Tyson and Secretary, Department of Social Services (Social services second review)

Tyson and Secretary, Department of Social Services (Social services second review) [2018] AATA 3781 (10 October 2018)
Division:GENERAL DIVISION
File Number(s): 2018/0149
Re:Colin Tyson
APPLICANT

Secretary, Department of Social ServicesAnd
RESPONDENT

DECISION
Tribunal:Senior Member Linda Kirk
Date:10 October 2018
Place:Sydney

The reviewable decision is affirmed.
............................[sgd]............................................
Senior Member Linda Kirk
CATCHWORDS
SOCIAL SECURITY – reduction of Applicant’s Newstart allowance – whether Applicant’s and former spouse’s company was at the relevant time a “designated private company” and a “controlled private company” – whether Applicant was “attributable stakeholder” – whether Applicant’s “income attribution percentage” in the company should be reduced – whether Applicant should be attributed with 50% of profit derived from company in relevant period – whether Applicant should be attributed with deemed income from shareholder loans - applicable derivation and attribution periods considered – reviewable decision affirmed
LEGISLATION
Social Security Act 1991 - ss 593, 1068, 1076,1207,1207N,1207Q,1207X,1207Y, 1208C, 1208D; Parts 3.10, 3.18
Corporations Act 2001 – s 180
CASES
SDSS v Garvey (1989) 22 FCR 132
SECONDARY MATERIALS
Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 – Parts 2, 4; ss 7, 11, 13, 25, 29, 31
REASONS FOR DECISION
Senior Member Linda Kirk
10 October 2018

