A taxpayer has appealed to the Federal Court against the decision of the AAT in Re Rowntree and FCT [2016] AATA 420.

The matter was complex but resulted in alleged loans of over $4m being made by various companies (directly or indirectly) to a taxpayer. The AAT affirmed the Commissioner’s objection decision, that$3m of the payments were assessable income, of the taxpayer, under the deemed dividend provisions in Div 7A of the ITAA 1936. The balance of the payments ($1m) were found to be actual loans to the taxpayer outside Div 7A. The AAT arrived at its decision based on the taxpayer having the onus to show the assessments were excessive, as there was insufficient evidence to support a finding that loan agreements existed at the time when the advances were made, whether relevant company resolutions were made and whether required interest was paid on the purported loans. Shortfall penalties for intentional disregard of the law’ (75%) were set aside for 50% penalties for ‘reckless’ behaviour in lodging the returns (and no remission was given).

[LTN 143, 27/7/16]