GHTZ and Commissioner of Taxation (Taxation)
[2024] AATA 453
•14 March 2024
GHTZ and Commissioner of Taxation (Taxation) [2024] AATA 453 (14 March 2024)
Division:SMALL BUSINESS TAXATION DIVISION
File Number(s): 2019/8263, 2020/0685-2020/0687, 2021/1430-2021/1432, 2022/0581 & 2022/0584
Re:GHTZ
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Deputy President B W Rayment OAM KC
Date:14 March 2024
Place:Sydney
The Tribunal decides that:
(a)The decision dated 11 November 2019 on the objections to the first amended assessment and penalty assessment issued in January 2018 is set aside and substituted with a decision allowing the objections in full;
(b)The decision dated 30 January 2020 on the objections to the second amended assessment and penalty assessment issued on 31 August 2018 is set aside and substituted with a decision allowing the objections in full;
(c)The decision dated 30 January 2020 on the objections to the third amended assessment and penalty assessment issued on 15 March 2019 is varied insofar that the objections concerning Cars 10 and 11 and penalties are allowed in full, and save as aforesaid the decision is affirmed;
(d)The decision dated 24 February 2021 on the objections to the fourth amended assessment and penalty assessment issued on 10 November 2020 is set aside and substituted with a decision allowing the objections in full; and
(e)The decision dated 21 January 2022 on the objections to the Division 165 amended assessment and scheme penalty assessment issued on 18 August 2021 is set aside and substituted with a decision allowing the objections in full.
.................................[SGD].......................................
Deputy President B W Rayment OAM KC
CATCHWORDS
TAXATION – LUXURY CAR TAX – whether Applicant entitled to decreasing luxury car tax adjustments – whether refusal to accept a quote is contrary to the statute – whether Applicant was acting as agent for an undisclosed principle – whether Applicant acted as trustee for other entities – whether transactions were shams – whether s 15-30 of the A New Tax System (Luxury Car Tax) Act 1999 should be construed in the light of its heading and other context – whether Division 165 of A New Tax System (Goods and Services Tax) Act 1999 applies
LEGISLATION
A New Tax System (Goods and Services Tax) Act 1999 (Cth)
A New Tax System (Luxury Car Tax) Act 1999 (Cth)
Taxation Administration Act 1953 (Cth)
CASES
Attorney-General v Prince Ernest Augustus of Hanover [1957] AC 436
CIC Insurance Ltd v Bankstown Football Club (1997) 187 CLR 384
Commissioner of Taxation v Unit Trend Services Pty Ltd [2013] HCA 16; (2013) 250 CLR 523
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614
Federal Commissioner of Taxation v Jayasinghe [2016] FCAFC 79; (2016) 247 FCR 40
Federal Commissioner of Taxation v La Rosa [2003] FCAFC 125; (2003) 129 FCR 494
Konebada Pty Ltd ATF the William Lewski Family Trust v Commissioner of Taxation [2023] FCA 257
K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309
Mount Isa Mines Ltd v Commissioner of Taxation (Cth) (1959) 33 ALJR 98
Stallion (NSW) Pty Ltd v Commissioner of Taxation [2019] FCA 1306SZTAL v Minister for Immigration and Border Protection and Anor (2017) 262 CLR 362
REASONS FOR DECISION
Deputy President B W Rayment OAM KC
14 March 2024
The Applicant is a Victorian company which has been given the pseudonym ‘GHTZ’. Its sole controller is a man who has sold motor vehicles for many years. I have decided to give him a name other than his own name, consistent with his company having been given a pseudonym. I will call him Mr Peters.
GHTZ was a licenced motor dealer with both a wholesale and a retail licence. Mr Peters decided in about 2017 to begin trading luxury cars as well as the other cars he traded. Luxury cars attract a kind of sales tax known as luxury car tax (LCT) and the case involves important questions of construction of the A New Tax System (Luxury Car Tax) Act 1999 (the LCT Act, or simply the Act). Mr Peters at no stage sold the luxury cars to end-users, and always sold them to other dealers. The persons who bought from GHTZ were all licenced dealers. Either they or their sub-buyers dealt with end-users and sold to them at the retail level. Downstream of the Applicant sub-buyers from it were tax evaders, but the Applicant was not a tax evader. Questions arise about whether Mr Peters knew of tax evasion downstream of his resale of the luxury cars.
The Commissioner assessed the Applicant to tax on a number of bases by a series of assessments reflected in the pleadings (strictly the Statements of Facts, Issues and Contentions, or SFICs) of the parties. The pleadings revealed a strong contest of fact arising from the assessments of the Commissioner and the trial of the case was lengthy, conducted both in Melbourne and Sydney. These reasons include in Parts 2, 3 and 4 detailed findings of fact which I make about those issues, having heard amongst other things a lengthy cross-examination of Mr Peters.
The review concerns 17 luxury cars traded by Mr Peters over the months of July, August and September 2017. For a number of reasons it is necessary to distinguish the 13 new cars which GHTZ bought from distributors of the overseas manufacturers of the cars, known in the trade as marque dealers, from four used cars each less than two years old which GHTZ bought from vendors who were not distributors of luxury cars for overseas manufacturers.
The case concerns what is described in the LCT Act as a decreasing LCT adjustment, allowable under s 15-30 of the LCT Act, which is discussed below. The construction of that section was introduced into issues in the case by me, and no issue was pleaded about it in the Commissioner’s SFIC, or in any assessment, and I explained the point to the parties before the hearing began, saying that I wished to hear from each of them about the point in due course. That is one of two important legal questions about the LCT Act which affects the issues in the case in a number of ways. The other question is about the entitlement conferred by the Act on dealers such as the Applicant when purchasing a luxury car to quote. I have decided to deal with those questions in Part 1 of these reasons, because of their importance to the resolution of various issues arising between the parties.
PART 1 – THE LCT ACT
Some sections of the LCT Act are explanatory sections. Section 23-10(2) provides that:
(2) Explanatory sections form part of this Act, but they are not operative provisions. In interpreting an operative provision, an explanatory section may only be considered:
(a) in determining the purpose or object underlying the provision; or
(b) to confirm that the provision’s meaning is the ordinary meaning conveyed by its text, taking into account its context in this Act and the purpose or object underlying the provision; or
(c) in determining the provision’s meaning if the provision is ambiguous or obscure; or
(d) in determining the provision’s meaning if the ordinary meaning conveyed by its text, taking into account its context in this Act and the purpose or object underlying the provision, leads to a result that is manifestly absurd or is unreasonable.
Two of the explanatory sections are s 2-1 and s 2-5. They are as follows:
2‑1 What this Act is about
This Act is about the luxury car tax. It is a single stage tax that is imposed on supplies and importations of luxury cars and is in addition to any GST that may be payable. The tax is only calculated on the value of the car that exceeds the luxury car tax threshold.
Note: The luxury car tax is imposed by 3 Acts:
(a) the A New Tax System (Luxury Car Tax Imposition—General) Act 1999; and
(b) the A New Tax System (Luxury Car Tax Imposition—Customs) Act 1999; and
(c) the A New Tax System (Luxury Car Tax Imposition—Excise) Act 1999.
2‑5 Luxury car tax (Part 2)
(1) Part 2 sets out the rules that establish liability for the luxury car tax. The tax applies to both supplies and importations of luxury cars. (Divisions 5 and 7)
(2) There is a system of quoting which is designed to prevent the tax becoming payable until the car is sold or imported at the retail level. (Division 9)
Another explanatory section is s 9-1 of the Act which states:
9‑1 What this Division is about
In certain circumstances you can quote for a supply or importation of a luxury car and not pay the luxury car tax. This is designed to avoid the luxury car tax becoming payable unless the car is sold or imported at the retail level.
Quoting is dealt with in s 9-5 in the following terms:
9-5 Quoting
(1) You are entitled to *quote your *ABN in relation to a supply of a *luxury car or an *importation of a luxury car if, at the time of quoting, you have the intention of using the car for one of the following purposes, and for no other purpose:
(a) holding the car as trading stock, other than holding it for hire or lease; or [...]
(2) However, you are not entitled to *quote unless you are *registered.
Supplies to a recipient of a luxury car who quotes are not taxable supplies. Section 5-10 of the Act states:
5‐10 Taxable supplies of luxury cars
(1) You make a taxable supply of a luxury car if:
(a) you supply a *luxury car; 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 the indirect tax zone; and
(d) you are *registered, or *required to be registered.
(2) However, you do not make a taxable supply of a luxury car if:
(a) the *recipient *quotes for the supply of the car; or
(b) the car is *more than 2 years old; or
(c) you export the car in circumstances where the export is *GST‐free under Subdivision 38‐E of the *GST Act.
(3) A *car is more than 2 years old at the time of a supply if:
(a) for a car that has not been *imported—the car was manufactured more than 2 years before the time of the supply; or
(b) the car was *entered for home consumption more than 2 years before the time of the supply.
When GHTZ bought a new car from a marque dealer it desired to quote and thereby avoid the incidence of LCT on the sale to it. However, Mr Peters found that the marque dealers informed him that a quote by him would not be accepted. This led to controversy between Mr Peters and the marque dealers. One dealer wrote to him and said that it was company policy that it would not accept a quote for a supply of a luxury car. His witness statement included (without any objection) a piece of hearsay to the effect that the marque dealer in question was following instructions from the ATO in refusing to accept his quote.
The Respondent called no oral evidence in this review. However in paragraph 76 of its written closing submissions the following is said:
Further, the Commissioner acknowledges that some brand dealers operating in the retail market will not accept quotes from other car dealers as a result of ATO compliance activity in the industry and that this practice was in place during 2017, being the period relevant to this matter. This practice was encouraged to combat the growing number of schemes observed, where the most usual driver for quoting when purchasing from a retailer was to extract the LCT from the transaction and on-sell the car with no LCT, and these types of supply chains rarely existed other than to exploit the LCT provisions. It was also considered uncommercial for a retail dealer to sell to another dealer at or near retail price, and for that dealer to add on their own costs of operation/freight/financing and profit margin, and somehow compete against the same retailer who sold them the car, without the LCT refunds which went unmatched by any payment of LCT. Accordingly, the Commissioner concedes that the Applicant would be entitled to a decreasing LCT adjustment if the Tribunal finds (contrary to the Commissioner’s submissions) that the Applicant in fact purchased the 13 luxury vehicles that it acquired from brand dealers (cars 1, 2, 3, 4, 6, 10-17) on its own account and the Applicant intended to hold those vehicles as trading stock. Any such entitlement would be subject to the operation of Division 165, which if engaged in respect of these vehicles, would alter the Applicant’s net amount in accordance with the Division 165 declaration, by negating the decreasing adjustment as a GST benefit the Applicant obtained from a scheme.
One question is whether the refusal to accept a quote was inconsistent with the statutory entitlement given by s 9(5) of the Act to quote. Refusal to accept a quote from a person entitled to quote is hardly consistent with the recipient of the supply having an “entitlement” to quote. The notion of LCT as a single stage tax, payable by the end-user to the vendor, the vendor then being liable to account to Commissioner, is also out of step with the LCT being borne by an intermediate purchaser.
The second question raised with the parties by the Tribunal also affects the first question.
The heading of sub-div 15-B and s 15-30 referring to change of uses are both parts of the Act: see s 23-1. Section 15-30 is as follows:
Subdivision 15‑B—Change of use adjustments
15‑30 Changes of use—supplies of luxury cars
(1) You have a decreasing luxury car tax adjustment if:
(a) you were supplied with a *luxury car; and
(b) luxury car tax was payable on the supply because you did not *quote for the supply; and
(c) you were *registered at the time of the supply; and
(d) you intend to use the car for a *quotable purpose; and
(e) you have only used the car for a quotable purpose.
(1A) You have a decreasing luxury car tax adjustment if:
(a) you are supplied with a *luxury car; and
(b) luxury car tax is payable on the supply; and
(c) you are *registered at the time of the supply; and
(d) were you to *import the car for the same purpose as your purpose in acquiring it, luxury car tax would, because of paragraph 7‑10(3)(ba), not be payable on the importation; and
(e) you do not intend to use the car, or permit it to be used, other than for that purpose.
(2) The *decreasing luxury car tax adjustment is equal to the amount of luxury car tax that was payable on the supply.
(3) You have an increasing luxury car tax adjustment if:
(a) you were supplied with a *luxury car; and
(b) either:
(i) no luxury car tax was payable on the supply because you *quoted for the supply; or
(ii) you had a decreasing luxury car tax adjustment under subsection (1); and
(c) you use the car for a purpose other than a *quotable purpose.
(3A) You have an increasing luxury car tax adjustment if:
(a) you were supplied with a *luxury car; and
(b) you had a *decreasing luxury car tax adjustment under subsection (1A) in relation to the supply; and
(c) either:
(i) you use the car (or permit it to be used), and that use would have prevented a decreasing luxury car tax adjustment arising under that subsection if it had been your purpose in acquiring the car; or
(ii) you supply the car to another entity.
