Reliance Carpet Co Pty Ltd

was the Full Federal Court right?

Maheswaran Sridaran

Research output: Contribution to journalArticle


The taxpayer granted an option to a prospective purchaser for the purchase by the latter of a property owned by the taxpayer. Under the option, the taxpayer received a security deposit from the prospective purchaser, subsequent to which the taxpayer entered into a contract with the prospective purchaser for the sale of the property. The purchase was not completed by the prospective purchaser, and the deposit was forfeited. The Commissioner assessed the taxpayer for GST payable on the forfeited deposit, but the taxpayer objected to the assessment, an objection which the Commissioner disallowed. The taxpayer then appealed to the Administrative Appeals Tribunal, which disallowed the appeal. The taxpayer then appealed to the Full Federal Court, which unanimously allowed the appeal. This article argues that the Full Federal Court’s decision was wrong. It argues so on either of two grounds: the Full Federal Court erred on drawing the proper conclusion on applying the relevant legislative provisions to the facts; or it applied a method of statutory interpretation (under the purposive approach) which was not the best. The submissions made on behalf of the Commissioner to the Full Federal Court did not include the first of those two grounds. Those submissions did include the second, but not underpinned by the analysis articulated in this article. The Commissioner was granted special leave by the High Court to appeal the Full Federal Court’s decision. It was subsequently announced that he would appeal to the High Court. In a postscript to this article it is noted that the High Court has since unanimously overturned the decision of the Full Federal Court in Reliance.
Original languageEnglish
Pages (from-to)269-281
Number of pages13
JournalJournal of the Australasian Tax Teachers Association
Issue number2
Publication statusPublished - 2008
Externally publishedYes

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