The AAT has affirmed income tax assessments issued to 2 company taxpayers for the 2003 and 2004 income years, increasing the taxable income of both companies.
The shareholders of the companies are members of the same family. After a tax audit, the Commissioner issued income tax assessments increasing the taxable income of both companies. In relation to the first taxpayer, the Tribunal said the issue was whether or not amounts described as “Accrued expenses”, “Salary and wages” and “Management fee” should have been added to the taxable income of the company in the relevant years. In relation to the second taxpayer, the issue involved certain amounts described as “salary and wages expenses”.
Essentially, the Tribunal did not accept the explanations for the amounts as claimed by the taxpayers. Key findings made by the Tribunal were as follows:
- Accrued expenses – in relation to the first taxpayer, the Tribunal was unable to identify the components of the “accrued expenses” and was not satisfied with the taxpayer’s explanations as to the amounts.
- Salary and wages – both taxpayers had claimed they were “definitively committed” to the payment of “accrued” salary and wages to directors in the relevant years. However, the Tribunal disagreed.
- Management fee – the Tribunal was not satisfied that the first taxpayer had “incurred’ the claimed management fee in the relevant year.
Accordingly, the Tribunal was not satisfied that the adjustments made by the Commissioner increasing the taxable income were excessive.
(AAT Case [2013] AATA 9, Re Kelly’s Office Furniture Pty Ltd & Anor and FCT, AAT, Ref Nos: 2011/1161-1162 and 2011/1202-1203, Frost DP, 11 January 2013.)
[LTN 8, 14/1/13]