Hickman and Commissioner of Taxation

[2005] AATA 339

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 339

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No QT2002/274

TAXATION APPEALS   DIVISION		)
Re		CRAIG RICHARD HICKMAN

Applicant

And COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Deputy President Don Muller

Date15 April 2005  

PlaceBrisbane

Decision The Tribunal affirms the decision under review.  

................SIGNED........................

D.W. MULLER

DEPUTY PRESIDENT

CATCHWORDS

TAXATION – taxpayer claimed interest on money claimed to have been borrowed to purchase an annuity – transactions involving loan and purchase of annuity held to be shams – decision to disallow claimed deduction of interest affirmed

Income Tax Assessment Act 1936: s67AAA(1)(b)

Income Tax Assessment Act 1997:  section 8-1

Taxation Administration Act 1953: s.14ZZK

REASONS FOR DECISION

Deputy President Don Muller        

1.      Craig Richard Hickman, the Applicant taxpayer, makes the following assertions and claims:

(a)On 29 June 1999 he borrowed $500,000 from Pacific Factors Limited.

(b)On 29 June 1999, he used the $500,000 he borrowed from Pacific Factors Limited to purchase an annuity from Pacific Annuity Grantors Limited.

(c)The terms of the loan “Facility Agreement” included conditions that:

(i)Interest of 12% per annum be paid in advance, and

(ii)That all interest and capital be paid on or before the “termination date” of 30 June 2019.

(d)The terms of the “Annuity Agreement” included a provision that Mr. Hickman receive annual payments of $274,762 on 1 July for each of the fifteen years on and from 2028 to 2042.

(e)He paid the first instalment of interest, $60,000, on 29 June 1999.

(f)He claimed a deduction of $60,000 for the interest payment in the tax year ended 30 June 1999.

2.      The Respondent disallowed the Applicant’s claimed deduction in full and also imposed a penalty for “lack of reasonable care” at a rate of 25% of tax shortfall, $29,096.25.  That is, a penalty of $7,274.06.

3. The Respondent took the view that the terms of Mr. Hickman’s annuity agreement were consistent with the goal of a superannuation scheme. That, consequently, the claimed deduction of $60,000 was not allowable because it was a financing cost in relation to contributions made to a fund for the purpose of making provision for superannuation benefits for Mr. Hickman. Such costs were specifically denied as deductions to taxpayers, pursuant to subsection 67AAA(1)(b) of the Income Tax Assessment Act 1936, which provided:

“A deduction is not allowable under this Act to a taxpayer in respect of a financing cost in relation to:

(a)  contributions made to a fund for the purpose of making provision for superannuation benefits for, or for dependents of, the taxpayer or another person;”

4.      The Respondent also determined that the claimed deduction was not allowable under section 8-1 of the Income Tax Assessment Act 1997 (the ITAA 1997).  The relevant subsection of which provides:

“8-1  General deductions

(1)  You can deduct from your assessable income any loss or outgoing to the extent that:

(a) it is incurred in gaining or producing your assessable income;”

The main parts of the Respondent’s reasoning in relation to this part of the decision were:

(a)“In your case the transaction you entered required a large interest payment in 1999 and a correspondingly large tax deduction disproportionate to the assessable income derived in that year.”

(b)“There would in your case, be a clear taxation advantage arising from early termination of the Annuity Agreement.  You would be able to claim tax deductions in the first few years of the Agreement while avoiding having to declare the assessable income in distant future years.”

(c)“The documents you have provided do not contain sufficient evidence to indicate that the annuity was intended or expected to remain on course for the full duration.”

(d)“There is no clause in the Annuity Agreement specifically preventing early termination or providing for a penalty should this occur.  You would not be disadvantaged should the Grantor exercise the right to terminate following from, for example, your default in making payments on the related loan.”

(e)“It is noted that clause 5.2 of the Annuity Agreement allows the Grantor to terminate the Annuity at any time.  The only obligation on the part of the Grantor following termination of the Annuity Agreement is to pay to the Annuitant the capital value of the Annuity.  There is no corresponding clause in the Annuity Agreement allowing for termination by the Annuitant.  However, the termination right of the Grantor is an important factor bearing on the likelihood of the annuity running its full course.  An event which could possibly trigger a termination of the Annuity agreement would be a default on the part of the Annuitant in respect of the loan repayment.  Furthermore, pursuant to clause 4.1 of the agreement, ‘The Annuitant may at any time during the Term assign the whole of its rights pursuant to this Agreement to any other person (the Assignee)’.  This clause makes it even more possible that you may not ever receive the income against which you wish to claim deductions.”

