In a decision handed down on Tues 22.10.2013, the Full Federal Court has unanimously allowed the Commissioner’s appeal and held that s 255 notices requiring a company to retain out of Canadian currency sufficient funds to meet a taxpayer’s Australian income tax liability were effective.
The taxpayers (RCF IV and RCF V) were limited partnerships formed in the Cayman Islands. They owned shares in an Australian company (Talison), which they sold to a third party. The amounts payable to the taxpayers were denominated in Canadian currency and were payable out of a Canadian bank account maintained by Talison. There was no obligation on Talison to pay the taxpayers in Australian dollars.
The Commissioner issued notices under s 255 of the ITAA 1936 requiring Talison, as “a person having the receipt control or disposal of money belonging to” the taxpayers, to retain from that money, and to pay to the Commissioner, the amounts the taxpayers were assessed to pay. The relevant amounts were expressed in Australian currency.
The Federal Court held that the s 255 notices were ineffective and the Commissioner appealed.
The principal issue in the appeal was in essence whether the reference to “money” in s 255 was confined to Australian currency or does it include foreign currency? The Full Federal Court allowed the Commissioner’s appeal finding that “money” should be read in s 255 as including a debt, which the recipient of the notice owes to the non-resident taxpayer, whether or not that debt is denominated in Australian dollars.
(FCT v Resource Capital Fund IV LP & Ors [2013] FCAFC 118, Full Federal Court, Allsop CJ, Gordon and Jagot JJ, 22 October 2013.)
[LTN 204, 22/10/13]