Mr. and Mrs. Abichandani were the directors and shareholders of a private company called Abichandani Associates Pty Ltd. Although it's not clear what the company did, the Abichandanis were experienced accountants and tax agents.
During the 2012 and 2013 tax years, the company gave loans and payments to the Abichandanis and to some other entities they controlled, including a partnership where the Abichandanis were partners. They didn't have proper loan agreements for these transactions.
The tax office said the partnership and the shareholders owed taxes because they got deemed dividends under Division 7A.
The Abichandanis disagreed with the tax office's decision and objected to it. But their objections were rejected, so they asked the Administrative Appeals Tribunal (AAT) to review the decision. The AAT had to decide on four main things:
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Did the company give loans to the partnership and to the Abichandanis as shareholders, and if so, how much?
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Did transferring units in a unit trust and making various payments to the Abichandanis count as deemed dividends under S.109C?
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Could the tax office choose not to count the deemed dividends under S.109RB, and if so, should they do that for the Abichandanis?
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Were the penalties the tax office imposed too harsh, and should they reduce them? (The tax office fined the Abichandanis 50% of the amount they owed because they were reckless.)
The AAT decided that the transactions between the entities the Abichandanis controlled broke the rules of Division 7A, which meant they were treated as dividends. They'll explain more about why they made this decision later.
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- Topics on Division 7A (1) – Legislative background (1)
- Topics on Division 7A (2) – Legislative background (2)
- Topics on Division 7A (4) – Case Background (2)
- Topics on Division 7A (5) – Case Background (3)
- Topics on Division 7A (6) – Case Background (4)
- Topics on Division 7A (7) – Case Background (5)
