Newsletter
March 2014 Newsletter
Forestry managed investment scheme losses refused
An individual has been unsuccessful before the Administrative Appeals Tribunal (AAT) in a matter concerning losses claimed in tax returns for the 2006 and 2007 income years.
The individual had invested in a forestry managed investment scheme and the losses from that investment, which amounted to $1 million over the two years, had been claimed on the basis that he was a member of a partnership. During an audit of the taxpayer's affairs, the taxpayer disclosed to the Tax Commissioner that the partnership losses should not have been claimed and that the 2007 return had been lodged by his tax agent without his authority. The Commissioner refused the claims for losses and issued amended assessments. However, the Commissioner also treated the taxpayer as a person who had made a voluntary disclosure and he decided to reduce the shortfall penalty originally imposed by 80%.
The taxpayer objected to the amended assessments and penalty on the basis that an ATO officer had led other taxpayers to understand that the investment he had made in the scheme could be made. However, the AAT affirmed the Commissioner's decision. It held, among other things, that the returns had been lodged by the taxpayer's tax agent with his authority and that he had failed to discharge the onus of showing that the scheme had not been entered into or carried out for the sole or dominant purpose of the individual obtaining a "scheme benefit". This meant that in the circumstances, the Commissioner could, under the tax law, refuse the losses claimed and issue the amended assessments.