Chalmers and the Lynton Chalmers Superannuation Fund and Commissioner of Taxation
[2008] AATA 308
•15 April 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 308
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2007/717
TAXATION APPEALS DIVISION ) Re R Chalmers and The Lynton Chalmers Superannuation Fund Applicants
And
Commissioner of Taxation
Respondent
DECISION
Tribunal Mr A Sweidan, Senior Member Date15 April 2008
PlacePerth
Decision The Tribunal affirms the decision under review.
..........[Sgd Mr A Sweidan]............
Senior Member
CATCHWORDS
GST - Penalties - Input tax credit claimed where no tax invoice held.
LEGISLATION
Taxation Administration Act 1953 s 284-75(1)
REASONS FOR DECISION
15 April 2008 Mr A Sweidan, Senior Member BACKGROUND
1. There is no dispute as to the relevant facts which, based on the evidence before the Tribunal, are as follows.
2. On 8 June 2005, the applicants entered into a contract with Crosscity Enterprises Pty Ltd as vendor (“the Seller)”) to purchase Unit 7/82-84 King Street, Perth, being Lot 44 on Strata Plan 38579 (“the Property”).
3. Clause 18.2 of the Conditions of Sale provided:
“Unless otherwise expressly agreed in the contract, the seller must not apply the margin scheme on the purchase price.”
4. It was not otherwise expressly agreed in the Contract that the Seller could apply the margin scheme on the Purchase Price.
5. In 2005 the GST Law was amended such that on and after 29 June 2005 for the margin scheme to apply, the Buyer and the Seller had to agree in writing.
6. By letter dated 13 January 2006, the applicants sought from the Seller’s conveyancing representative, a tax invoice.
7. The Seller’s response on 19 January 2006 was that as the property was bought as a residential apartment there would be no tax invoice.
8. Annexure A to the Contract provided that the property would be used as an office with the seller having to obtain prior to settlement, Strata Company approval for the applicant’s fit out.
9. On 20 January 2006 the applicants sought a private ruling from the respondent on whether GST applied to the supply of the property.
10. On 23 March 2006 the respondent advised that subject to the Seller having not applied the margin scheme, the supply was subject to GST, and the applicants would be entitled to an input tax credit in respect of the supply if the applicants held a valid tax invoice.
11. The applicants having received a refusal from the Seller for the issue of a tax invoice, did not believe that further request would produce a different result.
12. The applicants relied on Clause 18.2 of the contract that the Seller would not apply the margin scheme to the Purchase Price in breach of contract.
13. Acting in the belief that the Seller would honour his contractual commitment not to apply the margin scheme, the applicants took the view that the margin scheme had not been applied.
14. The Seller had however, unbeknown to the applicants, elected to apply the margin scheme to the supply of the Property.
15. On 11 April 2006, the applicant lodged its BAS for the period 1 January 2006 to 31 March 2006, which, contrary to the advice of the applicant’s accountant, included a claim for an input tax credit in respect of the supply of the Property, notwithstanding that the applicants did not hold a tax invoice in respect of the supply.
16. Following review, the respondent formed the view that the claiming of a GST input credit by the applicants in circumstances where it did not hold a valid tax invoice amounted to the making of a statement that was false or misleading in a material particular, resulting in a GST shortfall of $48,182.
17. On 15 June 2006, the respondent issued a penalty assessment to the applicants under section 298-30 of the Taxation Administration Act in which he imposed an administrative penalty of $12,045.50, being 25% of the shortfall amount.
18. On 11 August, 2006, the applicants objected to the penalty assessment, and on 20 December 2006 the respondent disallowed the objection. The applicants now seek a review of that decision.
RESPONDENT’S CONTENTIONS
19. In claiming an input tax credit in circumstances where they did not hold a valid tax invoice, the applicants made a false or misleading statement (“the Statement”) in terms of Subdivision 284-B of the Taxation Administration Act, rendering them liable to an administrative penalty under section 284-75.
