Mavris and Commissioner of Taxation (Taxation) - [2018] AATA 1825

Mavris and Commissioner of Taxation (Taxation) [2018] AATA 1825 (19 June 2018)

Division:TAXATION & COMMERCIAL DIVISION
File Number(s): 2016/5193
Re:Dimitrios Mavris
APPLICANT

AndCommissioner of Taxation
RESPONDENT

DECISION

Tribunal:Ms G Lazanas, Senior Member
Date:19 June 2018
Place:Sydney

The decisions under review are set aside and remitted to the Respondent to issue assessments in accordance with the Tribunal’s reasons for decision.

..........................[sgd]..............................................

Ms G Lazanas, Senior Member

CATCHWORDS

TAXATION – LUXURY CAR TAX – supplies of luxury cars – whether luxury car tax quotes obtained by the supplier – meaning of quote – administrative penalty – failure to lodge Business Activity Statements – uplift in penalty - objection decisions set aside and remitted to Commissioner

LEGISLATION

A New Tax System (Australian Business Number) Act 1999 (Cth) s 41

A New Tax System (Goods and Services Tax) Act 1999 (Cth) s 9-5

A New Tax System (Luxury Car Tax) Act 1999 (Cth) ss 2-1, 5-5, 5-10, 9-1, 9-5, 9-10, 9-15, 9-20, 9-25, 27-1

Taxation Administration Act 1953 (Cth) s 14ZZK, Sch 1, s 284-75, 284-220, 298-20, 388-50

CASES

Imperial Bottleshops Pty Ltd & Egerton v Federal Commissioner of Taxation (1991) 22 ATR 148

LDGL and Commissioner of Taxation [2017] AATA 2779

Sanctuary Lakes Pty Ltd v Commissioner of Taxation (2013) 212 FCR 483

REASONS FOR DECISION

Ms G Lazanas, Senior Member

19 June 2018

INTRODUCTION

Mr Dimitrios Mavris is in dispute with the Commissioner of Taxation about his liability to luxury car tax (“LCT”) under the A New Tax System (Luxury Car Tax) Act 1999 (Cth) (“LCT Act”) in relation to certain transactions concerning three luxury cars that he sold, namely, a Mercedes, a McLaren and a Bentley. He also disputes the administrative penalty imposed by the Commissioner under s 284-75(3) of Schedule 1 to the Taxation Administration Act 1953 (Cth) (“TAA”) for failing to lodge Business Activity Statements (“BASs”) for the relevant tax periods, as well as an uplift in the penalty by 20% pursuant to s 284-220 of Schedule 1 to the TAA. He further argues that the penalties should be remitted.
Mr Mavris was a sole trader selling new and used cars. Initially, he claimed that the transactions regarding the luxury cars never took place. He said he could not remember them and that he could not locate any invoices in relation to the transactions and he had not issued the invoices which were obtained by the Commissioner. He claimed that he was, therefore, not liable to any GST or LCT and consequently, any penalties.
However, his story changed in his affidavit evidence and when he gave evidence at the hearing, by which time he accepted that the supplies took place and that he was liable to GST on the supplies of the relevant luxury cars. Accordingly, the GST aspects of the transactions were not before the Tribunal. Mr Mavris maintained, however, that he was still not liable to LCT or to any penalty or, if any penalty was imposed, it should be remitted.
As canvassed in more detail below, there were numerous shortcomings in the evidence, however, notwithstanding these, I have concluded that Mr Mavris is not liable for LCT with respect to the Mercedes and the McLaren. This is because he produced the requisite LCT quotes given by the respective recipients. However, Mr Mavris is liable to LCT in respect of the Bentley as he failed to persuade me that he had obtained a LCT quote for the Bentley.
As the taxpayer, Mr Mavris bears the burden of proving that the assessments of LCT and penalty are excessive and, additionally, that the decision not to remit the penalties should not have been made or should have been made differently: s 14ZZK(b) of the TAA. Although the Commissioner had issued default assessments to Mr Mavris, the arguments before me were confined to the issue of whether Mr Mavris was liable to LCT in relation to three specific luxury cars and I have accordingly proceeded on the same basis. As to the issue of penalties, I was not convinced that the penalties imposed at the rate of 75% based on Mr Mavris failing to lodge his BASs, increased by an uplift of 20%, in respect of the reduced tax shortfall, were excessive or that they should be remitted to any extent.

