15 Mar 10 Decision Impact Statement - Lawrence
The ATO has published a Decision Impact Statement in relation to the decision of Jessup J of the Federal Court in Lawrence v FCT  FCA 1497; 2008 ATC 20-052; 70 ATR 376. The Decision Impact Statement outlines the ATO's response to that part of the case which concerns the application of the administrative penalty provisions in Schedule 1 to the Taxation Administration Act 1953 (TAA). The Commissioner took the view that the arrangement entered into by the taxpayer was a scheme by way of, or in the nature of, dividend stripping for the purposes of s 177E ITAA 1936. Jessup J held that s 177E applied.
Accompanied by a letter of 3 May 2005, the Commissioner had sent a notice under s 264 of ITAA 1936 to the taxpayer to attend and give evidence concerning his income, and the income of numerous related entities, for the 1996 to 2004 years. It was accepted that the taxpayer made a voluntary disclosure of the details of the arrangement by letter dated 12 May 2005.
The ATO accepts that it was open to Jessup J to find that it was reasonably arguable that s 177E did not apply to the arrangement into which the taxpayer had entered. The ATO also accepts that, based on the particular terms of the letter of 3 May 2005, and the accompanying s 264 notice, it was open to his Honour to find that the taxpayer had not been "told" that an income tax audit was to be conducted of his financial affairs for the 2003 income year before he made the voluntary disclosure of 12 May 2005.