S. E. Sedgwick & Y. E. Sedgwick and Commissioner of Taxation (Taxation)
[2015] AATA 690
•10 September 2015
S. E. Sedgwick & Y. E. Sedgwick and Commissioner of Taxation (Taxation) [2015] AATA 690 (10 September 2015)
Division
TAXATION & COMMERCIAL DIVISION
File Number(s)
2014/0034
Re
S. E. Sedgwick & Y. E. Sedgwick
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Professor R Deutsch, Deputy President Date 10 September 2015 Place Sydney The decision under review is affirmed.
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Professor R Deutsch, Deputy President
CATCHWORDS
TAXATION AND REVENUE – goods and services tax – revised business activity statements – time limit on entitlement to input tax credits – decision affirmed
LEGISLATION
A New Tax System (Goods and Services Tax) Act 1999 (Cth) ss 17-5, 29-10, 31-8, 93-5, 93-10
Taxation Administration Act 1953 (Cth) ss 14ZZK
CASES
Re The Trustee for SBM Trust and Commissioner of Taxation [2015] AATA 174
Re Van Gestel and Commissioner of Taxation [2014] AATA 396
REASONS FOR DECISION
Professor R Deutsch, Deputy President
10 September 2015
RELEVANT FACTUAL BACKGROUND
The facts in this case were not in dispute and are set out in the Respondent’s Outline of Submissions as follows:
[8] The Applicant is a partnership. The partners of the Applicant were at all relevant times Ms Yolonde Sedgwick and Ms Shontelle Sedgwick.
[9] The Applicant was registered for GST effective from 1 July 2005 to 30 June 2006 (“relevant period”). It accounted for GST on a cash basis and lodged its business activity statements on a quarterly basis.
[10] During the relevant period, the Applicant operated a restaurant and traded as “New York Style Pizza and Hot Dogs”.
[11] On 5 June 2008, the Applicant, through a tax agent, lodged BASs for each of the quarterly tax periods within the relevant period (“BASs”) and reported amounts at labels 1A and 1B as follows (T3-22 to T6-29):
Table 1
Tax period ending 1A 1B Net amount 30 September 2005 5,543 2,906 2,637 31 December 2005 4,825 1,809 3,016 31 March 2006 4,567 1,484 3,083 30 June 2006 4,978 444 4,534 [12] The Applicant paid the liabilities arising from the amounts reported at Table 1 immediately above.
[13] Yolonde Sedgwick asserts that in around 2012 she became aware of potential misconduct on the part of a tax agent that allegedly involved, inter alia, completing and lodging the BASs without the Applicant’s consent (T1-14 to 16).
[14] On 6 November 2012, Yolonde Sedgwick made a request under the Freedom of Information Act 1982 (“FOI Act”) on behalf of the Applicant.
[15] On 9 November 2012, the Respondent provided a response to the Applicant’s application under the FOI Act.
[16] On 29 November 2012, the Applicant, through a tax agent revised the amounts reported at labels 1A and 1B in the BASs as follows (T7-30 to T10-37) (“revised BASs”):
Table 2
Tax period ending 1A 1B Net amount 30 September 2005 4,059 4,188 (129) 31 December 2005 3,940 3,846 94 31 March 2006 3,420 3,626 (206) 30 June 2006 2,017 2,840 823 [17] Based on the information contained in the revised BASs, the amount of ITCs claimed by the Applicant increased by $7,857, and the amount of GST payable by the Applicant reduced by $6,477.
[18] On 15 January 2013, the Respondent processed the revised BASs and issued refunds to the Applicant in the amount of $14,334.00 (T11-38).
[19] On 22 January 2013, the Respondent sent a letter to the Applicant headed “Activity statement review of S.E Sedgwick & Y.E Sedgwick”, indicating, inter alia, that the Applicant’s activity statements for the relevant period had been reviewed and revised. That letter attached the Respondent’s Reasons for Decision in relation to the amendments made to the Applicant’s BASs (T12-39).
[20] As a result of this review, the Respondent revised the amounts reported at labels 1A and 1B of the BASs for the relevant period back to the original amounts reported by the Applicant (see Table 1 above and T13-45 to T16-52). Consequently, on 25 January 2013, the Respondent issued Notices of Assessment to the Applicant for each of the quarterly tax periods within the relevant period (T17-53 to T20-60).
[21] On 28 October 2013, the Applicant lodged an Objection against the Notices of Assessment referred to at paragraph 19 immediately above (T21-61-84).
[22] On 8 November 2013, the Respondent disallowed the Objection in full (“Objection decision”).
[23] On 3 January 2014, the Applicant applied to the Administrative Appeals Tribunal (“Tribunal”) for review of the Objection decision (T1-1 to 17).
THE ISSUES
Broadly, the issue is whether the Applicant is entitled to a refund, other payment or credit in the amount of $14,334, by reason of the revised BASs lodged for the relevant tax periods.
The main, and for reasons that will become apparent shortly, the only question which requires resolution is whether the Applicant could claim GST input tax credits (“ITCs”) when the claim for such credits was made more than four years after the end of the period for which such claims are allowed under the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (“GST Act”).
If the Applicant could overcome the problems presented by the four year rule, there would be an issue as to whether they were entitled to the claimed ITCs having regard to the lack of tax invoices or other evidence of the ITCs claimed.
Finally, there was an argument put by the Applicant that the taxable supplies reportable for the relevant tax periods had been overstated due to some sort of fraud perpetrated against the Applicant.
RELEVANT LEGISLATIVE FRAMEWORK
Division 93 of the GST Act concerns the time limit on a taxpayer’s entitlement to ITCs.
