EXCELLAR PTY LTD v FC of T
Members: G Lazanas SM
Tribunal:
Administrative Appeals Tribunal, Sydney
MEDIA NEUTRAL CITATION:
[2015] AATA 282
ATC 6684
G Lazanas (Senior Member)1. On 22 December 2005, the taxpayer Excellar Pty Ltd (Excellar) sold a property for $5,500,000 and derived a capital gain of $1,866,247. The amount of the capital gain was reduced by Excellar in its 2006 income tax return to $554,364 on the basis that it was entitled to the CGT small business concessions in Division 152 of the Income Tax Assessment Act 1997 (ITAA 1997), namely, the small business 50% reduction (Subdivision 152-C) and the small business retirement exemption (Subdivision 152-D).
2. The CGT small business concessions are only available if, amongst other criteria, certain basic conditions for relief are satisfied. One of those conditions is that the taxpayer satisfies the "maximum net asset value test" (MNAV test) in s 152-15 of the ITAA 1997. In October 2009, the Commissioner started an audit of Excellar and subsequently concluded that it did not satisfy the MNAV test.
3. On 11 August 2010, following the receipt of further information from the taxpayer's accountants, the Commissioner issued a notice of an amended assessment to Excellar for the year ending 30 June 2006, by increasing the net capital gain disclosed in its return by $1,405,249 to $1,959,613. On 11 August 2010, the Commissioner also issued a notice of assessment of shortfall penalty to Excellar on the basis of s 284-80 of Schedule 1 to the Taxation Administration Act 1953 (TAA) at the rate of 25% for failure to take reasonable care. Furthermore, the Commissioner decided that the shortfall penalty should not be remitted under s 298-20 of Schedule 1 to the TAA.
4. On 8 October 2010, Excellar objected to the amended assessment on the basis that "it should have the benefit of the Small Business Active Asset Reduction" and that "the amended taxable income included the sum of $500,000 which is the subject of a Small Business Retirement Exemption". Furthermore, Excellar stated that "the shortfall interest charge … is incorrect …" Notably, Excellar's objection did not set out any grounds with respect to the CGT cost base calculation on the disposal of its property or with respect to the imposition or remission of penalties.[1]
5. On 19 April 2012, the Commissioner allowed in part the objection of Excellar whereby the net capital gain income of Excellar for the 2006 income year was reduced from $1,959,613 to $1,866,247 (a reduction of $93,366) on account of additional amounts included in the CGT cost base calculation. The Commissioner maintained that Excellar did not satisfy the MNAV test. The Commissioner also considered the issue of penalties (even though this was not raised in the objection) and decided that his decisions to impose a shortfall penalty and not to remit the penalty were correct. The Commissioner decided to partially remit the shortfall interest charge.
6. In June 2012, Excellar applied for a review of the objection decision by this Tribunal.
7. For the reasons that follow, I have decided that the Commissioner's objection decision with respect to the amended assessment was correct and, in particular, that Excellar did not satisfy the MNAV test. Therefore, it was not entitled to claim any of the CGT small business concessions.
8. As Excellar's objection overlooked certain grounds, I have ordered that its grounds of objection are expanded to include two issues with respect to the cost base calculation of the CGT property (refurbishments and land tax) and, in addition, the imposition and remission aspects of the shortfall penalty. However, notwithstanding the extension of the grounds of objection, I agree with the Commissioner's objection decisions with respect to these matters.
THE ISSUES BEFORE THE TRIBUNAL
9. The essential issue is whether Excellar satisfies the MNAV test. Excellar will satisfy the MNAV test if, just before the CGT event, the sum of the following amounts does not exceed $5,000,000: (1) the net value of the CGT assets of Excellar; (2) the net value of the CGT assets of any entities connected with Excellar; and (3) the net value of the CGT assets of any of Excellar's small business CGT affiliates or entities connected with any small business CGT affiliates of Excellar that have not already been counted under (2).
10.
ATC 6685
As will emerge from the reasons below, there were numerous subsidiary issues in dispute between the parties. In addition, the taxpayer approached its case on a number of alternative bases and produced various MNAV calculations for these scenarios, to which the Commissioner responded with differing propositions. It is unnecessary to traverse all of the permutations, although it is necessary to consider some of the issues in detail.11. A convenient starting point is what Excellar effectively contended was its primary position in terms of identifying the assets and liabilities to be taken into account in the MNAV test. This is shown in the table below at [12] under the heading 'Applicant's Contention', with the total net value of the CGT assets of the relevant entities being, according to Excellar's submissions, approximately $4,850,000 and, therefore, under the $5,000,000 maximum net asset value threshold (which was relevant at the time). Under the heading 'Commissioner's Contention' in the table below, are the assets and liabilities that the Commissioner submitted should be taken into account, which result in Excellar's MNAV calculation being, according to the Commissioner, approximately $8,460,000. As can be seen from the table, the parties disputed not only the assets and liabilities to be taken into account, but the amounts in question. The table is primarily based on Exhibit A26 being the "Second Amended Schedule of Applicant's Assets and Liabilities for purposes of Maximum Net Asset Value Test" prepared by Excellar on or about 20 June 2014.
12. For reference purposes, I have inserted in the table, next to the relevant items, the number of the issue as it is discussed in these reasons. For example, the Chatswood Property is the 1st issue, cash at bank is the 2nd issue and so on. Some items listed in the table involve the same issue and I have grouped the discussion of these for each of the entities.
| APPLICANT'S CONTENTION | COMMISSIONER'S CONTENTION | |
| EXCELLAR PTY LIMITED | ||
| Assets: | ||
| Chatswood Property (1stissue) | 3,720,000 | 5,500,000 |
| Cash at bank (2nd issue) | 0 | 318,243 |
| IAG shares | 2,502 | 2,502 |
| Loan to Wellmist and Parktran partnership (3rd issue) | 0 | 223,490[2]
|
| Total Assets | 3,722,502 | 6,044,235 |
| Less Liabilities: | ||
| CBA Better Business Bill | -1,000,000 | -1,000,000 |
| Loan from George Aroney | -1,530,000 | -1,530,000 |
| Macquarie Instalments | -3,988 | -3,988 |
| Energy Australia (4th issue) | -3,257 | -2,961 |
| Orange mobile phone (4th issue) | -90 | -81 |
| CBA merchant fee (4th issue) | -99 | -88 |
| Willoughby Council waste fees (4th issue) | -815 | -741
ATC 6686 |
| ATO account balance | -534 | -534 |
| CBA Bill Handling Fee (5th issue) | -100 | 0 |
| Bank Interest on Bill (5th issue) | -5,954 | 0 |
| Water rates adjustment on settlement (5th issue) | -216 | 0 |
| Land tax adjustment on settlement (5th issue) | -21,075 | 0 |
| Solicitors fees (5th issue) | -2,167 | 0 |
| Telstra accounts (2) (5th issue) | -379 | 0 |
| Vodafone accounts (2) (5th issue) | -266 | 0 |
| Koolwater Plumbing (5th issue) | -175 | 0 |
| Nokia rent refund (5th issue) | -6,417 | 0 |
| Willoughby Council rates (5th issue) | -4,230 | 0 |
| Pearl Linen (5th issue) | -387 | 0 |
| Koutzoumis Lawyers' bill (5th issue) | -4,000 | 0 |
| Clark & Jacobs (5th issue) | -3,300 | 0 |
| ATO (5th issue) | -534 | 0 |
| ATO BAS amount(5th issue) | -2,415 | 0 |
| CBA Line Fee for $1.1m Bill Facility (5th issue) | -1,555 | 0 |
| Total Liabilities | -2,591,953 | -2,538,393 |
| Net CGT Asset Value for Excellar | 1,130,549 | 3,505,842 |
| GEORGE ARONEY ( 6th issue ) | ||
| Assets: | ||
| Bundeena Property (7th and 8th issues) | 630,000 | 630,000 |
| Campsie Property (7th issue) | 1,910,000 | 1,910,000 |
| Loan to Excellar | 1,530,000 | 1,530,000 |
| IAG shares | 6,822 | 6,822 |
| Cash at bank (9th issue) | 0 | 2,671 |
| Total Assets | 4,076,822 | 4,079,493 |
| Less Liabilities: | ||
| CBA Better Business Bill | -1,530,000 | -1,530,000 |
| Canterbury Council rates (10th issue) | -4,693 | 0 |
| Land Tax Bundeena and Campsie Properties (10th issue) | -21,486 | 0
ATC 6687 |
| Clark & Jacobs invoice (10th issue) | -12,100 | 0 |
| Canterbury Council rates Campsie Property (10th issue) | -2,346 | 0 |
| ANZ Visa (10th issue) | -730 | 0 |
| Century 21 real estate agent fees re Bundeena Property (10th issue) | -198 | 0 |
| Century 21 real estate agent fees re Bundeena Property (10th issue) | -116 | -76 |
| ATO BAS (10th issue) | -7,123 | 0 |
| Sydney Water | -1,175 | -1,175 |
| Integral Energy Bundeena Property | -235 | -235 |
| Bank interest (discount on bill) (10th issue) | -7,981 | 0 |
| CBA line fee for $1.53m bill facility (10th issue) | -2,012 | 0 |
| Sutherland Shire Council rates re Bundeena (2 quarters) (10th issue) | -507 | 0 |
| Total Liabilities | -1,590,702 | -1,531,486 |
| Net CGT Asset Value for George Aroney | 2,486,120 | 2,548,007 |
| WELLMIST | ||
| Assets: | ||
| Artarmon Property & Business (50%) (11th issue) | 3,615,000 | 4,750,000 |
| Total Assets | 3,615,000 | 4,750,000 |
| Less Liabilities: (12th issue) | ||
| Excellar Loan (3rd issue) | 0 | -111,745 |
| CBA Better Business Bill | -2,160,000 | -2,160,000 |
| Koutzoumis Lawyers (13th issue) | -1,088 | -989 |
| Commission on sale (13th issue) | -52,250 | -47,500 |
| Macquarie instalments | -5,299 | -5,299 |
| CBA account overdraft | -14,099 | -14,099 |
| Glenn Diamond | -1,016 | -1,016 |
| David Nabulsi (13th issue) | -305 | -277 |
| Fire Engineer's report (14th issue) | -37,500 | 0 |
| Land tax adjusted on sale (14th issue) | -32,520 | 0
ATC 6688 |
| Marinescape (14th issue) | -98 | 0 |
| Marinescape (14th issue) | -98 | 0 |
| David Nabulsi (14th issue) | -1,784 | 0 |
| Otis Elevator (14th issue) | -1,050 | 0 |
| Pearl Linen (14th issue) | -4,512 | 0 |
| Sydney Water (14th issue) | -1,692 | 0 |
| Secom Security (14th issue) | -91 | 0 |
| Swimmart (14th issue) | -322 | 0 |
| Tropical Plant Hire (14th issue) | -180 | 0 |
| Lane Cove Council (14th issue) | -3,179 | 0 |
| Collex (14th issue) | -203 | 0 |
| Doyle Bros (14th issue) | -315 | 0 |
| CBA Better Business Bill Facility Interest (14th issue) | -11,665 | 0 |
| Commander (14th issue) | -314 | 0 |
| AGL (14th issue) | -438 | 0 |
| Bridge Ellis (14th issue) | -144 | 0 |
| Bridge Ellis (14th issue) | -252 | 0 |
| Country Energy (14th issue) | -1,318 | 0 |
| Council rates - balance (14th issue) | -6,347 | 0 |
| Sydney Water (14th issue) | -3,385 | 0 |
| Property adjustments on sale other than land tax and water (14th issue) | -2,733 | 0 |
| Liability to adjust rent prepayment to Hutchison (14th issue) | -6,716 | 0 |
| Liability to adjust rent prepayment to Optus (14th issue) | -8,882 | 0 |
| GST shortfall claim (14th issue) | -14,035 | 0 |
| Wages owing to staff (14th issue) | -2,713 | 0 |
| CBA line fee for $4.32m bill facility (14th issue) | -2,930 | 0 |
| Total Liabilities | -2,379,473 | -2,340,925 |
| Net CGT Asset Value for Wellmist | 1,235,527 | 2,409,075 |
| Total Net CGT Asset Value for Excellar and connected entities | 4,852,196 | 8,462,924 |
13.
