In a decision handed down on 7.6.2012, the Full Federal Court allowed the Commissioner’s appeal and set aside the decision in AAT Case [2011] AATA 479, Re Greenhatch and FCT and held that the assessable income of a beneficiary presently entitled to a discounted capital gain made by the trust was only the discounted proportion of the gain – and not the whole gain as originally decided by the AAT. It arrived at this decision, in effect, on the basis that s 97 of the ITAA 1936 drove the process of determining the beneficiary’s share of the net income of the trust (including a capital gain) to be included in their assessable income (and not Subdiv 115-C of the ITAA 1997 which required grossing up the gain in the beneficiary’s hands for the purposes of applying the discount).
The matter was relevant to the taxpayer’s claim for a personal superannuation deduction of $98,000 under s 290-160 of the ITAA 1997 on the basis that his salary and wage income was not more than 10% of his assessable income. The Commissioner argued that the taxpayer breached the 10% rule as only the 50% discounted part of the gain formed part of his assessable income, while the taxpayer argued that he did not breach the rule as the full 100% amount of the gain formed part of his assessable income.
(FCT v Greenhatch [2012] FCAFC 84, Full Federal Court, Edmonds, Greenwood and Robertson JJ, Federal Court, 7 June 2012.)
[LTN 109, 7/6]