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ATO Wins Court Battle Against Offshore Superannuation Scheme

by Mary Swire, Tax-News.com, Hong Kong

10 December 2003


The Australian Tax Office won another victory in the courts recently after a Federal Court judge denied deductions for contributions made by a company to a New Zealand based superannuation fund on behalf of the company's owners, who were also its sole employees.

In the case of Walstern Pty Ltd v Commissioner of Taxation, the Court agreed with the ATO that the sole purpose of the contribution was not to provide superannuation benefits to people who were employees. It also held that fringe benefits tax (FBT) applied in respect of the contributions at the time the amounts contributed were allocated by the fund to the employee owners.

Welcoming the Court’s ruling, Tax Commissioner Michael Carmody pointed to an extract from Justice Hill’s decision on the ATO’s rationale in contesting the superannuation scheme, which stated that:

"The ability of a private company employer to obtain unlimited deductions for contributions made to a superannuation fund benefiting employees who are directors and shareholders without either the trustee of the fund being liable to pay tax on the amounts contributed or the employer being liable to pay fringe benefits tax must be the holy grail for tax planners."


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