THE ISSUES BEFORE THE TRIBUNAL

The essential issue is whether Mr Mavris is liable to LCT on three luxury cars under the LCT Act. That depends on whether he obtained LCT quotes for the purposes of the LCT Act.
The issues with respect to penalties concern both the imposition and the remission aspects arising under the TAA.

THE LEGISLATIVE PROVISIONS

The key statutory provisions relevant to this tax dispute are contained in the LCT Act. Section 2-1 of the LCT Act relevantly explains 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.
Pursuant to s 5-5 of the LCT Act, LCT is payable on any taxable supply of a luxury car. Section 25-1 of the LCT Act relevantly defines a “luxury car” as a car whose luxury car tax value exceeds the luxury car tax threshold. It is common ground that all three cars the subject of this proceeding were luxury cars.
Section 5-10 sets out the circumstances in which a taxable supply of a luxury car is made, as follows:
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 Australia; 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.
If the conditions in s 5-10(1) are satisfied then the entity has made a “taxable supply” of a luxury car and must pay an amount of LCT determined under s 5-15, unless one of the exceptions in s 5-10(2) apply.
The exception upon which Mr Mavris relies is s 5-10(2)(a) of the LCT Act, namely, that the recipient has quoted for the supply of the car. This is where “recipient” is relevantly defined in s 27-1 of the LCT Act to mean “the entity to which the supply was made” and “quote” is defined in s 27-1 of the LCT Act to mean “quote an ABN”. “ABN” has the meaning given by s 41 of the A New Tax System (Australian Business Number) Act 1999 (Cth) to mean the entity’s Australian Business Number as shown in the Australian Business Register.
Significantly, unlike the position in the GST Act where one of the building blocks for a taxable supply is that the supply must be for consideration, s 5-10(1) of the LCT Act relevantly only requires that “you supply a luxury car”. It follows, that the transfer of cars amongst dealers, under the booking system described by Mr Mavris satisfies the criteria for a taxable supply of a luxury car for the purposes of the LCT Act, regardless of whether consideration was provided.
Division 9 of the LCT Act concerns the quoting system. Section 9-1 of the LCT Act explains that “[i]n certain circumstances you 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”.
Section 9-5 sets out the circumstances in which there is an entitlement to quote as follows:

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
(b)*research and development for the manufacturer of the car; or
(c)exporting the car in circumstances where the export is *GST-free under Subdivision 38-E of the*GST Act.

(2) However, you are not entitled to *quote unless you are *registered.

Section 9-10 sets out the position with respect to periodic quoting, as follows:
9-10 Periodic quoting
(1) You may make a periodic quote under this section for supplies that you intend to receive from a supplier during the period covered by the periodic quote. The period must not exceed 12 months.
(2) If you make a periodic quote on or before the first day of the period to which the quote relates, you are to be treated as having *quoted your *ABN for all supplies from the supplier during that period, other than supplies in respect of which you have notified the supplier in accordance with subsection (3).
(3) If you are not entitled to *quote for a particular supply from the supplier during the period, you must notify the supplier of that fact at or before the time of the supply. The notification must be in the *approved form.
(4) You are guilty of an offence if you contravene subsection (3).
Maximum penalty: 20 penalty units.
Note 1: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.
Note 2: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit.
(5) Section 9-25 applies to a *quote that you are treated as having made under subsection (2) of this section for a particular supply.
Section 9-15 provides as follows in relation to the manner in which the quote must be made:

9-15 Manner in which quote must be made

(1) A *quote (including a periodic quote) must be in the *approved form.

(2) A *quote is not effective unless it is made at or before the time of the supply or *importation.

