304 Wanda Street Pty Ltd and Commissioner of Taxation (Taxation)

[2020] AATA 921

304 Wanda Street Pty Ltd and Commissioner of Taxation (Taxation) [2020] AATA 921 (22 April 2020)

Division:GENERAL DIVISION

File Number(s):      2018/1775

Re:304 Wanda Street Pty Ltd

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Mr P W Taylor SC, Senior Member

Date:22 April 2020

Place:Sydney

The Commissioner’s 6 June 2017 objection decision to refuse the input tax credit claim, in the Applicant’s Business Activity Statement for the month ended June 2016, is affirmed.

......................[SGD]..................................................

Mr P W Taylor SC, Senior Member

CATCHWORDS

TAXATION – GST – input tax credit claim – creditable acquisition – corporate trustee –land acquisition – disallowance – administrative penalty – whether applicant was carrying on an enterprise – taxable supply – objection decision affirmed

LEGISLATION

A New Tax System (Goods and Services Tax) Act 1999 ss 9-5(b), 9-10(2)(d), 9-25(4), 9-30(2), 11-5, 11-15(1), 11-20, 11-25, 23-15, 27-10, 27-15, 29-10(2), 29-10(3)(a, 29-10 (3)(b) and 195-1

A New Tax System (Goods and Services Tax) Regulations 1999 r 23-15.01

Taxation Administration Act 1953 s 14ZZK(b)(ii)

CASES

Case N101 (1981) 81 ATC 560

Clayton v Commissioner of Taxation [2013] AATA 428

Commissioner of Taxation v Anstis [2010] HCA 40

Commissioner of Taxation v Swansea Services Pty Ltd (2009) 72 ATR 120

Goodman Fielder Wattie Ltd v Federal Commissioner of Taxation (1991) 29 FCR 376

Davsa Forty-Ninth Pty Ltd (as trustee for Krongold Ford Business Unit Trust) v Commissioner of Taxation [2014] AATA 337

Ell v FCT (2006) ATC 4098

Fairway Estates Pty Ltd v Federal Commissioner of Taxation (1970) 123 CLR 153

Inglis v Federal Commissioner of Taxation (1979) 10 ATR 493

Macmine v Federal Commissioner of Taxation (1979) 24 ALR 217

Married Couple v Commissioner of Taxation [2013] AATA 888

Peerless Marine Pty Ltd v FCT (2006) ATC 2419

Professional Admin Service Centres Pty Ltd v Federal Commissioner of Taxation [2013] FCA 1123

Re AT84/20 and Commissioner of Taxation [1987] AATA 3845

Russell v Federal Commissioner of Taxation (2011) 190 FCR 449

Spriggs v Federal Commissioner of Taxation (2009) 239 CLR 1

The Married Couple v Commissioner of Taxation [2013] AATA 888

Toyama Pty Ltd v Landmark Building Developments Pty Ltd [2006] NSWSC 83

REASONS FOR DECISION

Mr P W Taylor SC, Senior Member

1. 304 Wanda Street Pty Ltd (“Wanda”) was incorporated on 12 April 2016. Shortly afterwards it became registered for GST, but with effect from its date of incorporation. Wanda is the corporate trustee of the Wanda Street trust, pursuant to a Trust Deed that also bears the 12 April 2016 date.

2. At that time Wanda’s sole director and shareholder was Ms JA Kim. She was an “in house” lawyer who worked at CAP Accounting / Accolade Advisory (“Accolade”) under the supervision of a Mr Sam Cassaniti. Ms Kim also had a private personal relationship with Mr Cassaniti, who was one of the two principal Wanda Street trust beneficiaries.

3. Wanda and the trust derive their names from the address of a vacant 14 hectare block of land at Pindimar, near Port Stephens in New South Wales. In May 2016, a few weeks after its incorporation, Wanda acquired the land from Pindimar Holdings Pty Ltd (“PindiHold”). That company, also the trustee of a private trust, had Accolade’s office as its principal place of business and was then apparently controlled by another Accolade employee, its office manager Mr Michael Lowe.

4. Wanda’s acquisition of the land was the subject of a 30 May 2016, $700,000, contract for sale, and a same dated mortgage to Reliance Financial Services Pty Ltd (“Reliance”). Reliance also operated from Accolade’s premises, and mainly lent to Accolade’s clients. Mr Sam Cassaniti and Accolade’s accountancy practice manager, Mr David Cassaniti, who was a former director of PindiHold and had recently resigned as a director of Reliance, organised the mortgage. The mortgage (i) indicated that Wanda was acting as trustee of the Wanda Street Trust, (ii) secured both a principal amount of $800,160 and the (unstated) balance of PindiHold’s (unparticularised) mortgage interest debt to Reliance,[1] (iii) contained a 10% daily compounding interest rate, (iv) required repayment by 30 June 2018 but, (v) did not impose any intervening periodic payment obligation.

   [1]Pindimar had itself acquired the property as a result of a mortgagee sale completed in June 2013. However, no mortgage document relating to its acquisition of the property was put into evidence. The ATO’s 23 June 2015 audit decision reasons (which rejected the “purchase related” input tax credit claim in PindiHold’s June 2013 BAS) recorded that PindiHold had never provided any evidence of a loan from, or mortgage to, Reliance.

5. Apart from the, somewhat unusual, obligations Wanda assumed under the mortgage to Reliance, Wanda contributed nothing to the settlement of the purchase. Nor is there any evidence of it having made any subsequent repayment (of either principal or interest). Twenty one months after the May 2016 purchase, Wanda lodged a Development Application relating to the land. That application was refused on 27 September 2018, though perhaps repeated, in an amended form, in February 2019:- see paragraph 73 below.

   WANDA’S JUNE 2016 BUSINESS ACTIVITY STATEMENT

6. On about 24 June 2016 Ms Kim received, at her home address, a letter from solicitors Mr Sam Cassaniti had instructed on Wanda’s behalf. The letter provided particulars of the 30 May 2016 settlement of the property acquisition. The particulars included (i) a copy of the front page of the contract for sale, apparently completed to indicate that it involved a “taxable supply” and with a handwritten annotation recording a $30,140 duty amount, (ii) a settlement statement listing a GST component of $70,019.51, (iii) settlement cheques for $577.40 (payable to the Great Lakes Council), $30,160 (payable to the Office of State Revenue) and $769,637.22 (payable to Reliance itself), (iv) PindiHold’s tax invoice for $770,000, including a $70,000 GST amount[2] and, (v) a legal costs invoice for $1,697.30.[3]

   [2]The 23 June 2015 audit decision resulted in PindiHold having a $36,363 shortfall and incurring a 75% shortfall penalty. In April 2016 the Commissioner commenced winding up proceedings against the company. Those proceedings resulted in the appointment of a liquidator on 8 July 2016. PindiHold did not receive any of the May 2016 settlement funds, did not lodge a BAS for June 2016, and never accounted for the $70,000 amount in the tax invoice it issued to Wanda.

   [3]I observe that the documents provided on 24 June 2016 suggest that the settlement payments and the stamp duty payable on the contract (ie., $577.40 + $769,637.22 + $30,140) totalled $800,354.62 – some $194 more than the principal amount stated in the mortgage.

7. Ms Kim had stopped working at Accolade several weeks before she received the 24 June 2016 letter from Wanda’s solicitors. But, at some time prior to 29 July 2016, Mr Sam Cassaniti caused Wanda to lodge its Business Activity Statement “BAS” for June 2016. In that 21 July 2016 BAS Wanda claimed an input tax credit for the $70,000 GST amount included in Pindimar’s tax invoice.

8. Wanda’s entitlement to the $70,000 input tax credit claim is the principal matter in contention the present proceedings.

   THE COMMISSIONER’S 2017 AUDIT DECISION

9. In January 2017 the Commissioner disallowed Wanda’s input tax credit claim, amended the June 2016 BAS to reflect that disallowance, and imposed a $35,000 administrative penalty. The Commissioner’s decision relied on a number of matters. Only two of those matters were maintained in the review proceedings. They involved the propositions that neither Wanda nor PindiHold had been conducting an enterprise at the time of the 30 May 2016 property acquisition.

10. The Commissioner’s 6 June 2017 objection decision adhered to the audit decisions relating to both the input tax credit claim and the associated penalty. The essence of the Commissioner’s objection decision reasons was that, in the absence of evidence of the conduct of relevant enterprises, Wanda’s acquisition of the property was not a “creditable acquisition”.

11. The 6 June 2017 objection decision is the subject of Wanda’s review application in the present proceedings. These reasons are concerned solely with the disallowance of the input tax credit claim. The parties have agreed to, and I have directed, the separate, and subsequent, determination of the penalty issue.

    INPUT TAX CREDIT ENTITLEMENT

12. Under the relevant provisions of A New Tax System (Goods and Services Tax) Act 1999 (“GST Act”), a taxpayer is entitled to an input tax credit for any “creditable acquisition” they make:- see GST Act s 11-20.

13. Input tax credit entitlement amount:- The amount of any input tax credit entitlement equals the GST payable on the supply to the taxpayer: see GST Act s 11-25. That entitlement is attributable to particular “tax period(s)” (which are typically quarterly, as in PindiHold’s case, but may be monthly, as they were for Wanda):- GST Act ss 27-5, 27-10 & 27-15. The extent of the entitlement for any particular period will depend upon whether or not the taxpayer accounts on a cash basis, the time when the taxpayer pays any of the consideration and, when the taxpayer possesses a tax invoice for the acquisition:- see GST Act s 29-10(2), (3)(a) & (3)(b).

14. Creditable acquisition:- The matters necessary to satisfy the GST Act s 11-5 “creditable acquisition” criterion are that the taxpayer

    (a)received the goods or services “solely or partly” for a “creditable purpose”:-

    (b)provided consideration for the supply

    (c)received the goods or services pursuant to a “taxable supply”, and

    (d)was either registered, or required to be registered, for GST (ie., carried on an enterprise and their GST turnover (in effect, the value of their taxable supplies - GST Act s 188-15) met the $75,000 registration threshold:- see GST Act s 23-15 & A New Tax System (Goods and Services Tax) Regulations 1999 r 23-15.01).

15. Creditable purpose acquisition:- An acquisition satisfies the “creditable purpose” criterion if

    (a)the supply is neither “input taxed” nor of a private or domestic nature:- GST Act s 11-15(2),

    (b)and to the extent that, the taxpayer made the acquisition in carrying on their enterprise: GST Act s 11-15(1).

16. Carrying on an enterprise:- An enterprise is “an activity or series of activities” done, amongst other things, in the form of either (i) a business or (ii) an adventure or concern in the nature of trade. Those criteria exclude activities undertaken as a hobby or as a recreational pursuit:- GST Act s 9-20. The concept of a “business” includes “any profession, trade, employment, vocation or calling” other than activities undertaken as an employee:- GST Act s 195-1. The concept of carrying on an enterprise includes “doing anything in the course of the commencement or termination of the enterprise”:- see GST Act s 195-1.

17. Taxable supply – real property:- Any assignment of real property located in Australia is a supply “connected with the indirect tax zone”:- GST Act ss 9-10(2)(d), 9-25(4) & 195-1. Such a supply is a “taxable supply” (according to the criteria in GST Act s 9-5) if it is neither GST free nor input taxed (see GST Act s 9-30(2) and Division 40) and all of the following apply:-

    (a)the supplier is either registered, or required to be registered, for GST: - GST Act s 23-5), and

    (b)the supplier makes the supply for consideration

    (c)the supplier makes the supply “in the course or furtherance of an enterprise they carry on”.

    THE COMMISSIONER’S ENQUIRIES ABOUT WANDA’S JUNE 2016 BAS.

18. Although Ms Kim stopped working at Accolade at the end of May 2016, she continued to receive a monthly payment from Mr Sam Cassaniti. Until 12 September 2016 (when she was replaced by Mr Jason Saville), she retained her status as Wanda’s sole director and shareholder.[4] Her residential address remained Wanda’s principal place of business (according to ASIC’s register) until 11 October 2016.

