Australian Tax Court Uses Documents Improperly Obtained In Breach Of Exchange Of Tax Information Agreement

iStock_000024834312XSmallIn the Australian Federal Court on Tuesday (8 October) Justice Perram allowed the Australian Tax Office (“ATO”) to use documents obtained in apparent breach of the exchange of the Tax Information Agreement (“TIA”) between Australia and the Cayman Islands.

It appears that the Cayman Islands Tax Information Authority (“CITIA”) erroneously provided the ATO with information for tax years prior to the date set as operational for the agreement.

The Australian court’s decision has effectively validated an effective retrospective application of the Cayman’s TIA, at least in this case.

The judgement (in Hua Wang Bank Berhad v Commissioner of Taxation (No 7) [2013] FCA 1024) found that although the Caymans Grand Court had decided on 13 September 2013 that the CITIA decision on 23 February 2011 to provide the information to the ATO should be set aside and the documents should be returned;

“…for the purposes of deciding whether the documents were obtained improperly is besides the point:the ATO validly requested the material under Art 5 and it validly received them under Art 6. That the Grand Court has quashed that decision is a matter of domestic law and can have no effect upon the lawfulness of the ATO’s receipt of that material.”

This case follows the Full Federal Court judgement in Denlay v Commissioner of Taxation [2011] FCAFC 63 which held that even if the obtaining of information involved unlawful conduct on the part of ATO officers it would not necessarily impinge upon the validity of an assessment made using the information.

In accordance with Circular 230 Disclosure

Director Principal of Rollo & Company Pty Ltd, a CPA practice that specialises in Australian & international tax, estate and succession planning, professional education, negotiation and mediation, mentoring – executive coaching, and higher education consulting. We also provide the Student Ombudsman Service at Macquarie University in Sydney.

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