It’s the talk of the town, well, actually, the talk of the tax bar.

Tax guru, Justice John Logan, has been overturned, again, by the Full Feds.

In the recent fringe benefits taxation case, Commissioner of Taxation v Toowoomba Regional Council, faithfully reported by Ginger Snatch, the appeal bench littered their reasons with genuflection towards Logan as they went about the painful task of chopping him to pieces.

Now, we find in Commissioner of Taxation v Cheung, that Charlesworth, Goodman and Horan JJ eviscerated the primary judge without so much as a momentary reflection on his status as a learned tax expert.

Lin Jum Cheung was born in Port Vila, Vanuatu. Before moving to Australia he helped his sister in the development of a supermarket business called AMB. It ultimately became the largest supermarket chain in the country.

The sister sent large dollops of surplus money back to Mr Cheung in Australia to manage, invest, and possibly, to pay suppliers. In the meantime, he travelled back and forth between Australia and Vanuatu and provided his wisdom about the operation of the family business.

The commissioner issued income tax assessments to Mr Cheung for the years 2005 to 2015, claiming that about $33 million, or about a third of the profit generated by the ABM supermarkets, should have been included in his assessable income.

Logan J found that none of the 100 or so deposits in his account from banks in Vanuatu was income.

All Cheung was doing was providing friendly advice as a family elder, and the payments from his loving sister were voluntary gifts.

The amounts of interest, however, were assessable.

Dear oh me. The Fulls went to town, even describing HH’s conclusions about Cheung’s involvement in a business as “glaringly improbable”.

It could not be accepted that the payments had no relationship with Cheung’s contributions to the development of the business.

The advantage of the trial judge to determine the facts had been misused.

Just three spiky pars from the full court will suffice:

45. On the proper application of the principles just stated, the primary judge ought to have concluded that Mr Cheung had failed to discharge his onus of proof and, accordingly, the appeal from the Objection Decision ought to have been dismissed.

46. The fact-finding function miscarried because the primary judge did not make an assessment of the honesty of the witnesses based on the evidence as a whole. In multiple instances … the primary judge did not examine or explain how (if at all) the witnesses explained evidence that contradicted or undermined their asserted facts or the narrative put forward in Mr Cheung’s appeal statement. His Honour formed impressions of the witnesses based on his observations of tenor or demeanour with little or no examination of the extent to which their testimony was undermined or contradicted by their own accounts or by documentary records. Further in respect of Mr Cheung, the conclusion of ‘honesty’ formed by the primary judge is not explained by reference to any particular observation of the outward manner in which he testified or the content of the testimony.

47. The reasons do not otherwise disclose an analysis of much of the evidence upon which the Commissioner relied … In those respects, the fact-finding process involved a misuse of the advantage of a trial judge of the kind referred to in Devries. That gives rise to a discrete basis for appellate intervention, quite apart from the more often quoted passages in Fox v Percy.

This cruelly ignores the years of nuanced refinements acquired by those who ply the slippery slope of tax jurisprudence.

And poor Justice Simon Steward, another expert in the field, even had a couple of his Federal Court tax rulings chucked out by his brothers and sisters on High.

Where’s the respect?

Commissioner of Taxation v Cheung 

NB. We’re now told Commissioner of Taxation v Cheung is the third, not second, 3-0 Full Court decision overturning a decision by tax expert Logan J in favour of a taxpayer this year. The first is: Commissioner of Taxation v S.N.A Group Pty Ltd … Quite a send-off since he retired in March.