Royal Lion Capital Pty Ltd and Commissioner of Taxation (Taxation)

[2021] AATA 3049

Royal Lion Capital Pty Ltd and Commissioner of Taxation (Taxation) [2021] AATA 3049 (25 August 2021)

Division: SMALL BUSINESS TAXATION DIVISION

File Number(s):2020/4595      

Re:Royal Lion Capital Pty Ltd  

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Member D Mitchell

Date:25 August 2021

Place:Brisbane

The Tribunal affirms the decision under review meaning that the assessments made on         3 April 2019 are to be varied to the extent set out in the Respondent’s informal review decision as outlined in the table at paragraph 13 of this decision.

.............................[SGD]..........................

Member D Mitchell

CATCHWORDS

TAXATION – goods and services tax – bank account methodology audit – was the Applicant required to be registered for GST – did the Applicant make taxable supplies – Applicant’s burden to prove assessment excessive or otherwise incorrect – which assessments  were the subject of the objection decision – decision under review affirmed

LEGISLATION

Administrative Appeals Act 1975 (Cth)

A New Tax System (Goods and Services Tax) Act 1999 (Cth)

A New Tax System (Goods and Services Tax) Regulations 2019 (Cth)

Taxation Administration Act 1953 (Cth)

CASES

Bosanac v Commissioner of Taxation [2018] FCA 946

Bosanac v Commissioner of Taxation [2019] FCAFC 116
Bosanac v Commissioner of Taxation [2019] HCA 41
Briginshaw v Briginshaw (1938) 60 CLR 336
Imperial Bottleshops Pty Ltd and William John King Egerton v Federal Commissioner of Taxation (1991) 22 ATR 148

Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63

REASONS FOR DECISION

Member D Mitchell

25 August 2021

INTRODUCTION

1. Royal Lion Capital Pty Ltd (the Applicant) is seeking review of an objection decision of the Commissioner of Taxation (the Respondent) dated 29 May 2020.[1]

   [1] Exhibit 1, T Documents, T2, page 7, Objection Decision.

2. The reviewable decision disallowed the Applicant’s objection to assessments of net GST amounts for the tax periods from 1 April 2018 to 31 December 2018 (the Tax Periods).[2]

   [2] Exhibit 1, T Documents, T2, pages 8-11, Reasons for Objection Decision.

   BACKGROUND

3. The Applicant was incorporated on 20 December 2017 and on the same date registered for a tax file number (TFN) and Australian Business Number (ABN). The Applicant’s main business activity was described as ‘management consulting service’. The Applicant did not register for Goods and Services Tax (GST).[3]

   [3] Exhibit 1, T Documents, T2, page 10, paragraphs 22, 33-35, Reasons for Objection Decision and Exhibit 3, Respondent’s Outline of Submissions, page 2, paragraph 10.

4. The Applicant’s sole director and company secretary since its incorporation is Mr Mohammad Mustapha. The Applicant’s registered address is also Mr Mustapha’s residential address.[4]

   [4] Exhibit 3, Respondent’s Outline of Submissions, page 2, paragraph 10.

5. The Respondent undertook a covert audit into the Applicant’s GST affairs using a bank account methodology.[5] The Respondent formed the view that the Applicant had exceeded the GST registration turnover threshold of $75,000 from 1 April 2018 and that it was carrying on an enterprise of providing investment services.[6]

   [5] Exhibit 2, Hearing Bundle, R1, Respondent’s Statement of Issues, Facts and Contentions, page 60, paragraph 9.

   [6] Exhibit 1, T Documents, T3, page 14, Audit reasons for decision.

6. Based on information obtained in relation to 22 deposits into two bank accounts held with the Commonwealth Bank the Respondent calculated the Applicant’s quarterly sales and corresponding GST payable for the Tax Periods.[7] The Respondent did not allow input tax credits in respect of withdrawal amounts on the bank statements.[8]

   [7] Exhibit 1, T Documents, T3, 14-19, Audit reasons for decision.

   [8] Exhibit 1, T Documents, T3, pages 14-16, Audit reasons for decision.

7. At the conclusion of the audit, on 3 April 2019, the Respondent registered the Applicant for GST and issued an audit completion letter with reasons for decision and a notice of assessments of net amount for the Tax Periods.[9]

   [9] Exhibit 1, T Documents, T3, pages 12-19, Audit reasons for decision and Appendix A – Table of deposits into bank account which represent taxable supplies and T4, pages 20-21, Notice of assessments of net amount for the tax period 1 April 2018 to 31 December 2018.

