Walters v Commissioner of Taxation [2007] FCA 1270

Walters v Commissioner of Taxation [2007] FCA 1270

The identified sequence of transactions from 13 to 15 April 1999, up to but not including the ultimate sale of the Dart Trading shares to Terrence and Annette Walters, was a scheme for Part IVA. But for that scheme, each taxpayer would have sold the share and included a capital gain of $349,999.00 in assessable income. The non-inclusion of that amount was attributable to the integrated and inter-dependent scheme that produced the uplifted cost base, not to the Subdivision 122-A rollover choice alone, so s 177C(2)(a)(i) did not exclude the tax benefit. Having regard to the s 177D(b) factors, the Tribunal was entitled to conclude that the dominant purpose was obtaining that tax benefit. The...

Jurisdiction
Australia
Judgment Date
20 August 2007
Procedural Posture
Taxation and Revenue Appeal Concerning Part IVA of the Income Tax Assessment Act 1936 (cth), CGT Consequences and Additional Tax by Way of Penalty / Appeal From the Administrative Appeals Tribunal Constituted by Senior Member BJ Mc Cabe
Outcome
The Walters application was dismissed and the Commissioner of Taxation's application was upheld; the Tribunal's penalty decision was set aside and the Commissioner's objection decisions on additional tax by way of penalty were affirmed.
Legal Topics
['part IVA Tax Avoidance' 'cgt Asset Disposal' 'tax Benefit' 'dominant Purpose' 'subdivision 122 a Rollover' 'section 177 C(2)(a) Exclusion' 'additional Tax by Way of Penalty' 'reasonably Arguable Position']
['taxation and Revenue' 'administrative Appeals Tribunal Appeals'] ['part IVA Tax Avoidance' 'cgt Asset Disposal' 'tax Benefit' 'dominant Purpose' 'subdivision 122 a Rollover' 'section 177 C(2)(a) Exclusion' 'additional Tax by Way of Penalty' 'reasonably Arguable Position']

Case Brief

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Procedural Posture

Taxation and Revenue Appeal Concerning Part IVA of the Income Tax Assessment Act 1936 (cth), CGT Consequences and Additional Tax by Way of Penalty / Appeal From the Administrative Appeals Tribunal Constituted by Senior Member BJ Mc Cabe

Legal Issues

  1. 1 ['Whether the Tribunal misconstrued or misapplied s 177C(2)(a)(i) of the Income Tax Assessment Act 1936 (Cth).' 'Whether the applicants obtained a tax benefit in connection with a scheme notwithstanding their Subdivision 122-A rollover elections.' 'Whether the Tribunal misconstrued or misapplied s 177D(b)(i) to (viii) of the Income Tax Assessment Act 1936 (Cth).' 'Whether the sole or dominant purpose of entering into the identified scheme was obtaining a tax benefit.' 'Whether it was reasonably arguable, for s 226(2) of the Income Tax Assessment Act 1936 (Cth), that Part IVA did not apply.']

Ratio Decidendi

The identified sequence of transactions from 13 to 15 April 1999, up to but not including the ultimate sale of the Dart Trading shares to Terrence and Annette Walters, was a scheme for Part IVA. But for that scheme, each taxpayer would have sold the share and included a capital gain of $349,999.00 in assessable income. The non-inclusion of that amount was attributable to the integrated and inter-dependent scheme that produced the uplifted cost base, not to the Subdivision 122-A rollover choice alone, so s 177C(2)(a)(i) did not exclude the tax benefit. Having regard to the s 177D(b) factors, the Tribunal was entitled to conclude that the dominant purpose was obtaining that tax benefit. The...

Court Disposition

The Walters application was dismissed and the Commissioner of Taxation's application was upheld; the Tribunal's penalty decision was set aside and the Commissioner's objection decisions on additional tax by way of penalty were affirmed.

Orders

  • ['The application by David James Walters and Rhondda Isobel Walters is dismissed.' 'The application by the Commissioner of Taxation is upheld.' "The decision of the Administrative Appeals Tribunal made on 16 December 2005 by which the Tribunal set aside the decision of the Commissioner of Taxation 'to impose penalty...