Assad and Commissioner of Taxation (Taxation)

[2023] AATA 2995

Assad and Commissioner of Taxation (Taxation) [2023] AATA 2995 (15 September 2023)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):2022/3499      

Re:Tarik Assad

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Senior Member G Lazanas

Date:15 September 2023

Place:Sydney

The objection decision dated 27 April 2022 is affirmed.

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Senior Member G Lazanas

CATCHWORDS

TAXATION – goods and services tax – cancellation of ABN and GST registrations – whether taxpayer carrying on an enterprise – whether GST assessments excessive – insufficient reliable evidence – decision to cancel ABN and GST registrations affirmed – decision in respect to GST assessments affirmed

LEGISLATION

A New System (Australian Business Number) Act 1999 (Cth), ss 8, 18
A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 7-1, 9-5, 9-20, 11-5, 11-15, 23-10, 25-55, 195-1
Taxation Administration Act 1953 (Cth), s 14ZZK

CASES

Commissioner of Taxation v Swansea Services Pty Ltd [2009] FCA 402
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614
Ferguson v Commissioner of Taxation (1979) 37 FLR 310
Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81; 5 ATR 672
Martin v Federal Commissioner of Taxation (1953) 90 CLR 470 at 474
Spriggs v Commissioner of Taxation

(2009) 239 CLR 1

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

REASONS FOR DECISION

Senior Member G Lazanas

15 September 2023

INTRODUCTION  

1. Mr Tarik Assad applied to this Tribunal for review of an objection decision made by the Commissioner of Taxation dated 27 April 2022 (the Objection Decision). The Commissioner decided to disallow Mr Assad’s objection against the cancellation of his Australian Business Number (ABN) under the A New System (Australian Business Number) Act 1999 (Cth) (the ABN Act) and, also, the cancellation of his GST registration under the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act). In addition, the Commissioner disallowed Mr Assad’s objection to the amended assessments of net amount (the GST assessments) for the monthly tax periods from 1 October 2017 to 30 September 2018, 1 May 2019 to 30 June 2019, December 2019, July 2020, 1 September 2020 to 30 November 2020, 1 January 2021 to 30 April 2021 and 1 June 2021 to 31 July 2021 (the Relevant Periods).

2. Mr Assad argued that he was a sole trader carrying on an enterprise and that the Commissioner should never have cancelled his ABN and GST registrations nor issued him with the GST assessments for the Relevant Periods.

3. As these reasons will explain, I have decided the Commissioner was correct in cancelling Mr Assad’s ABN and GST registrations and in issuing the GST assessments. I was not persuaded that Mr Assad was carrying on an enterprise during the Relevant Periods nor that he was likely to carry on an enterprise for at least 12 months after the Relevant Periods. I have also decided that Mr Assad did not discharge the onus of proving that the GST assessments issued to him were excessive and what the assessments should have been.

THE FACTUAL AND PROCEDURAL BACKGROUND

1. Mr Assad registered the business name ‘Khaled, Sadie' with the Australian Securities & Investments Commission on 29 November 2018 with effect from 1 July 2016. This business name was subsequently changed to ‘Assad, Tarik’ on 28 September 2021 and registered to Mr Assad’s ABN.

2. Mr Assad registered for an ABN on 29 November 2018 backdated to 1 July 2016. In his ABN application, Mr Assad described his main business activity as a wholesaler. Mr Assad registered for GST on 18 July 2021 backdated to 1 July 2017. Mr Assad reported on a monthly basis and used the cash accounting method for GST purposes.

