ATO APPEAL - CHEUNG v COMMISSIONER OF TAXATION [2024] FCA 1370

The ATO appeals Cheung - a further focus on $30+ million of inbound funds to take place.

On 12 November 2024, we provided an update on the case of Lin Jum Cheung v Commissioner of Taxation – a novel case involving the ATO’s tax assessment of large inbound fund transfers from Vanuatu to an individual in Australia.

Whilst the ATO had originally assessed those amounts as income, the Federal Court (constituted by Logan J) overturned that decision, in summary, due to the compelling oral evidence provided by family members as to the true nature of the money (being gifts).

Unsurprising to some, the Commissioner of Taxation has launched a Full Federal Court appeal in relation to Logan J’s decision. One might expect that the volume of the funds involved and the argument over whether funds were truly gifts were factors weighing heavily on the appeal decision. With that said, the gravity of the matter is not a sole determinative factor - the Commissioner needs to find error in the Federal Court’s judgment. The appeal hearing is not a de novo hearing and it may not be enough for the Commissioner even if the Full Federal Court judges may have reached a different opinion than the primary judge. A ground of appeal will need to be upheld and in these appeals the evidence and points of argument are typically limited to that established at the first hearing.

Incidentally, there is another similar, oral evidence appeal recently decided before the Full Federal Court. The case of Liang (another decision of Logan J) involved the tax treatment of bank deposits made into a bank held by the trustee of a trust which owned property. The Full Federal Court provided its appeal judgment on 31 January 2025 in favour of the Commissioner. We will write on that case shortly.

Smailes Krawitz acts and advises in taxation disputes.

LINK TO JUDGEMENT

You can keep up to date with the appeal’s progress HERE

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Alan Krawitz5 February 2025