The taxpayers won on one aspect of one issue out of nine. The onus goes back to the Tribunal with them.
Your client collects money that mostly belongs to other people. The ledgers call it pass through. Hasan is what happens when that label meets a regulator’s paperwork and the onus of proof.
The family in Hasan won in the Federal Court on 7 August 2026, though only on one aspect of one issue out of nine [250]. The judgment shows why even that may change nothing. Three adviser lessons follow.
Hasan v Commissioner of Taxation [2026] FCA 1072.
What happened
Start with the structure. Kids First held the childcare approval and its Educators (contractors minding children in their own homes) could not [20, 22, 23]. In this model the scheme paid only if parents were liable to the approved service, whose operators said they complied [113]. Parents were charged $35,455,931.83 over the 2014 to 2016 income years [11].
The taxpayers’ case was that the fees belonged to the Educators [16].
The Tribunal was “left to assume that almost every document of this business was either misplaced, lost or destroyed” [42].
It found the contracts sat with Kids First, so the full fees were income derived by the trust [54]-[55].
The s 14ZZK onus went undischarged and the operators carried 50% recklessness penalties [62]-[66].
What the appeal fixed and what it could not
The Tribunal had read s 43 of the Assistance Act as creating the parents’ liability [143]. Derrington J held s 43 “neither creates nor imposes a liability” but presupposes one arising elsewhere [145]. The misreading was inseparable from the contract finding, so the decision fell [146]-[147].
The same conclusion was open without it [147], [232].
The misreading “was not an error that necessitated a different outcome” [249]. The Court flagged that even the winners’ costs may be apportioned [250].
The matter goes back to the Tribunal for determination according to law. The taxpayers return carrying the same onus, without the evidence the Court said they should have been able to produce [119].
The correction bought a rehearing, not a result? Every step of that is orthodox. The timing is not. The scheme set a 36 month retention floor [21] and Kids First did not comply with its record-keeping obligation [84]. Twelve years on, those records still decide the case?
The practical takeaway
First, pass through treatment turns on legal entitlement, not the ledgers. A client who claims to run inside a scheme can expect the contracts read through it [135]. Even the Gap Payments of $10,491,702.39 were derived income on the Tribunal’s contract finding, with no finding on who recovered them [11, 169, 173].
Second, the file is the case. A retention minimum is not litigation cover. Keep the file until the dispute is dead.
Third, the s 284-75(6) safe harbour failed before the Tribunal because the operators never gave their accountants the regulator’s guidance on who had to charge the fees [223]. Ask for the regulator’s materials, not just ledgers.
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.