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Administrative Appeals Tribunal of Australia |
Last Updated: 29 January 2003
ADMINISTRATIVE APPEALS TRIBUNAL )
GENERAL ADMINISTRATIVE DIVISION |
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Re |
LUKE NORMAN BUTLER (A BANKRUPT) |
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And |
PAUL A. PATTISON, TRUSTEE IN BANKRUPTCY |
Tribunal |
Deputy President, Don Muller |
Date 13 January 2003
Decision
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The Tribunal: 1. Varies the Assessment of Income made by the Respondent on 11 April 2002. 2. Determines that the Assessment of Income be reduced from $74,080 to $45,400. 3. Remits the matter to the Respondent for re-assessment of the Applicant's liability. |
D.W. MULLER
Bankruptcy - assessment of income for contribution assessment period
Bankruptcy Act 1966: ss 139L, P, Q, R, S, T, W, X, Y, Z
Fringe Benefits Tax Assessment Act 1986 s.136(1)
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DEPUTY PRESIDENT DON MULLER |
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1. This is an application by Mr. Luke Butler ("the Applicant") for a review of a decision of Mr Paul Pattison, Trustee in Bankruptcy, dated 11 April 2002, who assessed the Applicant's income for the contribution assessment period, 7 February 2002 to 6 February 2003, as being $74,080.00 and liability to pay contributions totalling $21,019.45 under sections 139P and 139W of the Bankruptcy Act 1966 ("the Act").
2. At the hearing the Applicant was represented by Mr Pitmann, from Morgan Conley and the Respondent was represented by Mr Eleftheriou, from Hawthorn Cuppaidge & Badgery.
3. The issues for determination by the Tribunal are:
(i) whether the Trustee's assessment was valid; and if not
(ii) whether the Trustee is required to make a fresh assessment based on further information received by the Trustee.
4. The background to this application for review may be conveniently summarised as follows:
(i) The Applicant was a director of Global Air Leasing Pty Ltd (ACN 090 602 118) from November 1999 to February 2002.
(ii) Global Air Leasing is the owner of a Boeing 747 Aircraft, which is used for international charters. At the date of the hearing, 5 September 2002, the Boeing 747 was "stored" in Indonesia.
(iii) The Applicant's expertise was in the management of charter flight operations and the negotiation, lease and sale of Boeing 747 Aircraft and other aircraft.
(iv) On 6 February 2002 the Applicant's second wife, Simone Ayele Arabella Butler was appointed as a director of the following companies:
(a) Global Air Leasing Pty Ltd;
(b) Butler Investment Finance Pty Ltd;
(c) LMMB Pty Ltd; and
(d) Oz Airline Pty Ltd.
(v) The Applicant filed a Debtor's Petition pursuant to section 66 of the Act on 7 February 2002 at the Brisbane office of Insolvency and Trustee Services of Australia.
(vi) On 7 February 2002 a Sequestration Order against the estate of the Applicant was filed in the Federal Magistrates Court at Melbourne MZ 610 of 2001 on the petition of Spirit Airlines Pty Ltd (ACN 081 017 978).
(vii) On 7 February 2002, the Applicant was made bankrupt and the Respondent was appointed as trustee of the bankrupt estate of the Applicant, by the Victorian Branch of Insolvency and Trustee Service Australia.
(viii) In order to assess the Applicant's income for the contribution assessment period from 7 February 2002 to 6 February 2003 the Respondent requested on 8 February 2002 that the Applicant complete the following documents :
(a) Statement of Affairs;
(b) Personal Questionnaire;
(c) Business Questionnaire ; and
(d) Annual Statement of Income.
(ix) On 11 April 2002 the Trustee received a letter from the Applicant's solicitors Morgan Conley, dated 10 April 2002 requesting the use of his passport:
"We refer to the above and advise that Mr Butler urgently requires the use of his passport as it is necessary for Mr Butler to leave Australia in order for him to continue to derive an income....
