The AAT has affirmed the Commissioner’s decision that a company was not entitled to claim interest deductions of $11m over a 10-year period in respect of loans apparently made to it by a related company. It did so on the basis of what it said was the paucity of primary evidence supporting the existence of the loans and the payments of interest, despite verbal evidence to the contrary. Accordingly, the AAT was not satisfied that the interest expense claimed by the taxpayer was accurate, and said that “to accept the Applicant’s assertion about the availability of interest deductions and the quantum of them would be to engage in an exercise of speculation”.
The AAT also found that the assessments made by the Commissioner were not made out of time as the taxpayer had returned “nil assessments” and that as a result, the notices of “assessment” issued were not assessments – which meant that the normal time limits in s 170 of the ITAA 1936 did not apply. However, the AAT reduced the original administrative penalties of 90% (including a 20% uplift factor) imposed for “intentional disregard” and, instead, reduced the penalty to 50% based on an extreme level of carelessness to comply with the taxation law.
(AAT Case [2012] AATA 394, Re Suburban Property Owner and FCT, AAT, Ref Nos 2009/6058-6068, Frost DP, 5 June 2012.)
[LTN 173, 3/9]