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On 16 May 2012, the ATO issued a Decision Impact Statement in relation to the decision of the Full Federal Court in Allen (Trustee), in the matter of Allen's Asphalt Staff Superannuation Fund v FCT [2011] FCAFC 118 (7 September 2011).

The case concerned whether certain income of a superannuation fund received in its capacity of beneficiary of a trust estate was special income of the fund. The Full Federal Court concluded that the income was special income of the fund. In consequence the trustee was liable to pay tax at the rate of 47% on this amount. However, the Full Federal Court determined that no penalty should be imposed, because, contrary to the conclusion of the primary judge, the taxpayer's position was reasonably arguable.

The taxpayer's application for special leave to appeal to the High Court was refused on 10 February 2012 - see [2012] HCA Trans 25.

The ATO states that the Full Federal Court's reasons for concluding that the relevant amount was special income are consistent with the ATO view set out in TR 2006/7.

In relation to the decision that no penalty was warranted, the ATO states:

"The ATO considers that the approach of the Court on the issue of 'reasonably arguable position' is essentially consistent with the position outlined in Miscellaneous Taxation Ruling MT 2008/2 Shortfall penalties: administrative penalty for taking a position that is not reasonably arguable ('MT 2008/2') and the majority decision of the Full Federal Court in Cameron Brae Pty Ltd v FCT [2007] FCAFC 135 ('Cameron Brae'). We do not consider that any further changes are required to MT 2008/2, given that it already incorporates guidance from Cameron Brae.

The Full Court in Allen did not depart from nor overturn the fundamental propositions outlined by Hill J in Walstern Pty Ltd v FCT [2003] FCA 1428 (' Walstern '), which were endorsed by two later Full Federal Courts (Pridecraft Pty Ltd v FCT [2004] FCAFC 339 and Cameron Brae).

Rather, the ATO sees the reference in Allen at [75] to the approach taken in Cameron Brae as being 'somewhat less strict than that suggested by Hill J in Walstern', as being specific to context and distinguishing the Walstern case on its facts."


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