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Plan for asset protection |
How do you operate your business? Taxpayers who carry on a business through corporate and trust entities should ensure that such arrangements cannot be classified as schemes to obtain tax benefits, but as a form of asset protection and liability limitation. |
In a recent decision, the Full Federal Court (Commissioner of Taxation v Mochkin [2003] FCAFC15) held that the taxpayer conducted his business through a corporate entity for the dominant purpose of asset protection and limited liability, and not for the dominant purpose of obtaining tax benefits. |
The taxpayer had established corporate and trust entities to carry on a sharebroking business which resulted in significant tax advantages. The Australian Taxation Office (ATO) claimed that the dominant purpose of the taxpayer's arrangement was to obtain a tax benefit and therefore sought to attack it through Part IVA of the Income Tax Assessment Act 1936. |
However, the Full Federal Court held that the fact that the scheme had tax advantages was not inconsistent with the finding that the taxpayer's dominant purpose was not to obtain a tax benefit. |
