SFQV and Commissioner of Taxation - [2024] ARTA 9

SFQV and Commissioner of Taxation (Taxation) [2024] ARTA 9 (20 December 2024)
Applicant:SFQV
Respondent: Commissioner of Taxation
Tribunal Number: 2023/3742

Tribunal:Deputy President G Lazanas
Place:Sydney
Date:20 December 2024

Decision:The Tribunal affirms the decisions under review.

..........................[SGD]..............................................
Deputy President G Lazanas
Catchwords
GOODS AND SERVICES TAX – attribution of GST payable on taxable supply of development services – determination of value of non-monetary consideration – excess GST – determination of excess GST – whether excess GST passed on to purchasers of residential units – whether windfall gain – burden of proof – objection decisions affirmed
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) s 37
A New Tax System (Goods and Services Tax) Act 1999 (Cth) ss 9-5, 9-15, 9-70, 9-75, 17-5, 19-10, 29-5, 29-25, 75-10, 142-5, 142-10, 142-15, 142-25, 182-1, 195-1
Australian Capital Territory (Planning and Land Management) Act 1988 (Cth) s 29(3)
Planning and Development Act 2007 (ACT) ss 234, 296, 298
Taxation Administration Act (Cth) ss 14ZZE, 14ZZJ, 14ZZK
Tax Laws Amendment (2014 Measures No. 1) Act 2014 (Cth)
Unit Titles Act 2001 (ACT) s 33
Cases
AP Group Limited v Commissioner of Taxation (2013) 214 FCR 301
Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) 77 CLR 143
ATS Pacific Pty Ltd v Commissioner of Taxation (2014) 219 FCR 302
Avon Products Pty Ltd v Federal Commissioner of Taxation [2004] FCA 475
Avon Products Pty Ltd v Federal Commissioner of Taxation [2005] FCAFC 63
Avon Products Pty Ltd v Federal Commissioner of Taxation [2006] HCA 29
Central Equity Ltd v Federal Commissioner of Taxation (2011) 214 FCR 255
Commissioner of Taxation v Multiflex Pty Ltd (2011) 197 FCR 580
Commissioner of Taxation v Qantas Airways Limited [2012] HCA 41
Domestic Property Developments Pty Ltd v Commissioner of Taxation [2022] AATA 4436
Federal Commissioner of Taxation v DBRreef Funds Management Limited [2006] FCAFC 89
Minister for Immigration and Border Protection v Makasa (2021) 270 CLR 430
M3K Services Pty Ltd and Commissioner of Taxation [2021] AATA 4416
WYPF and Commissioner of Taxation [2021] AATA 3050
Secondary Materials
A New Tax System (Goods and Services Tax) (Particular Attribution Rules Where Total Consideration Not Known) Determination (No 1) 2000 (Cth)
Explanatory Memorandum to the Tax Laws Amendment (2014 Measures No. 1) Bill 2014 (Cth)
Goods and Services Tax: Particular Attribution Rules Where Total Consideration Not Known Determination 2017 (Cth)
GSTD 2021/1: Goods and Services Tax Determination: Goods and services tax: development works in the Australian Capital Territory
GST Ruling GSTR 2001/6 – Goods and service tax: non-monetary consideration
Macquarie Dictionary Online, Pan Macmillan Australia, 2024
Oxford English Dictionary Online, Oxford University Press
Statement of Reasons
INTRODUCTION

