Question:
Clark’s Case: Indemnity costs ordered against Tax Office
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
The Full Federal Court has ordered the Tax Office to pay the legal costs for Mr and Mrs Clark following the High Court refusing a Tax Office application to hear an appeal in this case.
In October, taxInsight we reported on the High Court refusal of leave for the Tax Office to appeal the case. Continuing to play hardball, the Tax Office then refused to cover the Clark’s legal costs for successive Court hearings.
The costs order is on a full indemnity basis for all costs incurred since February 2010 when an offer to settle for $5,000 was made to the Tax Office. As the Tax Office eventually lost, it should have accepted that offer.
Costs can be ordered by a Court on an indemnity basis or alternatively on a party-party basis. The indemnity basis is more generous as it requires the Tax Office to simply pay the lawyers bills as they stand. Party-party awards of costs require a thorough review to ensure the most economical approach was taken to each step in the legal action of the other party.
This award of costs shows the importance of making a reasonable offer to settle early in the litigation process.
FCT v Clark (No. 2) [2011] FCAFC 140, Tax Vine No. 45, 18 November 2011