“Approved form” is defined in s 27-1 of the LCT Act to have the meaning given by s 995-1 of the Income Tax Assessment Act 1997 (Cth) which, in turn, provides that “approved form” has the meaning given by s 388-50 in Schedule 1 to the TAA. Section 388-50 states, as follows:
388-50 Approved forms
(1) A return, notice, statement, application or other document under a *taxation law is in the approved form if, and only if:
(a)it is in the form approved in writing by the Commissioner for that kind of return, notice, statement, application or other document; and
(b)it contains a declaration signed by a person or persons as the form requires (see section 388-75); and
(c)it contains the information that the form requires, and any further information, statement or document as the Commissioner requires, whether in the form or otherwise; and
(d)for a return, notice, statement, application or document that is required to be given to the Commissioner--it is given in the manner that the Commissioner requires (which may include electronically).
(1A) Despite subsection (1), a document that satisfies paragraphs (1)(a), (b) and (d) but not paragraph (1)(c) is also in the approved form if it contains the information required by the Commissioner. The Commissioner must specify the requirement in writing.
(2) The Commissioner may combine in the same *approved form more than one return, notice, statement, application or other document.
(3) The Commissioner may approve a different *approved form for different entities.
Example: The Commissioner may require high wealth individuals to lodge a different income tax return to that required to be lodged by an individual whose only income is a salary.
The Commissioner states on his website that the “quote” must be in the following format, which both parties agreed was the “approved form”:[1]
I hereby quote Australian business number <insert ABN> in relation to the supply of the luxury car as detailed above/attached.
Name of business:
Name of person authorised to quote:
Signature of person authorised to quote:
Date:
[1] Australian Taxation Office, Quoting an ABN viewed 12 June 2018.
A periodic quotation must be in the following format:[2]
I hereby quote Australian business number <insert ABN> in relation to the supply of all luxury cars obtained by me during the period <dd/mm/yy> to <dd/mm/yy> inclusive, except luxury cars about which I notify you to the contrary at or before the time of their supply.
Name of business:
Name of person authorised to quote:
Signature of person authorised to quote:
Date:
[2] Australian Taxation Office, Periodic Quotations ABN/#Periodicquotations viewed 12 June 2018.
Sections 9-20 and 9-25 of the LCT Act which are concerned with ineffective quotes state, as follows:

9-20 Incorrect quote nevertheless effective for certain purposes

If you *quote in circumstances in which you are not entitled to quote, or the quote is not in the *approved form, the quote is nevertheless effective for the purpose of subsection 5-10(2) or 7-10(3) (whichever is relevant), unless section 9-25 applies.

9-25 Quote not effective for certain purposes if there are grounds for believing it was improperly made

A *quote is not effective, so far as it would have resulted in you not paying luxury car tax, if at the time of the quote the person to whom the quote is made has reasonable grounds for believing that:
(a)you are not entitled to quote in the particular circumstances; or
(b)the quote is not made in the *approved form; or
(c)the quote is false or misleading in a material particular (either because of something stated in the quote or something left out).

THE FACTUAL BACKGROUND

The factual background of this matter is drawn from the affidavits of Mr Dimitrios Mavris and his accountant, Mr Malcom Davies, as well as their oral evidence at the hearing.
At the relevant time, Mr Mavris carried on an enterprise, as a sole trader, of selling new and used cars under the trading name Mavco Wholesale which he had started in or about December 2011. This was in addition to another business of renting cars that he was also involved in, through a related entity.
He registered for GST in April 2004 and reported his GST liability in quarterly tax periods, on a cash basis. He registered for LCT effective from 1 April 2011 and he obtained his wholesale car dealer license in December 2011. A small portion of the cars that he bought and sold were luxury cars, that is, vehicles that exceed the luxury car tax threshold for the purposes of the LCT Act. Mr Mavris claimed that that side of his business was unusual in the sense that he mostly bought and sold cheaper cars.
In July 2013, the Commissioner commenced an audit of Mr Mavris. The audit was initiated due to third party information from other GST and LCT audits of other car dealers. At the commencement of the audit, Mr Mavris had not lodged any of his BASs for the period 1 January 2010 to 31 March 2013. The Commissioner sent Mr Marvis several letters requesting him to lodge the outstanding BASs, but he failed to do so.
On 25 June 2015, the Commissioner issued Mr Mavris with default assessments for the quarterly tax periods ending 30 June 2012, 31 December 2012, 31 March 2013 and 30 September 2013. The assessments concerned Mr Mavris’s liability to pay GST and LCT with respect to supplies of eight luxury cars and GST on other commission and consulting income, as well as an administrative penalty for failing to lodge his BASs pursuant to s 284-75(3) of Schedule 1 of the TAA. The penalty was levied at the rate of 75% for the first tax period and at 75% plus an uplift of 20% for each of the subsequent tax periods pursuant to s 284-220(1) of Schedule 1 to the TAA.
In August 2015, Mr Mavris lodged an objection against the assessments. The objection was prepared by Mr Davies and relevantly stated in relation to the three luxury cars the subject of this proceeding that these supplies were not made by Mr Mavris and the invoices obtained by the Commissioner showing Mavco Wholesale as the seller were never issued by Mr Mavris. Furthermore, Mr Mavris claimed he was never in possession of the cars. It was not contended, at the objection stage, by Mr Mavris that he had received LCT quotes from the recipients.
In August 2016, the Commissioner allowed certain parts of Mr Mavris’s objection but disallowed other parts. A notice of amendment assessment was issued, and the assessed LCT liability was held to be $144,039. The penalties were reduced, on account of the lower tax shortfall, to $121,370.70.
On 28 September 2016, Mr Mavris applied to the Tribunal for a review of the Commissioner’s objection decision.
The transactions which were still in issue at the hearing, and which are the subject of this decision, relate to the following three supplies by Mr Mavris:
(a)a Mercedes G55 to Haberfield Automotives Pty Ltd on 17 May 2012 for $185,000;
(b)a McLaren to Auto Motori on 27 October 2012 for $365,000; and
(c)a Bentley Continental to Premier Wholesale on 30 October 2012 for $250,000.
THE EVIDENCE

