The ATO will not seek special leave to appeal to the High Court from the decision of the Full Federal Court in Aussiegolfa Pty Ltd (Trustee) v CofT [2018] FCAFC 122. This Tax Technical Article relates to the Full Federal Court’s decision.
The ATO’s decision not to appeal was revealed in an ASX announcement by DomaCom Limited (DCL) – the operator of the managed investment scheme at the centre of the case.
In Aussiegolfa, the Full Federal Court held that an SMSF investment, in a DomaCom sub-trust, which gave the SMSF a fractional interest in a residential unit, of student accommodation, was not in breach of the s62 SIS Act ‘sole purpose’ test, despite the unit being ultimately leased to the SMSF member’s daughter (though, it was leased through a third party, arm’s length, letting agent – and it was lent at arm’s length market rent).
DomaCom was less successful on the other part of the Full Federal Court appeal, in that the Court held that the ‘sub-fund’ (which owned the residential unit) and not the widely held overall fund (comprising many ‘sub-funds’) was the relevant entity by which to assess the 5% limit on investing ‘in-house assets’ (s82 SIS Act). The Court held that the ‘sub-fund’ was, relevantly, a ‘related party’ of the SMSF, so its investment in the sub-fund units was an ‘in-house asset’, which breached the 5% of market value cap.
DomaCom’s ASX announcement said that it was now addressing this further issue by “reviewing our constitution and disclosure documents to address these items with respect to future sub-funds”. Having read what the Full Federal Court said about this, however, I’m not sure that re-casting the words, alone, will be enough.
[ASX website: DomaCom – No ATO Appeal; LTN 196, 11/10/18; Tax Month – October 2018]
CPD questions (answers available)
- Is the ATO appealing the Aussiegolfa decision?
- Is DomaCom listed on the ASX?
- Did it give notice of this development, to the ASX?
- Did it win the ‘sole purpose’ point?
- Did it win the ‘in-house assets’ point?
