Deductions for redeemable pref dividends on restructure allowed in part - Noza Holdings
10 Feb 2011
The Federal Court (Gordon J) has upheld in part a taxpayer's claim for deductions for dividends paid on redeemable preference shares (being debt interests for tax purposes) that were issued as part of a complex corporate restructure involving Australian and United States companies, all of which formed part of a corporate group. The total amount of the dividends paid in the 2003 income year was $222,655,981, of which $170,983,354 was held to be deductible under s 25-90 ITAA 1997.
Further, the Court held that Part IVA did not apply to deny the taxpayer a deduction for the amount otherwise allowable. The use of redeemable preference shares, which gave rise to the relevant "tax benefit", was a solution to a problem involving a US foreign exchange accounting issue, with the result that the "scheme" as identified was not entered into for the sole or dominant purpose of enabling the taxpayer to obtain the tax benefit: Noza Holdings Pty Ltd v FCT  FCA 46 (Federal Court, Gordon J, 4 February 2011).