This case is about the application of the A New Tax System (Goods and Services Tax) Act1999 (Cth) (GST Act) to a property development undertaken in the Australian Capital Territory (Development) by the applicant referred to as SFQV.[1] The Development has given rise to several GST disagreements between SQFV and the Commissioner of Taxation (Commissioner) notwithstanding that certain GST aspects of the Development were the subject of a private ruling issued by the Commissioner to SFQV.
[1] The applicant has the pseudonym SFQV as it asked for a private hearing pursuant to s 14ZZE of the Taxation Administration Act 1953 (Cth) (TAA). Similarly, the applicant’s related entities and the witnesses also have pseudonyms. Pursuant to s 14ZZJ of the TAA, the Tribunal has ensured, as far as practicable, that the reasons for the decision are framed so as not to be likely to identify the taxpayer’s identity.
SFQV acquired Land in the Australian Capital Territory (ACT) from the ACT Land Development Agency (the LDA) and, in addition to paying an amount of monetary consideration for the acquisition, it provided non-monetary consideration in undertaking to develop the Land, including by building residential apartments on the Land. That non-monetary consideration is referred to as the Development Services. The provision of the Development Services resulted in a number of GST issues, including whether SFQV had passed on excess GST to purchasers of residential units at the Development when calculating its GST under the margin scheme and, if so, whether it should be refunded the GST by the Commissioner.
In summary, there are broadly five key issues for determination by the Tribunal which were canvassed in the Commissioner’s two objection decisions which are the reviewable decisions before the Tribunal for determination. The Commissioner’s objection decisions addressed two objections that were lodged by SFQV.
First, the Commissioner disallowed SFQV’s objection against assessments of net amount for eight quarterly tax periods ended 30 September 2015, 30 September 2017, 31 December 2017, 31 March 2018, 30 June 2018, 30 September 2018, 31 December 2018 and 31 March 2019 (GST Assessments Objection Decision). Secondly, the Commissioner disallowed SFQV’s objection against the Commissioner’s refusal to exercise the discretion in s 142-15(1) of the GST Act to refund the excess GST (Section 142-15 Objection Decision).
SFQV bears the burden of proving that the assessments of net amounts for the relevant tax periods are excessive and what the assessments should have been, as per s 14ZZK(b)(i) of the TAA. Further, SFQV has the burden of proving that the Commissioner’s refusal to exercise the discretion under s 142-15(1) of the GST Act should not have been made or should have been made differently: s 14ZZK(b)(ii) of the TAA.
As these reasons will explain, I have decided to affirm both the GST Assessments Objection Decision and the Section 142-15 Objection Decision.
THE ISSUES BEFORE THE TRIBUNAL
The first issue for determination by the Tribunal, also referred to as the “attribution issue”, concerns whether the GST payable by SFQV to the Commissioner totalling $10,314,568.50 in respect of the taxable supply of Development Services is attributable to the September 2015 quarterly tax period or the September 2015 or the September 2017 quarterly tax period. SFQV argued that the GST amount was attributable to the September 2017 tax period. The Commissioner argued it was attributable to the September 2015 tax period.
The second issue is whether there was “excess GST” as that term is defined in Division 142 of the GST Act. The determination of the excess GST issue depends on how excess GST is worked out. The Commissioner argued that there was excess GST as it has to be identified at a very granular level on an individual supply basis, whereas SFQV argued that there was no excess GST. SFQV argued that the determination of excess GST referred to the situation where the assessed net amount takes into account an amount of GST that is greater than the sum of GST calculated for that tax period. The excess GST issue is relevant for each of SFQV’s September 2017, December 2017 and March 2018 quarterly tax periods (and had specific importance for the September 2017 tax period due to SFQV’s interpretation). As will shortly become clear, in respect of those tax periods, it is common ground that SFQV had overpaid GST on its sales of residential units to purchasers at the Development as it only accounted for the monetary consideration for its acquisition of the Land and did not deduct the value of the non-monetary consideration for its acquisition of the Land (being the provision of the Development Services) in calculating the margin for GST purposes.
The third issue concerns what was the value of the non-monetary consideration for SFQV’s acquisition of the Land. Specifically, the question is whether the GST liability on the taxable supply of SFQV’s Development Services (a monetary amount) is included when calculating the value of the non-monetary consideration in the form of Development Services provided by SFQV to the LDS. This is referred to as the “non-monetary consideration amount” issue.
The fourth issue, which in part depends on the answer to the second issue (whether or not there was excess GST), is whether SFQV passed on any excess GST to the purchasers of the residential units (the “passing on” issue). The Commissioner contended that SFQV passed on the excess GST to the purchasers of the residential units. SFQV disagreed and argued, even if there was excess GST, it had not passed on any excess GST due to its pricing policy and practice.
The fifth issue, which depends on the answer to the fourth issue, is whether SFQV is entitled to be refunded by the Commissioner any excess GST passed on. Broadly, this entails determining whether refunding the overpaid GST to SFQV would not result in a windfall gain to SFQV (the “windfall gain” issue).
In light of the number of issues, the number of tax periods and the numerous possible permutations in the determination of the reviewable decisions, it is appropriate to first canvass the factual background and the evidence followed by the procedural background to the dispute. This is then followed by an analysis of the issues by reference to the applicable statutory provisions and principles.
THE FACTUAL BACKGROUND AND THE EVIDENCE
The parties filed a hard copy Tribunal Book (TB) which, besides their respective Statements of Issues, Facts and Contentions (SFICs), comprised documents filed pursuant to s 37 of the former Administrative Appeals Tribunal Act1975 (Cth) and SFQV’s written evidence. References to tab numbers and page numbers are to the TB, which incorporated reproduced larger and legible spreadsheets that were provided at the hearing. An electronic copy of the TB which replicated the hard copy TB incorporating the abovementioned spreadsheets was also filed by the Respondent with the Tribunal.
The following findings of fact are based on the evidence given and the documents in the TB as specifically referenced below. The findings draw on the respective SFICs of the parties as well as the written and oral evidence of SFQV’s two witnesses.
The Development
SFQV is a private company and is the trustee of a fixed unit trust. References to SFQV throughout this decision are to the applicant in its trustee capacity.
SFQV undertook a project known as the Development which involved the development of Land situated in the ACT and the subsequent sale of residential units on the Land to individual purchasers. SFQV held the Land pursuant to a 99-year lease which was granted by the LDA as part of the arrangements.
SFQV engaged a related entity, SFQV Developments Pty Ltd, to act as the developer of the Land, pursuant to an agreement. Separately, construction works on the Land were carried out by another related entity of SFQV, being SFQV Constructors Pty Ltd.
At all material times, SFQV had a sole director, who was also the sole director of SFQV Developments and SFQV Constructors (the Director). The Director has worked in the property industry for over 30 years, and founded the group to which SFQV belongs (the SFQV Group). The SFQV Group is engaged in development and construction of high rise apartments and mixed use precincts in the ACT. The Director gave written evidence in the form of three sworn affidavits. He also gave oral evidence and was cross-examined at the hearing which took place in person.
The other witness was, at the relevant times, a senior development manager employed by the SFQV Group (the Manager). The Manager affirmed an affidavit and also gave oral evidence and was cross-examined. He had provided sales pricing information regarding the residential units at the Development, as well as feasibility and marketing advice.
Both the Director and the Manager were reliable witnesses and provided straightforward evidence. I accept their evidence.
Commercial Contract of Sale
On 1 October 2014, SFQV as Buyer entered into a Commercial Contract for Sale with the LDA as Seller.[2]
[2] TB, Tab 66, pp 1,117-1,186.
The relevant terms of the Commercial Contract included the following:
(a)Completion was 30 working days from the date the LDA served the Crown Lease for the Land on SFQV, subject to the completion of certain works and the registration of a plan of survey for the Land by the LDA: special condition 33.
(b)On completion, the LDA as delegate of the ACT Planning and Land Authority and on behalf of the Commonwealth would grant or procure the grant of a lease to SFQV. The lease would be substantially on the terms and conditions of the “Specimen Lease” which was Annexure B to the Commercial Contract: cl 1.1.
(c)The price was $5,400,000. The deposit was payable in two equal instalments; the first of which was payable on the date of the Commercial Contract, and the second of which was payable on completion; the balance of the price was also payable on completion: cl 2.1, 2.5, 30 and special condition 36.1.
(d)The LDA was required to give SFQV vacant possession on completion: cl 16.
(e)The GST margin scheme applied to the supply of the Land: cl 26.
Other relevant special conditions of the Commercial Contract stated, as follows:
37.1 This Contract is contingent upon the parties entering into the Project Delivery Agreement prior to or at the same time they entered into this Contract and the Seller may terminate (at its absolute discretion) this Contract at any time should the Buyer execute this Contract without executing the Project Delivery Agreement
...
37.3 The Buyer must comply with all of its obligations under the Project Delivery Agreement.
37.4 The Buyer acknowledges and accepts that restrictions on dealing with the Land apply until the Buyer has complied with its obligations under the Project Delivery Agreement as set out in the Project Delivery Agreement.
37.5 Except as otherwise provided in the Project Delivery Agreement, the Buyer must not complete any agreement for the sale of, or permit any transfer to be registered in respect of, the whole or any part of the Land or any dwelling erected or to be erected on the Land, prior to the Buyer having complied with all of its obligations under the relevant Project Delivery Agreement.
Clause 38 of the Commercial Contract defined the Project Delivery Agreement to mean “the project delivery agreement or deed made on the date of the Commercial Contract for Sale between the Seller [LDA] and the Buyer [SFQV] in relation to the Land”.
Project Delivery Agreement
Also on 1 October 2014, the LDA and SFQV entered into a Project Delivery Agreement.[3] Pursuant to cl 3, SFQV undertook to design and construct all buildings on the Land consistent with: (a) all applicable laws; (b) the Intended Development Design Outcomes; and (c) the terms and conditions contained in the Project Delivery Agreement. The “Intended Development Design Outcomes” was defined to mean “the document entitled ‘[REDACTED] Intended Design and Development Outcomes’ (including all attachments) which is included at Attachment A”: cl 1.1. This document provided guidance on the development intentions of the project.[4]
[3] TB, Tab 67, pp 1,187-1,201.
[4] TB, Tab 7, pp 200-220.
The Project Delivery Agreement provided for the LDA to have input into the development. For example, SFQV was obliged to submit the proposed development application to LDA and was obliged to adopt changes reasonably required by the LDA: cl 4.1.
Clause 9.1 of the Project Delivery Agreement relevantly stated that SFQV must not sell or assign, or agree to sell or assign any interest in the Crown Lease or the Land to any person before the date on which the LDA is required to release the Security (as provided for in the Project Delivery Agreement), except in certain circumstances. Clause 9.3 stated that notwithstanding other provisions, SFQV was entitled to market product in any development it proposed to construct on the Land and to enter into contracts for sale.
With reference to GST, cl 15.1 of the Project Delivery Agreement stated:
In addition to any other consideration, the recipient of a Taxable Supply made under or in connection with this Agreement (Recipient) must pay to the party making the Taxable Supply (Supplier) the amount of GST in respect of the Taxable Supply. This subclause does not apply if the consideration specified for the Taxable Supply is expressly agreed to be GST inclusive.
Crown Lease
SFQV acquired its interest in the Land as Lessee from the ACT Planning and Land Authority on behalf of the Commonwealth, pursuant to a Crown Leasedated 3 July 2015.[5] As stated at [22(b)] above, the Crown Lease was in substantially the form of the “Specimen Lease” that was annexed to the Commercial Contract.
[5] TB, Tab 69, pp 1,203-1,218.
Clause 3 of the Crown Lease set out covenants of SFQV as the Lessee, as follows:
(a) That the Lessee shall within forty eight (48) months from the date of the commencement of the lease … complete the erection of an approved development on the land in accordance with plans and specifications prepared by the Lessee and previously submitted to and approved in writing by the Authority and in accordance with every Statute Ordinance or Regulation applicable to such development.
(b) To use the land for the purpose of residential use LIMITED to multi-unit housing of not less than one hundred and forty five (145) dwellings and not more than one hundred and eighty five (185) dwellings …
Clause 3(b) of the Crown Lease was subsequently varied, including to provide for the construction of an increased number of units by SFQV as the Developer.
Clause 3(a) of the Crown Lease had the effect that s 298 of the Planning and Development Act 2007 (ACT) was applicable. Section 298 applied where a lease contained a “building and development provision” and imposed restrictions on the transfer or assignment of such leases, prior to compliance with the building and development provision: see ss 296(1), 298(1)(d)(i). A “building and development provision” is “a provision … that requires the lessee to carry out stated works on the land comprised in the lease…”: s 234. Those provisions confirmed, as per also the Commercial Contract, that SFQV was restricted in assigning or transferring the Crown Lease until it had completed the Development.
Clause 4 of the Crown Lease provided that the Commonwealth agreed to give quiet enjoyment to the Lessee. Clause 5 provided for termination by the ACT Planning and Land Authority in certain circumstances, including if an approved development was not completed within the specified period or where the Lessee failed to perform any covenants or failed to observe or perform any covenants: cl 5(a)(ii) and cl 5(a)(iv).
Development Agreement
SFQV as “Owner” engaged SFQV Developments as Developer pursuant to an agreement dated 17 May 2016 (the Development Agreement).[6] Clause 2 of the Development Agreement stated:
The Owner [SFQV] appoints the Developer [SFQV Developments] to coordinate the consultants and contractors to carry out the Project on and from the Effective Date and the Developer [SFQV Developments] agrees to the appointment in accordance with the terms and conditions of this Agreement.
[6] TB, Tab 65, pp 1,098-1,116.
The “Project” was defined to be “the redevelopment of the Land, including the construction of … residential units and … commercial units”: cl 1.1.
Clause 14 of the Development Agreement required SFQV to pay SFQV Developments a “Fee”, calculated in accordance with that clause. Clause 14.1 of the Development Agreement stated the GST-inclusive Fee was to be calculated by reference to the following:
(a) Agreed Project Costs; plus
(b) Aggregate of Agreed Project Costs Variations; plus
(c) Margin multiplied by Agreed Project Costs; plus
(d) Margin multiplied by Agreed Project Costs Variations where the Owner and the Developer have agreed that the Margin will apply to those Agreed Project Costs Variations under clause 14.2.