(f)“Schedule 2 of the Annuity Agreement provides that the annuity income is not payable until the Year 2028.  The remoteness in time of this distant date makes the eventual receipt of income proportional to the interest expenditure claimed in the earlier years only a theoretical possibility.”

(g)“The Grantor company is registered off-shore and there is insufficient evidence to indicate whether a permanent presence on the part of the annuity payer is likely to subsist until the Year 2028, bearing again on the likelihood of future income.”

(h)“A commonsense weighing of all the evidence in your case leads us to conclude that the outgoing of interest was not incurred in the expectation that the annuity would run its course.  Even if the intention on your part was not to terminate the scheme at an early date, after the interest deductions were exhausted, an objective view of the circumstances would suggest an income return was remote and unlikely.”

(i)“A practical view of the circumstances surrounding the transaction you have entered would lead to the conclusion that it was entered into with the dominant purpose of gaining a tax deduction.  The receipt of income in future years, where the annuity does not become payable until the Year 2028, is too uncertain to give rise to a nexus with the claimed interest deduction.”

(j)“Your 1999 taxation return did not include any income from the annuity.  Therefore no deduction is to be allowed for that year.”

5.      The Applicant seeks a review of the objection decision.

6.      At the hearing the Applicant was represented by his solicitor, Mr. Steele, and the Respondent was represented by Mr. Zichy-Woinarski QC and Ms. Brennan of Counsel.

7.      The Applicant relies on subsection 8-1(1)(a) of the ITAA 1997, quoted in paragraph 4 above.

8.      The material placed before the Tribunal consisted of the following documents:

(a)The section 37 statement;

(b)A “Master Document File” tendered by Mr. Steele, which contained copies of the loan agreement, the annuity agreement, cheques, bank statements and the certificates of incorporation of the two companies, Pacific Factors Limited and Pacific Annuity Grantors Limited. (among a lot of other documents).

(c)Two statements of David Norcross Hudson dated 12 December 2003.  Mr. Hudson described himself as a director of Delpac Limited, which is a director of both Pacific Factors Limited and Pacific Annuity Grantors Limited.

(d)A statement of Michael David Hickman, the Applicant’s father, dated 23 December 2003.

(e)A statement of Marjory Hickman, the applicant’s mother, dated 26 February 2004.

(f)Two statements of the Applicant.

(g)A set of supplementary section 37 documents.

(h)A statement by Zoe Dowsett, actuary.

9.      No witnesses were called by either party.  Mr. Steele and Mr. Woinarski both made formal objections to the admission into evidence of statements made by persons who were not available for cross-examination.

10.     Mr. Steele explained the failure of the appearance of his witnesses in the following terms:

(a)This matter had originally been scheduled for hearing over five days starting on 31 May 2004.

(b)On 28 May 2004, the Respondent sought an adjournment of the hearing on the basis that counsel representing the Respondent needed urgent medical treatment.

(c)The Applicant reluctantly agreed to the adjournment but in the process had to pay the fees for five days of a Senior Counsel, whom he had briefed for the hearing.

(d)The Applicant was retrenched from his employment in February 2004 and he is now a full-time student.  He lives in Victoria and could not now afford a protracted hearing nor to pay witness expenses.

(e)The Applicant is now a student and could not afford the time off study to give evidence.

(f)The Applicant’s parents could not afford the expense of giving evidence.

(g)The Applicant could not afford to fly Mr. Hudson from Vanuatu.

11.     I was sympathetic to Craig Hickman’s loss of legal expenses occasioned by the earlier adjournment.  It was not due to any fault on his part, nor of anyone else for that matter.  However, I take the view that he should have made an effort to take a few hours out of his study to make himself available for the hearing.  I note that in 1999, Craig Hickman was employed by Merrill Lynch as an investment advisor.  He was not necessarily an uneducated by-stander.

12.     The Applicant’s parents, Michael Hickman and Marjory Hickman, claim to have played a very significant role in this affair.  His father acted as the investment advisor, and his mother purported to act under his power of attorney to sign the documents in Vanuatu on his behalf. 