(3B) However, subparagraph (3A)(c)(ii) does not apply if luxury car tax would, because of paragraph 7‑10(3)(ba), not have been payable if the other entity had instead *imported the car for the same purpose as its purpose in acquiring the car from you.
(4) The *increasing luxury car tax adjustment is equal to: (a) the amount of luxury car tax that the supplier of the car would have had to pay if you had not *quoted for the supply; or (b) the amount of the *decreasing luxury car tax adjustment; whichever is relevant.
So what is a change of use for this purpose? The entitlement to quote under s 9-5 depends on the intention of the recipient at the time of supply or importation of the luxury car: s 9-5(1). Quoting for a person entitled to quote will prevent a supply being a taxable supply and quoting for an importation will prevent the importation being a taxable importation: s 15-30. Section 15-30(1) refers to cases where a person (the recipient or the importer) did not quote, who (after the supply or importation) intends to use the car for a quotable purpose, if they have only used the car for a quotable purpose. By contrast s 15-30 refers to a change of use if you have used the car for a purpose other than a quotable purpose, that is, to turn back to the date of supply your intended use which was then different from the use to which you put the car. Thus the expression “change of use” in the heading to the section (and in the heading to the subdivision) extends to a change of intended use.
Now for Mr Peters there was no change of intended use and no change of actual use of the cars after the supply to him by the marque dealers as between the actual use and the intended use at the time of the supply. He at all times intended to use and after the supply, he did use the cars for a quotable purpose and for no other purpose, namely as trading stock. That is not consistent with the heading of the subdivision or the heading of the section itself. There was no change of use.
Section 9-5 and s 15-30 are twins, and the heading to s 15-30 (and to the subdivision in which it is contained) shows that both the decreasing adjustments and the increasing adjustments will arise when the heading applies. To use the language favoured by Viscount Simonds, whose speech in Attorney-General vPrince Ernest Augustus of Hanover [1957] AC 436 at 461-471 was influential in the judgment of Mason J in K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 (Gordon & Gotch) as mentioned below, every word of a statute is a part of the context which shows the “colour and content” of especially general words used in a section of the relevant Act. Viscount Simonds added that he conceived it to be his right and duty to examine every word of a statute in its context, using context in its widest sense. The heading to s 15-30 is specific to the section itself and that may add to its emphasis.
When context affects the colour and content of a section, it is to be considered whether or not the section is ambiguous on its face. That is clear from the dissent of Mason J in Gordon & Gotch and especially from the later decision in CIC Insurance Ltd v Bankstown Football Club (1997) 187 CLR 384 (CIC). Gordon & Gotch concerned whether the heading of a part of a South Australian statute affected the construction of one section in that part, which taken, in isolation, read as if it may apply beyond the category mentioned in the heading of the part.
In Gordon & Gotch at 315, Mason J said:
Problems of legal interpretation are not solved satisfactorily by ritual incantations which emphasise the clarity of meaning which words have when viewed in isolation, divorced from their context. The modern approach to interpretation insists that the context be considered in the first instance, especially in the case of general words, and not merely at some later stage when ambiguity might be thought to arise.
If the proper construction of s 15-30 is that Mr Peters has no refund from the Commissioner by way of decreasing adjustment because there was no change of use, then the effect of the marque dealers refusing to accept his quote is that not only does he have to pay them LCT on the sale to him, but he has no means to recover it as a decreasing adjustment under s 15-30. Moreover, if he also declined to accept a quote from his buyer (always another dealer) he (correctly) believed he would be depriving them of a statutory entitlement, meaning that he alone would pay the LCT. Moreover contrary to the purpose of the Act, LCT would be payable at the wholesale level, and not at the retail level. If there is a price differential as between the Applicant’s resale and the sale to the ultimate end-user, then only additional LCT arising from the price differential would be payable by the end-user.
The passage quoted above from the dissenting judgment of Mason J in Gordon & Gotch was adopted by Brennan CJ, Dawson, Toohey and Gummow JJ in CIC at 408. Their Honours said:
[T]he modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy.
In the dissenting judgment of Allsop CJ in Federal Commissioner of Taxation v Jayasinghe [2016] FCAFC 79; 247 FCR 40 (Jayasinghe) the passages from Gordon & Gotch and CIC cited above are described as cited too often to be doubted, and many High Court authorities are cited by Allsop CJ. His Honour’s remarks were cited with approval by Gageler J in SZTAL v Minister for Immigration and Border Protectionand Anor (2017) 262 CLR 362 at [37].
See also the remarks of Allsop CJ in Jayasinghe at [8]-[11].
I drew the attention of the parties to the High Court authorities. They each referred to two Federal Court authorities, one decided at first instance and the other a Full Court decision. They are the decision of Thawley J in Stallion (NSW) Pty Ltd v Commissioner of Taxation [2019] FCA 1306 at [242] where his Honour said:
Headings to sections form part of the LCT Act: s 23-1(1). The Commissioner submitted that this had the consequence that there must be a “change of use” in order for the provision to have any application. That submission cannot be accepted. The language of the section beneath the heading is clear as to when a person has a decreasing LCT adjustment. The statutory scheme does not necessarily require that there be a change in use, despite the heading.
The Full Court decision is Automotive Invest Pty Ltd v Commissioner of Taxation [2023] FCAFC 129 at [92] where Wheelahan and Hespe JJ said at [92]:
The issue is whether each of the cars in dispute was used for a purpose other than for the quotable purpose of holding the car as trading stock, other than holding it for hire or lease, and for no other purpose. The operative terms of s 15-30 do not refer to a change in the use made of a car since the time of quotation or supply of the car but refer to use for a purpose other than a “quotable purpose” which in turn is defined to mean “a use … for which you may *quote under section 9-5”. The heading to s 15-30 does not inform the construction of s 9-5.
With respect, it seems to me that I am unable to follow what is said in the two Federal Court decisions, because they appear to be inconsistent with the High Court authorities just discussed, to which their Honours made no reference.
In my opinion, the heading to s 15-30 is an important part of the context of the section, affecting its interpretation. In Part 3 of these reasons, and also in Part 4 of these reasons, concerning the Commissioner’s anti-avoidance case , these conclusions about s 15-30 are directly relevant.
In the result, since I reject on the grounds mentioned in Part 2 of these reasons the Commissioner’s case of agency, trust and sham, the Applicant succeeds in relation to the new cars because of the concession of the Commissioner mentioned in paragraph 76 of its written closing submissions, set out above at [12] (which I will refer to as the Commissioner’s concession). The conclusions I have expressed in Part 1 were not embraced by either party and their respective submissions about the anti-avoidance case did not depend on the view of the LCT Act which I have taken in this part. The remarks I have made in Part 4 of these reasons about the absence of a GST benefit, making the scheme case otiose, are conclusions drawn from the construction I have put upon s 15-30 of the LCT Act in its context, which do not draw on any of the submissions of the parties. On the view I have taken of Division 165 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act), it is mandatory in considering GST benefit to have regard to the legal rights and obligations affecting the scheme, and that matter has been determined consistently with the views expressed in this part of the reasons for decision.
As to the second-hand cars, the Commissioner’s concession has no application, and the Commissioner succeeds because there was no change of use, meaning that the Applicant had no right to claim a decreasing adjustment.
I mention that I have sought to make all necessary findings of fact and law to explain the conclusions which I have reached. Both parties, however, made submissions on a number of other points about subsidiary issues to which it was conceived by them that I would or may come in my reasons for decision. The written submissions on both sides extended to hundreds of pages, with rebutters and surrebutters. Rather than attempt to repeat the submissions on both sides, if it becomes necessary for any appeal to canvass any of the points I have not found it desirable to discuss, the papers in the case contain the voluminous written submissions and a full transcript of the oral evidence and addresses, as well as the many volumes of Tribunal documents, all received without any objection. If I were to repeat or seek to summarise all the issues debated throughout the hearing, and on which I have not found it necessary to write, it would make these reasons quite indigestible and less clear than I hope these reasons are.
PART 2 – THE NEW CARS
The Applicant’s business model when the trading in luxury cars took place was that he would negotiate with marque dealers to purchase the cars, and would often be asked to pay dealer delivery charges because he would leave the cars with the marque dealers until the end-user would take delivery of the cars. The Applicant would not arrange for the delivery to take place and his buyer or its sub-buyer would do that. The Applicant would not have a showroom or sales staff for the luxury cars, and would not insure them because the marque dealer would continue to insure them in its premises until final delivery. Mr Peters said, and I accept, that his business model was common in the case of wholesale dealers who buy from marque dealers. The Commissioner sought to suggest that because of the Applicant’s business model, which affected all the new cars, it should be inferred that Mr Peters was acting as an agent for an undisclosed principal.
The business model, Mr Peters said, was typical in the trade. His brother who trades in the same market was not cross-examined by the Respondent but his evidence confirmed important aspects of the business model described by Mr Peters, without producing material conflicts with his evidence. The brother’s own practices were slightly different from those of Mr Peters but the general thrust was the same. Mr Graham Cuthbert, a long-time member of the same trade, with some differences from Mr Peters, analysed the profit which the Applicant made on each of the new and second-hand cars, discussing whether those profits were typical or not. I am not much assisted by that analysis. The Applicant did make a profit on each vehicle, sometimes substantial, sometimes not.
One thing which Mr Peters, the brother and to some extent Mr Cuthbert made clear was that the trading by an intermediate dealer who bought from a marque dealer was often high volume, often by telephone or just by email, and completed within a short period. As Mr Peters said, he had no motive to enquire about what his buyer or any sub-buyer did with his or her customers, and did not make such enquiries. The Commissioner, who did much work on the activities of those who dealt with the Applicant directly or indirectly, unearthed documentary facts which had been entirely unknown to Mr Peters, and which he regarded at the time as none of his concern.
Mr Peters made his first witness statement some time before July 2022, probably around 2021 as appears from paragraph 36. His second witness statement was dated July 2022. Some matters of importance in both witness statements should be referred to, particularly because for the most part they were not challenged in cross-examination on behalf of the Commissioner. In some cases, statements which he made were specifically confirmed by other witnesses who were not cross-examined or, in the case of an expert witness, he was not challenged on similar evidence.
Mr Peters said in his first statement that at first the Applicant dealt in cars by selling to retail customers. He said that from about 2014 he identified a lucrative industry in prestige or “high-end” luxury motor vehicles where there would be greater profit margins by trading in them with other dealers, not being retail customers. Dealing with other dealers rather than the public avoided holding costs, including insurance, and the substantial capital costs of acquiring a showroom, amongst other things. He could turn a profit without dealing with the end-users, which would have increased his overheads substantially.
He said that he would typically pay the marque dealer a holding deposit (of, say $10,000) when he had agreed a price and would not have “possession” of the car until he paid the balance due, saying that the balance due would come from the purchasing dealer who would also quote to him.
He said that when he bought from a larger dealership, such as Zagame Automotive Group Pty Ltd (Zagame), Dutton Garage Wholesale Pty Ltd (Dutton) or Trivett Bespoke Automotive Pty Ltd (Trivett), they would not accept his quote, and that he was told that the ATO had told them not to accept an ABN (that is, a quote) but charge him LCT on every car sold.
Mr Peters says that as the law was explained to him, where he had paid LCT, he was entitled to a decreasing adjustment of LCT, resulting in a refund of the LCT he had paid. That is, as he understood his rights, in cases where he had paid LCT because his proposed quote was not acceptable to the marque dealers, he had a right to a refund of the LCT he would pay and the Commissioner had, in the usual case, a duty to refund it. He said that he mortgaged his own house and lent the money to the Applicant so it could pay the LCT, expecting the Commissioner to refund the LCT in due course. As it happened in 2017-2018, the Commissioner in fact did not refund the LCT paid by the Applicant to the marque dealers, and the Commissioner’s defence of the case was aimed at showing that he was not obliged to do so.
Mr Peters said that he would not have risked his personal property to raise finance to pay the LCT only for it to be refused by the Respondent. If he had known that the Commissioner would refuse the refund of the LCT, he would not have acquired the vehicles in question.
He said that the market exploded in 2017 for high-end luxury cars with demand exceeding supply and rapid price increases.
At paragraph 43 of his first statement he said that he had never knowingly been involved in any scam, that he is an honest person and believes in transparency, honesty and integrity in all his business dealings for more than 26 years. He said he has had an unblemished career and would certainly never have been involved in any criminal activity relating to non-payment of LCT.