“Agreed Project Costs” was defined to mean $91,300,000 inclusive of GST. “Margin” was defined to mean 22% inclusive of GST as adjusted by cl 14.4. Broadly, cl 14.4 incentivised SFQV Developments to achieve the “Agreed Sales” (defined to mean $124,140,790 inclusive of GST). Where SFQV Developments exceeded the Agreed Sales, the Margin would be increased by 1% for every $1 million or part thereof. Conversely, if the Developer failed to reach the Agreed Sales, then for every $1 million or part thereof that the sales were less than the Agreed Sales, the Margin would be decreased by 1%.
Additionally, cl 14.2 stated that SFQV Developments would be liable for all costs above the “Agreed Project Costs” except for “Agreed Project Costs Variations” which were separately covered in cl 14.3, such that SFQV or SFQV Developments could at any time propose a variation to the Agreed Project Costs. If accepted, that variation would become Agreed Project Costs Variations, either payable to SFQV Developments or set off against the amount payable to SFQV Developments, as applicable.
Clause 14.5 stated that subject to cl 15 (which set out the order in which the proceeds of sale were to be applied to make certain payments), SFQV Developments was required to invoice SFQV for the Fee 60 days after the date of the registration of the units plan.
Planning Approvals and Construction Works
The planning approvals in respect of the Development were granted between 17 September 2015 and 1 June 2017.[7] The construction works commenced on the Land on or about 6 June 2016. The last certificate of occupancy and use was granted on 4 August 2017.[8]
[7] TB, Tabs 70-76, pp 1,219-1,327.
[8] TB, Tab 79, p 1,344.
According to the affidavit evidence of the Director, the Development was broken up into two stages.[9] Stage one involved the construction of approximately 180 residential apartments, two car parking areas, laneway works and associated landscaping and site works. Stage two involved the construction of a further approximately 180 residential apartments, three commercial premises situated at ground level and parking spaces for up to 140 vehicles.
[9] TB, Tab 61, pp 1,046-1,047 at [25].
Stage one referred to the period up to when SFQV obtained construction finance which occurred in late October 2016. The Director stated in his affidavit that he “decided to break the development up into two stages because he wanted to ensure that construction work could be commenced quickly which in turn depended on obtaining construction finance quickly which in turn depended on meeting pre sales targets required by the construction financier. By breaking the development up into two stages SFQV was able to meet pre sales targets sooner, obtain finance sooner and thus start construction sooner.”[10] SFQV was of the view that it would be easier to meet targets in respect of half of the Development (namely, stage one) than the whole.[11]
[10] TB, Tab 61, p 1,047 at [26].
[11] TB, Tab 61, p 1,047 at [26].
Units Plan Registration
On 8 September 2017, the ACT Registrar General registered an approved units plan in respect of the Land and the Development.[12] Subsection 33(1) of the Unit Titles Act 2001 (ACT) relevantly stated that on the registration of a units plan, the lease of the parcel ends. Further, the former lessee of the parcel becomes the holder of an estate in leasehold in each unit for the term fixed, subject to the provisions in the units plan, as if a separate lease of that unit for that term and subject to those provisions had been granted to the former lessee by the Territory under the Planning and Development Act 2007 (ACT): s 33(2) of the Unit Titles Act 2001 (ACT). Additionally, the term of the leases on the units begins on the registration of the units plan and ends on the date on which the term of the lease of the parcel would have ended: s 33(5).
[12] TB, Tab 82, p 1,349.
It follows that upon registration of the units plan, the Crown Lease ended. It was replaced by a deemed lease under s 33(2) of the Unit Titles Act 2001 (ACT). The units plan specified that the term of the lease of each of the units expires on 2 July 2114.[13]
[13] TB, Tab 82, p 1,431.
Exchange and settlement of residential units
SFQV offered stage one units for sale to the public between March 2015 and 28 May 2021 and stage two units between November 2015 and 19 February 2021.[14]
[14] TB, Tab 61, p 1,048 at [35].
Contracts of sale in respect of these units were exchanged between 24 March 2015 and 28 May 2021.[15] The precise dates of the exchange of contracts are set out in an extract from SFQV’s business records attached to the first affidavit of the Director.[16] The contracts settled between 15 September 2017 and 30 June 2021, as substantiated by the voluminous settlement statements in evidence.[17]
[15] TB, Tab 61, p 1,048 at [36].
[16] TB, Tab 61, p 1,048 at [36]; TB, Tab 83, pp 1,445-1,476.
[17] TB, Tab 61, p 1,048 at [37]; TB, Tab 91, pp 1,626-3,635.
Pricing policy and practice
SFQV’s Director gave extensive written and oral evidence in relation to the SFQV Group’s pricing policy and practice, as well as the pricing strategy adopted by SFQV.
The SFQV Group has been operating for approximately 20 years. Prior to the Director establishing the group, he worked in the construction industry for over 15 years in project management and leadership roles, including as an engineer.
The Director stated that the SFQV Group began scoping works for the potential development on the Land in about August 2014 and it was completed in about 2017.
As the managing director of the group, the Director oversaw all aspects of the development and construction of the Development. This included the setting up of legal entities that owned, developed, and sold subdivided units in the Development.
During stage one, SFQV was funded by its own capital and the loan it obtained to procure the Crown Lease. The essential difference between the two periods was that, in the first period, SFQV wanted to price units aggressively to maximise sales. The Director stated that “[i]t was important to [SQFV] to obtain further debt finance as soon as possible”, and that this “requires a sufficient number of pre-sales to give lenders confidence in the development”.[18] The Director added that he “wanted units to sell for the highest possible price the market would bear, but [he] had to balance this against the need to maximise quick sales”.[19]
[18] TB, Tab 61, p 1,048 at [40].
[19] TB, Tab 61, pp 1,048-1,049 at [40].
During stage two, after October 2016, and after having met the requirements for and obtained development/construction finance, the Director was prepared to “accept a slower burn on sales, with a view to maximising revenue over the medium term”.[20] The Director stated he was “less concerned about pricing aggressively to maximise quick sales and was instead more concerned about pricing at the highest price the market would bear, in order to maximise the gross realisation of the development”.[21]
[20] TB, Tab 61, p 1,049 at [41].
[21] TB, Tab 61, p 1,049 at [41].
However, the Director also referred to the fact of being “conscious that there were competitor developments” in the local area, and he “needed to ensure that prices were not set at a level which was materially above the market rate being offered in the competitor developments”.[22] He noted that the units in “two significant competitor developments”, “which were in close proximity”, were being offered to the market at prices which he “considered to be very low” and he had to ensure that units in the Development “were priced attractively… compared to those in the competitor developments”.[23] Towards the end of the project, the Director was more willing to accept offers below the listed price to clear residual stock.[24]
[22] TB, Tab 61, p 1,049 at [42].
[23] TB, Tab 61, p 1,049 at [42].
[24] TB, Tab 61, p 1,049 at [41].
In respect of when pricing for units in stage one were available to the public, the Director decided the initial prices in around February 2015.[25] The Director settled the prices for stage two units between around February 2015 and April 2015, but did not release the stage two prices to the market at that point.[26] The stage two prices were released to the market starting in around mid-November 2015, after having “tested the initial prices against then current market price[s] and adjust[ing] them to meet the market”.[27]
[25] TB, Tab 61, p 1,049 at [43].
[26] TB, Tab 61, p 1,049 at [43].
[27] TB, Tab 61, p 1,049 at [43].
In cross-examination, the Director could not initially recall if the prices for units for release to the public in stage two were only adjusted once or multiple times.[28] However, the Director later clarified that the prices for release to the public of stage two units were only adjusted once.[29] He also stated that prices would have changed on a monthly basis depending on individual offers that were made on different units and whether they were accepted.[30]
[28] Transcript P-37, lines 41-46.
[29] Transcript P-41, lines 29-34.
[30] Transcript P-37, lines 24-28.
The Director referred to another factor which occasionally influenced ultimate settlement prices for the Development as being bank valuations obtained by purchasers, namely, where the bank valuation came in below the contract price. On a few occasions, SFQV agreed to accommodate the purchaser’s specific circumstances and reduced the prices after exchange of contracts having regard to the fact the purchasers would have otherwise been unable to obtain finance for the full purchase price.[31]
[31] TB, Tab 61, p 1,050 at [44].
The Director stated he was the final decision-maker on SFQV’s pricing of units. The Director summarised the matters to which he had regard when setting prices as being:
(a) above all, the maximum price the market would bear;
(b) initially, the need to maximise sales to obtain debt finance;
(c) after debt finance was obtained, the desire to maximise the overall gross realisation from the development;
(d) the advice he received from external sales and pricing consultants about pricing; and
(e) the cost to SFQV of carrying out the development.[32]
[32] TB, Tab 61, p 1,050 at [45].
The Director was cross-examined about his experience in development activities including conducting feasibility studies in connection with developments. He agreed that a feasibility study is a detailed analysis of whether or not the revenue which an entity would derive from a development would exceed the costs of the development.[33] In response to whether the purpose of a feasibility study is to determine if the development would be profitable, the Director stated it is “[t]o measure the profitability, yes”.[34]
[33] Transcript P-32, lines 25-27.
[34] Transcript P-32, lines 32-33.
The Director further agreed in cross-examination that in conducting a feasibility study, he would consider all of the costs involved in carrying out a development; in particular, he stated “[t]he anticipated costs, yes”.[35] Asked whether those anticipated costs would include applicable taxes, he responded: “GST, yes”.[36] In response to the question whether he would factor those costs into determining whether or not the development was feasible, he stated it was “[o]ne of the factors, yes”.[37]
[35] Transcript P-32, lines 35-36.
[36] Transcript P-32, line 38.
[37] Transcript P-32, lines 40-41.
More specifically, in relation to the Development, the Director agreed in cross-examination that SFQV entered into the Development expecting to make a profit; that various feasibility studies were undertaken in relation to the Development prior to purchase right through to delivery of the project; and that these feasibility studies were for the purpose of measuring profitability as the project continued.[38] He also confirmed in cross-examination that the feasibility studies considered and measured all of the costs of carrying out the Development and that these costs included GST liabilities on the sales of the ultimate developed units.[39] Further, the Director acknowledged that the outcome of the feasibility studies was that the Development would be profitable and that one way SFQV sought to achieve this was by maximising revenue.[40]
[38] Transcript P-33, lines 5-8, lines 9-18.
[39] Transcript P-33, lines 20-24.
[40] Transcript P-33, lines 29-38.
The Director expressly acknowledged that SFQV sought to maximise the gross realisation from the Development overall, and to ensure the Development would be profitable by recovering its costs.[41] He admitted that recovering costs included any taxes SFQV was liable to pay in connection with the Development, which included the GST liabilities on the sales of the developed units.[42] He also agreed that SFQV forecast that it would recover all its costs on the Development and in order for the Development to be profitable, SFQV needed to sell the units at a price above cost.[43]
[41] Transcript P-33, lines 40-44.
[42] Transcript P-34, lines 1-2.
[43] Transcript P-35, lines 27-34.
The Director made clear that he was focused on maximising the profitability of the Development. The pricing strategy involved getting “the highest possible price the market would bear”. He explained that the meaning of that expression was “[t]he highest price a market could sustain or get taken up. So purchasers, what they’re willing to pay depending on market factors. Interest rates, competing stock, sentiment in the marketplace, price point are certainly factors that we would consider in what the market can bear.”[44]
[44] Transcript P-61, lines 24-29.
The Director also explained that in relation to pricing decisions in respect of unit sales, there was a collaborative approach, but “ultimately the sign-off and approval of the final price list sat with [him]”.[45] He added that “[f]eedback would have been received from sales agents, our own market research internally from the team, the director of development or general manager of development. So there was an approach taken to price the units depending on orientation, view and the like. So it was a collaborative approach particularly on a large project.”[46]
[45] Transcript P-35, lines 38-40.
[46] Transcript P-35, lines 40-45.
The Director was asked about the involvement of a former development manager that worked with SFQV as well as that of the Manager. The Director stated the former development manager was responsible for presenting his recommendations and strategy regarding pricing.[47] In relation to the Manager, he stated “[h]e didn’t have authority to make decisions, but he certainly provided recommendations to [the former development manager] and probably did the grunt work…”[48] The Director added that the Manager was a development manager at the relevant time and he later became the sales director for pricing and was responsible for work on the feasibility studies as well as collaborating with real estate agents. The Manager was at the coalface liaising with sales agents and marketing teams.[49]
[47] Transcript P-36, lines 12-13.
[48] Transcript P-37, lines 2-4.
[49] Transcript P-77, lines 17-27.
The Director also agreed in cross-examination, as follows:
(a)SFQV had a desired rate of return, as in “the minimum net profit” that it was looking to make from the Development;[50]
(b)SFQV had “a forecasted minimum price to sell” the developed units;[51]
(c)the “only … element to recover the cost[s] would be the sale price”;[52]
(d)SFQV was a profit-making entity and would only enter into developments that would be profitable;[53]
(e)“the forecasted revenue figure needed to exceed the costs of the development”;[54] and
(f)the sales prices set for the units in the Development were based on the GST margin scheme and included an amount for GST;[55]
[50] Transcript P-42, lines 1-4.
[51] Transcript P-42, lines 19-22.
[52] Transcript P-42, lines 29-32.
[53] Transcript P-46, lines 5-8.
[54] Transcript P-46, lines 10-11.
[55] Transcript P-51, lines 15-18.
The Manager’s evidence was similarly focused on the pricing of the units for sale at the Development. He stated in his affidavit that when pricing units in the Development, he applied the "bottom up" methodology.”[56] “The basis of the "bottom up" methodology is to try to work out, based on the objective characteristics of the property intended to be sold and using comparable sales data from other properties, the price that a purchaser is likely to pay for the relevant property. Applying that methodology, [he] had regard to comparable market sales of apartments in the ACT region …. In deciding whether apartments were "comparable", [he] had regard to objective characteristics of the apartments, which included various factors such as the number of bedrooms, bathrooms, … the size of the apartment and any views from the apartment.”[57]
[56] TB, Tab 53, p 804, [12].
[57] TB, Tab 53, pp 803-804, [11].
The Manager stated he applied the "bottom up" methodology because it was his experience from working in the property industry that “prospective purchasers will pay market prices, but will not pay more, and that they are indifferent to the amount spent by the developer in order to bring the apartment into existence, such as costs of acquiring the land and building the apartment.”[58] Documentary examples of this methodology in the form of spreadsheets were exhibited to the Manager’s affidavit.[59] The Manager stated he either initially prepared them or else he worked on them as they involved an iterative process.
[58] TB, Tab 53, pp 803-804, [11]
[59] TB, Tab 53, p 805 at [15]-[16]; pp 938-1,003.
The Manager stated that when applying the “bottom up” methodology, to price individual units in the Development, he was aware of the “desired rate of return” within the SFQV Group and “conscious that it was desirable not to recommend pricing that was likely to have the result that [SFQV] would not meet its desired rate of return.”[60] The Manager explained that ensuring that an internal rate of return is met fixes a “soft floor” for pricing, “in the sense that [he] would generally not want to recommend a price for an apartment which was likely to result in the internal rate of return not being met”.[61] However, “[w]here the market price for apartments exceeds the price which is likely to result in a desired rate of return being met, then the internal rate of return” was not the driver of pricing.[62] Rather, “the driver then is the market price”.[63]
[60] TB, Tab 53, p 805 [17].
[61] TB, Tab 53, p 805 at [17].
[62] TB, Tab 53, p 805-806 at [17].
[63] TB, Tab 53, p 806 at [17].
The Manager added that while factors such as the cost of development and profit margins were relevant to the feasibility of a development, he did not have regard to these, including GST in providing pricing advice.[64] The Manager explained that “the various factors affecting the cost of development, including GST, are relevant to working out the feasibility of a project and profit margins, but they did not affect the pricing advice [he] gave to [SFQV] for the [REDACTED] Development or more generally because that pricing advice was a reflection of the pricing that [he] considered the market could bear using the "bottom up" methodology, and in no way took into account factors affecting the cost of development, including GST”.[65]
[64] TB, Tab 53, p 806 at [18].
[65] TB, Tab 53, p 806 at [18].
In summary, the Director and the Manager gave straightforward evidence. They impressed me as experienced, professional and capable operators in the property industry. By any measure, they both had a wealth of property development experience and were calculating in the way they went about maximizing the gross revenue and profitability of the Development.
PwC advice and the Commissioner’s private rulings
On or about 22 June 2016, the Director and the then development manager of SFQV had a meeting with representatives of PwC.[66] In his affidavit, the Director stated that at the meeting “PwC discussed [the] GST treatment that could apply to projects involving the LDA”.[67] The meeting with PwC is corroborated by a follow up email from PwC to the Director dated 23 June 2016. The email also attached a draft PwC engagement letter for GST consulting services for the SFQV Group.
[66] TB, Tab 61, p 1050 at [48]; TB, Tab 85, p 1491.
[67] TB, Tab 61 at [48].