We note that to date , Mr Butler has not been assessed to make payments to the trustee in respect of his bankruptcy, and accordingly is not required to make a contribution pursuant to section 139P of the Bankruptcy Act in the period he proposes to be absent from Australia. " (T18)
(x) On 11 April 2002, the Respondent issued to the Applicant a Notice of Assessment of Contributions for the Contribution Assessment Period: 7 February 2002 to 6 February 2003. The Notice contained the following:
"You are liable to pay contributions to your estate of $21,019.45 under Division 4B of the Bankruptcy Act 1966. I have calculated that figure based on the following information:
1. Income Assessed $
I have calculated this amount as follows:
Disclosed Income - Salary/Wages from Global Air
Leasing Pty Ltd (Receiver and Manager Appointed) Nil
Fringe Benefits to employee
-Accommodation $15,000
-Payments under Lease/Hire Purchase $13,200
-Telephone, Gas & Electricity $ 2,400
-Airline Transport $20,000
-Motor Vehicle $ 7,880
-Living Expenses $15,000
-Mobile Phone $ 600
Undisclosed Income
-Payments to Margaret Butler on account of
your liability under the Order made on
27 July 2000 in the Family Court at Brisbane
in BR49464 of 2000 $20,676
Less - Child Support/Maintenance Payments ($20,676)
Tax Payable Not applicable
(FBT payable by employer)
Plus - Expected Tax Refund Not applicable
Total Income Assessed (A) $74,080
2. Actual Income Threshold Amount (AITA)
I have calculated this amount based on the Base Income Threshold Amount (BITA) $32,041.10, adjusted for the number of your dependants as follows:
NIL full dependants
Actual Income Threshold Amount (AITA) (B) $32,041.10
3. Contribution Payable
Actual Contribution A - B
2 $21,019.45
You must make your first payment on or before 30 April 2002. You must pay the amount by 10 instalments of $2,101.95 and a final payment of $2,101.90 in accordance with the following schedule.
Date Payment ($)
1. 30 April 2002 2,101.95
2. 31 May 2002 2,101.95
3. 28 June 2002 2,101.95
4. 31 July 2002 2,101.95
5. 30 August 2002 2,101.95
6. 30 September 2002 2,101.95
7. 31 October 2002 2,101.95
8. 29 November 2002 2,101.95
9. 30 December 2002 2,101.95
10. 31 January 2003 2,101.90"
(xi) From 14 April 2002 to 26 April 2002, following an application to the Federal Magistrates Court, the Applicant travelled overseas on behalf of Global Air Leasing Pty Ltd to negotiate with the Comores Government for the:
(a) charter of a Boeing 747 aircraft for the 2002 tourist season; and
(b) to secure payment of charters previously provided.
(xii) On 26 April 2002 the Applicant received a letter from Global Air Leasing Pty Ltd's Director, Simone A. Butler, terminating the Applicant's employment. The letter states:
"We note that from February 2002 whilst you have remained an employee of the company, the company has not been able to pay you any benefits or salary associated with that employment and has not done so.
It is the company's wish to finalise its position with you in respect of your employment for that period. To this end we propose:
1. That your employment with the company be terminated with effect from today;
2. That you acknowledge that you have neither been paid nor received any salary or remuneration for the period of your employment and that you waive any right to pursue any salary or wages for that period, including any fringe benefits of any nature whatsoever..."
(xiii) On 10 May 2002 the Applicant applied for a review of the Assessment made by the Respondent on the basis that the Respondent incorrectly assessed the income likely to be derived by the Applicant during the contribution assessment period. The Applicant claimed that the assessment was based on the erroneous assumption that he would continue to be employed by Global Air Leasing Pty Ltd and receive benefits from that employment.
5. The Applicant claims that the Respondent should have made a fresh assessment pursuant to section 139W(2) of the Act based on his changed circumstances.
6. At the hearing, two witnesses gave evidence for the Applicant. They were the Applicant himself, and Maxwell James Mead, "manager of the legal and corporate affairs of Global Air Leasing Pty Ltd". No witnesses were called on behalf of the Respondent.
7. The Tribunal also had available to it the following documents:
(i) Documents lodged under section 37 of the Administrative Appeals Act 1975;
(ii) Affidavit of Luke Norman Butler dated 28 August 2002;
(iii) ASIC search of Global Air Leasing Pty Ltd dated 2 September 2002;
(iv) Internet Search of Global Air Leasing Pty Ltd dated 5 September 2002;
(v) ASIC search of Butler Investment Finance Pty Ltd dated 5 September 2002;
(vi) ASIC Search of LMMB Pty Ltd dated 5 September 2002;
(vii) ASIC Search of Oz Airlines Pty Ltd dated 5 September 2002;
(viii) ANZ Bank records of the Applicant dated 5 June 2002;
(ix) Copy of a Letter from the Applicant to Comores Airlines dated 13 April 2002; and
(x) Affidavit of Maxwell James Mead dated 28 August 2002.
8. The relevant legislation is contained in the following sections of the Act.
"139J The objects of this Division are:
(a) to require a bankrupt who derives income during the bankruptcy to pay contributions towards the bankrupt's estate; and
(b) to enable the recovery of certain money and property for the benefit of the bankrupt's estate.