In his second statement he said that he did almost all his deals over the phone, the goal being to locate a buyer within a day or a few days of buying a car. He said that he did not know what steps his buyer or any sub-buyer took with the cars, and knew nothing of any tax evasion by his buyer or any sub-buyer. As will become apparent, I accept that evidence. The tax evaders who failed to account to the Commissioner for LCT, on the probabilities, would not have told Mr Peters of their intended tax evasion, and although some of them were called, there was no evidence to suggest that Mr Peters was told anything of the tax evasion they practised. From Mr Peters’ point of view, his file was closed once he had been paid by his buyers and he had settled with the marque dealers.
As a result of the terms of paragraph 76 of the Commissioner’s final written submissions, the Applicant must prove that for each of the new cars its purchases and sales of them was not a sham, not conducted by it as the agent for an undisclosed principal, not transacted by the Applicant as trustee for others, and that it held the cars as trading stock, that is, for resale. Also for each of those cars the Applicant must deal with the allegation of a scheme under Division 165 of the GST Act. The scheme allegations ultimately arise in relation to the new cars, and I deal with scheme allegations in Part 4 of these reasons.
Car 1
Car 1 was a Ferrari F149M California T. Ferrari Brisbane. A marque dealer sold the car to the Applicant for $380,000 including GST of $27,861 and LCT of $72,413, as is set out in an invoice dated 20 July 2017 which was paid in full by the Applicant. The Applicant did not quote, no doubt because of the stance taken by all marque dealers in Queensland, New South Wales and Victoria. The Applicant claimed a decreasing LCT adjustment for the LCT in its July BAS filed in September. In July the Applicant resold the vehicle to Bundoora Provident Pty Ltd (Bundoora) (a company which was in fact a tax evader) which excluded any amount for LCT because Bundoora quoted for the sale by the Applicant to it, and the Applicant sold the car free of LCT to that company for $342,750. That sum represented a profit on the wholesale price (but not the LCT) the Applicant paid Ferrari Brisbane. When Ferrari Brisbane (by Mr Franco Giammattei) sent the invoice to Mr Peters, it was attached to an email sent to the Applicant ([email protected]) addressed to Mr Peters by name in the following terms:
I hope this email finds you well.
I have been dealing with Rami on the purchase of the Ferrari California T.
Congratulations, all complete.
I have attached the contract to this email. Please print this off and sign and return to me via email along with the completed credit card details for a $10,000 deposit. The car will then be secured and removed from the market.
Once I have received both of these forms and taken the deposit, I will get the car taken to have the vehicle protection film applied and have it ready for delivery ASAP.
l will then issue you with a Tax Invoice so that you can arrange for the final balance to be paid for and then you can have the truck collect the vehicle.
If you have any questions, please do not hesitate to contact me on 04[XX XXX XXX]
Kindest regards
Franco
Mr Peters says that he negotiated the (wholesale) price with the sender of the email. The sender was not called to give evidence. Rami, referred to in the email, was neither called nor interviewed by the Respondent, although a Rami Ykmour received correspondence from the ATO requiring him to answer questions about a car he purchased, being Car 4, sold by the Applicant to Gabriel Salatino’s company or business, Monaco Co (Monaco). Mr Ykmour, asked about Mr Peters by name, replied that he had no idea who he is. He said he bought Car 4 from Rolls Royce Alexandria. Mr Ykmour sent the ATO an invoice addressed to a person who may be his wife, which does not include any LCT. The total purchase price is stated to be $605,000. It seems to me that Rami Ykmour is not the Rami referred to in the email accompanying the invoice from Ferrari Brisbane to the Applicant.
Mr Antonio Graziani, who was called by the Applicant on summons, also mentioned the name Rami at Tr 639-640, 641-642, 645 and 672. He said Rami was a dealer on his own account and once brought him cars to sell on consignment. He used the surname Younes for Rami. He said he did not think he was connected with Tenjay Pty Ltd, trading as European Motori (Tenjay).
Mr Peters’ evidence about Rami Younes is somewhat vague. He said in his second witness statement that Rami was from Tenjay, and worked as his agent to deal with Ferrari Brisbane and that Tenjay was paid $24,000. However, when the matter was investigated by the Commissioner in cross-examination, it emerged that the payment of $24,000 to Tenjay related to another car altogether, not connected with this case. Mr Peters said that he had very limited dealings with Rami. In his evidence in re-examination, he said again that he thought Rami was from Tenjay. That seems to put him at odds with Mr Graziani who said he was an independent dealer. Mr Graziani made no suggestion that Rami was his company’s agent.
The involvement of Rami Younes in negotiations with Ferrari Brisbane is not something which I am confident about at all.
For many of the cars sold by marque dealers to the Applicant, interest had previously been expressed by the ultimate end-user, although the transactions involving the Applicant ignored the involvement of the end-user. The email set out above at [45] to Mr Peters from Ferrari Brisbane seems to rely upon the Applicant as if it were the end-user. That may have been consistent with whatever arrangements Ferrari Brisbane had with the overseas manufacturer about the distributor’s territory..
The terms of the email to Mr Peters which accompanied the invoice also rather indicates that the author and Mr Peters were acquainted with each other.
The price charged to the Applicant was less than the price quoted to the end-user Mr Hookey, suggesting that the price charged to the Applicant by Ferrari Brisbane was a wholesale price rather than the retail price at which Ferrari Brisbane offered the vehicle to Mr Hookey. I see no reason to reject Mr Peters’ evidence that he negotiated (or played a part in negotiating) the wholesale price charged to the Applicant by the marque dealer. He ended up with a price on which he could make a profit on resale.
Of course, since he sold to a wholesale dealer, as he understood Bundoora was, he was obliged to accept the buyer’s quote and did so. The consequence was that he could not pass on the LCT to Bundoora and the only course open to him was to claim a decreasing LCT adjustment.
Mr Peters correctly believed that he was entitled to quote under the Act if he bought for resale to another dealer. If he quoted, he would not be paying LCT or claiming a decreasing LCT adjustment, but rather it would be left to the end-user to pay LCT on the car, and the dealer who sold to the end-user would charge him or her the only LCT paid on the car.
Since that procedure was just what the Act envisaged, there was nothing wrong with the Applicant failing to quote since the Act only entitled it to quote, rather than requiring him to do so. However, as discussed in Part 1, the refusal of the marque dealer to allow the Applicant to quote meant that it was deprived of his statutory entitlement to quote.
However by effectively depriving it of the right to quote, the Applicant was put into the position that its only course was to claim a decreasing LCT adjustment. The Applicant did claim decreasing adjustments on all the new cars, none of which would have been claimed if the marque dealers had not refused to accept the Applicant’s quotes.
The sting of the scheme alleged in the Respondent’s SFIC seems to depend on the participants, including the Applicant, having a purpose of claiming a decreasing LCT adjustment, being a position into which he was forced by the marque dealers’ refusals to receive his quote. The Applicant’s case was that he had no wish to pay LCT to the marque dealers, and believed that their refusal to accept his quote was wrong.
Agency and Car 1
The Respondent’s SFIC suggests that the Applicant was an agent for Italia Motori as trustee for Canosa Trust (Italia Motori) when he bought, and presumably sold, Car 1. Were there any dealings at all between Italia Motori and the Applicant? According to Mr Peters’ evidence, there were none. He said that he did not know who the end-user of the car was. He said that his only meeting or discussion with Mr Graziani was some 30 years previously. According to Mr Graziani, there were no dealings between him and the Applicant. Mr Peters financed the LCT he paid to Ferrari Brisbane from his own resources, as his bank records confirm. The money came from his bank, secured on his matrimonial home. That suggests to me that there was no agency at all. He also paid a $10,000 deposit to Ferrari Brisbane from his own resources. Neither the LCT he paid nor the deposit was refunded to him by Italia Motori. The balance of the price paid to Ferrari Brisbane came from Bundoora, his sub-buyer. Purchase and resale, and funding a purchase out of resale proceeds is, according to the Applicant, not unusual for wholesale dealers. I see no reason to reject that evidence.
Mr Peters also said that it is not unusual that there might be a pre-sale of a vehicle he later sold elsewhere. It was put to him in cross-examination that he knew that Scott Hookey was the end-user and he denied that suggestion. He had never met or spoken to Mr Hookey, and nor did he speak with Mr Graziani at all.
As to the suggestion made to Mr Peters that he was “inserted” into a transaction between Scott Hookey and Ferrari Brisbane or Italia Motori, it seems to be an indirect way of putting the agency suggestion, although it is somewhat vague.
That an end-user might be already anxious to acquire the vehicle, and would buy it from a sub-buyer of their purchaser, would likely reassure Mr Peters that his own purchaser would in due course be provided with funds to complete the purchase from the Applicant. Realising that there was an end-user already interested in the car would not alarm Mr Peters at all.
If there were some agency as alleged, the Applicant would likely have asked his principal to provide him with the funds to pay the LCT, which he did not do. Similarly, it ignores the fact that the Applicant was not acting gratuitously. He was interested throughout these transactions in making a profit for his company. If the profit belonged to some “principal” he would presumably have looked to that person to reimburse him for his time and effort. There is no suggestion of that.
As to trust, the Applicant undertook no obligation to hold the 17 cars for any beneficiary. A trader who buys and sells, as the Applicant did, would not lightly be found to be doing so as a trustee. In most cases there would be an instrument recording a trading trust, and there is none. The search for a beneficiary for whom he held on trust suggests no such person exists. He was trading on his own behalf and a trustee cannot be the sole beneficiary of a valid trust.
As to sham, the evidence only suggests that he intended to enter into a contract of purchase with the marque dealer, under which he would incur obligations, and then resell under a contract pursuant to which he would be owed obligations. I conclude that both the marque dealer and Mr Peters intended their contract to operate according to its terms. As to his contract of sale, Mr Peters intended his contract to operate according to its terms, and so far as he knew, so did Bundoora. Both performed their contracts in full.
I would reject the propositions that the Applicant was an agent or trustee and that the transactions of purchase and sale were shams. I am satisfied that none of those suggested propositions is correct.
Bundoora Provident Pty Ltd
This company was set up by Mr Terence McNamara who gave a compulsory interview to the ATO, the transcript of which is before the Tribunal, and he also gave evidence before the Tribunal. The business affairs of Bundoora and Wish Fall Pty Ltd (Wish Fall) were conducted from space within Mr McNamara’s (Victorian) tax agent’s office and Norman Allen who became a director of the companies was an old friend of Mr McNamara’s.
According to Mr McNamara, he had set up Bundoora and introduced Mr Peters to Norman Allen for a commission payable by Mr Graziani. Mr Graziani, who was also called, knew Mr McNamara as his former tax agent in Sydney, but claimed privilege about arrangements leading to the setting up of Bundoora. Mr McNamara said that Mr Graziani told him that the role of Bundoora was to be an intermediate dealer.
The ATO also examined Mr Norman Allen compulsorily, and the transcript of that evidence is before the Tribunal. He was summoned to give evidence before the Tribunal by the Applicant but did not appear.
It emerged from the evidence that in the transaction relating to Car 1, Bundoora (which quoted to the Applicant on its purchase from the Applicant, which was signed by Norman Allen) charged LCT to Italia Motori and received payment in full from that company. Italia Motori (which did not quote to Bundoora) in turn sold Car 1 to Scott Hookey for the sum of $425,000 being a price cheaper than Mr Hookey told the ATO at his compulsory examination he had been offered the vehicle by Ferrari Brisbane, namely $450,000. Mr Hookey said that he had been told by Mr Graziani, principal of Italia Motori, that he could get him a cheaper price than he had been quoted by Ferrari Brisbane. Italia Motori charged LCT to Mr Hookey and in its BAS set off the LCT it had paid to Bundoora against the LCT collected by it from Mr Hookey.
Mr Hookey was not called on the review. In submissions both parties proceeded on the basis that Mr Hookey told the truth to the ATO, and I see no reason to disagree with that view. Mr Hookey also said that he had had no dealings with Mr Peters and did not know him. That is consistent with the evidence of Mr Peters and I accept that evidence also.
The means by which Mr Graziani made good on his promise to Mr Hookey was by buying Car 1 from Bundoora. So the chain of title began with Ferrari Brisbane, continued with the Applicant, passed to Bundoora and went to Italia Motori, who sold to Mr Hookey, who paid LCT to Italia Motori.
Italia Motori paid LCT to Bundoora, having failed to quote to Bundoora, and Bundoora failed to remit the LCT to the ATO.
The Applicant said that he knew nothing of the facts stated above, save for his purchase from Ferrari Brisbane and his sale to Bundoora. Bundoora quoted to the Applicant, so that transaction did not include LCT, which explains why the Applicant claimed a decreasing LCT adjustment. On the other hand, the Applicant did pay LCT to Ferrari Brisbane, which paid it to the ATO.
