The ATO on Wed 7.8.2013, released a Decision Impact Statement on the Federal Court’s decision in Yazbek v FCT [2013] FCA 39.
In that case, the Federal Court dismissed an appeal from an AAT decision and confirmed that for the purposes of the time limits within which an assessment can be amended under s 170(1) of the ITAA 1936 (and for other tax purposes, unless otherwise stated), the term “beneficiary of a trust estate” takes its ordinary meaning which is “a person for whose benefit a trust is to be administered and who is entitled to enforce the trustee’s obligation to administer the trust according to its terms” and not only a person who has an actual interest in trust income or property.
The ATO said the decision accords with its view of the operation of s 170(1) and that it confirms that the term “beneficiary” means any person (or entity) for whose benefit a trust is to be administered and who is entitled to enforce the trustee’s obligation to administer the trust according to its terms. Therefore, it said a 4-year period of review applies to a taxpayer who is a beneficiary of a trust (except if it is a small business entity), and the review period applies equally to both ATO and taxpayer initiated amendments (this is the case even if the amendment is made for a reason unrelated to the trust).
[FJM Note: There were two key elements to this case. The first has been noted (that a discretionary beneficiary is still relevantly a ‘beneficiary’ for s170(1) and other purposes. The other is that the amendment doesn’t have to be in the individual’s capacity as a ‘beneficiary’ to escape the 2 year limit on amendments (and have the 4 year limit apply instead). This is a two edged sword for the Commissioner, as it means that the objection period is automatically 4 years – instead of having to apply after 2 years to have the objection treated as within time.]
[LTN 151, 7/8/13]