The abovementioned PwC letter refers to PwC providing, as part of the work to be performed, “a letter of advice setting out the GST treatment of relevant transactions” and a “submission in the form of a request for a Private Binding ruling to the ATO”, amongst other things.[68] The fee proposed by PwC was 20% of any GST Saving (plus GST) for all sales (past and future), for current developments on land purchased prior to the date of the engagement letter.
[68] TB, Tab 85, p 1,495.
On 25 July 2016, SFQV engaged PwC to provide advice on GST issues in respect of its developments. The Director stated that he formed the belief that it was “highly likely” that SFQV would be able to include the cost of the Development Services when calculating the margin for the Development.[69] Amongst other things, the Director placed weight on the fact that PwC was willing to undertake work preparing and obtaining private binding rulings for a contingency fee.
[69] Transcript P-61, lines 5-7.
The Director stated in his oral evidence that, although he believed that SFQV could include the cost of the Development Services in its GST margin scheme calculations, he decided to act “conservatively” and to lodge SFSV’s Business Activity Statements (BASs) without taking into account the Development Services when calculating the margin. Consequently, SFQV lodged BASs on the basis that the Development Services were not deducted in determining the GST liability under the margin scheme.
There are various emails attached to the affidavit of Director that show that in August 2016 PwC began requesting documents to provide its GST consulting services to an entity related to SFQV regarding another development.[70]
[70] TB, Tab 86, pp 1,502-1,505.
On 30 June 2017, the Commissioner issued a private ruling to SFQV’s related entity (the application for private ruling having been lodged on or about 13 April 2017).[71] The Commissioner’s private ruling to SFQV’s related entity confirmed that it could deduct the non-monetary consideration when calculating the margin on the basis that development services were consideration for the acquisition of a Crown lease from the LDA. The Commissioner ruled that the services were additional (non-monetary) consideration for the acquisition of the Land from the LDA. The Commissioner also ruled that SFQV’s related entity made a taxable supply of development works to the LDA.
[71] TB, Tab 87, pp 1,560-1,588.
It was not until 13 November 2017 that SFQV, through PwC, applied for a private ruling from the Commissioner in relation to its own Development Services provided to the LDA.[72] The following two questions were put to the Commissioner on behalf of SFQV:
Did [SFQV] make a taxable supply of Development Services to [the LDA] in relation to the development of real property located at [REDACTED] Australian Capital Territory (the [REDACTED] Site) under the agreements entered into between [SFQV] and the LDA for the “Project”; and
Were the Development Services provided by [SFQV] to the LDA non-monetary consideration for [SFQV’s] acquisition of the [REDACTED] Site from the LDA?
[72] TB, Tab 88, pp 1,589-1,607.
The expression “Development Services” referred to the works SFQV was required to undertake and provide to the LDA and was defined by reference to cl 3(a) of the Crown Lease. The term “Project” was not expressly defined in the application.
On 13 December 2017, the Commissioner issued a private ruling to SFQV (Private Ruling).[73] The Commissioner ruled that SFQV made a taxable supply of Development Services to the LDA in relation to the development of the site under the agreements entered into between SFQV and the LDA for the Project. Further, the Development Services provided by SFQV to the LDA constituted non-monetary consideration for SFQV’s acquisition of the Land from the LDA. Consequently, SFQV was entitled to take into account the value of the non-monetary consideration (the Development Services), for the purposes of the GST margin scheme calculation. The Commissioner rightly acknowledged that he was bound by the Private Ruling for the purposes of this dispute.[74]
[73] TB, Tab 89, pp 1,608-1,624.
[74] The Commissioner’s views regarding the GST treatment of development works are now substantively different as set out in GSTD 2021/1: Goods and Services Tax Determination: Goods and services tax: development works in the Australian Capital Territory.
SFQV’s Tax Invoice
On 21 December 2017, SFQV issued to the ACT Suburban Land Agency (SLA) (the successor agency to the LDA from 1 July 2017) a tax invoice for the “[p]rovision of development services with respect to the [REDACTED] Site”.[75] The invoice was for a total of $113,460,254.00 including GST of $10,314,568.50. Only an amount equal to the GST component of $10,314,568.50 was expressly stated as the “amount owing”. SLA paid the GST to SFQV on or about 8 February 2018.
[75] TB, Tab 90, p 1,625.
THE PROCEDURAL BACKGROUND
At this juncture, it is appropriate to set out the details of SFQV’s BASs as initially lodged and amended throughout the audit, as well as the Commissioner’s assessments which were the subject of the GST Assessments Objection Decision.
Business Activity Statements
SFQV initially lodged its BASs for the September 2015 and September 2017 to March 2019 quarters, as follows:

