BRIAN CLIMO and COMMISSIONER OF TAXATION
[2012] AATA 350
•13 June 2012
[2012] AATA 350
Division TAXATION APPEALS DIVISION File Number(s)
2009/2548
Re
BRIAN CLIMO
APPLICANT
And
COMMISSIONER OF TAXATION
RESPONDENT
DECISION
Tribunal M D Allen, Senior Member
Date 13 June 2012 Place Sydney The objection decision under review is varied in accordance with the table at [29] of these reasons. The objection decision is otherwise affirmed.
...........[sgd].............................................................
M D Allen, Senior Member
CATCHWORDS
TAXATION – Liability to Goods and Services Tax – Failure to lodge returns – Applicant claimed not liable as he did not engage in any supply personally but as an agent – Decision under review varied
LEGISLATION
A New Tax System (Goods and Services Tax) Act 1999 ss 9-5, 9-10, 9-40
Taxation Administration Act 1953 s 14ZZK, Sch 1 s 284-75
CASES
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614
REASONS FOR DECISION
M D Allen, Senior Member
13 June 2012
By application made 5 June 2009 the Applicant sought review of an objection decision that determined that he should be assessed for Goods and Services Tax (GST) on a series of transactions in the period 1 January 2004 to 31 March 2007 and imposed a penalty for failing to lodge GST returns for the said period.
For his part, the Applicant has maintained that at no time was he required personally to lodge GST returns as all activities carried out by him were done as an employee or as an agent.
Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states inter alia “You must pay the GST payable on any taxable supply that you make”. A “taxable supply” is defined in Section 9-5 of the GST Act as:
Taxable supplies
You make a taxable supply if:
(a) you make the supply for consideration; and
(b) the supply is made in the course or furtherance of an enterprise that you carry on; and
(c) the supply is connected with Australia; and
(d) you are registered, or required to be registered.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
The activities engaged in by the Applicant may be described as follows. The Applicant has substantial experience as a real estate agent. Operating under a registered business name “The Property Support Group” the Applicant conducted “seminars” for members of the public who wished to invest in property. An example of a flyer promoting such seminars is at document T180 page 1522 of the documents prepared pursuant to s 37 of the Administrative Appeals Tribunal Act 1975. Telemarketers were also employed to advertise the said “seminars”.
If, following such a seminar, an investor wished to proceed, they entered into a “joint venture agreement”. Various company names appear on joint venture agreements which were before the Tribunal but none were in the Applicant’s name, although he did sign some on behalf of the relevant companies.
The scheme operated on the basis that a company with whom the Applicant had some association would buy blocks of land from a developer. Several blocks would be purchased on the basis of obtaining from the developer a discounted price for bulk buying. The land would then be on-sold to the investor at its list price and the difference between the actual cost and the sale price would be profit in the hands of the company. An agreement would be made between the investor and Aushomes Pty Ltd (Aushomes), a builder, to construct a dwelling house on the land. Aushomes then paid a commission to the company. The joint venture agreement provided that 50% of this commission would go to the investor and that on the sale of the house and land any profit would be divided equally between the investor and the company.
Various companies are in some way associated with the Applicant. Mrs Josephine Climo is the Applicant’s wife. She is also known as Josephine Yip, Yip being her maiden name. She is also known as Ching Yip, being her Cantonese name.
(i)Jacca Garments Company Limited is a company incorporated in Hong Kong. It has also traded under the name Vella Fashion Garments Pty Ltd. The company is the owner of the business name “Vella Marketing Services” in Hong Kong. Until 12 April 2007 Mrs Josephine Climo held 9,999 shares out of a total of 10,000 issued shares. The other shareholder was a relative of Mrs Climo who is a resident of Hong Kong. Mrs Climo was a director until 11 April 2007.
(ii)Jacca Garments Factory Limited is shown in the Australian Business Register as being registered from 1 May 2005 and as trading as “Vella Fashion Garments Factory” (Exhibit R2).
(iii)Chissam Holdings Pty Ltd is a company incorporated in Queensland. At all times, Mrs Climo was the sole shareholder and director.
(iv)Midland Properties Pty Ltd is a company incorporated in Queensland. At all times, the Applicant was the sole shareholder and director.
(v)Vella Marketing Services Pty Ltd is a company incorporated in Queensland. At all times, Mrs Climo was the sole shareholder and director.
(vi)Vella Projects Pty Ltd is a company incorporated in Queensland. At all times, Mrs Climo was the sole shareholder and director.
