FEDERAL COURT OF AUSTRALIA
Spassked Pty Ltd v
Commissioner of Taxation (No 5) [2003] FCA 84
CORRIGENDUM
SPASSKED PTY
LIMITED (ACN 003 255 847) v
COMMISSIONER OF TAXATION - N 1362 OF 1999
STANLEY PARK LIMITED (ACN 008 432 997) v COMMISSIONER OF TAXATION - N 1363 OF 1999
INDUSTRIAL EQUITY
LIMITED (ACN 004 617 164) v COMMISSIONER OF TAXATION - N 1364 OF 1999
LINDGREN J
14 FEBRUARY
2003
(CORRIGENDUM
15 SEPTEMBER 2003)
SYDNEY
|
IN THE FEDERAL COURT OF AUSTRALIA |
|
|
|
NEW SOUTH WALES DISTRICT REGISTRY |
N 1362 OF 1999 |
|
|
BETWEEN: |
SPASSKED PTY LIMITED (ACN 003 255 847) APPLICANT |
|
|
AND: |
COMMISSIONER OF TAXATION RESPONDENT |
|
|
IN THE FEDERAL COURT OF AUSTRALIA |
|
|
|
NEW SOUTH WALES DISTRICT REGISTRY |
N 1363 OF 1999 |
|
|
BETWEEN: |
STANLEY PARK LIMITED (ACN 008 432 997) APPLICANT |
|
|
AND: |
COMMISSIONER OF TAXATION RESPONDENT |
|
|
IN THE FEDERAL COURT OF AUSTRALIA |
|
|
|
NEW SOUTH WALES DISTRICT REGISTRY |
N 1364 OF 1999 |
|
|
BETWEEN: |
INDUSTRIAL EQUITY LIMITED (ACN 004 617 164) APPLICANT |
|
|
AND: |
COMMISSIONER OF TAXATION RESPONDENT |
|
|
JUDGE: |
LINDGREN J |
|
DATE: |
14 FEBRUARY 2003 CORRIGENDUM 15 SEPTEMBER 2003 |
|
PLACE: |
SYDNEY |
CORRIGENDUM
1 In [192], in the second passage within square brackets in the quoted passage, delete "primary" and substitute "dissenting", so that it reads "[the dissenting Judge]" rather than "[the primary Judge]".
|
I certify that the preceding numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Lindgren. |
Associate:
Dated: 15 September 2003
FEDERAL COURT OF AUSTRALIA
Spassked Pty Ltd v
Commissioner of Taxation (No 5) [2003] FCA 84
INCOME TAX - deduction - interest on loan - group of numerous companies - shares of ultimate holding company (IEL) listed on Australian Stock Exchange - intermediate holding company (Spassked) borrowed funds from finance company (IEF) within the group - Spassked, a large "dividend trap" and loss making company - Spassked incurred interest on borrowed funds - used borrowed funds to subscribe for shares in subsidiary (GIH) - GIH established with two classes of shares, "A" and "B" - "A" class, carrying right to franked and unfranked dividends, held by Spassked - "B" class, carrying right to franked dividends only, held by IEL - GIH invested profitably in various subsidiary companies - Spassked incurred tax losses as a result of interest expenses - Spassked transferred tax losses pursuant to s 80G of the Income Tax Assessment Act 1936 (Cth) to other members of the corporate group - whether interest an allowable deduction under s 51(1) of the Income Tax Assessment Act 1936 (Cth) - whether, in consequence, losses had been available to be transferred - whether Spassked had expectation of gaining or producing assessable income - whether subjective purpose in incurring expense relevant to determining deductibility under s 51(1) of the Income Tax Assessment Act 1936 (Cth) - significance of "expectations" - whether expectation of receipt of dividends occasioned the borrowing of money from IEF at interest
INCOME TAX - Commissioner's contention that application incompetent as no amount of tax payable in the relevant year of income and therefore no "assessment" within the meaning of s 175A of the Income Tax Assessment Act 1936 (Cth) - whether determination that no amount of tax payable is not an "assessment" within the meaning of s 175A of the Income Tax Assessment Act 1936 (Cth) and, therefore, not an "appealable objection decision" with which the taxpayer is "dissatisfied" within the meaning of s 14ZZ of the Taxation Administration Act 1953 (Cth)
Taxation Administration Act 1953 (Cth) ss 14ZL, 14ZQ, 14ZY, 14ZZ, 14ZZN, 14ZZO
Income Tax Assessment Act 1936 (Cth) ss 51(1), 175A
Ammonia Soda Co Ltd v Chamberlain [1918] 1 Ch 266 cited
Marra Developments Ltd v BW Rofe Pty Ltd [1977] 2 NSWLR 616 cited
Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 distinguished
Stuart (No 2) v Federal Commissioner of Taxation (1996) 96 ATC 4942 distinguished
Deputy Federal Commissioner of Taxation v Sheehan (1986) 86 ATC 4718 distinguished
