Three Federal Circuit judges have reserved their decision about tax payed on interest earned whilst bushfire class action participants compensation payments were held in trust. A decision is not expected until late November.
Law firm Maurice Blackburn is fighting a court ruling slugging the firm higher taxes on interest earned by compensation payouts held in trust before it was paid to Black Saturday class action participants.
The interest earned was also used by Maurice Blackburn to pay its legal fees and costs.
The Murrindindi fire killed 40 people and nearly wiped out the town of Marysville in February 2009, with thousands of survivors later landing a $300 million class action settlement.
Lawyers for the group are appealing a Federal Court ruling meaning they have to pay tax on the full amount of interest their payouts earned – rather than on a reduced amount after administration costs.
Maurice Blackburn’s head of class actions Andrew Watson was put in charge of the fund following the 2015 settlement, and he took the Australian Taxation Office to court in a bid ensure the firm’s fees could be deducted from the interest earned.
He had hoped to use the $8,355,722 interest earned in the 2015/16 financial year to fund administrative costs, totalling $4,341,327.That would have saved the survivors money because they would have only paid tax on $4 million worth of interest, not $8.3 million.
But Federal Court Justice John Middleton sided with the tax office, saying managing the compensation scheme wasn’t a commercial activity and so couldn’t be used to as a basis of a claim under tax law.
“I do not consider that the activities of the taxpayer, properly identified, were of a commercial character,” Justice Middleton said in his ruling.
Maurice Blackburn appealed the decision, with barrister Daniel McInerney on Thursday telling three Federal Court judges the money in dispute was significant for the bushfire survivors.
“(It’s) highly significant, as I say, to the victims waiting for distributions from the fund,” he said, speaking about the interest component.
The Murrindindi survivors sued electricity provider SP AusNet, Utility Services Corporation Limited and the state’s environment department.
They alleged the department had failed to reduce fuel loads and power lines weren’t properly maintained but as part of the settlement AusNet denied it was to blame.
The federal judges reserved their decision on Maurice Blackburn’s appeal.
-With AAP.
