(http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/AATA/2022/2832.html)
The AAT has overturned an ATO decision to deny the cash flow boost to a company that constructively paid directors' fees by treating earlier drawings as directors' fees.
The taxpayer company was a vehicle for the provision of actuary and related consultancy services by Mr Robert Johnson. The company was largely dormant between 2015 and June 2019, but in July 2019 Mr Johnson undertook a number of initiatives to revitalise the business.
In its activity statement for March 2020, the taxpayer disclosed directors' fees (ie wages) totalling $69,500 with PAYG withholdings of $24,846. The taxpayer did not pay directors' fees by way of an actual payment in March 2020, but it did so constructively by declaring earlier directors' drawings to be directors' fees during March 2020 (the ATO accepted that directors' fees may be paid constructively in that way).
The ATO denied the taxpayer the cash flow boost for March 2020 but the AAT has overturned that decision. Despite the absence of contemporaneous documentary evidence, such as a directors' minute or pay slips, the AAT was satisfied on the balance of probabilities that Mr Johnson, on behalf of the taxpayer, determined in March 2020 that amounts totalling $69,500 were to be treated as directors' fees. The AAT was also satisfied that neither the taxpayer nor Mr Johnson had entered into or carried out a scheme for the sole or dominant purpose of making the taxpayer entitled to the cash flow boost for March 2020 or increasing its entitlement for the period.
© 2022 CPA Australia Ltd
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