The AAT has confirmed that a taxpayer, a member of an overseas property development group, was not entitled to deductions for over $18m in various outgoings incurred in connection with the development of a “golf course and resort style living” complex. The outgoings were incurred following the taxpayer’s restructuring when it ran into financial and other difficulties. The taxpayer claimed the deductions in the 2003 income year.
- The AAT found the taxpayer was not entitled to a deduction for a loss of $8.4m incurred in relation to the sale of membership interests in the golf club on the basis that, although they had become trading stock, the taxpayer had not discharged the onus of proving that $8.4m was the proper market value of the membership interests.
- It also found that the taxpayer was not entitled to a deduction for $1m that it had paid into a trust account to meet a future liability under the restructure as the liability would not be incurred until the amounts were paid out.
- The AAT also found that the taxpayer was not entitled to a deduction in the 2003 income year for either $4.1m in respect of its obligations to undertake development works or $1.2m in relation to planning regulation obligations as part of the restructure arrangements as the liabilities arose in the 2004 income year.
The AAT also affirmed the imposition of 25% shortfall penalties for failing to take reasonable care, except in relation to remitting the penalty imposed for claiming a deduction for planning regulation obligations.
(AAT Case [2012] AATA 404, Re Sanctuary Lakes Pty Ltd and FCT, AAT, Ref No 2010/1370, Forgie DP, 29 June 2012.)
[LTN 126, 3/7]