Tax period (quarter)

Date lodged

Amount reported at label 1A (GST on Sales)

Amount reported at label 1B (GST on Purchases)

Assessed net amount

September 2015

16 October 2015

$0

$247

$247 CR

September 2017

17 October 2017

$6,604,049

$6,224,069

$379,980 DR

December 2017

19 February 2018

$1,404,944

$1,332,031

$72,913 DR

March 2018

23 April 2018

$576,258

$759,327

$183,069 CR

June 2018

30 July 2018

$35,312

$580,092

$544,780 CR

September 2018

16 October 2018

$59,796

$481,157

$421,361 CR

December 2018

27 February 2019

$68,641

$519,482

$450,841 CR

March 2019

17 April 2019

$14,713

$192,463

$177,750 CR

It is common ground that SFQV reported the taxable supplies and GST liabilities relating to the sale of the units in its BAS for the September 2017 quarter, and subsequently in each of its BASs for the December 2017 through to June 2019 quarters as the settlements occurred throughout these periods. Further, SFQV used the GST margin scheme in calculating its GST liabilities relating to the sale of the units.
For the September 2017, December 2017 and March 2018 quarters, SFQV worked out its “margin” for the purposes of the GST Act by accounting only for the monetary consideration for its acquisition of the Land, namely the $5.4 million it paid to the LDA pursuant to the Commercial Contract (see [22] above). In other words, SFQV did not take into account the non-monetary consideration (in the form of the Development Services) it provided to LDA for the acquisition of the Land.
Although SFQV had obtained the Private Ruling on 13 December 2017, it did not start to factor an amount for the non-monetary consideration for its acquisition of the Land in its GST margin scheme calculations until it lodged its BAS for the June 2018 quarter on 30 July 2018. That is, even though SFQV had obtained the Private Ruling on 13 December 2017, SFQV inexplicably did not apply the Private Ruling and continued to overpay GST on the sale of its residential units in its BAS for December 2017 lodged on 19 February 2018, as well as in its BAS for March 2018 lodged on 23 April 2018.
For the tax quarterly tax periods ending June 2018, September 2018, December 2018 and March 2019, SFQV worked out its margin by relevantly taking into account both the monetary consideration ($5.4 million) and non-monetary consideration (the Development Services) for its acquisition of the Land from the LDA.
Curiously, SFQV did not report its taxable supply of the Development Services or any GST payable on the supply of Development Services in any of its BASs as originally lodged. As stated above, SFQV had recovered the GST payable from the SLA (previously the LDA) by issuing it with a tax invoice in December 2017.
GST Review, GST Audit and Amended Assessments
On 24 October 2018, the Commissioner notified SFQV that it was reviewing SFQV’s affairs for the period 1 July 2017 to 30 September 2018 and asked for certain information.[76] On 10 December 2018, PwC responded to the Commissioner’s queries.
[76] TB, Tab 14, p 322.
In relation to the calculation of the Development Services invoiced to the SLA, it stated:
The value of the development services invoiced to the SLA was calculated with reference to the costs incurred by [SFQV] under the subcontract agreement for completion of the works, in December 2017, based on forecast information available at that time (the Development Fee).
The value of the development services supplied by [SFQV] to LDA was calculated based on the costs incurred by [SFQV] in developing the land (which was performed under a subcontract), in accordance with paragraph 70 of GSTR 2015/2. We note that in calculating the cost of development:
- The cost of development services includes the performance of all the development services that [SFQV] agreed to undertake on the land under the PDA entered into with LDA, and consisted of project costs plus margin incurred under the subcontract; and
- [SFQV] considers that costs plus the margin represents the ‘full cost of development works (including builder margins)' and, pursuant to paragraph 70 of GSTR 2015/2, is a reasonable basis for determining the GST inclusive market value of its supply of development services to the LDA.
Furthermore, the underlying Development Fee under the subcontract was calculated as follows:
- The subcontract defined the calculation of the Development Fee to be based on a formula taking into account agreed project costs and a margin, and adjusted for any contract variations.
The values used for the calculation of the Development Fee were as follows:

Agreed project costs (inclusive of GST)

$91,300,000

Variations

$0

Margin

24.27%

Project costs x Margin

$22,160,253.83

Development Fee (inclusive of GST)

$113,460,253.83

GST at 1/11th

$10,314,568.50

Development Fee (excl GST)

$103,145,685

The amount invoiced to the SLA for the development services supplied was therefore equal to the cost incurred by [SFQV] in delivering those services, represented by the Development Fee amount paid under the subcontract.

With reference to the Commissioner’s question as to whether the supply of the Development Services identified in SFQV’s tax invoice to the SLA was reported, PwC advised on 10 December 2018, as follows:
The development services supply was not reported in one particular tax period. An amount equal to the GST amount of the development services was reported in label G1 in March 2018 BAS, however no GST was reported at label 1A in relation to this supply in March 2018.
Instead, an amount equal to the GST on the development services was included in the GST reported on the sale of the developed properties for the period September 2017- March 2018, as calculated under the margin scheme. This is by virtue of only the monetary consideration for land being included in the margin scheme cost base for those sales, so that the margin for those sales effectively included an apportionment of the consideration for the supply of the development services.
With effect from 1 April 2018, [SFQV] started reporting the GST on sales of units on the basis that the cost base includes both the monetary and the non-monetary consideration paid for the land and [SFQV] has a separate liability to report GST on the supply of the development services to the extent it has not already been reported as per above.
On 24 June 2019, PwC replied to the Commissioner in the following terms in relation to questions around whether Division 142 of the GST Act had been considered:
In summary, we have considered the application of Division 142 … and have concluded it does not apply, for the following reasons:
Division 142 applies only to amounts of 'excess GST'. The arrangements … involved overpaid GST (on the taxable supplies of developed properties under the margin scheme) and underpaid GST (on the taxable supplies of development services) equal to the same amount. As the increase in GST on the supply of the development services and a corresponding decrease of GST on the supplies of the developed properties under the margin scheme are equal and offsetting, there is no change to the total GST to be remitted … therefore no 'excess GST' amount….
… an amount on account of GST on the development services was paid to [REDACTED] … by the LDA pursuant to the contractual requirement under the GST gross-up clause in the respective Project Delivery Agreement. An equivalent amount of GST payable by [REDACTED] … as explained above was offset by a decrease in the GST payable under the margin scheme on the supplies of the developed properties.
Purchasers were not notified of a change in the GST calculated under the margin scheme given there was no change to the Price (which was inclusive of any GST under the margin scheme), the GST treatment (which continued to be taxable rather than changing from taxable to GST-free or input taxed), or the purchasers' entitlement to an input tax credit (as acquisitions under the margin scheme are for a non-creditable purpose).[77]
[77] TB, Tab 18, p 501.
On 15 August 2019, the Commissioner commenced an audit in respect of SFQV’s GST affairs for the September 2015 to June 2019 quarters.[78]
[78] TB, Tab 19, pp 519-521.
On 28 February 2020, SFQV requested that the Commissioner amend its assessments for the September 2017 to June 2018 quarters inclusive and the December 2018 to March 2019 quarters inclusive.[79]
[79] TB, Tabs 27-32, pp 576-581.
On 1 and 2 April 2020, SFQV’s assessments were amended, as follows:

Tax period (quarter)

Amended amount at label 1A
(GST on Sales)

Amount at label 1B (GST on Purchases)

Amended assessed net amount of GST

September 2017

$10,268,955

$6,224,069

$4,044,886 DR

December 2017

$12,338

$1,332,031

$1,319,693 CR

March 2018

$45,225

$759,327

$714,102 CR

June 2018

$34,007

$580,092

$546,085 CR

December 2018

$94,314

$519,482

$425,168 CR

March 2019

$15,611

$192,463

$176,852 CR

On 15 April 2020, PwC (on behalf of SFQV) requested that the Commissioner exercise the discretion in s 142-15 of the GST Act and treat s 142-10 as never having applied in respect of the September 2017, December 2017 and March 2018 quarters on the basis that it was inappropriate for s 142-10 to apply. It was submitted that an example in the Explanatory Memorandum to the Tax Laws Amendment (2014 Measures No. 1) Bill 2014 (Cth) (2014 Explanatory Memorandum) which involved an adjustment to the margin scheme cost base was similar to the situation for SFQV. Specifically, PwC stated, as follows:
The adjustment of the margin scheme cost base because of non-monetary consideration provided for the land gives rise to GST payable by [SFQV] in an alternative period or periods on its development services supply to the SLA. None of those earlier periods are time barred. There is no windfall for [SFQV], merely an adjustment of GST under the margin scheme. There is no windfall, as the exact same amount of GST refunded needs to be paid as GST in another tax period. Taking into account overall fairness, the Commissioner should exercise his discretion in section 142-15 in these circumstances.[80]
[80] TB, Tab 34, p 601.
On 15 October 2020, the Commissioner issued a notice of amended assessments of net amount of GST for each of the September 2015 and September 2017 to June 2019 (inclusive) quarters.[81]
[81] TB, Tab 37, p 634.
On 16 October 2020, the Commissioner:
(a)notified SFQV that the GST audit had concluded, and that he had decided not to exercise the discretion in s 142-15 of the GST Act;[82] and
(b)issued a further notice of amended assessments of net amount of GST for the June 2018 and December 2018 to June 2019 quarters.[83]
[82] TB, Tab 39, pp 638-643.
[83] TB, Tab 38, p 636.
The combined effect of the notices of amended assessments issued by the Commissioner on 15 and 16 October 2020 (excluding the June 2019 quarter which is not disputed) is summarised below:

Tax period (quarter)

Amended amount at label 1A
(GST on Sales)

Amount at label 1B (GST on Purchases)

Amended assessed net amount of GST

September 2015

$10,314,568

$247

$10,314,321 DR

September 2017

$6,604,189

$6,224,069

$380,120 DR

December 2017

$1,404,804

$1,332,031

$72,773 DR

March 2018

$502,160

$759,327

$257,167 CR

June 2018

$72,077

$580,092

$508,015 CR

September 2018

$103,773

$481,157

$377,384 CR

December 2018

$146,261

$519,482

$373,221 CR

March 2019

$31,364

$192,463

$161,099 CR

On 14 December 2020, SFQV lodged an objection against the amended assessments for the September 2015, September 2017, December 2017 and March 2018 quarters. SFQV also objected against the Commissioner’s refusal to exercise the discretion provided for in s 142-15 of the GST Act.[84]
[84] TB, Tab 40, pp 644-690.
On 18 March 2022, SFQV lodged an objection against the amended assessments for the June 2018, September 2018, December 2018 and March 2019 quarters.[85]
[85] TB, Tab 41, pp 691-754.
On 23 March 2023, the Commissioner disallowed the objections.[86]
[86] TB, Tabs 1 and 2, pp 1-21.
On 22 May 2023, SFQV commenced these proceedings by its application for review of the GST Assessments Objection Decision and the Section 142-15 Objection Decision.[87]
ISUUE 1 - TO WHAT TAX PERIOD WAS THE GST ATTRIBUTABLE ON THE TAXABLE SUPPLY OF DEVELOPMENT SERVICES?
[87] TB, Tab 3, pp 22-31.
The first issue concerns the tax period to which the GST payable on the taxable supply of Development Services was attributable. The Commissioner’s amended assessments attributed the GST payable to the September 2015 quarter because it was in that quarterly tax period, according to the Commissioner, that SFQV received consideration for the supply of the Development Services. This was based on the date of the grant of the Crown Lease (3 July 2015) which falls into the September 2015 quarter.
The Commissioner also considered that it was not appropriate to use the specific attribution rules as this was not a situation in which the consideration for the Development Services was unknown, as it was always possible for the value of the consideration for the Development Services to be ascertained by SFQV engaging professional valuers. Additionally, the Commissioner considered this was not a situation where the ascertainment of the total consideration depended on a future event that was not entirely within SFQV’s control.
SFQV contended that the GST was not attributable to the September 2015 tax period and, accordingly, the Commissioner’s assessment of SFQV’s net amount for that tax period was excessive. SFQV argued that the GST liability was instead attributable to the September 2017 tax period for a number of reasons. SFQV argued that it was in the September 2017 tax period that the consideration for the taxable supply of Development Services was received by SFQV upon the registration of the units plan as that is when the Crown Lease ended and SFQV became the holder of the leasehold estate in each of the units that it could sell for a profit. SFQV argued that its bargain was that it would develop the Land and sell the unit titles, not the Crown Lease. According to SFQV, what moved the supply of the Development Services was the registration of the units plan, not the grant of the Crown Lease.
Alternatively, SFQV argued that even if some of the consideration for SFQV’s taxable supply of Development Services was received in the September 2015 quarter, SFQV did not know the total consideration for the taxable supply and the ascertainment of the total consideration depended on a future event that was not entirely within SFQV’s control. Consequently, SFQV contended the GST was attributable to the September 2017 tax period, being the period in which it became aware of the total consideration and there were no longer any contingencies.

I have decided that the Commissioner is correct and that the GST liability on the taxable supply of Development Services was properly attributable to the September 2015 quarter. SFQV received the consideration for the Development Services, in the form of the grant of the Crown Lease on 3 July 2015. It is convenient to set out the statutory provisions and principles regarding supplies made for consideration and attribution of GST payable before considering the submissions of the parties.
Supply made for consideration
Section 9-5 of the GST Act relevantly states that an entity makes a taxable supply if the supply is made “for consideration”. Consideration is defined in s 195-1 of the GST Act to relevantly mean “any consideration within the meaning given by s 9-15 in connection with the supply”.
Section 9-15(1) of the GST Act defines “consideration” in the following terms:
9‑15 Consideration