Mr Colin Tyson (‘the Applicant’) was paid Newstart allowance (‘NSA’) from 24 September 2014. On 8 May 2015, the Applicant’s rate of NSA was reduced with effect from 8 January 2015 when he was attributed with 50% of the net profit from Monwood Property Pty Ltd (‘Monwood’) and deemed income on loans.
On 14 July 2015 the Applicant requested a review of the decision to reduce his rate of NSA. On 21 June 2016 an Authorised Review Officer (ARO) found that the decision to reduce the Applicant’s NSA was correct. On 31 March 2017 the Applicant requested a review of this decision by the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1). In a decision dated 11 December 2017 (‘the reviewable decision’) the AAT1 affirmed the decision of the ARO to reduce the Applicant’s NSA with effect from 8 January 2015.
On 15 January 2018 the Applicant lodged an application for review of the reviewable decision with this Tribunal.
The matter was heard in Sydney on 18 July 2018. The Applicant appeared in person and was self-represented.
LEGISLATIVE FRAMEWORK
NSA qualification criteria
The qualification criteria for NSA are in section 593 of the Social Security Act 1991 (‘the Act’).
593 Qualification for newstart allowance
(1)Subject to sections 596, 596A, 597 and 598, a person is qualified for a newstart allowance in respect of a period if:
(a)       the person satisfies the Secretary that:
(i)       throughout the period the person is unemployed; or
(ii)the person is a CDEP Scheme participant in respect of the period; and
(b)in the case of a person to whom subparagraph (a)(i) applies-- throughout the period, or for each period within the period, the person:
(i)       satisfies the activity test; or
(ii)       is not required to satisfy the activity test; …
NSA means test
NSA is means tested. In SDSS v Garvey,[1] the Full Federal Court explained the policy underlying this principle:
... namely to maintain a basic level of income for those who were unable to receive sufficient income to provide for themselves.
[1] (1989) 22 FCR 132 at 136.
Income test
The rate of NSA payable to a person is worked out using Rate Calculator A at the end of section 1068 of the Act:[2]
1068 Rate of widow allowance, newstart allowance (18 or over), sickness allowance (18 or over), partner allowance, and mature age allowance under Part 2.12B
(1) The rate of:
(a) newstart allowance; or is to be calculated in accordance with the Rate Calculator at the end of this section
[2] Module A in the Rate Calculator at the end of section 1068 provides for the overall rate calculation process (step 5 refers to the income test), and Module B sets out how to calculate the maximum basic rate. Module E at the end of section 1068 is the income test, which is used to work out the effect of a person’s ordinary income on the person’s maximum payment rate. In short, the income test determines any income reduction for the maximum NSA rate. If a person earns enough income to reach the cut-off point, their payment reduces to $nil. The income test from time to time is found in the Guide and on the Department’s website: >
The Secretary contends that the rate of the Applicant’s NSA should be reduced in accordance with the formula in the income test after taking into account:
(i)Monwood’s income attributed to him in accordance with Part 3.18 of the Act; and
(ii)Deemed income under section 1076(2) of the Act from the Applicant’s loans to Monwood.
Attribution of income
Through the operation of Part 3.18 of the Act - Means Test Treatment of Private Companies and Private Trusts - a person is attributed with the income and assets of a private company in prescribed circumstances for the purpose of section 1068(1)(a) of the Act. If a person is an ‘attributable stakeholder of a private company then some or all of the income and assets of the company may be included in the income and assets of the person that are taken into account to work out the rate of the person's NSA.
Section 1207Y(1) in Part 3.18 of the Social Security Act provides (and at all material times has provided) for the attribution of income:[3]
1207Y Attribution of income
(1) For the purposes of this Act, if:
(a)during a particular derivation period of a company or trust, the company or trust derives an amount that is ordinary income; and
(b)an individual is an attributable stakeholder of the company or a trust throughout the attribution period that relates to the derivation period of the company or trust; and
(c)the attribution period begins on or after 1 January 2002; and
(d)if that amount:
(i)had been derived by the individual instead of by the company or trust; and
(ii)in the case of income accounted for on an accrual basis as mentioned in subsection (5)—had been so derived by the individual on a cash basis;
that amount would have been ordinary income of the individual; and
(e) that amount is not excluded income (see subsection (2));
then, in addition to any other ordinary income of the individual, the individual is taken to receive, during that attribution period, ordinary income at an annual rate equal to the individual's income attribution percentage of the amount worked out using the formula:
Amount referred to in paragraph (a) ^
Number of days in the derivation period
Excluded income
(2)The Secretary may, by writing, determine that, for the purposes of the application of subsection (1) to a specified individual and a specified company or trust, a specified amount is excluded income.
Section 1207 of the Act outlines the circumstances under which the assets and income of a private company are attributed to an individual:
1207 Simplified outline
·For an asset or income to be attributed to an individual:
(a) the company must be a designated private company or the trust must be a designated private trust (sections 1207N and 1207P); and
(b) the company must be a controlled private company in relation to the individual or the trust must be a controlled private trust in relation to the individual (sections 1207Q and 1207V); and
(c) the individual must be an attributable stakeholder of the company or trust (section 1207X).
Designated private company
Section 1207N of the Act states that a company is a designated private company if the consolidated revenue of the company and its subsidiaries for the financial year is less than $25 million and the gross assets of the company and its subsidiaries at the end of the financial year are less than $12.5 million.
1207N Designated private companies
(1) For the purposes of this Part, a company is a designated private company at a particular time if:
(a)the company satisfies at least 2 of the following conditions in relation to the last financial year that ended before that time:
(i)the consolidated revenue for the financial year of the company and its subsidiaries is less than $25 million, or any other amount prescribed by regulations made for the purposes of paragraph 45A(2)(a) of the Corporations Act 2001;
(ii)the value of the consolidated gross assets at the end of the financial year of the company and its subsidiaries is less than $12.5 million, or any other amount prescribed by regulations made for the purposes of paragraph 45A(2)(b) of the Corporations Act 2001;
(iii)the company and its subsidiaries have fewer than 50, or any other number prescribed by regulations made for the purposes of paragraph 45A(2)(c) of the Corporations Act 2001, employees at the end of the financial year; or
(b) the company came into existence after the end of the last financial
year that ended before that time; or
(c) the company is a declared private company (see subsection (2));
and the company is not an excluded company (see subsection (5)).
Controlled private company
Subsection 1207Q(1) of the Act states that a company is a controlled private company of an individual if the individual passes the control test.
Subsection 1207Q(2) of the Act states that an individual passes the control test if the aggregate of the direct voting interests in the company that the individual holds and the direct voting interests in the company held by associates of the individual is 50% or more.
