Other ATO Developments
Decision Impact Statement: Kafataris
24.12.2008
The Commissioner has issued a Decision Impact Statement dealing with the decision of Lindgren J in Kafataris v FCT [2008] FCA 1454. The issue for decision was whether CGT event E1 happened when a taxpayer’s interest in real property was placed on trust (a superannuation fund) of which the taxpayer was a member and whether the absolute entitlement exception to CGT event E1 happening applied. Lindgren J rejected the taxpayer’s contentions.
The ATO considers that the approach taken by Lindgren J aligns with the “core principle” adopted in TR 2004/D25 (at para 10). The draft ruling makes further propositions which were not necessary for his Honour to consider (for example, the effect of having multiple beneficiaries). The Commissioner’s practice with regard to these propositions will continue as set out in the draft ruling.
Additionally, Lindgren J made some conclusions not expressed in the draft ruling. These are:
· the existence of a power of sale by the trustee in respect of an asset is inconsistent with absolute entitlement by a beneficiary to the asset as against the trustee; and
· a provision in the instrument of trust denying a beneficiary any interest in any particular asset of a trust is inconsistent with absolute entitlement by a beneficiary to any of the assets of the trust.
These conclusions are not inconsistent with the draft ruling and the ATO accepts that they are correct.
For the text of the Decision Impact Statement, click here.