(1) Consideration includes:
(a) any payment, or any act or forbearance, in connection with a supply of anything; and
(b) any payment, or any act or forbearance, in response to or for the inducement of a supply of anything.
The High Court stated in FederalCommissioner of Taxation v Qantas Airways Ltd[88] that the word “for” in the phrase “the supply for consideration” in s 9-5(a) is not used to invoke contractual principles but rather requires a connection or relationship between the supply and consideration.[89]
[88] [2012] HCA 41.
[89] Qantas at [14].
In AP Group Limited v Commissioner of Taxation,[90] the Full Federal Court stated that to make “the supply for consideration” required that the consideration must be “in connection with” the supply but the supply must also be “for” the consideration.[91] “For” in this context means “in order to obtain”.[92] It was necessary in that case to ask whether the taxpayer made each relevant supply in order to obtain a payment in connection with the supply,[93] and whether each supply was made by the taxpayer for a prospective payment later received.[94] It follows that it is necessary to establish a connection between the making of the supply and the provision of consideration for the supply. In s 9-5(a), the focus is on the actions of the supplier and whether the actions of the supplier were undertaken in order to obtain consideration or to induce consideration.
[90] (2013) 214 FCR 301.
[91] AP Group at [33] (Edmonds and Jagot JJ); [74] (Bromberg J).
[92] AP Group at [33].
[93] AP Group at [74].
[94] AP Group at [75].
In Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW),[95] Dixon J described “consideration” under s 66 of the Stamp Duties Act 1920-1940 (NSW) as “the money or value passing which moves the conveyance or transfer”.[96]
[95] (1948) 77 CLR 143.
[96] Archibald Howie at 152.
WYPF and Commissioner of Taxation[97] is a relevantly similar case to this one with respect to the provision of development services or works described as Preparatory Works and Building Works made by the taxpayer to the ACT Land Development Authority. Senior Member Olding relevantly observed that there was “no relevant distinction” between the “in order to obtain” formulation in AP Group and the “thing that ‘moves’” formulation in Archibald Howie. He also stated that both are consistent with “consideration” being defined, not as a stand-alone concept, but as consideration “for” a supply or acquisition.[98]
[97] [2021] AATA 3050.
[98] WYPF at [19]-[20].
Attribution Principles
SFQV did not account on a cash basis for GST purposes. The default attribution principle for entities that do not account on a cash basis is set out in s 29-5(1) of the GST Act.
Subsection 29-5(1) states:
The GST payable by you on a *taxable supply is attributable to:
(a) the tax period in which any of the *consideration is received for the supply; or
(b) if, before any of the consideration is received, an *invoice is issued relating to the supply – the tax period in which the invoice is issued.
The principle established by s 29-5 is subject to determinations issued by the Commissioner. In particular, s 29-25(1) gives the Commissioner the power to determine “the tax periods to which … GST on *taxable supplies of a specified kind … [is] attributable”. Subsection 29-25(3) makes clear that determinations made under s 29-25(1) override s 29-5(1) to the extent of any inconsistency.
Pursuant to s 29-25(1), the Commissioner had made the A New Tax System (Goods and Services Tax) (Particular Attribution Rules Where Total Consideration Not Known) Determination (No 1) 2000 (Cth) (2000 Determination).
Clause 3(1) of the 2000 Determination states:
This Determination applies where:
(a) you make a taxable supply;
(b) you do not know the total consideration for the supply when any consideration is received for the supply or an invoice is issued relating to the supply; and
(c) the ascertainment of the total consideration depends on a future event or events that is not entirely within your control;
and either:
(d) an invoice is issued relating to the supply; or
(e) any consideration is received for the supply.
Clause 4 of the 2000 Determination states:
(1) Where, in a tax period before you know the total consideration, an invoice is issued relating to a taxable supply which states an amount of consideration and:
(a) no consideration is received for the supply in that tax period – the GST on the supply is attributable to the tax period but only to the extent of the amount of the consideration stated in the invoice; or
(b) consideration is received for the supply in that tax period – the GST on the supply is attributable to that tax period but only to the extent:
(i) where the consideration received is less than or equal to the amount of the consideration stated in the invoice – the amount of consideration stated in the invoice; or
(ii) where the consideration received is more than the amount stated in the invoice – the amount of the consideration received.
(2) Where, in a tax period before you know the total consideration, an invoice is not issued relating to the supply and:
(a) consideration is received for the supply in that tax period – the GST payable on the taxable supply is attributable to that tax period but only to the extent of the consideration received in that tax period; or
(b) no consideration is received for the supply in that tax period – none of the GST on the supply is attributable to that tax period.
(3) The GST payable on the taxable supply is attributable under subclauses (1) and (2) only to the extent that it has not been attributed to an earlier tax period.
(4) However, the GST payable on the taxable supply is attributable to the tax period in which you first know the total amount of consideration for the taxable supply to the extent that it has not been attributed to an earlier tax period.
I turn now to address the parties submissions regarding the first issue. SFQV argued that the grant of the Crown Lease on 3 July 2015 pursuant to the arrangements between the LDA and SFQV was not consideration for the Development Services on essentially two grounds. SFQV’s first ground was that it was in September 2017 when consideration for the taxable supply of Development Services was received by SFQV, as that is the quarter in which the units plan was registered. According to SFQV, that was the consideration that “moved” the supply of the Development Services under the GST Act. This was due to the fact that it was on 8 September 2017 that the Crown Lease ended and SFQV became the holder of an estate in leasehold in each unit for the remaining term of the former Crown Lease: ss 33(1) and (2) of Unit Titles Act 2001 (ACT).
SFQV argued its position was supported by the fact that the commercial objective of its arrangements with the LDA was for SFQV to obtain valuable property from which it could profit. SFQV stated it did not obtain an interest in the units until the units plan was registered on 8 September 2017. SFQV argued it was always contemplated from the time of entering into the Commercial Contract. In particular, cl 37.4 and 37.5 of the Commercial Contract and the Project Development Agreement required SFQV to develop the Land and, in return, it would acquire proprietary interests from which to profit. SFQV argued that the unit titles were the proprietary interests which it could dispose and not the Crown Lease issued to SFQV on 3 July 2015. SFQV also argued it could only derive profit when its obligations under the Project Delivery Agreement were fully discharged.
SFQV explained that the Crown Lease was a unitary title to the Land and was subject to substantial restrictions on sale and assignment; both under the contractual framework with the LDA and under statutory provisions including s 298 of the Planning and Development Act 2007 (ACT). Additionally, the effect of ss 33(1) and (2) of the Unit Titles Act 2001 (ACT) was that the Crown Lease would come to an end upon the registration of the units plan, as happened on 8 September 2017.
SFQV also emphasised that, prior to the receipt of the registered units plan, the Crown Lease could have been terminated in certain circumstances pursuant to cl 5(a)(ii), namely, if an approved development in accordance with the Crown Lease was not completed within the specified period. The receipt of the registered units plan thus completed the Development and removed the contingency in cl 5(a)(ii) (see [33] above). According to SFQV, it was only upon receipt of the registered units plan that the consideration as contemplated by s 9-15(1) of the GST Act was received for the supply of the Development Services: s 9-5(a).
Finally, SFQV submitted that as GST is a practical business tax, it is concerned with what a taxpayer as a matter of commercial reality receives as consideration for a supply. SFQV referenced judicial statements that the GST Act is “designed to operate in a practical business context and is to be interpreted accordingly.”[99] Further, it should be given a “practical and fair business operation” which accords with “social and economic reality”.[100] Consequently, SFQV argued that merely because a chose in action has arisen in the hands of the supplier does not imply that consideration has therefore been received by it; otherwise, s 29-5(1)(b) would be rendered substantially otiose. This is because, whenever an executory contract was entered into, the GST on the taxable supply contemplated by that contract would always fall to be attributed, under s 29-5(1)(a), at the time of entry into the contract.
[99] ATS Pacific Pty Ltd v Commissioner of Taxation (2014) 219 FCR 302 at [71] (Pagone J), [74] (Davies J); see also Commissioner of Taxation v Multiflex Pty Ltd (2011) 197 FCR 580 at [37] (Stone, Edmonds and Logan JJ).
[100] Central Equity Ltd v Federal Commissioner of Taxation (2011) 214 FCR 255 at [53] (Gordon J).
The second, alternative ground on which SFQV argued that the GST payable on the taxable supply of Development Services was attributable to the September 2017 quarterly tax period, was that SFQV did not know the “total” consideration for the supply when it was granted the Crown Lease and the ascertainment of the “total” consideration depended on future events. This proceeded on the assumption that the grant of the Crown Lease was some of the consideration for SFQV’s supply of Development Services. SFQV sought to bring itself within the terms of cl 3(1)(b) and 3(1)(c) of the 2000 Determination (see [117] above).
SFQV submitted that cl 4(2) of the 2000 Determination was relevant because SFQV did not issue the tax invoice to SLA until December 2017 and it did not know the total consideration for the supply of the Development Services until September 2017.
SFQV argued it did not know the total consideration because it always remained possible that the Crown Lease would be terminated. SFQV’s approach was that the total consideration depended on, for example, ongoing performance of covenants under the Crown Lease such as obtaining approved plans from the government (cl 3(d), (e)), (cl 5(a)(iv)) and completion of the Development (cl 5(a)(ii)). SFQV stated that it always remained possible the LDA would not approve the registration of the units plan. SFQV asserted that it followed that if the Crown Lease was terminated, the consideration for the Development Services would be reduced. SFQV added that some of these events were beyond its control because although it engaged a related entity, SFQV Developments and that entity engaged SFQV Constructors, there were over 100 unrelated independent contractors working on the Development. If the units plan was not registered, SFQV would not obtain saleable units. Those, amongst other events, were said to be not entirely within SFQV’s control as per cl 3(1)(c) of the 2000 Determination and, therefore, the special attribution rules as provided for in s 29-25 of the GST Act arguably applied.
SFQV further argued that the applicable GST attribution principle was cl 4(2) of the 2000 Determination. SFQV urged the Tribunal to conclude that no consideration of any economic value was received for the purpose of cl 4(2) of the 2000 Determination and, therefore, the consideration for the taxable supply of Development Services was received in September 2017 when the units plan was registered. Furthermore, SFQV argued that, if during the September 2015 tax period SFQV received consideration of more than nominal value, at most the consideration that it could have received during that tax period was $5.4 million. This correspondent to the amount SFQV paid the LDA.
Finally, SFQV argued, for completeness, that it was the 2000 Determination that applied and not the later Goods and Services Tax: Particular Attribution Rules Where Total Consideration Not Known Determination 2017 (Cth) (2017 Determination). This was because it was not in dispute that SFQV commenced the provision of its Development Services on 6 June 2016. As the date of effect of the 2017 Determination was 1 April 2017, the 2000 Determination applied and not the 2017 Determination. Regardless, nothing turns on this subsidiary issue as both the 2000 and 2017 Determinations were expressed in relevantly identical terms. On the conclusion reached regarding the attribution issue, the 2017 Determination does not, in any event, assist.
I agree with the Commissioner’s submission that the grant by LDA of the Crown Lease on 3 July 2015 during the September 2015 quarter, was the consideration for the supply of the Development Services by SFQV. This was because there was a sufficient connection or relationship between the Development Services and the grant of the Crown Lease for the purposes of s 9-5(a) of the GST Act, as interpreted by the High Court in Qantas.[101] This conclusion is founded on the broad, inclusive definition of consideration in s 9-15(1)(a) which expressly covers any payment, or any act or forbearance in connection with a supply. I also agree, in the alternative, the grant of the Crown Lease “induced” the supply of the Development Services as contemplated by the definition of consideration in s 9-15(1)(b) of the GST Act.
[101] Qantas at [14].
It is well established that a Crown lease that is automatically renewable is the most extensive property interest that can be held in the ACT with the Commonwealth holding the reversion.[102] Granted, it is significant in the scheme of the arrangements between the LDA and SFQV that cl 3(a) of the Crown Lease required SFQV to complete the Development Services within a stipulated time. However, the fact that if SFQV did not satisfy that condition, the LDA as lessor had a right to terminate the Crown Lease under cl 5(a)(ii) does not detract from the grant of the Crown Lease itself being consideration for GST purposes. There is no requirement in the GST Act that consideration is unconditional. SFQV’s assertion that SFQV did not obtain a “relatively unimpeachable right under the Crown Lease to the use and transfer of the Land” does not take account of the breadth of the definition of consideration in s 9-15. Moreover, taken as a whole, the contemporaneous transaction documents required the grant of the Crown Lease to allow the Development Services to be carried out. SFQV would not have been under a contractual obligation to supply the Development Services if the transaction documents had not provided for the grant of the Crown Lease, and the Crown Lease had not been granted.
[102] Australian Capital Territory (Planning and Land Management) Act 1988 (Cth), s 29(3).
The following terms of the Commercial Contract and Crown Lease support the close connection between the grant of the Crown Lease and the Development Services:
(a)Clauses 1.1 and 1.2 of the Commercial Contract provided that, on completion, the LDA was to grant, or procure the grant of, a Crown Lease substantially upon the terms and conditions of the Specimen Lease attached to the Commercial Contract.
(b)The Crown Lease contained the same terms concerning SFQV’s completion of the Development Services as were contained in the Specimen Lease.
(c)Special condition 37.1 of the Commercial Contract provided that the Commercial Contract was contingent on the parties entering into a Project Delivery Agreement prior to or at the time of entering into the Commercial Contract, and special condition 37.3 required SFQV to comply with all of its obligations under the Project Delivery Agreement.
(d)Clause 4 of the Crown Lease effectively provided SFQV as Lessee with quiet enjoyment of the Land.
(e)Clause 16 of the Commercial Contract provided SFQV with vacant possession of the Land.
Having regard to the factual background, the grant of the Crown Lease was of significant economic value and it “moved” SFQV to supply the Development Services.[103] It was the consideration for the supply of the Development Services, and it was granted in the September 2015 quarter. Alternatively, the Development Services were supplied by SQFV “in order to obtain” the Crown Lease.[104] It is immaterial under either view that the Development Services were completed after the receipt of the consideration because the time of a supply is not relevant to whether a supply is made for consideration, in the same way that the time of supply is not relevant to when the GST liability arises. In any event, certain activities related to SFQV supplying the Development Services were apparently commenced in contemplation of the grant of the Crown Lease as evident from the fact that applications for development consents were lodged shortly after the grant of the Crown Lease (see [40] above).
[103] Archibald Howie at 152.
[104] AP Group at [33]; WYPF at [19]-[20].
This conclusion is consistent with the Commissioner’s public GST Ruling GSTR 2001/6 – Goods and service tax: non-monetary consideration, where he states at [80], [82]-[83]:
[…] Consideration for a supply may include acts, rights or obligations provided in connection with, in response to, or for the inducement of a supply. However, things such as acts, rights and obligations can often be disregarded as payments as they do not have economic value and independent identity separate from the transaction. […]
Whether a payment is consideration for a supply depends on the true character of the transaction. Consideration for a supply is something the supplier receives for making the supply. Although a non-monetary payment (and acts or forbearances) can form consideration, the character of the transaction will determine whether it forms part of the consideration received by the supplier for making the supply.
Many transactions involve exchanging various rights and obligations between the parties to the transaction. In particular, the true character of the transaction may characterise the payment as a condition of the contract rather than the provision of non-monetary consideration. For example, in many cases, agreeing to enter into a contract to receive a supply for a specific period of time is not non-monetary consideration for that supply.

