Alternative assessments not tentative: Federal Court

The Federal Court has found that a company’s tax assessments were not tentative or provisional, and therefore were valid.

For the 2011 to 2014 income years, the Commissioner of Taxation had notified the taxpayer, which was the trustee of a discretionary trust, that it was liable to pay tax assessed in two different amounts calculated by two different methods. The Commissioner explained to the taxpayer in writing how the two assessments applied.

The taxpayer argued that the assessments were tentative because, for each year, they imposed two separate and different income tax liabilities on its single trustee capacity. The Court denied this claim, agreeing with the ATO that a trustee’s liability to pay income tax is of a “representative character” and the relevant tax law provisions allow for a trustee’s liability to multiple assessments regarding different beneficiaries’ entitlements to a share of the net trust income.

Accordingly, in effect the Court found that the primary and alternative assessments were comparable to assessments issued to two or more taxpayers in relation to the same income in the same income year, and were not liable to be set aside as tentative or provisional.

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