Nigel Satterley’s property group is taking the tax commissioner to court, claiming a $2.5 million payment to compensate shareholders after a failed development should be tax deductible.
Nigel Satterley’s property group is taking the tax commissioner to court, claiming a $2.5 million payment to compensate shareholders after a failed development was to preserve its reputation.
Satterley Property Group lodged a notice of appeal in the Federal Court against the Federal Commissioner of Taxation last week, claiming $2,557,897 should be tax deductible.
The group claimed the $2.5 million payment was made to preserve goodwill with investors who made losses on the developments, which would make attracting future investments easier.
The losses sustained by investors were allegedly tied to projects known as the Austin Cove and Beacham Road joint ventures, from which Satterley Property Group received management and selling fees.
The group claimed maintaining credibility and good relations with investors was an essential part of its business.
According to the group’s appeal, the $2.5 million payment made to the participating shareholders represented 50 per cent of the Top-Up Payment agreed under its Share Sale Agreements.
The group claimed the Top-Up Payments were incurred on revenue account, not being capital or of a capital nature, and thus were deductible.
In the appeal, which relates to the group’s taxable income for the financial year ending June 30, 2020, Satterley Property Group claimed it did not obtain an enduring advantage in making the Top-Up Payments.
“The process of incurring and making Top-Up Payments was considered likely to manage, preserve and maintain its business, goodwill and reputation,” the appeal document read.
“The advantage it sought was to overcome the inevitable notoriety of the financial failure of three related projects, and to maintain the goodwill of its business, which was temporary and uncertain.
“The potential for negative publicity, class actions for damages or legal action from investors who lose money on development projects would more likely than not deter future investors from investment, which would adversely affect the applicant’s future ability to derive assessable income.”
A Satterley Property Group spokesperson said the “three projects” referred in the appeal related to three main corporate entities involved in the one development, being Austin Lakes.
"Austin Lakes comprised of two land parcels – one zoned for 2500 lots and 'Beacham Road' that had not yet been zoned residential," they said.
"We’d also like to note that all suppliers and creditors were paid in full."
A hearing date has not yet been set.