In a lengthy decision handed down on Fri 19.12.2014, the Federal Court has found that 5 companies were resident of Australia and liable to pay tax here on the proceeds of the sale of shares in ASX listed entities.
This case concerned appeals from decisions of the Commissioner disallowing 5 taxpayers’ objections to a number of assessments. The taxpayers are Chemical Trustee Ltd, Derrin Brothers Properties Ltd, Bywater Investments Ltd, Hua Wang Bank Berhad and Southgate Investment Funds Ltd. The combined amount of tax in dispute was id=”mce_marker”4.26m.
Each of the taxpayers had made profits on the acquisition and sale of securities in entities listed on the Australian Stock Exchange, which the Commissioner had treated as income and subject to income tax.
The Federal Court said there were 8 sets of issues between the parties concerning:
- The central management and control issue;
- The double taxation issue;
- The capital/revenue issue;
- The trading stock issue;
- The penalties issue;
- The nominee issues;
- The charging orders; and
- Miscellaneous issues.
Each of the taxpayers had argued that its place of central management and control was in various overseas locations – Apia in Samoa, London or Neuchâtel in Switzerland.
After lengthy consideration, the Federal Court concluded that each of the taxpayers was resident in Australia and liable to pay income tax.
It said that assuming that Chemical Trustee, Derrin Brothers, Bywater and Southgate were also resident in the United Kingdom and/or Switzerland, the provisions of the treaties lead to the conclusion that they are to be taxed under Australian law.
The Court found the profits of all the taxpayers were made on revenue account, but they were entitled to make trading stock elections. All held their shares beneficially.
The Court said the taxpayers’ appeals should be allowed in relation to the trading stock issue but no other.
The Court directed the Registrar to forward a copy of its reasons to the Commonwealth Director of Public Prosecutions, ASIC and the Australian Federal Police. Perram J said: “The facts I have found strongly suggest widespread money laundering, tax fraud of the most serious kind and, possibly in some instances, insider trading. The conduct revealed in this case is disgraceful.”
(Hua Wang Bank Berhad & Ors v FCT [2014] FCA 1392, Federal Court, Perram J, 19 December 2014.)
[LTN 246, 19/12/14]