ATC 6689
I canvass the issues as they arise with respect to the calculation of the assets and liabilities, for each of the relevant entities; that is to say, I analyse the net value of the CGT assets of Excellar, followed by the net value of the CGT assets of Mr Aroney and then Wellmist. It was common ground that they were connected entities of Excellar as was Mrs Aroney. It was also common ground that the net value of the CGT assets of Mrs Aroney was nil.14. As there was a large body of evidence filed by the parties in this matter, I deal with the relevant evidence with respect to each of the disputed issues as they arise. Before doing so, it is necessary to set out the relevant legislative framework.
THE LEGISLATION
15. The legislative provisions with respect to the small business concessions for capital gains are set out in Division 152 of ITAA 1997. The provisions have been amended but I have set them out as they applied to the 2006 income year in issue.
16. Broadly, the basic conditions for relief are relevantly explained in s 152-5 of the ITAA 1997, as follows:
This Subdivision sets out some basic conditions for relief. If the basic conditions are satisfied, then a small business entity may be able to reduce its capital gains using the small business concessions in this Division.
The 3 major basic conditions are:
- (a) a limit of $5,000,000 on the net value of assets that the business and related entities own;
- (b) the CGT asset must be an active asset;
- (c) if the asset is a share or interest in a trust, there must be a controlling individual just before the CGT event and the entity claiming the concession must be a CGT concession stakeholder in the company or trust.
- …
17. Subsection 152-10(1) then sets out the basic conditions in the following way:
(1) A *capital gain (except a capital gain from *CGT event K7) you make may be reduced or disregarded under this Division if the following basic conditions are satisfied for the gain:
- (a) a *CGT event happens in relation to a *CGT asset of yours in an income year;
Note: This condition does not apply in the case of CGT event D1: see section 152-12.
- (b) the event would (apart from this Division) have resulted in the gain;
- (c) you satisfy the maximum net asset value test (see section 152-15);
- (d) the CGT asset satisfies the active asset test (see section 152-35).
Note: This condition does not apply in the case of CGT event D1: see section 152-12.
18. There is no issue here that Excellar satisfies paragraphs (a), (b) and (d) and that the satisfaction of the MNAV test in paragraph (c) of s 152-10(1) is the only basic condition that is disputed.
19. Section 152-15 relevantly provides as follows in relation to the satisfaction of the MNAV test:
You satisfy the maximum net asset value test if, just before the *CGT event:
(a) the sum of the following amounts does not exceed $5,000,000:
- (i) the *net value of the CGT assets of yours;
- (ii) the net value of the CGT assets of any entities *connected with you;
- (iii) the net value of the CGT assets of any *small business CGT affiliates of yours or entities connected with your small business CGT affiliates (not counting any assets already counted under subparagraph (ii)); and
Note: Some assets aren't included in the definition of net value of the CGT assets: see subsections 152-20(2) and (3).
20.
ATC 6690
It is unnecessary to consider the meaning given to the expression "entities connected with you" as Excellar and the Commissioner agree that the entities connected with Excellar just before the CGT event were George Aroney, Patricia Aroney and Wellmist. It will be necessary, however, to consider the meaning of the expressions "small business CGT affiliates" of yours and "entities connected with your small business CGT affiliates" and this is discussed below.21. Subsection 152-20(1) sets out the meaning of the "net value of the CGT assets" of an entity. It states, as follows:
(1) The net value of the CGT assets of an entity is the amount (if any) by which the sum of the market values of those assets exceeds the sum of the liabilities of the entity that are related to the assets.
22. There are no relevant definitions of the expressions "market value of those assets" and "liabilities … that are related to the assets" for the purposes of s 152-20(1) and so they take their ordinary meaning, to which I will come shortly.
23. Subsections 152-20(2), (3) and (4) set out further rules for working out the net value of the CGT assets of an entity. Those relevant in the present case are extracted below:
(2) In working out the net value of the CGT assets of an entity:
- (a) disregard *shares, units or other interests (except debt) in another entity that is *connected with the first-mentioned entity or with a *small business CGT affiliate of the first-mentioned entity; and
- (b) if the entity is an individual, disregard:
- (i) assets being used solely for the personal use and enjoyment of the entity, or the entity's *small business CGT affiliate; and
- …
(3) Subsection (4) applies in working out the net value of the CGT assets of an entity that is:
- (a) your *small business CGT affiliate; or
- (b) *connected with your small business CGT affiliate.
(4) Disregard assets of that entity that are not used, or held ready for use, in the carrying on of a *business (whether alone or jointly with others) by:
- (a) you; or
- (b) an entity *connected with you (unless the connection with you is only because of your *small business CGT affiliate).
Example: You and your husband decide to sell a florist's business that you jointly carry on. Your husband also wholly owns a company that carries on a newsagency business. You yourself have no other involvement with the newsagency business.
You need to work out whether you satisfy the maximum net asset value just before the sale. For this purpose, you disregard the newsagency company's assets. This is because, even though the company is "connected" with you, in that your small business CGT affiliate (ie your husband) owns it (see section 152-30), this connection arises only because your husband controls the company.
24. Section 152-25 sets out what is meant by a "small business CGT affiliate". Section 152-25 states as follows:
(1) A person is a small business CGT affiliate of yours if:
- (a) you are an individual and the person is your *spouse or *child under 18 years; or
- (b) the person acts, or could reasonably be expected to act, in accordance with your directions or wishes, or in concert with you.
(2) Another partner in a partnership in which you are a partner is not your small business CGT affiliate only because the partner acts, or could reasonably be expected to act, in concert with you in relation to the affairs of the partnership.
25. The legislative provisions with respect to penalties are set out later in these reasons.
THE FACTUAL BACKGROUND
26. There was no dispute between the parties about the facts which are summarised below.
27. Excellar is a private company. At all relevant times, its shareholders were George Aroney and Patricia Aroney who are husband and wife. Mr Aroney beneficially owned 51%
ATC 6691
of the shares in Excellar and Mrs Aroney beneficially owned 49% of the shares.28. The entities connected with Excellar for the purposes of the MNAV test are George Aroney, Patricia Aroney, and Wellmist Pty Ltd (Wellmist), the latter being a private company which was wholly beneficially owned by Mr Aroney. The partnership of Wellmist and Parktran Pty Ltd (Parktran) owned a property and business known as the Artarmon Inn. Wellmist had a 50% interest in the partnership.
29. The capital gain in issue in this matter was derived from the sale by Excellar of a property at Chatswood (Chatswood Property) by contract dated 22 December 2005 for $5,500,000 to MBY Motels Pty Ltd, an unrelated party. At the relevant time, the Chatswood Property was a boarding house with 32 rooms and a manager's unit, owned and run by Excellar. The ground floor of the Chatswood Property was a commercial showroom leased to a tenant. There were also car parking spaces. It was common ground between the parties that the Chatswood Property was an active asset for the purposes of s 152-40(1).
WHAT IS THE NET VALUE OF THE CGT ASSETS OF EXCELLAR?
