Case: Traknew Holdings Pty Ltd v Federal Commissioner of Taxation (1991) 21 ATR 1478
Outcome: discussed
The taxpayers make three points concerning the operation of s 99B. Firstly, they submit that the section should be read down to recognize the difficulties identified by Hill J in his decision in Traknew Holdings Pty Ltd v Federal Commissioner of Taxation (1991) 21 ATR 1478. His Honour said at 1492: 'The application of s 99B also presents difficulty. Literally, the section is capable of applying in the circumstances of the present case. However, the section was not enacted to render assessable payments or applications to the benefit of discretionary beneficiaries. Such payments or applications were already made assessable income by force of s 97 alone or in combination with s 101 , leaving aside a case where s 98 applies but the presently entitled beneficiary is under a legal disability where the trustee is assessable.' 136 His Honour then went on to consider the history of the enactment of the section, suggesting that it is concerned primarily with the derivation of accumulated income from a source outside of Australia. His Honour did not finally decide whether or not it was appropriate to adopt a narrow construction of s 99B in order to give effect to that perceived parliamentary intention. In view of my conclusions concerning other aspects of the matter, it is not necessary that I address this question. 137 The Commissioner also relies upon Pt IVA of the Act. However the identified schemes (identified in par 7.1 of the Commissioner's amended statement of facts issues and contentions) depend for their efficacy upon the carried-forward losses. I have found that there were no such losses. It may be possible to identify one other scheme, not involving such losses, to which Part IVA could apply. However no such case was advanced by the Commissioner. It would be unfair to the taxpayers were I to proceed in that way. In any event, I understand that the Commissioner relies on Part IVA in the alternative to the case which I have determined in his favour. It is therefore unnecessary for me to consider its operation. It is also unnecessary to consider the operation of Schedule 2F. 138 Whether or not the amended assessments are excessive depends upon the way in which Nommack Nominees' income is distributed. There are four possibly relevant taxpayers: Mr and Mrs Weyers, Nommack Nominees in its own right and Nommack Nominees as trustee of the Sydney trust. The amended assessments affecting the last-mentioned taxpayer are not in issue before me, but my findings lead to certain inferences concerning those assessments. 139 I have concluded that the whole of the distribution by Cherrybrook, nominally to Nommack Nominees as trustee, in the 1995 year ($156,887) was actually to Mr and Mrs Weyers and should have been included in their assessable income. It is quite clear from their evidence that their drawings were used for joint, as well as individual expenses. It would be pointless to speculate about whether Mr or Mrs Weyers would have had greater personal expense. No doubt a large part went to maintaining their children and their household. That income should be treated as having been distributed equally.