1207Q Controlled private companies
(1)       For the purposes of this Part, a company is a controlled private company in
relation to an individual if the company is a designated private company and:
(a)      the    individual passes    the control test set out   in subsection (2); or
(b)      the    individual passes     the source test set out   in subsection   (3).
Control test
(2)       For the purposes of this section, an individual passes the control test in
relation to a     company if:
(a)      the    aggregate of:
(i)the direct voting interests in the company that the individual holds; and
(ii)the direct voting interests in the company held by associates of the individual;
is 50% or more; or
(b)      the    aggregate of:
(i)the direct control interests in the company that the individual holds; and
(ii)the direct control interests in the company held by associates of the individual;
is 15% or more; or
(c)      the company is sufficiently influenced by:
(i)       the individual; or
(ii)       an associate of the individual; or
(iii)2 or more entities covered by the preceding subparagraphs; or
(d)the individual (either alone or together with associates) is in a position to exercise control over the company.
Source test
(3)For the purposes of this section, an individual passes the source test in relation to a company if:
(a)the individual has transferred property or services to the company after 7.30 pm, by standard time in the Australian Capital Territory, on 9 May 2000; and
(b)the underlying transfer was made for no consideration or for a consideration less than the arm's length amount in relation to the underlying transfer.
Attributable stakeholder
Subsection 1207X(1)(a) of the Act states that if a company is a controlled private company in relation to an individual, the individual is an attributable stakeholder of the company unless the Secretary of the Department otherwise determines. Subsection 1207X(1)(b) of the Act states that the attribution percentage is 100% unless the Secretary determines otherwise.
1207X Attributable stakeholder, asset attribution percentage and income attribution percentage
Company
(1) For the purposes of this Part, if a company is a controlled private company in relation to an individual:
(a)the individual is an attributable stakeholder of the company unless the Secretary otherwise determines; and
(b)if the individual is an attributable stakeholder of the company—the individual's asset attribution percentage in relation to the company is:
(i) 100%; or
(ii)if the Secretary determines a lower percentage in relation to the individual and the company—that lower percentage; and
Part 2 of the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 (‘Attributable Stakeholders determination’) sets out the decision-making principles when making a determination that an individual is not an attributable stakeholder of a company.[4] For example, section 7 of the Attributable Stakeholders determination provides:
[4] T Documents, T3 page 69
7 Circumstances affecting relationship with company or trust
(1) The Secretary must consider whether there are relevant circumstances that make it inappropriate for the individual to be an attributable stakeholder of the company or trust.
2) For subsection (1), relevant circumstances include the extent to which the relationship between the individual and the company or trust is affected by any of the following circumstances:
(a)circumstances arising from the legal structure of the company or trust;
(b)circumstances arising from the administrative arrangements of the company or trust;
(c)whether, having regard to the relationship between the individual and the company or trust, the individual can reasonably be expected to exercise effective control in relation to the company or trust.
11 Benefit from assets and income of company or trust
(1)The Secretary must consider whether the individual receives or derives any kind of benefit (other than a benefit mentioned in section 9 or 10) from the assets or income, or both, of the company or trust.
(2) For this section, benefit:
(a)is not limited to a benefit to which the individual has a legal or equitable entitlement; and
(b)includes benefits received or derived in the form of property or services.
13 Other circumstances
The Secretary must consider any other circumstance that affects the involvement of the individual with the activities or the administration of the company or trust.
The Tribunal has an unfettered obligation to consider relevant circumstances under section 7(1). That is, the Tribunal is not limited to the circumstances set out in section 7(2). Those circumstances are an inclusive list for the purposes of section 7(1).
Income attribution percentage
The Applicant’s income attribution percentage is 100% unless the Tribunal determines a lower percentage in accordance with the decision-making principles in Part 4 of the Attributable Stakeholders determination.[5]
The principles in Part 4 mirror the principles in Part 2 of the determination:
25 Circumstances affecting relationship with company or trust
(1)The Secretary must consider whether there are relevant circumstances that make it inappropriate for the individual to have an income attribution percentage of 100%.
(2)For subsection (1), relevant circumstances include the extent to which the relationship between the individual and the company or trust is affected by any of the following circumstances:
(a)circumstances arising from the legal structure of the company or trust;
(b)circumstances arising from the administrative arrangements of the company or trust;
(c)whether, having regard to the relationship between the individual and the company or trust, the individual can reasonably be expected to exercise effective control in relation to the company or trust and, if so, the extent of that control.
29 Benefit from assets and income of company or trust
(1)The Secretary must consider whether the individual receives or derives any kind of benefit (other than a benefit mentioned in section 27 or 28) from the assets or income, or both, of the company or trust.
(2) For this section, benefit.
(a)is not limited to a benefit to which the individual has a legal or equitable entitlement; and
(b)includes benefits received or derived in the form of property or services.
31 Other circumstances
The Secretary must consider any other circumstance that affects the involvement of the individual with the activities or the administration of the company or trust.
Derivation and attribution periods
The Act provides for the determination of the relevant derivation and attribution periods for the purposes of Part 3.18.
1208C Derivation periods
(1) For the purposes of this Part:
(a) if a company or trust was in existence throughout a tax year of the company or trust—the tax year is a derivation period of the company or trust; and  
(b) if a company or trust was in existence during a part of a tax year of the company or trust—that part of the tax year is a derivation period of the company or trust.  
…
1208D Attribution periods
(1) The Secretary may, by writing, determine that, in the event that a specified individual is an attributable stakeholder of a specified company or trust at a specified time (the start time ):
(a) a period beginning at the start time and ending at whichever is the earlier of the following times:
(i) the later time specified in the determination;
(ii) the time when the individual ceases to be an attributable stakeholder of the company or trust;
is an attribution period for the purposes of the application of this Part to the individual and the company or trust; and
(b) that attribution period relates to a specified derivation period of the company or trust.
Deemed income from assets
Division 1B of Part 3.10 of the Act provides for determination of deemed income from financial assets
Deemed income from financial assets--persons other than members of couples
(1)   This section applies to a person who is not a member of a couple.