    [4]Ms Kim resigned as a director on 12 September 2016, and transferred her shareholding to Mr Saville, for no consideration. Thereafter Mr Saville was Wanda’s sole director and shareholder. However, Accolade’s office address, and not that of Mr Saville, was notified to ASIC as its new principal place of business.

19. On about 29 July 2016 Australian Taxation Office (ATO) officers contacted both Ms Kim and Accolade, and requested information about the input tax credit claim in Wanda’s June 2016 BAS. For her part, Ms Kim apparently orally advised the ATO that Wanda had purchased a commercial property that could be leased out. Accolade’s written response to the ATO included a copy of at least some of the documents that had been provided by Wanda’s solicitors with their 24 June 2016 letter, and (perhaps also) a copy of Wanda’s mortgage to Reliance.

20. In a 22 August 2016 letter addressed to Ms Kim at Accolade’s postal address, the ATO informed her that it was auditing the June 2016 BAS, and would withhold payment of the input tax credit claim amount, pending receipt of further information. The letter requested (i) evidence of the GST payment to PindiHold and, (ii) bank statements showing loan repayments to Reliance.[5] The following day, Ms Kim returned a call from the ATO audit officer. In that phone conversation Ms Kim said she

    (a)had dealt with Mr Lowe, borrowed “around” $700,000 from Reliance, and had funded the purchase GST and stamp duty partly from her own savings and partly by borrowing from friends (in amounts she could not recall)

    (b)had bought the land for investment purposes, but was unsure how best to develop it, and would make a decision about that in the next six to 12 months

    (c)was not sure of the size of the property

    (d)had not obtained either development approval, or funds she intended to use to develop the land, and contemplated talking to friends to see what options were available and how to obtain funding

    (e)had made various loan repayments, by withdrawing from her own account and delivering cash amounts to Accolade

    (f)thought that withholding payment of the input tax credit claim would have no impact on Wanda’s current financial position.

    [5]The repayment request indicates that the ATO either did not then have a copy of, or had not fully appreciated the payment obligations contained in, the 30 May 2016 mortgage

21. Following that phone call, the ATO officer sent Ms Kim an email requesting both the same information as that in the 22 August 2016 letter, and also copies of the Reliance loan agreement and mortgage. On 24 August 2016 an Accolade employee sent a copy of the mortgage documents, copies of the purchase settlement cheques, and a 22 August 2016 letter from Accolade to the ATO. On 25 August 2016 Ms Kim sent a further email reply to the ATO. In it she apologised for not having been clear during her telephone conversation the previous day, and explained that she had not been able to recall the information specifically, without having the file. The attachments to her email included (i) a bank record indicating a $2,500 payment she described as a repayment to Reliance, (ii) a copy of the Reliance mortgage, (iii) copies of the settlement statement and PindiHold’s tax invoice, (iv) copies of the 30 May 2016 settlement bank cheques, (v) a copy of the stamp duty payment cheque, and (vi) Reliance’s statement of account for the loan to Wanda. (That statement recorded a $2,500 “payment” on 18 August 2016.)

22. The following day, the ATO audit officer sent Ms Kim a further email, querying the apparent inconsistencies between the information Ms Kim had conveyed in her earlier telephone conversation and the contents of the documents she had provided with her 25 August 2016 email. In her email response Ms Kim stated (i) Wanda had actually borrowed the entire settlement amount, (ii) Wanda had no bank account transactions, (iii) she assumed Reliance was PindiHold’s mortgagee and, (iii) the 10% mortgage interest was to be capitalised until Wanda “completes the development”.

23. The latter statement in Ms Kim’s response provoked a further enquiry from the ATO about the nature of “the development”. She answered that enquiry on 30 August 2016. Notwithstanding what she had said in her phone conversation a week earlier, she described the proposed development as a “self-sufficient, low environmental impact eco-lodge and farm” and said it was her “first business”. As an attachment to her email, she provided a copy of a “business plan” for the proposed development:- see paragraph 31 below. A few days later she provided copies of Wanda’s bank statements - for the period from 20 May to 19 August 2016. The statements suggested that the account had been opened on 20 May 2016, recorded only trivial account keeping debit entry fees and interest costs, and indicated that it was correspondingly overdrawn.

24. By early October 2016, in circumstances not revealed by the evidence, Mr Saville’s name had been given to the ATO as a point of contact for Wanda. This was despite the fact that he had not been mentioned by either Ms Kim or Accolade, in any previous communications about the property purchase. In early October 2016, after Mr Saville’s appointment as the sole Wanda director, Accolade personnel followed up the progress of the June BAS audit. At that stage responsibility for the audit had passed to a third, and apparently more senior, ATO officer. He requested copies of bank statements reflecting payment of the 30 May 2016 settlement amounts. When Accolade provided these statements they revealed that the immediate source of the funds for the 30 May 2016 settlement cheques was another corporate entity - “Armstrong Scalisi Holdings Pty Ltd” (Armstrong Scalisi). That company shared its business address with both Accolade and Reliance. The previously mentioned Mr Lowe was both a (recently appointed) director of Armstrong Scalisi Holdings Pty Ltd and a (recently resigned) former director of Reliance.  

25. The provision of these bank statements provoked further enquiry from the ATO. That enquiry was about the nature of the dealings between Reliance and Armstrong Scalisi Holdings Pty Ltd. In particular, the ATO requested a more precise statement about the payments involved in the 30 May 2016 settlement. A few days later, the ATO notified Ms Kim that she would be required to attend an interview about the acquisition of the property.

26. On 19 October 2016, Accolade responded to the ATO’s further enquiry. The primary emphasis of the five page response involved assertions that (i) PindiHold had directed Wanda to pay the purchase money to Reliance, (ii) Wanda had granted a new mortgage to Reliance and, (iii) given the mortgage, and the previously provided settlement details, the arrangements between Reliance and Armstrong Scalisi (under which Reliance had assertedly funded the settlement) were irrelevant. Perhaps more importantly, for the purpose of the review proceedings, Accolade’s response went on to confirm that Wanda’s business plan was for the development of the property as a “self-sufficient eco lodge”, and specifically, the development described in the “business plan” document Ms Kim had provided with her 30 August 2016 email.

    THE DECEMBER 2016 INTERVIEW WITH MS KIM.

27. On 8 December 2016, three months after she had resigned as Wanda’s director, Ms Kim attended an ATO interview.[6] About three weeks prior to the interview she had enquired of the ATO whether she could bring someone with her and, when informed that she could, she said she would “speak to her accountant”. Three days later she retained solicitors to act for her and, in due course, attended the interview with a junior barrister. Mr Saville, who had by then been Wanda’s sole director since early September 2016, was not present during the interview nor had he otherwise communicated directly with the ATO.

    [6]The interview was in response to two notices the Commissioner had issued (in October and pursuant to s 353-10 of Schedule 1 to the Taxation Administration Act 1953.

1. In the course of the 8 December 2016 interview Ms Kim

   (a)said that, prior to Wanda’s April 2016 incorporation, Mr Cassaniti and Mr Saville had been talking about development of the property, but had not really started doing any work and, even at the time of the May 2016 property purchase there was no “actual business plan”

   (b)said that her conduct in becoming the Wanda director, establishing the trust and participating in the acquisition of the property had been undertaken at the request of Mr Cassaniti and (less specifically) Mr Saville

   (c)said she had not received any valuation of the property and that Mr Cassaniti, had made the arrangements for the acquisition of the property, the mortgage from Reliance and had paid the legal fees associated with the property acquisition

   (d)speculated that the property price had been based on the amount of PindiHold’s existing debt, but did not know what the amount was and could not account for that debt appearing to have increased to $700,000 since PindiHold’s $400,000 acquisition of the property in 2013

   (e)said she had stopped working at Accolade in May 2016

   (f)said she had paid Reliance $2,500 in August 2016 (from her own income tax refund), even though she knew the mortgage capitalised interest and did not require any interim payments

   (g)confirmed her 12 September 2016 resignation as a director, and the transfer of her shareholding to Mr Saville

   (h)said she had not received any payment for the share transfer, nor any compensation for her loan repayment to Reliance (as to which see paragraph (e) above)

   (i)said that although at the time of Wanda’s incorporation she had no real knowledge of any business plan for the development of the property, in July 2016 she had got from Sam Cassaniti the document attached to her 30 August 2016 email to the ATO (see paragraph 23 above) (she also got from him the other documents she had provided to the ATO)

   (j)said she believed (quite inconsistently with her statement that there was no “actual business plan”) that Mr Saville, David Cassaniti and Mr Sam Cassaniti had developed the business plan at some time prior to the May 2016 acquisition of the property

   (k)said she had no idea of the zoning of the property and did not know whether Mr Sam Cassaniti or Mr Saville had made any enquiries about it, but she had heard in September 2016 that Mr Saville was going to put development plans to the Council,

   (l)stated that about a week before the December 2016 interview, Mr Saville had given her copies of layout drawing relating to the development of the property. Those drawings (apparently those described later in these reasons – see paragraphs 40(a), 40(c), 40(d) & perhaps 40(e) below) showed proposed buildings that were significantly different from, and to her limited and diffident, understanding preceded, the “eco-lodge” development described in the document she had sent to the ATO with her 30 August 2016 email.

   OVERVIEW OF MS KIM’S EXPLANATIONS

2. It is clear that in the course of the 8 December 2016 interview Ms Kim sought to portray the entirety of her conduct (in relation to Wanda’s incorporation, the execution of the trust deed, the acquisition of the property, and the execution of the mortgage) as having been done at the request of Mr Sam Cassaniti and, though less specifically, Mr Saville. It is also clear that she acknowledged having no real knowledge of the nature of the property prior to the May 2016 acquisition, and no knowledge of any development proposal at that time. Whatever knowledge she had ultimately gained about those matters had been acquired from July 2016 onwards, and as a result of her communications, principally with Mr Sam Cassaniti, following the Commissioner’s enquiries. Against that background it is apparent that Ms Kim sought to portray herself as having no real independent decision making function relating to the property, despite her formal status (until 12 September 2016) as Wanda’s sole director and shareholder.

3. Ms Kim’s 8 December 2016 interview responses are inconsistent with her initial responses to the ATO in July and August 2016, and difficult to reconcile with her own conduct in making the $2,500 payment in August 2016. In her previous responses to the ATO she had (i) appeared to have assumed personal responsibility for the control of Wanda, the decision making relating to the purchase of the property and the loan repayments, (ii) not accorded either Mr Sam Cassaniti or Mr Saville any significant decision making role and, (iii) after initially disavowing having any specific proposal in mind, shortly afterwards unambiguously identified the “eco-lodge” proposal as the “business plan” for her first investment. It is difficult to reconcile those inconsistencies (she did not give evidence in the review proceedings) with an uncritical acceptance of the transaction, and development proposal, ignorance (and personal disinterest) Ms Kim professed in the December 2016 interview. It is correspondingly difficult, given the many unusual, and apparently uncommercial, circumstances surrounding the transaction, to accept as reliable her assertion that at the time of the May 2016 acquisition, Wanda had either the “Off the Grid”, or any other, specific plan for the property.

   THE “OFF THE GRID” BUSINESS PLAN

4. The 20 page “Off the Grid” document that Ms Kim obtained from Mr Sam Cassaniti in July 2016, and proffered to the ATO as Wanda’s operative business plan relating to the May 2016 acquisition of the property, describes the proposed development as a “self-sufficient, low environmental impact Eco-lodge and Farm”. It goes on to detail that development as including a “main building” with kitchen, bathroom, dining and office facilities, a “main residence for the owner”, “service buildings”, a shed for farming operations, and “ten guest safari tents” with accommodation for 2 to 4 guests per tent.

5. Despite its ambitious prose, the undated “Off the Grid” document is obscure in many respects. It does not state any of the following matters:- (i) its author, (ii) the entity that commissioned the document, (iii) the document’s intended recipient(s) or, (iv) its real purpose. The only indications of the likely date of the document are its reference to the Great Lakes Local Environment Plan 2014, and its inclusion of a MidCoast Council property information map, endorsed with a 2016 copyright entitlement claim. The latter date would seem to fix the date of the document as having been prepared at some time in 2016. And, since the MidCoast Council was formed by NSW Government proclamation on Thursday 12 May 2016 (as a result of the merger of the former Great Lakes, Greater Taree and Gloucester Shire Councils) there is a basis for inferring that the Off the Grid plan (at least in the form Mr Cassaniti provided it to Ms Kim in July 2016, had been prepared (at the earliest) some time after 12 May 2016.