30. For the purposes of the MNAV test, a CGT asset is valued at its market value just before the relevant CGT event. In the present case, CGT event A1 happened when the contract for sale of the Chatswood Property was entered into on 22 December 2005: ss 152-15 and 152-20(1). Both parties accepted that the expression "just before the *CGT event" should be given its ordinary meaning and that this was 22 December 2005 (the relevant date). The parties, however, disputed the market value of the Chatswood Property.
The Chatswood Property
31. The first issue concerns the market value of the Chatswood Property as at the relevant date. Was it the price for which the Chatswood Property was sold by Excellar or was its market value different to the sale price?
32. The market value of real property, within its ordinary meaning, is to be determined in accordance with the principles stated by the High Court in
Spencer v Commonwealth (1907) 5 CLR 418. Relevantly, Griffith CJ stated as follows at 432:
In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e., whether there was in fact on that day a willing buyer, but by inquiring "What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?" It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together.
33. Justice Isaacs stated at 441:
To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.
34. The case of Spencer concerned the value of land which was being compulsorily resumed. In this case, the parties accepted the valuation principles in Spencer but sought to interpret and apply them in different ways. Counsel for the Commissioner, Mr O'Brien, argued that
ATC 6692
it is unnecessary, in the present case, to look any further than the contract price of $5,500,000 agreed between Excellar and the purchaser in respect of the Chatswood Property and that this was the market value of the property just before the CGT event. Mr O'Brien submitted that as the parties were acting at arm's length and were willing, but not anxious to sell or buy and had freely negotiated the price, the contract price was equal to the market value. Therefore, the Commissioner did not need to call any valuation evidence.35. On the other hand, Excellar's counsel, Mr Bevan, contended that Spencer stands for the proposition that one should not look at the actual selling price of the asset. Mr Bevan put it this way:
The Commissioner's thesis is what has been rejected by Sir Samuel Griffith which is to look at what the parties did in that particular transaction.
Now, our valuation evidence is that by definition the one thing you can never have regard to when you're valuing Blackacre is what the vendor sold it for or the purchaser paid for it. You have to look at what Whiteacre, Greenacre, Brownacre which are comparable properties sold for because otherwise you're doing what Sir Samuel Griffith said you can't do which is inquiring what price a man desiring to sell could actually have obtained for it on a given day and the reason for this is because you can never trust the vendor or the purchaser to be dispassionate and fully informed …
The vendor and the purchaser are too close to it; that's why you need the valuer to undertake an objective test of what other people have done in more than one transaction …[3]
Transcript P-12 to 13
36. Excellar argued that the market value of the Chatswood Property was $3,720,000 and relied, primarily on the evidence of Mr Ian Handley, a qualified valuer with over 30 years' experience in the Australian property market, to prove the market value of the Chatswood Property.[4]
37. Mr Handley valued the Chatswood Property at $3,720,000 exclusive of GST as at the relevant date by considering a number of comparable boarding house properties with a sale date on or about 22 December 2005.[5]
38. In relation to the ground floor commercial showroom, Mr Handley nominated a rate of $5,000, per square metre "based on the limited sales of commercial showroom premises in the area". He did not specify in his report the comparable sales evidence of showrooms.
39. Mr Handley also applied the capitalisation method as a check against the direct comparison method of valuation using information provided to him as to the net income for the boarding house and the rental from the commercial premises. He adopted a yield of 10% based on two boarding house properties for which he recorded the investment yield (a smaller boarding house with 12 rooms in Annandale reflected a yield of 12.13% net per annum and another smaller boarding house with 12 rooms in Darlinghurst had a 9.29% yield). In relation to the commercial showroom, he adopted a 7% yield on the commercial premises. Mr Handley allowed no vacancy factor in his capitalisation method of valuation "[g]iven current strong market conditions at the date of valuation". His capitalisation method of valuation produced an estimated valuation of $3,300,000.
40.
ATC 6693
Mr Handley was extensively cross-examined at the hearing. He confirmed that his valuation approach is based on the principles in Spencer. He was also asked about the actual selling price for the Chatswood Property and why he had not taken that into account in his valuation. Mr Handley responded as follows:There is several reasons for that. The purchase price never, ever necessarily means value; that's the number one point. The second point is that in most valuations that we do, we are generally instructed by an instructed party not to include the subject property as part of the evidence. Number three, they don't want that, whoever the party might be, because they don't think it's necessarily reflective of what the value of the property is. We've got to look wider at the sales evidence that we can get our hands on, and that is what has been put in here. And, fourthly, in my experience with doing these valuations for over 30 years, it has never been the case of value equals purchase price. We have been instructed to exclude it because the instructing party wants a wider view of what's really happening in the marketplace. And if I may just finish, most of the lending institutions that we have been involved with, want it excluded. They say when they lend, their LVR is the lesser of valuation or purchase price, whichever is the lesser.[9]
Transcript P-99
41. As to the comparable sales of boarding houses, it is clear that Mr Handley's valuation did not reference any comparable sales in the north Sydney region, except a smaller, older style boarding house with 19 backpacker rooms in Manly with a sale price of approximately $99,000 per room. He acknowledged, as noted above, that there were limited comparables in the immediate area of the subject property. Most of the boarding houses which were considered were in the inner city suburbs of Sydney including several in Redfern. It also transpired that Mr Handley's valuation did not take into account the manager's room or the 10 car parking spaces on the subject property. In addition, the depreciable assets included in the contract for sale with a written down value of $1,395,376 were not taken into account in the capitalisation method of valuation. Mr Handley could not explain some of these matters at the hearing but he offered the following explanation by letter dated 4 June 2014 to the Tribunal:
"For the Chatswood property, whilst I acknowledge there may be some commercial value in renting out these car spaces to the open market, we were advised that these spaces were not available to anyone else other than the occupants/tenants.
Therefore I did not include or assess any rental stream for this component in the valuation of the subject property… .
In respect of the Chatswood valuation I made an allowance for plant and equipment in this report because it was a loss making business and in my opinion this aspect had no value, but the plant and equipment had an independent value"[10]
Exhibit A22
42. The explanations did not assist in clarifying matters. His explanation that the boarding house was a loss making business was at odds with the information that he said was provided to him by Mr Aroney or Excellar's accountant to the effect that the net income and operating profit of the boarding house was $240,000, plus $65,000 net rent per annum from the commercial showroom.[11]
43. Excellar also relied on the evidence of Mr Aroney who stated in his witness statement dated 28 June 2013 that he considered the market value of the Chatswood Property was $4,100,000 based on an offer for that amount received in 2005 from a company which was an agent for purchasers of such properties. Mr Aroney also said that the selling price of $5,500,000 was far better than what he considered to be the market value of the property at the relevant time "because of the generous terms in the Contract".[12]
44. Mr John Evat, a director of MBY Motels Pty Ltd, the purchaser entity of the Chatswood Property, gave evidence in the form of two
ATC 6694
witness statements (one on behalf of Excellar and one on behalf of the Commissioner). He also gave evidence at the hearing. Mr Evat confirmed that Excellar and the purchaser entity were unrelated although he was well acquainted with Mr Aroney.[14]45. I do not accept Excellar's contention that the market value of the Chatswood Property was $3,720,000 on the basis that Spencer stands for the proposition that the sale price of the subject property is to be ignored and that an expert valuer's evidence of comparable sales is the preferred approach to determining the market value of the subject property. On the contrary, I consider that the actual selling price of the subject property is very informative as was observed in
Inez Investments Pty Ltd v Dodd (1979) 26 The Valuer 501. In that case, the issue was different, namely, whether a valuer was negligent in failing to investigate and take into account the existence of a contract for sale of the property when undertaking a valuation for mortgage purposes, but the principles insofar as valuation practice are concerned are equally applicable to the issue here of determining the market value of the subject property. Carmichael J of the New South Wales Supreme Court held at 505:
"where a valuation of a piece of real estate is sought as at a particular date the most relevant information is the sale of that very property, if there be one, at or close to that date. The matters requiring analysis are the terms and conditions of the contract, and was it a voluntary sale of a not anxious seller to a not anxious buyer?"
46. That is to say, the selling price is the most relevant information and the sale has to be analysed to see how it complies with the test of value set out in Spencer's case. In the Inez Investments case, Carmichael J stated at 505 that "[f]ailure to carry out these functions is to risk ignoring the best evidence of value".
47. In the present matter the evidence of Mr Aroney and Mr Evat, establishes that Excellar and MBY Hotels Pty Ltd were a willing but not anxious seller and purchaser. In regard to the sale contract[19]
48. It follows that, insofar as Mr Handley's valuation report is concerned, I reject Excellar's submission that I should adopt it as expert evidence decisive of the market value issue. I do not accept that the valuation evidence, at least in the present matter, is of a kind that is based on matters that are so complex that the Tribunal is unable to reach its own
ATC 6695
conclusions. I have taken into account the fact, acknowledged also by Mr Handley, that valuing is "an imprecise science".[21]49. I find that the contract price for the sale of the subject property - $5,500,000 - was evidence of its market value as at the relevant date and is the appropriate amount to be included in the MNAV test.
Cash at Bank
50. The second issue is whether Excellar's "other assets" include cash at bank and, if so, the amount to be included. Excellar argued that cash is not a CGT asset. However, an amount held in a bank account is clearly a chose in action for the depositor, that is, a debt owed by the bank to the depositor and, therefore, a CGT asset under s 108-5 of ITAA 1997.
51. As to the amount of the bank account balance, Excellar's balance sheet as at 30 June 2005 showed a credit balance of $336,052, however, Excellar was unable to produce any independent evidence, such as bank account statements, as to what the balance was as at the relevant date. The Commissioner included the amount of $318,243 based on the interest income of Excellar for the 2006 income year as provided to the Commissioner by the bank.
