The AAT has affirmed that most of the ATO’s objection decision as the taxpayer could not prove that the monies received were characterised as loans.

The taxpayer was a Chinese businesswoman who has been living in Australia since 2006. She received large payments from China in the 2011, 2012 and 2013 years of income. The taxpayer argued the inflow of money – most of which came from her daughter in China – was actually borrowed money that was ultimately obtained through intermediaries from Chinese banks. The ATO issued amended assessments in respect of the 2011 and 2012 financial years which included the disputed amounts in the taxpayer’s assessable income. The ATO also issued a default assessment in respect of the 2013 year of income and imposed administrative penalties in all 3 years.

The AAT found that the taxpayer could not prove that the money received from her daughter ($16m) was a loan as the taxpayer and her daughter did not create loan documents to record the terms of the loan and there was no evidence that the taxpayer took any steps to repay her daughter or the Chinese banks while she was in Australia. The AAT also found that the $1.1m received from a friend was not a loan either as there were timing issues regarding the documentation. Finally, the objection decision with respect to the 2013 year of income was varied so that the $10,000 repayment received from a subsidiary company was not treated as assessable income.

YPQF v FCT [2019] AATA 518, AAT, File Nos 2016/5583-5585, McCabe DP, 21 March 2019.

[LTN 60, 28.3.19; Tax Month – March 2019]

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