139W Assessment of bankrupt's income and contribution
(1) As soon as practicable after the start of each contribution assessment period in relation to a bankrupt, the trustee is to make an assessment of the income that is likely to be derived, or was derived, by the bankrupt during that period, of the actual income threshold amount that is applicable in relation to the bankrupt when the assessment is made and of the contribution (if any) that the bankrupt is liable to pay in respect of that period under section 139S.
(2) If at any time, whether during or after a contribution assessment period, any one or more of the following paragraphs applies or apply:
(a) the trustee is satisfied that the income that is likely to be derived, or was derived by the bankrupt during that period is or was greater or less than the amount of that income as assessed by the last preceding assessment in respect of that period; ....
the trustee is to make a fresh assessment of the income that is likely to be derived, or was derived, by the bankrupt during that period, ...
(3) The powers of the trustee under subsection (2) may be exercised on the trustee's own initiative or at the bankrupt's request, but the trustee is not required to consider whether to exercise those powers at the bankrupt's request unless the bankrupt satisfies the trustee that there are reasonable grounds for the trustee to do so."
Sections 139P, 139Q, 139R, 139S and 139T contain the provisions which relate to the liability of a bankrupt to pay contributions.
"139L Income, in relation to a bankrupt, has its ordinary meaning, subject to the following qualifications:
(a) the following are income in relation to a bankrupt...
(v) the value of a benefit that:
(A) is provided in the circumstances by any person (the provider) to the bankrupt; and
(B) is a benefit within the meaning of the Fringe Benefits Tax Assessment Act 1986...
(vi) the value of a loan made to the bankrupt by an associate entity of the bankrupt....
(vii) the amount of money, or the value of any other consideration, received by a person other than the bankrupt from another person as a result of the work done or services performed by the bankrupt......
139 X Basis of assessments
(1) In making an assessment of the income that is likely to be derived, or was derived, by a bankrupt during a contribution period the trustee may have regard to any information provided by the bankrupt or any other information in the trustee's possession.
(2) If the trustee considers that any information provided by the bankrupt is or may be incorrect, the trustee may disregard that information and may make an assessment on the basis of what the trustee considers to be the correct information."
Section 139Y allows the trustee to regard the bankrupt as receiving reasonable remuneration for activities that resemble employment even if the bankrupt does not receive any remuneration for the activities.
139Z (1) If a bankrupt:
(a) does not provide information about whether he or she is likely to derive, or derived, income or particular class of income during a contribution assessment period; or
(b) claims not to be likely to derive, or not to have derived, any income or a particular class of income during a contribution assessment period;
but the trustee has reasonable grounds for believing that the bankrupt is likely to derive, or derived, income or income of that class, during the period, then for the purpose of making an assessment, the trustee may determine the bankrupt is likely to derive, or derived, income or income of that class, during the period and may determine the amount of that income.
(2) Without limiting the matters that a trustee may take into account for the purpose of making an assessment as mentioned in subsection (1) in respect of a contribution assessment period, the trustee may have regard to any employment or other work or other income-producing activities that were engaged in by the bankrupt before that period and may determine whether the bankrupt is likely to engage, or to have engaged, in similar employment, work or other income producing activities during that period."
9. For the purposes of the Fringe Benefits Tax Assessment Act 1986, a benefit is:
"s 136(1) Benefit includes any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be, provided under:
(a) an arrangement for or in relation to:
(i) the performance of work (including work of a professional nature), whether with or without the provision of property;
(ii) the provision of, or of the use of facilities for, entertainment, recreation or instruction; or
(iii) the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction;
(b) a contract of insurance; or
(c) an arrangement for or in relation to the lending of money"
10. The Respondent assessed the Applicant's income from his employment with Global Air Leasing Pty Ltd as nil. This was based on the following:
(i) The Applicant's answers in his Annual Statement of Income and the Statement of Affairs.
(ii) Information from the Australian Tax Office, contained in a letter dated 26 March 2002, to the Respondent, that Mr. Butler had applied for a Tax File Number in 1989 but that he had never lodged any Income Tax returns since that time.
11. The other amounts assessed by the Respondent to be the Applicant's income for the contribution assessment period, set out in paragraph 4(x) above, were based on the Applicant's answers in the Annual Statement of Income provided by him on 14 February 2002.
12. The Respondent also noted that amounts totalling $47,055.00 had been deposited into the Applicant's ANZ Bank account between 19 November 2001 and 11 January 2002.