3. Mr Assad lodged all his GST returns (also known as Business Activity Statements or BASs) with the Commissioner for the Relevant Periods in July and August 2021, as follows:

Tax Period	Total sales *	GST on sales *	Purchases	Input tax credits	Date BAS lodged
October 2017	$7,700	$700	-	$8,455	6/08/2021
November 2017	$1,200	$120	-	$3,250	6/08/2021
December 2017	-	-	-	$24,718	6/08/2021
January 2018	-	-	-	$762	6/08/2021
February 2018	$10,000	$1,000	-	$15,600	6/08/2021
March 2018	$25,000	$2,500	-	$426	7/08/2021
April 2018	-	-	-	$1,272	8/08/2021
May 2018	$12,000	$2,000	-	$34,579	8/08/2021
June 2018	$165,000	$15,000	-	$9,031	8/08/2021
July 2018	-	-	-	$8,800	12/08/2021
August 2018	-	-	-	$3,000	8/08/2021
September 2018	$11,000	$1,100	-	$5,284	12/08/2021
May 2019	$13,000	$1,300	-	$1,187	12/08/2021
June 2019	$3,800	$380	-	$120	8/08/2021
December 2019	$166,000	$16,600	-	$1,400	12/08/2021
July 2020 Revised	$3,000	$300	-	$9,200	23/07/2021
September 2020	-	-	-	$212	21/07/2021
October 2020	-	-	-	$75	21/07/2021
November 2020	-	-	-	$1,200	21/07/2021
January 2021 Revised	-	-	-	$5,430	29/07/2021
February 2021	-	-	-	-	21/07/2021
February 2021 Revised	-	-	-	$2,134	23/07/2021
March 2021	-	-	-	$444	21/07/2021
April 2021	-	-	-	$350	21/07/2021
June 2021	-	-	-	$350
July 2021 Revised	-	-	-	$850
Total	$41,000	Total	$138,129

(*The references to “Total Sales” and “GST on Sales” in the headings to the table are as per the BAS form and do not refer to sales as ordinarily understood.)

1. Mr Assad lodged nil BASs for the periods from 1 July 2017 to 30 September 2017 on 6 August 2021. Mr Assad also lodged a nil BAS for the month of August 2021.

2. On 20 August 2021, the Commissioner commenced a GST audit of the Relevant Periods to examine whether Mr Assad was carrying on an enterprise.

3. On 3 December 2021, the Commissioner issued an audit finalisation letter concluding that Mr Assad was not carrying on an enterprise. The Commissioner cancelled Mr Assad’s ABN registration “with effect from 30 November 2021”. The Commissioner also cancelled Mr Assad’s GST registration “as of 30 November 2021”.

4. On 10 December 2021, the Commissioner issued Mr Assad with the GST assessments by reducing his BASs to nil. This resulted in Mr Assad being assessed for GST shortfalls totalling $97,129, calculated by reducing the total GST payable in the amount of $41,000 and also reducing the total input tax credits claimed in the sum of $138,129 for all of the Relevant Periods. (See the table at [6] above).

5. On 14 January 2022, Mr Assad lodged an objection to the cancellation of his GST registration, ABN cancellation and GST assessments for the Relevant Periods.

6. On 27 April 2022, the Commissioner disallowed Mr Assad’s objection.

7. On 2 May 2022, Mr Assad applied to the Tribunal for a review of the Objection Decision.

THE ISSUES

1. The key issue is whether Mr Assad has discharged his onus of proof by satisfying the Tribunal that he was carrying on an enterprise during the Relevant Periods. The following issues must also be determined:

   (a)whether the Commissioner’s decision to cancel Mr Assad’s ABN pursuant to s 18 of the ABN Act should not have been made or should have been made differently;

   (b)whether the Commissioner’s decision to cancel Mr Assad’s GST registration pursuant to s 25-55(2) of the GST Act should not have been made or should have been made differently; and

   (c)whether the GST assessments issued to Mr Assad were excessive and what the assessments should have been.

2. The burden of proof with respect to the abovementioned issues rests with Mr Assad, as the taxpayer in accordance with subparagraphs (i) and (ii) of s 14ZZK(b) of the Taxation Administration Act 1953 (Cth) (the TAA). See, generally, Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 as to the burden of proof faced by taxpayers in tax disputes. The standard of proof that applies is proof on the balance of probabilities.

THE RELEVANT LEGISLATIVE PROVISIONS

1. It is necessary to briefly refer to the relevant provisions of the GST Act and the ABN Act.

2. Section 7-1 of GST Act relevantly provides that GST is payable on “taxable supplies” and entitlements to input tax credits arise on “creditable acquisitions”.

