Topics on non-arm’s length income – NALI (4)




Background to GYBW’s case continues 

  • In August 2011, Mr D advised Mr K that he was contemplating retirement from his accounting practice. Mr K asked Mr D to become the Chief Financial Officer for the BE Pty Ltd business, where he would receive a gross wage of $243,000 per annum together with the allocation of a motor vehicle or an allowance, plus superannuation contributions. Mr K also offered Mr D a 20% interest in the business.
  • On 8 September 2011, another company (‘B Holdings’) was incorporated with Mr K as the sole director and T K Investments Pty Ltd as sole shareholder, acquired 800 shares in B Holdings for $800. The SMSF acquired 20% of the shares in B Holdings for $200.
  • On 9 September 2011, Mr K transferred 100% of the shares in BE Pty Ltd to B Holdings for $200 (equal to the paid-up value of the BE Pty Ltd shares). There were no retained profits recorded in the accounts of BE Pty Ltd at that time.
  • Mr D’s evidence was that the business was not worth more than book value and without Mr K there was no business. Further, Mr D’s evidence was that, by September 2011, business turnover “had collapsed” and there was no guarantee further work orders would be received.


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Tags: NALI

Written by Panbo Ye

I help people discover POWERFUL unknowns in Tax Ideas | Wealth Strategies | Retirement Planning | Finance Solutions!

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