6. The property map details, and the other “property information”, in the “Off the Grid” document indicated that parts of the Wanda Street property had two different zonings under the 2014 Environmental Plan. Relevant elements of the two different zones were outlined in the document. The objectives of one zone (“RU2 Rural Landscape”) included the support of tourism and recreation. The uses permitted (with consent) in that zone included the construction of dwelling houses and farm buildings. The permitted uses in the other zone (“RU 5 Village”) permitted dwelling houses, but prohibited the construction of farm buildings and farm stay accommodation.

7. The actual boundaries of the two zones on the Wanda property were not shown in the “Off the Grid” document, but the narrative description stated that “two thirds of the property is bound by environmental constraints”. The document also went on to refer to discussions with the Mid Coast Council and reported that “eco-tourist developments are generally permitted and welcomed”. These two statements, given the prohibitions affecting “farm” construction within the “RU 5 Village” zoning would seem to convey that the proposed development site was within the “rural landscape” zone.[7] They also indicate that the proposal, for “eco-tourist” accommodation and an associated farm, though permissible only with consent, would fall within the objectives of, and the uses permitted by, the “rural landscape” zoning. Consequently, the “Off the Grid” document conveys the impression that the proposed development would comply with the existing zoning restrictions, and makes no reference to any re-zoning being required or contemplated.

   [7]           In his oral evidence Mr Saville confirmed that location for the dwelling on the property.

8. Overall the “Off the Grid” document has something of the tone of a marketing proposal for the sale of the property. But it recorded Reliance’s agreement to fund the acquisition of the property, and contemplated that the construction costs would be funded by a combination of first mortgage, second mortgage, savings and “family funds”. Consequently the better view of the document is that it had been formulated by the property purchaser and was, consistent with its title, in the nature of a “business plan” for the property. As to the detail of that plan, the development costs were itemised, albeit in a somewhat rudimentary and imprecise way, in a “Calculation of Expenditure” table. The first table item was the $800,000 cost of acquiring the property. The remaining table items totalled $2.13m and included, as the largest single cost, $450,000 for acquiring and fitting out 10 “safari tents”.

9. The “Off the Grid” document also included a “projected profits” table. This profit projection contemplated a 35% occupancy rate in the 2017 year, and a resultant net profit of $40,622 (after taking into account a $100,000 interest cost) in the year ending in June 2017. In the following two years the occupancy rate was projected to rise to 55%, revenue to $1.174m and net profit to $301,688. In the following four years, (and despite the apparent contradiction in the narrative of the business plan) the number of “cabins” rose to 15, but the interest cost remained the same. The occupancy rate rose to 65%, both revenue and net profit almost doubled in the fourth year alone.

10. The details in the Off the Grid document’s expenditure and projected profit tables were obviously deficient in a number of significant respects. First of all, the projection consistently attributed 32% of total revenue to “food and alcohol sales”, but recorded no cost of those sales. Second, there was no articulation of the source of funds for the projected $2.13m construction and fit out costs. Indeed, given the static $100,000 interest cost, even after the projected 50% increase in the number of cabins, the overwhelming inference is that the “plan” assumed that the entire development and fit out costs could be funded from unspecified “no interest” sources. Third, there was no allowance for design and planning approval costs. Fourth, there was no specific, let alone reasoned, time scale or program for the commencement and completion of the development. Fifth, there was no explanation for the inconsistency between the plan narrative, with its contemplation of “10 safari tents”, and the 50% increase (to 15) in the number of “cabins” after the first three years of proposed operation. These deficiencies are so significant as to call into doubt whether there was any real substance and intention underlying the “Off the Grid” plan. That doubt is only underscored by (i) Ms Kim’s initial responses to the ATO, (ii) the absence of evidence about the creation of the document, (iii) the fact and circumstances of Mr Saville’s disavowal of the “Off the Grid” plan during the review proceedings:- see paragraph 45 below, and (iv) Mr Saville’s (apparently justified) characterisation of the proposal as unachievable:- see paragraph 47 below.

    THE LONG ASSERTED PRIMACY OF THE “OFF THE GRID” DEVELOPMENT PROPOSAL

11. The communications with Ms Kim, at least after her 30 August 2016 email, and specifically during the 8 December 2016 interview, had consistently identified the “Off The Grid” document as the “business plan” that had motivated Wanda’s May 2016 acquisition of the property, and set out its intentions for the property. That consistency was maintained subsequently, in (i) material Accolade provided in 2017 in support of Wanda’s objection, (ii) Wanda’s formal contention document of 24 August 2018 and, (iii) Mr Saville’s 23 August 2018 affidavit.

12. Accolade’s 15 May 2017 email supplement to Wanda’s objection consisted of eight layout drawings it asserted Wanda had provided as evidence of its plans for the proposed development of the property. The email also identified a “Business Plan – 304 Wanda Street” as an additional attachment. However, no such document was included in the section 37 documents the Commissioner lodged with the Tribunal. Furthermore, the index to those documents stated that the “Business Plan” document had not in fact been provided with the email. It follows that the “Off The Grid” Business Plan that Ms Kim had sent with her 30 August 2016 email was the only “plan” document that Wanda provided to the Commissioner.

13. The eight layout drawings attached to Accolade’s May 2017 email varied significantly in their details and timing. They were as follows:-

    (a)a June 2011 site plan of the property, entitled “proposed development at “No 1 Warri Street Pindimar”, but showing no details of the nature of that development

    (b)a second, undated “site plan” showing the approximate location of a proposed development on the same land, but without any details of the development, other than provision for a short access driveway from Warri Street on the northern boundary of the property, and some 400 metres from Wanda Street on the southern boundary

    (c)a single page undated "preliminary design for proposed house" at 1 Wanda Street, with 4 adjacent bedrooms on the southern end of the proposed building, and two first floor bedrooms on the northern end

    (d)two undated hand drawn pages showing a significantly different building layout, with 6 bedrooms, each with an ensuite, located along a gallery / walkway shown as extending to the north of the proposed building[8]

    (e)an undated, hand drawn “Lodge Site Layout” showing a proposed main building, with a two bedroom manager’s residence, pool and lounge and dining room, together with 10 (otherwise undetailed) construction elements located along a 92m walkway extending to the south of the proposed main building.

    (f)two untitled and undated, hand drawn untitled plans, one of which arguably depicts some details of part of a “manager’s” residence, and another of which shows the internal layout of two, single bedroom units located on a walkway leading to a “house”, which is not otherwise shown. Mr Saville gave inconsistent evidence to the effect that (i) the second plan indicated a proposal to build “two wings” with an additional four units, (ii) that option had been an initial proposal that was scrapped following a “pre-lodgement” meeting with Council, and was not part of the February 2018 Development Application but, (iii) it was Wanda’s current proposal (apparently notwithstanding that it was not part of the Development Application drawings).

    [8]In his oral evidence Mr Saville described the three plans (in this and the preceding sub-paragraph) as original concept plans he had first seen in 2015 and with which he had not agreed.

14. It is surprising, given Ms Kim’s apparent dismissal of the drawings referred to paragraphs 40(c) & 40(d) (and apparently also the drawing referred to in paragraph 40(e)) as having preceded the “Off the Grid” plan (see paragraph 28(l) above) that Wanda included those plans in its May 2017 email as corroborative of its development plan for the property. It is also surprising that the other drawings were provided because, as is evident from the preceding descriptions, they provided no persuasive evidence that Wanda in fact had a “business plan” that coincided with the “Off the Grid” document. Although the ambiguous “Lodge Site layout” drawing could perhaps be so interpreted, the timing of its creation is doubtful,[9] and even though Mr Saville said it had been created in 2017, he conceded that it did not contemplate any of the “tent” style accommodation referred to in the “Off the Grid” document. Against that explanation the conclusion follows that none of the layout drawings Wanda provided in May 2017 in fact depicted an “eco-tourist” facility with tent accommodation. Hence, neither individually nor collectively were the drawings demonstrably corroborative of the type of business described in the “Off the Grid” documents.

    [9]The undated “Lodge Site Layout” drawing shares a similar appearance to, and, inexplicably, was amongst, documents Wanda’s solicitor obtained, in November 2018, from CAP Accounting - PindiHold’s former accountants. Seeing that PindiHold had disposed of the land in May 2016, and itself gone into liquidation in July 2016, there is no readily acceptable explanation for its accountants having such a document in their former client’s file, if it was in fact a document created in 2017. It is also notable that the document is not marked with the project number indicated in the February 2017 invoice that Wanda’s architect issued for work he apparently did in connection with the preparation of Wanda’s development application. In addition, it appears to have been amongst the plans Ms Kim produced during her December 2016 interview. In those circumstances, the more readily acceptable conclusion is that Mr Saville’s recollection of the date of the document is mistaken, and it was in fact created much earlier than 2017, as Ms Kim seemed to indicate, during her December 2016 interview.

15. Despite the incongruity thus revealed by comparison of the Off the Grid document with the layout drawings provided to the ATO in May 2017, Wanda adhered to its avowal of the Off the Grid document as its business plan when it lodged its Statement of Issues, Facts and Contentions (SoFIC) on 24 August 2018. In that document Wanda was quite unambiguous. It detailed a sequence of events in which Wanda (i) determined to start a “tent based eco-lodge”, (ii) formulated a business plan and, (iii) purchased the property. As to what the business plan was, Wanda’s SoFIC was just as specific as Ms Kim had been two years earlier. The business plan was the “Off the Grid” proposal. That was very specifically stated in paragraph 22 of Wanda’s SoFIC.

16. Finally, on 31 January 2019 Wanda lodged submissions that had been prepared by its Counsel. Those submissions, perhaps relying on one interpretation of what Ms Kim had diffidently said during her December 2016 interview (and apparently referring to the Lodge Site Layout drawing (see paragraph 40(e) above) attributed to PindiHold an intention to build permanent structures on the land. The submissions contrasted that intention with the “semi-permanent” (ie.“tent”) structures contemplated in the “Off the Grid” document. The submissions very explicitly described that document as Wanda’s plan and as the “most recent business plan” for the property, and one that had been prepared prior to, and that had motivated, the May 2016 acquisition of the property.

    MR SAVILLE’S AFFIDAVIT AND ORAL EVIDENCE.

17. Similarly unambiguous was the content of Mr Saville’s own 23 August 2018 affidavit, which Wanda also lodged with the Tribunal on 24 August 2018. In his 23 August 2018 affidavit Mr Saville asserted his involvement, since Wanda’s April 2016 incorporation, in “furthering the business’ development of its land”. In paragraphs 11 and 14 of that affidavit Mr Saville described the “Off the Grid” document as summarising “my plans for the property”. He included the document as part of the 130 page Exhibit to his affidavit, and described the plans as being for a “proposed holiday – getaway business” which he named the “Gillawarra Hideaway”. His label for the task involved in establishing that business was the “Gillawarra Hideaway Project”. He particularly drew attention to the “Executive Summary” in the Off the Grid document, which unambiguously described the “proposed holiday business”, and the proposed design, as “inspired from the camping experience”. In paragraph 13 of his affidavit Mr Saville said that he and his domestic partner had, “since 2016” worked on the property and made arrangements “towards realising the Business Plan”.

1. However in February 2019, on the morning the review hearing commenced, Wanda’s Counsel asserted (despite the unambiguous contents of the written submissions he had previously provided) that paragraph 11 of Mr Saville’s 23 August 2018 affidavit was “obvious[ly]” in error. This was said to be something that Mr Saville had pointed out the day before, when Counsel had first met Mr Saville and had raised the “business plan” with him. The affidavit error was said to be “obvious” because the Table in the “Off the Grid” document projected operations and profit in the 2017 year. The submission was that this timing reflected an unrealistically optimistic assumption about the time likely to be required to obtain Development Approval and complete construction. It was suggested that a more reasonable assumption was that the approval and construction process would take two years. It could therefore safely be concluded, according to Counsel’s submission, that the Off the Grid Business Plan was a 2015 document, and had been PindiHold’s business plan.

