Commissioner of Taxation v Noza Holdings Pty Ltd

[2012] FCAFC 43

Full Court of the Federal Court28 March 2012

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Interrogate

Catchwords

1. Income Tax
2. › Deductions
3. › Losses or outgoings incurred in deriving income from foreign source
4. › Dividend on preference shares classified as debt interest
5. › Whether outgoing incurred on declaration of dividend or on accruals basis
6. › Whether debt created by declaration even if insufficient profits
7. › Income Tax Assessment Act 1997 (Cth), s 25-90
8. › Corporations Act 2001 (Cth), ss 254T, 254V(2), 256D
1. Income Tax
2. › Deductions
3. › When outgoing incurred
4. › Presently existing liability
5. › Cumulative preference share dividends
6. › Whether terms of issue create presently existing liability absent declaration
7. › Whether conditions on profitability and director resolution prevent incurrence
1. Income Tax
2. › Income or capital
3. › Dividend from foreign subsidiary
4. › Whether distribution from company surplus constitutes income at general law
5. › Character in hands of recipient
6. › Income Tax Assessment Act 1997 (Cth), s 25-90(a)
1. Corporations
2. › Dividends
3. › Declaration of dividend
4. › Debt arising on declaration under s 254V(2)
5. › Whether dividend invalid if declared without sufficient profits
6. › Whether dividend voidable rather than void
7. › Corporations Act 2001 (Cth), ss 254T, 254V(2), 256D

Quick Take

A declaration of dividend by directors creates a debt under s 254V(2) of the Corporations Act 2001 (Cth) even where the company has insufficient profits, and this debt constitutes an outgoing incurred for the purposes of s 25-90 of the Income Tax Assessment Act 1997 (Cth). The terms of cumulative preference shares do not themselves create a presently existing liability to pay dividends absent a directors' declaration; the conditions of profitability and directors' resolution go to the existence of the entitlement, not merely the time of payment. The income or capital character of a dividend for the purposes of s 25-90(a) is determined by its quality in the hands of the recipient, not by the source of the fund from which the distribution is paid.