8. On the same day, a notice of assessments of penalty for failing to provide a document was issued by the Respondent.[10]  The Applicant did not object to the imposition of penalties and as such that assessment is not before this Tribunal.

   [10] Exhibit 1, T Documents, T5, pages 22-23, Notice of assessments of penalty for failing to provide a document.

9. At the instigation of the Applicant, a meeting was convened on or around 1 May 2019, which was attended by the Applicant’s then legal representative, Mr Mustapha and the Respondent’s audit officer.  At that meeting the Applicant was made aware of what documentation was required in order for it to prove that deposits into its bank accounts were not to be classified as a taxable supply. It was clearly outlined by the Respondent’s representative that all general comments would require supporting documentation and that a sentence explanation was not enough to prove that a taxable supply had not been made.[11]

   [11] Exhibit 1, T Documents, T2, page 8, paragraphs 8-10, Reasons for Objection Decision.

10. On 31 May 2019, the Applicant, through its legal representative, provided a response together with attachments to the Respondent in relation to the audit decision.[12]

    [12] Exhibit 1, T Documents, T6, pages 24-74, Email from Applicant’s legal representative with response to audit position, letter signed by Mr Mustapha and associated annexures.

11. The Applicant provided explanations in relation to all 22 transactions in question. Of those transactions the Applicant conceded that 8 transactions totalling $91,305.87 were commission and should be classified as GST income.[13] Of the other transactions the Applicant submitted that they related to loans to the Applicant from individuals or were interest income received from Bnktown relating to a loan between Bnktown as the borrower and the lenders for which the Applicant acted as an intermediatory.[14]

    [13] Exhibit 1, T Documents, T6, page 31, Letter signed by Mr Mustapha (noting that 7 transactions are listed in the dot point below the table for the period 1 October 2018 – 31 December 2018, however 8 amounts within the table all share the same label as “Loan and Profit Share Arrangement”).

    [14] Exhibit 1, T Documents, T6, pages 30-32, Letter signed by Mr Mustapha.

12. On 23 July 2019, the Respondent notified the Applicant that it had completed the informal review of the audit.  The Respondent accepted that four of the transactions in question were not consideration for taxable supplies made by the Applicant and issued amended assessments on the same day.[15] The amended assessments resulted in a decrease of the net amount for the 30 June 2018 and 31 December 2018 quarters and no change to the net amount for the 30 September 2018 quarter.[16]

    [15] Exhibit 1, T Documents, T7, pages 75-78, Response to informal review of taxpayers information supplied on 31 May 2019 with revised Appendix A – Table of deposits into bank account which represent taxable supplies and T8, pages 79-80, Notice of amended assessments of net amount for the tax period 1 April 2018 to 31 December 2018.

    [16] Exhibit 1, T Documents, T8, pages 79-80, Notice of amended assessments of net amount for the tax period 1 April 2018 to 31 December 2018.

13. The change of position in relation to the Applicant’s GST shortfall amounts as assessed by the Respondent between audit and informal review are summarised as follows:[17]

    [17] Exhibit 3, Respondent’s Outline of Submissions, page 4, paragraph 19.

Tax Period	Audit taxable supplies       3 April 2019	GST payable/ shortfall[18]	Post-audit taxable supplies         23 July 2019[19]	GST payable/shortfall[20]
01 April – 30 June 2018	$153,000	$13,909	$116,500	$10,590
01 July – 30 Sept 2018	$29,000	$2,636	$29,000	$2,636
01 Oct – 31 Dec 2018	$271,306	$24,664	$221,306	$20,118
Total shortfall				$33,344

[18] Exhibit 1, T Documents, T4, pages 20-21, Notice of assessments of net amount for the tax period 1 April 2018 to 31 December 2018.

[19] Resulting from Exhibit 1, T Documents, T7, pages 75-78, Response to informal review of taxpayers information supplied on 31 May 2019 with revised Appendix A – Table of deposits into bank account which represent taxable supplies.

[20] Exhibit 1, T Documents, T8, pages 79-80, Notice of amended assessments of net amount for the tax period 1 April 2018 to 31 December 2018.

