The recent Australian case Anderson v FC of T highlights the risks of trusteeship and reinforces the fact that liability already incurred as a trustee cannot be voided through the trustee’s retirement. Although the facts of the case relate in part to specific provisions of the Australian GST Act, the message to be taken from the case reinforces the importance of appreciating the risks trustees take when trustee and private interests blur merges. See My trust and me
In Anderson v FC of T the taxpayer was the trustee of a family trust that owned land that was subdivided in the course of a commercial development project. After the project ran into difficulties, the trustee sold two lots from the project and paid the sale proceeds directly to a mortgagee to whom the trustee had given a personal guarantee. The sales were settled on 13 October 2009 and 18 November 2009. The trustee then retired on 9 December 2009. GST was not returned. The Administrative Appeals Tribunal held that the taxpayer could not escape liability by virtue of having retired as the retirement was after the sales were settled. An argument that required the taxpayer to be an incapacitated entity (for the purposes of the Australian GST Act), was also unsuccessful as the legislated criteria was not met. Although the mortgagee was in a position to exert pressure – control had not been exerted over guarantees given.
The case highlights, both the need for debts to be called up for liability to be crystallised and the fact that trustees remain liable for actions carried out while still a trustee.
- Anderson v FC of T 2015 ATC ¶10-387;  AATA 167