(vii)Tasman Services Pty Ltd is a company incorporated in Queensland. At all times, a Jennifer Anne Leslie Webster was the sole shareholder and director.
(viii)Ravensbrook Holdings Pty Ltd is a company incorporated in Queensland. At all times, Jennifer Anne Leslie Webster was the sole shareholder and director.
Although the names of various of the above companies appear on contracts and marketing and joint venture agreements it is the contention of the Respondent that the use of the companies’ names in various documents was done to disguise the Applicant’s involvement in the enterprise and amounted to a sham.
The Applicant gave evidence in these proceedings. At times his evidence was contradictory and at the end of his testimony I was still unable to fully ascertain just how he managed his affairs.
If I understand the Applicant’s evidence correctly, he carried out the activities he said he did without any reward but purely to assist companies associated with his wife in order that those companies might profit from property dealing in Australia.
The Applicant’s case was not assisted by the failure of his wife to give evidence. She had made a statement (Exhibit A3) but I derived no assistance from that statement.
Mr Brett Shepherd is a Director of Aushomes. In a statement dated 10 February 2011 he said:
This is to confirm my verbal advice that all payments made by Aushomes Pty Ltd were made to the companies Jacca Garments, Vella Fashion & Midland Properties. As the first two companies were overseas based marketing businesses, the cheques were made out to cash to allow the Australian representative of those companies to transfer the funds. …
Mr Shepherd was not called in these proceedings.
Tribunal documents T44 to T94 inclusive are marketing agreements with Aushomes as a party. Of those agreements, 39 purported to be between Aushomes and Vella Marketing Services Pty Ltd, a company incorporated and registered in Australia. The statement by Mr Shepherd makes no reference to Vella Marketing Services Pty Ltd. Of the documents before the Tribunal, most have not been signed by or on behalf of Aushomes and none refer to Jacca Garments, or more particularly, Jacca Garments Company Limited. In the absence of Mr Shepherd to explain the discrepancy between his statement and the documents before me, I find I can place no weight on his evidence.
Of the joint venture agreements before me, the only parties referred to as having an “arrangement” with Aushomes are Vella Marketing Services Pty Ltd, Vella Projects Pty Ltd or Tasman Services Pty Ltd, none refer to Jacca, Vella Fashion Garments or Midland Properties Pty Ltd.
Of the marketing agreements signed on behalf of Aushomes the other party to these agreements is Vella Marketing Services, a business entity not referred to by Mr Shepherd in his statement.
It cannot be disputed that Aushomes did receive a supply. At its simplest, investors were introduced to Aushomes with the intention Aushomes would be engaged to build a dwelling on land owned by the investors.
Again, it cannot be disputed that the Applicant, or persons engaged by him, advertised so as to encourage people to attend “investment seminars” and to buy property and then construct a house on that property.
The Applicant, trading as The Property Support Group, engaged people to assist him in this activity and rented rooms in which to hold the seminars.
Although the Applicant claimed he was reimbursed for the expenditure incurred there are no documents in evidence to support this assertion. As stated by Mr Shepherd, payments of commissions were made by Aushomes by cheques made out to cash.
Pursuant to section 14ZZK of the Taxation Administration Act 1953, the Applicant bears the onus of proving that any assessment of tax is excessive. In order to discharge this onus of proof, the taxpayer must prove not only that the assessment is excessive but also prove what the true amount should be: see Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614. Of course, in this matter the Applicant’s case is that the assessments must be nil, as he was not liable.
Section 9-10 of the GST Act gives a broad meaning to the word “supply”. To my mind the finding and introduction of would-be purchasers of Aushomes services is a supply and consideration was received for that supply. Given the evidence before me I cannot be satisfied that that consideration did not pass to the Applicant rather than, as he maintained, to companies associated with his wife.
Similar considerations apply with regard to the companies Tasman Services Pty Ltd and Ravensbrook Holdings Pty Ltd.
At all times the sole director of both companies was Jennifer Anne Leslie Webster, who the Applicant described in evidence as being a friend of the family.
On 4 January 2008 a faxed letter from Ms Webster was received by the Gold Coast office of the Australian Tax Office (ATO). That letter read:
Dear Karen
I received your faxed letter of January 7, 2008.
I confirm that I was involved in the setting up of these two companies, Tasman Services Pty. Ltd. and Ravensbrook Holdings Pty. Ltd., but not involved in their operations/activities if any.
