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The High Court (Crennan and Keane JJ) has refused the taxpayer special leave to appeal from the decision of the Full Federal Court in FCT v Greenhatch [2012] FCAFC 84 (Edmonds, Greenwood and Robertson JJ, 7 June 2012).

In that case, the Full Federal Court held that the "proportional approach", which applies in determining what part of the net income of a trust will be included in the beneficiary's assessable income under s 97 ITAA 1936 ("the trust amount"), applied equally to determine what part of the "trust amount" was attributable to a discount capital gain derived by a discretionary trust (of which the taxpayer was a beneficiary) for the purposes of the now repealed s 115-215(3) ITAA 1997.

The " proportional approach" was confirmed by the High Court in FCT v Bamford [2010] HCA 10 as the correct approach in applying s 97. However the taxpayer argued, unsuccessfully, that it had no application to the former s 115-215(3), and that the whole of his "trust amount" was attributable to the discount capital gain derived by the trust.

If the taxpayer's argument had been successful, the taxpayer's income from salary and wages would have been less than 10% of his total assessable income (because of the grossing up of the discount capital gain), and he would have been entitled to a deduction for concessional superannuation contributions under s 290-160 ITAA 1997. In contrast, the rejection of the taxpayer's argument meant that his salary and wages was not less than 10% his total assessable income, and he was not entitled to the deduction.

In rejecting the taxpayer's application for special leave, the High Court said:

"There are insufficient reasons to doubt the correctness of the Full Court’s decision, based on the construction, in accordance with well-settled principles, of provisions which have now been repealed. This matter raises no question of public importance."

Greenhatch v FCT [2013] HCATrans 104 (10 May 2013)


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