Section 93-5 of the GST Act, as applicable to the assessments in dispute, under the heading “Time limit on entitlements to input tax credits” relevantly provided as follows:
(1)You cease to be entitled to an input tax credit for a *creditable acquisition to the extent that you have not taken it into account in working out your *net amount for:
(a) the tax period to which the input tax credit would be attributable under subsection 29-10(1) or (2); or
(b) any other tax period for which you give to the Commissioner a *GST return during the period of 4 years after the day on which you were required to give to the Commissioner a GST return for the tax period referred to in paragraph (a).
DOES DIVISION 93 OF THE GST ACT OPERATE SO AS TO DENY THE APPLICANT’S ENTITLEMENT TO GST INPUT TAX CREDITS?
In respect of each of the relevant ITCs now claimed by the Applicant, the ITC had not been taken into account by the Applicant in working out its net amount for a period for which it gave the Commissioner a GST return during the period of four years after the day on which the Applicant was required to give to the Commissioner GST returns for the tax periods to which those ITCs would be attributable under section 29-10(2) of the GST Act.
Section 29-10(2) of the GST Act provides that, if a taxpayer accounts on a cash basis, the input tax credit that is attributable to a tax period is only attributable up to the extent that consideration for the creditable acquisition was provided in the tax period.
By virtue of section 29-10(2), the tax periods to which the relevant ITCs would be attributable were:
·the tax period ended 30 September 2005;
·the tax period ended 31 December 2005;
·the tax period ended 31 March 2006; and
·the tax period ended 30 June 2006.
Section 31-8 of the GST Act, under the heading “When GST returns must be given— quarterly tax periods”, provides that a taxpayer to which a quarterly tax period applies, must give its GST return for the tax period to the Commissioner by dates specified in a table contained in subsection 31-8(1) of the GST Act (section 31-8(1)(a)), or within such further period as the Commissioner allows (section 31-8(1)(b)).
In this case, section 31-8(1)(b) does not apply as the Commissioner has not allowed any further period and by virtue of section 31-8(1)(a) of the GST Act and the dates set out in the table contained in section 31-8(1), the Applicant was required to give its GST returns to the Commissioner by the following dates in respect of each of the following quarterly tax periods:
·by 28 October 2005 for the tax period ended 30 September 2005;
·by 28 February 2006 for the tax period ended 31 December 2005;
·by 28 April 2006 for the tax period ended 31 March 2006; and
·by 28 July 2006 for the tax period ended 30 June 2006.
Thus, for the purposes of section 93-5 of the GST Act, the four year period within which the relevant input tax credits had to be taken into account in assessing a net amount for the Applicant ended on the following dates:
·by 28 October 2009 for the tax period ended 30 September 2005;
·by 28 February 2010 for the tax period ended 31 December 2005;
·by 28 April 2010 for the tax period ended 31 March 2006; and
·by 28 July 2010 for the tax period ended 30 June 2006.
It is uncontroversial that the relevant ITCs were not so taken into account within the designated time frame. It was not submitted and it does not appear to be the case that it could reasonably have been submitted that an exception provided for in section 93-10 was available.
The operation of Division 93 of the GST Act in circumstances such as these is clear and unambiguous and leaves no room for the operation of a discretion: see Re The Trustee for SBM Trust and Commissioner of Taxation [2015] AATA 174.
This may be unfortunate but there are policy reasons that underpin the imposition of such a decisive cut-off date. The circumstances presented by the Applicant do not change or alter in any way the decisiveness of the provision.
DID THE APPLICANT MAKE TAXABLE SUPPLIES AS REPORTED?
This issue was raised in submissions put by the Applicant in a manner which could only be described as cryptic and vague.
The Applicant asserted that “[f]rom my point of view, the original BAS that were lodged on my behalf were done in error” and that “[f]raudulent activity was involved in the lodgement to begin with”. There was also some reference to fraudulent activity being conducted by the Applicant’s accountant. The Applicant further asserts that “[t]he tax accountant who made the lodgement made grave errors that have landed me in this predicament and furthermore he was not licenced …”.
It is difficult to assess the significance of all the statements in the overall context of this case, but the simple fact of the matter remains that it is for the Applicant to show that the relevant assessments that are being challenged were excessive: section 14ZZK of the Taxation Administration Act 1953.
Based on the rather scant materials that have been put before the Tribunal in this case, the Applicant has not established that the relevant assessments were excessive and, in particular, there is virtually no contemporaneous documentation to indicate that the taxable supplies reported in the various BASs were in any particular way, not accurate.
The Applicant in this case has made a number of assertions regarding the conduct and general behaviour of her former accountant and is making generalised and unsubstantiated claims that this accountant or perhaps someone other than the accountant specifically had been responsible for certain fraudulent activities which led to the taxpayer’s current problems.
I have already indicated that such vague assertions do not amount to evidence to support a contention that the assessments in question were excessive. If the Applicant genuinely held the belief that it had been the subject of fraudulent activity, it would have been necessary to have called in the police so as to establish the existence of such fraudulent activity. If that had led to a successful police investigation, that investigation combined with specific information regarding the amount and nature of the fraudulently included supplies would have gone some considerable way, perhaps even all the way, towards establishing her case in this Tribunal in respect of the taxable supplies issue. In the absence of such a successful police investigation and further information, the Tribunal has little alternative but to largely ignore the assertions regarding fraudulent behaviour: see also Re Van Gestel and Commissioner of Taxation [2014] AATA 396 at [15].
DECISION
The decision under review is affirmed.
I certify that the preceding 23 (twenty -three) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President
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Associate
Dated 10 September 2015
Date of hearing 27 July 2015 Advocate for the Applicant Ms Y Sedgwick Counsel for the Respondent Mr G O'Mahoney
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