3. Section 9-5 of the GST Act which is concerned with “taxable supplies” states that an entity makes a taxable supply if, relevantly, the supply is made in the course or furtherance of an enterprise the entity carries on and the entity is GST registered or required to be registered.

4. Section 11-5 of the GST Act is headed “what is a creditable acquisition” and broadly provides that an entity makes a “creditable acquisition” if, relevantly, the entity acquires anything solely or partly for a “creditable purpose” and the entity is registered or required to be registered for GST. Subsection 11-15(1) of the GST Act sets out the meaning of “creditable purpose” and relevantly provides that an entity acquires a thing for a creditable purpose to the extent that the entity acquires the thing in carrying on the entity’s enterprise.

5. The term “enterprise”, which is key to the present case, is defined in s 9-20 of the GST Act. The relevant paragraph (a) of s 9-20(1) states as follows:

   (1) An enterprise is an activity, or series of activities, done:

   
   

   (a)            in the form of a *business; or …

6. However, the other important part of the definition of “enterprise” that is relevant is paragraph (c) of s 9-20(2) which relevantly provides an exclusion in the following terms:

   (2)     However, enterprise does not include an activity, or series of activities, done:

   
   

   …

   (c)     by an individual … without a reasonable expectation of profit or gain; or …

7. The term “business” is, in turn, defined in s 195-1 of the GST Act as including “any profession, trade, employment, vocation or calling, but does not include occupation as an employee”.

8. There is also a definition in s 195-1 of the GST Act of “carrying on” an enterprise to include “doing anything in the course of the commencement or termination of the enterprise”.

9. As to GST registration, s 23-10 of the GST Act provides that an entity may be registered under the GST Act if the entity is carrying on an enterprise, whether or not the entity’s GST turnover is at, above or below the registration turnover threshold.

10. Pursuant to s 25-55(2) of the GST Act, the Commissioner must cancel an entity’s registration if the Commissioner is satisfied that the entity is not carrying on an enterprise and believes on reasonable grounds that the entity is not likely to carry on an enterprise for at least 12 months.

11. Turning to the relevant provisions of the ABN Act, s 8(1)(a) provides that a person is entitled to have an ABN if "you are carrying on an enterprise in Australia". That is, the requirements for the registration of an ABN are similar to the requirements for GST registration, namely, carrying on an enterprise.

12. Pursuant to s 18(1) of the ABN Act, the Registrar of the Australian Business Register (being the Commissioner of Taxation) may cancel an ABN registration if satisfied that at the time the applicant was registered, the applicant was not entitled to have an ABN or the applicant is no longer entitled to have an ABN.

13. As can be readily seen from the abovementioned relevant statutory provisions in the GST Act and in the ABN Act, the “carrying on” of an “enterprise” is a core element for an entity to make “taxable supplies” and to make “creditable acquisitions” and, in addition, to be entitled to an ABN and registered for GST.

WAS MR ASSAD CARRYING ON AN ENTERPRISE?

1. Mr Assad argued in his objection that he carried on a business of trading, hiring, buying, and selling of cars during the Relevant Periods. However, at the hearing, Mr Assad, being the only person who gave evidence, stated that the enterprise he conducted during the Relevant Periods was limited to hiring cars. Mr Assad did not explain why he had provided various descriptions of his enterprise. However, Mr Assad acknowledged that he did not have a motor vehicle dealer’s licence nor did he have a driver’s licence.

2. Aside from his assertion that he was carrying on a car hire business, Mr Assad provided no independent evidence to support his claim that he was engaged in such a business. The documents that were before the Tribunal in the T-Documents lodged by the Commissioner, did not assist Mr Assad’s case. For example, his personal bank statements did not provide any support for the claim that he was a sole trader as there was no evidence of any income or the usual expenditure associated with commercial transactions of a sole trader. Indeed, there were only two payments that Mr Assad referred to, that were supposedly related to his car hire business. Mr Assad claimed these payments were to a driver named ‘Jack’ in the sum of $250 on 16 April 2018 and $400 on 30 April 2018. However, those two payments did not establish what Mr Assad was paying that person for and, on their face, merely indicated that payments were made.

