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Tax Effective Arrangements: Sham or Shambles - OCT08
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TAX EFFECTIVE ARRANGEMENTS: SHAMS OR SHAMBLES
Raftland Pty Ltd as trustee of the Raftland Trust v. Commissioner of Taxation [2008] HCA 21, 22 May 2008
The High Court of Australia has recently considered the concept of sham in the context of income tax in the matter of Raftland Pty Ltd as trustee of the Raftland Trust v. Commissioner of Taxation1.
In the High Court, and in the Federal Court, and the Full Federal Court, the taxpayer pursued appeals against assessments of income tax made by the Commissioner of Taxation. The taxpayer was not successful in any Court (other than on a minor issue before the Full Federal Court, which was reversed by the High Court).
The amounts involved were substantial. For the three years 1995, 1996 and 1997, on total assessed taxable incomes of $4,105,207.00, total tax assessed was $4,205,570.30, of which $2,259,770.30 was for understatement penalties and interest and late returns. On any view, this was a very bad result for the taxpayer.
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