From the total sum of $415,000 paid by Italia Motori to Bundoora, Bundoora, instead of remitting the LCT and the GST to the ATO disbursed $414,500 as follows: it paid the Applicant $342,750 being the amount of the Applicant’s invoice to Bundoora (being the wholesale price charged to the Applicant by Ferrari Brisbane plus a profit, from which the Applicant also paid a commission to a third party) and to which the Applicant added the LCT charged by Ferrari Brisbane from Mr Peters’ own resources. Next, Bundoora made a payment to Italia Motori of $5,000, which meant that Italia Motori made a total profit of $15,000 on the sale to Mr Hookey. It paid Mr McNamara $8,500 and Mr Allen $1,000, and paid $57,250 to Tenjay. The $57,250 is unexplained in the evidence. However on Car 3 Tenjay lent Bundoora $150,000 to enable it to pay an instalment of the purchase price payable by it to the Applicant on its purchase from the Applicant of Car 3. There may therefore have been other transactions between Tenjay and Bundoora to explain the $57,250.
The failure to remit the LCT by Bundoora obviously amounts to tax evasion by that company.
Mr Peters during his cross-examination said that he knew nothing of the non-payment of LCT by Bundoora. There is no evidence that he did know of that non-payment. He put his own good character forward in his first written statement, and importantly, he was not challenged on that assertion. I accept his evidence as to his good character. Similarly, the Commissioner’s SFIC makes no allegation that the Applicant knew Bundoora was a tax evader. Nevertheless, in closing submissions, the Commissioner asserted that the Applicant’s intention was to defraud the ATO, and repeated that submission for all 17 cars. I accept Mr Peters’ assertion as to his good character, and reject the submission made by the Commissioner in closing submissions of an attempt to defraud the Commissioner.
I am satisfied that Mr Peters had no information to the effect that Bundoora (and Wish Fall) were tax evaders. There is no evidence to the contrary. I am also mindful that the probabilities strongly suggest that Bundoora would not have disclosed its wrongdoing to others not involved in it, especially to a company such as the Applicant, whose own payments of LCT to Bundoora for second-hand cars bought from it (as a vendor to the Applicant) would be stolen by Bundoora. I accept that the Applicant knew nothing to suggest to him that Bundoora or Wish Fall were tax evaders, and to the extent that the actions of Italia Motori (especially in failing to quote to it) assisted Bundoora to evade taxes, Mr Peters had no way of knowing that would occur. Mr Graziani had no contact with Mr Peters or the Applicant.
As to how the Applicant came to deal with Bundoora (and also its related company Wish Fall) Mr Peters said that he was told by Bundoora that it was interested to acquire any luxury cars, and that he checked with others that Bundoora was known in the trade: Tr 250. He spoke to Dutton and Robert Damelian. Thereafter he had regular dealings with that company and also Wish Fall. He described Bundoora as his best customer, who always paid him in a timely way and reliably.
In due course, Italia Motori appointed Mr McNamara as its sole director and then went into liquidation.
Mr McNamara said that he had no contact with the Applicant. Mr Peters said that he had only a few discussions with principals or employees of Bundoora, but he was uncertain whom he spoke to, and that after early discussions in which he was told they were interested to acquire luxury cars, he mainly dealt with them by email. I do not find Mr McNamara’s evidence, although confidently given, to be reliable and prefer the evidence of Mr Peters where they are in conflict. According to Mr McNamara, Mr Allen and unidentified others controlled Bundoora and controlled its bank accounts, using a token for that purpose. In the early stages of his evidence, Mr McNamara suggested that he had nothing to do with transactions entered into by Bundoora. However as his evidence continued it became clear that he had been involved in a number of transactions of the company. The company had a lot of dealings with Italia Motori as a vendor to it and charged it LCT as to which Italia Motori elected not to quote. LCT paid to Bundoora by Italia Motori was never returned or accounted for to the Commissioner. Mr McNamara suggested that others actually conducted the activities of Bundoora, and said that neither he nor Mr Allen knew enough about the industry to conduct those transactions itself. Mr Graziani denied that Mr McNamara did not have knowledge of the industry. The evidence does not permit me to identify who may have controlled the affairs of Bundoora, or how it actually disposed of the money which it made by tax evasion. Mr McNamara spoke of a group of dealers who controlled Bundoora and while that may be so, I cannot make findings to that effect. If there was a group of dealers, it seems clear that the Applicant was not one of them.
Car 2
According to the Applicant’s evidence this car was brought into Australia together with other Lamborghinis from Singapore through Zagame in Victoria. The Applicant paid a $10,000 holding deposit to Zagame on 7 July 2017. On the same day he emailed to Zagame a copy signed by him of a contract of sale apparently sent to him by Zagame, which specified a price of $750,000 including GST of $53,740.12 and LCT of $157,814.17. There was no VIN number on the contract.
On 11 August 2017 Zagame sent to the Applicant an invoice stating the price as $750,000, including LCT and GST with a credit of $10,000 so that the balance payable was $740,000. The VIN number of the vehicle was stated on this invoice.
On 14 September 2017 the Applicant invoiced Sydney South Prestige Pty Ltd (SSP) for the vehicle free of LCT (“as agreed”) for the sum of $650,000.
In the second statement of Mr Peters he says that George Seeley, acting for SSP, told him that he had a customer who wanted a Lamborghini and that is what led to the sale by him of Car 2 to SSP.
On 15 September SSP paid the Applicant the sum of $650,000.
On 18 September SSP quoted to the Applicant for the purchase of the vehicle and on the same day, the Applicant paid $740,000 to Zagame.
On 19 September or 20 September, the car was supplied to SSP and then left Zagame’s premises. SSP had the car transported to Sydney from Zagame.
SSP entered into a contract to sell the vehicle on 15 July 2017 and received from the purchaser, ABN Wholesalers Pty Ltd (ABN Wholesalers), the sum of $100,000 on 17 July 2017. SSP appears to have kept that sum until it paid the sale price of $650,000 owed to the Applicant under the invoice of 14 September.
The selling price payable to SSP by ABN Wholesalers was $700,000, and the balance of $600,000 was paid to SSP on 15 September 2017, permitting SSP to make a profit of $50,000, and enabling SSP to pay the Applicant on 15 September as noted above.
Mr Peters was asked about the fact that he did not pay Zagame until SSP had paid him. He replied that “that’s normally how it works in the car trade”.
In his statement he said that SSP quoted, which is why the Applicant did not pass on the LCT to SSP. Asked why he did not arrange for the car to be transported to SSP, he said that he left it to his buyer to arrange transport. That was the usual way he did business with all 17 cars, including the second-hand cars.
He said in evidence that he was unaware of any dealings between SSP and Zagame.
There were irregularities affecting SSP’s transaction with ABC Wholesalers. If that company was the end-user, it should have been charged LCT by SSP and that appears not to have occurred. Mr Peters was unaware of any such matter.
As with Car 1, I do not see any of the transactions of the Applicant as supporting the contention that the Applicant was an agent or trustee for any person, or that Mr Peters’ transactions of purchase and sale were shams. The Applicant appears to have acted on its own behalf, and the Applicant’s transactions were genuine.
Car 3
This was a second Lamborghini imported from Singapore by Zagame under arrangements made between the Applicant and Zagame, negotiated between Mr Peters and a Zagame salesman. The Applicant asked for and obtained from Zagame agreement for the manufacturer’s warranty to commence from the date of sale of the vehicle in Australia. He had done the same for Cars 1 and 2.
I mention here that there was a third cancelled transaction with a Lamborghini imported from Singapore which it is only necessary to discuss in detail in relation to penalty in Part 5 of these reasons.
In accordance with Bundoora having indicated to the Applicant that it was in the market for luxury cars, the Applicant, having made arrangements with Zagame to buy the vehicle, sold it to Bundoora.
Zagame sold the vehicle to the Applicant for the price of $825,000, including GST of $58,984.88 and LCT of $175,121.87. Bundoora quoted on 14 September 2017, and the Applicant invoiced Bundoora for $750,000 with GST of $68,181.82 and no LCT.
Bundoora paid the purchase price in three instalments: $150,000 on 27 September, $330,000 on 6 October and $270,000 on 9 October.
On 6 October, the Applicant made a part-payment to Zagame of $450,000 and on 9 October it paid the balance of purchase moneys to that company.
The investigations of the Commissioner revealed that Bundoora invoiced Italia Motori on 4 November for $765,000 including GST of $54,862.11 and LCT of $161,516.77, and that on 29 August 2018 Italia Motori sold the vehicle to Tenjay for an unknown amount.
Bundoora did not remit the GST or the LCT which it received to the Commissioner.
The Applicant said that he did not know who collected the vehicle from Zagame.
The Commissioner’s closing submissions at page 135 speaks of “inserting the Applicant into the transaction”. As with Cars 1 and 2, I find that the Applicant, as the invoices indicate, acted on its own behalf, was not an agent or trustee for any other person, and its transactions of purchase and sale were not shams.
I reject submissions made on behalf of the Commissioner at page 136 of the closing submissions that it should be inferred that the Applicant knew that Bundoora would not account to the Commissioner for taxes received by it. Not only is such an inference contrary to the probabilities, in that it seems to me that telling the Applicant of its tax evasion would likely have led the Applicant to cease to deal with Bundoora at all, but there is no evidence of any such communication with the Applicant. I accept the Applicant’s evidence in re-examination that having now been apprised of the tax evasion, he will never deal with Bundoora or any person connected with it in the future.
I also reject submissions at page 138 of the closing submissions that the agreements of the Applicant were a sham and “part of an arrangement to defraud the Commissioner which depended on the Applicant claiming a refund of LCT from the ATO”. The only reasons that the Applicant claimed a decreasing adjustment were that, as a result of the stance taken by the Marque dealer, he was unable to quote, as he wished to do, and, in accordance with the statutory right of his buyer, he was bound to accept the buyer’s quote. That left him only with the possibility of recouping the LCT by claiming a decreasing LCT adjustment. He believed that he was entitled to do so. There was no arrangement to defraud the Commissioner to which the Applicant was a party.
Car 4
The Applicant bought a new Rolls Royce from Trivett for $640,000 including LCT of $132,670.62 and GST of $46,120.84 and sold it to Monaco, a business owned by Gabriele Salatino for $524,830 with no LCT. This was the only transaction with Mr Salatino and the Applicant.
The day before the invoice to the Applicant, the end-users (Mr and Mrs Ykmour) paid a deposit of $100,000 to Trivett. The end-users were the customers of Prestige Motor Sport Sydney Pty Ltd trading as Prestige Motor Haus (Prestige Motor Haus), which bought the vehicle from Monaco for $604,000 inclusive of GST and LCT.
Mr Ykmour told the ATO he had never heard of the Applicant or Mr Peters. Mr Peters said he dealt only with Mr Salatino.
Mr Salatino was called on a summons issued by the Tribunal at the request of the Applicant. His email correspondence with the Tribunal said that he was not acquainted with Mr Peters. He also said he was presently bankrupt.
Although he said he would not be appearing he arrived in the hearing room. He was examined by counsel for the Applicant and cross-examined by counsel for the Commissioner.
He said that he had never bought a Rolls Royce or any other luxury car. Shown documents, he said that one signature was definitely his signature and another definitely was not. He said that he sold a few second-hand cars, but never sold a new car, and never bought one.
He said he knew nothing about the documents that showed that he bought the Rolls Royce and sold it, and denied that he made a profit of $80,000 on the transactions. He said he would have known if he had $80,000 in his bank account, but did not know.
He said he would send the Tribunal copies of his bank records, but none were received.
After his evidence was completed, bank records obtained by the Commissioner were produced by the Commissioner and became evidence before the Tribunal. Because of that evidence I am not satisfied that Mr Salatino’s evidence was at all reliable. He received money into his bank account from Prestige Motor Haus and paid the Applicant.
It seems to be entirely contrary to the probabilities that Prestige Motor Haus would pay a substantial sum into his bank account and for his account to transfer the amount shown on an invoice from the Applicant, without his knowledge.
He said that the quote from his company to the Applicant was not signed by him. The Applicant produced an email to Mr Salatino dated 9 October 2017 asking for the quote. That suggests that the quote bearing the date 10 August 2017 was backdated by someone.
I do not treat any of Mr Salatino’s evidence as reliable.
The closing submissions of the Commissioner seem to take a number of points about the quote purporting to come from Monaco. Apart from whether Mr Salatino signed it, and its date, the Commissioner points out that Monaco was not registered for GST at the date of the quote. However, so far as I can see there is no relevance to the quote: the Commissioner’s concession raises no question about quotations.
Similarly, the assessment relating to Car 4 (the fourth amended assessment) does not assess the Applicant on any basis connected with a quote. Rather that assessment is based on the assertion that the Applicant was an agent, or trustee, and that the Applicant’s purchase and sale were shams. The point does not arise because neither the assessment nor the objection raises it.
It seems clear that the end-user paid $100,000 on 9 August 2017. The Applicant was, by Trivett, given credit for that amount against the sale price of $640,000 on the invoice dated 11 August 2017, which explains why the Applicant paid $540,000 to Trivett.