   DIFFICULTIES WITH THE “OBVIOUS MISTAKE” SUGGESTION

2. The following day Mr Saville swore a further affidavit in which he disavowed the “Off the Grid” document as “his” business plan. He said that, as soon as he had realised the error in his previous affidavit he had informed Wanda’s lawyers and instructed them to inform the Commissioner’s representatives. In his oral evidence Mr Saville sought to explain that he made the error because, even though paragraph 11 of his affidavit specifically named the “Off the Grid” document and stated the tab number where it was included as part of the affidavit Exhibit, the documents in the Exhibit were not actually in any particular order and he had just assumed that the reference in paragraph 11 of his affidavit to “my plans for the property” meant that the correct plan had been included.

3. Many difficulties confront acceptance of both the proposition that “Off the Grid” was PindiHold’s plan and also Mr Saville’s asserted affidavit error and the reason for it. The first difficulty arises from the fact that there is simply no evidence to support the proposition that PindiHold ever conceived of the idea of a “tent” development. Indeed, the bushfire assessment report PindiHold received in July 2015, with its construction material recommendations, tends to be inconsistent with the likelihood of Pindihold having had such a plan:- see paragraph 117 below. The second difficulty is that Mr Saville’s explanation requires acceptance of the proposition that he was asked by Wanda’s solicitor to swear an affidavit that, despite the detailed Exhibit tab references it contained, was not in fact complete and the Exhibit tab documents in order. The witness attestation on the first page of the affidavit exhibit tends to contradict the likelihood of that proposition. The third difficulty is that Mr Saville’s explanation tends to gloss over the wording in paragraph 11 of the affidavit, which was quite explicit in giving the “Off the Grid” title to the document being identified. That also tends to contradict the likelihood of Mr Saville having any contemporaneous misunderstanding when he gave instructions for, and swore, his affidavit. Fourthly, the apparent contradiction is even more striking in the light of Mr Saville’s subsequent oral evidence. This was to the effect that (i) he had seen the document at some time in 2015, (ii) he knew it was a PindiHold document, (iii) he had regarded the “farm” and tent equipped eco-lodge proposal it contained as inconsistent with the planning limitations and an unacceptable bushfire hazard and, (iv) he thought the financial projection in the document was very over inflated and not realistic. This combination of reasons that Mr Saville gave for having long ago dismissed the “Off the Grid” proposal as unachievable, if that aspect of his evidence were accepted as accurate, would have to be regarded as quite inconsistent with the likelihood that Mr Saville merely mistakenly described the “Off the Grid” plan as “my plan” for the Wanda Street property.

4. The unlikelihood that Mr Saville gave a reliable and accurate explanation for the supposedly mistaken content of paragraph 11 of his 23 August 2018 affidavit is only emphasised by his own acknowledgement, when pressed in cross examination, that he could not identify an “entire business plan, and indeed that Wanda had no specific business plan document. He resorted to the claim that what constituted the “plan” he mistakenly assumed was being referred to in paragraph 11 of his affidavit was an amorphous collection of the reports and things that he had worked on. A further difficulty with that explanation was that Mr Saville’s affidavit had specifically included the February 2018 Development Application drawings as separately identified parts of the Exhibit to the affidavit. It follows that the reference in paragraph 14 of his affidavit to the “executive Summary” on page 4 of “the Business Plan” could not have been a reference to any specific document that Mr Saville had produced. It could only have been a reference to the “Off the Grid” document.

5. Mr Saville was then pressed to explain how the assertion that the “Off the Grid” plan was not Wanda’s plan, and the professed “mistake” in his first affidavit, could be reconciled with the contents of Wanda’s SoFIC. Mr Saville then denied having provided instructions for, being involved in the preparation of, or even having seen or reviewed, Wanda’s SoFIC document. Those denials were made despite the fact that it was filed on the same date as his affidavit and also despite Mr Saville having previously asserted being the source of, and indeed, so far as he was aware, the only person who had been involved in giving, instructions to Wanda’s legal representatives for the purposes of the review proceedings.[10]

   [10]However, later in his oral evidence Mr Saville appeared to acknowledge that Mr Sam Cassaniti had in fact provided instructions to Wanda’s legal representatives for the purpose of putting “the affidavits and all of that together” for the proceedings. This variation in Mr Saville’s evidence provides a further reason for scepticism about the reliability of that evidence.

6. When pressed further to identify what business plan he had in fact prepared before Wanda purchased the property Mr Saville said he had put together a concept for a 10 room construction which he had asked the architects to prepare some designs for, had lodged that with the Council, and had “got all the reports done based on [the] 10 rooms”, but he could not remember when that had been done. He denied he had done that after Wanda’s purchase of the property, but then confessed to “getting a little bit confused”. His acknowledgement of confusion seems to have been well warranted, because the only objective evidence of any “10 room” proposal was the “Lodge Site Layout” to which I have earlier referred:- see paragraph 40(e) above. Mr Saville’s later evidence about that document was that it had been drawn some time in 2017 (ie. well after May 2016) and there had been no other plans prepared between 2015 and then. However, as I have already indicated (see the footnote to paragraph 41 above) the actual date of the “Lodge Site Layout” drawing, though problematic, is likely to have preceded the “Off the Grid” document.

7. Finally, there is the consideration that Mr Saville’s evidence about having seen the Off the Grid document in 2015 (thus disavowing it as Wanda’s document) appears to be of doubtful reliability. In his second affidavit (of 27 February 2019), and in his oral evidence, Mr Saville asserted an imprecise recollection that he had first seen the “Off the Grid” document whilst doing consulting work for PindHold, in “about 2015”. That proposition is difficult to reconcile with either what appears to be the earliest likely date of the document (see paragraph 32 above) or its contents. In relation to the latter, the expenditure calculation in the Off the Grid document included an $800,000 land acquisition cost. It also included the statement that Reliance “has agreed to fund the acquisition of the land”. As a matter of objective fact, there was no reason, and it would have been inaccurate, to attribute to PindiHold an $800,000 cost for its acquisition of the property. As an additional objective fact, Reliance’s asserted agreement to fund that acquisition is only evidenced by the 30 May 2016 mortgage and settlement. Those two considerations strongly point to the objective improbability that the “Off the Grid” document was a statement of PindiHold’s business plan for the property. Consistent with that improbability, there is no objective evidence that the “Off the Grid” document existed at any time prior to July 2016, when Ms Kim obtained it from Mr Sam Cassaniti:- see paragraph 28(i) above. Furthermore, it was not amongst the PindiHold documents Wanda’s solicitor obtained from CAP Accounting in November 2018:- see the footnote to paragraph 41 above.

   IF NOT “OFF THE GRID” – WHAT PLAN?

8. Mr Saville asserted that, since Wanda’s 30 May 2016 acquisition of the property he had been the “lead project manager” for Wanda relating to the land, and that his and Wanda’s concept for the development of the property was that contained in plans (including the amended plans) that had been the subject of Wanda’s February 2018 development application. That application involved what he called the “new concept” of a two storey building containing luxury rooms with ensuites. He claimed that, on the afternoon of the (adjourned) first day of the hearing, he had changed the lodged plans (i) to move the building site so as not to encroach on the midden that had subsequently been identified in a June 2018 Heritage Report Wanda had obtained (see paragraph 69 below) and, (ii) to delete a previously proposed swimming pool[11].

   [11]Although not specifically stated in the evidence, this change must have related to a new development application. Supplementary Tribunal document ST4-17 was a printout of a MidCoast Council Development Application register. It recorded that Wanda’s February 2018 Development Application had been refused on 27 September 2018.

9. Mr Saville’s assertion about extent of his interest and involvement with the property at the time of, and in the months following, the May 2016 acquisition of the property was significantly lacking in detail. It is noticeable that it was not corroborated by either (i) anything in the communications between Ms Kim / Accolade Advisory prior to September 2016 or, (ii) any contemporaneous documents.

10. Mr Saville said Wanda had retained a firm of architects for the purpose of designing its proposed development. In support of that claim he included in the Exhibit to his 23 August 2018 affidavit the following documents. He identified them as all having been prepared after Wanda’s purchase of the property:-

    (a)Seven pages of architectural drawings, which he said had been prepared sometime in about 2018 and submitted as part of the Development Application Wanda made to the MidCoast Council in February 2018;

    (b)Copies of amended versions of the location and detailed site plan drawings that had been lodged with the Development Application. The amended plans re-sited the proposed building further to the south, omitted the previously proposed swimming pool, and relocated water tanks and effluent disposal areas.

11. The proposed development depicted in the February 2018 Development Application drawings involved a two storey, four bedroom building, described as “proposed Bed and Breakfast”. As drawn the main section of the building had kitchen and dining facilities, and four bedrooms. There was an adjoining two storey, two bedroom building, without kitchen and dining facilities. Despite the description on these layout drawings, the Development Application itself was only for a “new single dwelling”. Mr Saville said the reason for the limited nature of the application was the Council’s advice that approval for a bed and breakfast facility would have required more reports, taken longer and not met what he said was “our deadline of 28 February 2018”. However Mr Saville did not explain the nature of that supposed deadline. Furthermore, concern about delay, as a reason for making only a “dwelling” application, seems inconsistent with his other evidence. That evidence was that, if he got dwelling approval, it would still be difficult to get a “bed and breakfast” approval. Mr Saville said that unless and until he obtained clarification of the constraints for any further approval, he only intended to undertake part of the construction sufficient to create the two bedroom manager’s suite.

12. In any event, the building shown in the development application drawings was not, as Mr Saville acknowledged in his oral evidence, a proposal involving the “tent” accommodation outlined in the “Off the Grid” business plan document. Neither was it the “10 bedroom lodge” that Mr Saville alluded to in his oral evidence as the ultimate aspiration of his endeavours. Finally, it was also clearly very different from any of those shown in the plans Accolade had provided in May 2017 in support of its objection:- see paragraph 39 above.

13. Mr Saville’s 23 August 2018 affidavit then alluded to, and in some instances provided documents relating to, steps he said he had taken on Wanda’s behalf in pursuit of the development of the property. He supplemented that evidence with further details and documents provided in his 27 February 2019 affidavit. The timing and nature of the events involved are indicated in the following paragraphs. (The single underlined dates refer to documents that were referred to only in Mr Saville’s February 2019 affidavit. The double underlined dates indicate documents were attachments to a short November 2018 affidavit by Wansda’s solicitor.)

14. 20 February 2017:- This was the date of a $3,850 invoice from a firm of architects (R & L Starr) to Wanda for the preparation of a Development Application for “project 16 / 78”. It referred to the project as involving a “proposed dwelling”. Mr Saville said that this invoice was paid on 26 February 2018. That payment date perhaps casts doubt on the accuracy of the invoice date. There is no evidence of any Development Application having been lodged in 2017. No drawings bearing 2017 dates were in evidence. There is no subsequently dated invoice for the DA lodgement that actually occurred in February 2018.

15. July 2017. Wanda registered the business names “Gillawarra” and “Hideaway Group”. These names are similar to, but slightly different from those Mr Saville used in his 23 August 2018 affidavit:- see paragraph 44 above.

16. 12 August 2017:- Mr Saville had obtained a licence as a structural landscaper in October 2016. In August 2017, as the operator of his landscape business he issued the first of several invoices to Wanda relating to work done in relation to the property. The invoice was for the “commencement of Landscape Design works in preparation for submittal with the Development Application, in accordance with the Landscape Design proposal”. That proposal may be the 15 February 2019 document referred to below.

17. 22 August 2017 – Eagle One Excavations invoiced Wanda for clearing work done on the property. This work was described by Mr Saville as having been carried out to reduce the vegetation fire risk. Consequently its performance could not be regarded as necessarily related to any proposed development of the property.

18. 1 September 2017:- This was the date of an On-site Wastewater Disposal Capability Assessment report prepared by a firm of quantity surveyors. It was stated relating to a proposed 10 bedroom tourist accommodation building. Mr Saville said that this report provided information for the purpose of the architectural drawings submitted with the February 2018 Development Application. However, that building shown in the plans lodged with that application was demonstrably not a 10 bedroom tourist lodge.