1. On 23 September 2019, the Applicant lodged an objection.[21] The Applicant provided that the reason for objecting to the assessments was “Majority of credits deposited into the business bank accounts were treated as GST Income when they ought to have been loan. Loan agreements were rejected.”[22] The Applicant further provided that documentation to support its objection would be provided once a case officer was presented.[23]

   [21] Exhibit 1, T Documents, T9, pages 81-85, Applicant’s notice of objection.

   [22] Exhibit 1, T Documents, T9, page 83, Applicant’s notice of objection.

   [23] Exhibit 1, T Documents, T9, page 85, Applicant’s notice of objection.

2. On 18 February 2020, the Respondent acknowledged receipt of the Applicant’s objection and requested that further information be provided.[24]

   [24] Exhibit 1, T Documents, T10, pages 86-88, Acknowledgement of objection and request to provide evidence.

3. On 19 March 2020, the Applicant provided a letter outlining explanations in relation to the transactions in dispute together with supporting documents.[25] The Applicant provided information in relation to: [26]

   ·the interest rate breakdowns in relation to the loans made to Bnktown;

   ·how the deposits described as interest income from Bnktown were distributed to the lenders; and

   ·two amounts that it submitted were loans.

   [25] Exhibit 1, T Documents, T11, pages 89-135, Letter from Applicant with annexures.

   [26] Exhibit 1, T Documents, T11, pages 89-135, Letter from Applicant with annexures.

4. On 29 May 2020, the Respondent disallowed the Applicant’s objection in relation to the Tax Periods, finding that the Applicant failed to provide any probative evidence to support its contentions.[27] However, it should be noted that the Applicant’s objection has been taken to relate to the assessments issued at the end of the audit and as such the true objection decision allowed the Applicant’s objection in part for the 30 June 2018 and 31 December 2018 quarters and refused the Applicant’s objection in full for the 30 September 2018 quarter.  This objection decision was consistent with the Respondent’s decision upon informal review.[28]

   [27] Exhibit 1, T Documents, T2, pages 7-11, Objection Decision and reasons for decision.

   [28] See paragraphs 64-66 of these reasons for decision for explanation on the scope of the Applicant’s objection and the effect of the resulting objection decision.

5. On 29 July 2020, the Applicant made an application to this Tribunal for review of the objection decision.[29]

   [29] Exhibit 1, T Documents, T1, pages 1-6, Application for review of decision.

6. A Hearing was held by Microsoft Teams on 30 July 2021.  At Hearing the Applicant was represented by Mr Mustapha as its sole director, who gave evidence under affirmation.

   THE LAW

7. The relevant law in this matter includes the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act) and the Taxation Administration Act 1953 (Cth) (TAA 1953).

8. Where a person disagrees with an amended assessment issued by the Respondent they may object to that decision.[30] Following a review of the objection, an objection decision is made by the Respondent.[31]

   [30] Following the requirements set out in Part IVC of the TAA 1953.

   [31] Section 14ZY of the TAA 1953.

9. Where a taxpayer is dissatisfied with an objection decision made by the Respondent they may apply to the Tribunal for a review of the decision or appeal to the Federal Court against it.[32]

   [32] Section 14ZZ of the TAA 1953.

10. The Applicant in exercising its right to seek review of the Respondent’s objection decision has, by virtue of section 14ZZK(b)(i) of the TAA 1953, the burden of proving that the assessments for the Tax Periods in dispute are excessive or otherwise incorrect and what those assessments should have been.

11. The Tribunal is not bound by the rules of evidence and it may inform itself on any matter in such a manner as it thinks appropriate.[33] However, in Briginshaw v Briginshaw (1938) 60 CLR 336 Dixon J (as he then was) considered the relevance of the civil or balance of probabilities standard of proof in Tribunal proceedings. For the Applicant to persuade this Tribunal of the facts it offers to demonstrate that the amended assessments were excessive and as such incorrect and what the assessments should have been:[34]

    …. the tribunal must feel an actual persuasion of its occurrence or existence ... It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality… it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony, or indirect inferences.

    [33] Section 33(1)(c) of the Administrative Appeals Act 1975 (Cth).

    [34] Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362.