Mr Peters’ recollection is that he arranged with Mr Salatino for a deposit of $100,000 to be paid to Trivett by his customer. Trivett did receive that sum from the end-user on 9 August 2017. The end-user says and Mr Peters says that there was no communication between them. It seems clear that Car 4 was sold to Monaco by the Applicant and resold by Monaco.
In that Mr Peters purchased the Rolls Royce for resale by the Applicant, it was part of his trading stock. As with the other cars, his failure to insure the car, and his failure to become personally involved in the delivery to the end-user do not mean that his transactions of purchase and sale were shams.
I reject the suggestions of the Commissioner that the Applicant acted as the agent or trustee for any person and that Mr Peters’ purchase and sale of Car 4 were shams. The Applicant’s transactions were genuine, and were conducted on the Applicant’s own account.
Car 6
This was a Range Rover purchased from Purnell Motors Pty Ltd (Purnell) by the Applicant and sold to Tenjay by the Applicant. The Applicant’s file of papers is apparently incomplete. For example, the invoice in favour of the Applicant’s vendor, Purnell was produced to the Commissioner by Purnell, not the Applicant. The Applicant paid a “security deposit” of $159,000 to Purnell on 17 August 2017, prior to the date of the document produced by Purnell to the Commissioner, 24 August 2017. The chronology shows that on 8 June, Tenjay quoted to the Applicant. On 16 August 2017, the Applicant invoiced Tenjay (LCT exclusive) and on the same day, Tenjay paid the Applicant in full. On 17 August the Applicant paid Purnell $21,000 more than Purnell had paid the Applicant on 17 August 2017. The LCT charged by Purnell to the Applicant was $25,132.44, as appears from the demonstrator contract/invoice which Purnell sent to the Applicant on 24 August 2017 and by inference Mr Peters paid the LCT from his own resources, as to the sum of $21,000.
The transaction involved a trade-in supplied to Purnell, presumably by the end-user. For that vehicle, Purnell credited the Applicant on the contract/invoice of 24 August with $15,000.
The Purnell documents accordingly suggest a mixture between dealings with the end-user and dealings with the Applicant. Purnell has directed documents to the Applicant which arguably treat the end-user and the Applicant together. They were in fact unrelated, and Mr Peters said that he had no idea of the end-user’s identity.
His recollection of the transaction itself is imperfect, but he remembers that he learned of the trade-in, and that Purnell attempted to have the Applicant purchase the trade-in as well. Mr Peters refused to take the trade-in and his notes record that its engine was “stuffed”.
These matters do not suggest to me any kind of agency between Mr Peters and any other person, or any kind of trusteeship, nor that his purchase and sale were shams. Documents relating to the transaction may still be missing, and if they existed, they may have made the chronology clearer. To some extent, I have assumed that Car 6 is like the other transactions of the Applicant with marque dealers, because of the documents relating to purchase and resale.
The onus of proof of the Applicant needs to be satisfied on the balance of probabilities, and perfect proof is not required.
After the dealings of purchase and sale of the Applicant, other transactions took place between Tenjay and Sydney City Prestige Wholesale Pty Ltd, not involving the Applicant.
As with the other cases, the vehicle remained with Purnell until delivered to the end-user, Mr Peters did not insure it and the delivery was something in which he was not involved. He explained that those things were the way he usually handled his wholesale dealings, and I see no reason to doubt that.
In this case, as with others, the Commissioner directed attention to the fact that the invoice directed to the Applicant by the marque dealer required the Applicant to pay a wholesale price for the car, but also included work done by the marque dealer on the car to make it fit for delivery to the end-user (called a dealer delivery charge) and the costs of registration of the car necessary to enable the end-user to drive it away. These matters are merely a consequence of the fact that the whole purpose of the Applicant and the marque dealer was that ultimately the vehicle would end up owned by the end-user, known or unknown. For the Applicant these matters were a cost of acquiring the car by wholesale, and carried no implication of agency, as the Commissioner asserted.
Car 10
This vehicle was an Audi sold new by Audi Centre Sydney. Like Car 6, the marque vendor sent an invoice to the Applicant which took account and gave credit for a $10,000 deposit paid by the end-user to Audi Centre Sydney. The Applicant issued an invoice to Bundoora, which quoted, and Bundoora invoiced Prestige Motor Haus, which did not quote to Bundoora, and charged it LCT, which Bundoora appropriated to itself.
As before, I find that Mr Peters was not aware of tax evasion by Bundoora, and did not regard its sub-sale or any of its details as part of his concern and did not know of them.
He was on notice that an end-user was involved in the dealings with Audi Centre Sydney because he was credited with a deposit presumably paid by the end-user. That fact did not concern the Applicant and was not apparently unusual in the industry.
The Commissioner did not seek to elicit evidence from the expert Mr Cuthbert seeking to show that what the Applicant described as a “presale” by the marque dealer, was out of the ordinary in the industry.
Payment of deposit of $10,000 did not entail that the Applicant was not contracting on its own behalf in a wholesale transaction of purchase from the marque dealer, or that the sale to Bundoora was not an actual sale by the Applicant. Nor did the payment of a deposit to the marque dealer show that the end-user or his or her vendor was an entity for whom the Applicant acted as agent.
It appears that Mr Arthur Kekatos, who was involved in other car dealings for Trivett, assisted the end-user in its dealings with Audi Centre Sydney, on some basis. He would have known that the Applicant was prepared to enter into wholesale transactions with marque dealers and no inference of agency or trust is able to be drawn from that fact.
Dealings between the end-user and Prestige Motor Haus with which the Applicant had no involvement were also shown as a result of investigations by the Commissioner. Those dealings do not involve Mr Peters or show that there was any agency or trust, or that his purchase and sale were shams. The Commissioner’s investigations also show that a trade-in was involved as between Prestige Motor Haus and the end-user, but not involving the Applicant.
In this case, like in others, the Commissioner submitted that the LCT paid by the Applicant was “shared” with others involved in the chain leading to the end-user. There was in my opinion no sharing of the LCT or the decreasing adjustment which the Applicant claimed in its BAS. That claim was in reality the only way in which Mr Peters had the prospect of recovering the LCT which he alone paid, given that he was in effect prevented from quoting, contrary to his statutory right to do so. The others involved in the chain leading to the end-user did not pay or assist in the payment of the LCT by the Applicant. Indeed LCT ought to have been paid to the Commissioner as a result of the transaction by the end-user, and the Applicant had no involvement in its non-payment. Nor did its payment exonerate any entity in the chain from payment of the LCT which ought to have been paid by the vendor to the end-user, and not paid to Bundoora by that end-user. The object of Mr Peters throughout appears to be, as he suggested, to make a profit as a wholesale purchaser and wholesale vendor, and to a person reading the LCT Act, the thing of which Mr Peters complained, that is, the refusal to accept his quote, was the only feature of the transaction known to Mr Peters which would seem to be contrary to the Act and to its scheme.
The company Bundoora has been mentioned above in relation to a number of the cars, and is involved in this transaction. The Applicant attempted to call Mr Allen, who did not appear, and succeeded in calling Mr McNamara. Mr Peters’ evidence about that company was that he had few conversations with Bundoora, all by telephone. He said that it was explained to him that it was interested in acquiring luxury cars, and that he made some enquiries about it, and decided to deal with it. He found it to be a reliable purchaser, describing it as his “best customer”. He said he found it to be easy to deal with, and all he needed to do was send it an invoice and it would quote, and settle its purchase for the amount which he would specify in his invoice. Mr McNamara said that he did not know Mr Peters and never had a conversation with him until 2018 when he “barged” into Bundoora’s office and spoke to Mr McNamara and Mr Allen. I prefer the evidence of the Applicant to that of Mr McNamara and the transcribed evidence of Mr Allen, which also suggested that he had had no dealings with the Applicant or Mr Peters in 2017. Mr Allen’s evidence was unable to be tested in the Tribunal, because he did not appear.
Mr McNamara’s evidence was that Mr Graziani, for whom he had once acted as the tax agent, asked him to find him a person who would be prepared to act as an intermediary in a dealer’s transaction for a commission the amount of which Mr McNamara said he could not remember. Mr McNamara said he introduced Graziani by telephone to Norman Allen, an old friend of his. He said he made available office space of his own free of charge to Mr Allen. He said at first that he left all the business of Bundoora to Mr Allen and that he had nothing to do with the company’s business. Later in his cross-examination, as mentioned above, it became apparent that Mr McNamara had been involved in a number of dealings by email with Bundoora, and that in at least one case, he had received a “commission” of larger amounts than Mr Allen received. That change in Mr McNamara’s testimony was very noticeable and is one of the factors which gave me pause in accepting his evidence.
Mr Graziani in his evidence claimed privilege when asked about Mr McNamara’s evidence given to the Commissioner in Mr McNamara’s compulsory examination before ATO officers relating to the request to set up Bundoora.
As I have said, I accept the evidence of Mr Peters as to the reason why he dealt with Bundoora, which appears in fact to have been his “best customer” and to have reliably settled each transaction in which it was invoiced by the Applicant.
Car 11
This vehicle was a Ferrari which Ferrari Brisbane sold to the Applicant and which the Applicant sold to Bundoora, and which Bundoora sold to Prestige Motor Haus, which paid LCT to Bundoora, utilising money paid to it by the end-user. The Applicant gave evidence that he knew nothing of the tax evasion in all those transactions, and no other evidence suggests the contrary, despite a detailed and lengthy cross-examination by counsel for the Commissioner, and some 350 pages of closing submissions. He also gave evidence in this as in all other cases that transactions to which the Applicant was not a party were not, speaking generally, known to him at all. I accept that evidence.
The Commissioner’s suggested chronology for Car 11, is that on 8 September 2017, the Applicant received a deposit of $10,000 from Macquarie Leasing Pty Ltd (Macquarie Leasing).
Six days later, on 14 September, Ferrari Brisbane sent the Applicant an invoice at TB6996. The purchase price was $640,000 including LCT of $132,670.62 and GST of $46,120.86. it included a credit of $5,000 for a deposit paid to it by the Applicant on 15 September, according to the date printed on a credit card statement. No doubt that was in fact received on or before 14 September 2017 by Ferrari Brisbane.
On 18 September 2017 Bundoora paid $450,000 to the Applicant and on the following day it paid $95,000 to the Applicant, making $545,000 in total. On the same day the Applicant forwarded an invoice to Bundoora for $555,000 and the Applicant paid $635,000 to Ferrari Brisbane, which took account of the $5,000 deposit paid to Ferrari Brisbane by the Applicant.
The Applicant’s records show that the $10,000 deposit paid on 9 September was credited to Bundoora so that Bundoora’s payment of $545,000 was the balance required to satisfy the invoice sent to Bundoora for $555,000. That invoice included no LCT because Bundoora quoted on 19 September.
On 19 September the car was transported to Sydney from Brisbane, the Queensland registration was cancelled, and the car was registered in NSW.
Bundoora issued an invoice for its sale of the vehicle to Prestige Motor Haus on 18 September for $700,000 including LCT of $146,231.31 and GST of $50,342.61. Bundoora did not remit the GST or the LCT to the Commissioner. Prestige Motor Haus invoiced the end-user, First Master Capital Pty Ltd for $750,000 including GST of $68,181.81 on 14 September 2017 and on 15 September the end-user paid Prestige Motor Haus in full.
The cross-examination by the Commissioner’s counsel of Mr Peters about this car started at Tr 728. At Tr 730, the cross-examiner suggests that the payment by Macquarie Leasing of $10,000 was a payment made at the instance of the end-user. Mr Peters said he does not deal with end-users, but it appears to me that the suggestion made by counsel was correct.
At Tr 734 Mr Peters said that he dealt with Arthur Kekatos and told him to organise the transport of the car. That is, I take it, to the end-user.
At Tr 736 the cross-examiner put that “what really happened with the car was that the end-user […] bought the car from Ferrari Brisbane and the Applicant, Bundoora and Prestige Motor Haus were simply inserted into the transaction to obtain an LCT refund in the hands of the Applicant”. Mr Peters denied that suggestion.
Dealings between the end-user and Ferrari Brisbane may or may not have occurred. The documents show only dealings between Prestige Motor Haus and the end-user. Mr Kekatos (who came from Trivett in Sydney) appears to have asked for an invoice to be sent by Ferrari Brisbane to the Applicant, which Mr Peters paid forthwith, having received the $10,000 deposit from Macquarie Leasing and $545,000 from Bundoora, and having paid the LCT from his own resources. Bundoora dealt with the Applicant as its vendor and sold the vehicle to Prestige Motor Haus.
