High Court rules in lengthy offshore tax case

The High Court has ruled in a long-running case that involved a company setting up complex offshore structures, labelled by the ATO as “blatant tax evasion”.

Tax&Compliance | 17 November 2016 | Katarina Taurian

Tax&Compliance

17 November 2016

By: Katarina Taurian

COMMENTS

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Tax&Compliance Katarina Taurian 17 November 2016

Yesterday, the ATO announced Hua Wang Bank Berhad and Bywater Investments Limited’s appeal to the High Court was unanimously dismissed, confirming that the corporate entities were residents of Australia for tax purposes.

The court found that the company should not be regarded as residing outside Australia merely
because it had established a board of directors abroad to act upon the dictates of an Australian resident.

Tax commissioner Chris Jordan said the decision means that any parties that set up complex structures offshore with the clear intent to avoid paying tax in Australia should take “a hard look at
what they are doing” and whether they want to risk being caught and seriously penalised.

“The decision is not a one-off decision. We’ve fought this case already in the Federal Court. Today’s High Court decision affirms that we will maintain our resolve to pursue cases of blatant tax evasion. We can and will catch this type of contrived behaviour,” Mr Jordan said.

“We will use all our available powers and resources to deal with such schemes and ensure all Australian residents pay the right amount of tax.

“This case has had a substantial litigation history, including 19 challenges to the evidence and procedure at the Federal Court, followed by an appeal to the full Federal Court. This was not an easy process.

“I have made it clear that the ATO will not shy away from difficult and complex cases, no matter how long they take to run, and no matter how many obstacles are put in our way.

“We will not give up and will continue to challenge – through the courts if we need to – cases where we see corporate entities seeking to game the system. It is not fair to see this occur when other entities are working hard to engage with us and ensure their operations are above board, and most importantly they pay the right amount of tax they are obliged to under the law.”