ADMINISTRATIVE APPEALS TRIBUNAL )
) 2013/0493-0494
GENERAL ADMINISTRATIVE DIVISION )Re:ROGER PESCOTT
Applicant
And:INSPECTOR-GENERAL IN BANKRUPTCY
Respondent
CORRIGENDUM TO DECISION [2013] AATA 680
The Tribunal amends its decision of 24 September 2013 as follows:
1.in (2)(b) of the decision which appears prior to the reasons for decision and within the reasons for decision at [133] by:
(a)deleting “relation to each contribution assessment period being CAP2 and CAP3”; and
(b)in its place inserting “in the period beginning from 1 July 2013 in CAP3”.
_(sgd) S A Forgie_
Deputy President
CATCHWORDS – BANKRUPTCY – contribution assessments – fringe benefits – value of fringe benefits – housing right benefit – assessing value of right – identifying nature of right as right to occupy or as a lease –assessment by reference to rental value – consideration of principles – assessment of rental value when consideration wholly in kind or partly in kind – adjourn further consideration of value of garden maintenance and any other relevant matters.
CATCHWORDS – BANKRUPTCY – contribution assessments – fringe benefits – identifying provider of right – identifying whether provided under a right to occupy given by the owner or, under a lease or otherwise by spouse – reconciliation of provisions relating to housing right fringe benefit with those relating to support provided by way of lodging (including board) – right to occupy given by owner does not exclude certain income under modified definition of “fringe benefit” – right to occupy provided by spouse may do so.
CATCHWORDS – PRACTICE AND PROCEDURE – estoppel – whether Tribunal bound to adopt finding of facts made by differently constituted Tribunal in reviewing contribution assessment relating to earlier contribution assessment period – not bound by those findings – whether should, as matter of discretion, adopt those findings of fact – findings not adopted.
DECISION AND REASONS FOR DECISION [2013] AATA 680
ADMINISTRATIVE APPEALS TRIBUNAL )
) 2013/0493-0494
GENERAL ADMINISTRATIVE DIVISION )
ReROGER PESCOTT
Applicant
AndINSPECTOR-GENERAL IN BANKRUPTCY
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Date: 24 September 2013
Place: Melbourne
Decision:The Tribunal:
(1)sets aside the decision of the respondent dated 14 January 2013 setting aside the decision of the Trustee dated 20 September 2012 to issue contribution assessment notices in respect of contribution assessment periods, CAP2 and CAP3; and
(2)for that decision substitutes, in part, a decision that:
(a)the value of the applicant’s housing fringe benefit at the property described either as Trawalla House or as the Homestead at Trawalla including approximately five hectares of gardens is to be calculated according to the following formula:
where:
$1,800 represents that part of the rental paid in cash monthly; and
$x represents the value in money terms of the work undertaken on the garden by Mrs Pescott; and
(b)the amount of income assessed to the applicant as fringe benefit in relation to each contribution assessment period being CAP2 and CAP3 is reduced by $250 per week; and
(3)adjourns further consideration of the decision that should be substituted to enable…
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- Case
- [2013] AATA 680
- Decision Date
CaseChat Overview and Summary
The Tribunal concluded that for the purposes of the Fringe Benefits Tax Assessment Act 1986 (FBTA Act) and the Bankruptcy Act, acts of kindness have a value, and the best evidence of this value is based on the lease that Mrs Pescott recently entered with Rosegrange. The lease set the monetary consideration at $1,800 per month, which, considering the obligation to maintain the main homestead, should be seen as the net rental payable for Trawalla House. The Tribunal determined that the "real rental" would be $1,800 per month plus an amount attributable to the work on the garden. This calculation is consistent with the definition of "recipients rent" in the FBTA Act. The Tribunal attributed half of the market value of residence at Trawalla House to Mr Pescott, thereby assessing the market value of his housing right benefit. The Tribunal also clarified that rent is paid for a lease or licence to occupy, not for food, and therefore cannot be characterised as both under the modified provisions of the FBTA Act.
The Tribunal ruled that it was not bound by the findings of facts made by a differently constituted Tribunal in a previous review. However, the Tribunal considered whether it should, as a matter of discretion, adopt those findings of fact. Ultimately, the findings were not adopted.
The Tribunal set aside the decision of the respondent and substituted a new decision, which included a formula for calculating the value of the applicant's housing fringe benefit. The Tribunal also reduced the amount of income assessed to the applicant as fringe benefit by $250 per week and adjourned further consideration to allow the parties to obtain evidence relevant to the calculation of the value of the work on the garden.
