I Think Rookie Kaiser and Frigs should read the Federal Court Judgement a bit closer. A mere magic wand on the PDS is not going to change the reality of the the Federal Courts Findings against DOMACOM on the substantive points of the Appeal.
IMO the recent release to the ASX looked liked a bit of window dressing to " Buy on the Rumor" and Ultimately, "Sell on the Fact" . This might explain the buyers who shelled out $20,000 to ramp the SP following the announcement.
The Court has issued Orders re costs and implementation and seeks submissions from DOMACOM within 14 days, I'm guessing that the content of those submissions will be enlightening to all Share Holders.
Here is an extract from the SMSF Sole Purpose test News Site:
Three judges of the Federal Court have now ruled that the original judge was correct that the sub-fund was a ‘related trust’ of the SMSF and that the units did not constitute an investment in a widely held trust – leading to the investment being an in-house asset, and in excess of the 5% limit. However the appeal succeeded on a third point, with the Court finding that leasing the property to a relative of a member would not breach the Sole Purpose Test – at least in this case.
The ruling is likely to be seen largely as a failure for Domacom. The sub-funds being in-house assets greatly reduces the ability of SMSFs to use the services of the company to buy residential property and lease it to relatives.
The appeal was brought by Aussiegolfia, but the case has been the matter of statements from Domacom to shareholders and executives have publicly been in favour of using SMSF assets to buy property which is rented by relatives.
The decision that the Sole Purpose Test would not be breached in this case largely seems to revolve around market rent. “Importantly, in the present case, although the Burwood Property, being the underlying property associated with the Burwood Sub-Fund units held by Aussiegolfa, would be leased to the daughter of the sole member of the Benson Fund, the lease would be at market rent,” said Judge Moshinsky, in the ruling. “In these circumstances, there does not appear to be any financial or other non-incidental benefit to be obtained by Ms Benson by leasing this property rather than another; nor does there appear to be any financial or other non-incidental benefit to be obtained by Mr Benson by the property being leased to his daughter rather than another tenant.” “It is true that Ms Benson would obtain a benefit in the sense that she obtains accommodation. But in circumstances where this is obtained at market rent, it does not appear to be a relevant benefit for present purposes.” “Further, I do not consider the fact that (as the primary judge found) the selection of Ms Benson as the tenant was explained, in part, by the desire of Mr Benson and DomaCom to test the ability for residential properties held by self-managed superannuation funds to be used by related parties, to be a relevant factor. ” Though the Judge also says that this conclusion is “necessarily dependent on the facts and circumstances of the particular case”.
“For example, the situation would be different if the lease were not at market rent.”
“The situation would also be different if the Benson Fund’s investment policy had been affected by the leasing of the property to Ms Benson.” The Federal Court ruling also impacts an appeal to a decision by the Administrative Appeals Tribunal (AAT). “In circumstances where the Commissioner’s appeal against the Tribunal decision is effectively contingent on Aussiegolfa succeeding on the in-house asset issues in the Federal Court Appeal, it follows from the rejection of the grounds of appeal relating to those issues that the AAT Appeal is to be dismissed.” Full ruling: Aussiegolfa Pty Ltd (Trustee) v Commissioner of Taxation [2018] FCAFC 122
With time running out on Cash Flow again, I'm wondering how any prospective lenders will view the full text of this Judgement from the Appeal Division of the Federal Court.
(20min delay)