The ATO on Fri 22.11.2013, released Decision Impact Statements on the following cases:
- Sanctuary Lakes Pty Ltd v FCT [2013] FCAFC 50 – In that case, the Full Federal Court unanimously dismissed the taxpayer’s appeal against an AAT decision on the substantive issue and confirmed that the taxpayer was not entitled to deductions for over id=”mce_marker”8m in relation to a range of outgoings incurred in connection with the restructuring of the development of a “golf course and resort style living” complex. However, the majority of the Full Court dismissed Commissioner’s claim that the AAT had erred in law in reducing penalties to zero as it found that the taxpayer had a reasonably arguable position (RAP). The High Court subsequently refused the taxpayer special leave to appeal. The ATO said in the Decision Impact Statement that while it is unusual for a taxpayer to have a RAP under the income tax law, but to be found not to have taken reasonable care, the Full Court has recognised that having a RAP and taking reasonable care are independent statutory standards for the imposition of administrative penalties. Importantly, it said the Court rejected the proposition that it necessarily follows that a taxpayer and the taxpayer’s agent must have taken reasonable care in making statements if the taxpayer had a RAP under the law. Accordingly, the ATO said it will amend para 17 of PS LA 2011/30 to ensure consistency with the comments of the Full Court on s 298-20.
- Fitzroy Services Pty Ltd v FCT [2013] FCA 471 – In that case, the Federal Court held that a taxpayer was not entitled to deductions for management fees paid to associated companies and for interest and bank charges paid to a foreign bank in respect of loans made to it by the bank. In doing so, the Court essentially found that the taxpayer had not discharged the onus of proving that the outgoings were incurred in producing assessable income. However, it also found that as there was no “fraud or evasion”, then the time limits for amending assessments applied to prevent the Commissioner denying all the deductions claimed. In the Decision Impact Statement, the ATO said it considers the Court’s application of the law to the facts to be uncontroversial and respectfully correct.
[LTN 227, 22/11/13]