Raftland Pty Ltd as trustee of the Raftland Trust v Commissioner of Taxation

Income tax – Trust income - Present entitlement - Trust deed provided that beneficiaries entitled under default provision had immediate and indefeasible vested interest in income - Income never paid to or demanded by appellant as trustee of Unit Trust - Whether appellant as trustee of Unit Trust presently entitled to trust income - Whether entitlement of appellant under default provision reflected legal entitlements intended by parties creating trusts - Application of parol evidence rule - Whether entitlement of appellant under default provision a "sham".

Income tax – Trust income - Present entitlement - Reimbursement agreement - Income Tax Assessment Act 1936 (Cth), s 100A provided that beneficiary otherwise presently entitled to income of trust estate deemed not to be presently entitled where entitlement arose out of, or arose by reason of act, transaction or circumstance that occurred in connection with, "reimbursement agreement" - Whether transactions between building companies and Development Trust "reimbursement agreement" - Whether other income of Development Trust distributed to Raftland Trust but not derived from agreement between building companies and Development Trust arose out of, or arose by reason of act, transaction or circumstance that occurred in connection with, "reimbursement agreement" - Whether, by operation of s 100A, appellant as trustee of Raftland Trust and not tertiary beneficiaries of Raftland Trust presently entitled to trust income.

Income tax – Avoidance or minimisation of liability to tax - Proper analysis of documents and actions of appellant and other persons - Suggestion that certain actions constitute a "sham" - History and meaning of "sham" for the purposes of Australian law - Utility for legal purposes of conclusion that transactions constitute a "sham" - Whether in present case propounded documents expressed purposes and intentions of parties with legal consequences determined accordingly - Whether documents were a "sham" and may be disregarded with legal obligations of parties determined otherwise - Whether primary judge erred in references to and conclusions of "sham" - Whether Full Court erred in giving effect to different conclusion as to existence of "sham".

Trusts – Trust income - Whether losses borne by capital in previous tax years must be recouped before trust income is available for distribution - Relevance of existence of successive interests, where interest in income followed by interest in capital - Relevance of Upton v Brown (1884) 26 Ch D 588.

Words and phrases – "present entitlement", "reimbursement agreement", "sham".

Income Tax Assessment Act 1936 (Cth) – ss 99A, 100A, 226H, 260, Pt IVA.