Decleah Investments Pty Ltd and anor as Trustee for the PRS Unit Trust and Commissioner of Taxation (Taxation)

The applicants, Decleah Investments Pty Ltd and another as trustee for the PRS Unit Trust, appealed to the Federal Court of Australia concerning assessments for Goods and Services Tax (GST) payable under the margin scheme. The dispute centred on the valuation of land acquired for subdivision and development, which impacted the calculation of the GST margin. The Commissioner of Taxation had issued assessments based on his own valuation after finding the applicants' valuations did not meet the requirements for an "approved valuation" under the *A New Tax System (Goods and Services Tax) Act 1999* (GST Act).

The primary legal issue before the court was whether the valuation provided by the applicants' expert, Mr. Gibson, constituted an "approved valuation" for the purposes of Division 75 of the GST Act. Specifically, the court had to determine if Mr. Gibson's valuation, particularly his fifth valuation dated August 2014, was made in a manner not contrary to professional standards recognised in Australia, as required by the Commissioner's determination for approved valuations. This involved considering whether Mr. Gibson's interpretation of an "as is" basis, which incorporated actual cash flows known up to the date of valuation, aligned with the legislative requirements and the Commissioner's determination.

The court reasoned that for a valuation to be "approved" under section 75-35 of the GST Act, it must comply with the requirements set out by the Commissioner in his determinations. Method 1 of the relevant determination stipulated that an approved valuation must be made in a manner not contrary to professional standards. The court found that Mr. Gibson's approach of using actual cash flows and hindsight information to determine the market value as at 1 July 2000 was contrary to the established professional standards for property valuation, which generally require valuations to be based on information available at the valuation date without the benefit of subsequent events. Consequently, Mr. Gibson's valuations were not considered approved valuations.

The court's decision meant that the applicants had failed to establish that their valuations were approved. As a result, the objection decision concerning penalties was set aside, and no penalty was imposed. In relation to the GST margin calculation, the court affirmed the objection decision, finding that the applicants had not demonstrated that the assessments were excessive, and therefore the objection decision was to be confirmed without alteration to the GST liability calculation.