King & Wood Mallesons

Asia-Pacific 100 position: 3

Commissioner of taxation wins appeal upholding s.255 notices

The Full Court of the Federal Court has allowed the commissioner of taxation’s appeal in FCT v Resource Capital Fund IV LP [2013] FCAFC 118. The appeal concerned the operation of section 255 of the Income Tax Assessment Act 1936 (ITAA), which empowers the commissioner to collect tax owing by a non-resident from any person who has the control, receipt or disposal of money belonging to the non-resident. In allowing the appeal, the Full Court held that the word ‘money’ in s.255 is not limited to Australian currency but includes foreign currency.

The taxpayer, a limited partnership formed in the Cayman Islands, owned shares in an Australian company, Talison. Under a scheme of arrangement, the taxpayer transferred its shares in Talison to a third party. The amount payable to the taxpayer was denominated in Canadian currency and was payable out of a Canadian bank account maintained by Talison. The commissioner issued assessments to the taxpayer seeking to tax it on a profit made on the transfer.

In attempting to collect the tax, the commissioner issued a notice to Talison under s.255 of the ITAA 1936. A person issued with a notice under s.255 is required to pay any tax that is or will become due by a non-resident if the person has the receipt, control or disposal of money belonging to the non-resident. The person is personally liable to the extent of any amount that he has retained or should have retained, but is not otherwise personally liable…

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