Bamyili Pty Ltd as Trustee for the McCarthy Family Trust and Commissioner of Taxation - [2004] AATA 1176

Administrative

Appeals

Tribunal

DECISION AND REASONS FOR DECISION [2004] AATA 1176
ADMINISTRATIVE APPEALS TRIBUNAL )
) No QT2002/178-180

TAXATION APPEALS DIVISION
)

Re BAMYILI PTY LTD as TRUSTEE
FOR THE McCARTHY FAMILY
TRUST

Applicant

And

COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Senior Member KL Beddoe
Senior Member BJ McCabe
Date10 November 2004
PlaceBrisbane

Decision The Tribunal decides:-
(a)      the decisions under review are set aside;
(b)      the objections are allowed in full; and
(c)       these proceedings have terminated in favour of the applicant.

.......[Sgd].......
K L Beddoe
Senior Member

CATCHWORDS
TAXATION – appropriation of trust income – review of objection decision – purported appointment of income to beneficiary ineffective – consequences of ineffective appointment of income – decision to assess income of trustee set aside
Income Tax Assessment Act 1936 ss 97, 99A
McPhail v Doulton [1971] AC 424
East Finchley Pty Ltd v Federal Commissioner of Taxation (1989) 19 ALD 85
Ramsden v Federal Commissioner of Taxation [2004] FCA 632
REASONS FOR DECISION

10 November 2004
Senior Member KL Beddoe

Senior Member BJ McCabe

1.      Bamyili Pty Ltd as Trustee for the McCarthy Family Trust seeks review of objection decisions by the respondent in relation to the years of income ended 30 June 1996 to 30 June 1998. The individual applicant seeks review of an objection decision in relation to the year of income ended 30 June 1996.
2. The Trustee has been assessed in each year of income under section 99A of the Income Tax Assessment Act 1936 (“the Act”) and the individual applicant under section 97 of the Act in relation to the net income of the Trust.
3. Issues also arise as to whether the respondent was correct in assessing additional taxes in accordance with Part VII of the Act and, if so, whether those additional taxes should be remitted in full or in part. The individual taxpayer also objected on grounds that the amended assessment in issue was not authorised by section 170 of the Act.
4.      These matters were heard jointly with other cases which have a common theme of appointment of net income of the relevant family trust to a company correctly described as No 2 Pitt Street Pty Ltd as Trustee of the Northbourne Holdings Unit Trust (“Northbourne”).
5.      At the hearing Mr Russell QC appeared with Mr Bickford for all the applicants and Mr Hack SC appeared with Mr Robertson for the respondent.
6. The documents lodged in the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 were before the Tribunal. There is a generic set of documents marked T1 to T69 and also sets of documents specific to the applicants marked Exhibit Y.
7.      Further documents were tendered and marked as exhibits and oral evidence was given by John Damian Andrews, Ian Roland Stevens, Ginette Danen Muller, Steven Irvine Hart, Julie Jean McCarthy and Peter Edmond McCarthy.
8.      By a deed of trust dated 5 August 1977 Archibald Young Whyte settled the PE McCarthy…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

AGLC: Bamyili Pty Ltd as Trustee for the McCarthy Family Trust and Commissioner of Taxation [2004] AATA 1176
Case: [2004] AATA 1176
Decision Date: 10 November 2004

CaseChat Overview and Summary

Bamyili Pty Ltd as Trustee for the McCarthy Family Trust sought a review of a decision by the Commissioner of Taxation concerning the appropriation of trust income. The dispute centred around the validity of an appointment of income to a specific beneficiary and the implications of such an ineffective appointment on the assessment of income. The Administrative Appeals Tribunal was the court responsible for this review.

The primary legal issue before the tribunal was whether the purported appointment of income to the beneficiary was valid. If the appointment was ineffective, the court had to determine the consequences of this ineffectiveness and whether the assessment of income by the Commissioner of Taxation was appropriate. The interpretation of relevant sections of the Income Tax Assessment Act 1936, particularly sections 97 and 99A, and the applicability of judicial precedents, including McPhail v Doulton, East Finchley Pty Ltd v Federal Commissioner of Taxation, and Ramsden v Federal Commissioner of Taxation, were central to the tribunal's analysis.

The tribunal found that the appointment of income to the beneficiary was ineffective, leading to the conclusion that the income remained part of the trustee's assessable income. The tribunal set aside the decisions under review, allowed the objections in full, and terminated the proceedings in favour of the applicant. The tribunal's reasoning was grounded in the statutory framework and judicial precedents, which supported the notion that an ineffective appointment of trust income results in the income being assessed to the trustee. This decision underscored the importance of clear and valid appointment processes in trust law and tax assessment.

Orders

Orders of the court

The Tribunal decides:-

(a) the decisions under review are set aside;

(b) the objections are allowed in full; and

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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TAXATION APPEALS DIVISION		)
Re		BAMYILI PTY LTD as TRUSTEE FOR THE McCARTHY FAMILY TRUST