Federal Court Confirms IG Position on treatment of Capital Gains

On this page

The Inspector General in Bankruptcy (IG) welcomes the Federal Court judgment in the matter of Robson as trustee for the bankrupt estate of Lanning v Commissioner of Taxation [2024] FCA 720.

The judgment, handed down on 4 July 2024, confirms the IG’s approach and guidance regarding treatment of capital gains tax (CGT) in bankruptcy by trustees and also confirms the Official Trustee’s current practices.

In the circumstances of this case, the trustee in bankruptcy was found to be answerable as a taxpayer in respect of capital gains from the sale of properties because the gains were derived by the trustee in his representative capacity.

The Commonwealth was represented by the Commissioner of Taxation. The views of the IG were sought by the Australian Taxation Office before the Commonwealth position was put to the Court.

The case was brought by the trustee of the bankrupt estate of Mr Lanning and in the interests of law clarification was funded by the Commonwealth pursuant to section 305 of the Bankruptcy Act 1966 (Cth).

The judgment, and clarification of this matter, serve as important reminders to trustees of their legal obligations with regard to the treatment of CGT in bankruptcy.

The Federal Court judgment can be accessed from the Federal Court of Australia website. The IG’s guidance on CGT in bankruptcy can be accessed from the Treatment of capital gains tax in bankruptcy page on the AFSA website.

The last date to appeal is 1 August 2024.