Crookshanks and Commissioner of Taxation (Taxation)

[2019] AATA 6891

Crookshanks and Commissioner of Taxation (Taxation) [2019] AATA 6891 (6 August 2019)

Division:                  SMALL BUSINESS TAXATION DIVISION

File Number(s):      2019/2151

Re:  Mohammed Crookshanks

APPLICANT

And  Commissioner of Taxation

RESPONDENT

DECISION

Tribunal:                  Deputy President Bernard J McCabe

Date:  6 August 2019

Place:  Sydney

The application is dismissed pursuant to s 42B(1)(b) of the Administrative Appeals Tribunal Act 1975 (Cth).

.............................[SGD]...........................................

Deputy President Bernard J McCabe

© Commonwealth of Australia 2019

CATCHWORDS

SMALL BUSINESS TAXATION DIVISION - amended income tax assessment - deduction for managing taxpayer's own affairs – deduction for the cost of managing tax affairs of an entity - applicant not a public officer of the company - no reasonable prospect of success - application dismissed

LEGISLATION

Administrative Appeals Tribunal Act 1975 s 42B Income Tax Assessment Act 1936 ss 69, 132, 252 Income Tax Assessment Act 1997 s 25-5

REASONS FOR DECISION

Deputy President Bernard J McCabe 6 August 2019

1. The applicant is a director of two trustee companies. He spent his own money in the course of managing the tax affairs of both corporate entities filed in the year ended 30 June 2017. He subsequently claimed a deduction in respect of that expenditure in his own income tax return for that period. He says that entitlement arises out of s 69 of the Income Tax Assessment Act 1936. The Commissioner of Taxation points out s 69 of the 1936 Act has been repealed, and the relevant provision is now found in s 25-5(1)(b) of the Income Tax Assessment Act 1997. I agree the provisions of the 1997 Act apply in this case, but both provisions have essentially the same effect.

1. The Commissioner argues the applicant’s case cannot succeed in any event. The Commissioner says I should exercise the discretionary power in s 42B of the Administrative Appeals Tribunal Act 1975 (AAT Act) to dismiss the application without proceeding to a final hearing given the limited prospects of success.

1. Both parties were given the opportunity to provide written submissions on the issue. The applicant’s  accountant  provided  a  single  page  of  submissions;  the     Commissioner’s

submissions were more detailed. Neither party asked to make oral submissions. I am not satisfied there was any further need to hear from the parties before making my decision.

1. Section 25-5(1)(a) says a deduction is available in connection with the cost of managing the taxpayer’s own affairs – but that sub-section is not in issue here. Section 25-5(1)(b) is potentially relevant. That sub-section provides a taxpayer may also deduct expenditure incurred by that taxpayer in:

   (b)complying with an obligation imposed on you by a * Commonwealth law, insofar as that obligation relates to the * tax affairs of an entity

1. The applicant says he spent his own money organising the tax affairs of the two companies. I do not understand there to be any dispute that the expenditures were occurred, and I gather it is accepted (at least for present purposes) the expenditures were referable to the management of the taxation affairs of the companies. But the Commissioner says the applicant does not come within the wording of s 25-5(1)(b). The Commissioner agues the applicant was not under an obligation with respect to the affairs of those companies. The Commissioner says the obligation usually attaches to the person nominated as the public officer of the company pursuant to s 252 of the 1936 Act. Mr Crookshank was not, in fact, the public officer, so he was not under an obligation in the sense intended by s 25-5(1)(b).

1. The applicant acknowledges he was not formally appointed as the public officer of either company. But the applicant said he acted as the public officer of the trustee companies, and that he should therefore be allowed to claim deductions in respect of managing the  tax affairs of those entities. There is no suggestion in the applicant’s submissions that the obligation might arise out of any other function or relationship he had with the companies.

1. The Commissioner is right. The applicant may have felt responsible for managing the taxation affairs of the entities, but he did not have any obligations imposed on him by law in the relevant sense if he was not appointed as public officer, and if that appointment was not notified to the Commissioner. The applicant has not identified any other basis for satisfying s 25-5. It follows he is not entitled to claim the deductions.

1. I am satisfied the substantive application has no reasonable prospects of success within the meaning of s 42B(1)(b) of the AAT Act. The application is therefore dismissed.

I certify that the preceding 8 (eight) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

................................[SGD]........................................

Associate

Dated: 6 August 2019

Date(s) of hearing:
Date final submissions received:	9 July 2019
Advocate for the Applicant:	Marco De-Corso
Respondent:	ATO Dispute Resolution