A business directed by former Nudie Foods founder and chief executive Andrew Binetter is now facing a $2 million tax bill, after it could not prove in the Federal Court that $4.75 million received from a bank in Israel was actually a loan.
The business was set up by Binetter’s father, who passed away in 2009. Binetter himself became a director of the company in 1998.
Federal Court judge Richard Edmonds instead found it to be “far more likely” that the transfer of $4.75 million to Rawson Finances in 1997 was really “a transfer of funds from Rawson’s bank account or accounts with [the bank], to Rawson’s bank account in Australia”.
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“It is odd that a bank which was willing to allegedly lend Rawson a substantial sum of money, unsecured and in circumstances where Rawson did not have any resources to meet its obligations on the alleged borrowing, was not prepared to have one or more of its officers corroborate the alleged character of the transactions,” Justice Edmonds said.
“That oddity evaporates under the alternative explication.”
Binetter’s father, Erwin Binetter, set up Rawson Finances in 1997. Both he and his wife served as directors, with Andrew Binetter appointed as a director in 1998. Erwin passed away in 2009.
During 1997, Rawson received three payments from Israeli bank MDB totalling $4.75 million. Binetter has argued “at all times” that these payments were actually a loan, on which it could deduct interest payments.
An original Tribunal hearing found that the payments were a loan, but Justice Edmonds disagreed with this finding. In his judgment, he found a series of “odd” circumstances which made it clear the payments were actually one-off transfers.
For instance, there was no evidence of any obligation on Rawson’s part to repay the money.
“There was no evidence that Rawson or any other entity, affiliated or not, gave security for the transfer of funds to Rawson’s Australian bank account, whether by way of charge, lien, set-off or surety.”
“That is entirely consistent with the alternative explication of the funds being Rawson’s funds, and not MDB’s funds, before they arrived in Australia.”
As a result, Justice Edmonds said the ATO’s appeal must be allowed, with costs.
“On the basis of my conclusion that Rawson has not established that the transfer of funds to its Australian bank account in 1997 were loans made to it by MDB, Rawson has not discharged the onus of showing the assessments to be excessive and the Commissioner’s appeal must succeed.”
Binetter, who is no longer chief executive of Nudie but remains a director, was contacted by SmartCompany, but no reply was available prior to publication.