Resource Capital Fund decision - 14 February 2018
Court surprises in tax analysis of private equity fund
The Federal Court recently handed down a long, complex and significant decision in the matter of Resource Capital Fund IV LP v Commissioner. The case involved the disposal by a Cayman Islands limited partnership of shares in an Australian mining company.
The decision addressed a range of matters including:
- Whether the relevant taxpayer was the limited partnership or the partners
- Whether the gain was on income account or capital account
- The source of that gain
- Interaction of Australian laws with the Australian/US double tax treaty.
The decision provides helpful clarity on some matters and equally raises many further questions on other matters. Whilst the assessments in question were overturned, the ATO won on a number of aspects. The case is still not finalised, with the matter remitted to the ATO for reconsideration. Further hearings are expected. The implications of the case need to be considered by private equity funds, any group structure with a limited partnership, and all foreign investors into companies with Australian land or mining operations.