Prestige Motor Haus did not charge LCT to the end-user: see TB6995. Yet it charged a price to the end-user which enabled it to pay LCT to Bundoora, including LCT. Both Prestige Motor Haus and Bundoora contravened the LCT Act: in the case of Prestige Motor Haus, by not charging LCT to the end-user, and in the case of Bundoora by failing to remit to the Commissioner the LCT and GST which it received. The Applicant was not complicit in either company’s breach of the Act. The Applicant was, in accordance with the matter conceded by the Respondent in paragraph 76 of the closing submissions, entitled to a decreasing LCT adjustment.
The Applicant was not an agent or trustee for any person and the Applicant’s transactions of purchase from the marque dealer and sale to Bundoora were not shams. Neither Bundoora nor Prestige Motor Haus benefited (or would have benefited) from the LCT paid by Mr Peters and if he had been refunded the LCT by the Commissioner by accepting a claim for the decreasing LCT adjustment claimed by the Applicant, no other person would have shared in that payment in any way.
The LCT and GST which Bundoora charged Prestige Motor Haus and which it did not remit to the Commissioner was unconnected with the LCT paid by the Applicant, and unconnected with the Applicant’s (unsuccessful) claim for a decreasing LCT adjustment. Rather than paying that amount to Bundoora, Prestige Motor Haus ought to have quoted to Bundoora and ought to have accounted to the Commissioner for LCT paid to it by the end-user.
The chronology established by the Commissioner, showing a deposit of $10,000 paid to the Applicant before the Applicant sold to Bundoora and before it bought from Ferrari Brisbane is odd, on the face of it, and suggests that parties likely knew what would occur shortly afterwards, and acted accordingly. The documentation from Ferrari Brisbane to the Applicant should have been followed by a sale by the Applicant to Bundoora, and a sale by Bundoora to Prestige Motor Haus, and then the payment of a deposit by the end-user or his financier. The fact that the Applicant did not take delivery of the car is explained by his usual method of doing business as a wholesale dealer, and so is his failure to insure the car while it remained with Ferrari Brisbane. As with the other new cars, there is nothing surprising about the fact that the Applicant paid for items such as dealer delivery. Ferrari Brisbane needed to recoup those costs, and despite a submission to the contrary by the Commissioner, it required payment for them even though the Applicant, with which it dealt, was a company paying a wholesale price, rather than a retail price. Also, in my opinion, there was nothing unusual or wrong with the Applicant being paid by its own buyer (Bundoora) and using those funds to pay Ferrari Brisbane.
Cars 12, 13, 14, 16 and 17
All of these cars were invoiced to the Applicant by Mercedes-Benz Toorak, a marque dealer, and the Applicant paid LCT as well as GST to Mercedes-Benz Toorak. The Applicant then invoiced SSP (represented by George Seeley in the dealings with the Applicant) for each car and SSP) quoted to the Applicant. The invoices to SSP accordingly were exclusive of LCT. As with all the 17 cars, the Commissioner attempted to persuade the Tribunal that the Applicant was an agent or trustee or that the Applicant’s transactions with the cars were shams. This was for the purpose of seeking to establish that the claims of the Applicant for a refund of LCT which Mr Peters paid from his own resources was impermissible.
Mr Peters said in his second witness statement at paragraphs 117-121:
Stock Numbers 2039, 2040, 2038, 2049 – Mercedes-Benz cars purchased from Mercedes-Benz Toorak and sold to South Sydney Prestige
I have addressed all of these cars together as the transactions were very similar. George Seely from South Sydney Prestige called me and said words to the effect of:
[Mr Peters], I’ve got many clients who want to buy new Mercedes-Benz AMGs but Mercedes-Benz Sydney dealerships aren’t selling to Sydney dealers. Can you get me [a particular car] from Melbourne?
I remember in one conversation about this time, George said to me:
I will buy as many AMGs as you can get your hands on.
For each of these deals, there was not much negotiation on price. I knew, and George knew, Mercedes-Benz Toorak wouldn’t sell to interstate customers – like SSP – directly. That meant George asked me to buy the car and sell it to them and I earned a small margin that was easy money. That’s why on each of these transactions my profit, after paying and claiming LCT, was so small.
For most, if not all, of these transactions I dealt with ‘Zein Baghdadi’ (Zein) at Mercedes-Benz Toorak. As set out further below, Zein left Mercedes-Benz Toorak in early 2018 and I do not have contact details for him anymore.
These transactions did not strike me as unusual. I knew that Mercedes-Benz had their marque dealers subject to geographic restrictions on who they could sell to. It also did not, at this stage, strike me as unusual that I was buying and paying LCT and SSP was purchasing under quote. Marque dealers generally refuse to accept quotes on their sales. I had no reason to think other than the correct amount of LCT would be charged and remitted by SSP when they sold to their client. As I had done a number of deals where I bought a vehicle subject to LCT and then on-sold under quote, I thought it was relatively straightforward.
Car 12
A note made by Mr Peters about Car 7 (Exhibit A9, page 113) is some evidence of an unsuccessful attempt by Mr Peters to ascertain what LCT had already been paid by prior owners of the car.
However the most important point for the outcome of these proceedings is that the Applicant cannot succeed in recovering a decreasing adjustment for the second-hand cars, including Car 7, because of the language and context of s 15-30 of the LCT Act, as is discussed below. The view to which I have come is that no LCT paid by the Applicant is available to claimed by it on the proper construction of s 15-30 unless the Commissioner’s concession has application. Since the Applicant cannot recover a decreasing adjustment, issues such as whether the quantum of the claim was incorrect because LCT was properly payable only on the incremental value of the car are irrelevant.
Car 8
This was another vehicle sold by Mr Hookey to Italia Motori and invoiced to Bundoora, at the same time as Car 7, which was also encumbered. The agreed chronology is as follows:
Date
Description
Reference
13/12/2016
Scott Hookey purchased the Lamborghini 5835 from Italia Motori for $980,000 inclusive of GST ($69,876.89) and LCT ($211,354.85).
4T5, p36
[TB.F16/P.6816]
August 2017 (estimated)
Scott Hookey agrees to sell the car back to Italia Motori.
(4T258: 3173; 3187-3188) [TB.F13/P.4942@4985-4986]
17/08/2017
Lamborghini 5835 transported back to Italia Motori by Alans Unique Car Carriers. It arrives on 19/08/2017.
4T7, p39
[TB.F16/P.6819]
21/08/2017
End-user pays $50,000 deposit to Italia Motori for the Lamborghini 5835.
4T236, p1019 (Italia Motori bank statement) [TB.F9/P.3847]
22/08/2017
Scott Hookey is told by Italia Motori to invoice Bundoora for both the Porsche 8458 and the Lamborghini 5835.
4T36, p112-113 [TB.F16/P.6726-6728]
Scott Hookey invoiced Bundoora for the Lamborghini 5835 for $1.2 million. 4T10, p42
[TB.F16/P.6820]
24/08/2017
Bundoora invoiced the Applicant for $1,210,000.00 inclusive of GST ($85,980.99) and LCT ($264,209.08). 4T11, p43
[TB.F16/P.6822]4T13, p45
[TB.F16/P.6823]4T13, p45
[TB.F16/P.6823]Italia Motori issues final tax invoice to end-user for $1,175,000.00 inclusive of GST ($85,533.44) and LCT ($256,132.15). 4T14, p46
[TB.F16/P.6824]End-user makes final payment of $1,125,000 for the Lamborghini 5835 to Italia Motori. 4T236, p1020 (Italia Motori bank statement) [TB.F9/P.3848] NSW registration transferred to Bundoora and to Italia Motori and to the end-user all with the same acquisition date. 4T18, p53
[TB.F16/P.6831]25/08/2017
The Applicant invoiced Wish Fall for $981,000.00 inclusive of GST ($89,181.82) and exclusive of LCT. 4T16, p50
[TB.F16/P.6828]Wish Fall provided LCT quotation signed by director Norman Allen for the Lamborghini 5835. 4T16, p51
[TB.F16/P.6829]28/08/2017
Italia Motori paid $1,150,000.00 to Wish Fall for the acquisition of the car with the particular “Sn 1811 Sv Orange Ca Nosa PL” 4T237, p1132 (Italia Motori bank statement) [TB.F10/P.3960] Wish Fall paid the Applicant $981,000 with the particular “Internet Transfer Pymt-Id [XXXXX ]4564 Sv Avent Orange”. 4T253, p2723 (Wish Fall bank statement) [TB.F8/P.3151] 29/08/2017
The Applicant paid Bundoora $1.21 million with the particular “To [XXXX]-[XXXXX X]5593”. 4T242, p1348-9 ([GHTZ] bank statement) [TB.F6/P.2192] Bundoora paid $1.2 million to Scott Hookey. 4T229, p687 (Bundoora bank statement) [TB.F8/P.3058]
4T246, p1951 (Scott
Hookey bank statement) [TB.F13/P.5278]18/09/2017
NSW Registration transferred to Centurion International Holdings Pty Ltd (acquisition date stated as 5 September 2017).
David Tan is director of Centurion International Holdings Pty Ltd.4T18, p53
[TB.F18/P.6831]
As the chronology shows, the facts are relevantly similar to those of Car 7 and the transaction documents are dated between 24 August 2017 and 28 August 2017.
The vehicle was encumbered as appears from a PPSR search in the Applicant’s records dated 25 August 2017, and the encumbrance was not cleared as at the date when the Applicant bought the vehicle from Bundoora and resold it to Wish Fall.
The cross-examination about the car is at Tr 403-412 and then from Tr 557 and following. The evidence of Mr Peters was that he could not remember in 2023 what transpired about the encumbrance as at August 2017: Tr 565. He said that in fact the encumbrance was sorted because he heard nothing further about the matter of an encumbrance.
He said that he trusted the vendor, and referred to the fact that they settled all transactions with him reliably. As I observed previously, as a matter of probability, Bundoora and its controllers would not have let him know of their true business model, including their intention to fail to account to the Commissioner for LCT or GST. Bundoora only had a motive to keep him in the dark.
In fact, the encumbrance must have been cleared before Italia Motori sold the vehicle to the end-user, so no loss was caused on that account.
As with the other second-hand cars, I reject the Commissioner’s case of agency, trust and sham, and I find adversely to the Applicant on the claimed decreasing adjustment on legal grounds.
Car 9
The agreed chronology for this vehicle is as follows:
Date
Description
Reference
05/10/2016
Italia Motori purchases McLaren from Lifestyle Motors for $840,000 including GST of $60,039.53 and LCT of $179,565.23.
2T60 p914 (invoice) [TB.F17/P.6868]
4T50, p149 [TB.F17/P.6888] (Italia Motori police book)2T60 p903 at p906 [TB.F17/P.6857 at 6860] (Italia Motori answer to RFI from ATO)
06/10/2016
Scott Hookey purchases McLaren from Italia Motori for $850,000 inclusive of GST ($60,766.10) and LCT ($181,572.92).
4T50, p148 [TB.F17/P.6887]
14/10/2016
Car registered in NSW to Italia Motori (acquisition date stated to be 5 October 2016).
4T61, p160 [TB.F17/P.6900]
30/08/2017
Scott Hookey invoiced Wish Fall for $659,982 purportedly inclusive of GST ($47,519.45) and LCT ($137,268).
4T51, p150 [TB.F17/P.6889]
31/08/2017
Wish Fall emailed [Mr Peters] an invoice dated 1 September 2017 for $670,000 inclusive of GST ($48,218.78) and LCT ($139,593.69).
R1 p59-60
01/09/2017
Bundoora invoiced Dutton Garage Wholesale Australia PL $650,000 including GST of $59,090.91. Bundoora gave Dutton Garage a declaration that the sale was not subject to LCT.
4T52, p151 [TB.F17/P.6890]
4T53, p152 [TB.F17/P.6891]
06/09/2017
Bundoora sends email to [Mr Peters] attaching the LCT quote and repeatedly asks [Mr Peters] to send the invoice “I have got people bugging me for the LT invoice. Money ready to go”.
R1 p61-65.
4T55, p154 [TB.F17/P.6893]
07/09/2017
Applicant invoices Bundoora for $549,000 inc GST of $49,909.09 and exc LCT (estimated date on basis of emails in R1 p61-65. Copy of actual email attaching invoice has not been produced.)
4T56, p155 [TB.F17/P.6894]
Italia Motori paid Bundoora $650,000.00 with the description:
· “Loan from Im Canosa Pl”. (Bundoora bank statement)
· “Loan to Bundoora” (Italia Motori bank statement)
4T236, p1023 [TB.F9/P.3851] (Italia Motori bank statement) Bundoora paid the Applicant $549,000 with the particular:
· “LT675” (Bundoora bank statement)
· “Inv 2023 Bunproviden T” ([GHTZ] bank statement)
4T229, p689 [TB.F8/P.3060] (Bundoora NAB bank statement) The Applicant paid Wish Fall $670,000 with the particular “675Lt” (Wish Fall bank statement).
