Keifel J held that the appointment of a loss trust controlled by Harts Accountants as a beneficiary of the Raftland trust and the purported distributions of trust income by the trustee of the Raftland trust to the trustee of the loss trust were a sham, 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.
In dismissing the appeal, the Full Federal Court disagreed with Keifel J's view that the appointment of the loss trust was a sham. On this basis, it was the trustee of the loss trust that was presently entitled to the income purportedly distributed by the trustee of the Raftland trust. Nevertheless, the Full Federal Court took the view that s 100A continued to apply and, in particular, that the terms of s 100A(3A) did not prevent this conclusion.
At the conclusion of the appeal, the High Court reserved its judgment.
For a copy of the transcript of the High Court appeal, go here and here