Amended assessment issued four years later was within time
In an interlocutory matter the AAT has found that a taxpayer was at all relevant times a beneficiary of a trust estate and that an amended assessment issued in April 2010 for the 2005 tax year was issued within time – that is, within four years pursuant to Item 4 of s 170(1) of the Income Tax Assessment Act 1936.
The taxpayer lodged his 2005 tax return in April 2006, disclosing a nil amount under the Label “Distributions from trusts”. The original assessment was issued on 18 April 2006. However, on 12 April 2010, the Commissioner issued an amended assessment that included an additional $2.1 million for the 2005 tax year.
The AAT noted that during the 2005 tax year, a distribution of trust income was allocated to the taxpayer’s wife with the remainder allocated to a company, but none was allocated to the taxpayer. The AAT also noted the trust deed defined “Father” in the “Eligible Classes” to mean the taxpayer.
The taxpayer argued that, as he had received no distributions in relation to the 2005 tax year, he was not a beneficiary of the trust estate at any time in that year and therefore the amended assessment was out of time.
Essentially, the taxpayer made arguments about the ordinary legal meaning of the word “beneficiary” and proposed a narrower construction of the concept in the context of qualification (d) of Item 1 of s 170(1); broadly, it was argued the qualification requires the beneficiary to have “received” an entitlement. The taxpayer also argued that s 170 imposes “a special, more rigorous or penal tax regime” and should be read down in favour of the taxpayer. Further, the taxpayer contended that the construction of s 170 advanced by the Commissioner would produce “unlikely, improbable and surprising, if not anomalous, outcomes” and therefore should not be preferred.
The Commissioner contended that, as the taxpayer was a member of the Eligible Class, the taxpayer was a beneficiary of the trust estate during the whole of the 2005 tax year, and accordingly, the amended assessment was within time.
The issue for determination was whether the taxpayer was “a beneficiary of a trust estate at any time” in the 2005 tax year as those words are used in qualification (d) of Item 1 of s 170(1). If so, the Commissioner’s power to issue amended assessments can be extended from two years to four years by Item 4. The AAT rejected the arguments raised by the taxpayer. It found that the taxpayer was at all relevant times a beneficiary under the trust, and that the amended assessment was timely by operation of Item 4 of s 170(1).
Re Yazbek and FCT [2012] AATA 477, www.austlii.edu.au/au/cases/cth/AATA/2012/477.html