13.     Michael Hickman’s affidavit states that Michael Hickman is a director of Factor & Finance Facilities Pty Ltd., which is the trustee of the Factor Unit Trust and acts as Australian agent for Pacific Factors Limited.  His affidavit also states that he has been retained since the mid 1990s to prepare subsidiary accounts of both Pacific Annuity Grantors Limited and Pacific Factors Limited.

14.     Michael and Marjory Hickman both live and work in Brisbane.  The hearing was in Brisbane.  The explanation by Mr. Steele that they could not “afford” to give evidence was curious to say the least.

15.     However, I took the view that the statements of the Applicant, Mr. Hudson, Michael David Hickman, Marjory Hickman and Zoe Dowsett contained material which shed a good deal of light on the nature of the transactions and should be included in the matters to be considered by the Tribunal.

16.     The “Master Document File” contains two documents which purport to be photocopies of the certificates of incorporation of Pacific Factors Limited and Pacific Annuity Grantors Limited.  They show the two companies as having both been incorporated in Vanuatu on 11 January 1996.

17.     Other documents in the file indicate that Pacific Factors Limited and Pacific Annuity Grantors Limited both operate out of premises at Lo Lam House, Kumul Highway, Port Vila, Vanuatu.

18.     Mr. Woinarski informed the Tribunal that the Respondent has tried without success to determine independently of the material supplied by the Applicant, the financial status, standing, reputation or even the existence of the two Vanuatu companies.  Apparently the law of Vanuatu makes it impossible to make any kind of check on companies registered in that country.

19.     In a nutshell the Respondent does not accept that the Applicant actually paid the $60,000 to any company in Vanuatu or anywhere else.  The Respondent does not accept that the transactions are genuine.  The Respondent does not accept that the Vanuatu companies have sufficient substance to either loan anyone $500,000, or guarantee to pay out sums of money of the order of $270,000 annually from the years 2028 to 2042.

20.     The various documents available to the Tribunal purport to show the following sequence of events:

(a)In May 1999, Craig Hickman borrowed $105,000 from Pacific Factors Limited to fund his acquisition of a house property at Springvale, Victoria.  (Craig Hickman’s statement, exhibit 6).  (However, a statement made by Michael Hickman, dated 29 June 1999, says that the finance was provided by Hickman and Associates and was to be repaid by Craig upon his obtaining refinancing from the NAB).

(b)On 22 June 1999, Michael Hickman wrote to his son Craig and Craig’s wife, Deborah, to advise them to acquire “Annuities” from Pacific Annuity Grantors Limited.  The letter contains the following:

“As you are aware, Marj and I have discussed your long term welfare, especially with regard to you for retirement (yes I know it’s a long time away).  We are especially concerned that you have no suburban house investment thus requiring more capital for retirement than those that will not need to pay long term rentals.

I am aware of your employers responsibility toward superannuation.  This may not be enough to finance your retirement lifestyle needs.

It is also a truism that if you ‘have it in your pocket you will spend it!’.  This is another advantage of residential property acquisition – it forces saving.

For these reasons I am recommending to you both that you consider acquiring ‘Annuities’ from Pacific Annuity Grantors Limited.  You will need to borrow to fund the purchase.  We can also arrange this for you and are prepared to be Guarantors over the debt.

We are recommending to Debbie that she acquires a lower value Annuity than you own thereby reducing her debt.  Should you require, further Annuities can be acquired should circumstances permit.”

(c)On 24 June 1999, Craig and Deborah Hickman signed two cheques drawn on the NAB, payable to Factor & Finance Facilities Pty Ltd for $60,000 and $24,000 respectively (exhibit 8, folio10).

(d)On 25 June 1999 a cheque for $84,000 was deposited to the NAB account of Craig and Deborah Hickman (exhibit 8, folio 145).

(e)The $84,000 deposited in the NAB account of Craig and Deborah Hickman was provided to them by Michael Hickman (see letter written by Michael Hickman on 11 September 2003, exhibit 8, folios 246, 247).

(f)On 28 June 1999, Factor & Finance Facilities banked the two cheques of $60,000 and $24,000 from Craig and Deborah Hickman (exhibit 4, paragraph 19 and exhibit 2, document 9).  (It is not shown when Factor & Finance Facilities received the two cheques.)  The bank statement of Factor & Finance Facilities also shows a debit of $84,000 on 28 June 1999, which remains unexplained.

