The AAT has held that an individual taxpayer who was the controller of several trusts that operated a wine growing business and who was also a beneficiary was not presently entitled to an amount of over $480,000 that one of the trust made from the sale of business premises that occurred on the same day the trust purchased it under an option agreement it exercised with the landlord.
The Commissioner had issued default assessments to the taxpayer, arguing that because the profits from the sale were deposited into an account operated by the taxpayer, the taxpayer was presently entitled to the amount as assessable income under either s 101 or s 97 of the ITAA 1936.
However, the AAT found that the Commissioner incorrectly interpreted the operation of s 101 as the section required the exercise of the trustee’s discretion for it to apply, which it found was not the case here. Further, it found that the mere receipt of funds by a discretionary beneficiary would only activate s 101 if the receipt had been “allocated”, which again it found was not the case in the circumstances. The AAT also found that the taxpayer as a beneficiary was not assessable on the funds under s 97 for similar reasons.
In addition, the AAT noted that some 80% of the funds deposited were disbursed, not for taxpayer’s personal use, but for vineyard and wine-related expenses of the business in the relevant year of income. In any event, the AAT found that a disclaimer made by the taxpayer to the income was effective despite it being made some 11 months after the payment was made. In this regard, the AAT noted, among other things, that the taxpayer did not have access to relevant documentation, then held by ASIC, to make the disclaimer sooner.
(AAT Case [2014] AATA 342, Re Moignard and FCT, AAT, Ref No 2012/3591, Dunne SM, 30 May 2014.)
[LTN 105, 3/6/14]