Building Company Owner and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2010/3520-3522)
Judgment date: 1 November 2012
Date published: 20 December 2012

Summary of decision:
Outlines the ATO's response to this case which concerns whether the taxpayer's circumstances warrant the exercise of the discretion in relation to dividends under s 109RB of the ITAA 1936.

Overview of facts:
The taxpayer and his brother were the director and shareholder of a building company. The taxpayer withdrew money from the company bank accounts and deposited the funds into his personal bank accounts on several occasions during the years of 2005, 2006 and 2007. | There was no written loan agreement between the taxpayer and the company for the 2005 year. As a result, $261,950, being total amount withdrawn in the year, was assessed by the Commissioner as a dividend under section 109C of the ITAA 1936. | For the 2006 and 2007 year, the taxpayer had an undated written agreement, which lacked details of the loans. The amounts were treated as dividends and assessable under section 109D in the sum of $102, 189 for the 2006 year and $317,729 for 2007. | The main issue before the Tribunal was whether the Commissioner's discretion under section 109RB should have been exercised. | Issues decided by the tribunal | The Tribunal decided that it was appropriate in the circumstances to exercise the discretion, with the result that the amounts treated as dividends were disregarded. In addition, the Tribunal affirmed the Commissioner's objection decision with respect to the income year ended 30 June 2005, although the penalty was reduced from 50% to 25%

Issues decided:
The Tribunal decided that it was appropriate in the circumstances to exercise the discretion, with the result that the amounts treated as dividends were disregarded. In addition, the Tribunal affirmed the Commissioner's objection decision with respect to the income year ended 30 June 2005, although the penalty was reduced from 50% to 25%

ATO view of decision:
The case was decided on its own facts.

Administrative treatment:
Implications for ATO Precedential documents (Public Rulings & Determinations etc) | N/A | Implications for Law Administration Practice Statements | N/A

Legislative references: Income Tax Assessment Act 1936 Div 7A 109C 109D 109E 109N 109R 109RB Taxation Administration Act 1953 Sch 1, Div 280 280-160 Sch 1, Div 284
Case references: BRK (Bris) Pty Ltd v Commissioner of Taxation (2001) 46 ATR 347 [2001] FCA 164 2001 ATC 4111
Subject references: Money transferred to individual from company of which the individual was a shareholder and director Discretion if deemed dividend arose because of an honest mistake or inadvertent omission