19. 15 February 2018:- Prior to the February 2018 Mr Saville prepared a Landscape Management Plan for Pindimar Bay. The document describes itself as a ”generalised example” that provides “a guideline for landscapes with the Port Stephens area”. It is demonstrably not specific to the Wanda Street property or to any proposed development. However, it was apparently submitted with the February Development Application, along with various drawings Mr Saville had prepared showing an overall landscape design layout, tree locations, proposed tree removals and waste management locations relating to the property.

20. 19 February 2018:- This is the date of a BASIX (building sustainability index) certificate that was prepared by Richard Starr for the 6 bedroom “separate dwelling house” that was the subject of Wanda’s February 2018 Development Application.

21. 20 February 2018:- This is the date of a statement of environmental effects prepared by Richard Starr for a “double story dwelling house” on the Wanda Street property.

22. 22 February 2018: This is the lodgement date of the Development Application for the “separate dwelling house” described earlier in these reasons:- see paragraph 55 above.

23. 1 March 2018:- 5QS Consulting Group invoiced Wanda for engineering services relating to a site survey and wastewater and stormwater plans for the site.

24. 1 June 2018:- The Mid Coast Council advised Wanda’s architects that the Development Application required submission of an ecological consultant’s report containing a Threatened Species Assessment relating to the proposed development.

25. 24 June 2018:- Wanda obtained an Aboriginal Heritage Due Diligence Assessment Report relating to the development proposal. That report described the proposed development as involving the construction of a 4 bedroom house.

26. 16 August 2018:- Council issued a planning certificate to Infotrack Pty Ltd. The certificate indicated that there were proposals to amend the Great Lakes Local Environment Plan so as to allow four bedroom dwellings to be used for short term holiday rental, without a requirement for development consent. Although the evidence did not establish that there was any connection between that company and Wanda, Mr Saville asserted that Wanda was responsible for the planning amendment proposal.

27. 20 September 2018- This was the date of a Flora and Fauna assessment report prepared by Envirotech Environmental and Engineering Consultancy Services. Although the report has a stated release date of 9 October 2014, its contents took into account legislation enacted in 2016, and also referred to a site survey that was undertaken on 25 and 26 July 2018.

28. 18 January 2019:- An entity named Travers Bushfire and Ecology prepared a bushfire protection assessment report for a “two storey dwelling and detached shed” on the Wanda Street property. The report notes that the “Council has formally requested an updated bushfire assessment because the location of the proposed building has changed since the first development application - namely DA 392 / 2018. That description indicates the likely existence of a second development application, the details of which were not the subject of any specific evidence.

29. 25 February 2019:- These were two further amended versions of the location plan and the detailed site plan referred to earlier in these reasons:- see paragraph 54(b) above. They are consistent with the note referred to in the preceding paragraph and appear to relate to an (actual or foreshadowed) new development application, the details of which were not the subject of any evidence.

    OVERVIEW OF MR SAVILLE’S EVIDENCE

30. Mr Saville’s “about turn” in disavowing the “Off the Grid” plan, his quite unpersuasive explanation of the reasons for the “mistake” he asserted, the improbability that he first saw the “Off the Grid” plan in early 2015, the improbability that it was a PindiHold “business plan”, and the improbability that it was a genuine plan in any event, combine to leave me very sceptical of the reliability of any aspect of Mr Saville’s evidence. In particular I am sceptical that Mr Saville played any part in Wanda’s activities at any time prior to his appointment as the company’s director in September 2016. That scepticism is reinforced by the matters I noted earlier (see the second sentence of paragraph 53 above).

1. Prior to Mr Saville’s appointment as a director, Wanda’s activities were controlled by Ms Kim, perhaps with assistance (to use a possibly euphemistic expression) from Mr Sam Cassaniti. So far as Ms Kim was concerned, her early interactions with the ATO suggest there was no contemporaneous proposal or plan for the development of the Wanda Street property. Indeed, her conduct in making an unnecessary and uncompensated interest payment to Reliance in August 2016 rather betrays the likely reality that the motives underlying, and the purpose of, Wanda’s acquisition of the property were then obscure. So far as the available evidence suggests, the person best informed about any such motives and purposes was Mr Sam Cassaniti. He was primarily responsible for the decision to acquire the property. He arranged the mortgage from Reliance. He was the contact person instructing Wanda’s solicitors. He paid the conveyancing costs for the transaction. He provided the “Off the Grid” business plan (and other documents) to Ms Kim, so that she could address the ATO’s requests for information. He provided instructions to Wanda’s solicitors in relation to the present proceedings:- see the footnote to paragraph 49 above.

2. As against that, the obvious reality is that Wanda did acquire the land and, from some time during 2017, pursued an attempt to secure a development approval for a dwelling on the property. In his oral evidence Mr Saville insisted that his ultimate intention was to build a 10 bedroom eco lodge. That was hoped to be achieved by a staged process, in which he would first apply for a dwelling approval (as per the February 2018 Development Application). After that approval had been granted, he proposed to complete the construction of the manager’s suite section of the proposed building, apply for a bed and breakfast approval (and apparently complete the construction of the premises following the grant of that approval). Wanda would then apply for a further Development Approval, perhaps involving the construction of additional accommodation to reach the intended total of 10 rooms, for an eco lodge. The critical question to determine is whether Wanda’s “post purchase” activities, including the pursuit of the February 2018 development approval for a “new single dwelling”, provide an evidentiary basis from which it is appropriate to conclude that Wanda was conducting an enterprise at the time of the May 2016 property acquisition.

   THE COMMISSIONER’S CONTENTIONS

3. The Commissioner emphasised that Wanda bore the onus of establishing that the 6 June 2017 input credit claim refusal decision should not have been made:- Taxation Administration Act 1953 (“TAA”) s 14ZZK(b)(ii). The Commissioner’s statement of issues, and written submissions, explicitly put Wanda to proof of all the factual matters on which it intended to rely to substantiate the input tax credit entitlement claimed. Macmine v Federal Commissioner of Taxation (1979) 24 ALR 217 at 236 per Stephen J. Consistent with the TAA s 14ZZK onus, Wanda had to establish, on the balance of probabilities, that it made the May 2016 acquisition of the property for the purpose of, and in the course of carrying on, an enterprise.

4. The Commissioner contended that Wanda had not discharged its onus of showing either that

   (a)Wanda acquired the property “in carrying on an enterprise” and thus for a “creditable purpose” within the meaning of s 11-15(1) of the GST Act.

   (b)PindiHold “supplied” the property “in the course or furtherance of an enterprise” it carried on, and that the transaction therefore involved a “taxable supply” and a “creditable acquisition” (for the purposes of GST Act ss 9-5(b) & 11-5(b)).

5. In developing his submissions, the Commissioner accepted that the ultimate question whether an activity had occurred in the course and for the purpose of carrying on an enterprise involved an answer that was a matter of “fact and degree”:- per Brennan J in Inglis v Federal Commissioner of Taxation (1979) 10 ATR 493 (Inglis) at 496-497. That is to say, it is ultimately a matter of impressionistic assessment, made after regard to all the relevant considerations in the circumstances of the particular taxpayer. Those considerations included the taxpayer’s intention, the apparent purpose of the contentious activities, their essential character, and whether they have been undertaken in a systematic, organised or business-like manner;- see Spriggs v Federal Commissioner of Taxation (2009) 239 CLR 1 at 19. Consistent with the proposition that the taxpayer’s intention was not a determinative consideration, the Commissioner contended that a distinction could be drawn between activities that marked the commencement of an enterprise and those that were preparatory to its commencement. The Commissioner’s submissions pointed to the comments of Dowsett J in Russell v Federal Commissioner of Taxation (2011) 190 FCR 449 (Russell) at [71] as supporting the validity of such a distinction. Whether such a distinction existed in any particular case depended on an assessment of matters such as (i) whether or not there was a demonstrable commencement of trading activity, (ii) the length of time between intention and activity:- see Clayton v Commissioner of Taxation [2013] AATA 428 at [17]; and (iii) the extent to which a contentious activity, though motivated by an enterprise aspiration, had a more immediate other purpose:- The Married Couple v Commissioner of Taxation [2013] AATA 888 (Married Couple) at [26], [51] & [71] (establishing a private residence and olive grove with an ultimate intention of providing income producing short stay accommodation).

6. According to the Commissioner’s submissions, the matters that served to characterise Wanda’s activities as merely preparatory to the carrying on of an enterprise were

   (a)The absence of any reliable evidence of any articulated business purpose having motivated the acquisition of the property

   (b)The probability that the “business plan” proffered as the reason for the property acquisition had only been created months after the acquisition, and in response to the Commissioner’s audit enquiry

   (c)The appearance that the originally proffered business plan was disingenuous, and had in fact been disavowed by Wanda during the review hearing.

   (d)The evidence that, having disavowed the “Off the Grid” business plan, and castigated it as unachievable, Wanda conceded it had not (until some time before the review proceedings) carried out any corresponding feasibility assessment of its own and had not, in any event, disclosed the details of that feasibility.

   (e)The fact that Wanda had made no real progress in pursuing its professed “enterprise” activity, even three years after its acquisition of the property.

   (f)The absence of any evidence of any income generation from the property, and the absence of any evidence of systematic accounting relating to the postulated enterprise.

   (g)The fact that such architectural plans and development applications as Wanda has made, have been most specifically directed at obtaining approval for a residential dwelling, in circumstances where Wanda contemplates the necessity for a staged process of approval and construction before it could actually undertake its eco lodge activity

   (h)None of Wanda’s steps seeking development approval have been demonstrably related to its ultimately asserted ambition of an eco tourist “lodge” and, in any event, the prospects of obtaining such an approval appear to be questionable under the applicable Local Environment Plan.

   (i)Whatever significance might be accorded to the activities to which Mr Saville pointed as having occurred after he became Wanda’s sole director, there is no sufficient evidentiary basis for concluding that any of those activities warrant the conclusion that Wanda was carrying on an enterprise at the time of the May 2016 acquisition of the property.

   (j)The conduct of Ms Kim in her initial responses to the ATO in July and August 2016, the ignorance she acknowledged in her December 2016 interview, and the inconsistent and unreliable evidence Mr Saville gave about Wanda’s intention at the time of the May 2016 property acquisition preclude satisfaction that Wanda was carrying on (even in the limited sense of commencing to carry on) any enterprise at that time.

7. The Commissioner further contended that, given the imprecision and inconsistency of Mr Saville’s evidence, the apparently unsubstantiated commerciality of the financing arrangements relating to the property, and the inordinately protracted delay in progressing the asserted development proposal, that Wanda had not negatived the proposition that its acquisition of the property was “of a private or domestic nature”, and thus excluded from characterisation as something that had occurred in the course of carrying on an enterprise. Wanda complained that this was not an issue that had been raised for determination in the proceedings, and insisted that it was not an argument that could be entertained in the review proceedings.

8. There is some substance in Wanda’s complaint. Whilst the Commissioner’s statement of issues made it plain that Wanda had to discharge the statutory onus under TAA s 14ZZK, it did not specifically raise the “private or domestic nature”. If that point were to be pursued as a positive allegation it would have been necessary to address the “essential character” of Wanda’s activities and to identify, with some precision, the particular conduct:- see Commissioner of Taxation v Anstis [2010] HCA 40 at [32]-[38]; (2010) 272 ALR 1. And it would have been necessary to afford Wanda an adequate opportunity to address the point, both in evidence and submissions. Wanda’s stance, that the matter had not been squarely raised, and was not something that it was in position to address specifically, was justified.

9. On the other hand, I am inclined to regard the Commissioner’s submissions as not having made a positive assertion that Wanda’s acquisition of the property was essentially of a private nature. Rather, as I perceive the way the Commissioner’s submissions were advanced, the point being made was that the element of Mr Saville’s apparent personal commitment to the proposed development of the property, the involvement of his partner in some of the activities, and the intention to reside on the property at least for some time, combined to detract from confidence that Wanda should properly be regarded as carrying on an enterprise. Such a contention was open to the Commissioner although, as will be apparent from the specific findings I make in these reasons, those matters are not significant considerations in the determination of the review proceedings.

