Tax Tip 373: Legal Cases Involving Taxation and Property

These 2 cases are on being in the business of property investing:

Allen v Commissioner of Taxation and

Allzams Trust v Commissioner of Taxation

This case is a tribunal review of a decision by the Commissioner over a private binding ruling application as to whether the taxpayers were in the business of property.

Allen owned 9 properties in his personal capacity as well as a block of 5 units as trustee of the Allzams Trust. He had been retrenched from his day job and argued that he was now doing property investing as a business. The ATO initially said no and he went to the Tribunal to have this decision reviewed.

The Tribunal rules that Allen was in the business of renting properties in the 2018 and 2019 taxation year and that the Commissioner to relook at the private ruling for the trust with additional relevant information to be supplied to them.

There are 2 cases for this as there are 2 separate taxpayers.

Allen and Commissioner of Taxation (Taxation) [2021] AATA 2768 (6 August 2021)

Allen and Commissioner of Taxation (Taxation) [2021] AATA 2768 (6 August 2021)

and

Allzams Trust and Commissioner of Taxation (Taxation) [2021] AATA 2767 (6 August 2021)

Allzams Trust and Commissioner of Taxation (Taxation) [2021] AATA 2767 (6 August 2021)

 

Advanced Holdings Pty Limited as trustee for The Demian Trust v Commissioner of Taxation [2020] FCA 1479 (15 October 2020)
Advanced Holdings Pty Limited as trustee for The Demian Trust v Commissioner of Taxation [2020] FCA 1479 (15 October 2020)

Appealed
Advanced Holdings Pty Limited as Trustee for The Demian Trust v FCT [2021] FCAFC 135
Advanced Holdings Pty Limited as Trustee for The Demian Trust v Commissioner of Taxation [2021] FCAFC 135 (4 August 2021)

ATO won

This case involve a discretionary trust where the trustee was replaced, but the new trustee's appointment was defective.

The trustee of a discretionary trust held units in a unit trust with the unit trust doing a property development.
Before the development started the trustee of the discretionary Trust was changed from Company A to Company B. This was defective. That meant Company B was not the trustee of the discretionary trust.
Company B ended up owning units in the unit trust - but in its own right and not as trustee.

Why?
The document replacing the trustee didn't remove the original trustee, company A. Also the trust deed required 2 months notice to be given when a trustee resigned and this was not given.

Something like this can have far reaching consequences.
The sale proceeds of this development was over $48 million

 

Mingos v Commissioner of Taxation [2019] FCA 834

TAXATION – appeal from decision of the Commissioner of Taxation disallowing objection to inclusion of capital gain from sale of property in taxpayer’s assessable income for 2014 income year – where proceeds from sale distributed to taxpayer by trust – where title to property in name of trustee company – whether property had been held on beneficial “subtrust” for taxpayer such that main residence exemption applicable – where property transferred to trustee company with consent of taxpayer – where property treated as trust asset for relevant income years – where no contemporaneous evidence of relevant interest in or entitlement to property at time of sale – whether amount of capital gain on which taxpayer assessed excessive – onus not discharged – appeal dismissed
Mingos v Commissioner of Taxation [2019] FCA 834 (7 June 2019)