Bucket companies – you have to wait!

We reported three weeks ago that the ATO lost a significant case on bucket companies – you can read that blog – here.  The Full Federal Court in a 3 – 0 decision decided that unpaid entitlements from a trust to bucket companies did not constitute a loan within the meaning of Division 7A.

That is they did not have to:-

• Be paid out before lodgment of the year of the loan’s Tax Return or otherwise
• Put under the terms of a Division 7A loan agreement.

This Full Federal Court decision was favourable to taxpayers.

The ATO have filed a special leave application to have the matter re-heard by the High Court (the highest court in the land).

It has been said by some commentators that the ATO’s post 2009 view was controversial.  Other tax experts have pointed out how the legislation has been subject to amendment after amendment in order for the way they want it to work.  Others have said they had to appeal as there is way too much at stake.  And do so even though they have unanimously lost a decision before 3 very senior judges.

And so we wait.

We understand the appeal may be heard by August.

In the meantime, the ATO have issued what they call a Decision Impact Statement.

In that Statement the ATO have advised that:-

• The ATO will continue to administer the law as it now stands.
• The ATO will not issue any amendments or private rulings nor consider any objections until the High Court hears the appeal.
• In tax speak, the ATO will continue to consider reimbursement agreement issues where no complying Division 7A loan agreement exists.

We will keep you posted.

And so we wait …

At MRS, we will spend today planning for your success.