statute explicitly provides consequences for people in certain positions then they should be able to utilize those. Justice
Mahoney decided section
242:
or similar so as to carry on a business of primary production. The money for all this was lent by O'Shea or associates and the trusts were to end after 21 years, at which point all assets reverted to him or associates. The actual assets and production, it seems, were to be small, and in any case
321:
Section 260 was worded very broadly, striking out any agreement "altering the incidence of any income tax". If taken literally then almost any everyday business transaction would come under it. Consequently, it had been "read down" in case law over the years to decide when it should not apply.
285:
Any income actually earned by the trusts would, or would not be, distributed to some or all beneficiaries entirely at the discretion of the trustee. Beneficiaries were not actually going to receive income, or nothing significant, just be "presently entitled" to satisfy section 157. Cridland for
200:
In the taxonomy of tax schemes, this one was in the category of a wholly intentional tax benefit but which people other than those intended came to access. Amendments tightening the definition of a primary producer were subsequently made, so such a scheme would fail today.
310:, and under the general anti-avoidance provision of ITAA section 260 (which was operative at that time) they ignored Cridland's interest in the trusts and issued assessments for tax years ending 30 June 1970, 1971 and 1972 accordingly. Cridland took the matter to the
372:
they determined that if the statute provides certain consequences then a taxpayer may enter into circumstances or transactions to which the statute applies, and that section 260 does not strike those out just because this is to the taxpayer's advantage.
332:
157 was not a choice in this sense and which the taxpayer could make of themselves, and indeed regarded the section as having a more mechanical nature so that primary producers operating their business via a trust could come under division 16.
277:
to register a person if the trustee was satisfied the person had donated at least $ 1 either to an institution under section 78 of the ITAA (various museums, cultural funds, etc.), or to a similar body approved by a university
293:
It seems O'Shea made no profit from the scheme. Presumably if he was creating a scheme for himself anyway then it cost little to let others join, and perhaps the scheme brought other business for his accounting firm.
282:. O'Shea even made a $ 500 payment to a section 78 body himself to cover anyone who might fail to have a documented payment themselves (and therefore might have failed to meet the formal requirements of the scheme).
216:
D. P. O'Shea was a partner in the firm Fadden and O'Shea and was, as the court said, "versed in the arts of tax minimization". He hit upon a scheme to access the income averaging provisions of division 16 of the
223:(ITAA). Income averaging allowed a taxpayer to spread income over multiple tax years and was meant for primary producers (farmers etc.) with highly variable incomes. Section 157 provided that if a
159:, when the statute explicitly provides tax benefits for taxpayers in certain circumstances, taxpayers may deliberately enter those circumstances without attracting the anti-avoidance provisions of
262:. Students were to pay a nominal sum of $ 1 to join. Over 5,000 responded and became beneficiaries of the No. 1 trust. Brian Cridland, the subject of the court action, was a student at the
411:
families operating their business through a trust. (Trusts as an ownership structure have some advantages for ongoing family businesses and are and were quite often used in farming.)
506:
364:
155:
403:
The
Commissioner of Taxation must be satisfied the beneficiary's interest wasn't acquired primarily for the purpose of obtaining income averaging.
273:
The payment of $ 1 each was not meant to make a profit for O'Shea and associates, in fact it was seldom collected. The trust deeds allowed the
559:
554:
270:
course. He became a beneficiary of the No. 2 trust and then in 1970 was transferred to the No. 4 trust when the No. 2 ceased operation.
227:
is carrying on a business of primary production, then all the income beneficiaries are likewise considered carrying on such a business.
359:
instead unanimously found for him and against the ATO, holding the choice principle was not so narrow as
Mahoney had interpreted it.
328:(1957) to matters where the statute contains alternatives available to the taxpayer (in that case a public versus private company).
480:
467:
324:
311:
564:
396:
restricting the definition of a primary producer in section 157. As from 1 July 1978 there are now two further requirements,
279:
219:
164:
160:
286:
instance said to the court he didn't expect any income, he did receive $ 1 in each of June 1969, 1970 and 1971 though.
538:
303:
190:
119:
407:
These requirements act to prevent a similar broad-based scheme today, but don't deny income averaging benefits to
569:
515:
489:
435:
263:
63:
519:
493:
439:
336:
267:
178:
41:
530:
459:
455:
386:
87:
83:
348:
127:
463:
259:
101:
91:
197:, but the test case was decided in favour of the taxpayer, one of the students, Brian Cridland.
340:
116:
511:
431:
59:
30:
485:
255:
322:
This included not applying it to transactions "of a normal character", nor as decided in
352:
344:
315:
131:
123:
548:
307:
194:
356:
247:
135:
534:
389:
251:
235:
213:
182:
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224:
189:) for tax purposes, allowing them certain income averaging benefits. The
210:
138:
408:
274:
186:
368:(1976), not decided until after Mahoney had made his judgement. In
231:
531:
Income Tax
Assessment Amendment Bill 1978 Second Reading Speech
246:
In 1969 O'Shea distributed pamphlets advertising his scheme at
481:
W P Keighery Pty Ltd v
Federal Commissioner of Taxation
362:
The justices followed their own High Court decision in
181:
case concerning a novel tax scheme whereby some 5,000
144:
112:
107:
97:
75:
70:
55:
47:
37:
23:
400:A minimum $ 1,040 must be received from the trust.