   WANDA’S CONTENTION – THE SUFFICIENCY OF ENTERPRISE INTENTION

10. As I have stated earlier in these reasons, Wanda’s contention, prior to what transpired at the start of the review hearing in February 2019, was that it had a specific development proposal (the “Off the Grid” plan) at the time of its acquisition of the property. Recognising that a contemporaneous mere intention was not determinative of the “creditable purpose” character of the May 2016 property acquisition, Wanda nevertheless emphasised that the concept of “carrying on an enterprise” was defined in the GST Act to include “anything done in the course of the commencement” of the enterprise. It followed that whilst mere intention could not be determinative, it could operate to characterise as the carrying on of an enterprise, any activity, even of a preliminary kind, undertaken for the purpose of implementing that intention. Wanda’s submission placed considerable emphasis on this proposition, articulated by Barwick CJ in Fairway Estates Pty Ltd v Federal Commissioner of Taxation (1970) 123 CLR 153 at 166

    … there can be a course of business although as yet there is nothing more than an intention to carry on the business and a single transaction carried out in pursuance of that intention.

11. In Russell v Federal Commissioner of Taxation (2011) 190 FCR 449 (at [70] & [87]) and in Commissioner of Taxation v Swansea Services Pty Ltd (2009) 72 ATR 120 (at [64]) that proposition was extended to embrace the notion, clearly implicit in the opening words of GST Act s 9-20 and the related GST Act s 195-1 definition, that a single activity could constitute both the commencement and the conduct of enterprise. Relying on that extension of the “single transaction” proposition Wanda contended that the determinative consideration was whether or not, at the time of acquiring the property, Wanda had intended to develop it, broadly along the lines, and for the purpose, suggested by the activities of which Mr Saville gave evidence. Wanda submitted that an affirmative answer to that question justified the conclusion that Wanda had commenced, and thus was carrying on, an enterprise at the time of the property acquisition in May 2016. The submission relied on (a) the activities involved in the acquisition of the property, and (b) the many “post purchase” activities summarised earlier in these reasons (at paragraphs 58 to 73). The latter were said to be consistent with, and to evidence, the acquisition of the property being a step taken in carrying on Wanda’s enterprise.

12. The extension of the “single transaction” proposition to embrace the possibility that a single activity marks the commencement of an enterprise does not justify the conclusion that an activity motivated by the enterprise purpose does in fact commence the enterprise itself. Whether or not it does, depends on the totality of the circumstances. In that regard, despite the emphasis placed on it in Wanda’s submissions, the reasoning in Russell when it is understood against the circumstances actually involved in that matter, does not justify the conclusion urged on Wanda’s behalf.

13. What was in issue in Russell were input tax credit claims relating to costs the taxpayer incurred in demolition of, and the construction of various other, facilities on a rural property the taxpayer had acquired. Even though the evidence showed that the property acquisition itself had been motivated by the business intention, it was not contended that the property acquisition marked the commencement of the taxpayer’s enterprise. Rather the contentious enterprise question was whether or not the construction of a swimming pool on the land could be regarded as the commencement of the “naturist” business that the taxpayer claimed was his intended purpose. In answering that question, the difference in view between Dowsett J, on the one hand, and Gordon and Edmonds JJ, on the other, was only as to whether there was a sufficient evidentiary basis to be satisfied about the reality of the taxpayer’s enterprise intention in constructing the pool.

14. Furthermore, and again despite Wanda’s contrary submission, all the members of the court should be taken as having accepted the proposition that there was a conceptual distinction between the preparation for and the actual commencement of a business. Dowsett J specifically articulated that proposition (at [71]) and, on a fair reading of the reasons for judgment of Gordon J (with whom Edmonds J agreed), it was endorsed by the whole court. In her judgment (at [87](5) Gordon J stated that “intention or purpose of the acquisition is relevant but not determinative”, and specifically referred to the paragraph [71] in the reasons of Dowsett J. Her Honour’s statement that the intention of an acquisition was not determinative of its character as an activity in carrying on an enterprise is quite inconsistent with the proposition that an enterprise motivated acquisition necessarily marks the commencement of the exercise. Her Honour’s statement points to the need for a precise identification of the contentious enterprise, and an assessment of the particular circumstances, in order to determine whether, as a matter of fact and degree, the enterprise has been commenced.

    WANDA’S CONTENTION – MR SAVILLE’S ENTERPRISE INTENTION

15. Wanda’s post hearing submissions placed emphasis on Mr Saville’s oral evidence that he did some “due diligence” before deciding that he wanted to become involved in the acquisition of the property. He claimed that he had worked with Wanda’s architect and prepared a series of documents that constituted his plan for the property and informed his decision whether he wanted to become involved in the property.

16. Mr Saville’s claim is immediately confronted by the scepticism to which I have already referred:- see paragraph 74 above. The more specific difficulty with the claim is that Mr Saville’s evidence about it was both vague in its generality and inconsistent in its content. The vagueness of his supposed “due diligence” claim stands in sharp contrast to his evidence that he did not obtain any valuation of the property, left all the acquisition and financing arrangements to Mr Sam Cassaniti and had no discussions with him about them. He never knew the amount of the PindiHold debt that was secured by the mortgage, and did not really understand what the arrangement was. He had not formulated any specific business plan. He did not know how Wanda was going to fund the proposed development. He had not carried out any kind of feasibility at the time of the property acquisition. In fact, even at the time of the hearing he had done only one feasibility (after swearing his 23 August 2018 affidavit). That feasibility related to a 10 room lodge - which was not the subject of Wanda’s development application - and was of a limited and preliminary kind. He did not put it into evidence in the review proceedings.

17. The preceding considerations indicate the hollowness of Mr Saville’s claim to have undertaken any pre-acquisition “due diligence”. In addition, the claim that he had worked with the architects and prepared drawings prior to his decision to become involved as a beneficiary, was not only unsubstantiated but apparently contrary to other evidence. There was no evidence of the architect’s involvement other than in relation to the various drawings dated in 2011, 2018 and 2019. The only invoices from the architect were dated in 2017 and 2018. The only drawings that Mr Saville specifically identified as having been prepared in the period between 2015 and the February 2018 Development Application drawings were the (problematically timed) “Lodge Site layout” and the other drawings referred to in paragraph 40(f) above. He actually said that no other drawings had been prepared in that intervening period.

18. It follows that, far from having carried out “due diligence” prior to PindiHold’s acquisition of the property, and having participated in decision making relating to it, the evidence fails to show reliably any active involvement at all on Mr Saville’s part. It also follows that even if I were to find (and I do not) that Mr Saville then had some kind of subjective intention to pursue a development proposal for the land, I would not be satisfied that his subjective intention actually influenced Wanda’s acquisition of the property.

    COMMENCEMENT OR PRE-COMMENCEMENT OF AN ENTERPRISE

19. Even if I had been satisfied that Wanda had some kind of development intention at the time of its acquisition of the property I would not have concluded that the acquisition of the property marked the commencement of an enterprise. In that regard I accept that there are occasions where a single transaction involving the acquisition of an asset might be accepted as the start of a business or enterprise. They are likely to involve circumstances where the business or enterprise activity involves the actual physical use of, or dealing with, the acquired property. This was the case with the catamaran in Peerless Marine Pty Ltd v FCT (2006) ATC 2419, the luxury yacht in Ell v FCT (2006) ATC 4098, the art works in Federal Commissioner of Taxation v Swansea Services Pty Ltd [2009] FCA 402 (although that was a case where the taxpayer had an established, many year practice of acquiring expensive art works, and the point in issue was the character of that practice rather than the time of its commencement) and the motor vehicles in Davsa Forty-Ninth Pty Ltd (as trustee for Krongold Ford Business Unit Trust) v Commissioner of Taxation [2014] AATA 337; (2014) 98 ATR 671. Those situations can be regarded as broadly analogous to the contentious swimming pool in Russell. But where the acquisition is merely of property that provides the venue for the contentious enterprise, a more nuanced factual enquiry is required in determining the point at which it is properly to be regarded as having commenced.

1. There are many examples of where enquiries of that kind have been undertaken in the decided cases. In Goodman Fielder Wattie Ltd v Federal Commissioner of Taxation (1991) 29 FCR 376, the material point in issue was the deductibility of expenses that Goodman Fielder had incurred in contributing to the funding of a research centre the company had established with the Queensland Institute of Technology (QIT). The purpose of the research was to develop, with a view to their commercial exploitation, a particular kind of pharmaceutical agent. The company’s approval of its contribution to the research centre funding was based on an assessment of the potential commercial application of some of the agents intended to be developed, that assessment involved sales projections for the contemplated products. About a year after entering into the funding agreement with QIT, the company established its own laboratory and manufacturing premises. There it carried out further product development testing and manufacturing, activities which it undertook, albeit ultimately unprofitably, over the course of the following three years.

2. The Commissioner had disallowed the research contribution costs the company made in the period between the formal funding agreement with QIT and the establishment of its laboratory and manufacturing facilities. The questions involved were whether the company had incurred the expenses “in carrying on a business for the purpose of gaining assessable income” or whether the research expenses were “related to” a business the company was carrying on for the purpose of producing assessable income:- see 101 ALR 329 at 338. The Commissioner’s determination, which Hill J upheld, was that the company’s research expenditure in the period prior to establishing its factory premises were pre-business expenses and not allowable deductions. What was regarded as critical by Hill J was whether and when the company had committed itself to the business of manufacturing and dealing in the products thrown up by the research activities. Notwithstanding the commercial intention underlying the company’s decision to contribute to the research funding, His Honour considered that the company’s interest in the research centre, and its products, was (in the initial and contentious period) only provisional, not then a consequence of a decision to embark on the manufacturing business, and not properly to be regarded as having been incurred in the conduct of a business of producing assessable income. Hill J said this (at 101 ALR 340)

   Critical to the resolution of the present controversy is the characterisation of the business activity itself which is said to have commenced. It was conceded properly by the applicant that if the business claimed to be carried on by it was to be characterised as one of manufacturing … then that business did not commence (until the factory premises were established) …

   For the applicant it was submitted that the income producing activity or business activity in which the applicant was engaged in the relevant period should be characterised as an activity of researching and developing monoclonal antibody products for manufacturing and sale. The difficulty in the path of the applicant, however, is that during the relevant period the element of commitment was absent. The evidence … makes clear that the applicant was engaging in activities of a provisional kind only.

3. In Inglis v Federal Commissioner of Taxation (1979) 10 ATR 493 the point in dispute was the deductibility of property maintenance, rates, borrowing costs and other property outgoings relating to a pastoral property during a six year period when the property had been de-stocked and all farming activities had ceased. The taxpayer’s unsuccessful argument was that the cessation of farming activities had been forced on them by commercial hardship, and they had at all times intended to resume the pastoral business as soon as they resolved those commercial difficulties. They relied, unsuccessfully, on this argument to contend that the business should be regarded as having continued, and the expenses properly allowed as necessarily incurred for an income producing purpose. Brennan J said this in rejecting the argument:-

   The carrying on of a business is not a matter merely of intention. It is a matter of activity. Yet the degree of activity which is requisite to the carrying on of a business varies according to the circumstances in which the supposed business is being conducted. Little activity may suffice for carrying on a business which does not call for much activity, as in Thomas v FC of T (1972) 72 ATC 4094 ; 46 ALJR 397 ; ATR 165 and in Ferguson v FC of T (1979) 79 ATC 4261 ; 8 ATR 331 .

   …

   Lord Buckmaster said in J & R O'Kane & Co v IR Comrs (1922) 12 TC 303 at 347 : “… the intention of a man cannot be considered as determining what it is that his acts amount to”. But even if the intention of the owner is relevant in determining whether a business is merely going through a quiet period, or whether it has ceased, an intention to revive a business in the future does not preclude a finding that it has ceased to be carried on. At the end of the day, the extent of activity determines whether the business is being carried on. That is a question of fact and degree.

