Gutteridge v Commissioner of Taxation [2013] AATA 947

Mr & Mrs Gutteridge were a husband and wife who were the beneficiaries of a discretionary trust.  The trust carried on a business.  When the business was sold, the trust made capital gains.

The trust sought to claim the CGT small business concession. The concession is only available if the assets of the taxpayer, and any entities “connected with” the taxpayer, do not exceed $6m. 

The sole director and shareholder of the trustee was Mr & Mrs Gutteridge’s daughter.  She controlled another entity which had assets.  The Commissioner considered that those entities were “connected with” the trust, and added them for the purposes of the test.  This brought the value of relevant assets over the $6m maximum limit.

Mr & Mrs Gutteridge appealed to the AAT. The primary issue was whether the daughter “controlled” the Trust — that is, whether the trustee “could reasonably be expected to act” in accordance with the directions or wishes of the daughter.  If the daughter “controlled” the trust, the assets of her separate entity would need to be included in the test.

Based on the evidence before it, the AAT held that Mr Gutteridge alone controlled the trustee.  Even though the daughter was the sole director and shareholder, the trustee was not accustomed to act in accordance with her wishes.  Accordingly, the concession was held to be available.

This case potential has wide reaching implications in trust and taxation law.  The ATO has released a Decision Impact Statement regarding the case that can be accessed here.