234:(or otherwise grant) use of that to newly formed
230:O'Shea had one of his companies acquire land and
8:
428:Cridland v Federal Commissioner of Taxation
325:Keighery v Federal Commissioner of Taxation
243:remain effectively under O'Shea's control.
174:Cridland v Federal Commissioner of Taxation
24:Cridland v Federal Commissioner of Taxation
507:Mullens v Federal Commissioner of Taxation
365:Mullens v Federal Commissioner of Taxation
29:
20:
452:Cridland v Commissioner of Taxation (Cth)
394:Income Tax Assessment Amendment Bill 1978
185:students became primary producers (as in
80:Cridland v Commissioner of Taxation (Cth)
16:Judgement of the High Court of Australia
420:
385:Following the High Court's decision,
7:
14:
306:decided the scheme was a form of
377:provisions of the ITAA applied.
312:Supreme Court of New South Wales
238:. Those trusts were to acquire
318:agreed with the commissioner.
280:Student Representative Council
220:Income Tax Assessment Act 1936
1:
560:High Court of Australia cases
392:introduced amendments in the
555:Australian taxation case law
518:290 (9 September 1976),
438:330 (30 November 1977),
492:66 (19 December 1957),
586:
304:Australian Taxation Office
191:Australian Taxation Office
153:Following the decision in
335:Cridland appealed to the
149:
28:
264:University of Queensland
266:nearing the end of his
179:High Court of Australia
62:, (1977) 140
42:High Court of Australia
565:1977 in Australian law
339:, where Chief Justice
512:[1976] HCA 47
432:[1977] HCA 61
60:[1977] HCA 61
486:[1957] HCA 2
102:Supreme Court of NSW
268:engineering degree
170:
169:
577:
570:1977 in case law
523:
503:
497:
477:
471:
449:
443:
425:
108:Court membership
51:30 November 1977
33:
21:
585:
584:
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574:
545:
544:
527:
526:
504:
500:
478:
474:
466:(13 May 1976),
450:
446:
426:
422:
417:
383:
316:Justice Mahoney
300:
256:New South Wales
207:
17:
12:
11:
5:
583:
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573:
572:
567:
562:
557:
547:
546:
543:
542:
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498:
472:
444:
419:
418:
416:
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405:
404:
401:
382:
379:
299:
296:
206:
203:
193:held this was
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167:
147:
146:
142:
141:
114:
113:Judges sitting
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57:
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10:
9:
6:
4:
3:
2:
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571:
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563:
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558:
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553:
552:
550:
540:
536:
532:
529:
528:
521:
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514:, (1976) 135
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509:
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502:
499:
495:
491:
488:, (1957) 100
487:
483:
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476:
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469:
468:Supreme Court
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461:
457:
453:
448:
445:
441:
437:
434:, (1977) 140
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366:
360:
358:
354:
350:
346:
343:and Justices
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338:
333:
329:
327:
326:
319:
317:
313:
309:
308:tax avoidance
305:
297:
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261:
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253:
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244:
241:
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204:
202:
198:
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195:tax avoidance
192:
188:
184:
180:
177:, was a 1977
176:
175:
166:
162:
158:
157:
152:
148:
145:Case opinions
143:
140:
137:
133:
129:
125:
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111:
106:
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100:
98:Appealed from
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54:
50:
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43:
40:
36:
32:
27:
22:
19:
505:
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479:
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451:
447:
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406:
393:
384:
381:Subsequently
375:
369:
363:
361:
334:
330:
323:
320:
301:
292:
288:
284:
272:
248:universities
245:
229:
218:
208:
199:
173:
172:
171:
154:
150:
79:
76:Prior action
71:Case history
18:
535:John Howard
464:76 ATC 4095
390:John Howard
236:unit trusts
161:section 260
92:76 ATC 4095
549:Categories
520:High Court
494:High Court
440:High Court
415:References
337:High Court
252:Queensland
214:accountant
183:university
454:(1976) 6
387:Treasurer
240:livestock
209:In 1968,
165:ITAA 1936
82:(1976) 6
66: 330
56:Citations
537:(at the
314:, where
260:Victoria
211:Brisbane
458:212; 9
409:farming
370:Mullens
345:Stephen
341:Barwick
275:trustee
187:farmers
163:of the
156:Mullens
124:Stephen
117:Barwick
86:212; 9
48:Decided
470:(NSW).
357:Aickin
353:Jacobs
298:Courts
205:Scheme
136:Aickin
134:&
132:Jacobs
510:
484:
462:631;
430:
355:and
349:Mason
232:lease
225:trust
151:(5:0)
128:Mason
90:631;
38:Court
302:The
258:and
539:ATO
533:by
516:CLR
490:CLR
460:ALR
456:ATR
436:CLR
250:in
88:ALR
84:ATR
64:CLR
551::
351:,
347:,
254:,
139:JJ
130:,
126:,
122:,
120:CJ
541:)
522:.
496:.
442:.
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