Peate v Federal Commissioner of Taxation (1964) 111 CLR 443

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  • Peate was a doctor who practiced with other doctors in a company called A E Westbank Pty Ltd (Westbank).
  • Each doctor in Westbank agreed that payment for treatment should be due to Westbank directly, even though the doctor might have rendered medical services in his own name.
  • Peate further agreed that if he failed to carry out this obligation, he would pay Westbank liquidated damages an amount equivalent to the usual fees for the treatment;
  • Peate also agreed that any moneys tendered or forwarded to him by any person in respect of fees should be the property of Westbank.
  • Essentially, Peate did not take any fees from any patient.
  • The arrangement between the doctors essentially gave Westbank the beneficial property in fees collected and gave the quality of a resolution of a board of directors to the decisions of the doctors as to disbursement.
  • Section 260 of the Income Tax and Social Services Contribution Assessment Act 1936 (Cth) (the Act) declares void every “arrangement” made or entered into, orally or in writing, so far as it has or purports to have the purpose or effect of in any way, directly or indirectly, avoiding any liability imposed on any person by the Act


  • Did Peate’s arrangement with Westbank contravene section 260 of the Act?


  • Yes, the arrangement essentially converted fees into a disbursement, in an attempt to deny the ATO taxes.


“A proprietary company, controlled by one man, has today taken the place of John Doe, William Roe and others who at an earlier time came out of ink-wells in attorneys’ offices to do acts in the law of which law-abiding citizens might have the benefit while avoiding disadvantageous consequences. By incantations by typewriter, the obtaining of two signatures, payment of fees and compliance with formalities for registration, a company emerges. It is a new legal entity, a person in the eye of the law. Perhaps it were better in some cases to say a legal persona, for the Latin word in one of its senses means a mask: Eripitur persona, manet res.”

(Windeyer J at page 478)

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