(2)   A person who has financial assets is taken, for the purposes of this Act, to receive ordinary income on those assets in accordance with this section.

(3)   If the total value of the person's financial assets is equal to or less than the person's deeming threshold, the ordinary income the person is taken to receive per year on the financial assets is the amount worked out by multiplying the value of those assets by the below threshold rate.
(3A) If the total value of the person's financial assets exceeds the person's deeming threshold, the ordinary income that the person is taken to receive is worked out as follows:
Method statement
Step 1.  Multiply the person's deeming threshold by the below threshold rate.
Note 1:          For deeming threshold see subsection 1081(1).
Note 2:          For below threshold rate see subsection 1082(1).
Step 2.  Subtract the deeming threshold from the total value of the person's financial assets.
Note:             For deeming threshold see subsection 1081(1).
Step 3.  Multiply the remainder worked out at Step 2 by the above threshold rate.
Note:             For above threshold rate see subsection 1082(2).
Step 4.  The total of the amounts worked out at Steps 1 and 3 represents the ordinary income the person is taken to receive per year on the financial assets.
(4) The person is taken, for the purposes of this Act, to receive one fifty-second of the amount calculated under subsection (3) or (3A) as ordinary income of the person during each week.
ISSUES FOR DETERMINATON
The issues for determination are as follows:
(a)whether Monwood was at the relevant time a ‘designated private company’ within the meaning of Part 3.18 of the Act;
(b)whether Monwood was a ‘controlled private company’ in relation to the Applicant within the meaning of Part 3.18 of the Act;
(c)whether the Applicant was an ‘attributable stakeholder’ of Monwood within the meaning of Part 3.18 of the Act;
(d)the Applicant’s ‘income attribution percentage’ in Monwood within the meaning of Part 3.18 of the Act and, if it is 100%, whether it should be reduced to less than 100%;
(e)whether the Applicant should be attributed with 50% of the 2013/14 profit derived by Monwood for the purpose of calculating the rate of his NSA from 8 January 2015;
(f)if so what are the applicable derivation and attribution periods?
(g)whether the Applicant should be attributed with deemed income from his shareholder loans to Monwood.
EVIDENCE BEFORE THE TRIBUNAL
Corporate structure and officeholders of Monwood