12. The discharge of the Applicant’s evidentiary burden in this matter must be considered keeping in mind that the evidence said to support the Applicant’s position is uniquely within the Applicant’s possession or control.[35]

    [35] Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63, per Latham CJ at 87-88.

13. The GST Act provides that an entity must pay the GST payable on any taxable supply they make.[36]

    [36] Section 9-40 of the GST Act.

14. A  taxable supply is made by an entity if the supply was made for consideration; in the course or furtherance of an enterprise being carried on by the entity; is connected with the indirect tax zone; and the entity is required to be registered for GST, unless to the extent that the supply is GST-free or input taxed.[37]

    [37] Section 9-5 of the GST Act.

15. Consideration includes any payment, or any forbearance, in connection with a supply of anything and in response to or for the inducement of a supply of anything.[38]

    [38] Section 9-15 of the GST Act.

16. An enterprise is an activity, or series of activities, done in the form of a business or in the form of an adventure or concern in the nature of trade.[39]

    [39] Section 9-20 of the GST Act.

17. An entity is required to be registered under the GST Act if it is carrying on an enterprise and its GST turnover meets the registration turnover threshold.[40] The GST turnover threshold applicable to the Applicant is $75,000.[41]

    [40] Section 23-5 of the GST Act.

    [41] Section 23-15 of the GST Act and regulation 23-15.01 of the A New Tax System (Goods and Services Tax) Regulations 2019 (Cth).

18. The Respondent must, even if the entity has not applied for registration, register an entity for GST if it is satisfied that the entity is required to be registered.[42]

    [42] Section 25-5 of the GST Act.

    ISSUES

19. The issues for determination by the Tribunal are:

    (a)whether the Applicant was required to be registered for GST; and if so

    (b)whether the Applicant has discharged its burden of proof to establish that the GST assessments for the Tax Periods were excessive or otherwise incorrect and what the assessments should have been.

    CONSIDERATION

20. Each application is considered on its own merits. In matters of this kind the Applicant bears the burden of proving that the GST assessments were excessive or otherwise incorrect and what those assessments should have been.

21. In Bosanac v Commissioner of Taxation [2018] FCA 946, Stewart J found at [9]:[43]

    The onus is on the taxpayer to prove on the balance of probabilities the extent to which an impugned assessment is excessive.  Where a taxpayer fails to retain records which evidence the course of a business, or fails to create such documents, he or she may well face a great difficulty in demonstrating excessiveness.  This was the very problem which the applicant faced here.

    [43] Which was endorsed by the Full Federal Court and High Court in Bosanac v Commissioner of Taxation [2019] FCAFC 116 and Bosanac v Commissioner of Taxation [2019] HCA 41, respectively.

22. That is the very problem faced by the Applicant in this matter. The concerns raised by the nature of the evidence provided and scarcity of supporting source documents were summarised by the Respondent, with which the Tribunal agrees, as follows:[44]

    [44] Exhibit 3, Respondent’s Outline of Submissions, pages 8-10, paragraph 40.

    40.The Applicant’s evidence can properly be described as lacking and unreliable:

    (a)the Applicant has not given any real description of its business activities beyond stating it was an intermediary between Bnktown and the lenders and it made payments at the direction of the lenders.  This absence of evidence of any formal documentation about its business dealings transacted in the 2869 and 0033 CBA accounts is in spite of the significant sums that were passed through the accounts.

    (b)in the Applicant’s letter of 31 May 2019, Mr Mustapha stated that “Monies received as Interest Income relating to a loan between Bnktown as the borrower and the lender being either Filomina, Angelo Russo, or related entity or on the direction of Filomina and Angelo. The company acts as an intermediary.  Please find attached as Annexure “A” supporting bank statements and Loan Agreements.”  However, the “supporting bank statements” of the Applicant that it provided in support of its assertions are merely undated records of transactions that are already known to the Commissioner from banking records obtained direct from the CBA to carry out the audit.

    (c)it failed to provide all the information that would have assisted the Commissioner and now the Tribunal, including:

    i.failure to supply copies of the investment loans between Bnktown and the lenders;

    ii.failure to supply a copy of the purported loan from Rabbih Kassir, and evidence of the repayment with interest of the purported loan from Mohamad Kassem; and

    iii.failure to provide complete copies of the Applicant’s bank statements.

    (d)the Applicant has not provided any evidence of the basis for which amounts were paid to the various “interest income” recipients.