4. The decision in Married Couple v Commissioner of Taxation [2013] AATA 888 concerned an input tax credit claim by taxpayers who had purchased a property, built a residence and, three years later executed a partnership agreement and obtained GST registration. That registration was back dated to take effect prior to the date of the expenses they had incurred over a three year period following their acquisition of the property. Their evidence was that they had purchased the property after planning to establish a mixed business combining elements of agricultural production and commercial accommodation. The expenses for which they made input tax credit claims included power connection, road making, and building costs for a house, and investment loan interest. The couple had established a partnership bank account, but there was no evidence they had derived any income from the property, and it had never been advertised for letting. They had not stocked the property, nor had they carried out any planting.

5. SM Lazanas accepted the taxpayers’ intention had been to let the property, that it was not intended to be their private residence, and that they had intended to commence a business at some future time. However, SM Lazanas considered that the kinds of activities that they had undertaken on the property were inherently neutral as evidence of a business activity, because they were the kinds of things that would have been required of the, “as landholders, regardless of whether they were carrying on a business”. SM Lazanas went on to say that “the fact that no rental income was earned … and that they were not even close to earning income shows that the business had not yet commenced”:- see [2013] AATA 888 at [26]-[27].

6. In relation to the specific question whether the Married Couple could be regarded as conducting an enterprise for the purposes of the GST Act SM Lazanas (at [2013] AATA [58] embraced the proposition, which she regarded as having been endorsed by Dowsett J in Russell v Commissioner of Taxation [2011] FCAFC 10 at [71], that there as a conceptual distinction between commencing a business and taking preparatory steps for such a commencement. SM Lazanas then went on to illustrate the proposition by reference to Case N101 (1981) 81 ATC 560 and Re AT84/20 and Commissioner of Taxation [1987] AATA 3845. In the former case soil testing, preparing a planting and irrigation layout for an orchard were held not to constitute the commencement of the taxpayer’s macadamia growing business. In the latter case, the taxpayer had already planted trees and that was held to mark the commencement of the business, despite the fact that they were not yet mature enough to provide marketable produce. Then turning to the circumstances of the Married Couple, SM Lazanas concluded that the work that had been done by them, in reclaiming land on which an orchard might be established, did not mark the commencement of the agricultural enterprise, and was merely preparatory.

7. The circumstances addressed by the Tribunal in Clayton v Commissioner of Taxation [2013] AATA 428 in many respects parallel, and in other respects are more favourable than, those of Wanda. There the taxpayers had purchased a rural property on which they intended to establish an eco tourist facility. They had made some improvements to the property, prepared a business plan, planned the construction of visitor accommodation, lodged a development application, retained consultants, conducted market research, undertaken studies in conservation and land management. Even though the taxpayers eventually obtained development consent to construct visitor accommodation, financial pressures caused them to defer construction, they undertook marketing activities for tours of the property and established an orchard. Despite all of this, the taxpayers failed in their input tax credit claim in relation to the expenses they had incurred over the four year period prior to the financial year in which they first provided accommodation to paying guests. SM McCabe, obviously alert to the proposition that the commencement of a business or enterprise, though marking a modest level of activity, could still be probative of it being carried on said this.

   [17] Every business has to start somewhere. Where the business progresses from its foundations to operation within a reasonable time frame, it is easier to see how initial expenditures can be seen as part of a course of conduct that amounts to carrying on an enterprise. But where there is delay – where the momentum of the activities is lost – it becomes harder to make a connection between initial expenditure and the operations which result. That connection is even more difficult to establish where the business has not, or does not, commence trading in due course.

   [18] While there were some features of a business present during the period under review, the activities are better described as preparatory and exploratory in nature. They may yet lead to the establishment of an enterprise; one hopes so, for the taxpayers appear to be genuine in their desire to contribute to the growth of tourism in their local area. But that is not enough to meet the definition in the Act. I am not satisfied they were carrying on an enterprise. That means they were not entitled to claim they made creditable acquisitions during that period.

8. In the present case Wanda’s, ultimately asserted, enterprise intention was the operation of 10 room eco lodge. The long drawn out series of incremental activities indicated earlier (see paragraphs 58 to 73 above), the September 2018 refusal of its development application, the suggestion that it has made further (unresolved) development application, and the reality that it has undertaken no construction work of any kind, all combine to require the conclusion that its acquisition of the property was not an activity that constituted carrying on any enterprise. The propriety of that conclusion is underscored by the apparent uncommerciality of Wanda’s actions.

   THE RELEVANCE OF COMMERCIALITY TO ENTERPRISE CHARACTERISATION

9. I referred earlier to the problematic nature of the costings and projections set out in the “Off the Grid” plan, and I expressed the view that the difficulties apparent from the document gave rise to a question whether it was in any sense a document that could be regarded as probative of Wanda’s business and trade intentions and activity. Once Wanda abandoned the “Off the Grid” document there was little evidence to show that it had brought any rational financial analysis to bear on its acquisition of the property and its subsequent activities relating to it.

10. In considering the significance of such a situation, it is important to accept that business and profit making activities and motives are not co-extensive with business success. As Emmett J said in Ell v FCT (2006) 61 ATR 661 at 689 [111] and [114] “a business may be carried on though it is not profitable or economical”. But His Honour added “provided it is carried on with a view to profit”, and then went on to observe that a significant disproportion between income and expenses could lead to justifiable conclusions negating such a conclusion. It follows that whether or not such a profit making motive exists as a matter of substantive reality may be assessed by regard to, amongst other things, the apparent commerciality (or uncommerciality) of the taxpayer’s conduct or hypothesised enterprise:- see Married Couple at [50] & [51]. SM McCabe took a similar view in Educational Pty Ltd v Commissioner of Taxation [2011] AATA 445 where the taxpayer, over a four year period, had made substantial capital outlays, but generated no significant income from its intended operating activities.

11. The potential relevance of the objective uncommerciality of the taxpayer’s arrangements, in informing the assessment whether they have embarked on the conduct of an “enterprise” was alluded to by McKerracher J in Swansea (by reference to the specific exclusion in GST Act s 9-20(2)(c). It is well made by regard to the circumstances involved in Professional Admin Service Centres Pty Ltd v Federal Commissioner of Taxation [2013] FCA 1123; (2013) 94 ATR 445 (Professional Admin Service Centres Pty Ltd) There the taxpayer asserted that it was conducting an enterprise in providing funding to a defendant in criminal proceedings, in consideration of an apparent repayment promise contingent on successful defence of the proceedings and the recovery of damages in contingently contemplated subsequent malicious prosecution proceedings. Edmonds J characterised this arrangement as portraying an inherently uncommercial arrangement, which he was not prepared to accept as indicative of an underlying reality of business or enterprise motive. His Honour came to that view partly because of (i) what he regarded as the inherent unlikelihood of a commercial reality, (ii) the absence of any evidence explaining the commercial judgment underlying the funding agreement, (iii) the absence of any evidence of the taxpayer having any other commercial operation (sufficient to fund the litigation lending activity) and, (iv) the absence of any evidence of genuine commercial judgments having been made at the time of entering into the transaction:- see [2013] FCA 1123 at [62] to [65].

12. All of those considerations of uncommerciality considered in the Married Couple matter, and in Professional Admin Service Centres Pty Ltd, resonate in relation to Wanda’s circumstances. Wanda’s director at the time of the property acquisition, and Mr Saville himself, despite his due diligence claim, took no part in, and really had no knowledge of, the financial arrangements that had been made to acquire the property. Mr Sam Cassaniti, who was a personal beneficiary of the Wanda Street trust was apparently content to encourage Ms Kim, as Wanda’s sole director, to embark on an $700,000 GST exclusive purchase transaction, without any property valuation, and grant a 12 month, 10% interest rate mortgage that secured an amount which, whilst not specifically stated, certainly exceeded the purchase price of the property. In relation to those matters, it may be inferred from Ms Kim’s evidence that Mr Cassaniti never caused on encouraged Wanda to undertake enquiries about either (i) the value of the land, (ii) the amount of the PindiHold debt or (iii) the availability of other sources of finance for the acquisition of the property. Furthermore, it was Mr Cassaniti who apparently provided Ms Kim with the unrealistic, and in reality unachievable (according to Mr Saville’s evidence), “Off the Grid” proposal as Wanda’s “business plan” for the property.

13. The financial scenario pointed to in the “Off the Grid” document was inherently flawed (for the reasons I have alluded to earlier – see paragraph 37 above. It was expressly abandoned by Mr Saville as overblown and unachievable:- see paragraph 47 above. Mr Saville’s own evidence was that he had not carried out any feasibility assessment of his own – until the apparently rudimentary exercise he undertook after preparing his 23 August 2018 affidavit, and which he never put into evidence:- see paragraph 90 above.

14. Finally, the evidence establishes that Wanda had no funds of its own at the time of the property acquisition, has not been revealed to have generated any subsequent income, has never repaid any of the Reliance mortgage amount and, according to Mr Saville has never enquired about, and has never known, at any time since 2016, the amount of the mortgage debt.

15. Wanda’s apparently total indifference to its financial circumstances (apart from its pursuit of the input tax credit claim) tends away from any reliable conclusion that Wanda could be regarded as having any particular enterprise intention when it acquired the property in May 2016, and as having then commenced an enterprise at the time of its acquisition of the property.

    THE CHARACTER OF PINDIHOLD’S “SUPPLY”

16. The Commissioner’s essential contention was that the absence of direct evidence about the circumstances of PindiHold’s acquisition and ownership of the property removed the possibility of an adequate evidentiary basis for any conclusion that PindiHold had conducted an enterprise. More specifically there was no sufficient evidentiary foundation for a conclusion that PindiHold had transferred to land to Wanda as part of carrying on an enterprise, so as to characterise Wanda’s acquisition as having been made as the result of a “taxable supply”.

17. Although the conclusion I have reached about the character of Wanda’s acquisition means that the decision under review should be affirmed in any event, it is appropriate, given the issues raised and addressed in the proceedings, to also address the “taxable supply” issue. In so doing it is necessary to outline what the evidence revealed about PindiHold and its activities relating to the property.

    PINDIHOLD’S CORPORATE BACKGROUND & APPARENT ACTIVITIES

18. PindiHold was incorporated on 24 February 2012. In September 2012 it became registered for GST, apparently with effect from 2 April 2012. At that time its sole director, secretary and shareholder was David Cassaniti (24 February 2012 to 7 May 2013). By June 2013 a Mr Gregory Tomkinson had become PindiHold’s sole director and secretary. In August 2014 he was replaced in those roles by Mr Michael Lowe. (Messrs Cassaniti and Lowe (in sequence) have been PindiHold’s only shareholders.) PindiHold was the trustee of the Hawks Nest Discretionary Trust. The trust became registered for GST on 24 February 2012.

19. The limited information revealed by the evidence about PindiHold, and about its activities relating to the Wanda Street property, fall into four different time periods. They are outlined in the following paragraphs.

20. Events that occurred before PindiHold’s acquisition of the property. The following events fall into this time period:-

    (a)June 2011:- The preparation of the site plan of the property, entitled “proposed development at “No 1 Warri Street Pindimar”, referred to earlier in these reasons:- see paragraph 40(a) above.

    (b)Undated:- Copies of each of the undated drawings that Wanda provided to the ATO, as attachments to the 15 May 2017 email, and which I have described earlier in these reasons - at paragraphs 40(b), 40(c), 40(d), 40(e) & 40(f) above.

    (c)19 June 2012:- PindiHold commissioned a contour and detailed survey of the Wanda Street property from Le Motte Group Pty Ltd, a form of surveyors and town planners. The map showed the location of a proposed dwelling, in a position similar to that shown on the Location Plan included in Wanda’s February 2018 Development Application.

    (d)28 June 2012:- Le Mottee Group Pty Ltd issued an invoice to PindiHold for the survey map, and for work involved in the preparation of a Bushfire Assessment Report and a Flora and Fauna Report from Le Mottee Group Pty Ltd. It is unclear why these invoices were directed to PindiHold. It is also unclear whether either of these reports was in fact ever provided. A statement of account Le Mottee Group Pty Ltd issued to PindiHold in early December 2013 indicated that PindiHold had not paid the June 2012 invoice.

1. Events relating to PindiHold’s acquisition of the property:- The following events fall into this category:

   (a)29 June 2012:- PindiHold contracted to purchase the Wanda Street property from Reliance Financial Services (NSW) Pty Ltd.