52. Mr Aroney, with leave of the Tribunal, filed a fifth witness statement dated 4 June 2014 which addressed, amongst other things, the cash at bank issue. His evidence was that, based on his recollection and his experience as the manager of the day to day business and financial transactions of Excellar in 2005 and 2006, the credit balance in the bank account as at 30 June 2005 was fully expended by 22 December 2005 (the relevant date) in paying the trade creditors of Excellar.[23]
Additional Asset - Loan by Excellar to Wellmist and Parktran Partnership
53. Mr Aroney referred to a loan of monies by Excellar in or about November 2004 to the Wellmist and Parktran partnership to enable it to settle the purchase of a property at Artarmon, discussed below. This is supported by a facsimile from the CBA to Mr Aroney setting out cheques drawn for the settlement.[25]
GST Component of Liabilities
54. The fourth issue is whether the GST component of certain liabilities is included or excluded from the MNAV calculation. Mr O'Brien argued that the GST component shown on invoices from Energy Australia, Orange mobile phone, CBA merchant fee and Willoughby Council waste fees to
ATC 6696
Excellar set out in the table at [12] should be excluded on the basis that Excellar is entitled to an input tax credit for the GST charged. Mr O'Brien referred me toCommissioner of Taxation v Byrne Hotels Qld Pty Ltd [2011] FCAFC 127 where the Full Federal Court allowed the GST exclusive amount of the agent's commission and solicitors' fees as liabilities in applying the MNAV test (see Byrne Hotels case at [120], [129], [130] and [132]).
55. Mr Bevan submitted that the GST issue was not specifically agitated or addressed in the Byrne Hotels case and that the GST inclusive amounts are the liabilities. Certainly, the judgment of the Full Court of the Federal Court does not reveal that the GST aspect was canvassed by the parties or considered by the Court. That case was mainly concerned with whether a real estate agent's fees and solicitors' fees were liabilities and is considered later in these reasons. For present purposes, I agree with Mr Bevan that the GST inclusive amounts of the expenses are the liabilities owed by Excellar just before the CGT event. I have taken into account the fact that "liabilities" is not defined either within Division 152 or by s 995-1 of the ITAA 1997 and has its ordinary meaning. Relevantly, liabilities means debts due for payment, which necessarily refers to the amount (inclusive of any GST) that is owed. I do not consider that a taxpayer's entitlement to input tax credits has any relevant implications in the circumstances, especially as the entitlement to claim input tax credits arises when a taxpayer's net amount of GST for a tax period is worked out pursuant to the provisions of the A New Tax System (Goods and Services Tax) Act 1999 (see ss 7-5, 17-5 and Divisions 33 and 35), and not at the time of incurring the expenses. Furthermore, a taxpayer's entitlement to claim input tax credits for any GST charged is independent of the obligation owed to the supplier.
Were Excellar's Liabilities in Existence Just Before the CGT Event?
56. The fifth issue is whether certain liabilities, most of which the Commissioner accepts are expenses of Excellar related to its CGT assets, were in existence just before the CGT event. It turns on whether Excellar discharged the onus of proof regarding the existence and amount of the liabilities in circumstances where Excellar did not provide any bank statements to show when invoices were paid and, in some cases, did not have copies of the invoices to substantiate the amounts in question. The absence of bank statements, complete cheque butts and other financial records made the task very difficult although I accept Mr Aroney's explanation that many business records, including of Excellar were lost in the course of moving house.
57. In his first witness statement dated 28 June 2013, Mr Aroney stated that the trade creditors as at the relevant date totalled $27,102 without giving any itemisation.[27]
58. My approach in concluding that some of these liabilities were in existence as at the relevant date is based on independent records that were produced and in reliance on Excellar's available cheque butts as well as, in some cases, supported by Mr Aroney's list (see [57] above). If invoices were produced without any record of payment or without some independent evidence showing that these were still outstanding, I was generally
ATC 6697
not satisfied that these were liabilities that were still in existence as at the relevant date. I note for completeness that Excellar filed evidence by an accounting expert as to the meaning of liabilities that related to assets but I found it unnecessary to refer to this in any detail as the Commissioner did not take issue with the relationship of liabilities to assets. I turn now to address the various liabilities claimed. These are listed as the fifth issue in the table set out at [12] above.59. I find that the CBA handling fee of $100 and discount of $5,954 were debited by the bank on 22 December 2005 as per the bank's letter of the same date which expressly states that "[y]our Account Number … has today been debited with the sum of $6,053.93"[30]
60. I find that the Willoughby City Council rates ($4,230) were a liability as at the relevant date based on a facsimile from Excellar's lawyers dated 1 January 2006 directing a cheque to be drawn to the council for that sum.[31]
61. I find that the Sydney Water rates ($216) were not a liability as at the relevant date, because although they were referenced in the same facsimile (referred to at [60] above) asking for a cheque to be drawn to Sydney Water, I was not satisfied that it was a liability in existence as at the relevant date. The settlement sheet showed that the water rates were adjusted for the period from 1 January to 31 March 2006[32]
62. I find that the amount shown as the land tax adjustment on settlement of the Chatswood Property in the amount of $21,075 based on the same facsimile referred to above at [60] asking for a cheque in that sum for the Office of State Revenue was not a liability as at the relevant date. I was not given enough information to determine what liability for land tax, if any, did exist as at the relevant date. Mr Aroney stated that that amount actually referred to land tax payable for the 2006 calendar year but had proceeded on the basis that the same amount was charged for the 2005 calendar year although he had no assessment or receipt for the prior year's payment. His statement is contrary to the settlement sheet for the Chatswood Property which showed the 2006 year land tax payable as being $13,326.[33]
63. There is no evidence to show when the following amounts were actually paid although I acknowledge that new documents were produced during the course of the hearing, including invoices bearing dates prior to the relevant date. Therefore, I find that these were not liabilities of Excellar in existence as at the relevant date: solicitors' fees invoice dated 11 November 2005 for the sum of $2,167 and Koolwater Plumbing account for $175.
64. I find that the Telstra, Vodafone and Pearl Linen accounts ($379, $266 and $387, respectively) were liabilities of Excellar in existence as at the relevant date, based on suppliers' statements and Excellar's cheque butts that were produced for the first time at the hearing.[34]
65.
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I find that the Koutzoumis Lawyers invoice for $4,000 dated 2 February 2006 produced at the hearing was in relation to the sale of the Chatswood Property and obviously spanned the relevant date in that it involved preparing the contract of sale and attending to the settlement on 1 February 2006. Excellar argued that the entirety of the amount was a liability as at the relevant date whereas the Commissioner argued that none of it was a liability although he had not seen the invoice until it was produced at the hearing. Based on the Full Court's judgment in the Byrne Hotels case, the unbilled lawyers' fees were liabilities at the relevant time to the extent they related to work that was done by the lawyers prior to that time. In the present case, I am satisfied that approximately half of the fees and disbursements related to work that was undertaken before the relevant date on the basis of an apportionment referable to the attendances enumerated in the lawyers' invoice and Excellar had an obligation to pay that amount prior to the relevant date. Accordingly, I find that $2,000 was a liability in existence before the relevant date.66. In relation to the Clark & Jacobs invoice dated 14 March 2006 for $3,300 produced at the hearing, the schedule of services attached to the invoice showed that the work was undertaken by that firm in the period from 17 January to 28 February 2006, that is, after the relevant date.[36]
67. I find that Excellar did not have a liability owing to the ATO as at the relevant date for the amount of $2,415 being the net amount of GST reported on its Business Activity Statement lodged in respect of the quarterly tax period ended 31 December 2005. The date that the BAS was lodged was not in evidence. It is very unlikely that the BAS was lodged before the relevant date for a number of reasons including that it is for the period ending 31 December 2005 and because the relevant documents for the preparation of the BAS were only provided to Clark & Jacobs in mid January 2006 (see [66] above). Accordingly, the GST liability of $2,415 being the net amount payable to the Commissioner was not a liability as at the relevant date. There was no suggestion that Excellar had a different GST liability before the relevant date. The Commissioner conceded during the hearing that Excellar had a liability to the ATO for a separate account balance of $534.[39]
68. Excellar had a $1 million bill facility arranged on or about 10 February 2005 that was still current as at the relevant date. It claimed to have a liability for a CBA line fee of $1,555, which was charged monthly in advance at the rate of 1.6% per annum of the bill facility limit.[40]
69. The complete list showing the net value of the CGT assets of Excellar and its connected entities, in accordance with my reasons, is set out in the attached table marked Annexure A .
WHAT IS THE NET VALUE OF GEORGE ARONEY'S CGT ASSETS?
The Bundeena Property and the Campsie Property
70. Mr Aroney owned a property at Baker Street, Bundeena (Bundeena Property) which was partly used for private purposes, namely, as a holiday house, and partly used to derive rent, as evident from the rental income and deductions in respect of the Bundeena Property
ATC 6699
disclosed in his tax returns. At the relevant time, Mr Aroney also owned a property at Beamish Street, Campsie (Campsie Property). The Campsie Property was commercial and was leased.71. There was no dispute between the parties that if the Bundeena Property is to be included in the MNAV test, its market value as at the relevant time was $630,000. The parties also agreed that if the Campsie Property is to be included its market value at the relevant time was $1,910,000. The parties however disputed whether the properties should be counted in the MNAV test which I will refer to as the seventh issue .
72. Excellar stated that both properties should be disregarded from the net value of the CGT assets of Excellar under s 152-20(4) because they were "non-business assets" under s 152-20(4), set out at [23] above.