    (e)in relation to the deposit of $9,200 on 4 December 2018, the Applicant has given inconsistent explanations about it, ascribing to it the character of both “Income inclusive of GST” and “interest income from Bnktown”.  Although changing the nature of the $9,200 deposit from GST income to interest income in its second letter of March 2020, the Applicant does not however include the payment in the Table of interest income amounts to be disbursed to the lenders in that quarter.

    (f)The Applicant has not explained what became of the remainder amounts each quarter between what it said was received as interest income and what interest it said was distributed to the lenders:

Tax Period	Interest income from Bnktown into 2869	Payments to Russo and Kyriakou entities as claimed
1 Apr to 30 Jun 2018	$76,500	$41,000
1 July to 30 Sep 2018	$29,000	$25,000
1 Oct to 31 Dec 2018	$50,000	$41,000

(g)The Applicant has not explained how it dispersed the purported cash deposit of $40,000 interest income from Bnktown deposit into account ending 0033 on 2 May 2018.

(h)The Applicant’s Table C of entities to which it claims it distributed interest income in the last relevant quarter are not consistent with the transaction records it provided.  For example, in Table C the Applicant claims to have transferred $20,000 to Australasian Global Investment Unit Trust on 23 October 2018, however, the transaction record supplied by the Applicant records the recipient as “cam.”  The Commissioner has no information whatsoever about “cam.”   Similarly, the Applicant claims to have transferred a further $5,000 to Australasian Global Investment Unit Trust on the same date, however the transaction record supplied by the Applicant records the recipient as “Wenworth Williams Tr.”  Annexure “A” to Mr Mustapha’s statutory declaration is referenced at item 5 as providing the names of the recipients of the interest income.  It is noted that Annexure “A” names the entities in Table C (and not those in the transaction records).

[Footnotes omitted]

1. The evidence provided by Mr Mustapha at Hearing in his capacity as director and sole operator of the Applicant did not assist in providing any clarity to what the true GST assessment position was, if it was in fact different to that being contended by the Respondent.

2. Mr Mustapha explained to the Tribunal that the Applicant was initially set up to act as an intermediary between lenders and borrowers.  The Applicant would secure funds to be lent to a borrower who would pay 10-15% interest per 6 to 8 weeks.  The Applicant would offer the lender a return of, for example, 10% interest per 6 to 8 weeks, charge the borrower 15% interest for that period, with the difference in the interest rate being the Applicant’s profit.

3. Mr Mustapha contended that the Applicant was not receiving a commission nor was it earning any income for the services it had provided; it makes profits from the interest based on the margin.  He told the Tribunal that the profit is paid to the Applicant and then distributed accordingly.

4. Mr Mustapha’s evidence was unclear in relation to what occasions the Applicant was the intermediary for borrowers and lenders and when it itself was the borrower and lender.  Further, he was unable to explain why interest was being received from Bnktown in an extremely disproportionate value to the funds being paid to Bnktown.

5. Mr Mustapha told the Tribunal that the profit would be transferred to Southern Global Group as a commission, so what was occurring was a profit distribution structure. When asked what the benefit for the Applicant in such an arrangement was, Mr Mustapha told the Tribunal he was the director of Southern Global Group, which is a related entity.

6. Mr Mustapha told the Tribunal he was the only one working for the Applicant, however that:

   The issue that I have is that if money of $4.3 million came into the account, what service did I provide when I had a full-time job – you know, I was an accountant. To me, I’m trying to explain that this vehicle – this company – was acting as an intermediary between a lender and a borrower, and its profits came in as part of an interest income.

7. Mr Mustapha told the Tribunal that during the relevant period he had a full-time job as an accountant with his former employer, Wentworth Williams, an accounting firm, and was also a director of the Applicant and other companies.

8. Mr Mustapha told the Tribunal he agreed that the Applicant was carrying on a business but contended it was not required to be registered for GST as it did not have a turnover of more than $75,000.

9. When it was put to him that there were no financial statements before the Tribunal that set out what the Applicant’s turnover was, Mr Mustapha told the Tribunal that was because he had not prepared them.  He said there were a lot of documents that had not been prepared or provided.

