The Australian Taxation Office (ATO) has used a Federal Court decision this week to send a strong message on the need for agricultural Managed Investment Schemes (MISs) to deliver on the schemes in the way that has been promised.
The ATO referenced the fact that Federal Court had fined Barossa Vines Limited and its directors more than $1 million for breaching the promoter penalty provisions of the Taxation Administration Act.
It pointed out that the court had awarded civil penalties to the ATO against a company and four people running a MIS because they failed to carry out their wine grape growing activities in accordance with the agreed terms of their product ruling.
Commenting on the outcome, ATO deputy commissioner Tim Dyce said the judgment sent a strong message that the courts would penalise scheme promoters who do not implement schemes in the way they promised.
“We issue product rulings to give investors certainty about the tax consequences of their investment. However, the scheme must be implemented as it was described,” Dyce said. “As we discovered, this was not the case and the promoters’ actions had unfortunate consequences for investors, whose deductions were disallowed.”
He said the ATO always preferred to adopt a consultative approach by working with scheme designers and product issuers so they were aware of their responsibilities under a product ruling.
“We thank those community members who came forward with information which led to this court outcome, as this helps us protect investors from scheme promoters who breach the promoter penalty provisions,” Dyce said.
The ATO cited the words of the Federal Court judge, Justice Besanko, who, delivering his judgement, said: “These are significant contraventions ¨ The failure to heed the warnings of the viticultural experts and others and to check on the progress on the [grape vine] rootlings mean, to my mind, that the respondents were prepared to put their own commercial interests ahead of their important obligations to investors.”
