In a majority decision, the Full Federal Court has dismissed the Commissioner’s appeal from a 2011 AAT decision that held that premium income derived by a non-resident insurance company was not sourced either directly or indirectly from Australia and was therefore not assessable to the company.
Before the AAT, in AAT Case [2011] AATA 847, Re Crown Insurance Services Ltd and FCT, the Commissioner contended that the company was an Australian resident for the purposes of s 6-5(2) of the ITAA 1997, but that contention was rejected by the AAT and that decision was not challenged by the Commissioner on his appeal to the Full Federal Court.
The AAT found, as a matter of fact, that the premium income was not sourced either directly or indirectly from Australia. Instead, it found that the source of the company’s income was insurance contracts with the member companies, which were made in Vanuatu and were wholly performed in Vanuatu. The sole question on appeal, therefore, was whether the company, being a foreign resident, received premium income directly or indirectly from an Australian source during the relevant year, which, because of the provisions of s 6-5(3)(a), was assessable income.
The Full Federal Court said it was argued that the better view of the facts was that the company’s income was sourced indirectly from Australia. In the majority’s opinion (Jessup J dissenting), that was a question of fact and therefore the Court had no jurisdiction to hear the appeal. The majority held that the company’s claim that the appeal was incompetent should be upheld and it therefore dismissed the Commissioner’s appeal.
(FCT v Crown Insurance Services Ltd [2012] FCAFC 153, Full Federal Court, Lander, Jessup and Foster JJ, 2 November 2012.)
[LTN 215, 6/11]