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The AAT has held that payments of $1.6 million made to the taxpayer by her former husband's company were income according to ordinary concepts and therefore assessable to her, notwithstanding the fact that it was not clear from the evidence in what capacity the payments were made to her (as shareholder, employee or investor).

The AAT said, at para 20:

"The taxpayer’s explanation in her oral and written evidence of her role in and relationship with [her husband’s] company is not consistent with the documentary evidence. That other evidence – in particular exhibit 24 – suggests she was an independent investor in the company and expected to receive a flow of income as a return on her investment. While it is unclear whether she actually was a shareholder in the company, I am satisfied the evidence establishes she expected regular payments from the company (although it also suggested she was not fussed about how those payments were obtained or characterised, as long as they were not depicted as loans to her which might be recoverable) that would enable her to expand her property holdings and live a luxurious lifestyle. While I accept the evidence also suggests [her husband] may have kept her in the dark about his activities and excluded her from the operations of the company, I am satisfied the taxpayer expected and did receive approximately $1.6 million from the company in connection with her investment. In any event, I am certainly not persuaded the taxpayer has discharged the responsibility imposed under s 14ZZK of the Taxation Administration Act offer a better alternative explanation for what transpired."

WJBS and Anor and FCT [2013] AATA 518 (AAT, McCabe SM, 23 July 2013).


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