This session examines Ziegler v Commissioner of Taxation; Wellton Holdings Pty Ltd v Commissioner of Taxation (2025 ATC 20-983), with particular focus on the contracting issue arising from the 2009 Settlement Deed. The central question is whether an alleged breach of a settlement agreement can render an assessment “excessive” for the purposes of Pt IVC review. The decision also addresses assessable recoupment under s 20-20 ITAA 1997, the Commissioner’s power to increase administrative penalties under Sch 1 TAA 1953, and the operation of s 177EA ITAA 1936. The case raises foundational issues concerning the relationship between administrative settlement and statutory tax liability.
- Contracting Issue and “Excessiveness”
The taxpayers argued that the Commissioner’s conduct departed from the 2009 Settlement Deed and that this departure rendered subsequent assessments excessive. The FCAFC rejected this submission, holding that in Pt IVC proceedings the question is whether the assessment exceeds liability imposed by statute. An alleged contractual breach does not alter substantive statutory liability. The Commissioner cannot contract out of the tax Acts unless the statute itself gives binding effect to the arrangement. Any remedy for breach lies in separate contractual proceedings. - Assessable Recoupment
A credit of recalculated GIC to the taxpayer’s income tax account was held to be “received” as a recoupment under s 20-20(3) ITAA 1997. The Court confirmed that “recoupment” is broad and not confined to cash receipts, and that the provision applies where the amount was in fact deducted. - Increased Administrative Penalties
The Commissioner was not functus officio after issuing initial penalty notices. The duty to assess penalties under s 298-30 Sch 1 TAA 1953 is continuing and may be exercised again as occasion requires. The taxpayer’s protection lies in the right to object to the increased assessment. - Section 177EA
The Tribunal did not err in its application of the purpose test in s 177EA(3)(e). Shorthand references to “purpose of the scheme” did not amount to legal error where the correct statutory inquiry into the purpose of persons was applied.
Discussion Focus
- The meaning of “excessive” in Pt IVC and its confinement to statutory liability.
- The constitutional and structural limits on executive settlement of tax disputes.
- Whether and how administrative settlements can bind the Commissioner absent express statutory machinery.
- The interaction between settlement context and Part IVA or s 177EA purpose analysis.
Please see below link to case materials which is assumed reading in order to participate in the discussion:
Ziegler v FC of T; Wellton Holdings v FC of T 2025 ATC 20-983
BSKF v FC of T; HGYT v FC of T 2024 ATC 10-735
Discussion led by David Marks KC