Florence Chen (led by Dr R Schulte) appeared for the respondents, instructed by Dentons.
This was an appeal to the Full Court of the Federal Court of Australia, involving two companies operating with the Coronis Group Ltd, who claimed tax deductions for fees required by written agreements between 2005 and 2015. These deductions were rejected by the Commissioner and resulted in amended assessments of income tax and assessments of administrative penalty. The Court considered two principal issues as raised in the notice of appeal: firstly, whether the primary judge was correct to conclude that the taxpayers entered into inferred contracts with the trustees of the trusts for use of trust assets upon payment of a fair and reasonable fee in each relevant year, and if so, whether the primary judge correctly concluded that all the relevant amounts the taxpayers paid to the trustees were referrable to the inferred contracts.
The Court concluded that there was no evidence of a contract requiring the taxpayers to pay service fees to the trustees, that there were no outward communications or conduct showing that the taxpayers requested services or agreed to pay fees, and that the payments lacked consistency, suggesting that the conclusion could not be drawn that the taxpayers were contractually liable to pay annual service fees. It was held that the appeal be allowed, with the Court ordering that the taxation appeals of the applicants against the objection decisions of the respondent be dismissed, the applicants pay the respondent’s costs of the taxation appeals to be taxed, and the respondents pay the appellant’s costs of the appeal to be taxed.
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