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But tax specialists say its comments on reimbursement agreements fall short and the issue of ordinary family or commercial dealing remains unresolved.
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ATO to amend s100A ruling in wake of Guardian appeal
28 April 2023
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The ATO has responded to the landmark Guardian AIT appeal ruling in January with a decision impact statement that admits it will have to amend its position on trusts, Section 100A and reimbursement agreements.
The Full Federal Court ruling in January rejected the ATO’s position that a reimbursement agreement existed in the Guardian case and so s100A did not apply.
“We will make minor updates to TR 2022/4 to reflect aspects of the court’s decision in accordance with the comments made in this decision impact statement,” the ATO said.
The changes would take in the court’s view that the plans or recommendations of advisers “could not form part of a reimbursement agreement without a finding that they had communicated it to the participants or were otherwise authorised to act on their behalf”.
Other changes would reflect “the court’s observation that, ordinarily, a beneficiary will need to be a party to the reimbursement agreement where the payment of moneys is proposed to be made to the trustee by a beneficiary”.
Tax specialist John Jeffreys commended the ATO for recognising the accountants in the Guardian case did not create or participate in a reimbursement agreement.
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“The ATO argued this point before the Full Federal Court and the court rejected the argument,” he said. “Accountants and legal advisers should be pleased with this development.”
However, he said the ATO fell short in its comments on the case.
“I think the ATO could have been far more expansive in its discussion about why a reimbursement agreement did not exist in the Guardian case. There is an important discussion in the judgement about this issue and I do not think the ATO has tried to properly explain the full implications of the Full Federal Court’s comments.
“Rather, the ATO has tried to confine the decision on section 100A to the particular facts of the case. This is disappointing.”
Although it rejected the ATO’s position on s100A, the Full Federal Court said the arrangements in the case could be subject to Part IVA.
“The implications of Part IVA being held to apply to Mr Springer [the respondent] in one of the years in question has important, and possibly wide reaching implications,” Mr Jeffreys said. “The comments by the ATO on this critical part of the case in its decision impact statement are disappointingly very limited.”
IPA general manager of technical policy Tony Greco said the profession was also “desperately seeking judicial guidance” on the s100A exception for “ordinary family or commercial dealing”.
“The ATO’s narrow interpretation of this exception was one of the main points of difference in opinion between submissions made and where the ATO guidance landed in its final ruling on s100A,” he said.
“When the case was first heard by a single judge of the Federal Court the same decision was made that there was no reimbursement agreement.
“Justice Logan however did make some comments regarding his interpretation of the ordinary family and commercial dealings which was not as narrow as the ATO guidance.
“For s100A purposes this is where the battle will be and we need a case that considers this exception.”
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