13. The Applicant gave evidence to the following effect to support the proposition that the Respondent's assessment was no longer valid:
(i) He is now unemployed and receiving none of the benefits Global Air Leasing Pty Ltd was previously giving him. He has nothing to do with Global Air anymore.
(ii) He has no formal air qualifications which would allow him to earn a living from pilot work. He trained as a pilot and has a private pilot's licence.
(iii) He has a limited ability to earn income.
(iv) He supplied the Respondent with an amended Annual Statement of Income on 19 July 2002 which showed a significant change in circumstances.
(v) The value to the Applicant of benefits paid by Global Air in relation to motor vehicle leasing, mobile telephone use and travel expenses are less than the total amounts paid.
(vi) He receives a total of $150 from his parents per week and $100 from his wife. As from February 2002 he has lived with his parents at subsidised rent.
(vii) The following amounts set out at paragraph 29 of his original Statement of Income were for airline expenses, living allowance and hotel expenses while he was away from Australia on business. The amounts paid were not for personal use.
"(b) Airline Transport $20,000
(d) Living Expenses $15,000
(e) Accommodation $15,000"
(viii) The amount of $20,676.00 to be paid in compliance with a Family Court Order to his former wife should not be taken into account because the amounts were previously paid for him by friends Adrian Warat, Raymond Alcock and Norman Butler (his father). He has not complied with the Family Court Orders since he was made bankrupt and he has an oral agreement with his wife not to comply with the Orders.
(ix) His capacity to earn income is approximately $40,000 per year.
14. Mr. Butler gave further evidence which included the following:
(i) Global Air rents an office at the Brisbane Airport. It contains records, in particular maintenance records for the Boeing 747.
(ii) He thinks that Global Air may have taken over the lease payments of the Landrover which he transferred to his wife.
(iii) The income of Global Air was $1.2M(US) in 2000/01 and in 2001 to February 2002, several hundreds of thousands of dollars (U.S.)
15. Mr. Mead gave the following evidence:
(i) He has been a manager of Global Air since early 2000.
(ii) He gets paid on a part-time daily basis.
(iii) The company had three employees as at April 2002.
(iv) Mr. Butler attends at the Brisbane Airport office daily. Mr. Butler spends his time at the office checking the computer, answering faxes and the telephone and in general attempting to get the company "up and running".
(v) Mr. Mead and Mr. Butler attend meticulously to the maintenance schedules of the plane or otherwise the plane will become virtually valueless.
16. The Tribunal accepts that the $50,000 included under the three headings of accommodation ($15,000), airline transport ($20,000) and living expenses ($15,000) should be reduced by the amounts that were actually paid by way of expenses. However, no documentary evidence was actually produced to show how the money was received and distributed. Mr. Butler gave evidence that the expenses were associated with a six weeks business trip to Southern France and that the plane fares were actually paid for him. The Tribunal is prepared to accept that the allowances covered expenses and that there was no net income to Mr. Butler in association with these items.
17. The Tribunal did not hear evidence from Mr. Butler's former wife about maintenance payments but accepts that Mr. Butler is not currently paying her anything.
18. The Tribunal accepts the evidence of Mr. Mead that Mr. Butler spends most days at the Global Air office. Consequently, the Tribunal does not accept that Mr. Butler has cut all ties with Global Air, nor does it accept that Mr. Butler receives no benefits through any connection with Global Air. However, without evidence, it is difficult to put a figure on it.
19. The Tribunal accepts the evidence of Mr. Butler that he has the capacity to earn $40,000 per year. The Tribunal assesses that capacity as being in addition to any other benefits which he receives, namely a benefit from the leased vehicle and the mobile telephone.
20. The Tribunal notes that Mr. Butler has not disclosed whether or not he received any payment in respect of the termination of his employment with Global Air.
21. On the evidence available to it the Tribunal assesses the Applicant's Income for the Contribution Assessment Period, 7 February 2002 to 6 February 2003, as:
Capacity to earn $40,000
Value to him of motor vehicle ($400 x 12) $ 4,800
Value to him of Mobile Telephone $ 600
$45,400
22. The Tribunal varies the decision under review and remits the matter to the Respondent to re-assess the Applicant's liability on the basis of an Assessment of Income of $45,400 for the relevant period.
I certify that the 22 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President Don Muller.
Signed: .......................................................................................
C. O'Donovan, Associate
Date/s of Hearing 5 September 2002
Date of Decision 13 January 2003
Counsel for the Applicant Morgan Conley
Solicitor for the Respondent Mr S Eleftheriou
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