10. In relation to the 18 transactions that remained in contention between the parties after the informal review, Mr Mustapha told the Tribunal he no longer conceded that 8 transactions (which he had previously conceded were commission and therefore taxable supplies) were not interest and said that they should not be considered as taxable supplies.  He told the Tribunal that he had previously made such concessions because he did not have documentation to support the amounts. Mr Mustapha said he did have such documentation however he has not been able to provide this as evidence.

11. The failure to provide documentation held by the Applicant was a common theme across Mr Mustapha’s evidence. He told the Tribunal that he was using the Xero accounting file however had not provided the files as they were not up to date and were not reconciled.

12. Mr Mustapha told the Tribunal that Bnktown, Gubell Capital Management and Avant Garde Investments were the main entitles the Applicant was involved with and these entities were associated with Amin Naaman or his relations and were now in liquidation.  Mr Mustapha directed the Tribunal to a Liquidators Report[45] he had provided as evidence that the Applicant was not providing a service to Mr Naaman and his associated entities but rather it was part of a Ponzi scheme. He further directed the Tribunal to an article from the Daily Telegraph[46] in relation to Mr Naaman as evidence that he could not locate Mr Naaman to have him sign loan agreements.

    [45] Exhibit 2, Hearing Bundle, A3, Deloitte letter to creditors Gutbell Capital Management P/L (In Liq’d) – Amin Naaman, director, pages 5-28.

    [46] Exhibit 1, T Documents, T11, pages 109-112, Daily Telegraph article, Naamtech owner Amin Naaman missing as investors owed millions.

13. Mr Mustapha said when he engaged with Mr Naaman he did not have any loan agreements as he was making payments on time so there were no ‘dramas’, but when things went sour, which is well publicised, he attempted to get a loan agreement however Mr Naaman refused.  Consequently, the Applicant does not have a loan agreement with Bnktown.

14. Mr Mustapha’s evidence in relation to the specific transactions in question did not shed any light upon the submissions made at the time that the Applicant’s objection was lodged. Mr Mustapha told the Tribunal he did not call Mohammad Kassem or Rabih Kassir to give evidence in relation to the amounts he said they had provided as loans to the Applicant as he owed them money and did not want to talk to them when he had not resolved how to get their money back to them.  The responses provided by Mr Mustapha in relation to the arrangements regarding those transactions were at best lacking and unclear.  

15. Mr Mustapha was unable to explain with any certainty the differences between the amounts being received and those being paid out that he said were interest collected from borrowers and distributed to lenders or as to what happened to such amounts other than to make reference to the profit being made on the interest rate margin by the Applicant.

16. Mr Mustapha contended that the Applicant had not provided any taxable supplies during the Tax Periods, nor had it claimed any GST credits, and as such the assessments were incorrect.

17. The Applicant’s Statement of Issues, Facts and Contentions provided that the Applicant wanted the Tribunal to conclude that the transactions being classified by the Respondent as taxable supplies were loans because:[47]

    [47] Exhibit 2, Hearing Bundle, A1, Applicant’s Statement of Issues, Facts and Contentions, pages 1-2.

    ·Interest payments were made to the lenders

    ·Loan repayments were made to the lenders

    ·Business Activity ABN Registration was Business Investment Commission Scheme, Category: Portfolio, investment, management service - on a commission or fee basis

    ·The Applicant did not provide any goods or services

    ·Several loans received from the applicant came from personal bank accounts

    ·No invoices were issued

    ·No services were provided

    ·The Applicant acted as an intermediary between the lender and the borrower

    ·The Applicant did not claim input tax credits in respect to withdrawals made, which reinforces that debits made from the Applicants bank accounts were of loan or interest nature

    ·Loan agreement was provided

    ·Statuary declaration executed by the lender

18. At Hearing the Respondent sought to rely on its filed Statement of Issues, Facts and Contentions[48] and Outline of Submissions[49]. 

    [48] Exhibit 2, Hearing Bundle, R1, Respondent’s Statement of Issues, Facts and Contentions, pages 59-62.

    [49] Exhibit 3, Respondent’s Outline of Submissions, pages 1-11.

19. The Respondent contended that the Tribunal should not be satisfied that the Applicant has proved that the assessments are excessive as, in short, the Applicant’s material is incomplete and unreliable. The Respondent further contended that none of the evidence given by the Applicant should be relied upon by the Tribunal.[50]

    [50] Exhibit 3, Respondent’s Outline of Submissions, page 10, paragraph 41-43.

