Mobbs and Commissioner of Taxation (Taxation)

The Administrative Appeals Tribunal considered the dispute between Mr. Mobbs and the Commissioner of Taxation concerning the proper characterisation of director's fees and share issues. Mr. Mobbs contended that these amounts were derived by his company, Hastcombe, which made his services available to the companies, rather than being derived by him personally. The Commissioner had assessed the amounts as income derived by Mr. Mobbs and also imposed administrative penalties for a shortfall in tax.

The primary legal issue before the Tribunal was whether the director's fees and share issues were income derived by Mr. Mobbs or by Hastcombe. This involved determining whether there were contractual arrangements in place whereby Hastcombe provided Mr. Mobbs' services to the companies in exchange for these payments and shares. A secondary issue was whether Mr. Mobbs had exercised reasonable care in relation to his tax affairs, which was relevant to the remission of the administrative penalty.

The Tribunal found that while Mr. Mobbs asserted the existence of oral agreements for Hastcombe to provide his services, there was a significant lack of documentary evidence to support this. Specifically, there were no written agreements, board minutes, remuneration reports, or other contemporaneous records from the companies (ITL, SML, and Connexxion) or Hastcombe that evidenced such arrangements. The Tribunal noted that the constitutions of some companies contemplated direct payment of fees to directors, and there was no evidence of a decision to depart from this. While the invoicing and payment of invoices by the companies to Hastcombe were considered relevant, they were not deemed decisive in the absence of supporting contractual documentation. The Tribunal also found that Mr. Mobbs had not provided sufficient evidence to demonstrate that he had exercised reasonable care, as it was unclear what information he had provided to his accountant and whether the accountant had been fully informed of the circumstances.

Ultimately, the Tribunal was not persuaded that Mr. Mobbs had taken sufficient care to ensure that the payments and shares were provided in return for Hastcombe making his services available to the companies. Consequently, the Tribunal affirmed the Commissioner's decision regarding the characterisation of the income and the imposition of the penalty.