Orders
Orders of the court
The Tribunal:
(1) sets aside the decision of the respondent dated 14 January 2013 setting aside the decision of the Trustee dated 20 September 2012 to issue contribution assessment notices in respect of contribution assessment periods, CAP2 and CAP3; and
(2) for that decision substitutes, in part, a decision that:
(a) the value of the applicant’s housing fringe benefit at the property described either as Trawalla House or as the Homestead at Trawalla including approximately five hectares of gardens is to be calculated according to the following formula:
where:
$1,800 represents that part of the rental paid in cash monthly; and
$x represents the value in money terms of the work undertaken on the garden by Mrs Pescott; and
(b) the amount of income assessed to the applicant as fringe benefit in relation to each contribution assessment period being CAP2 and CAP3 is reduced by $250 per week; and
(3) adjourns further consideration of the decision that should be substituted to enable the parties to:
(a) obtain evidence relevant to the calculation of the value of $x in the formula; and
(b) address matters other than fringe benefits, if any, to which I should have regard in reviewing the Trustee’s assessments.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
For the purposes of the FBTA Act and, in turn, of the Bankruptcy Act, that act of kindness has a value and the only evidence that I have of its value is based on the lease that Mrs Pescott recently entered with Rosegrange. The monetary consideration is fixed in that lease at $1,800 per month but, given the obligation to maintain the main homestead, must be regarded as representing the net rental payable for Trawalla House. To use the words of Scott LJ in Robinson Brewers, the “real rental” would have been $1,800 per month plus an amount attributable to the work on the garden and effectively credited from the rent that would otherwise have been payable. Inclusion of an amount attributable to the work on the garden is also consistent with the definition of “recipients rent” in s 136(1) of the FBTA Act. If any is paid, the recipient’s rent is the amount by which market value of the recipient’s housing right is reduced in order to calculate the value of the housing fringe benefit. I have set out the definition at [54] above but note specifically that it refers to “the amount of rent or other consideration paid to the provider …” (emphasis added). I will call the amount attributed to the work on the garden as “$x per month”. That means that the rental payable and the rental that can be taken to be the real rental, and so the market rental in a case such as this where there is a limited market of one family unit, is ($1,800.00 + $x) x 12 per year. That is the real rental payable from 1 July 2013 and so the market rental value of Trawalla House. I have no evidence to suggest that it would have been at a lesser rate had it been payable in the previous eighteen months. Some mention was made of Mr Pescott’s only using a limited number of rooms in Trawalla House but, given the photographic evidence he supplied of some of the rooms and the size of the house, it would seem that only a relatively few rooms may be in regular use by any member of the family. He did not provide any support for the proposition that his access to the property was limited. Therefore, I have attributed half of the market value of residence at Trawalla House to Mr Pescott so that the market value of his housing right benefit in each of CAP2 and CAP3 was assessed according to the formula: Whether rent is being paid is a question of fact but I think that it is important to note that it is paid, in effect, for a lease or licence to occupy. It is not paid in return for food. I give my reasons for reaching that conclusion below. To characterise any agreement as being either for the payment of rent or for the payment of board and lodging requires careful analysis for it cannot be characterised as both under the modified provisions of the FBTA Act. If it were able to be, the value of the fringe benefit, and the amount taken to be the bankrupt’s income, would be reduced by that amount under s 26 and then discounted by a further $250 because it has been provided by a close relative or brother or sister. That cannot be the intention of Parliament.[133] [133] The difficulty that I have had in reconciling the modified provisions of the FBTA Act with the Bankruptcy Act leads me to think that the marriage of provisions directed to ensuring that tax is paid on the value of certain fringe benefits in respect of a person’s employment and the value of benefits to a bankrupt is not a harmonious one. The FBTA Act is cast in terms that have their foundation in a relationship of employment but the Bankruptcy Act must take account of relationships that go far beyond that of employment. It seeks to deal with situations where benefits are provided by friends, colleagues, family members and so on. This leads to difficulties in assessing the value of fringe benefits relating to the normal arrangements of living with the family. The FBTA deals separately with housing right fringe benefits, living away from home allowance fringe benefits (ss 30-34) and board fringe benefits which are clearly limited to meals (ss 35-37). As I have noted, those provisions are modified in their application for the purposes of the Bankruptcy Act. That includes s 36 relating to the assessment of the value of board fringe benefits but it continues to apply only to the provision of food (Regulations; Schedule 4, Item 19). The modification made to s 136(1) by the Regulations then adopts the language of “lodging (including board)”. That is not consistent with the language of the FBTA Act. It is, of course, possible that “lodging (including board)” would be a fringe benefit by virtue of being a residual fringe benefit for the purposes of s 45 of the FBTA Act, which provides: “A benefit is a residual benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive).” The outcome would not be any different from treating it as a housing right fringe benefit for the assessment of the value of a residual fringe benefit is no different: “Subject to this Part, the value of a residual fringe benefit in relation to a contribution assessment period is the cost to the provider of providing the benefit, reduced by the amount of the recipient’s contribution.”: FBTA Act; s 50 as modified by Regulations, Schedule 4, Item 25.