B&F Investments Pty Ltd as trustee for the Illuka Park Trust v Commissioner of Taxation

In the case of B&F Investments Pty Ltd as trustee for the Illuka Park Trust v Commissioner of Taxation, the Full Bench of the Federal Court of Australia considered appeals against the primary judge's determinations regarding tax assessments issued to BE Co and IP Trustee. The primary judge had found that section 100A of the Income Tax Assessment Act 1936 (ITAA 1936) applied to deny the beneficiary, BE Co, a present entitlement to certain income and, in the alternative, that section 207-150 of the Income Tax Assessment Act 1997 (ITAA 1997) applied, preventing BE Co from claiming a tax offset. The Full Bench was tasked with determining whether the primary judge had erred in these conclusions.

The legal issues before the Full Bench were whether the primary judge correctly interpreted section 100A(8) of the ITAA 1936 and whether the primary judge was right in concluding that a deemed dividend was part of a dividend stripping operation under section 207-155 of the ITAA 1997. The court also had to decide if the primary judge erred in dismissing BE Co’s application, given that section 100A applied. The Full Bench concluded that the primary judge's determination that section 100A applied was correct and, as a result, the appeal by BE Co should be allowed. The court found it unnecessary to determine whether the deemed dividend was part of a dividend stripping operation.

The reasoning of the Full Bench was based on the premise that if section 100A applied, BE Co would not be presently entitled to the deemed frankable dividend, and therefore, BE Co would not be liable for tax on that dividend. Given that the primary judge had found section 100A applicable, the deemed dividend would not be taxable for BE Co. The Full Bench also noted that BE Co had been unsuccessful on the grounds it raised concerning the excessiveness of the assessment. The court allowed BE Co’s appeal and dismissed IP Trustee’s appeal, setting aside the primary judge’s orders and substituting new orders that allowed BE Co’s application and set aside the Commissioner's objection decision in relation to the 2014 income year, allowing the objection in full. The Full Bench directed the parties to file any agreed minutes of proposed order in relation to costs within seven days, and if no agreement was reached, to file short submissions on the issue of costs within 14 days.