The High Court has released the transcript from the hearing (in Canberra) from the Full Federal Court decision in Blank v FCT [2015] FCAFC 154. The appeal was heard by the High Court on 23 August 2016 (HCATrans 181) and 24 August 2016 (HCATrans 182). The Court reserved its decision.
In a majority decision, the Full Federal Court had dismissed the taxpayer’s appeal and confirmed that payments of US$160m he received, in instalments, following his termination from a company were assessable to him as ordinary income in the income year in which the right to the payments arose.
[LTN 165, 26/8/16]
FFC Catchwords
INCOME TAX – appellant participated in profit participation schemes as employee of company group in foreign countries and in Australia – employee allocated “profit participation units” (PPUs) and equal number of shares in holding company – amount payable to appellant on termination of employment – whether amount assessable as ordinary income or as a capital gain – whether amount deferred compensation – PPUs a mechanism for calculation of amount of profit share to be paid to appellant – conditional executory promise to appellant to pay amount on termination – amount was reward for service as deferred compensation – amount assessable as ordinary income – part of amount withheld for discharge of foreign tax liabilities – when income derived – that part of amount was derived when paid by agreement with appellant to foreign tax authorities – whether income exempt under section 23AG of Income Tax Assessment Act 1936 (Cth) as foreign earnings derived from foreign service – apportionment under section 23AG not possible – whether CGT event C2 happened – cost base of asset if CGT event C2 happened – valuation of appellant’s rights under profit participation scheme – whether prejudice caused to respondent if appellant allowed to re-open case – both appeal and cross-appeal dismissed