20. The Respondent contended that: [51]

    …the evidence of the Applicant does not contribute to discharging the onus of showing negatively that the assessments were excessive and therefore wrong and also did not positively prove what correction should be made. The Applicant produced almost no primary sourced documents, and only an explanation with an accompanying table of amounts remitted to the purported lenders. The Respondent submits this table of remittances should not be accepted as being accurate.

    [51] Exhibit 3, Respondent’s Outline of Submissions, page 10, paragraph 44.

21. In reviewing the material before it and the evidence provided at Hearing, it was clear to the Tribunal that the Applicant has chosen not to provide documents in its control to the Tribunal to support the assertions being made by Mr Mustapha on its behalf.

22. The Tribunal accepts Mr Mustapha’s evidence that he was unable to obtain corroborating evidence from Mr Naaman and that if he had the benefit of hindsight he would not have entered the arrangements with him. While the Tribunal acknowledges the stressful situation that Mr Mustapha has found himself in, it is of great concern to the Tribunal that despite his professional expertise and experience as an accountant he failed to ensure that the Applicant was able to meet its obligations under relevant taxation laws.  It is reasonable to expect that Mr Mustapha, and as a consequence the Applicant, is in a far better position than the average taxpayer to be aware of the relevant record keeping requirements.

23. To that extent the Tribunal considers that Mr Mustapha’s evidence is unreliable and unpersuasive as he was unable to give clear evidence in relation to the 18 transactions in question or the Applicant’s business arrangements. Further, at Hearing he retracted a concession he had made in relation to 8 transactions that they were commission and therefore were taxable supplies. This was on the basis that he had never agreed with that concession, however as he did not have supporting documentation for those transactions, he thought it would better to give the Respondent something so that they might be more lenient. This in and of itself flies in the face of the Applicant’s contention that it did not need to be registered for GST.

24. The Tribunal fails to understand why Mr Mustapha says there are further documents that support the Applicant’s contentions however he is unwilling to provide them to the Tribunal or Respondent.  He did not offer any reason as to why this was the case.  As such the Tribunal is left wondering how many pieces of the puzzle are actually missing.

25. The Tribunal is mindful that the evidence adduced by the Mr Mustapha on behalf of the Applicant should be considered carefully. Hill J in Imperial Bottleshops Pty Ltd and William John King Egerton v Federal Commissioner of Taxation (1991) 22 ATR 148 at 155 stated:

    A taxpayer who does not keep records of his deductible outgoings faces a very difficult task. If he goes into the witness box and swears that he incurred the outgoings he is making a self-serving statement. That does not necessarily mean that he is not to be believed. Such a statement, like statements of purpose, or object or state of mind must, however, be “tested most closely, and received with the greatest caution”: Pascoe v FCT (1956) 6 AITR 315; 11 ATD 108 at 111. It would, of necessity, be a rare case indeed where a taxpayer, claiming to have expended a very large sum of money on trading stock and other business expenses, would succeed in satisfying the burden of proving that the assessment is excessive. Some other corroborative evidence would normally be required which makes it more probable than not that his sworn testimony is to be believed. It must, however, be borne in mind that the evidence of a taxpayer is not to be regarded as ‘prima facie unacceptable’, cf McCormack v FCT (1979) 143 CLR 284 at 302 per Gibbs J; 9 ATR 610; 23 ALR 583.

26. The Applicant acknowledged that the Tribunal has no documentary evidence before it to support the contention that it did not meet the $75,000 turnover threshold that would require it to be registered for GST.  It further acknowledged that there was a lot of material that was either not created or not produced to the Tribunal.  Effectively the Applicant asked the Tribunal to accept its contentions, based on Mr Mustapha’s word, that all of the transactions addressed at audit by the Respondent were not taxable supplies and as such the correct assessments would have been nil assessments or that no assessments were required. That is, the Applicant wants the Tribunal to accept its contentions without providing corroborating probative evidence to support such contentions.

27. Considering the unfortunate position the Applicant currently finds itself in as a whole, the Tribunal agrees with the Respondent that the evidence provided by the Applicant can properly be described as lacking and unreliable. The Applicant has not been able to provide a clear picture of the arrangements between it and the parties with whom it interacted.

