In a decision handed down on Thur 4.12.2014, the Full Federal Court unanimously allowed the Commissioner’s appeal from the decision in [2014] AATA 155 Re Macoun and FCT, effectively finding that an early retirement pension received by a resident taxpayer from the World Bank was not exempt from Australian income tax.
The AAT had ruled that the early retirement pension a resident taxpayer received from the World Bank in the 2009 and 2010 income years in accordance with its foreign service retirement plan was exempt from Australian income tax by virtue of the effect of the International Organisation (Privileges and Immunities) Act 1963 (the Act). In particular, the AAT found that as the payments were “emoluments” (in that they were profit or gain arising from an office or employment or as “compensation for services” by way of remuneration for working for the Bank) they were, therefore, entitled to “immunity” from taxation by virtue of certain regulation made under the Act.
However, after first finding that the appeal was competent in that it raised a question of law and was made within the requisite time, the Full Court then found the AAT’s process of reasoning was flawed in 2 main respects.
- First, it had adopted a “bottom up” approach to the construction of the Act by reference to the terms of relevant delegated regulations, rather than a “top down” approach – with the result that the AAT had wrongly construed its operation by reference to those regulations.
- Secondly, the Court found that the AAT’s approach to the consideration of “entitlement” during the course of employment was totally irrelevant and that the only relevant consideration was “receipt” during the course of employment – and in this case, as the taxpayer had ceased to hold office when the pension was received, it was not entitled to immunity.
Accordingly, the Full Court allowed the Commissioner’s appeal, set aside the decision of the AAT and affirmed the original decision under review.
(FCT v Macoun [2014] FCAFC 162, Full Federal Court, Edmonds, Perram and Nicholas JJ, 4 December 2014.)
[LTN 235, 4/12/14]