Federal Commissioner of Taxation v Ryan (2000) 201 CLR 109 distinguished
Steele v Deputy Commissioner
of Taxation (1999) 197 CLR 459 cited
Hart v Federal Commission of Taxation (2002) 2002 ATC 4608 followed
Amalgamated Zinc (De Bavay's) Ltd v Federal Commissioner of Taxation (1935) 54 CLR 295 cited
Commissioner of Taxation (Cth) v Riverside Road Lodge Pty Ltd (in liq) (1990) 23 FCR 305 cited
Ronpibon Tin NL & Tongkah Compund NL v Federal Commissioner of Taxation (1949) 78 CLR 47 discussed
AGC (Advances) Ltd v Federal Commissioner of Taxation (1975) 132 CLR 175 cited
Fletcher v Federal Commissioner of Taxation (1991) 173 CLR 1 followed
Commissioner of Taxation v Consolidated Press Holdings Ltd (2001) 207 CLR 235 cited
Lunney v Commissioner of Taxation (1958) 100 CLR 478 cited
Federal
Commissioner of Taxation v Snowden & Wilson Pty Ltd (1958) 99 CLR 431 cited
Brookton Co-operative Society Ltd v Commissioner of Taxation (1981) 147 CLR 441 distinguished
Federal Commissioner of Taxation v Total Holdings (Australia) Pty Ltd (1979) 43 FLR 217 discussed
Federal Commissioner of Taxation v EA Marr and Sons (Sales) Ltd (1984) 84 ATC 4580 distinguished
Ure v Federal Commissioner of Taxation (1981) 50 FLR 219 cited
Service v Commissioner of Taxation (2000) 97 FCR 265 discussed
Magna Alloys and Research Pty Ltd v Federal Commissioner of Taxation (1980) 49 FLR 183 followed
John v Federal Commissioner of Taxation (1989) 166 CLR 417 cited
Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404 cited
Pascoe v Commissioner of Taxation (1956) 30 ALJ 402 cited
SPASSKED PTY
LIMITED (ACN 003 255 847) v
COMMISSIONER OF TAXATION - N 1362 OF 1999
STANLEY PARK LIMITED (ACN 008 432 997) v COMMISSIONER OF TAXATION - N 1363 OF 1999
INDUSTRIAL EQUITY
LIMITED (ACN 004 617 164) v COMMISSIONER OF TAXATION - N 1364 OF 1999
LINDGREN J
14 FEBRUARY
2003
SYDNEY
|
IN THE FEDERAL COURT OF AUSTRALIA |
|
|
|
NEW SOUTH WALES DISTRICT REGISTRY |
N 1362 OF 1999 |
|
|
BETWEEN: |
SPASSKED PTY LIMITED (ACN 003 255 847) APPLICANT |
|
|
AND: |
COMMISSIONER OF TAXATION RESPONDENT |
|
|
JUDGE: |
LINDGREN J |
|
DATE OF ORDER: |
14 FEBRUARY 2003 |
|
WHERE MADE: |
SYDNEY |
THE COURT ORDERS THAT:
1. The respondent's motion, brought by notice of motion filed
on 1 December 2000, be dismissed.
2. The proceeding be stood over to 11 March 2003 for the making of orders, including orders as to costs.
3. The parties supply to the Associate to Lindgren J by 7 March 2003 an agreed form of orders or, failing agreement, the forms of orders for which they respectively contend and written submissions in support of those orders.
Note: Settlement
and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
IN THE FEDERAL COURT OF AUSTRALIA |
|
|
|
NEW SOUTH WALES DISTRICT REGISTRY |
N 1363 OF 1999 |
|
|
BETWEEN: |
STANLEY PARK LIMITED (ACN 008 432 997) APPLICANT |
|
|
AND: |
COMMISSIONER OF TAXATION RESPONDENT |
|
|
JUDGE: |
LINDGREN J |
|
DATE OF ORDER: |
14 FEBRUARY 2003 |
|
WHERE MADE: |
SYDNEY |
THE COURT ORDERS THAT:
1. The proceeding be stood over to 11 March 2003 for the making of orders, including orders as to costs.
2. The parties supply to the Associate to Lindgren J by 7 March 2003 an agreed form of orders or, failing agreement, the forms of orders for which they respectively contend and written submissions in support of those orders.
Note: Settlement
and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
IN THE FEDERAL COURT OF AUSTRALIA |
|
|
|
NEW SOUTH WALES DISTRICT REGISTRY |
N 1364 OF 1999 |
|
|
BETWEEN: |
INDUSTRIAL EQUITY LIMITED (ACN 004 617 164) APPLICANT |
|
|
AND: |
COMMISSIONER OF TAXATION RESPONDENT |
|
|
JUDGE: |
LINDGREN J |
|
DATE OF ORDER: |
14 FEBRUARY 2003 |
|
WHERE MADE: |
SYDNEY |
THE COURT ORDERS THAT:
1. The proceeding be stood over to 11 March 2003 for the making of orders, including orders as to costs.
2. The parties supply to the Associate to Lindgren J by 7 March 2003 an agreed form of orders or, failing agreement, the forms of orders for which they respectively contend and written submissions in support of those orders.
