Managed Contracts Pty Ltd and Commissioner of Taxation (Taxation)

This matter concerned an appeal by Managed Contracts Pty Ltd (the applicant) against a decision of the Commissioner of Taxation (the respondent) disallowing the applicant's objection to amended Goods and Services Tax (GST) assessments for the tax periods from 1 July 2014 to 30 September 2017. The applicant had not maintained a detailed schedule of sales and purchases for each tax period, instead relying on bank statements. The Commissioner had issued amended assessments, which the applicant contended were excessive.

The primary legal issues before the Tribunal were whether the applicant had discharged its onus of proving that the Commissioner's assessments were excessive, and consequently, whether the applicant was entitled to a more favourable outcome regarding its GST liabilities and input tax credits (ITCs). A related point of contention involved the accounting basis for GST and ITCs, with the applicant initially asserting an accruals basis for ITCs in its pleadings, despite its representative's later assertions of a cash basis and the notation of "non-cash (accruals)" on the filed Business Activity Statements.

The Tribunal found that the applicant's lack of proper records significantly hampered its ability to prove its entitlement to ITCs. While the applicant's representative, Mr Purvis, was not found to be dishonest, his evidence was considered unhelpful due to his repeated references to irrelevant matters and an apparent inability to focus on the fundamental requirements of GST compliance. The Tribunal noted that the applicant's Business Activity Statements were marked as "non-cash (accruals)", and therefore proceeded on that basis, although it considered the distinction between cash and accrual accounting to be less significant in this case than the applicant perceived, particularly concerning ITCs where possession of a tax invoice is a prerequisite for claimability under either method. Ultimately, the Tribunal lacked sufficient confidence in the applicant's assertions regarding its ITC entitlements to accept that it had proven its entitlement to amounts beyond those already conceded by the Commissioner.

The Tribunal varied the decision under review. The Commissioner was required by statute to issue amended assessments and adjust the applicant's account records to give effect to the Tribunal's decision.