Decision impact statement

Commissioner of Taxation v McNeil

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Court Citation(s):
[2007] HCA 5
2007 ATC 4223
64 ATR 431
(2007) 233 ALR 1
(2007) 229 CLR 656

Venue: High Court
Venue Reference No: S56/2006
Judge Name: Gummow ACJ, Hayne, Callinan, Heydon and Crennan JJ
Judgment date: 22 February 2007
Appeals on foot:
No

Impacted Advice

Relevant Rulings/Determinations:

• CR 2001/75

Subject References:
Income tax
Derivation of income
Respondent acquired shares which were later the subject of a buy-back arrangement that gave the respondent "sell-back rights"

Précis

Outlines the Tax Office's interim response to this case which concerned the assessability of the value of sell back rights provided to a shareholder of St George Bank Limited

Brief summary of facts

In February 2001, St George Bank granted rights to its shareholders which permitted them to sell back some of their shares at a price slightly above their market value.

The Tax Office issued a class ruling stating that those shareholders who received sell back rights would be liable to pay income tax.

St George funded litigation on behalf of shareholders to challenge the class ruling. The costs of the appeals to the High Court were borne by the Commissioner.

Issues decided by the court or tribunal

The High Court on 22 February 2007 allowed the Commissioner's appeal from the Full Federal Court that share sell back rights granted to St. George Bank shareholders in 2001 are considered income and therefore assessable.

Tax Office view of Decision

The High Court's decision provides certainty on the tax treatment of sell back rights for the affected taxpayers.

The Class Ruling CR 2001/75 regarding 2001 sell back rights for St George Bank Limited shareholders is available from the legal database at www.ato.gov.au

Administrative Treatment

The Tax Office will work with St George Bank to contact affected shareholders and provide advice on the decision and what it means for them.

There are a small number of people who objected to inclusion of this amount in their return. Their objections have been on hold pending the Court's decision. They will now be finalised. These taxpayers do not need to take any action; we will write to them.

The Tax Office will now do all we can to assist affected taxpayers finalise their tax affairs.

Implications on current Public Rulings & Determinations

Under consideration.

Implications on Law Administration Practice Statements

Under consideration

Legislative References:
Corporations Law
Ch 2J
257A
257B
257C
257D
257E
257F
257G
257H
257J

Income Tax Assessment Act 1936 (Cth)
Pt III, Div 2, subdiv D

Income Tax Assessment Act 1997 (Cth)
6-5

Case References:
Commissioner of Taxation (NSW) v Stevenson
(1937) 59 CLR 80

Thornett v Federal Commissioner of Taxation
(1938) 59 CLR 787

Federal Commissioner of Taxation v Blakely
(1951) 82 CLR 388

Federal Commissioner of Taxation v Uther
(1965) 112 CLR 630

Federal Commissioner of Taxation v Slater Holdings Ltd
(1984) 156 CLR 447
84 ATC 4883
15 ATR 1299

Ord Forrest Pty Ltd v Federal Commissioner of Taxation
(1974) 130 CLR 124
74 ATC 4034
4 ATR 230

Federal Commissioner of Taxation v Miranda
(1976) 11 ALR 85
(1976) 76 ATC 4180
(1976) 6 ATR 367

Inland Revenue Commissioners v Blott
[1921] 2 AC 171

Federal Commissioner of Taxation v Dixon
(1952) 86 CLR 540

Reseck v Federal Commissioner of Taxation
(1975) 133 CLR 45
75 ATC 4213
5 ATR 538