Note: Settlement
and entry of orders is dealt with in Order 36 of the Federal Court Rules.
SPASSKED
PTY LIMITED v COMMISSIONER OF TAXATION
(N1362 of
1999)
STANLEY
PARK LIMITED v COMMISSIONER OF TAXATION
(N1363 of
1999)
INDUSTRIAL EQUITY LIMITED v COMMISSIONER OF TAXATION (N1364 of 1999)
Table of Contents
INTRODUCTION................................................................................................... [1]-[11]
GENERAL BACKGROUND FACTS................................................................. [12]-[28]
THE SPASSKED STRUCTURE.......................................................................... [29]-[44]
FRANKED AND UNFRANKED DIVIDENDS............................................................... [30]
SECTION 46 "DIVIDEND REBATES".................................................................. [31]-[32]
TAX LOSSES................................................................................................................... [33]
DIVIDEND TRAPS................................................................................................. [34]-[36]
COMPANY LAW AND TAX LAW TREATMENT OF LOSSES.............................. [37]-[38]
THE CHANGES MADE BY THE SPASSKED RESTRUCTURING....................... [39]-[44]
THE
RESPECTIVE PARTIES' STATEMENTS
OF FACTS, ISSUES AND CONTENTIONS...................................................... [45]-[58]
MORE DETAILED EVIDENCE OF THE FACTUAL BACKGROUND...... [59]-[138]
THE IEL GROUP................................................................................................... [61]-[62]
BUSINESS MANAGEMENT/ADMINISTRATION AND PLANNING ROLE......... [63]-[64]
HEAD
OFFICE MANAGED COMPANIES
AND EXTERNALLY MANAGED COMPANIES.................................................... [65]-[67]
DIVIDEND RECOMMENDATIONS...................................................................... [68]-[70]
ADMINISTRATION TEAM MEETINGS......................................................................... [71]
STRUCTURAL CONCERNS.................................................................................. [72]-[74]
INTRODUCTION OF THE DIVIDEND IMPUTATION SYSTEM.................................. [75]
DIVIDEND TRAPS.......................................................................................................... [76]
WASTAGE OF TAX LOSSES.......................................................................................... [77]
THE SPASSKED PROPOSAL................................................................................ [78]-[81]
EXPECTATIONS IN RESPECT OF THE SPASSKED RESTRUCTURING.......... [82]-[90]
IMPLEMENTATION OF THE SPASSKED STRUCTURE.................................. [91]-[106]
INTEREST.......................................................................................................... [107]-[110]
INVESTMENT BY SUBCOS............................................................................... [111]-[112]
FRANKED AND UNFRANKED DIVIDENDS................................................... [113]-[114]
TAKEOVER OF IEL BY THE ADSTEAM GROUP IN NOVEMBER 1989........ [115]-[124]
PAYMENT OF DIVIDENDS BY GIH TO SPASSKED.................................................. [125]
NEGOTIATIONS WITH AUSTRALIAN TAXATION OFFICE.......................... [126]-[132]
LIQUIDATION PROJECT.................................................................................. [133]-[136]
DIVIDENDS PAYABLE................................................................................................. [137]
AGREEMENTS FOR THE PURPOSES OF s 80G OF THE ACT................................ [138]
REASONING.................................................................................................... [139]-[246]
COMPETENCY.................................................................................................. [139]-[157]
SUBSECTION 51(1)........................................................................................... [158]-[245]
General legal principles............................................................................. [158]-[192]
General................................................................................................... [158]-[159]
Deductibility of interest on money borrowed......................................... [160]-[162]
Expectation or purpose.......................................................................... [163]-[169]
Holding companies................................................................................. [170]-[180]
Subjective and objective expectations and purposes............................. [181]-[186]
Tax considerations as a motive.............................................................. [187]-[190]
Magna Alloys..................................................................................................... [191]
Steele................................................................................................................. [192]
The facts..................................................................................................... [193]-[245]
Spassked's general course of borrowing from IEF................................ [193]-[194]
Four general matters.............................................................................. [195]-[198]
Particular circumstances.................................................................................. [199]
The question of expectation (in
the positive sense explained at
[164]-[166]) or purpose to be
determined as at mid 1987 to
28 June 1990..................................................................................................... [200]
Testimony of Daniels and Cottam.......................................................... [201]-[236]
Summary................................................................................................. [237]-[245]
PART IVA ISSUES........................................................................................................ [246]
CONCLUSION.................................................................................................. [247]-[249]
ANNEXURE "A" Diagram illustrating Spassked Restructuring....................................... [41]
ANNEXURE "B" Diagrams illustrating eleven transactions.......................................... [105]
ANNEXURE "C" Table of investments made by GIH in Subcos ................................. [111]