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The Federal Court (Jessup J) has dismissed a taxpayer's challenge to the Commissioner's decision (by his delegate) not to revoke a Departure Prohibition Order ("DPO") made in relation to the taxpayer under s 14S of the Taxation Administration Act 1953 ("Administration Act") on 13 May 2007.

The taxpayer was born in the United Kingdom in August 1943. He and his family emigrated to New Zealand in 1988. Between 1995 and 1999, the taxpayer was engaged as an engineering consultant in relation to energy policy reform then being implemented by the government of Victoria. Since 2002, the taxpayer has been resident in the United Kingdom and is now retired.
On 9 May 2007, the Commissioner assessed the taxpayer for income tax for the years ended 30 June 1996, 1997, 1998, 1999 and 2000. The total of those assessments was $5,616,712.30, all but $112,303.00 of which remained outstanding. On 13 May 2007, the Commissioner made an order under s 14S(1) of the Administration Act prohibiting the departure of the taxpayer from Australia for a foreign country. The taxpayer, who arrived in Australia on 16 April 2007, had proposed to leave Australia on 30 May 2007. The DPO prevented him from doing so.

The Court rejected the taxpayer's arguments that the refusal to revoke the DPO was an improper exercise of the Commissioner's powers, in that it constituted the exercise of a power for a purpose other than a purpose for which the power is conferred. Specifically, the taxpayer argued that the continuation of the DPO over the taxpayer was, to the knowledge of the Commissioner, capable of imposing duress on the taxpayer, for the purpose of compelling persons or entities other than the taxpayer to pay his tax liabilities.

The Court said, at para 39:

"On the facts of the present case, I could not find that the actual purpose of Mr Trewin [the delegate of the Commissioner] was to have persons other than the applicant pay his tax liabilities. I find that Mr Trewin approached his task as though the question was whether the tax liabilities were completely irrecoverable from the applicant. He was not satisfied that they were. It is true that, in this regard, Mr Trewin took account of assets as to which he was not satisfied that the applicant did not have an interest, or as to which he was not satisfied that the applicant did not have access, but it was always the applicant’s capacity to muster the necessary funds that was the focus of his deliberations...He referred to his belief "that the applicant had access to funds outside Australia from which the tax liabilities could be discharged". I reject the submission that Mr Trewin’s purpose was nothing more than to impose duress upon the applicant so that other persons or entities would discharge the applicant’s liabilities."

Troughton v FCT [2008] FCA 18 (Federal Court, Jessup J, 18 January 2008).

For a copy of the decision, go here

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