73. A pre-condition to the operation of s 152-20(4) requires Mr Aroney to be a small business CGT affiliate of Excellar, or connected with a small business CGT affiliate of Excellar. The sixth issue is whether Mr Aroney was a "small business CGT affiliate" of Excellar and it is necessary to resolve that issue in order to determine the seventh issue referred to in [71] about whether the Bundeena Property and the Campsie Property should be included in the MNAV calculation.
74. Relevantly, to meet the definition of "small business CGT affiliate" in s 152-25(1)(b), set out in [24] above, Mr Aroney must have acted, or could reasonably be expected to have acted in accordance with Excellar's directions or wishes, or in concert with Excellar. Excellar contended that Mr Aroney was a "small business CGT affiliate" on the basis that he acted or could reasonably be expected to act in concert with Excellar (it did not contend that Mr Aroney acted in accordance with his private company's directions or wishes).
75. I agree with the authorities that a director or shareholder is not a small business CGT affiliate of the relevant company merely because of the office they hold or the formal relationship they have with the company and that the definition of "small business CGT affiliate" requires something more than, or different to, those relationships that are dictated by legal requirements, fiduciary duties and the like. Those authorities include
Re Altnot Pty Ltd and Commissioner of Taxation [2013] AATA 140, where Deputy President Forgie found that the sole director and controlling shareholder of a company was not a "small business CGT affiliate" of that company and
Re The Taxpayer and Commissioner of Taxation [2010] AATA 455, where Deputy President Hack found that a director (who was also an employee and, through his company, a 15% shareholder) of the company was not a "small business CGT affiliate" of the company. At [54] Deputy President Hack observed:
I do not regard the submission as sound. The acts of the son director, that is the first three matters, are explicable on the basis of the son director's position as a director or as an employee (or both) of the applicant. That is to say, it was his conduct qua director of the applicant, not conduct of his in his own right or in his capacity as director of other entities. Moreover, there is no objective or purpose common to both, the object or purpose that underlies the conduct is that of the applicant. The son director's conduct is directed to that objective or purpose but it is not his objective or purpose. Were the matter to be tested in the way that the Commissioner suggests, every employee would be regarded as a small business CGT affiliate of the employer. What is required to satisfy the test of affiliate, and what is absent from the Commissioner's formulation, is demonstrated by the test of "in concert with" described by Finkelstein J in
Papua New Guinea Dockyard Ltd v Adams [24] in this way:"Many of the important cases that discuss the meaning of "acting in concert" are helpfully collected by Barrett J in
Bateman v Newhaven Park Stud Ltd [2004] NSWSC 566; (2004) 49 ACSR 597. These cases show that a person, A, will be acting in concert with another person, B, if A engages in conduct (act or omission) in consequence of an agreement or understanding between A and B and the conduct is in pursuance of an objective or purpose which is common to
ATC 6700
both. It is not as is sometimes suggested necessary to show that the common objective or purpose "has some pejorative element [such as] to circumvent the letter, or perhaps even the spirit, of some other statutory obligation or requirement"
76. Excellar contended that the phrase "in concert with" was incorrectly treated as being synonymous with "control" in the tax cases referred to above and they should not be followed. I disagree. The meaning of the phrase "to act in concert with" has been held (in non-tax contexts) to mean "at least an understanding between the parties as to their common purpose or object:
Adsteam Building Industries Pty Ltd v The Queensland Cement and Lime Co Ltd (No 4) [1985] 1 Qd R 127. In my view, it was not possible for Mr Aroney, as the controller and directing mind of Excellar, his private family company, to have reached an agreement or understanding with Excellar. Accordingly, Mr Aroney was not acting, nor could he reasonably be expected to have been acting, in concert with Excellar.
77. It follows that the conclusion with respect to the sixth issue is that Mr Aroney is not a "small business CGT affiliate" of Excellar within the meaning of s 152-25. Furthermore, as there are no small business CGT affiliates of Excellar it is not possible for Mr Aroney to be "connected with a small business CGT affiliate" of Excellar. Accordingly, s 152-20(4) has no application when working out the net value of the CGT assets of Mr Aroney.
78. Before determining the seventh issue referred to above at [71] in respect of both the Campsie and the Bundeena properties, there is a further issue (the eighth issue ) raised with respect to the Bundeena Property only and that is whether it can be disregarded and not included in the MNAV calculation on the basis of s 152-20(2)(b)(i) set out at [23] above. Broadly, that paragraph relevantly provides that you disregard assets being used solely for the personal use and enjoyment of the entity, in this case, being Mr Aroney, as one of the entities connected with Excellar. As Mr Aroney used part of the Bundeena Property for an income producing purpose, it follows that the property was not being used solely for his personal use and enjoyment. The statutory provision does not contemplate apportionment as was submitted by Excellar, or for that matter any other de minimus test. Therefore, the Bundeena Property was not used solely for Mr Aroney's personal use and enjoyment.
79. It follows that the seventh issue is also decided against Excellar. Accordingly, the Bundeena Property which the parties agreed had a market value of $630,000 as at the relevant date is included in the net value of the CGT assets of Mr Aroney for the purposes of the MNAV test. So too is the Campsie Property which the parties agreed had a market value at the relevant time of $1,910,000.
Cash at Bank
80. The ninth issue concerns whether Mr Aroney's cash at bank ($2,671 - about which there was no issue as to the amount in question), is to be included in the MNAV test. For the same reasons given above at [50], it is a CGT asset under s 108-5 of ITAA 1997 and, accordingly, to be counted in the MNAV calculation.
What were Mr Aroney's Liabilities?
81. I turn now to the liabilities in dispute between the parties, for the purpose of calculating the net value of the CGT assets of Mr Aroney. I have categorised all these disputed amounts in the table at [12] above as the tenth issue between the parties. Because further documents were produced at the hearing and further explanations were also provided, the Commissioner rightly conceded some of these amounts, reflected in a table presented at the hearing marked Exhibit R4. My consideration of the disputed amounts takes into account the Commissioner's revised position, as reflected in that Exhibit and explained below.
82. I find that the claim of $4,693 in respect of Canterbury Council rates was a liability of Mr Aroney in relation to his assets as at the relevant date. It represented the sum of the third and fourth instalments of rates for the Campsie Property. This amount was conceded by the Commissioner during the hearing, however, Mr O'Brien did not accept that the second instalment amount ($2,346) in respect of which a separate claim was made due on 30 November 2005 had not been paid as at the relevant date. As the taxpayer did not produce any
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evidence as to the date of payment of the second instalment, I infer that it had already been paid and find that the amount of $2,346 was not a liability in existence as at the relevant date.83. The claim for land tax owed by Mr Aroney in respect of the Campsie and Bundeena Properties ($21,486) was based on a 2006 year land tax assessment notice issued in February 2006 for land owned by him as at 31 December 2005, that is, after the relevant date.[42]
84. Mr Aroney had received an invoice from Clark & Jacobs in the sum of $12,100 dated 21 December 2005. The invoice shows that all of the work was undertaken in the period prior to the relevant date and related to his CGT assets. There was also a cheque butt showing payment was made on 12 January 2006.[43]
85. Excellar claimed liabilities based on Mr Aroney's ANZ Visa statement for the period 29 November to 28 December 2005 which had been stamped as paid at an ANZ bank on 18 January 2006. I find based on his evidence that the transactions on the statement relating to John Fairfax Publications up to the relevant date totalling $457 related to his CGT assets and are liabilities to be taken into account in the MNAV test. However, I was not satisfied that other amounts on that statement including for Optus, Caltex and Freshfood Services related to Mr Aroney's CGT assets. In so finding, I agree with the Commissioner's argument that the phrase 'related to' in s 152-20(1) takes its ordinary meaning. That is to say, there must be a real and substantial, not remote, relationship or connection between the CGT assets of the particular entity and the liability or liabilities of the entity related to those CGT assets:
Bell v Commissioner of Taxation [2012] FCA 1042 per Gordon J.
86. Mr Aroney had been charged fees of $198 by a Century 21 real estate agent for managing the Bundeena Property including water rates paid on behalf of Mr Aroney.[44]
87. I find that Mr Aroney did not have a liability owing to the ATO as at the relevant date for the amount of $7,123 being the sum of the net amount of GST and PAYG instalments reported on his BAS lodged in respect of the quarterly tax period ended 31 December 2005.[46]
88. Mr Aroney had a $1.53 million bill facility that matured on 28 November 2005 with its next term due on 28 December 2005. Excellar claimed that Mr Aroney had a liability of $7,981 referable to an interest amount of $7,881 plus a $100 handling fee as at the relevant date. However, correspondence from the bank shows that these amounts were debited in November 2005 and not outstanding as at the relevant date.[48]
ATC 6702
liability was not in existence as at the relevant date. The same analysis applies to a new liability claim made by Excellar at the hearing for a line fee in the sum of $2,012 with respect to the same facility. There was no evidence as to when this amount was debited so I was not satisfied that the amount claimed was a liability as at the relevant date. The evidence of Mr Stephen Small, a relationship executive at the Commonwealth Bank of Australia, who was familiar with the various loans to Mr Aroney and his related entities since about 1999, did not specify the dates when the relevant line fees were debited from the bank accounts.[49]89. I find that Mr Aroney had a liability as at the relevant date for Sutherland Shire Council rates in the sum of $570 (not $507 as incorrectly shown in Exhibit A25). This liability represents the final two instalments for the financial year in respect of the Bundeena Property based on the rates notice in evidence.[50]
90. The complete list showing the net value of the CGT assets of Excellar and its connected entities (including Mr Aroney), in accordance with my reasons, is set out in the attached table marked Annexure A .
