Kavich V. v Official Trustee in Bankruptcy & Anor [1995] FCA 446

Kavich V. v Official Trustee in Bankruptcy & Anor [1995] FCA 446

The additional tax under s207 was not a debt or liability to which Mrs Kavich was subject at the date of bankruptcy because no obligation to pay it arose until income tax had been assessed, had become due and payable, and remained unpaid. Although the liability could be linked to a pre-bankruptcy obligation to pay income tax, bankruptcy converted the income tax liability into a right to prove in the estate, so after bankruptcy the assessed income tax was not a debt payable by the bankrupt to the Commissioner and there could be no failure by her to pay income tax attracting s207. Since s207 tax never became payable and was not provable, the Trustee could not admit the proof for it or pay...

Jurisdiction
Australia
Judgment Date
30 June 1995
Procedural Posture
Bankruptcy Proceeding Concerning Proof of Debt for Additional Tax Under S207 of the Income Tax Assessment Act 1936 / Applications Under S178 of the Bankruptcy Act 1966 by Way of Appeal From the Official Trustee's Failure to Determine Whether to Admit the Deputy Commissioner's Proof of Debt
Outcome
The Court held that the Trustee was not entitled to admit the Deputy Commissioner's proof of debt for the s207 additional tax and that no amount could be paid on account of that tax out of the estate; the Deputy Commissioner's application was dismissed with costs payable to Mrs Kavich.
Legal Topics
['provable Debts' 'additional Tax for Late Payment' 'income Tax Assessments After Bankruptcy' 'discharge From Bankruptcy' 'surplus in Bankrupt Estate']
['bankruptcy' 'taxation'] ['provable Debts' 'additional Tax for Late Payment' 'income Tax Assessments After Bankruptcy' 'discharge From Bankruptcy' 'surplus in Bankrupt Estate']

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Procedural Posture

Bankruptcy Proceeding Concerning Proof of Debt for Additional Tax Under S207 of the Income Tax Assessment Act 1936 / Applications Under S178 of the Bankruptcy Act 1966 by Way of Appeal From the Official Trustee's Failure to Determine Whether to Admit the Deputy Commissioner's Proof of Debt

Legal Issues

  1. 1 ['Whether, at the date of bankruptcy, additional tax under s207 was a debt or future liability, certain or contingent, to which Mrs Kavich was subject.' 'Whether additional tax under s207 was a debt or liability to which Mrs Kavich became subject before discharge by reason of an obligation incurred before the date of bankruptcy.' 'Whether additional tax under s207 ceased to be payable on bankruptcy or on discharge from bankruptcy.' 'Whether additional tax under s207, even if not provable, should be payable out of the bankrupt estate by analogy to interest.']

Ratio Decidendi

The additional tax under s207 was not a debt or liability to which Mrs Kavich was subject at the date of bankruptcy because no obligation to pay it arose until income tax had been assessed, had become due and payable, and remained unpaid. Although the liability could be linked to a pre-bankruptcy obligation to pay income tax, bankruptcy converted the income tax liability into a right to prove in the estate, so after bankruptcy the assessed income tax was not a debt payable by the bankrupt to the Commissioner and there could be no failure by her to pay income tax attracting s207. Since s207 tax never became payable and was not provable, the Trustee could not admit the proof for it or pay...

Court Disposition

The Court held that the Trustee was not entitled to admit the Deputy Commissioner's proof of debt for the s207 additional tax and that no amount could be paid on account of that tax out of the estate; the Deputy Commissioner's application was dismissed with costs payable to Mrs Kavich.

Orders

  • ['The Deputy Commissioner is not entitled to prove in the bankrupt estate of Vera Kavich for additional tax of $239,915.58 sought to be imposed by way of late payment penalties for failure to pay income tax the subject of assessments or amended assessments issued on 27 November 1978.' "No part of the said additional...