In his affidavit affirmed on 20 September 2017, Mr Mavris adopted a different position to that set out in his objection. He claimed he had in fact made the supplies of the luxury cars. More importantly, for present purposes, he further claimed to have received LCT quotes from the respective recipients relieving him of his liability to LCT under s 5-10(2)(a) of the LCT Act. As the resolution of this case turns on the issue of whether the LCT quotes were received by Mr Mavris, I set out below his account of his dealings with respect to the three luxury cars.
Mr Mavris stated, and I accept, that he occasionally acquired more expensive cars and that these trades only arose because of his relationships with other dealers and, therefore, these trades were not in the ordinary course of his business. For example, he said he might know a dealer that had a demonstrator luxury car and another dealer who was looking to purchase a similar luxury car. In that situation, he would purchase the demonstrator car with the intention of reselling it because of the opportunity that arose. On other occasions, he would offer to help dealers by “booking” the cars into his name.
At the hearing, Mr Mavris explained that the practice of “booking” cars amongst dealers in the wholesale car industry involves registering the cars in different names of dealers on the database maintained by the NSW Roads and Maritime Services (“RMS”). Mr Mavris said that the way he came to be the “owner” of the three luxury cars was because of this so-called “booking” system, which he explained as follows:
…for instance, … the Bentley, I had a buyer for that car, and so what – what Premier Wholesale did was they booked the car out to me to say that I owned it and then that guy fell through and didn’t buy it. So then I said to him, “Listen, I don’t want this car anymore”. He goes, “Well, book it back to me”. They book it out so that they don’t cop any fines whilst I have the car… [3]
[3] Transcript P-24.
Mr Mavris stated that wholesalers of cars are exempt from stamp duty on the registration of cars which facilitates this “booking” system amongst them. Mr Mavris also stated that some dealers had outstanding fines with RMS and could not apparently register cars, so when he referred to helping dealers, he meant registering their cars through this “booking” system in his name on the RMS database, as they were unable or unwilling to register the cars.
The Mercedes