4T242, p1350 [TB.F6/P.2193] ([GHTZ] NAB statement)
Wish Fall paid Scott Hookey $653,059.06 with the particular “Internet Transfer Pymt-Id [XXXXX ]4734 LT675 Hookey”.
4T253, p2723 [TB.F8/P.3151] (Wish Fall NAB statement)
15/09/2017
Dutton Garage Wholesale Australia paid Bundoora
$650,000 with the particular “McLar675LT REDY2GO Dutton Garage”.
4T229, p689 [TB.F8/P.3060] (Bundoora NAB statement)
4T231 p721 [TB.F17/P.6912] (Dutton bank statement)18/09/2017
Bundoora repays $650,000 to Italia Motori with the particular:
· “Internet transfer Pymt-Id [XXXXX ]6462 Loan Repay” (Bundoora bank statement)
· “loan repay Bunprovid Ent” (Italia Motori bank statement)
4T229, p690 [TB.F8/P.3061] (Bundoora bank statement)
4T236, 1024 [TB.F9/P.3852] (Italia
Motori bank statement)20/02/2018
Dutton Garage Wholesale Australia invoiced Dutton Garage Australia for $661,000 inc GST of $60,090.91.
4T59, p158 [TB.F17/P.6898]
20/02/2018
Dutton Garage Australia invoiced the end-user Francis Luci for $735,000.00 GST inclusive of $64,121.28. The stamp duty charged was $29,626.80 and the transfer fee was $39.10.
4T60, p159 [TB.F17/P.6899]
See also [TB.F17/P.6903-4] (Vicroads certificate)
This vehicle was also encumbered and the facts are essentially the same as for Cars 7 and 8.
Findings about second-hand cars
I have dealt with the construction of s 15-30 in Part 1 of these reasons.
There was no change of use in relation to the second-hand cars. The Applicant bought them for resale and neither its intention nor its use of the second-hand cars changed at any time.
Therefore the Applicant was not entitled to a decreasing adjustment for amounts claimed on any of the four second-hand cars.
PART 4 – THE COMMISSIONER’S ANTI-AVOIDANCE CASE
For all 17 vehicles, in 2021 the Commissioner made for the first time a case under Division 165 of the GST Act an anti-avoidance case. That case was put by the Commissioner only in the alternative to the primary case made for the cars, dealt with already in these reasons. To that primary case, in relation to the second-hand cars, must be added the point introduced by the Tribunal before the hearing commenced: the question whether as a matter of law the Applicant was entitled to the disputed decreasing LCT claimed under s 15-30 of the LCT Act. Since I have resolved that issue in favour of the Commissioner in relation to the second-hand cars, the anti-avoidance case the subject of the 2021 assessment and the objection to it only arises in relation to the new cars.
The precise relevance of the Commissioner’s concession is one matter which will need consideration in the course of examining the various questions arising under Division 165 of the GST Act. The provisions of Division 165 as to GST benefit and as to the mandatory considerations which s 165-15 specifies as matters required to be taken into account as to purpose or effect include the legal rights and obligations involved in the scheme. None of the scheme participants knew of the Commissioner’s concession when they became participants. Section 165-5(1)(c) of the GST Act provides that the Division applies, inter alia, if taking account of the matters described in section 165-15, it is reasonable to conclude that either:
(i) an entity that (whether alone or with others) entered into or carried out the scheme, or part of the scheme, did so with the sole or dominant purpose of that entity or another entity getting a *GST benefit from the scheme; or
(ii) the principal effect of the scheme, or of part of the scheme, is that the avoider gets the GST benefit from the scheme directly or indirectly; [...]
Section 165-15 provides as follows:
165‑15 Matters to be considered in determining purpose or effect
(1) The following matters are to be taken into account under section 165‑5 in considering an entity’s purpose in entering into or carrying out the *scheme from which the avoider got a *GST benefit, and the effect of the scheme:
(a) the manner in which the scheme was entered into or carried out;
(b) the form and substance of the scheme, including:
(i) the legal rights and obligations involved in the scheme; and
(ii) the economic and commercial substance of the scheme;
(c) the purpose or object of this Act, the Customs Act 1901 (so far as it is relevant to this Act) and any relevant provision of this Act or that Act (whether the purpose or object is stated expressly or not);
(d) the timing of the scheme;
(e) the period over which the scheme was entered into and carried out;
(f) the effect that this Act would have in relation to the scheme apart from this Division;
(g) any change in the avoider’s financial position that has resulted, or may reasonably be expected to result, from the scheme;
(h) any change that has resulted, or may reasonably be expected to result, from the scheme in the financial position of an entity (a connected entity) that has or had a connection or dealing with the avoider, whether the connection or dealing is or was of a family, business or other nature;
(i) any other consequence for the avoider or a connected entity of the scheme having been entered into or carried out;
(j) the nature of the connection between the avoider and a connected entity, including the question whether the dealing is or was at arm’s length;
(k) the circumstances surrounding the scheme;
(l) any other relevant circumstances.
(2) Subsection (1) applies in relation to consideration of an entity’s purpose in entering into or carrying out a part of a *scheme from which the avoider gets or got a *GST benefit, and the effect of part of the scheme, as if the part were itself the *scheme from which the avoider gets or got the GST benefit.
Paragraph 76 has a rider in its final sentence in the following terms:
Any such entitlement would be subject to the operation of Division 165, which if engaged in respect of these vehicles, would alter the Applicant’s net amount in accordance with the Division 165 declaration, by negating the decreasing adjustment as a GST benefit the Applicant obtained from a scheme.
As to s 165(1)(b)(i), the “legal rights and obligations” are those of the LCT Act itself, and not those arising from the Commissioner’s concession. That is probably the meaning of the final sentence of paragraph 76 set out above, although perhaps its meaning is not quite clear. In any event, the concession operates inter partes in this case, and does not reflect legal rights and obligations in other cases. The views I have about the relevant parts of the LCT Act are set out in Part 1 of these reasons, and are quite different from the concession made in relation to the new cars. The Applicant can and does take advantage of the concession, but the words of s 165-15(1)(b) do not catch the concession. A concession only affects a case to the extent that it benefits the taxpayer as Menzies J held in Mount Isa Mines Ltd v Commissioner of Taxation (Cth) (1959) 33 ALJR 98.
I approach the schemes and Division 165 on the basis of two legal propositions explained in Part 1 of these reasons. The first is that the entitlement of a person such as the Applicant to quote for a taxable supply means, amongst other things, that the vendor in the taxable supply cannot refuse to accept such a quote, or otherwise compel the purchaser, otherwise entitled to quote, not to do so. The effect is, of course, that a purchaser entitled to quote does not need to pay LCT, and accordingly it will not be necessary for the buyer to claim a decreasing adjustment. Rather, as s 2-5 of the LCT Act provides, the system of quoting is designed to prevent the tax becoming payable until the car is sold at the retail level.
The purchaser who quotes on the first sale of a luxury car will also be unable to refuse to accept a quote made by a sub-buyer who is, like the Applicant itself, entitled to quote. So a sale by the Applicant to such a sub-buyer would, like the Applicant’s own purchase, be exclusive of LCT.
The second proposition is that a decreasing adjustment, if claimed by a person who elects for some reason not to quote, is not available unless there has been a change of use. In the circumstances of the Applicant, there was no change of use, and but for the Commissioner’s concession, he would have been unable to claim a decreasing adjustment on the proper construction of s 15-30 of the LCT Act.
The two propositions are not consistent with paragraph 212 of the Respondent’s SFIC, which is as follows:
For the purposes of the anti-avoidance provisions, the Respondent will contend:
(a) That the declaration made by the Commissioner on 16 August 2021 under section 165-40 of the GST Act was valid. In circumstances where Division 165 of the GST Act applies to amounts of LCT payable under the LCT Act because such amounts are treated as if they were amounts payable under the GST Act (Subdivision 13-A of the LCT Act), it is valid for a declaration with respect to an LCT decreasing adjustment to refer to an LCT benefit rather than a GST benefit. Further, the declaration made by the Commissioner identified that it was “negating GST benefits by way of decreasing Luxury Car Tax (LCT) adjustment amounts” such that the Applicant’s argument is without foundation in any event.
(b) that the “choice” principle does not apply because:
(i) the choice to acquire a motor vehicle not under quote is not one expressly provided for by the LCT Act and therefore s 165-5(1)(b) does not apply. The LCT Act expressly provides for an entitlement to quote in Division 9. There is no express provision for a choice not to quote; and
(ii) the GST (LCT) benefit “got” by the Applicant is not attributable to the choice not to quote on each purchase but rather is attributable to the Applicant satisfying each of the 5 criteria in section 15-30(1) of the LCT Act; and
(iii) the GST (LCT) benefit is “got” due to the commercial decision for the Applicant to acquire and on-sell each car. Absent the scheme the Applicant would not have bought and on-sold each car such that the choice to acquire each car not under quote would not have been available to it. The benefit is not attributable to the choice but rather it is attributable to the scheme.
(iv) In the alternative, s 165-5(3) applies in that the scheme or part of the scheme was entered into or carried out for the sole or dominant purpose of creating a circumstance or state of affairs in which the Applicant could choose to acquire each car without quoting such that the Applicant would be entitled to an LCT decreasing adjustment and therefore s 165-1(b) does not apply.
c) that the arrangements concerning the transactions for the 17 luxury cars entered into by the Applicant referred to in this SFIC, can be broken into the three types of arrangements referred to above, that is:
(i) Arrangement 1 – Bundoora type arrangements (six cars) referred to in paragraphs 89 above;
(ii) Arrangement 2 – used luxury car arrangements (four cars) referred to in paragraph 132 above; and
(iii) Arrangement 3 – Sydney South Prestige type arrangements (seven cars) referred to in paragraph 165 above;
d) the arrangements concerning each of the 17 transactions is a ‘scheme’ that gave rise to a ‘GST benefit’ to the Applicant, as those terms are defined in Division 165. The scheme relied upon by the Respondent in respect of each of the 17 cars is set out in Schedules 1 to 17 respectively;
e) the schemes, which had a number of variations, had the following common features:
(i) the immediate sale and acquisition of a new or used luxury car between participating motor dealers within a supply chain;
(ii) the acquisition by the Applicant of a luxury car on an LCT-inclusive basis and its on-sale under quote (LCT-exclusive) to a participant in the supply chain, as it was acquired for the purpose of re-sale;
(iii) the claiming by the Applicant of a decreasing LCT adjustment amount equal to the LCT paid on its acquisition of the car, without any corresponding LCT amount payable as the car was sold under quote;
(iv) the failure by one or more of the participants in a supply chain to report and remit the LCT properly payable on a transaction within the supply chain. In all instances, a participant who sold to the Applicant (four instances) or purchased a car from the Applicant (17 instances) failed to report and remit the LCT properly payable;
(v) at the time that the Applicant acquired the cars, it had already arranged their on-sale to another participant, having issued tax invoices and receiving payment in nearly every instance prior to it having acquired a car;
(vi) the Applicant never sighted or took physical possession of a car; and
(vii) all the participants in a supply chain received a share of the decreasing LCT adjustment amounts claimed by the Applicant and any other entity that claimed an LCT decreasing adjustment amount within a supply chain. This was achieved by the manipulation of the selling prices charged by each entity in the supply chain. Further, there was no evidence of genuine arm’s length negotiation in the sales of the cars through the supply chains, further supporting the contention that the prices we structured taking into account the LCT credits claimed and LCT that was not remitted, to ensure all parties profited;
(f) as a result of each scheme an amount that is payable to the Applicant is larger than it would be, or could reasonably be expected to be, but for the scheme; and
(g) taking into account the twelve matters listed in section 165-15 of the GST Act, it is reasonable to conclude that:
(i) one or more of the Applicant and the supply chain participants who are identified in this SFIC in respect of each the 17 transactions, entered into or carried out the scheme, or part of the scheme, for the sole or dominant purpose of the Applicant getting a GST (Luxury Car Tax) benefit from the scheme; or
(ii) the principal effect of the scheme, or part of the scheme, was that the Applicant got a GST (Luxury Car Tax) benefit from the scheme directly or indirectly.
As to paragraph 212(b)(i), it may be doubted whether the “entitlement” to quote does not expressly provide for a choice not to quote, because an entitlement does not involve a duty to quote. The Parliament has left it up to a person entitled to quote to decide whether or not to do so. If a person wishes to buy a luxury car for their own use they should not, and normally would not, quote.
More importantly, because of the second proposition, and the absence of any change of use in the circumstances of the Applicant, the Applicant got no GST benefit from the alleged scheme because, apart from the Commissioner’s concession, it had no entitlement to a decreasing adjustment. Also, from the point of view of all other participants, there was no decreasing adjustment to be shared, as paragraph 212(e)(vii) alleges. Each alleged scheme was therefore wholly futile.