3. Mr Assad’s income tax returns for the years ended 30 June 2018 and 2020 also did not provide any support that he carried on any enterprise during the Relevant Periods. Mr Assad’s tax return for the 2018 income year showed his main occupation as ‘Marketing Manager’ and that he had received salary and wages only. In his tax return for the 2020 income year, his only income was from government payments. Additionally, Mr Assad had not lodged his 2019 and 2021 income tax returns. While Mr Assad claimed to have received income from hiring cars in all income years, there was no evidence to corroborate his claim.

4. Other documents contained in the T-Documents before the Tribunal, including those produced by Mr Assad throughout the audit and objection stage, also did not provide any foundation for Mr Assad’s assertion that he was carrying on an enterprise during the Relevant Periods. Most of the documents related to acquisitions by companies which were associated with, or apparently associated with Mr Assad. None of them corroborated supplies and acquisitions made by Mr Assad.

5. At the hearing and in his objection, Mr Assad attempted to provide explanations as to why his ABN and GST registrations were incorrectly cancelled by the Commissioner. Mr Assad alleged that he was a victim of fraud in relation to numerous companies which he claimed were set up without his authorisation by his former accountant and tax agent (since deregistered by the Tax Practitioners Board). Mr Assad claimed that those companies had lodged incorrect BASs and had subsequently been audited by the Commissioner. Mr Assad claimed that various tax invoices had been incorrectly issued to those companies for purchases made by him and in respect of which he was entitled to claim back the GST credits. Mr Assad also stated that he registered for GST as a sole trader because it had been suggested to him by an officer from the Australian Taxation Office. However, all these explanations and allegations - even if they were true - were plainly irrelevant to Mr Assad’s GST dispute. This is because Mr Assad failed to engage with the key issue of whether he, as a sole trader, was carrying on an enterprise during the Relevant Periods.

6. Mr Assad did not demonstrate that he was carrying on an enterprise as there was nothing before the Tribunal such as bookings or invoices or specific details of any drivers or customers to show that he had undertaken an activity or series of activities in the form of a business. It is accepted that the definition of “enterprise” has been defined very broadly, and that it is not necessary for there to be repeated or continuous activities: see, for example, Toyama Pty Ltd v Landmark Building Developments Pty Ltd [2006] NSWSC 83 at [71] per White J and Commissioner of Taxation v Swansea Services Pty Ltd [2009] FCA 402 at [66] per McKerracher J. The analysis of whether activities constitute a business (and by extension, an enterprise) depends on the “large and or general impression gained”: see Martin v Federal Commissioner of Taxation (1953) 90 CLR 470 at 474; Ferguson v Commissioner of Taxation (1979) 37 FLR 310 at 321; and Spriggs v Commissioner of Taxation (2009) 239 CLR 1 at 19 [59]. However, as stated above, there was insufficient reliable evidence filed by Mr Assad to show the scale of activities, if any, and whether or not whatever he did was carried out in a business-like way.

7. Furthermore, as Mr Assad did not provide any evidence to substantiate that he at any time had a reasonable expectation of profit or gain, the exclusion in paragraph (c) of s 9-20(2) of the GST Act with respect to the definition of “enterprise” applies. This is because “enterprise” is specifically defined not to include an activity or series of activities done by an individual without a reasonable expectation or profit or gain (see [21] above).