Mr Mavris said that the Mercedes was “booked out” to him by Haberfield Automotives Pty Ltd in or around August 2011 as a personal favour to Haberfield Automotives. He said that the proprietor of Haberfield Automotives told him that he could not put the Mercedes onto his books because he had some outstanding fines with the RMS and so Mr Mavris offered to have it “‘booked” to his name, which I understood to mean registered in his name.[4] Subsequently, in or around May 2012, the Mercedes was “booked” back by Mr Mavris to Haberfield Automotives, that is, it was registered in the name of Haberfield Automotives. Mr Mavris claimed not to have paid for the Mercedes nor to have received any money for the sale of the Mercedes even though the invoice in evidence stated the sale price as $185,000.
[4] Exhibit A1, Affidavit of Dimitrios Mavris affirmed on 20 September 2017, paragraph 19.
A copy of the LCT quote that Mr Mavris said he obtained from Haberfield Automotives prior to him booking the Mercedes back was attached to Mr Mavris’s affidavit.[5]
[5] Annexure DM3.
The McLaren
Mr Mavris said that the McLaren was similarly “booked out” to him by Premier Wholesale, another car dealer, in or around September 2012 because it appeared that Mr Mavris might have a buyer for the car. Mr Mavris claimed that the McLaren was driven by a contact of his, who was considering purchasing it. However, his contact decided not to buy it and the McLaren was then “booked” to Auto Motori, a different car dealer. This happened following a discussion Mr Mavris had with the proprietor of Premier Wholesale on or about 23 October 2012 where that proprietor said to him “just book it out to Auto Motori”.[6] Mr Mavris said that he did not pay any money for the McLaren nor did he receive any money on the transfer of the McLaren even though the invoice showed the sale price as $365,000.
[6] Exhibit A1, Affidavit of Dimitrios Mavris affirmed on 20 September 2017, paragraph 32.
A copy of the LCT quote that Mr Mavris said he obtained from Auto Motori prior to him booking the McLaren to Auto Motori was attached to Mr Mavris’s affidavit.[7]
[7] Annexure DM5.
The Bentley
Mr Mavris stated that he acquired the Bentley from Premier Wholesale on 9 October 2012 through this same kind of “booking” arrangement. Mr Mavris stated that he did not recall the exact details as to why the Bentley was registered in his name, but it could have been because he had a possible buyer. Mr Mavris stated that he recalls having a conversation with the proprietor of Premier Wholesale on or about 23 October 2012 in relation to the “‘booking back” of the Bentley because he did not have a buyer for it and that he subsequently “booked” it back.[8] Curiously, the RMS records show that the transfer back by Mr Mavris to Premier Wholesale occurred on 9 October 2012, the same day on which Mr Mavris acquired the Bentley from Premier Wholesale and before his discussion about “booking” it back to Premier Wholesale apparently took place.[9]
[8] Exhibit A1, Affidavit of Dimitrios Mavris affirmed on 20 September 2017, paragraphs 37- 44.
[9] Supplementary T-Documents, page 223.
Mr Mavris stated that he did not recall receiving a LCT quote from Premier Wholesale. Additionally, Mr Mavris stated “I do recall thinking that I did not need to receive such a quotation, as I was transferring the Bentley back to its original supplier”.[10] This statement is, of course, at odds with the fact that Mr Mavris had previously obtained a LCT quote from a dealer with whom he had undertaken similar transactions, that is, he transferred the Mercedes to the same dealer who had supplied him with the Mercedes (see [35] to [36] above). Of course, it is also inconsistent with Mr Mavris’s original version of events throughout the tax audit, namely, that he did not recall ever making these supplies of luxury cars.

[10] Exhibit A1, Affidavit of Dimitrios Mavris affirmed on 20 September 2017, paragraph 41.

The LCT Quotes

As noted above, Mr Mavris had attached copies of the LCT quotes he claimed to have received in respect of the Mercedes and the McLaren to his affidavit (see [36] and [38] above). The Commissioner was skeptical about Mr Mavris’s version of events. On 6 February 2018, only a few weeks before the hearing, the Commissioner wrote to Mr Mavris, care of Mr Davies, asking him to produce the original LCT quotes that he claimed to have received, for inspection before 20 February 2018.[11] The Commissioner stated in his letter that the “authenticity of these documents is in issue”.
[11] Exhibit R1.
The production of the LCT quotes did not happen at that time. According to Mr Davies, who gave evidence at the hearing, this was because he had no instructions from Mr Mavris to act, and he was also unwilling to liaise with the Commissioner on behalf of Mr Mavris, in circumstances where he had not been paid by Mr Mavris.
At the hearing on 1 March 2018, the original handwritten copy of the LCT quote for the Mercedes was produced.[12] This matched the copy of the LCT quote for the Mercedes which was attached to the affidavit of Mr Mavris, already in evidence (see [36] above).
[12] Exhibit A4.
Mr Davies claimed to have provided the original LCT quote for the McLaren at an earlier meeting with the Commissioner’s representatives on 1 June 2017.[13] This was disputed by the Commissioner’s instructing solicitor at the hearing, who asserted that only a copy of the LCT quote for McLaren had been provided.[14]
[13] Exhibit A1, Affidavit of Dimitrios Mavris affirmed on 20 September 2017, Annexure DM5; see also Exhibit R2.
[14] Exhibit R2.
In relation to the Bentley, besides arguing that he didn’t think he needed to obtain a LCT quote from the dealer from whom he had earlier purchased the Bentley without being charged LCT, Mr Mavris also relied on legal arguments at the hearing to the effect that he had in fact obtained a LCT quote. I deal with these legal arguments below.