(g)At some time (undated), Craig Hickman applied to Pacific Factors Limited for a loan of $500,000 (exhibit 2 document 3).

(h)At some time (undated), Craig Hickman applied for an annuity purchase from Pacific Annuity Grantors Limited (exhibit 2 document 2).

(i)On 29 June 1999 the following events are claimed by Craig Hickman to have occurred:

(i)Marjory Hickman flew from Brisbane to Vanuatu;

(ii)Craig Hickman, in Melbourne, executed a “Specific Power of Attorney” appointing his mother, Marjory Hickman “as my attorney in the following matter.  This authority is restricted to the matter and subject detailed herein.  DETAIL OF MATTER  Any documentation in connection with the purchase of any annuity by the principal or agent of the principal from Pacific Annuity Grantors Limited” (exhibit 2 document 6);

(iii)Marjory Hickman signed the documentation in relation to the Facility Agreement and the Annuity Agreement on behalf of her son Craig Hickman at Port Vila, Vanuatu.

(j)On 4 July 1999, Marjory Hickman flew from Vanuatu to Brisbane.

(k)On 13 September 1999, Michael Hickman transferred $75,600 from the account of Factor & Finance Facilities to Pacific Factors Limited, Vanuatu, said to include $60,000 payment of interest due from Craig Hickman to Pacific Factors Limited (among other payments).

21.     The question as to whether or not Marjory Hickman signed the Facility Agreement and the Annuity Agreement on behalf of her son Craig on 29 June 1999 at Port Vila, Vanuatu, has been contentious.  When this matter was at the “Objection” stage, Hunt and Hunt, solicitors for Craig Hickman, sent copies of the Facility Agreement and the Annuity Agreement to the respondent.  The copies bore no evidence that they, or the originals, had ever been signed by anyone.  Additionally, the Facility Agreement contained “ITEM 4” which said the termination date was to be 30 June 2005.  The Respondent did not receive a copy of the agreements which bore Marjory Hickman’s signature until they were sent as annexures to a letter from Hunt and Hunt to the Respondent on 19 March 2003.  The signed Facility Agreement received by the Respondent in March 2003 contained “ITEM 4” which said that the termination date was to be 30 June 2019.

22.     Mr. Steele informed the Tribunal that the two unsigned documents, one of which  bore the termination date 30 June 2005 were actually draughts which had initially been sent to the Respondent by mistake.  

23.     Craig Hickman has provided documentation which includes three versions of his Statement of Loan Account with Pacific Factors Limited.  One is for the period 17 May 1999 to 30 June 2001; the second is for the period 17 May 1999 to 14 December 2002;  the third is for the period 29 June 1999 to 30 June 2003.  They all record essentially the same transactions except for some glaring differences.  The first two record Debit entries for the following dates (whereas the third one does not):

17.05.99        Drawdown  105,000

25.06.99        Drawdown                    60,000

All three show the following debits (among others):

29.06.99        Pacific Annuity Grantors Ltd          500,000

30.06.99        Interest   60,000

30.06.00        Interest   60,000

The first two show interest for 30.06.01 as 41,314.43.  The third shows interest for 30.06.01 as 21,316.43.  All three show credits of the following amounts (among others):

30.06.99          60,000

01.02.00          30,000

07.02.00          70,000

21.06.00          60,000

20.02.01        240,000

(Deborah Hickman’s Statement of Loan Account with Pacific Factors Limited shows credits on 30.06.99, 30.06.00 and 20.02.01 of 24,000, 24,000 and 100,000 respectively.

24.     The first two accounts, which include the debits of 105,000 for 17.05.99 and 60,000 for 25.06.99, have a higher balance than the other account.  All three accounts show the annual interest debit entry for 30.06.99 and 30.06.00 as 60,000 irrespective of the different balances.  However, the interest debit entry for 30.06.02 is 41,314.43 in the first two statements, but 21,041.86 in the third one.

25.     The calculation of the amount of interest has not been in conformity with the claimed Facility Agreement namely 12% (or 14% in certain circumstances) per annum.

26.     Michael Hickman claimed that he lent his son the $105,000 for the Springvale property in May 1999.  Michael Hickman also claimed in his letter of 11 September 2003 to have lent Craig $60,000 on 25 June 1999.  However, both amounts appear as debits on those dates in the first two of Craig Hickman’s Statements of Account with Pacific Factors Limited.