WHAT IS THE NET VALUE OF WELLMIST'S CGT ASSETS?
What is the Market Value of the Artarmon Assets?
91. Wellmist was in a 50/50 partnership with Parktran. The assets in the partnership consisted of the "Artarmon Inn" motel business (Artarmon Business) and the property at Pacific Highway Artarmon (Artarmon Property) where the hotel business was carried on, collectively referred to as the Artarmon Assets. The parties agreed that Wellmist's 50% interest in each of the assets of the partnership, namely, the Artarmon Assets, is included in the MNAV calculation but disagreed as to the market value of those assets.
92. The eleventh issue is the market value of the Artarmon Assets and whether it is the price for which the Artamon Assets were sold in late 2005. Excellar contended that the market value of Wellmist's CGT assets as at the relevant date was not 50% of the sale price of the Artarmon Assets ($4,750,000) but instead ($3,615,000) based on 50% of the valuation of the Artarmon Assets, that valuation having been undertaken by Mr Handley (who also did the valuation of the Chatswood Property referred to above). Excellar also relied on the evidence of Mr Aroney and Mr Arno Caras, the latter being a director of the purchaser entity of the Artarmon Assets.
93. The facts relating to the sale of the Artarmon Assets were not in dispute. On 31 October 2005 Wellmist and Parktran entered into contracts with Punthill Artarmon Pty Ltd (Punthill) for the sale of the Artarmon Assets. Pursuant to those contracts, the Artarmon Property was sold for $8,000,000 and the Artarmon Business was sold for $1,500,000, namely, $9,500,000 in total for the Artarmon Assets. Settlement occurred on 30 January 2006.
94. The Commissioner submitted that the contract prices agreed between Excellar and Punthill for the sale of the Artarmon Property and the Artarmon Business ($8,000,000 and $1,500,000, respectively) were the "market values" of those assets just before the CGT event and that 50% of that amount would be included in the MNAV test. The Commissioner relied on the Spencer case. Specifically, Mr O'Brien argued that there is no evidence that the partnership was an anxious vendor or that Punthill was an anxious purchaser or that the Artarmon Assets had any special value to Punthill.
95. Excellar submitted that the market value of the Artarmon Assets was $7,230,000 primarily in reliance on a valuation by Mr Handley.[51]
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2013 and prepared the valuation report shortly afterwards. He noted that the property had been extensively refurbished internally and externally since the date of valuation. He also noted that he had been advised by his client that part of the property was leased to Optus at the relevant time for an annual rental of $21,697 plus GST. He relied on financial statements provided to him by his client's accountants to conclude that "the subject property was a loss-making entity" and consequently, that the inherent value of the property was in the land and buildings and not with the related business.96. Mr Handley's valuation confirmed that "there have been limited sales of motels which could be considered similar to the subject property" and that "the date of valuation was pre the Global Financial Crisis, which saw property values across the market fall considerably".[52]
• 66 rooms @ $105,000 per room $6,930,000 • Plant and Equipment and F.F.& E as per written down value provided $150,000 • Optus income of $21,697 capitalised at say 15% $144,647 Total Estimated Valuation:- $7,224,647[53] Exhibit A8, Annexure C, page 14
97. Mr Handley also did a check method of valuation relating to the capitalisation of net profits by making certain assumptions including as to what a viable motel business operating from a similar property should achieve. Those assumptions included an average room tariff of $140 per night and an average occupancy of 70%. He then deducted operating costs as provided to him by his client. That calculation produced a net operating profit of $1,176,489 which he capitalised at the rate of 15% to produce a value of $7,843,000 exclusive of GST. Mr Handley adopted as his preferred valuation of the Artarmon Assets the value of $7,230,000 exclusive of GST based on the direct comparison method of valuation. When asked by Mr O'Brien at the hearing about the sales price of the Artarmon Assets and whether that reflected their market value at the relevant date, Mr Handley responded as follows:
…Well again, we've had this discussion before, purchase price does not equal value, in my opinion, and therefore that is why we looked at a broad range of sales.
…Well, as I said to you before we - when we look at a valuation, again using my statement before about it being an imprecise science, that's exactly what it is. If I just limited my, or your assumption that a sale price of whatever it was, $9.5 million is the market value, I've got no basis to assume that. I need to look at the market. What's really happening in the marketplace, and that's why I believe I have done in this valuation report. Again, I say, sales price is not valuation. You've got to look across the spectrum of the sales that have been completed and also in relation to that, in our belief at the time all this was going on, it was - we were in an overheated market. [54]
Transcript P-114
98. The Commissioner rejected Excellar's contention that the market value of the Artarmon Assets was $7,230,000. In particular, the valuation by Mr Ian Handley did not have any regard to the actual sale price of the Artarmon Assets. Mr O'Brien additionally pointed out that Mr Handley's valuation was problematic because of the following factors: none of the properties used as comparables sales evidence were on the North Shore; there were no proper inspections of the properties that comprised the comparable sales or of the rooms at the subject property; the price range for the rooms was very wide and no justification had been given
ATC 6704
for choosing the lower end of the range; the figure for the depreciating assets included in the calculation was incorrect and should have been at least $258,658; and the basis for choosing a capitalisation rate of 15% in respect of the rental income from Optus was unsupported.[55]99. Mr Aroney gave evidence that he believed that Wellmist and Parktran "received a very good offer" from Punthill for the Artarmon Assets.[56]
100. Mr Caras explained in his evidence, given in the form of a written statement filed on behalf of the Commissioner and orally at the hearing, that Punthill was actively looking for a site in Sydney at that time in order to expand their Melbourne based business and that there were very limited options available.[59]
101. I do not accept that the market value of the property was $7,230,000 in accordance with the valuation of Mr Handley. I consider that there are some difficulties with the valuation evidence, specifically the selection of the rate of $105,000 out of a possible range of between $96,430 to $303,571 per room on average, particularly when it is taken into account that the $96,430 room rate references a hotel at St Marys which is not a suburb close to the Sydney CBD. Mr Handley did not justify how he arrived at the rate of $105,000 per room but it was clearly at the lower end. I agree with Mr O'Brien's observation about the sensitivity of the calculation based on that room rate. If Mr Handley had applied an average room rate of $135,000 based on one of the Glebe hotels used as comparable sales evidence which comprised 59 rooms, the valuation for the Artarmon Assets would be approximately $9,350,000. Other aspects of Mr Handley's valuation were also unsubstantiated including the capitalisation rate of 15% applied to the rental income from Optus.
102. I have also had regard to the evidence of Mr Aroney and Mr Caras. In my view, the actual selling price was the market value of the Artarmon Assets in the present case as the parties were acting at arm's length and were willing, but not anxious to sell or buy and had freely negotiated the price. I do not consider that the Artarmon Assets had any special value to Punthill nor did the fact that it was agreed that Punthill could pay approximately half of the purchase price after completion of the sale account for any different selling price. Furthermore, my reasons set out above at [46], [47] and [49] are equally applicable in relation to the valuation of the Artarmon Assets. That is to say, the selling price is the most relevant information and the sale has to be analysed to see how it complies with the test of value set out in Spencer's case. I find that the market value of the Artarmon Assets was $9,500,000 and that $4,750,000 (representing Wellmist's 50% interest) is to be included in the MNAV calculation.
ATC 6705
103. The twelfth issue in this matter concerns Excellar's argument that Wellmist's liabilities were 100% of what Wellmist and Parktran owed as at the relevant date as partners are jointly liable for all liabilities without regard to their share in partnership capital. For example, Excellar contended that as an amount of $4,320,000 was borrowed by the Wellmist and Parktran partnership from the CBA, Wellmist was liable for 100% of this borrowing because, while it was only attributed 50% of the CGT assets of the partnership under s 108-5(2)(c) of the ITAA 1997, there was no equivalent deeming rule for liabilities. Excellar advanced this argument as one of its alternative scenarios in preparation for the hearing.
104. I am reluctant to accept this argument as it produces distortions in the application of the MNAV test when the net value of the CGT assets of a partner is calculated. I think the better view is that for the purposes of the MNAV test, Wellmist's assets and liabilities are 50%, equivalent to its interest in the partnership. This interpretation is also coherent with the test in s 152-20(1) of the ITAA 1997 which references "the liabilities of the entity that are related to the assets". Accordingly, I have proceeded on the basis that all liabilities that are counted in the MNAV calculation for Wellmist are 50% of the amounts of the liabilities of the Wellmist and Parktran partnership.
105. The thirteenth issue concerns the GST component of certain invoices, namely, whether the GST inclusive amount or the GST exclusive amount is to be taken into account in the MNAV test. It is the same issue that the Commissioner raised with respect to some invoices issued to Excellar and Mr Aroney, discussed above at [54], [55] and [84]. For the reasons explained above at [55], I find that the GST inclusive amounts are to be included in the MNAV test, as follows: Koutzoumis Lawyers - $1,088; commission on sale - $52,250; David Nabulsi - $305.
106. The fourteenth issue concerns numerous claims for liabilities about which the Commissioner had considerable doubts, including as to whether the liabilities related to the CGT assets of the partners and whether the liabilities were in existence as at the relevant date because of the paucity of evidence. I deal with each of the disputed amounts below, noting where appropriate the fact that new documents were produced by the taxpayer at the hearing.
107. In relation to the fire engineer's report ($37,500), the Commissioner submitted that the liability did not exist as at 22 December 2005 or, alternatively, if it did exist, it was not capable of being quantified at that time. I find that this was a liability in existence as at the relevant date based on the letter from Lane Cove Council dated 21 November 2005 produced at the hearing.[62]
108. I find that the land tax ($32,500) was assessed in respect of land owed as at 31 December 2005, that is, after the relevant date and, therefore, this was not a liability in existence as at the relevant date.