The reason was, that I had been injured in a serious motor vehicle accident and was on a heavy-duty prescription drug regime, and in severe constant pain, and could not properly attend to business. This is still the current position.
I do not know what Mr. Climo did, if anything.
In a later letter dated 29 January 2011, Ms Webster stated:
I authorised Brian Samuel Climo to represent Tasman Services Pty Ltd and Ravensbrook Holdings Pty Ltd in the business of land trading on behalf of the companies in the period from 2004 to 2006.
I also authorised Brian to be a signatory on the bank account of Tasman Services Pty Ltd and Ravensbrook Holdings Pty Ltd.
As director of Tasman Services Pty Ltd and Ravensbrook Holdings Pty Ltd, I signed a number of contracts in the name of Tasman Services Pty Ltd and Ravensbrook Holdings Pty Ltd for the purchase and sale of land.
In my earlier statement to the ATO I explained to the person who interviewed me that I was heavily sedated with pain killers as a result of a car accident.
I can’t really recall what I said then as I was incoherent at the time as I tried to explain to the interviewer.
I remained in a very confused state for many months around that time.
The injuries are severe and apparently permanent.
All land transactions in the name of Tasman Services Pty Ltd and Ravensbrook Holdings Pty Ltd were always on behalf of the companies and nobody else.
Although Ms Webster states: “I can’t really recall what I said then” apparently referring to telephone conversations she had with an officer of the ATO on 24 April and 21 December 2007 she makes no reference to her earlier letter of 9 January 2008. As Ms Webster was not called to give evidence I am left with two inconsistent statements, although the later statement has all the indicia of an attempt to mitigate the damage to the Applicant’s case contained in the letter of January 2008.
The Applicant’s evidence was that Ms Webster wished to deal in real estate and that the companies associated with his wife needed an injection of funds. He also said that the companies incorporated by Ms Webster were used to speculate in land in areas of Queensland, namely Gladstone and surrounds, where his wife did not wish to invest.
I do not intend to canvass the Applicant’s evidence as to Tasman Services Pty Ltd and Ravensbrook Holdings Pty Ltd in any great detail as, in the absence of Ms Webster to give corroborative evidence, I cannot give any weight to his evidence on this point. I found his evidence in relation to these two companies to be evasive and the suggestion that his wife’s companies required an injection of capital was raised for the first time in these proceedings. His evidence that the only money he ever received from the dealings by Tasman Services Pty Ltd and Ravensbrook Holdings Pty Ltd was a reimbursement of expenses is, in my view, risible.
I am satisfied that the Applicant has not met the onus of proof in relation to the matters before me. The Respondent conceded that the GST assessments of net amount for the periods 1 January 2004 to 30 June 2007 should not have included amounts reflecting supplies of miscellaneous services. The Respondent contended that the Applicant’s GST net amount should be reduced by the following amounts:
Tax period ended
GST net amount after objection
Reduction in GST net amount
Revised GST net amount
31 March 2004
$1,749
$891
$858
30 June 2004
$4,332
$2,675
$1,657
30 September 2004
$14,682
$5,350
$9,332
31 December 2004
$4,633
$0
$4,663
31 March 2005
$6,935
$1,783
$5,152
30 June 2005
$11,278
$891
$10,387
30 September 2005
$19,612
$5,385
$14,229
31 December 2005
$22,019
$5,350
$16,669
31 March 2006
$22,721
$5,350
$17,371
30 June 2006
$12,650
$0
$22,650
30 September 2006
$12,787
$0
$12,787
31 December 2006
$22,002
$0
$22,002
31 March 2007
$11,245
$0
$11,245
30 June 2007
-$115
$0
-$115
Accordingly, the objection decision under review as to his liability to pay GST is varied in accordance with the table above.
No argument was put to me regarding the question of penalties, indeed on the Applicant’s case of no liability, none could be. Given the findings I have made, I see no reason to interfere with the penalties imposed pursuant to section 284-75(3) of Schedule 1 to the Taxation Administration Act 1953.
The objection decision under review is varied in accordance with the table that appears in [29]. The objection decision is otherwise affirmed.
32. I certify that the preceding 31 (thirty one) paragraphs are a true copy of the reasons for the decision herein of M D Allen, Senior Member.
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Dated 13 June 2012
Dates of hearing 4 and 5 June 2012 Advocate for the Applicant Mr R Fabian Counsel for the Respondent Mr R Scruby instructed by the Australian Taxation Office
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