Monwood was incorporated on 4 July 2002.[6] In May 2011 Monwood began trading as an importer and retailer of horse floats under the name of Tally Ho Horse Floats, a retail business.[7] Prior to this date, Monwood accumulated tax credits of approximately $300,000.[8]
[6] T Documents, T15 page 183.
[7] T Documents, T4 page 82; Exhibit A1 Applicant’s Statement dated 18 July 2018.
[8] Exhibit A1, page 1.
Information obtained from the Australian Securities and Investment Commission's (ASIC) database in relation to Monwood records:
(a)The Applicant was the sole director and secretary of Monwood for the period 4 July 2002 to 15 February 2017;
(b)Ms Lynda Philpott became the sole director and secretary of Monwood on 15 February 2017;
(c)The Applicant and Ms Philpott have been the two shareholders in Monwood for the period 4 July 2002 to the present day, each beneficially holding one fully paid ordinary share.
The Applicant and Ms Philpott were in a defacto relationship between December 2001 and September 2007. Their business relationship continued following their separation. According to the Applicant, during the 2013/14 tax year their business relationship deteriorated and Ms Philpott took control of the business.[9] In the Centrelink 'Private Company' Form dated 9 March 2015 the Applicant stated Ms Philpott had taken control of the business against his will and legal action would be taken.[10] He had no further involvement in the day to day running of the business and no access to the bank account or company records from mid-2014.[11] According to the Applicant, over the next two years he and Ms Philpott attempted unsuccessfully to reach an equitable agreement in relation to ownership of the business.[12]
[9] Exhibit A1, page 1.
[10] T Documents, T4 page 83.
[11] Transcript pages 12-13.
[12] Exhibit A1, page 1.
In a letter dated 1 February 2016 Ms Philpott stated that between May 2011 and August 2014 they traded as a horse float importer using the trading name Tally Ho Horse Floats under the umbrella of Monwood in order to avail themselves of the significant tax losses.[13] The Applicant ceased to have any involvement with Tally Ho Horse Floats in August 2014 and all activities, assets and liabilities were assumed by Ms Philpott. The operative trading name of the business became Tally Ho Floats. According to the letter, the Applicant retains equity in the company ‘as the company has significant tax losses that will be available to each of us, until exhausted, on an agreed basis … Apart from preserving Monwood Property Development Pty Ltd as a corporate vehicle in order to be able to take advantage of the company's tax losses, [the Applicant] and I have no ongoing commercial relationship of any nature whatsoever.’[14]
[13] T Documents, T19, page 210.
[14] T Documents, T19, page 210
Information obtained from the Australian Securities and Investment Commission's (ASIC) database in relation to Monwood records that the Applicant resigned as Director and Secretary of Monwood on 15 February 2017. On that day, Ms Philpott was appointed as the sole Director.
In his written statement dated 18 July 2018 and in his evidence to the Tribunal, the Applicant stated that he asked David Crimmins, the accountant for Monwood, to register his resignation as director on 3 February 2016[15] and again on 9 February 2017.[16] He assumed that he no longer was an office bearer of Monwood from February 2016.[17] He did not complete or sign a form to effect this resignation.[18]
[15] T Documents, T19, page 231.
[16] T Documents, T19, page 230. Transcript pages 19-20.
[17] Exhibit A1, page 2.
[18] Transcript page 24.
On 29 August 2016 the Applicant completed another Centrelink ‘Private Company’ form in which he advised he owned one of two shares, but was no longer a director of Monwood.[19] He remained an attributable shareholder in Monwood ‘for the sole reason that to resign from being a shareholder would materially alter the structure of Monwood’s ownership and deny [him] and Ms Philpott access to the tax credit of the Company.’[20] He told the Tribunal that the tax credit owing was approximately $163,000, of which $83,000 was apportioned to Ms Philpott and $80,000 to him.[21]
[19] T Documents, T14 pages 167-169.
[20] Exhibit A1, page 2.
[21] Transcript page 28.
In his written statement, the Applicant stated that Ms Philpott operates Tally Ho Floats as a sole trader and she has exclusive access to its bank accounts and control of the business. His attempts over the past three years to have her complete tax returns have been met with opposition.[22] He told the Tribunal that he was unable to file a tax return for the company because he did not have access to the accounts and could not therefore accurately state the company’s income and expenses during this period.[23]
[22] Exhibit A1, page 2. Transcript pages 25, 51-52.
[23] Transcript page 53.
