This was an appeal brought by the Commissioner from the decision of the Federal Court to set aside the Commissioner’s objection decisions under Part IVC of the Taxation Administration Act 1953 (Cth) for the 2012 to 2014 income years. The dispute related to an application of s 100A and Part IVA of the Income Tax Assessment Act 1936 (Cth) and the primary judge found that the arrangement was carried out in the course of an “ordinary family or commercial dealing”. The relevant transactions were effectively:
- the trustee of the trust made its corporate beneficiary presently entitled to the net income of the trust, which became an UPE;
- the corporate beneficiary drew down on the UPE to pay the tax liability on the UPE;
- the corporate beneficiary paid a franked dividend to the trustee of the trust, as the trust held all of the shares of the corporate beneficiary, by extinguishing the existing UPE; and
- the trustee of the trust paid a distribution to the individual taxpayer, who was not required to pay any additional tax, as he was a foreign resident at the time.
For consideration by the Full Court was whether the primary judge erred in not finding that there was a s 100A reimbursement agreement or a Part IVA scheme for some of the relevant years. The Full Court upheld the primary judge’s decision for the 2012 income year, but set aside the primary judge’s decision for the 2013 income year finding that there was a Part IVA scheme. The Commissioner had not appealed the 2014 year.
Florence Chen (with B L Jones SC) appeared for the respondents, instructed by Holding Redlich.
The judgment is published here.