I need to talk about Lynn Smith’s case (http://www.austlii.edu.au/au/cases/cth/AATA/2011/563.html) so I can talk about statutory construction – and the significance of “context” in interpreting taxation law.
Lynn Smith withdrew monies from her SMSF to fund financial difficulties of her real estate agency. The AAT stated that the circumstances giving rise to the withdrawal were:
In 2008 their lender, Macquarie Bank, without notice, informed the Applicant and her husband that they no longer would extend credit to the real estate business. After seeking professional advice they were advised to place the real estate business into voluntary administration.
As explained by the Applicant in evidence, that course was not a realistic option as it would require the forced sale of their only real asset, the real estate company’s rent role. In Exhibit A2, the Applicant stated that the only other option available was to access monies from the Fund to maintain the business.
The withdrawal was otherwise than in accordance with payment standards prescribed under subsection 31(1) of the Superannuation Industry (Supervision) Act 1993, with the consequence that the amount was to be included in the taxpayers assessable income unless the Commissioner exercised his discretion under subsection 340-10(4) of the 1997 Act.
The question of whether the discretion should be exercised required an examination of the context in which the discretion appears in the 1997 Act. To consider the discretion, and the context, Senior Member MD Allen referred to Wilson v State Rail Authority of New South Wales [2010] NSWCA 198 (http://www.austlii.edu.au/au/cases/nsw/NSWCA/2010/198.html) and the decision of Allsop P. Commencing at paragraph 12, His Honour discussed the modern approach to the interpretation of statutes.
“I am mindful that any initial engagement with enactment history and context might be misunderstood as part of any enquiry as to the subjective intent of legislators or policy advisers so that such divined intent can be transferred to the words used by Parliament. Such an enquiry would be misdirected. It is the language of Parliament that must be interpreted and construed: However, as is now beyond dispute, in construing an Act, a court is permitted to have regard to the words used by Parliament in their legal and historical context. Context is to be considered in the first instance, not merely when some ambiguity is discerned. Context is to be understood in its widest sense to include such things as the existing state of the law and the mischief or object to which the statute was directed. These are legitimate means of understanding the purpose of the Act and of the relevant provisions, against which the terms and structure of the provisions and the Act, and a whole, are to be understood. Fundamental to the task, of course, is the giving of close attention to the text and structure of the Act, as the words used by Parliament to effect its legislative purpose. Nevertheless, general words, informed by an understanding of the context, and of the mischief to which the Act is directed, may be constrained in their effect. (Authorities omitted).”
Master chef tells us there we should have three tips:
• Allsop P has lost none of the zeal for “context” that he showed in HP Mercantile.
• While the text used by Parliament is given close attention, general words, informed by an understanding of the context, and of the mischief to which the Act is directed, may be constrained in their effect. One might say that the “mischief” of a GST at which section 11-15 is directed is embedded input tax in the price of taxable supplies. The scope of the general words of “relates to” are constrained to give the purpose of input tax relief its effect.
• Don’t take money from your SMSF – Lynn lost – having regard to the context of the SMSF concessions.