109. There were numerous miscellaneous expenses which it is appropriate to deal with collectively. These are:- Marinescape ($98) and ($98), David Nabulsi ($1,784), Otis Elevator ($1,050), Pearl Linen ($4,512), Secom ($91), Swimmart ($322), Tropical Plant Hire ($180), Collex ($203), Doyle Bros ($315), Commander ($314), AGL ($438), Bridge Ellis ($144) and ($252) and Country Energy ($1,318). Excellar produced a new document at the hearing being a partnership ledger of the Artarmon Inn showing debits on various dates including in late December 2005 and throughout January 2006 for payment to the abovementioned suppliers, in each case the amounts being double of the amounts shown above.[64]
ATC 6706
no invoices to substantiate these claims of liabilities and, in particular, to substantiate the existence of the liabilities as at 22 December 2005.110. I find that most of these were liabilities in existence as at the relevant date, based on the fact that payments were made on or about 4 January 2006, shortly after the relevant date, except claims for David Nabulsi ($1,784) and part of the claims for Pearl Linen, Swimmart and Tropical Plant Hire. I find that part of the Pearl Linen claim (being $1,910 which was paid on or about 16 January 2006) was not in existence as at the relevant date and the same for $273 of the Swimmart claim and $90 of the Tropical Plant Hire claim). I find that the balances were liabilities in existence as at the relevant date (Pearl Linen $2,602, Swimmart $273 and Tropical Plant Hire $90). I note an example of the difficulty that I had in reviewing these claims. Payments were made, according to the partnership ledger document, to Mr Nabulsi on 28 December 2005 and again on 4 and 9 January 2006. One of Mr Nabulsi's tax invoices which is in evidence as an annexure to Mr Aroney's third witness statement reveals that Mr Nabulsi was providing catering and management services at the Artarmon Inn and in the case of that particular invoice, he had invoiced for the week ending 25 December 2005.[65]
111. There were other claims for liabilities in respect of which I find that the taxpayer did not discharge the onus of proof in relation to those liabilities being in existence as at 22 December 2005, particularly as the settlement statement for the sale of the Artarmon Assets did not show any adjustments for these in late January 2006. These are as follows: Sydney Water rates ($1,692); adjustments to rent prepayments to Hutchison Telecommunications ($6,716); adjustments to rent prepayments to Optus ($8,882) and property adjustments other than land tax ($2,733). I also find that Excellar did not prove the following amounts were liabilities of Wellmist and Parktran as at the relevant date: GST shortfall liabilities for the financial year ended 30 June 2006 ($14,035), wages ($2,713), CBA facility interest ($11,665) and CBA line fee ($2,930).
112. However, I find that Excellar's claim for Council rates ($6,347) and a further claim for Sydney Water rates ($1,751) are liabilities as these were also conceded by the Commissioner at the hearing. Another claim for Council rates ($3,179) is not accepted as it was acknowledged by Excellar that this claim had been mistakenly duplicated.
Guarantees granted by George Aroney
113. The final issue with respect to the MNAV calculation emerges from one of the taxpayer's alternative scenarios put forward in relation to the MNAV test. It concerns whether two guarantees given by Mr Aroney which were in place as at the relevant date were liabilities to be included in the MNAV test as liabilities of Mr Aroney. Mr Aroney had given a guarantee in favour of the CBA in respect of a 'Better Business Bill Facility' of $1,000,000 of Excellar and a second guarantee in favour of the CBA in respect of a 'Better Business Bill Facility' of $4,320,000 of Wellmist and Parktran.
114. The Commissioner submitted that the guarantees are not liabilities of Mr Aroney for the MNAV test, including for the following reasons:
- (a) there is no evidence that just before the CGT event CBA was seeking recourse to Mr Aroney pursuant to either of the guarantees as there was no default of the respective obligations under the loans; and
- (b) the guarantees are not liabilities for the purposes of s 152-20(1) as just before the CGT event the liability was truly contingent, in the sense of being "uncertain as both a theoretical and practical matter":
Commissioner of Taxation v Byrne Hotels Qld Pty Ltd [2011] FCAFC 127 at [122].
115. I agree with the Commissioner's arguments and also adopt the numerous authorities where it has been specifically decided that contingent liabilities pursuant to guarantees are not liabilities for the purposes of the MNAV calculation as they are not presently existing legal obligations. See, in particular,
Re Christopher Bell and Commissioner of Taxation [2012] AATA 45 at [22],
Re Tingari Village North Pty Ltd and Commissioner of Taxation [2010] AATA 233 at [52]-[55] and
Re Carnavo and Commissioner of Taxation [2010] AATA 591 at [14]. Furthermore, I could not discern any points of differentiation between the nature of the guarantees given by Mr Aroney and the guarantees discussed in the abovementioned cases to support Mr Bevan's submission to the effect that Mr Aroney was a principal debtor of the bank because the guarantees referred to Mr Aroney as indemnifiying the bank. Under the terms of the Deed of Guarantee given by Mr Aroney with respect to the CBA facility to Wellmist and Parktran, Mr Aroney was only required to pay if the borrowers defaulted.[66]
ATC 6707
116. For the reasons set out above, the market value of the assets and the liabilities that are related to those assets to be included in the MNAV test for Excellar and its connected entities (including Wellmist) are as set out in Annexure A .
COST BASE ISSUES
117. Separately to the issues with respect to the MNAV test, Excellar submitted that an amount of $1,395,367 should be included in the CGT cost base calculation of the Chatswood Property under s 110-25(5) of the ITAA 1997 in respect of "refurbishments" on the basis that that amount represented the written down value of plant and equipment as at 30 June 2005. The Commissioner submitted that Excellar was not entitled to include any part of the said amount in the cost base because it was not capital expenditure incurred for the purpose of increasing or preserving the asset's value and even if it was, the amount should be a lesser amount at the relevant date, not the amount as at 30 June 2005. However, the Commissioner acknowledged that an amount of $1,365,013 was erroneously included when calculating the capital gain on the sale of the Chatswood Property in his objection decision.
118. Confusingly, Ms Karen Kelly, the principal of the firm Churton Kelly, the accountants and tax agent for Excellar, had stated that the amount of $1,395,376 was the correct amount on the basis that an amendment to Excellar's 2005 tax return was not allowed to increase deductions for depreciation and that $1,365,013 was the correct amount if the Commissioner allowed Excellar to increase deductions for depreciation in its 2005 tax return.[67]
119. There was a further issue raised at the hearing about the Commissioner not having made any allowance for land tax in calculating the cost base of the Chatswood Property in determining Excellar's capital gain.. However, it is clear from the terms of s 110-45(1B) of the ITAA 1997 that expenditure does not form part of the cost base to the extent that the taxpayer deducted it or can deduct it. As the land tax was plainly deductible expenditure for Excellar on the basis of it carrying on a boarding house business, s 110-45(1B) applies so as to exclude it from the cost base.
IS EXCELLAR LIABLE TO AN ADMINISTRATIVE PENALTY AT THE RATE OF 25%?
120. The above conclusion on the MNAV test means that Excellar, or its tax agent, made false and misleading statements in not completing its income tax return for the 2006 year by including the full amount of the capital gain from the sale of the Chatswood Property. It follows that Excellar has a tax shortfall for that year. Section 284-75 of Schedule 1 to the TAA deals with liability to penalty. It provided as follows as at May 2007 when Excellar lodged its tax return:
(1) You are liable to an administrative penalty if:
- (a) you or your agent makes a statement to the Commissioner or to an entity that is exercising powers or performing functions under a *taxation law; and
- (b) the statement is false or misleading in a material particular, whether because of things in it or omitted from it; and
- c) you have a *shortfall amount as a result of the statement.
ATC 6708
Note: Subsection 2(2) specifies laws that are not taxation laws for the purposes of this Subdivision.(2) You are liable to an administrative penalty if:
- (a) you or your agent makes a statement to the Commissioner or to an entity that is exercising powers or performing functions under an *income tax law; and
- (b) in the statement, you or your agent treated an *income tax law as applying to a matter or identical matters in a particular way that was not *reasonably arguable; and
- (c) you have a *shortfall amount as a result of the statement; and
- (d) item 4, 5 or 6 of the table in subsection 284-90(1) applies to you.
121. Shortfall amount is defined in s 284-80(1). At the relevant time, that section and Item 1 stated as follows:
(1) You have a shortfall amount if an item in this table applies to you. That amount is the amount by which the relevant liability, or the payment or credit, is less than or more than it would otherwise have been.
Shortfall amounts:
…
Item 1: A * tax-related liability of yours for an accounting period, or for a *taxable importation, worked out on the basis of the statement is less than it would be if the statement were not false or misleading
122. The Commissioner formed the view that Excellar was liable to pay a penalty at the rate of 25% on the basis that it, or its tax agent, had failed to take reasonable care to comply with the taxation law: s 284-90 (1) Item 3. The meaning of reasonable care was considered in
Aurora Developments Pty Ltd v Commissioner of Taxation (No 2) (2011) 196 FCR 457 by Greenwood J at [465] - [466]:
It follows as a matter of principle that the reasonable care test calls upon a taxpayer to exercise the care that a reasonable person would be likely to have exercised in the circumstances of the taxpayer in fulfilling the taxpayer's tax obligations. The test looks to whether such a person would have foreseen, as a reasonable probability or reasonable likelihood, the prospect that the action or step or the failure to act or take an affirmative step would result in a shortfall amount and in determining that question, a relevant factual enquiry is whether the taxpayer made the reasonable attempts a person in the position of the taxpayer ought to have taken so as to comply with the provisions of a taxation law. At para 1.75 of the Explanatory Memorandum, the observation is made that a taxpayer who prepares his or her own Business Activity Statement would usually be taken to have exercised reasonable care if the taxpayer relies upon the advice of an accountant or lawyer (or both) whom the taxpayer could reasonably expect to provide competent advice on the relevant matter in issue. At para 1.76, the observation is made that a taxpayer would be at risk of a penalty if the taxpayer was careless (that is to say, did not act reasonably) in presenting all of the relevant facts to an adviser and such a failure material affected the advice upon which the taxpayer sought to rely.
