Decision impact statement
Building Company Owner and Commissioner of Taxation
Venue: Administrative Appeals Tribunal
Venue Reference No: 2010/3520-3522
Judge Name: Deputy President Mr S Frost
Judgment date: 1 November 2012
Appeals on foot: None.
Decision Outcome: Partly favourable
Impacted Advice
Relevant Rulings/Determinations:- N/A
Subject References:
Money transferred to individual from company of which the individual was a shareholder and director
Discretion if deemed dividend arose because of an honest mistake or inadvertent omission
Précis
Outlines the ATO's response to this case which concerns whether the taxpayer's circumstances warrant the exercise of the discretion in relation to dividends under s 109RB of the ITAA 1936.
Brief summary of facts
The taxpayer and his brother were the director and shareholder of a building company. The taxpayer withdrew money from the company bank accounts and deposited the funds into his personal bank accounts on several occasions during the years of 2005, 2006 and 2007.
There was no written loan agreement between the taxpayer and the company for the 2005 year. As a result, $261,950, being total amount withdrawn in the year, was assessed by the Commissioner as a dividend under section 109C of the ITAA 1936.
For the 2006 and 2007 year, the taxpayer had an undated written agreement, which lacked details of the loans. The amounts were treated as dividends and assessable under section 109D in the sum of $102, 189 for the 2006 year and $317,729 for 2007.
The main issue before the Tribunal was whether the Commissioner's discretion under section 109RB should have been exercised.
Issues decided by the tribunal
The Tribunal decided that it was appropriate in the circumstances to exercise the discretion, with the result that the amounts treated as dividends were disregarded. In addition, the Tribunal affirmed the Commissioner's objection decision with respect to the income year ended 30 June 2005, although the penalty was reduced from 50% to 25%
ATO view of Decision
The case was decided on its own facts.
Administrative Treatment
Implications for ATO Precedential documents (Public Rulings & Determinations etc)
N/A
Implications for Law Administration Practice Statements
N/A
Court citation:
[2012] AATA 755
2012 ATC 1-048
(2012) 91 ATR 186
Legislative References:
Income Tax Assessment Act 1936
Div 7A
109C
109D
109E
109N
109R
109RB
Taxation Administration Act 1953
Sch 1, Div 280
280-160
Sch 1, Div 284
Case References:
BRK (Bris) Pty Ltd v Commissioner of Taxation
(2001) 46 ATR 347
[2001] FCA 164
2001 ATC 4111