Barkoczy, Stephen --- "Editorial" [2000] JlATax 1; (2000) 3(1) Journal of Australian Taxation 2

Editorial

Associate Professor Stephen Barkoczy

Since writing my last editorial, the High Court has delivered three significant tax decisions, namely Esso Resources Australia Ltd v FC of T 2000 ATC 4042, FC of T v Ryan 2000 ATC 4079 and FC of T v Scully 2000 ATC 4111. These cases have received quite an amount of press coverage over the last few weeks and will, no doubt, be the focus of much detailed forthcoming analysis.

The first case is, of course, significant not only in the context of taxation law but also generally because it concerns the doctrine of "legal professional privilege" which was also described, more aptly, by the High Court as "client legal privilege". A majority of the High Court held that the privilege should be founded upon a "dominant purpose" test rather than a "sole purpose" test. In other words, the privilege (which is "owned" by the client) attaches to confidential oral or written communications made for the dominant (rather than sole) purpose of obtaining or giving legal advice or for use in legal proceedings. In coming to this conclusion the High Court majority, in effect (although not technically), overruled what Stephen, Mason and Murphy JJ had said in Grant v Downs [1976] HCA 63; (1976) 135 CLR 674. The High Court majority concluded that the dominant purpose test struck a "just balance" and brought the Australian common law into conformity with other common law jurisdictions (it also, incidentally, sits comfortably alongside the privilege available under the Evidence Acts of the Commonwealth and various States). The effect of the decision is that the privilege will have a wider application than previously thought.

In the second case, a majority of the High Court overturned a unanimous Full Federal Court decision which had held that a "nil assessment" constituted a valid "assessment" which could not be amended outside, what was then, the three year time limit specified in s 170(3) of the Income Tax Assessment Act 1936. According to the High Court majority, the time limit under s 170(3) had not begun to run in the taxpayer's case as no tax had become due and payable. The majority declined to distinguish the earlier High Court decision in Batagol v FC of T [1963] HCA 51; (1963) 109 CLR 243 based on the facts. They also declined to construe s 204(1) as providing a notional payment date for the purposes of s 170(3). The decision will be a disappointment for taxpayers who seek finality and certainty in their tax affairs as it means that the Commissioner can generally "re-open" a "nil assessment" at any time in the future notwithstanding that the taxpayer may have made full and true disclosure in his or her return. Whilst the High Court majority indicated that a taxpayer who seeks to bring matters to a conclusion can rely on s 171, there is a concern about how practically useful such a provision might actually be.

In the third case, a majority of the High Court also overturned another Full Federal Court decision which had held that a benefit paid by a superannuation fund did not constitute an ETP as it constituted a total and permanent disablement benefit. The High Court majority held that the payment was not "consideration of a capital nature for, or in respect of, personal injury to the taxpayer" as the payment was not in the nature of "compensation" and it therefore did not fall within the exclusion in para (n) of the sec 27A(1) ETP definition.

There are a number of matters that should be reported in this first issue of the Journal for 2000 including the fact that Les Nethercott has relinquished his role as Associate Editor owing to commitments that he has in the role of Associate Dean (Graduate Studies) in the Faculty of Business and Economics at Monash University. I would like to thank Les for his contributions to the Journal, particularly during the inception stage. Although Les will no longer continue in the role of Associate Editor, I am pleased to advise that he will join the Journal's Advisory Board and we will therefore be able to continue to benefit from his input. It is also my pleasure to welcome Terry Murphy to the Advisory Board. Terry is a well known member of the Victorian Bar who has appeared for clients in many important tax cases.

Finally, it is with sadness that I report the tragic news regarding one of our Advisory Board members, Associate Professor Garth Harris from the University of Auckland, who passed away late last year following a long illness. Garth was well known for his contribution to taxation education and the taxation debate in New Zealand and his valuable input into this Journal was greatly appreciated by all involved in its production. Our sympathies are extended to his family, friends and colleagues.

February 2000