A ruling binds because of the law. A deed does not.
Can the ATO settle your tax dispute, then ignore the settlement? Ziegler v Commissioner of Taxation [2025] FCAFC 168 answers with a resounding yes.
The Full Federal Court (Bromwich, Thawley and Jackman JJ) delivered a decision every tax practitioner needs to understand. It strikes at the heart of what a settlement deed with the Commissioner is actually worth.
The facts
In 2009, Mr Ziegler and his entities settled longstanding disputes with the ATO via a Settlement Deed. Orrong Strategies paid $3.9 million plus GIC [1].
After settlement, Mr Ziegler executed a series of transactions transferring Orrong shares to himself, declaring a fully franked dividend, and claiming a refundable tax offset of $2,993,610, recovering much of what had been paid [3]-[4].
The Commissioner was, as the Court noted, “displeased” [4]. He made a s 177EA determination denying the imputation benefit and sought recovery of the offset [5].
Can a settlement deed constrain the Commissioner?
The taxpayer argued the assessments were “excessive” because they departed from the Settlement Deed. The Commissioner had agreed, for valuable consideration, to exercise his powers on a particular view of the taxing statutes [136]. The Court rejected this entirely.
Citing authority from FCT v Wade [1951] HCA 66 onwards, the Court reaffirmed that the “Commissioner cannot bind himself by administrative practice or by contract to give the tax laws an operation which they do not have” [142]-[143]. A taxpayer’s liability is determined by the substantive operation of the tax laws, not by contractual promises [150].
The Court drew a critical distinction: statutory rulings under s 357-60(1) bind the Commissioner because the statute says so. A Settlement Deed carries no such statutory force [149]. A ruling binds because of the law. A deed does not.
As for remedies? The taxpayer may have a contractual claim for breach, but those are separate proceedings. Breach of a deed does not make an assessment “excessive” within ss 14ZZK and 14ZZO [152]-[153].
The practical takeaway
When you settle with the ATO, you are not constraining the Commissioner’s statutory powers. The Commissioner retains full authority to assess according to the law as he sees it, even if that differs from what was contemplated in your settlement.
A settlement deed provides contractual rights, not statutory protection. Cases like this are uphill from day one, and the willingness to test these boundaries is how the law develops.
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.