Mr Anderson vs Federal Commissioner of Taxation

In Mr Anderson v the Commisioner of Taxation the tribunal was asked to decide whether the trustee of the Anderson Family Trust was liable for GST for the period in which two properties on its books were sold.  The period in question was October-December 2009.

Background

The Anderson Family Trust took out loans with a property development company to finance a property development.  It just so happens that the property development company in question was also contracted to perform developments for the Anderson Family Trust!

In July 2009 the property development company put the Anderson Family Trust on notice by telling them they had 28 days to catch up on loan payments, if the demand was not met they threatened to take ownership of the securities subject to this loan.  The loan security was in fact personal property of Mr Anderson and not the two properties that the loan was financing.

Mr Anderson was trustee of the Anderson Family Trust and when the properties were sold by 18 November 2009, the ATO expected the GST liability on sale (10% of sale - 10% of cost base and associated expenses) to be included in the 31 December quarter Business Activity Statement.

Instead, Mr Anderson gave all the proceeds to his angry creditors and claimed that he never sold the properties on behalf of the trust.  Mr Anderson claims that after the angry letter he received in July 2009 and after he failed to catch up on payments, all legal ownership of the properties became that of the property development company.

The Commissioner of Taxation rejected this claim, saying that under law the properties were never transferred out of the Anderson Family Trust.

Questions of Fact

The tribunal needed to decide whether or not the properties were transferred from the trust in order to determine who was liable to the GST on sale of the properties.

The tribunal found that the properties could not have been transferred for two reasons.  The first reason being that security for the loan was personal Property of Mr Anderson, any property being chased by creditors was not property of the trust. 

Secondly, Mr Anderson contended that the creditors forced him to sell the properties in question, and hence they were either in control on the properties or in control of the trust.  The judge rejected that the properties had been transferred to control of the property developers, irrespective of how much pressure they put on him.

Questions of Law

In regard to the latter point (about control of the trust), the judge noted that tax legislation narrowly defines a controlling entity:

"The applicant in this case is a natural person...that means he could only be regarded as an incapacitated entity if he has a representative. That expression is itself narrowly defined in s 195.1. None of the definitions assist the applicant. The applicant relies in particular on the reference in sub-section (ca) to "a controller (within the meaning of s 9 of the Corporations Act 2001 (Cth))" (emphasis added). Section 9 defines a controller as follows: (a) a receiver, or receiver and manager, of that property; or (b) anyone else who (whether or not as agent for the corporation) is in possession, or has control, of that property for the purpose of enforcing a security interest[.] The definition refers to the property of a corporation, whereas the applicant is an individual. It follows the definition does not fit." The other question of law posed in this dispute was whether or not the trustee was liable for GST, or, whether Mr Anderson as an individual was liable to GST in his role as the trustee.  In simple terms, can the ATO go after Mr Anderson in his individual capacity or are they limited to his capacity as the trustee of the Anderson Family Trust?   The judge remarks "anyone whose knowledge of trusts is uncontaminated by knowledge of the tax laws would find that a startling proposition" but then proceeds to quote s 184.1(2) of the GST Act: "The trustee of a trust...is taken to be an entity consisting of the person who is the trustee, or the persons who are the trustees, at any given time." The distinction is clear and the judge affirmed this. The question then arose, who was the trustee of the Anderson Family Trust who was liable to pay GST on the sale of these properties?  The ATO have narrowed it down to Mr Anderson or his mother, they decided not to take this point up in court as it requires further investigation.   Mr Anderson The judge, undoubtedly a fan of The Matrix failed to use the term Mr Anderson as many times as Agent Smith in the 1999 film (24 vs 29), but he came close... https://www.youtube.com/watch?v=XooISvoZ_rs   The case [2015] AATA 167:  http://www.austlii.edu.au/au/cases/cth/AATA/2015/167.html