McKinnon Holdings (NSW) Pty Ltd as Trustee for the McKinnon Equipment Trust and Commissioner of Taxation (Taxation)

McKinnon Holdings (NSW) Pty Ltd as Trustee for the McKinnon Equipment Trust (the Applicant) sought to claim input tax credits for the tax period ended 30 September 2010, arising from an agreement for the sale and purchase of assets. The Commissioner of Taxation disallowed these credits. The Applicant appealed this decision to the Administrative Appeals Tribunal.

The primary legal issue before the Tribunal was whether the Applicant had provided consideration to the vendor, Excavation, for the supply of the assets, which would entitle it to claim input tax credits under the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act). The Applicant advanced two arguments regarding the nature of the consideration provided: firstly, that the consideration was the unencumbered value of the assets, and secondly, that it was the value of the liabilities assumed under the agreement.

The Tribunal considered the terms of the agreement, particularly clauses relating to the "Completion Amount" and "Payment," and concluded that the parties' manifest intention was for the net amount paid on settlement to be nil or minimal, given that the liabilities attached to the assets exceeded the purchase price. Consequently, no monies were paid by the Applicant to Excavation upon completion. The Tribunal held that, under section 9-15 of the GST Act, no payment was made in connection with the supply. Furthermore, even if consideration had been provided, under section 29-10(2)(c), if accounting on a cash basis, no input tax credit is attributable to a tax period in which none of the consideration is provided. Regarding the second argument, the Tribunal found that the Applicant bore the onus of demonstrating the consideration provided by the assumption of liabilities and its economic value, which it failed to do, merely asserting the face value of the liabilities.

The Tribunal affirmed the Commissioner's decision. The Applicant may be entitled to input tax credits if evidence of payments is forthcoming, subject to time limits and the requirement for a tax invoice, and only in the quarter in which payment is actually made, as the Applicant accounts on a cash basis.