ATO loses APSI case
The AustralianTaxation Office (ATO) has lost a case in the Federal Court in which it argued that a stock broker had breached tax laws relating to the Alienation of Personal Services Income (APSI).
The case, which was held in the Federal Court in Melbourne and concluded late last month, has parallels with the way many financial planners operate and creates a legal precedent regarding APSI.
The precedent came about as the court ruled that the broker, Levi Mochkin, conducted his business to avoid personal exposure to the liabilities and debts, which may have occurred as part of doing business and not, as the ATO argued, in an effort to avoid paying tax by alienating it.
Importantly for the financial planning industry, Judge Ryan, who made the ruling, said: “... on the analysis which I favour, no personal services were provided by Mr Mochkin.”
Financial services lawyer and senior partner with the Argyle Partnership Peter Bobbin says the structure used by Mochkin is similar to many planning groups in operation today and the ruling further undermines the ATO’s position on APSI.
He says the ruling also contradicts aspects of the Corporation Law, which states that the principal business practitioner must be a natural person and not a company or business entity.
However, Bobbin says that while this may lay down legal precedent, it was too soon for other planners to act as the ATO has indicated it will appeal the decision.
AUTHOR
Jason Spits
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