The ATO has published a Decision Impact Statement in relation to the decision of the Federal Court in Ultra Thoroughbred Racing Pty Ltd v FCT  FCA 1300; 2013 ATC 20-428.
The decision concerned whether certain race winnings were required to be paid to the Commissioner pursuant to a s 260-5 notice where the taxpayer was registered as the owner but did not own the race horse.
A taxpayer had a tax debt in excess of $11 million. A race horse registered (as to a 50% share) in the taxpayer's name had been awarded prize money. The Commissioner issued a s 260-5 notice (commonly referred to as a garnishee notice) to Racing Victoria Ltd, requiring Racing Victoria to pay to the Commissioner the prize winnings otherwise payable to the taxpayer on the basis that the winnings were a debt due to the taxpayer and not the Applicant.
The Applicant, however, claimed that the race horse and the relevant prize money belonged to it, and not to the taxpayer. A contract between the taxpayer and the Applicant provided that all revenue from the race horse belonged to the Applicant.
The Applicant sought declarations (a) that it was the legal and beneficial owner of the prize money, and (b) that Racing Victoria was not required to pay any funds to the Commissioner pursuant to the garnishee notice.
The Court held that the contract between the taxpayer and the Applicant created a direct entitlement in the Applicant to the prize winnings. The rules of Racing Victoria did not operate to alter that entitlement. The Applicant's application was upheld.
The Commissioner considers that this decision turns on its own particular facts and that it does not have broader implications for the Commissioner's use of garnishee notices.