Genuine redundancy - changing the law by stealth

Hi all. This is about the legal outcome for the community of the decision of the Full Federal Court that my clause 97 redundancy was not a genuine redundancy.

In 2004 the ATO lost a big redundancy case in the Full Federal Court - Dibb v Commissioner of Taxation  [2004] FCAFC 126; (2004) 136 FCR 388. At that time the relevant provision was section 27F of ITAA 1936.

The Dibb decision drew together all the authorities on redundancy and synthesised them, effectively putting to rest the matter of what constituted "a bona fide redundancy" for tax purposes.

The ATO was obviously very grateful for this extremely important and useful decision, because it acknowledged it in a footnote (!) to its public ruling on redundancy, TR 2009/2.

In 2007, section 27F was repealed by the Superannuation Legislation Amendment (Simplification) Act 2007 (No 15 of 2007).

The Explanatory Memorandum said that the provision was to be retained  but would be "rewritten in a simplified and modernised form to improve the readability of the law."

The provision was rewritten as s.83-175 of the ITAA 1997. The amendment was effected by the Tax Laws Amendment (Simplified Superannuation) Act 2009 (No 9 of 2007).

The Explanatory Memorandum said:

4.58   The new terminology of 'genuine redundancy payment' and 'early retirement payment' replace the existing ITAA 1936 terminology dealing with payments in consequence of bona fide redundancy and approved early retirement schemes respectively.

Tax Treatment

4.59  Genuine redundancy payments and early retirement scheme payments continue to receive the same concessional tax treatment provided for in the ITAA 1936.

In summary, Parliament explicitly stated that the rules for taxing redundancy payments did NOT change despite the different language used.

However, in the decision I received,  the Full Court refused to look at the Explanatory Memoranda and based its construction on the ordinary meaning of the words. This was a very strange thing for the Full Court to do, because it is very well established that the correct approach to interpreting tax law is to ascertain Parliament's purpose, and the easiest way to do this is to refer to the Explanatory Memorandum.

Former Commissioner D'Ascenzo even published a paper confirming that the purposive approach was the correct way to interpret tax law.

Because they refused to take a purposive approach, the Full Court concluded that Parliament must have changed the law after the Dibb case, and thus based its judgment on that totally mistaken assumption.

So we now have the the Full Federal Court saying that the law is exactly the opposite of what Parliament intended it to be.

I sense a disturbance of the force . . . .





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