Part IVA and not s 100A applies to Guardian

January 27, 2023

The full bench of the Federal Court has dismissed the Commissioner of Taxation’s appeal and decided that section 100A of the Income Tax Assessment Act 1936 (ITAA 1936) has no application, as there was no “reimbursement agreement”.

The Court then concluded it was therefore unnecessary to consider the issues of purpose and the scope of the phrase “ordinary commercial or family dealing” contained in section 100A.

The full bench however did rule that Part IVA of the ITAA 1936 applied to the year ended 30 June 2013. This enables the Commissioner to include an amount in Mr Alexander Springer’s assessable income for that year, with compensating adjustments to tax already paid by his controlled company, a corporate beneficiary. 

The Court’s reasoning includes the declaration of the dividend by Mr Springer’s corporate beneficiary company in March 2013 necessarily meant that, in the year ended 30 June 2013, it was not being used as a vehicle for the accumulation of his wealth, as was asserted by him. By paying out the distribution it had received as a dividend, the balance of retained earnings recorded in the company’s financial statements as at 30 June 2012 were dissipated.

The Court ruled a comparison of the form and substance of the scheme therefore supports a conclusion that a party carrying out the scheme did so for the dominant purpose of enabling Mr Springer to obtain a tax benefit. (FCT v Guardian AIT Pty Ltd ATF Australian Investment Trust [2023] FCAFC 3, Perry, Derrington and Hespe JJ, 24 January 2023).