123. Excellar contended that it took reasonable care to comply with taxation laws and relied on its tax agent. A taxpayer does not meet the reasonable care standard by simply engaging a tax agent. The taxpayer and the tax agent must take reasonable care in preparing the tax return.
124. I was not satisfied that Excellar or its tax agent took reasonable care. The factors that I considered to be relevant to the question of penalty include the following:
- (a) Excellar did not properly address the requirements in the tax laws as to the MNAV test when lodging its 2006 tax return. The initial list of assets and liabilities which was said to have been relied on for the tax return was both incomplete and, as to many of the components of the calculation, simply incorrect.[70]
T7-58 to 59 and 62 T10-104 to 108
ATC 6709
- (b) Excellar had not properly collated all relevant information and supporting documents when preparing its 2006 tax return (nor in response to queries by the Commissioner throughout the audit). It appeared to have adopted a superficial approach to complying with the taxation laws evident from the lack of attention to the MNAV calculation. This failure at the time of lodging its tax return was reinforced by the numerous later iterations of lists of liabilities, as well as the additional documentation that subsequently surfaced, including during the course of the hearing. There was also significant movement by Excellar in the framing of its case leading up to the hearing.
- (c) the sums involved were relatively large calling for a higher standard of care, particularly as the threshold for the MNAV test was $5,000,000 and the sale price of the CGT asset in question (on its own) was $5,500,000. The gravity of the consequences was also significant in terms of income tax at stake for the taxpayer (more than $400,000). Excellar would have had to succeed on many of the issues that it raised to pass the MNAV test, including fundamentally the argument that was advanced some years after the lodgement of the 2006 tax return, that the market value of certain assets was significantly lower than their sale prices.
- (d) Excellar changed its tax agent in or about March 2007.[72]
Exhibit A7, paragraphs 2 and 3 Exhibit A7 paragraph 4 - (e) most of the issues involved were not errant matters of judgment, rather they involved a failure to take reasonable care as to the tax position, including as to the core detailed requirements of the MNAV test. Accordingly, I find that there was a lack of attention to detail in the preparation of Excellar's tax return and, in particular, a failure to properly consider the taxation laws.
125. Furthermore, Excellar did not adopt a reasonably arguable position at the time of lodging its tax return: s 284-75(2). Several legal arguments that were advanced at the hearing were not positions that informed Excellar's approach at the time of lodging its 2006 tax return. Accordingly, Excellar did not discharge the onus of proving that the assessment of penalty at the rate of 25% was excessive: s 14ZZK(b)(i) of the TAA.
SHOULD THE PENALTY BE REMITTED?
126. There is no basis for the Tribunal to exercise its discretion pursuant to s 294-20(1) to remit any part of the penalty, particularly taking into account the fact that Excellar adopted a careless position in its 2006 tax return, reinforced by the fact of it later changing its MNAV calculations on numerous occasions. There is nothing unjust or harsh about the imposition of penalties in this matter. Nor is the imposition of penalties at the rate of 25% in this matter contrary to the purpose of the penalty regime. Excellar did not persuade me that the decision on remission should have been made differently: former s 14ZZK(b)(iii) of the TAA (as applicable).
SHOULD THE SHORTFALL INTEREST CHARGE BE REMITTED?
127. Excellar objected to the Commissioner's decision to not remit in whole or in part the shortfall interest charge (SIC) imposed. Section 280-160 of Schedule 1 to the TAA provides that SIC may be remitted in full or in part where it is considered to be fair and reasonable to do so. The SIC is normally calculated from the notional due date of the original assessment until the amended notice of assessment was issued. It was partially
ATC 6710
remitted by the Commissioner in his objection decision as a result of allowing Excellar's request to increase the stamp duty cost in the CGT cost base calculation. No reason was advanced by Excellar as to why it should be further remitted and I have decided that there is none.CONCLUSION
128. For the reasons set out above and in Annexure A , the Tribunal decides that the Commissioner's objection decisions are affirmed.
ANNEXURE A - TRIBUNAL'S MAXIMUM NET ASSET VALUE CONCLUSIONS| ASSETS | LIABILITIES | NET ASSETS | |
| EXCELLAR PTY LIMITED | |||
| Assets: | |||
| Chatswood Property | 5,500,000 | ||
| Cash at bank | 318,243 | ||
| IAG shares | 2,502 | ||
| Loan to Wellmist and Parktran Partnership | 223,490 | ||
| Total Assets | 6,044,235 | ||
| Less Liabilities: | |||
| CBA Better Business Bill | -1,000,000 | ||
| Loan from George Aroney | -1,530,000 | ||
| Macquarie Instalments | -3,988 | ||
| Energy Australia | -3,257 | ||
| Orange mobile phone | -90 | ||
| CBA merchant fee | -99 | ||
| Willoughby Council waste fees | -815 | ||
| ATO account balance | -534 | ||
| CBA Bill Handling Fee | -100 | ||
| Bank Interest on Bill | -5,954 | ||
| Water rates adjustment on settlement | 0 | ||
| Land tax adjustment on settlement | 0 | ||
| Solicitors fees | 0 | ||
| Telstra accounts (2) | -379 | ||
| Vodafone accounts (2) | -266 | ||
| Koolwater Plumbing | 0 | ||
| Nokia rent refund | -6,417 |
ATC 6711 |
|
| Willoughby Council rates | -4,230 | ||
| Pearl Linen | -387 | ||
| Koutzoumis Lawyers' bill | -2,000 | ||
| Clark & Jacobs | 0 | ||
| ATO | 0 | ||
| ATO BAS amount | 0 | ||
| CBA Line Fee for $1.1m Bill Facility | 0 | ||
| Total Liabilities | -2,558,516 | ||
| Net CGT Asset Value for Excellar | $3,485,719 | ||
| GEORGE ARONEY | |||
| Assets: | |||
| Bundeena Property | 630,000 | ||
| Campsie Property | 1,910,000 | ||
| Loan to Excellar | 1,530,000 | ||
| IAG shares | 6,822 | ||
| Cash at bank | 2,671 | ||
| Total Assets | 4,079,493 | ||
| Less Liabilities: | |||
| CBA Better Business Bill | -1,530,000 | ||
| Canterbury Council rates | -4,693 | ||
| Land Tax Bundeena and Campsie Properties | 0 | ||
| Clark & Jacobs invoice | -12,100 | ||
| Canterbury Council rates | 0 | ||
| ANZ Visa | -457 | ||
| Century 21 real estate agent fees re Bundeena Property | 0 | ||
| Century 21 real estate agent fees re Buneena Property | -76 | ||
| ATO BAS | 0 | ||
| Sydney Water | -1,175 | ||
| Integral Energy Bundeena Property | -235 |
ATC 6712 |
|
| Bank interest (discount on bill) | 0 | ||
| CBA line fee for $1.53m bill facility | 0 | ||
| Sutherland Shire Council rates re Bundeena (2 quarters) | -570 | ||
| Total Liabilities | -1,549,306 | ||
| Net CGT Asset Value for George Aroney | $2,530,187 | ||
| WELLMIST PTY LTD | |||
| Assets (50%): | |||
| Artarmon Property & Business | 4,750,000 | ||
| Total Assets | 4,750,000 | ||
| Less Liabilities (50%): | |||
| Excellar Loan | -111,745 | ||
| CBA Better Business Bill | -2,160,000 | ||
| Koutzoumis Lawyers | -1,088 | ||
| Commission on sale | -52,250 | ||
| Macquarie Instalments | -5,299 | ||
| CBA account overdraft | -14,099 | ||
| Glenn Diamond | -1,016 | ||
| David Nabulsi | -305 | ||
| Fire Engineer's report | -37,500 | ||
| Land tax adjusted on sale | 0 | ||
| Marinescape | -98 | ||
| Marinescape | 0 | ||
| David Nabulsi | 0 | ||
| Otis Elevator | -1,050 | ||
| Pearl Linen | -2,602 | ||
| Sydney Water | 0 | ||
| Secom Security | -91 | ||
| Swimmart | -273 | ||
| Tropical Plant Hire | -90 | ||
| Lane Cove Council rates | 0 |
ATC 6713 |
|
| Collex | -203 | ||
| Doyle Bros | -315 | ||
| CBA Better Business Bill Facility Interest | -11,665 | ||
| Commander | -314 | ||
| AGL | -438 | ||
| Bridge Ellis | -144 | ||
| Bridge Ellis | -252 | ||
| Country Energy | -1,318 | ||
| Lane Cove Council rates - balance | -6,347 | ||
| Sydney Water | -1,751 | ||
| Property adjustments on sale other than land tax and water | 0 | ||
| Liability to adjust rent prepayment to Hutchison | 0 | ||
| Liability to adjust rent prepayment to Optus | 0 | ||
| GST shortfall liability | 0 | ||
| Wages owing to staff | 0 | ||
| CBA line fee for $4.32m bill facility | 0 | ||
| Total Liabilities | -2,410,253 | ||
| Net CGT Asset Value for Wellmist | $2,339,747 | ||
| Total Net CGT Asset Value for Excellar and connected entities | $8,355,653 |
Footnotes
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