28. Consequently, in the absence of credible evidence to the contrary, the Tribunal finds that the Applicant was required to be registered for GST.  Further, based on the evidence before it the Tribunal finds that the Applicant did not satisfy its onus to prove that the assessments for the Tax Periods were excessive or otherwise incorrect and what the correct assessments should be.

29. Interestingly at Hearing and in the Outline of Submissions provided the day prior to the Hearing, the Respondent took a new approach to the reviewable objection decision. The Respondent submitted that the objection related to the assessments issued on 3 April 2019 at the conclusion of the audit rather than the amended assessments issued on 23 July 2019 as a result of the informal review.[52] Consequently, the Respondent sought that the objection decision as it relates to the GST assessments for the Tax Periods should be affirmed, except for the concessions made by the Respondent at the conclusion of the informal review.[53]

    [52] Exhibit 3, Respondent’s Outline of Submissions, pages 1 and 11, paragraphs 1 and 51.

    [53] Exhibit 3, Respondent’s Outline of Submissions, page 11, paragraph 51.

30. The Respondent requested leave to provide written submissions in this regard after the Hearing and was granted leave to do so.  On 10 August 2021, the Respondent filed supplementary submissions that provided:[54]

    [54] Respondent’s Supplementary Submissions dated 10 August 2021.

    8. Section 155-90 of Schedule 1 to the TAA states:

    You may object, in the manner set out in Part IVC of this Act, against an assessment of an assessable amount of yours if you are dissatisfied with the assessment.

    9. Section 14ZV of the TAA sets out the limited objection rights in the case of certain taxation decisions:

    If the taxation objection is made against a taxation decision, being an assessment or determination that has been amended in any particular, then a person's right to object against the amended assessment or amended determination is limited to a right to object against alterations or additions in respect of, or matters relating to, that particular.

    ……..

    11.Read together with section 155-90 of Schedule 1 of the TAA, in the Commissioner’s view, the limited right of objection in section 14ZV imposes a requirement that an objection can only be made where the taxpayer is dissatisfied with the amended assessment.

    12.Accordingly, where the GST amended assessments were favourable to the Applicant (in the first and third relevant tax periods), and the Applicant’s grounds for objection did not object to the reduction in GST liability that was the subject of the amended assessments, the Commissioner has treated the Applicant’s Objection as an objection against the original GST assessments (and not the GST amended assessments).

    13. Consistent with his view, the Respondent Commissioner submits that the decision under review should be allowed to the extent of the concessions made by the Commissioner on informal review.

31. The Tribunal accepts the Respondent’s contentions in this regard noting that should it not do so, by virtue of the operation of section 14ZV of the TAA 1953 the Applicant’s right to object would be limited to the alterations made in respect of the particulars amended by the amended assessments. This would clearly be contrary to the Applicant’s intentions at the time of making its objection.

32. The Tribunal notes that the 4 transactions found by the Respondent not to be taxable supplies made by the Applicant as part of the informal review decision were not discussed or progressed in relation to the present application.  Consequently, and in consideration of the discussion above regarding the actual scope of the Applicant’s objection, the Tribunal accepts the Respondent’s concession that those 4 transactions should not be considered to be taxable supplies made by the Applicant in the relevant Tax Periods.

33. Consequently, based on the findings set out above, the Tribunal affirms the reviewable objection decision meaning that the assessments made on 3 April 2019 are to be varied to the extent set out in the Respondent’s informal review decision as outlined in the table at paragraph 13 above.

    CONCLUSION

34. In the absence of corroborating evidence to the contrary the Tribunal finds that the Applicant was required to be registered for GST.

35. Based on the evidence before it the Tribunal finds that the Applicant has failed to discharge its onus to prove that the assessments for the Tax Periods were excessive or otherwise incorrect.

36. Accordingly, the decision under review is affirmed meaning that the assessments made on 3 April 2019 are to be varied to the extent set out in the Respondent’s informal review decision as outlined in the table at paragraph 13 above.

I certify that the preceding      71 (seventy-one) paragraphs are a true copy of the reasons for the decision herein of Member D Mitchell

...............................[SGD].............................

Associate

Dated: 25 August 2021

Date of hearing:

Date of submissions:

30 July 2021

10 August 2021

Applicant:

Mr Mohammad Mustapha

Solicitors for the Respondent:

Ms Amanda Rogers

Australian Taxation Office