In a decision handed down on Tue 11.12.2012, the Full Federal Court has unanimously allowed the taxpayer’s appeal from an adverse objection decision and held that dividends of id=”mce_marker”83m paid to the taxpayer by companies incorporated in Luxembourg were excluded from assessable income by virtue of being non-assessable, non-exempt (NANE) income pursuant to s 23AJ of the ITAA 1936 (certain non-portfolio dividends from foreign countries not assessable). The taxpayer was an Australian resident unit trust, being an Australian public trading trust for the purposes of Div 6C of Pt III of ITAA 1936, and which had chosen to form a tax consolidated group for the purposes of Pt 3-90 of ITAA 1997 with the taxpayer as head company of the consolidated group.
The Commissioner had assessed the taxpayer, as head company, on the amounts (subject to allowance of a deduction for losses of $48m) on the basis that the taxpayer had derived the dividend income for its own benefit, albeit that the Commissioner contended before the Full Court that the taxpayer did not receive the dividends from the Luxembourg companies for its own benefit, but rather as trustee and therefore s 23AJ did not apply. However, the Full Court found that the taxpayer had derived the dividends for its own benefit and therefore s 23AJ applied to treat them as non-assessable, non-exempt income.
Although not necessary to decide the issue, the Full Court said it also would have found that the Commissioner would have been bound by Taxation Determination TD 2008/25 to find that s 23AJ did apply to a trust that is a member of a consolidated group.
(Intoll Management Pty Ltd v FCT [2012] FCAFC 179, Full Federal Court, Edmonds, McKerracher and Jagot JJ, 11 December 2012.)
[LTN 240, 11/12]