Financial position of Monwood
In the Centrelink 'Private Company' Form dated 9 March 2015, the Applicant declared that Monwood was trading and had the following assets:
(i)       plant and equipment valued at $31,871;
(ii)       stock valued at $38,000; and
(iii)      $16,858 in a bank account.[24]
[24] T Documents, T4 page 83.
Accompanying the Centrelink form was Monwood’s Annual Report for the year ended 30 June 2014 including:[25]
(a) A balance sheet;
(b)A profit and loss statement which showed, among other things, a profit before tax of $47,192 for the year;
(c)Notes to the financial statements showing, among other things, the details of the shareholder loans to the company in the balance sheet.
[25] T Documents, T4 page 99
Also accompanying the form was Monwood’s Company Tax Return for 2014 signed by the Applicant as the company’s public officer.[26] The company returns show that in the 2013/14 financial year the company made a gross profit of $100,665 with a net profit of $47,192 for the year.
[26] T Documents, T4 page 108.
On 8 May 2015, the Applicant completed an application form for NSA[27] in which he declared that he had ceased work on 20 September 2014 and that his income derived from Monwood was $23,596 per annum (being 50% of $47,192).
[27] T Documents, T5 page 118.
Notes to the financial statements record details of the shareholder loans:
·$137,742 L Philpott & C Tyson
·$31,970 Lynda Philpott
·$9,707 C Tyson.
The financial statements show a reduction in the loan by the Applicant from $54,469 in 2012/13 to $9,707 in the 2013/14 financial year and a reduction in the joint loan by $23,873 over the same period. Ms Philpott's shareholder loan increased from $25,117 to $31,970.
Benefits received by the Applicant
The Applicant denied receiving any other benefit from Monwood since the end of 2014, other than proposing to utilise prior year losses in a future business venture Wilton Storage. He was questioned about benefits he received from the company paying for overseas trips with Ms Philpott and their son. He confirmed that they travelled to China and Canada on business trips in 2012 and 2013.[28] Their son travelled with them and they stopped over in Los Angeles and visited Disneyland. The private and business expenses of the trips were apportioned and included in the company’s tax return. He contributed approximately $8000 of his own funds to pay for non-business related travel expenses.
[28] Transcript page 31.
In an email dated 24 February 2015 to a relative of Ms Philpott's, the Applicant proposed that Ms Philpott have the business ‘lock stock and barrel on the proviso that $20k of the Tally Ho profits are to be spent annually on Connor's school fees, sport and such like’ and that he is to be paid the money the business owes him plus one float. He stated ‘there needs to be professional advice on the fair and equal use of the tax loss situation ($160k).’[29] The Applicant told the Tribunal his son’s school fees have never been paid by Monwood. Prior to 2015 they were paid by his grandparents and for the past three years he has paid these fees which are approximately $25,000 per year.[30]
CONSIDERATION
[29] T Documents, T19 page 232
[30] Transcript page 40.
Was Monwood at the relevant time a ‘designated private company’?
On the basis of the evidence before it, the Tribunal finds that Monwood is a designated private company, as it satisfies at least two of the conditions prescribed in section 1207N(1)(a). It is a small non-public company and is not an excluded company in accordance with the Social Security (Means Test Treatment of Private Companies - Excluded Companies) Declaration 2001.
Further, ASIC searches of Monwood show that it meets the size criteria in section 1207N.[31] It is not required to file Annual Returns with ASIC under the Corporations Act 2001.
[31] T Documents, T14, page 186.
The Tribunal is satisfied that at the relevant time Monwood was a designated private company for the purposes of section 1207N of the Act.
(b)Was Monwood a ‘controlled private company’?
The Applicant is one of two shareholders of Monwood. Accordingly, the Tribunal finds that he meets the first control test in relation to section 1207Q(2)(a)(i) as he held 50% of the ordinary shares issued in the company from 4 July 2002 to the present day. The Applicant meets the second control test in relation to section 1207Q(2)(b) as he has had a 50% ‘direct control interest’[32] in Monwood since 4 July 2002. The Applicant also meets the control test in relation to section 1207Q(2)(d) as he was sole director of Monwood until his resignation on 15 February 2017.
[32] Section 1207T(1).
The Tribunal is satisfied that at the relevant time, Monwood was a ‘controlled private company’ for the purposes of section 1207Q.
(c)Was the Applicant an ‘attributable stakeholder’ of Monwood?
