Miley and Commissioner of Taxation (Taxation)

This matter concerned an appeal by Mr Miley against a decision of the Commissioner of Taxation regarding the applicant's satisfaction of the maximum net asset value test for a tax concession. The dispute centred on the valuation of Mr Miley's shares in private companies, AJM Environmental and AJM Property, immediately before a Capital Gains Tax (CGT) event. The Administrative Appeals Tribunal (AAT) had affirmed the Commissioner's decision that Mr Miley did not meet the test.

The primary legal issue before the AAT was whether the market value of Mr Miley's shares in AJM Environmental and AJM Property, for the purposes of the maximum net asset value test, should be determined by deducting the value of non-competition clauses from the total sale price. A secondary issue concerned penalties imposed by the Commissioner, specifically whether Mr Miley had a reasonably arguable case.

The applicant relied on the expert evidence of Mr Brendan Halligan, a chartered accountant and valuer. Mr Halligan opined that the purchase price for the companies reflected not only the market value of the equity but also the value of contractual rights, including non-competition agreements. He calculated that the non-competition clauses had a market value of $1,671,000 and, after quarantining this amount from the total purchase price, determined that only $16,016,000 was referable to the equity. Further adjustments led Mr Halligan to conclude that the market value of Mr Miley's shareholding in AJM Environmental was $3.101 million and in AJM Property was $14,000. The Tribunal accepted Mr Halligan's methodology for valuing the shares by deducting the value of the non-competition clauses, finding that this approach correctly determined the market value of the equity. Consequently, the Tribunal found that Mr Miley did not satisfy the maximum net asset value test. However, the Tribunal set aside the penalties imposed by the Commissioner, finding that Mr Miley had a reasonably arguable case.