8. The fact that Mr Assad arranged for a business name and, later, ABN and GST registrations are not evidence that Mr Assad engaged in an activity or series of activities in the form of a business, for the purposes of the definition of “enterprise” in s 9-20 of the GST Act (see [20] above). This is the case even allowing for the extended meaning of “carrying on” an enterprise as per s 195-1 of the GST Act which covers activities “doing anything in the course of the commencement…of the enterprise”. This is because, at most, the business name registration was a preliminary step in Mr Assad possibly doing something. Furthermore, the ABN and GST registrations were steps taken some years after Mr Assad claimed to have commenced his enterprise, as he asked for these to be backdated. In any event, the ABN and GST registrations are, of themselves, not sufficient evidence of the commencement of an enterprise for GST purposes within the meaning of “carrying on” an “enterprise”. The mere fact that an entity has successfully registered an ABN and for GST does not mean that the entity has satisfied the Commissioner that the entity is carrying on an enterprise. All that has practically happened is the entity has lodged forms for ABN and GST registrations and those registrations have occurred. Clearly, ABN and GST registrations do not of themselves substantiate the carrying on of an enterprise by an entity.

9. In circumstances where Mr Assad did not provide sufficiently reliable evidence, his oral testimony was not capable of belief. Accordingly, I was not satisfied that Mr Assad was carrying on an enterprise during the Relevant Periods. Furthermore, I was also not satisfied that Mr Assad was going to be carrying on an enterprise in the 12 months following the date of his cancellation as of 31 November 2021. In this regard, I took into account the facts that Mr Assad did not hold a motor vehicle licence and had no financial resources. Mr Assad also spent several periods in custody with the NSW Department of Corrective Services, including some of 2022 and 2023. Mr Assad was in the community in 2020 and 2021.

WAS THE COMMISSIONER CORRECT IN CANCELLING MR ASSAD’S ABN AND GST REGISTRATIONS?

1. As Mr Assad was not carrying on an enterprise in the Relevant Periods, the Commissioner was correct in cancelling his ABN and GST registrations. Pursuant to s 18(1) of the ABN Act, the Registrar of the Australian Business Register (being the Commissioner) may cancel a registration in the Register if satisfied that “(a) at the time you were registered, you were not entitled to have an ABN; or (b) you are no longer entitled to have an ABN”. I am satisfied that Mr Assad was no longer entitled to have an ABN. (There was no evidence in relation to Mr Assad’s situation on 1 July 2016 being the backdated date of his ABN registration).

1. The GST Act requires that the Commissioner must cancel a taxpayer’s GST registration if he is satisfied that the taxpayer was not carrying on an enterprise and he believes on reasonable grounds that the taxpayer is not likely to carry on enterprise for at least 12 months (s 25–55(2) of the GST Act). I am satisfied that the Commissioner was required to cancel Mr Assad’s GST registration for the same reason, namely, he was not carrying on an enterprise and was not likely to carry on an enterprise for at least 12 months after the date of cancellation of his GST registration.

WERE THE GST ASSESSMENTS EXCESSIVE?

1. As Mr Assad was not carrying on an enterprise, Mr Assad cannot have made taxable supplies, nor can he have made creditable acquisitions. This is because at least one essential element of the respective definitions of “taxable supplies” and “creditable acquisitions” was missing. Any supplies and any acquisitions that were made by Mr Assad were not made in the course of carrying on an enterprise. Accordingly, Mr Assad failed to prove that the GST assessments issued to him by the Commissioner were excessive and what the correct GST assessments should have been.

CONCLUSION

1. The Commissioner was correct to cancel Mr Assad’s ABN and GST registrations as Mr Assad failed to prove that he was carrying on an enterprise during the Relevant Periods. Accordingly, Mr Assad failed to discharge his onus of proving that the Commissioner’s decisions to cancel his ABN and GST registrations should not have been made

   
   

   (s 14ZZK(b)(ii) of the TAA). Further, Mr Assad also failed to prove that the GST assessments issued to him were excessive and what the correct assessments should have been (s 14ZZK(b)(i) of the TAA).

DECSISION

1. The Commissioner’s objection decision is affirmed.

I certify that the preceding 42 (forty-two) paragraphs are a true copy of the reasons for the decision herein of Senior Member G Lazanas

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Associate

Dated: 15 September 2023

Date of hearing:	25 August 2023
Advocate for Applicant:	Self-represented
Counsel for the Respondent:	Ms G Gaussen
Solicitors for the Respondent:	Ms V Prekazi, HWL Ebsworth