Raftland Pty Ltd as trustee of the Raftland Trust v Commissioner of Taxation [2008] HCA 21

HIGH COURT OF AUSTRALIA

GLEESON CJ,

GUMMOW, KIRBY, HEYDON AND CRENNAN JJ

RAFTLAND PTY LTD AS TRUSTEE OF THE

RAFTLAND TRUST APPELLANT

AND

COMMISSIONER OF TAXATION RESPONDENT

Raftland Pty Ltd as trustee of the Raftland Trust v Commissioner of Taxation [2008] HCA 21

22 May 2008

B39/2007

ORDER

1. Appeal dismissed.

2. Special leave to cross-appeal granted.

3. Cross-appeal treated as instituted, heard instanter and allowed.

4. Set aside the orders made in paragraphs 2 and 3 of the order of the Full Court of the Federal Court of Australia made on 31 January 2007 and, in their place, order that the appeal to that Court in respect of the year ended 30 June 1996 be dismissed.

5. Appellant to pay the respondent's costs of the appeal and cross-appeal.

On appeal from the Federal Court of Australia

Representation

D G Russell QC with H L Alexander for the appellant (instructed by Tobin King Lateef)

A Robertson SC with J H Momsen and P A Looney for the respondent (instructed by Australian Government Solicitor)

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Raftland Pty Ltd as trustee of the Raftland Trust v Commissioner of Taxation

Income tax – Trust income – Present entitlement – Trust deed provided that beneficiaries entitled under default provision had immediate and indefeasible vested interest in income – Income never paid to or demanded by appellant as trustee of Unit Trust – Whether appellant as trustee of Unit Trust presently entitled to trust income – Whether entitlement of appellant under default provision reflected legal entitlements intended by parties creating trusts – Application of parol evidence rule – Whether entitlement of appellant under default provision a "sham".

Income tax – Trust income – Present entitlement – Reimbursement agreement – Income Tax Assessment Act 1936 (Cth), s 100A provided that beneficiary otherwise presently entitled to income of trust estate deemed not to be presently entitled where entitlement arose out of, or arose by reason of act, transaction or circumstance that occurred in connection with, "reimbursement agreement" – Whether transactions between building companies and Development Trust "reimbursement agreement" – Whether other income of Development Trust distributed to Raftland Trust but not derived from agreement between building companies and Development Trust arose out of, or arose by reason of act, transaction or circumstance that occurred in connection with, "reimbursement agreement" – Whether, by operation of s 100A, appellant as trustee of Raftland Trust and not tertiary beneficiaries of Raftland Trust presently entitled to trust income.