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14 Oct 13 Decision Impact Statement - Bell

The ATO has issued a Decision Impact Statement in relation to the decision of the Full Court of the Federal Court in Bell v FCT [2013] FCAFC 32; 2013 ATC 20-380. The taxpayer's application for special leave to appeal to the High Court was dismissed on 16 August 2013 - see [2013] HCA Trans 179.

The case concerned whether the taxpayer, the trustee of a family trust, satisfied the maximum net asset value (MNAV) test prescribed by s 152-15 of ITAA 1997, for the purposes of the small business CGT concessions. Specifically, the issue before the Court was whether two liabilities, one arising in the context of a loan account and a linked offset account with the Adelaide Bank, and the other a loan from Macquarie Bank, related to the CGT assets of the taxpayer. If they did, the value of the CGT assets of the taxpayer were less than $5 million but. if they did not, the value of the CGT assets were more than $5 million and the MNAV was not satisfied.

The AAT had found that the Adelaide Bank facility consisted of two CGT assets, the loan account and the linked offset account. The loan account was a liability relating to a dwelling excluded from the MNAV test and, accordingly, was not included in the calculation. On appeal, the Full Court refused to disturb the AAT's findings in relation to the Adelaide Bank accounts. The Full Court held that the AAT's conclusion that the Adelaide Bank facility consisted of two accounts was reasonably open on the material before it and the question of characterisation was one of fact for the AAT.

The AAT found that the loan from Macquarie Bank related to the discharge of an obligation to distribute capital of the trust and therefore was not related to the assets relevant to the calculation required by s 152-20 of the ITAA 1997. The Full Court held that the AAT did not err in law in finding as it did.

The ATO states that the decision "is consistent with the Commissioner's view and current practices".


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