The Shortcomings in the Evidence

There were many inconsistencies in the evidence of Mr Mavris. The Commissioner was rightly circumspect about Mr Mavris’s story. As noted above, Mr Mavris did not initially recall having had any transactions with the three luxury cars the subject of this dispute. His version of events changed in his affidavit, by which time he claimed that while he did not recall ever personally issuing invoices for the three luxury cars, he then proceeded to recall specific conversations about “booking” out the cars. He also claimed to have obtained LCT quotes in relation to the Mercedes and the McLaren and attached copies of the LCT quotes to his affidavit.[15]
[15] Exhibit A1, Affidavit of Dimitrios Mavris affirmed on 20 September 2017, paragraphs 23, 34, and 42.
It was not entirely clear to me why the LCT quotes, which were critical to the issue of Mr Mavris’s LCT liability had not been discovered earlier, for example, at the objection stage, especially if, as Mr Mavris claimed, he had thoroughly searched his records for all relevant documents to provide to Mr Davies at the time of the audit.[16] This statement was, however, contrary to another statement by Mr Mavris that he didn’t provide the LCT quotes at the time because he had recently moved, and his records were in transit.[17]
[16] Transcript P-38-39.
[17] Transcript P-42.
What is clear is that Mr Mavris had kept the existence of the LCT quotes to himself as he did not reference them during the audit nor in the objection that had been prepared by Mr Davies on his behalf.[18] It is also clear that Mr Mavris had kept his accountant in the dark about his dealings in luxury cars. Mr Davies stated in his oral evidence that, although he had been engaged by Mr Mavris in or about December 2012 to assist him to lodge his outstanding BASs, he was unaware that Mr Mavris had any dealings in luxury cars until the Commissioner’s audit. Accordingly, I find that Mr Mavris was absent-minded and indifferent to his LCT compliance obligations. This finding is supported by the fact that Mr Mavris had not lodged his BASs for more than two years when the Commissioner commenced the GST and LCT audit of him.
[18] An order was made by the Tribunal at the hearing on 2 March 2018 pursuant to s 14ZZK(a) of the TAA allowing Mr Mavris to add the LCT quotes as additional grounds in his objection.
I accept the evidence of Mr Mavris on the so-called “booking” system although, as explained above, nothing turns on these arrangements for the purposes of LCT liability as the fact of whether the supplies of the luxury cars were for consideration is irrelevant.
I do not accept that Mr Mavris did not understand his LCT obligations. I find that he knew what was relevantly required with respect to quoting as he had obtained and produced LCT quotes in relation to other supplies of luxury cars in similar circumstances.
IS MR MAVRIS LIABLE TO LUXURY CAR TAX IN RESPECT OF THE MERCEDES, THE MCLAREN AND THE BENTLEY?
The Commissioner contended that Mr Mavris made a taxable supply of a luxury car within the meaning of s 5-10(1) of the LCT Act with respect to the Mercedes, the McLaren and the Bentley. The Commissioner relied upon the invoices recording the relevant transactions, which were consistent with data he obtained from the RMS database. The Commissioner was suspicious about the veracity of the LCT quotes regarding the Mercedes and the McLaren and urged me to exercise caution with Mr Mavris’s testimony. Specifically, the Commissioner pointed out that the evidence of Mr Mavris needed to be approached critically, in all the circumstances, citing comments made by Hill J in Imperial Bottleshops Pty Ltd & Egerton v Federal Commissioner of Taxation (1991) 22 ATR 148 at 155 and, more recently, by O’Loughlin DP in LDGL and Commissioner of Taxation [2017] AATA 2779 at [44] about witnesses who make self-serving statements without any corroborating evidence. The Commissioner contended that, having regard to the overall unreliability and inconsistency in Mr Mavris’s evidence, the Tribunal should conclude that he failed to discharge his onus of proof.
