Topics on non-arm’s length income – NALI (8)



The Tribunal’s decision in GYBW’s case continues

The SMSF further contended that the dividend paid by B Holdings to the SMSF was ‘consistent with an arm’s length dealing’ as:

  • the dealings between Mr D and Mr K (and their associated entities) were at arm’s length, as they were unrelated families who acted independently and in their own interests; and
  • the value of the shares in BE Pty Ltd was nominal and there was no value to be attributed to goodwill or other intangibles when the company was acquired by B Holdings in September 2011.

The Tribunal did not accept that the SMSF had demonstrated that the market value of the shares in BE Pty Ltd, acquired by B Holdings in September 2011, was no more than a nominal amount.

While the Tribunal accepted that BE Pty Ltd’s business was sporadic and its future profitability was never certain, it did not accept that the only cash flows that are relevant in determining the value of a business are those that are certain or guaranteed. That is, despite the risk associated with future cash flows, the Tribunal did not accept that the business’s value is necessarily nil or negligible. Referring to the High Court decision in Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd [1947] HCA, the Tribunal stated a valuation must consider the probable profit which the company may be reasonably expected to make in the future.


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Tags: NALI

Written by Panbo Ye

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