The Full Federal Court has held that the Commissioner was entitled to refuse to make a private ruling, thereby allowing his appeal against a first instance decision quashing his refusal to make the ruling.

The respondents were a company (Hacon) and 3 brothers. The company was a beneficiary of a family trust which conducted an extensive grazing business on several properties, the ownership of which was split between the brothers. Following their father’s death in 2012, the 3 brothers decided to restructure the grazing business so that, among other things, each of them had greater control over the part of the grazing business that was conducted on the particular properties they each owned.

In May 2016, Hacon and the brothers applied for a private ruling as to the potential application of Pt IVA of the ITAA 1936 to the proposed restructuring scheme. On 17 August 2016, the Commissioner wrote to the respondents’ advisers informing them that he had decided to exercise his discretion in s 357-110(1)(a) in Sch 1 TAA to decline to make a ruling. That provision allows the Commissioner to decline to make a ruling if he considers the correctness of the ruling “would depend on which assumptions were made about a future event or other matter”.

The 17 August letter stated that there remained matters “about which no further information has been provided”, but that even if further information were provided, the Commissioner would be required “to make assumptions about future events”. The letter then listed some of the matters about which assumptions would have to be made.

At first instance, in Hacon v FCT [2017] FCA 659, Logan J decided that the letter of 17 August was evidence of the Commissioner having considered that he needed “further information in order to make the requested ruling”. Having failed to request such information (as required by s 357-105 in Sch 1 TAA), Logan J quashed the decision to decline to make the ruling.

In a joint judgment, the Full Court has overturned Logan J’s decision. The Court held that although each matter identified in the Commissioner’s letter of 17 August may have been information, none was information which was required by the Commissioner to make the ruling. Instead, each matter was “an assumption about either a future event or about a future other matter that enlivened the Commissioner’s discretion under s 357-110(1)(a) to decline to make the ruling”.

(FCT v Hacon Pty Ltd & Ors [2017] FCAFC 181, Full Federal Court, Robertson, Pagone and Derrington JJ, 23 November 2017.)

[LTN 226, 24/11/17; Tax Month Nov 2017]

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