Mr Mavris contended that, with respect to the Mercedes and the McLaren, he received the LCT quotes from the recipients of those cars at the relevant time and that, therefore, the exception in s 5-10(2)(a) of the LCT Act applies and no taxable supply was made within the meaning of s 5-10(1) of the LCT Act. As already noted above, Mr Mavris developed this argument after the objection decision was made, at the time of filing his evidence in September 2017. Notwithstanding that, I am persuaded that the LCT quotes in respect of the Mercedes and the McLaren are reliable and probative of the fact of the recipients having provided those LCT quotes at the relevant time, as required by the LCT Act, namely, before Mr Mavris made the supplies of those luxury cars to the recipients. The fact that Mr Mavris produced only a photocopy of the LCT quote in respect of the McLaren was strange but nevertheless satisfactory, even though the whereabouts of the original copy was unknown.
The position with respect to the Bentley is different as there was no LCT quote to which Mr Mavris could point, as with the other two luxury cars. With respect to the Bentley, counsel for Mr Mavris relied on Exhibit A2, being the tax invoice issued by Premier Wholesale to Mavco Wholesale dated 9 October 2012 which contained the ABN of Premier Wholesale. Counsel for Mr Mavris argued Exhibit A2 constituted a “quote” for the purposes of the LCT Act because it fits within the definition of “quote” under s 27-1 of the LCT Act, that is, it satisfies the requirement that the recipient (Premier Wholesale) “quote an ABN.” Counsel for Mr Mavris further argued Exhibit A2 is for “the supply” of the Bentley pursuant to s 5-10(2)(a), referencing the supply by Mr Mavris to Premier Wholesale. This was said to follow because the supply and the re-supply of the Bentley between Premier Wholesale and Mr Mavris constituted a single transaction. Alternatively, Exhibit A2 was said to be a “periodic quote” pursuant to s 9-10 of the LCT Act on the basis that it was “for supplies that [Premier Wholesale] intend to receive from a supplier during the period covered by the periodic quote”.
I reject the submissions of counsel for Mr Mavris and do not agree that the tax invoice issued by Premier Wholesale to Mr Mavris is a LCT quote (including a periodic one) in relation to the subsequent supply by Mr Mavris of the Bentley to Premier Wholesale on 27 October 2012. Exhibit A2 is, as expressly stated on its face, a tax invoice in relation to the supply made by Premier Wholesale to Mr Mavris on 9 October 2012. It is not a document which quotes the recipient’s ABN “in relation to a supply of a luxury car” made by Mr Mavris and so fails the criteria of quoting in s 9-5(1) of the LCT Act. That is, Exhibit A2 is in relation to a supply of a luxury car going in the other direction, namely, a supply made by Premier Wholesale to Mr Mavris. The related argument that the supply and the re-supply for the Bentley constituted a single transaction and should somehow be conflated is entirely without foundation as both the GST Act and the LCT Act characterise such transactions separately with their respective tax consequences. Exhibit A2 is also not a “periodic quote” as no period is specified as required by s 9-10 of the LCT Act.
Counsel for Mr Mavris further argued that s 9-20 undermined the need to use the “approved form” designated in s 9-15(1) of the LCT Act. As set out above, ss 9-20 and 9-25 broadly provide that a quotation, even if wrongly made or not made in the approved form, is nevertheless effective, subject to specified exceptions. However, the point of difference in the present case is that there was no LCT quote made by Premier Wholesale to Mr Mavris, that is, there wasn’t any document produced by Premier Wholesale in the relevant context, that is, in relation to a supply of a luxury car by Mr Mavris. The situation may have been different under ss 9-20 and 9-25 of the LCT Act if there was a deficient LCT quote.
IS MR MAVRIS LIABLE TO ADMINISTRATIVE PENALTY AT THE UPLIFT PENALTY RATE? IF SO, SHOULD THE PENALTY BE REMITTED?
The Commissioner’s position with reference to the issue of administrative penalty was relatively straightforward. The Commissioner argued that administrative penalties were imposed under s 284-75(3) of Schedule 1 to the TAA because Mr Mavris failed to lodge his BASs by the due dates, the BASs were necessary for the Commissioner to determine Mr Mavris’s tax-related liability, and the Commissioner determined the tax-related liability without the BASs. This was incontrovertible in circumstances where, as noted above, Mr Mavris had failed to lodge his BASs for a considerable number of tax periods. The base penalty amount was calculated at 75% of the tax related liability concerned: s 284-90(1), Item 7 of the TAA.
