Cases Funny Stuff

The ATO has to be joking…

The next time the ATO complains about your client’s attention to detail remind of The Study and Prevention of Psychological Diseases Foundation Incorporated.

Back in 2007 a group of guys wanted to live the high life – sports cars, gambling,… But due to the tax rates they did not have enough money. So they duped the ATO into funding their high life… Legally!

They applied for a charity called The Study and Prevention of Psychological Diseases Foundation Incorporated. It was going to investigate certain effects on these guys, including driving sports cars and gambling. The ATO gave charity status to them and DGR status. Now, the donated their discretionary income to the charity, and used it tax free on fun stuff. They actually invested some of the amounts they invested to get returns and even donated assets worth millions of dollars.

It took until a review in 2011 for the Commissioner to take away these registrations… YOU HAVE TO BR KIDDING ME! The owners of the charity challenged the decision in the AAT but fortunately lost.

Tax free fun for four years… All on the ATO


Wooster, SMSF and death

As a new type of family becomes more prevalent, the “blended” family according to our verbally challenged opposition leader, issues like Wooster are going to become more relevant.

In this case a husband passed away. His wife expected almost $1 million from his SMSF but he had a BDBN in favour of his daughters of his previous marriage.

And then the real blending began…

The wife as a co trustee of the SMSF complained to her accountants that she knew nothing about this (being honest she knew not much about the running of the SMSF at all). Ah ha! Does this mean the BDBN has not been provided to the trustee and so is ineffective? The husband as co trustee obviously knew about it but the wife said she did not…

The wife then formed a trustee company, made it the trustee of the SMSF, with her as a director and and paid most of the hubbies account to herself. Interestingly i reckon she kept a lot in the account to pay the legal fees she expected.

Then the daughters challenged this and all agree to use a special review of the Court (non binding but cheap). The review said the BDBN was valid… But the wife decided to ignore this and keep the money.

The Victorian Supreme Court was not impressed to say the least. It confirmed the BDBN was valid, the daughters got a cost award, that as the wife as a director of the trustee company has acted in her interest against independent review she was personally liable and that she also not indemnified by the assets of the trusts.

This meant the hundreds of thousands of costs had to come out of the wife’s pocket! Now she had died by the time of the decision so she (her LPR) had the cash from the fund.

So in the end the daughters got their $1 million 5 years late, the wife got access to $600k in her final years and the lawyers got the wife’s assets remaining after death.

Lessons are first don’t go against a BDBN. The wife actually got (bad) advice but that is not enough. Second if a fight is going to happen, make sure the trustee or directors of the trustee are not going to benefit to the exclusion of other members…

Do will templates have a BDBN appendix and the instructions to send these forms to the trustees of the SMSF?

Funny Stuff

Excuses, excuses…

Need an excuse for being later with your tax return. I the UK you need a good one as they reject all the following…

  • My pet goldfish died;
  • I had a run-in with a cow
  • After seeing a volcanic eruption on the news, I couldn’t concentrate on anything else
  • My wife won’t give me my mail
  • My husband told me the deadline was March 31, and I believed him
  • I’ve been far too busy touring the country with my one-man play
  • My bad back means I can’t go upstairs. That’s where my tax return is
  • I’ve been cruising round the world in my yacht, and only picking up post when I’m on dry land
  • Our business doesn’t really do anything
  • I’ve been too busy submitting my clients’ tax returns

But in Australia it appears it is a bit easier to make up excuses… Try this…

An ACT magistrate has accepted a man developed a phobia about tax returns following a home invasion 13 years ago, in which his attacker taunted him about his tax documents, preventing him from lodging them ever since.

Christopher Ray Streicher, 55, of Kingston, pleaded guilty in the ACT Magistrates Court to 15 counts of failing to comply with notices from the Australian Tax Office relating to his failure to lodge tax returns from 1991 to 2005.

But Magistrate John Burns dismissed the charges without recording a conviction this week, after accepting Mr Streicher had not lodged the tax returns because he was reminded of the attack every time he tried to complete them.

The court heard that in November 1994, Mr Streicher was determined to complete his outstanding tax returns, and spent several hours on a Saturday collating the papers. The next day he was the victim of a home invasion, assault and robbery.

“I always wanted and hoped to be able to comply. But if I tried I get emotionally upset,” Mr Streicher told the court.

In a psychological report on Mr Streicher dated May 15, 2007, senior psychologist Harold Bilboe wrote, “Mr Streicher reported that he was tied up and threatened several times with a large knife, the person [robber] threatening to kill him. The robber noted the tax papers on the floor and taunted him about the papers while at the same time stealing everything of value.

“Since that time, he has had severe feelings of panic whenever he attempts to deal with his tax returns. This has resulted in him being several years in arrears with his returns and facing charges from the Australian Taxation Office.”

“The defendant in this case could certainly be said to be experiencing ‘circumstances of an unusual kind’ personal to him,” Mr Burns said. “His mental condition, following the home invasion in 1994, had a considerable effect on his ability to comply with his obligations.” He said he was satisfied the medical evidence had established a “direct causal link between the defendant’s phobia and the work necessary for him to comply with the [Tax Offices’s] notices.” The magistrate did not order Mr Streicher to lodge the tax returns, but indicated he may do so later.