27.     On the face of it, it looks as if the $60,000 which Craig Hickman paid to Factor & Finance Facilities in June 1999, sent on to Pacific Factors Limited by Michael Hickman in September 1999, originally came from Pacific Factors Limited.

28.     I note also in relation to that $60,000 that all three Statements of Loan Account of Craig Hickman credit him with having paid the $60,000 on 30 June 1999, not September 1999.

29.     The NAB statements of Craig and Deborah Hickman’s account show that on 15 June 2000 a sum of $84,000 was deposited in their account.  The same bank statement shows that on 22 June 2000 cheques numbered 646 and 647 were debited for the payment of $24,000 and $60,000 respectively.  The NAB bank statement of Factor & Finance Facilities shows a deposit of $84,000 on 22 June 2000.  This is practically identical to the pattern of deposits, cheques written and deposited which occurred in June 1999 (see paragraphs 20 (c) (d), (e) and (f) above).

30.     The NAB statements of Craig and Deborah Hickman’s account show that on 5 February 2001 a sum of $43,691.00 was deposited in their account, and on 12 February 2001 a sum of $258,292.18 was deposited in their account.  The statement also shows that on 20 February 2001 a sum of $340,000 was debited in relation to cheque number 700, which seems to correspond to a credit of $240,000 on 20.02.01 in Craig Hickman’s loan account with Pacific Factors Limited and Deborah Hickman’s credit of $100,000 on 20.02.01 in her Pacific Factors Limited loan account.

31.     The deposits of $258,292.18 and $43,691.00 into the Hickman’s NAB account do not appear to be from their employment.  Their bank statements suggest that they did not have a general capacity to pay $340,000 without an injection of funds from somewhere else.

32.     According to Craig Hickman’s statement (exhibit 7) dated 8 October 2004, the Annuity Agreement was terminated on 7 October 2004 and that he is entitled to the capital value of $664,559.

33.     There are many aspects of the arrangements entered into by Craig Hickman with Pacific Factors Limited and Pacific Annuity Grantors Limited which do not accord with commercial, business or common sense.  For example:

(a)I do not accept that any prudent investment advisor would commit $500,000 of borrowed money, on which he was paying interest initially at the rate of $60,000 per annum, to a company which was only three years old, incorporated in Vanuatu where it is impossible to obtain any information about the company, on the expectation that in about thirty years time the Vanuatu company would begin to pay annuities of the order of $270,000 per annum for fifteen years.  I do not believe that he would recommend the arrangement to a customer either.

(b)How did it happen that Craig Hickman’s Loan Account with Pacific Factors Limited showed a drawdown of $60,000 on 25.06.99, which was four days before the loan agreement was supposed to have been signed?  Was there some collateral agreement to loan Craig Hickman the amount that he would eventually pay as interest?

(c)Why did Craig and Deborah Hickman sign cheques payable to Factor & Finance Facilities Pty Ltd for $60,000 and $24,000 respectively on 24 June 1999, which was five days before the Facility Agreement was claimed to be signed?

(d)Did Michael Hickman actually write a letter to his son on 22 June 1999 to raise the matter of his son’s financial future?  Why not use the telephone?  Why insert an opening paragraph to the effect that his son had no suburban house investment when he later claims to have been involved in lending his son $105,000 to buy a house at Springvale?  The letter appears to me to be one of those, regularly seen in courts and tribunals, artificially created for the purpose of providing self-serving evidence at a later date.

(e)When did Craig Hickman make his applications to Pacific Factors Limited and Pacific Annuity Grantors Limited?  The copies provided to the Tribunal are both undated.

(f)Did Craig Hickman give his mother, Marjory Hickman, Power of Attorney to act on his behalf to obtain a loan of $500,000 from Pacific Factors Limited?  No such document was produced to the Tribunal.

(g)The document headed “Specific Power of Attorney” which was produced to the Tribunal purports to be restricted to the purchase of the annuity from Pacific Annuity Grantors Limited.  On its face it was signed in Melbourne on 29 June 1999, presumably when his mother was in Vanuatu.  There is no evidence that the document was ever transmitted to his mother.  The Power of Attorney was not included in the documents accompanying Craig Hickman’s Notice of Objection.  It was not included in the T-documents.