The Commissioner further determined that the base penalty amount should be increased by 20% pursuant to s 284-220 with respect to the tax period ended 31 December 2012, including by reason of Mr Mavris’s continued failure to lodge BASs despite numerous requests to do so.
Finally, the Commissioner determined that there were no grounds to exercise his discretion to remit all or part of the penalties under s 298-20(1) of the TAA.
Counsel for Mr Mavris contended that if there was no LCT liability for the Mercedes in respect of the tax period ended 30 June 2012, it followed that there should be no 20% uplift imposed for the subsequent tax period ended 31 December 2012 when the McLaren and the Bentley were supplied, referencing s 284-220(2)(c) of the TAA.
Counsel for the Commissioner submitted that it is unnecessary for the Tribunal to consider what the position would be if there was found to be no LCT liability on the part of Mr Mavris for the quarter ended 30 June 2012, because s 284-220(1)(e) TAA would still operate with respect to the subsequent tax periods. That paragraph relevantly provides that the base penalty is increased by 20% if “your liability to a penalty arises under subsection 284-75(3) and you were previously liable to a penalty under that subsection”, which covers Mr Mavris’s situation. This is because there would still be a base penalty that applied with respect to the GST liability for the earlier tax period as Mr Mavris did not submit at any stage that no GST was payable in respect of any of the three luxury cars.
I agree with the submissions of counsel for the Commissioner that, as it was accepted by the parties that there was a GST liability owing for the previous tax period ended 30 June 2012, Mr Mavris is liable to a 20% uplift in penalty. Accordingly, the administrative penalty applicable to the LCT shortfall in the tax period ended 31 December 2012 is the base penalty of 75% uplifted by 20%.
With respect to the issue of whether the penalty should be remitted, counsel for Mr Mavris argued that any penalty payable should be remitted in full or in part because none of the transactions were in the ordinary course of Mr Mavris’s business and Mr Mavris did not know nor ought reasonably to have known that LCT would have been payable. Counsel for Mr Mavris further argued that Mr Mavris is not in a financial position to be able to pay the penalties.
The question for the Tribunal is whether it is satisfied, having regard to the taxpayer’s particular circumstances, that it is appropriate to remit the penalty in whole or in part: Sanctuary Lakes Pty Ltd v Commissioner of Taxation (2013) 212 FCR 483 at [249] per Griffiths J.
I was not persuaded by Mr Mavris that the administrative penalty should be remitted to any extent, even considering his precarious financial predicament, about which I was given limited information at the hearing. The evidence strongly suggests that Mr Mavris was indifferent to his tax compliance having not lodged GST returns for some 2 years and that factor weighs heavily against any leniency in the present case. I agree with the submissions of counsel for the Commissioner that remission decisions need to consider the fact that a major objective of the penalty regime is to promote consistent treatment by reference to specified rates of penalty and, furthermore, the power to remit penalties must be exercised for a proper purpose in accordance with the objects of the TAA. Mr Mavris’s particular circumstances did not warrant remission of penalties.

CONCLUSION

The objection decisions must be set aside since Mr Mavris persuaded me that he is not liable to LCT on the Mercedes and the McLaren. The appropriate course is to remit the matter to the Commissioner for the issue of amended assessments of LCT and administrative penalty on the reduced tax shortfall, in accordance with these reasons.

I certify that the preceding 65 (sixty-five) paragraphs are a true copy of the reasons for the decision herein of Ms G Lazanas, Senior Member.

...........................[sgd].............................................

Associate

Dated: 19 June 2018

Date of hearing:	2 March 2018
Date final submissions received:	28 March 2018
Counsel for the Applicant:	Mr N Gangemi
Representative for the Applicant:	Mr M Davies
Counsel for the Respondent:	Ms M Ellicott
Solicitors for the Respondent:	ATO Review and Dispute Resolution