Tax Facts

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  • Commissioner bound to apply the law

    The Commissioner has released a Decision Impact Statement on the decision of the Full Federal Court in Macquarie Bank Ltd v C of T last October. The tax issue involved the allocation of Macquarie's Offshore Banking Unit expenses, although that is unimportant to the main point arising from the case.

    Following an audit, the ATO advised that amended assessments would be issued for several past years. Macquarie pre-emptively made application to the court seeking to prevent the issue of those amended assessments, arguing that the ATO's position was contrary to earlier statements and conduct. Macquarie sought to have the ATO's views applied for the future only, not to past years. Macquarie failed, the Full Court upholding the primary judge's decision that the Commissioner could not be compelled to adhere to his Practice Statement (PS LA 2011/27) about when a changed ATO view of the law should only be applied prospectively.

    The case is a good reminder that the Commissioner is generally not bound by his views other than those expressed in binding rulingshe is bound to apply the law as he believes it to be at any particular time. In the vast majority of cases, the only way to dispute a tax assessment is by the objection and appeal process. It is not much help simply to say, "But the ATO said ….”
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    22 Jan 2014

    Topic: Income Tax

  • Trust ‘controller’ for the Small Business CGT Concessions

    An AAT case handed down on Christmas Eve reminds us that all elements relating to entitlements to the small business CGT concessions must always be checked precisely in each case. In Gutteridge v C of T, the family patriarch succeeded in arguing that he was the controller of a trust with capital gains, despite his daughter being the sole director of the trustee company. That meant that the trust's turnover did not have to be aggregated with another business controlled by the daughter – consequently, the trust was a small business entity for the purposes of the small business CGT concessions.

    The AAT accepted evidence that the patriarch controlled the relevant trust from behind-the-scenes, despite not being a director of the trustee. So it was accepted that the trustee ‘acts, or could reasonably be expected to act, in accordance with the directions or wishes’ (s328-125(3) ITAA97) of the patriarch. The point is that, in the circumstances, one would reach the wrong conclusion by looking solely at formal matters such as the daughter's directorship, without seeking additional information.
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    15 Jan 2014

    Topic: CGT