Idlecroft Pty Ltd as Trustee for Simon John Fleury Family Trust and Anor and Commissioner of Taxation - [2004] AATA 1177

Administrative

Appeals

Tribunal

DECISIONS AND REASONS FOR DECISIONS [2004] AATA 1177
ADMINISTRATIVE APPEALS TRIBUNAL )
)

TAXATION APPEALS DIVISION )

Re
IDLECROFT PTY LTD as Trustee for SIMON JOHN FLEURY FAMILY TRUST - No. QT2002/231

SIMON JOHN FLEURY
- No. QT2002/230

Applicants

And

COMMISSIONER OF TAXATION

Respondent

DECISION

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

Decision
The Tribunal decides:

(a)      the objection decision in relation to the Trustee is set aside and            in lieu thereof the applicant’s objection is allowed in full;

(b)      the objection decision relating to assessment of income tax            payable by Simon John Fleury is affirmed;

(c) the objection decision relating to assessment of penalty tax payable by the said Simon John Fleury is set aside and a decision substituted that penalty tax be assessed in accordance with section 226G of the Act;

(d) there is no basis for exercising the discretion in sub-section 227(3) of the Act; and

(e)      these proceedings have terminated in a manner favourable to the            applicants.

......[Sgd]......
KL 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, 100A, 166, 166A, 170, 226G, 226H, 227
BRK (Bris) Pty Ltd v Federal Commissioner of Taxation [2001] ATC 4111
McPhail v Doulton [1971] AC 424
Ramsden v Federal Commissioner of Taxation [2004] FCA 632
East Finchley Pty Ltd v Federal Commissioner of Taxation (1989) 19 ALD 85
REASONS FOR DECISIONS

10 November 2004
Senior Member KL Beddoe

Senior Member Bernard McCabe

1.      Idlecroft Pty Ltd (“the Trustee”) as Trustee of the Simon John Fleury Family Trust (“the Trust”) seeks review of an objection decision by the respondent in relation to the year of income ended 30 June 1996. The individual applicant who is a beneficiary of the Trust also seeks review of an objection decision by the respondent in relation to the same year of income.
2. The two applications arise because the respondent has sought to assess the Trustee under section 99A of the Income Tax Assessment Act 1936 (“the Act”) and the individual as beneficiary of the Trust 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 assessed additional taxes should be remitted in part or in full.
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…

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: Idlecroft Pty Ltd as Trustee for Simon John Fleury Family Trust and Anor and Commissioner of Taxation [2004] AATA 1177
Case: [2004] AATA 1177
Decision Date: 10 November 2004

CaseChat Overview and Summary

The case of Idlecroft Pty Ltd as Trustee for Simon John Fleury Family Trust and Anor against the Commissioner of Taxation involved a dispute over tax objections. The respondents, Idlecroft Pty Ltd and Simon John Fleury, objected to assessments made by the Commissioner. The Federal Circuit and Family Court of Australia was tasked with reviewing these objections. The court had to determine whether the objections were justified and if the penalties imposed were appropriate.

The primary legal issues before the court were the validity of the objections raised by the respondents and the correctness of the penalties assessed by the Commissioner. The respondents argued that the assessments were incorrect and that the penalties were excessive. The court had to assess the evidence and arguments presented to decide whether the objections should be upheld or dismissed.

In its reasoning, the court found that while the objection decision regarding the Trustee was set aside, the objection against the assessment of income tax payable by Simon John Fleury was affirmed. However, the penalty tax assessment was set aside, and the court substituted a decision that the penalty tax should be assessed according to section 226G of the relevant Act. The court also concluded that there was no basis for exercising the discretion under subsection 227(3) of the Act. Ultimately, the court ruled in favour of the respondents on certain aspects of the objections but did not grant relief on all points.

Orders

Orders of the court

The Tribunal decides:

(a) the objection decision in relation to the Trustee is set aside and in lieu thereof the applicant’s objection is allowed in full;

(b) the objection decision relating to assessment of income tax payable by Simon John Fleury is affirmed;

(c) the objection decision relating to assessment of penalty tax payable by the said Simon John Fleury is set aside and a decision substituted that penalty tax be assessed in accordance with section 226G of the Act;

(d) there is no basis for exercising the discretion in sub-section 227(3) of the Act; and

(e) these proceedings have terminated in a manner favourable to the applicants.

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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