   (b)10 October 2012:- Century Construction Pty Ltd (an entity that was not then registered for GST, nor the registered proprietor of the land) but assertedly a secured creditor of Reliance Financial Services (NSW) Pty Ltd and acting as mortgagee in possession) issued a $400,000 (GST inclusive) tax invoice to PindiHold for the sale of the Wanda Street property

   (c)16 October 2012:- R & L Starr, a firm of architects issued an invoice to the Hawks Nest Discretionary Trust for unspecified “design development” work in relation to a proposed development on the Wanda Street property.

   (d)9 January 2013:- Reliance Financial Services (NSW) Pty Ltd and Century Construction Pty Ltd entered into a Deed of Assignment and Agreement, pursuant to which Reliance transferred the Wanda Street property to Century for a consideration of $380,000.

2. Pindihold’s period of ownership of the Wanda street property:- The following events fall into this category:

   (a)22 June 2013:- PindiHold became the registered proprietor of the Wanda Street property, following (i) settlement of the 10 October 2012 invoice transaction, wholly funded by a mortgage borrowing from Reliance Financial Services (NSW) Pty Ltd and, (ii) the registration of a “Transfer by Mortgagee under Power of Sale”.

   (b)5 July 2013:- PindiHold lodged a BAS for the quarter ended 30 June 2013, with a $36,363 input tax credit claim relating to the acquisition of the 304 Wanda Street property

   (c)3 December 2013:- Le Mottee Group Pty Ltd issued a statement of account to PindiHold, relating to the June 2012 invoices referred to above.

   (d)16 April 2015:- The ATO commenced an audit of PindiHold’s BAS for the quarter ended 30 June 2013.

   (e)10 July 2015:- The Commissioner completed an audit of PindiHold’s June 2013 BAS. The audit decision removed the $36,363 input tax credit claim (apparently related to the $400,000 GST inclusive purchase price under the 29 June 2012 sale contract) and imposed a $32,726 penalty. The basis for this decision was the sequence of events, and the absence of any documents, demonstrating the way in which PindiHold had actually funded the asserted 2012 / 2013 purchase. The Commissioner’s decision concluded that the documents relating to the asserted acquisition of the property had been “constructed in a manner designed to give the appearance that you have made a creditable acquisition and the sole purpose of this construct was to obtain the input tax credit of $36,363”.

   (f)24 July 2015:- Le Mottee Group Pty Ltd provided PindiHold with an environmental report for the construction of an (otherwise unspecified) “proposed dwelling” on the Wanda Street property. The report was the result of surveys undertaken on 12 March and 10 June 2012, and 16 January 2013.

   (g)30 July 2015:- Le Mottee Group Pty Ltd provided PindiHold with a Bushfire Assessment Report for a propose “single dwelling’ on the Wanda Street property. The report described the proposed dwelling as a two storey brick veneer house with an attached garage. The report did not otherwise address any detailed plan of the proposed dwelling, but it assessed the construction requirements having regard to the assessed bushfire attack level, and concluded that all external walls would have to be either non-combustible or clad with fire retardant material.

   (h)In April 2016 the Deputy Commissioner of Taxation commenced proceedings against Pindimar. Those proceedings resulted in Pindimar being put into liquidation on 8 July 2016.

3. Events after PindiHold’s winding up:-- Two years after PindiHold’s liquidation, in November 2018 Wanda’s solicitor requested PindiHold / the Hawks Nest Trust’s former accountants to provide the contents of their client files relating to the period from February 2012 to the transfer of the property to Wanda in May 2016. That request resulted in Wanda being provided with the documents to which I referred (in the paragraphs from 113 to 115 above) where the dates at the beginning of the paragraph have been double underlined. (The other dated paragraphs set out information that I have extracted from the ATO’s 23 June 2015 audit decision[12] – to which I referred earlier in these reasons:- see the footnote to paragraph 4 above.)

   [12]Wanda objected to any regard being had to the 2015 audit decision reasons. It contended that their contents were irrelevant to the review proceedings. I accept that contention in so far as it asserts that the result of, and the reasoning in, the audit cannot be probative in the determination of any factual issue in the current proceedings. However, I reject the contention in so far as it asserts that the factual matters recorded in the audit reasons cannot be probative in the present proceedings. In evaluating Wanda’s submission that PindiHold was conducting an enterprise, it is relevant to have regard to both the circumstances of PindiHold’s acquisition of the property, and to its apparent failure to provide evidence to the ATO in support of its input tax credit claim.

4. In its January 2019 submissions Wanda contended that the undated drawings referred to in paragraph 113(b) above (which Wanda had provided to the ATO in May 2017 as evidence of its own plans for the development of the property) could be relied on to demonstrate that PindiHold had been contemplating, and taking steps to formulate, the development of the property. The submissions offered their own, essentially conjectural interpretation of what the various drawings showed, and suggested, particularly in relation to the drawings referred to in sub-paragraphs 118(b) and 118(c) below that they suggested a hotel type development with kitchenette equipped bedroom units. Apart from the element of interpretative conjecture involved in the submission, an additional difficulty is that in his oral evidence Mr Saville, who said he had worked as a consultant for PindiHold either disavowed any knowledge of the undated documents, or identified them as drawings he had created for Wanda, after the May 2016 acquisition of the property.

5. Mr Savile’s evidence in relation to those particular drawings was to the following effect:

   (a)the single page “preliminary design for proposed house” – see paragraph 40(c) above:- This was one of three plans that Mr Saville said had been prepared prior to his first involvement with PindiHold in early 2015. He had no knowledge of their date, or of their significance.

   (b)the “six bedroom”drawings – see paragraph 40(d) above. These two undated pages (showing 6 bedrooms located off a walkway to the north of the main building) were the two other plans of whose provenance and purpose Mr Saville had no knowledge.

   (c)the “Lodge Site Layout” drawing – see paragraph 40(e) above:- This undated page was the plan that Mr Saville said had been created in 2017, for the purpose of a meeting he had with Council officers prior to submitting Wanda’s “dwelling” Development Application in February 2019. (I have addressed the uncertain timing and provenance of this document earlier in these reasons:- see the footnote to paragraph 41 above.)

   (d)the undated layout drawings – see paragraph 40(f) above:– Mr Saville’s (not entirely clear) evidence was that these were two other drawings that had been drawn up in 2017 for the purpose of the “pre-lodgement” meeting he had with the Council prior to lodging the February 2019 Development Application, and one of which Wanda had adopted in pursuing that application.

   WANDA’S “TAXABLE SUPPLY” CONTENTION

6. Wanda’s submission was that the various documents to which it pointed (in substance, those to which I have referred in paragraphs 113 to 116 above) permitted, and indeed warranted, a conclusion that PindiHold had been carrying on a development purposed “enterprise” relating to the property. The submission was that, having failed to implement its development plan, or secure its own continued existence, PindiHold had sold the property to Wanda as part of the “termination” of its enterprise. This submission relied, perhaps implicitly, on the belatedly assertedly “obvious” characterisation of the “Off the Grid” document as PindiHold’s plan.

7. Wanda’s submission was an ambitious one, having regard to the fact that it was made solely in reliance on a very limited number of variably dated or undated documents, events that preceded PindiHold’s acquisition of the property, and the unlikely characterisation of the “Off the Grid” document (as to which see paragraph 51 above). There was no interpretative or corroborative evidence from any PindiHold personnel, notwithstanding the apparent availability to Wanda of PindiHold’s documents and advisers and officers who had been associated with it. The highest point to which the evidence rose was Mr Saville’s vague recollections about having done some (imprecisely detailed) consulting work for PindiHold, as an employee of some other organisation.

8. The difficulties of arriving at a proper conclusion that PindiHold was carrying on any enterprise at the time of its May 2016 transfer of the property to Wanda are illustrated by the flawed ingenuity involved in the Applicant’s submissions about the nature of the drawings Wanda’s solicitor obtained from PindiHold’s accountants in November 2018, and the inferences that could properly be drawn from them. The reality is that PindiHold appears never to have got to the stage of putting forward any particular proposal for the development of the property. Furthermore, such investigative activities and designs as it may have undertaken appear to involve a mere intention to create a private dwelling house.

9. That evidence leads to a basic imprecision about the nature of any enterprise attributed to PindiHold. One conjecture is that it was a company that traded, or intended to trade in land (analogously to the art dealer in Swansea). Another conjecture is that it may have shared Wanda’s ultimately asserted intention to establish an “eco lodge”. But the former alternative seems hardly consistent with the opaque circumstances surrounding its 2013 acquisition of the property, and is without a proper evidentiary foundation. The latter alternative, even if one were prepared to assume that there was an underlying practical commercial reality to the circumstances of PindiHold’s 2013 acquisition, confronts substantially the same difficulties as those relating to the characterisation of Wanda as having carried on an enterprise. There is simply no evidence to substantiate the proposition that PindiHold had ever intended to, or had commenced, to carry on an enterprise. And in the absence of any significant evidence it would be inappropriate to conclude that PindiHold’s sale of the property to Wanda was an enterprise related activity.

   IN THE FORM OF AN ADVENTURE OR CONCERN IN THE NATURE OF TRADE

10. Notwithstanding the absence of evidence sufficient to provide any informed conclusion that PindiHold supplied the property to Wanda in the conduct of an enterprise, Wanda sought to rely on the proposition that it was sufficient to characterise the supply as taxable if it was “in the form of” a business or adventure in the nature of trade. The submission was that the transfer related documents sufficed to indicate that the supply had occurred “in the form” contemplated by that criterion in GST Act s 9-20, and was a taxable supply.

11. Wanda’s proposition would reduce the taxable supply criterion to one that turned solely on the documentary, or apparent, form of the transaction. It is a proposition that cannot be accepted. The purpose of the alternative limb of “enterprise” in GST Act s 9-20 is to include profit making activities that do not otherwise satisfy the indicia of a business:- It is not to substitute the appearance of mere form for a real assessment of the taxpayer’s actual activities:- see Toyama Pty Ltd v Landmark Builiding Developments Pty Ltd [2006] NSWSC 83 at [69]. In FCT v Swansea Services Pty Ltd [2009] FCA 402 McKerracher J acknowledged that the words “in the form of” in the GST Act s 9-20 (1)(a)(b) criteria of an enterprise had to be given weight, especially in the light of the fact that GST Act s 9-20(1) explicitly posited that an enterprise could (at least conceptually) involve a single activity. But His Honour went on to reject the proposition that the legislative intention was to direct attention merely to the form of the contentious transaction:-

    [98] …, the words ‘in the form of’ cannot be ignored. The Commissioner has also expressed the view (in Good and Services Tax Determination GST 2000/8 at [7]) that:

    The words “in the form of” have the effect of extending the meaning of enterprise beyond entities carrying on a business. An enterprise will include entities that carry out activities that have … the appearance or characteristics of business activities. (emphasis added)

    [99] Rather than these words supporting a suggestion that form alone may prevail over substance, they have the effect of extending the reach of ‘enterprise’ to those activities which are in the form of a business but would not, in the ordinary meaning of ‘business’ be considered such. But the activity must still be reasonably intended to be profit making in the case of an individual and cannot for any entity simply be a private recreational pursuit or hobby. That this is so is clear from the exclusions to ss 9–20 of the GST Act which, relevantly, rules out private recreational pursuits or hobbies or, in the case of individuals, (other than a charitable trustee) an activity or activities done without a reasonable expectation of profit or gain.

    CONCLUSION

12. The Commissioner’s 6 June 2017 decision, rejecting the input tax credit claim in Wanda’s June 2016 Business Activity Statement, is affirmed.

I certify that the preceding 125 (one hundred and twenty -five) paragraphs are a true copy of the reasons for the decision herein of Mr P W Taylor SC, Senior Member

...........................[SGD].............................................

Associate

Dated: 22 April 2020

Date(s) of hearing:	26/02/2019 and 27/02/2019
Counsel for the Applicant:	Mr Quintin Rares
Solicitors for the Applicant:	Ms Ella Dalrymple
Counsel for the Respondent:	Ms Madeleine Elicott
Solicitors for the Respondent:	Mr Simon Cho