Peter Greensill Family Co Pty Ltd (Trustee) v Commissioner of Taxation

The appeal concerned the interaction between div 855 of the Income Tax Assessment Act 1997 (1997 Act), sub-div 115-C of the 1997 Act and div 6 and div 6E of the Income Tax Assessment Act 1936 (1936 Act) in the context of capital gains made by a resident trust estate from non-taxable Australian property distributed to a non-resident beneficiary. The central issue was whether s 855-10 of the 1997 Act applied to disregard the capital gains. The court held that the capital gains were not disregarded by s 855-10 and that the section did not have any operation in the calculation of the amounts under ss 115-215 and 115-220 in sub-div 115-C. The appeals were dismissed, and the appellants were ordered to pay the respondent’s costs. The reasoning of the court was that s 855-10 did not apply to a capital gain made by the trustee of a resident trust estate and, consequently, the threshold requirement for sub-div 115-C to apply was satisfied. The court emphasised that s 855-10 did not override the residency hypothesis in the s 95 definition of “trust income”.