A decision was handed down on Friday.  The issues in this matter concern the purported loan agreement between Hua Wang Bank Berhad (‘HWBB’) and the Applicants. The Commissioner alleged they were sham agreements.

The taxpayers’ Australian super funds deposited $600k to HWBB as a purported investment which on-lent this money to the taxpayers to buy an apartment on the Sunshine Coast (a ‘back-to-back’ loan).

DP Frost found that:

  • the Super Fund loan to HWBB and its loan to the taxpayer (members) was a sham and the interest was not deductible and there was no withholding tax.
  • the true characterization of the arrangements was that a premature benefit was paid to the taxpayer/members (of $600k) on which they were assessable.
  • There was evasion and it was not necessary to find there had been fraud
  • There was intentional disregard of the law and the appropriate penalties were confirmed.
  • The actions of Mr Gould relating to evasion and penalties could be imputed on the taxpayers because he was their agent (but not tax agent).

(Morrison and Commissioner of Taxation [2015] AATA 114, 27 February 2015, Deputy President Frost)

[ATO LPR, 27/2/15]