FKYL and Commissioner of Taxation

The case of FKYL and the Commissioner of Taxation concerned a dispute over Goods and Services Tax (GST) liabilities and penalties. The applicant, FKYL, challenged assessments made by the Commissioner of Taxation relating to the sale of four residential properties. The core of the dispute involved the application of the GST margin scheme and the entitlement to claim input tax credits for expenses incurred.

The legal issues before the Tribunal were whether the four properties constituted new residential premises subject to GST, whether the margin scheme applied to their sale, and whether expenses claimed as input tax credits were incurred for a creditable purpose. Additionally, the Tribunal considered the Commissioner's authority to amend assessments and the appropriateness of penalties levied for failure to take reasonable care in completing Business Activity Statements (BASs).

The Tribunal found that the properties were new residential premises and not excluded by the five-year rule, as they had not been used for making input-taxed supplies for at least five years. Crucially, the Tribunal determined that the margin scheme did not apply because the applicant failed to produce written agreements with purchasers evidencing consent to its use. The Tribunal also found that the Commissioner was legally entitled to amend the assessments, and the applicant had not discharged the onus of proving the assessments were excessive. While the Commissioner's calculation of non-construction costs for input tax credits contained an arithmetical error, this was corrected in the applicant's favour. The Tribunal affirmed the penalties for failure to take reasonable care, noting the applicant had not sought legal or financial advice and had not established grounds for remission.

The Tribunal varied the decision under review by adjusting the applicant's net amount for the tax period ended 31 March 2011 to $28,784 and the shortfall penalty to $14,394, otherwise affirming the Commissioner's reviewable decision.