[vc_row][vc_column][vc_column_text]The ATO has released a Decision Impact Statement on 24th April outlining its response to the Full Federal Court decision of Commissioner of Taxation v Guardian AIT Pty Ltd ATF Australian Investment Trust [2023] FCAFC 3 (24 January 2023) (“Guardian Case”).
Refer attached a Link to our earlier Alert on Guardian case:[/vc_column_text][mk_button dimension=”flat” size=”large” url=”https://trovegroup.com.au/news/federal-court-findings-on-guardian-case/” target=”_blank” align=”none”]Link to our earlier Alert [/mk_button][vc_column_text]Guardian Case considered the application of Section 100A ‘reimbursement arrangements’ with respect to Trust distributions, as well as the application of the general anti-avoidance provisions under Part IVA.
The ATO’s observes in its DIS in light of Guardian Case the following:
- an arrangement which does not satisfy the requirements of section 100A may still nonetheless be subject to Part IVA;
- particular regard must be had to the substance of the scheme and its result or consequence, and
- a number of observations of the Court confirm the views expressed by the ATO in Taxation Ruling TR 2022/4 Income tax: section 100A reimbursement agreements (TR 2022/4), including that:
- Section 100A requires a reimbursement agreement to exist at, or prior to, the time by which a beneficiary is made presently entitled to income of the trust;
- An arrangement that constitutes an agreement may be both informal and unenforceable, and the parties may be free to withdraw from it or to act inconsistently with it, notwithstanding their adoption of it;
- There needs to be a common intention, or consensus existing between at least two parties.
Beyond this, the ATO observes that the Court’s decision on section 100A largely turned on the particular facts of the case (including no finding of a relevant ‘agreement’ at the time the present entitlement arose).
The question of whether an agreement exists at a particular time entails a fact-finding exercise which may require the examination of evidence from a range of sources.
In administering the law, the Commissioner will evaluate the reliability of particular assertions regarding the existence or otherwise of an agreement in light of all of the surrounding circumstances.
In some cases, it will be necessary to interview participants in the transactions under consideration, or those with knowledge of those transactions.
The Commissioner notes the Court’s conclusion that, in circumstances where the advisers were not parties to the agreement, the advisers’ plan or recommendation could not form part of a reimbursement agreement without a finding that they had communicated it to the participants or were otherwise authorised to act on their behalf.
The Commissioner considers that a requisite authorisation may exist in cases where the evidence establishes that the relevant parties have agreed in advance to follow an adviser’s plans or recommendations.
TR 2022/4 and Law Administration Practice Statement PS LA 2005/24 Application of General Anti-Avoidance Rules will both be updated for minor changes to take into account the Court’s observations.[/vc_column_text][mk_button dimension=”flat” size=”large” url=”https://www.ato.gov.au/law/view/document?docid=LIT%2FICD%2FQUD36of2022%2F00001&utm_campaign=TaxVine&utm_medium=email&_hsmi=256000633&_hsenc=p2ANqtz-_fnJuh-4QeG9_BVom-zA-t5fDzmIStMwjW0_-9NAo3TuyZiNwL5QPWHKOSIt7dI4IXmzYUBGcAVmBGn-vbwWk-phplbQ&utm_content=256000633&utm_source=hs_email” target=”_blank”]Link to DIS[/mk_button][mk_button dimension=”flat” size=”large” url=”http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCAFC/2023/3.html?utm_campaign=TaxVine&utm_medium=email&_hsmi=256000633&_hsenc=p2ANqtz–85g953S-t9ZVy8uj6X5N0WwgtWXkm-jpDcZJKiEdK3Z7QUDbD6hFN2cLd2YMh8ugG2u9lw-yM-kg48_naKeqe1QO0Wg&utm_content=256000633&utm_source=hs_email” target=”_blank” align=”none”]Link to Guardian Case[/mk_button][vc_column_text]Contact the Team at Trove for further information as to how this DIS may impact your current arrangements.[/vc_column_text][/vc_column][/vc_row]