There is a presumption that the Applicant is an attributable stakeholder of Monwood unless the Tribunal determines otherwise in accordance with the Attributable Stakeholders Determination: 1207X(1).
The Tribunal finds that the Applicant, as sole director and secretary of Monwood during the period 4 July 2002 to 15 February 2017, could ‘reasonably be expected to exercise effective control in relation to the company’ for the purposes of paragraph 7(2)(c) of the Attributable Stakeholders Determination.
The Tribunal has had regard to the duties of directors and other officers of a corporation in section 180 of the Corporations Act 2001, which include obligations of care and diligence. As sole director and secretary of Monwood until his resignation as director on 15 February 2017, the Applicant had a duty to ensure that Monwood’s tax returns for the 2014/15 and 2015/16 years were filed with the ATO. The Applicant’s claim that he did not have access to the information required to accurately complete the company’s tax return does not alter the legal obligation he had as its sole director to file a return for these financial years.
The Tribunal is satisfied that the Applicant was at the relevant time an ‘attributable stakeholder’ of Monwood for the purposes of section 1207X.
(d)What is the Applicant’s ‘income attribution percentage’ in Monwood and, if it is 100%, should it be reduced to less than 100%?
Section 1207Y of the Act provides that there is to be included in an individual's income an amount equivalent to the individual's attribution percentage of any amounts of ordinary income derived by the company. The Applicant’s income attribution percentage is 100% unless the Tribunal determines a lower percentage in accordance with the decision-making principles in Part 4 of the Attributable Stakeholders Determination.
Based on the evidence before it, the Tribunal finds that the Applicant derives an actual benefit from Monwood by way of the tax loss of approximately $163,000, half of which is available to him as one of the two shareholders of Monwood to take advantage of in a future tax year.
The Tribunal is therefore satisfied that the Applicant received or derived a benefit from the assets or income, or both, of Monwood for the purposes of paragraph 29(1) of the Attributable Stakeholders Determination.
(e)Should the Applicant be attributed with 50% of the 2013/14 profit derived by Monwood for the purpose of calculating the rate of his NSA from 8 January 2015?
Having considered the factors contained in the decision-making principles in Part 4 of the Attributable Stakeholders Determination, the Tribunal finds that it is appropriate to attribute the Applicant with an attribution percentage of 50% in recognition of the evidence regarding Ms Philpott's active involvement, benefits derived from and contributions to Monwood.
(f)What are the applicable derivation and attribution periods?
Monwood last filed a tax return for the financial year ending 30 June 2014 declaring its income and expenses for the period. Accordingly, the Tribunal is satisfied that the ‘derivation period’ within the meaning of section 1208C of the Act, is the 2013-14 tax year.[33]
[33] T Documents, T3 page 47.
The Secretary contends that the 2014-15 and 2015-16 tax years are ‘attribution periods’ in accordance with section 1208D. In view of the Applicant’s obligations and capacity as the sole director and secretary of Monwood, and his obligations under the Corporations Act, the applicable attribution periods are the two financial years prior to his resignation as director in February 2017.
The Tribunal is satisfied, based on the evidence before it, that the 2014-15 and 2015-16 tax years are attribution periods for the purposes of section 1208D.
(g)Should the Applicant be attributed with deemed income from his shareholder loans to Monwood?
On the basis of the evidence before it, the Tribunal finds that the loans made by the Applicant to Monwood, either in his sole capacity or jointly with Ms Philpott, are subject to the method statement in section 1076(3A) for calculating deemed income for the purpose of the income test in section 1068(1)(a) of the Act.
DECISION
The reviewable decision is affirmed.

I certify that the preceding 56 (fifty-six) paragraphs are a true copy of the reasons for the decision herein of Senior Member Linda Kirk

...........................[sgd].............................................
Associate
Dated: 10 October 2018

Date of hearing: 18 July 2018

Applicant: In person

Solicitors for the Respondent: Dr S Thompson, Department of Human Services

[3] T3/43.

[5] T3 page 78.

[2018] AATA 3781

10 October 2018

Key Legal Topics

Areas of Law

Administrative Law

Statutory Interpretation

Legal Concepts

Judicial Review

Jurisdiction

Statutory Construction

Procedural Fairness

Standing

Date of hearing:	18 July 2018
Applicant:	In person
Solicitors for the Respondent:	Dr S Thompson, Department of Human Services