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Tax Telegraph, September 2013

CasesResource Capital Fund IV LP & Anor v FCT & Anor [2013] FCA 801

The taxpayers were limited partnerships formed in the Cayman Islands. They owned shares in Talison, an Australian company, which they sold to a third party. The amounts payable to the taxpayers were denominated in Canadian currency and were payable out of a Canadian bank account maintained by Talison. There was no obligation on Talison to pay the taxpayers in Australian dollars.

In March 2013, the Commissioner issued notices of assessment to the taxpayers. The tax liability was denominated in Australian currency and it was understood by both parties that liability to tax under the Income Tax Assessment Acts can only be discharged by payment in Australian currency.

The Commissioner also issued notices under s 255 of the ITAA 1936 requiring Talison, as "a person having the receipt control or disposal of money belonging to" the taxpayers, to retain from that money, and to pay to the Commissioner, the amounts the taxpayers were assessed to pay. The relevant amounts were expressed in Australian currency.

The Federal Court held that the s 255 notices were ineffective as Talison did not have the receipt, control or disposal of any Australian currency belonging to the taxpayers from which to retain sufficient Australian currency to pay the tax payable. Nor did s 255 (or any other provision of the income tax legislation) authorise the conversion of the Canadian currency into Australian currency.

The Court also held that the word "money" in s 255(1) clearly refers to the currency of the tax obligation (ie Australian dollars) and not to foreign currency; nor, in the absence of authorisation or requirement to convert, does the word "money" refer to the proceeds of its sale.

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