(h)There is no evidence that Mr. Hudson, the director of Delpac Limited, the director of Pacific Factors Limited and Pacific Annuity Grantors Limited, ever sighted any power of attorney, or even whether he enquired about such a document.

(i)There is no evidence, either from Mr. Hudson or from Marjory Hickman, that Marjory Hickman actually signed the two agreements in Vanuatu on 29 June 1999.  The closest the evidence comes to the matter is a paragraph in Marjory Hickman’s affidavit which says:

“During my abovementioned stay in Vanuatu, I met with David Norcross Hudson at First Floor, Lo Lam House, Lini Highway, Port Vila, Vanuatu, at which time I signed various documents.  Because of the lapse of time since 1999, I cannot specifically recall each document I then signed. However, the Annuity Agreement and the Facility Agreement bear my signature.  I held at the time a power of attorney from my son in respect of signing such agreements.”

(j)Why does Craig Hickman’s loan account with Pacific Factors Limited credit him with having paid $60,000 to Pacific Factors Limited on 30.06.99 if the money was not sent to Vanuatu until September 1999?  A possible explanation is that Michael Hickman received the $60,000 from Craig Hickman on behalf of Pacific Factors Limited and transmitted that information to Vanuatu.  However the two cheques from Craig and Deborah Hickman were banked in the Brisbane account of Factor & Finance Facilities on 28 June 1999, not 30 June 1999.

(k)Where did the money come from?  The NAB account of Craig and Deborah Hickman shows injections of large sums of money just prior to their various payments to Pacific Factors Limited.  (See the discussion at paragraphs 20 to 30 above).  There is no evidence that Craig or Deborah Hickman had the capacity to service or repay loans of the order of $84,000 (deposited 25 June 1999), $84,000 (deposited 15 June 2000), $43,691 (deposited 5 February 2001) and $258,292.18 (deposited 12 February 2001).  The scenario looks suspiciously like a series of round robin transactions.

(l)The repayment of the loan monies by Craig Hickman to Pacific Factors Limited was totally unsecured.  No guarantees were given by anyone.  Craig Hickman had no rights or interest in the residual capital fund of the annuity over which he could create a charge in favour of Pacific Factors Limited.

(m)If Craig Hickman was truly entitled to a payout of $664,559 on 7 October 2004 and if he had genuinely reduced his debt to Pacific Factors Limited to $224,200.16 as at 30.06.03, as per statement number 3 (exhibit 2 document 29), why was he so lacking in funds in late 2004 that he could not afford to effectively run his case before the Tribunal?

34.     I do not accept that Craig Hickman used any of his own money in any of the transactions involving Pacific Factors Limited or Pacific Annuity Grantors Limited.  Nor do I accept that he borrowed the large sums of money which were deposited into his or his wife’s NAB joint account, referred to in paragraph 32(k) above (among others).  None of the relevant transactions were made at arms length on a commercial basis.

35.     On the material available to the Tribunal the Facility Agreement and the Annuity Agreement appear to be shams.

36.     In this case Craig Hickman and his legal advisers have known since the Objection Decision made in October 2002 and certainly no later than January 2004, when the Respondent delivered a statement of “Facts, Issues and Contentions”, that the Respondent did not accept that the loan agreement and the annuity agreement were genuine. The burden of proof is on the Applicant in these cases. Section 14ZZK of the Taxation Administration Act 1953 provides:

“14ZZK Grounds of objection and burden of proof

On an application for review of a reviewable objection decision:

(a)       ….

(b)       the applicant has the burden of proving that:

(i)if the taxation decision concerned is an assessment (other than a franking assessment) – the assessment is excessive;  or

(ii)…

(iii)in any other case – the taxation decision concerned should not have been made or should have been made differently.”

37.     In the absence of any acceptable evidence to the contrary, I find that the material placed before the Tribunal points to the conclusion that the so-called Annuity Agreement and Facility Agreement were shams which were arranged for the sole purpose of providing a façade of a framework according to which Craig Hickman could purport to make payments for the overriding purpose of obtaining a tax advantage.

38.     The Tribunal affirms the decision under review.

I certify that the 38 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President Don Muller

Signed:         .....................................................................................
R. Link, Associate

Date/s of Hearing   11, 12 October 2004 
Date of Decision   15 April 2005
Solicitor for the Applicant            Hunt and Hunt
Counsel for the Respondent       Mr. Woinarski
Solicitor for the Respondent       Australian Government Solicitor