As the High Court remarked in Commissioner of Taxation v Unit Trend Services Pty Ltd [2013] HCA 16; (2013) 250 CLR 523 at [48], s 165-5(1)(a) shows that the absence of a GST benefit is fatal to the application of Division 165. Therefore, s 165-5(1)(b) does not arise.
Paragraph 212(b)(ii) is directly inconsistent with the second proposition.
As to paragraph 212(b)(iii) the circumstances of Mr Peters are that he was compelled by the refusal of the marque dealers to accept its quote to refrain from quoting, if he wished to acquire the car at all. He was also encouraged not to quote by his (false) belief that he would in any event be entitled to claim and receive a decreasing adjustment. His claim for a decreasing adjustment was attributable to the fact that the marque dealers (wrongly) refused to accept a quote he desired to make, and to his false belief about his right to claim a decreasing adjustment.
Paragraph 212(b)(iv) alleges a matter that was unknown to the Applicant, as discussed earlier.
The failure of the Applicant to become entitled (apart from the Commissioner’s concession) to a decreasing adjustment meant that each scheme was futile in any event, and there is no information as to the belief of other alleged participants in the scheme as whether or not the Applicant had such an entitlement in any event.
As to s 165-15 of the GST Act, the two propositions referred to above were part of the legal rights and obligations involved in all schemes, and the circumstances referred to in s 165-15(1)(k) and (l) included the wrongful stance taken by the marque dealers, and the duty of the Applicant to accept quotes made by its buyers, entailing an inability to pass on LCT to them.
Returning to the rider to paragraph 76, quoted above at [263], Division 165 was not engaged for any of the new cars.
It should be mentioned that one submission made on behalf of the Applicant was that the Tribunal ought to review the Commissioner’s exercise of discretion under s 165-40 to make a declaration for the purpose of negating the Applicant’s GST benefits. My conclusion that there was no GST benefit makes it unnecessary to consider that submission. If I were dealing with that submission, I would have given leave for it to be raised, although the point was not taken in the objection, since the information about the Commissioner’s activities with the marque dealers emerged so late in the proceedings.
PART 5 – PENALTIES
Penalties arise about several matters: the second-hand cars, and the question of attribution, relating to the time at which the Applicant claimed a decreasing adjustment for a certain number of the new cars, including the cancelled car.
The Applicant’s claim for a decreasing adjustment in respect of the second-hand cars (Cars 5, 7, 8 and 9) fails on the proper construction of s 15-30 of the LCT Act.
The Applicant had advice as to the law, apparently not from solicitors, which he relied upon at all material times. The claims for a decreasing LCT adjustment which he made were all based on that belief. The advice was wrong. Both parties to this review submitted that the advice was correct. The concession made by the Commissioner for the new cars and what the Applicant did for the second-hand cars was no more than a reasonable mistake, before one considers the safe harbour provisions. If one assumes that a lack of reasonable care is involved in relying on advice which is wrong, the penalty may be, and ought in my opinion to be, remitted under s 298-20 of Schedule 1 to the Taxation Administration Act 1953. In my opinion the correct or preferable decision is to find that the claim for a decreasing adjustment in relation to the second-hand cars was not caused by the Applicant having failed to take reasonable care, and even if I am wrong about that, the penalty ought to be remitted.
The basis of the Commissioner’s first amended assessment in relation to Cars 2, 3 and the cancelled car was that the GST and LCT for those cars was not properly attributable to the July 2017 BAS. Car 2 was the subject of a $10,000 deposit paid by Mr Peters on 7 July 2017, and the subject of a new vehicle contract signed by him on the same date for $740,000 inclusive of GST of $53,740.12 and LCT of $157,814.17. No VIN number was recorded on the contract. On 11 August Zagame issued a New Vehicle Tax Invoice to the Applicant for the amount specified in the contract signed by the Applicant on 7 July, namely $740,000 which allowed for the deposit of $10,000. On 15 September SSP paid $650,000 to the Applicant (which excluded LCT) and on 18 September 2017 the Applicant paid $740,000 to Zagame. Also on 18 September, SSP quoted to the Applicant on the resale by the Applicant.
As to Car 3, Mr Peters signed a new vehicle contract with Zagame on 18 July 2017 for $825,000 inclusive of GST of $58,984.88 and LCT of $175,121.87, and again with no VIN number stated on the contract. On 11 August Zagame issued a new vehicle tax invoice to the Applicant including a VIN number for $825,000 inclusive of the GST and LCT in slightly different amounts than those stated in the contract dated 18 July, and also including dealer delivery of $20,972.03. The Applicant resold the vehicle to Bundoora, which quoted on 14 September, and Bundoora paid the purchase price of $750,000 with no LCT in three instalments being $150,000 on 27 September, $330,000 on 6 October and $270,000 on 9 October. On 27 September the Applicant paid Zagame $150,000, on 6 October the Applicant paid Zagame $450,000 and on 9 October the Applicant paid Zagame the balance of $215,000.
The Commissioner’s 15 January 2018 activity audit says, in relation the cancelled car, at TB36:
Stock 2003 Lamborghini Aventador LP700-4 VIN ZHWER1ZD8GLA04436
·You reported on your GST detail report that you purchased the vehicle from Zagame on 24 July 2017 for $760,000 (including GST of $54,442.16 and LCT of $160,130.89). No sale was reported in the period.
·Your police book indicated that the vehicle was purchased from Zagame on 18 July 2017 with 60kms on the odometer. It did not indicate any sale of the vehicle.
·You claimed LCT credits of $160,130.89 on your activity statement for the July 2017 monthly period.
·You made a deposit on the vehicle of $10,000 on 25 July 2017 from your NAB credit card account (ending in 0466) in the name of [GHTZ] (cardholder [Mr Peters]).
·No further payments or proceeds of sales were noted in your bank accounts in the July 2017 period. You have not advised us of any further payments being made in July 2017, in relation to this vehicle.
·When asked to provide supporting documentation to support your claim for GST and LCT credits, you provided us with the following
– A “New Vehicle Tax invoice” dated 11 August 2017 from Zagame. The tax invoice indicated that there was $750,000 outstanding. It also indicated that the vehicle had a future build date of 1 September 2017 and a future compliance date of 09/17.
– A “New Vehicle Contract” dated 24 July 2017 from Zagame. The contract was signed by the purchaser and trader authorised signature. The two signatures appear to be the same. A notation indicated that a deposit had been paid of $10,000 on 24/25 July 2017.
Mr Peters’ evidence in his second witness statement at paragraphs 70-72 includes the following:
Stock Number 2003 - Lamborghini Aventador with VIN ending 4436 (cancelled)
This was a proposed deal in respect of another one of the Aventadors that were in Singapore. I had a retail customer lined up for this car but because the LCT refund was withheld which impacted the planned cashflow for the deal, [t]he retail customer ended up contacting Zagames directly. I paid a deposit and received an invoice for it, but due to delays in the BAS refund, I did not have enough cashflow at the time to complete the deal which is why it fell through.
I also think it is relevant that I told the ATO all the facts about this transaction when it was happening and immediately engaged with the ATO from their first contact. If I was intending to participate in a tax fraud I would not have been that transparent with the ATO.
I set out below in a separate section the details of the preparation of the BAS, but I believed that having paid the deposit and had been invoiced by the Applicant I was entitled to a refund of the LCT amount and relied on Carrington Myers to complete the BAS and claim it as appropriate.
At paragraphs 136-137 he said:
I caused the Applicant to instruct Carrington Myers and Mr Michael Mazey to compile and complete the Applicants’ BAS. In respect of the purchase of cars, the usual practice in the car trade is that if you have paid a deposit and received an invoice you own the car and can on-sell it. The basis for doing so, was as I understood it, accruals accounting for tax to required accounting on the basis of transactions that both had and would occur.
At all times relevant to this proceeding, I believed at the time that as an accruals taxpayer, the Applicant was entitled to claim GST input tax credits and decreasing luxury car tax adjustments on the basis of transactions that had been invoiced and for which a deposit had been paid.
The Applicant’s tax agent Mr Michael Mazey said at paragraph 8 of his witness statement that his recollection is that Mr Peters told him that cars on which he had paid a deposit were owned by the Applicant and that this was the basis on which the car trade worked. He said: “I believe that understanding to be generally true now and also had that understanding when I filled out the BAS the subject to these proceedings.”
The Applicant was trading on an accruals basis and apparently, with all three cars just mentioned, treated the accruals basis as justifying the immediate claim for a decreasing LCT adjustment. Importantly, Mr Mazey’s evidence indicates that he supported the claim made in the BAS for July for a decreasing LCT adjustment although in the case of none of the three vehicles the LCT had been paid by the Applicant. In the case of Cars 2 and 3 it was paid in due course, but the cancelled car resulted in his deposit being appropriated to another transaction and the vehicle was sold to someone else in December 2017.
The Commissioner agreed at the objection stage to reduce the penalty for the cancelled car.
The fact that the claims for Cars 2 and 3 have never been paid by the Commissioner so far does not affect the Commissioner’s entitlement to a penalty, if a penalty was properly assessed under the Taxation Administration Act 1953.
The Commissioner reduced the assessed penalty for the cancelled car on the basis that when the sale was cancelled, that fact was voluntarily disclosed.
Some of the contemporary evidence indicates that the cause of the cancellation of the car was actually delay in completion of the transaction of purchase by the Applicant caused by the failure of the Commissioner to refund LCT to the Applicant as a decreasing adjustment, which effectively exhausted the funds available to the Applicant.
The reasoning of the Applicant and its tax agent as to Cars 2 and 3 was that since the Applicant accounted on an accruals basis, and since, as they understood it, payment of a deposit and entering into a contract of sale entitled the Applicant to claim GST and LCT at that time. That view was wrong in law, but they believed it to be true. Penalty on account of recklessness should therefore be rejected. It made the claims for a decreasing adjustment premature because of a failure to understand the Act correctly. The cancelled car did not proceed to a point where the Applicant could apply for a decreasing adjustment, but the occasion for a claim for a decreasing adjustment for Cars 2 and 3 (which were relevantly new cars) actually arose a quite short period before the filing date of the July BAS, filed in September.
Safe harbour provision
Section 284-75(6) of Schedule 1 to the Taxation Administration Act 1953 provides that:
(6) You are not liable to an administrative penalty under subsection (1) or (4) if:
(a) you engage a *registered tax agent or BAS agent; and
(b) you give the registered tax agent or BAS agent all relevant taxation information; and
(c) the registered tax agent or BAS agent makes the statement; and
(d) the false or misleading nature of the statement did not result from:
(i) intentional disregard by the registered tax agent or BAS agent of a *taxation law (other than the *Excise Acts); or
(ii) recklessness by the agent as to the operation of a taxation law (other than the Excise Acts).
The Applicant submitted amongst other propositions that the safe harbour provision is applicable to the claim made in the July BAS claims for a decreasing adjustment. The claims for a decreasing adjustment made by Mr Mazey in the July BAS (including for Cars 2 and 3 and the cancelled car) were made on the basis that the Applicant was accounting on an accruals basis and that entering into a contract for purchase and paying a deposit gave dispositive power to a dealer. He genuinely believed those matters and was not reckless and did not intentionally disregard a taxation law. Mr Mazey was not cross-examined on paragraph 8 of his witness statement although it was mentioned by the cross-examiner at Tr 969 and I accept him as a truthful witness.
It follows that no penalties are payable by the Applicant.
DECISION
The Tribunal decides that:
(a)The decision dated 11 November 2019 on the objections to the first amended assessment and penalty assessment issued in January 2018 is set aside and substituted with a decision allowing the objections in full;
(b)The decision dated 30 January 2020 on the objections to the second amended assessment and penalty assessment issued on 31 August 2018 is set aside and substituted with a decision allowing the objections in full;
(c)The decision dated 30 January 2020 on the objections to the third amended assessment and penalty assessment issued on 15 March 2019 is varied insofar that the objections concerning Cars 10 and 11 and penalties are allowed in full, and save as aforesaid the decision is affirmed.
(d)The decision dated 24 February 2021 on the objections to the fourth amended assessment and penalty assessment issued on 10 November 2020 is set aside and substituted with a decision allowing the objections in full; and
(e)The decision dated 21 January 2022 on the objections to the Division 165 amended assessment and scheme penalty assessment issued on 18 August 2021 is set aside and substituted with a decision allowing the objections in full.
I certify that the preceding 297 (two hundred and ninety -seven) paragraphs are a true copy of the reasons for the decision herein of Deputy President B W Rayment OAM KC
....................................[SGD]....................................
Associate
Dated: 14 March 2024
Date(s) of hearing: 22-25 August; 4-8, 13, 15 September;
23-25 October; and 1, 10 November 2023Date final submissions received: 22 December 2023 Counsel for the Applicant: Mr G Redenbach Solicitors for the Applicant: Moray & Agnew Lawyers Counsel for the Respondent: Ms A Wilson Solicitors for the Respondent: Gadens
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