20. The Statement resulted from a failure to take reasonable care to comply with a taxation law on the part of the applicants, giving rise to a base penalty amount under section 284-90 of 25% of the shortfall amount.
21. There are no grounds for a reduction in the base penalty amount under section 284-225.
TRIBUNAL’S FINDINGS
22. The only issue before the Tribunal is whether the amount of penalty imposed on the applicants is correct. For the reasons set out below the Tribunal finds that the penalty imposed is correct in the circumstances.
23. At the time the claim for an input tax credit was made, the applicants did not hold a valid tax invoice in respect of the supply of the Property.
24. Further, although the issue of the application of respondent’s discretion to treat another document as a tax invoice had been raised by the applicants (see T15 at p 147), the respondent had not at that time exercised that discretion in favour of the applicants (and did not subsequently do so).
25. Accordingly, the applicants could not point to any valid basis on which the claim for input credits could legitimately be made. Further, they were advised by their accountant not to make the claim.
26. At the relevant time, the decision on whether or not to apply the margin scheme was solely at the election of the seller, although the position was changed in relation to contracts entered into after 29 June 2005. After that date the buyer and seller had to agree in writing to order to use the margin scheme (see T5). The contract relating to the purchase of the Property was entered into on 8 June 2005.
27. In the present case, the seller elected to use the margin scheme in relation to the supply of the Property, meaning that input credits were not available to the applicants in respect of that supply.
28. While it may well be the case that the election by the Seller to use the margin scheme was a breach of the contract relating to the Property, this is a matter between the Seller and the applicants. It does not provide a valid basis for a claim for input credits in relation to the acquisition of the Property.
29. As noted above the applicants made a request for a tax invoice from the seller, and the Seller refused to provide one (T9, pp 77-77). The applicants made no further attempts to obtain a tax invoice.
30. The applicants sought a ruling from the respondent as to whether they were entitled to an input credit in respect of the acquisition of the Property, and were informed that a credit was available “provided the margin scheme has not been applied” (T14 p.131). The applicants made no attempt to ascertain whether the margin scheme had been applied. Although the ruling also advised the applicants to make a further formal approach to the Seller to obtain a tax invoice, particularly in view of the possibility that the Seller may have applied the margin scheme (T14 p 135), the applicants made no further attempt to ascertain whether the margin scheme had been applied. Rather, they simply claimed the input credit on the basis that the margin scheme had not been applied, and as if they held a valid tax invoice in respect of the supply.
31. The penalty regime in Part 3-10 of Schedule 1 to the Taxation Administration Act 1953 sets out the uniform administrative penalties that apply for failure to satisfy obligations under taxation laws.
32. Section 284-75(1) states that a taxpayer is liable to an administrative penalty if the taxpayer or his agent makes a statement that is false and this results in a shortfall amount.
33. The Tribunal finds that the statement made by the applicants (the BAS), in which they claimed input credits on the acquisition of the Property in circumstances where they did not hold a valid tax invoice and the margin scheme had been applied, meets the conditions for the imposition of a penalty.
34. The level of penalties is set out in the table in section 284-90.
35. The Commissioner has the discretion under section 298-20 to remit the penalty in part or full. In this case the penalty was remitted to 25%.
36. In the Tribunal’s view it is clear from the evidence that the claiming of the input tax credit in the circumstances of this case was the result of a failure to take reasonable care on the part of the applicants, and the applicants are accordingly liable to a penalty of 25% of the shortfall amount.
37. The Tribunal also finds that there are no circumstances which would warrant any further remission of the penalty under section 298-20.
DECISION
38. The Tribunal accordingly affirms the decision under review.
I certify that the 38 preceding paragraphs are a true copy of the reasons for the decision herein of Mr A Sweidan, Senior Member
Signed: .........[Sgd Ms E Jordan]...........................................
AssociateDate of Hearing 23 November 2007
Date of Decision 15 April 2008
Counsel for the Applicant Mr D K Barker
Solicitor for the Applicant Chalmers Legal StudioCounsel for the Respondent Mr Martin McCoy
Australian Taxation Office
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