The High Court dismissed the taxpayer's appeal from the decision of the Full Federal Court in Raftland: see 2007 TAXVINE No 4 (14) (14 February 2007). In so doing, however, it set aside the orders of the Full Federal Court, and held that the taxpayer's appeal to the Full Federal Court from the decision of Kiefel J at first instance be dismissed, the effect of which has been to restore the reasons for judgment of Kiefel J. Kiefel J held that the arrangement set out above was a "sham" or "facade", such that the trustee of the Raftland trust held the trust income upon trust for the default beneficiaries nominated under the Raftland trust. However, her Honour further held that s 100A applied to deem the default beneficiaries not to be presently entitled for tax purposes, with the consequence that the trustee of the Raftland trust was to be assessed on the trust income pursuant to s 99A: see 2006 TAXVINE No 7 (5) (10 March 2007).
The ATO's Decision Impact Statement confirms that the ATO will challenge trust loss trafficking arrangements by ascertaining the true intention of the parties and provides details about the ATO's understanding of the "sham" issue and its application.
For a copy of the Raftland Decision Impact Statement, go here.