Turning to SFQV’s situation, it is clear from all of the authorities that whether tax has been passed on is a question of fact.[145]
[145] M3K at [38]; Avon FCA at [56].
The expression “passed on” is not defined in the GST Act. The formerly applicable sales tax comprised part of the cost structure of doing business and, in the usual course of things would be passed on.[146] Similarly, the scheme of the GST law is for the GST to be “passed on” and borne by the consumer. In Federal Commissioner of Taxation v DBRreef Funds Management Limited,[147] it was observed that “[i]t is a fundamental premise of the GST Act that a supplier is entitled, and indeed expected, to pass on to the recipient of the supply the burden of the GST”. That case dealt with a supply of a property interest so SFQV’s proposition that different outcomes may ensue because sales tax applied to goods, and GST applies to a different tax base, namely, a supply of goods, services or anything else, does not advance its position. It is acknowledged, however, that there are likely to be different complexities in pricing under sales tax and under GST.
[146] Avon HCA at [9].
[147] [2006] FCAFC 89.
It is undeniable, notwithstanding any pricing complexities, that it is in the nature of sales tax, and GST, to be passed on and it will be “comparatively seldom” that a taxpayer will succeed in proving, on the balance of probabilities, that excess GST was not passed on.[148] The “usual position” is that profitable businesses recover all of their costs, which includes amounts paid as GST, in the prices charged to their customers.[149] A business that does not price its product at a level that recovers its costs will incur losses, contrary to the very reason for embarking upon the business.[150] SFQV was, by all accounts, operating a profitable business and it undertook the Development to make a profit.
[148] Avon HCA at [12]; WYPF at [58]; Domestic Property Developments at [67].
[149] M3K at [41]; Avon HCA at [9]; Domestic Property Developments at [66].
[150] M3K at [33].
It follows that a taxpayer faces “a difficult challenge” in proving it has borne the burden of excess GST itself in circumstance where it has sold units at prices that ensured the taxpayer exceeded its costs (including amounts payable as GST).[151] The evidence of both the Director and the Manager was that SFQV’s pricing of units recovered the costs of the Development including amounts ostensibly on account of GST. While SFQV was at pains to argue that there was no evidence the price of any unit sold by it showed an amount as GST being a material factor in the pricing, that was not to the point. The fact that it did not explicitly take into account costs in setting its prices for the sale of the units was irrelevant in circumstances where SFQV was, by any measure, always recovering its costs including the excess GST.
[151] Domestic Property Developments at [99].
SFQV’s main argument was that its pricing policy and practice did not have regard to GST as a cost in pricing the units and that its pricing was driven by the market. Also, purchasers were indifferent to the costs of the development, including the supplier’s GST liability. The Director’s evidence was that he wanted to sell the units at the highest price that the market would bear. This was confirmed by the Development Agreement which incentivised SFQV Developments to achieve in excess of $124,140,790 being the “Agreed Sales”, due to the possible adjustments to the Fee payable (see [38] above).
However, the fact that that strategy was what drove pricing decisions and that SFQV generally pursued it throughout, does not mean that excess GST was not passed on to the purchasers. Similarly, it was not to the point that SFQV did not set prices of the units by specific reference to costs such as GST or that it worked out its price lists using a “bottom up” methodology focused on the objective characteristics of the units. There was simply no evidence adduced to suggest that SFQV absorbed the excess GST itself.
Accordingly, I have concluded that SFQV failed to prove that it did not pass on the excess GST in its pricing of each of the units sold at all times. SFQV’s evidence that it set its prices at the maximum that the market would bear and had no regard to the GST in formulating its price list does not engage with the statutory question in s 142-5(1) of showing that it did not pass on amounts as GST to the purchasers of the units. The High Court statement in Avon HCA that the extent to which tax has been passed on “is not to be answered merely by pointing to price as the sole indicator of passing on”[152] is of significance in this context.
[152] Avon HCA at [26].
SFQV, at no stage, adduced any evidence or suggested that particular sales by it, or sales in particular periods were unprofitable and or that its prices did not recover all costs, including the excess GST. It was the Director’s evidence that the objective was to “maximis[e] revenue” and he was concerned to “maximise the gross realisation of the development”. He also expressly referred to the “cost to [SFQV] of carrying out the development” as one of the matters to which he had regard in pricing the units. Granted, it had a lower order of priority but that was because maximising the gross realisation was the top priority and achieving that meant recovery of costs was taken care of. Likewise, the Manager’s evidence was that he was aware of the “desired rate of return” and “conscious that it was desirable not to recommend pricing that was likely to have the result that [SFQV] would not meet its desired rate of return”. SFQV’s expectation was that its anticipated costs, including amounts on account of GST (whether correct or not), would be recovered at all times and there was no suggestion that it did not recover all of its costs.
SFQV’s submission that the critical issue was SFQV’s pricing policy and practice in respect of determining prices for units by purchasers, and not how SFQV formed the view the project was feasible in the first place is also not to the point. It is acknowledged that the evidence of the Director was consistent that the driver for pricing was the market, not internal feasibility analyses.[153] However, the Director also deposed that feasibility studies were done from prior to purchase through to delivery of the project to measure profitability of the Development. The evidence of the Manager was also clear in that he “was aware that GST was one of those factors than formed part of the feasibility of the development” even though “he] did not have regard to this in providing advice … for the [REDACTED] Development or more generally.”[154] The distinction between internal feasibility analyses and external pricing can only take the position so far and, significantly, does not assist in SFQV’s case, to prove that it did not pass on excess GST to purchasers. Both the Director and the Manager were very candid in their responses given in cross-examination about the use of feasibility studies and that GST was a known cost in property developments.[155]
[153] Transcript, P-42, lines13-17, 34-37, 39-44; Transcript P- 61, lines 23-39.
[154] TB, Tab 53, p 806, [18].
[155] Transcript, p 34, lines 14-21
Turning to the argument submitted in Avon HCA that “a tax is passed on only if the price at which the goods are sold is increased by the amount of the tax”,[156] the High Court specifically rejected that submission. SFQV’s submission to the effect that the “burden of a tax is not passed on if, irrespective of the incidence of the tax, the consumer would have paid the same amount for the supply”[157] is similar to the “test” contended for by the taxpayer in Avon HCA, that “a tax is only passed on if the price at which the goods are sold is increased by the amount of the tax”. The High Court held that “the “tests” merely restate the question using words different from the statutory language, and thus distract attention from the real task of the court.”[158] The fact that purchasers of units at the Development would have paid the market price and been indifferent to the GST implications do not assist SFQV’s position.
[156] Avon HCA at 358.
[157] Applicant’s Closing Submissions at [105] and [121](c).
[158] Avon HCA at [23]-[29].
The High Court also stated that “Avon’s “test’ is unsatisfactory at a more basic level. It assumes that, if a cost is being passed on, removing it from the entire system will have an immediate correlative effect upon price and profit. That assumption is in conflict with the more complex reality of price determination… Indeed, the complexity of Avon’s own pricing mechanisms belies that assumption. The Act requires proof of “the extent that the claimant has not passed [the overpayment] on. This question is not to be answered merely by pointing to price as the sole indicator of passing on.”[159] Again, the Tribunal is reinforced in its view that SFQV did not discharge its burden, by virtue of its singular focus on the pricing of units sold by reference to what the market would bear.
[159] Avon HCA at [25]-[26].
SFQV also did not persuade me that there were other comparable developments and units for sale by competing developers at or around the same time, and that the market prices of those other units were substantially the same as SQV’s units. Nor was SFQV able to proffer the basis of their GST treatment on the sale of units and whether they included non-monetary consideration in their GST margin calculations. In this regard, the information that the Director did give about the competitor developments (see [53] above), was that the units were being offered to the market at prices which he “considered to be very low.”[160] That evidence was inconclusive, but it is possible the competitor developers had property taken into account any development works in calculating the GST margin and were not passing on excess GST.
[160] TB, Tab 61, p 1,049 at [41].
To the extent that SFQV submitted that if a taxpayer “believes” that excess GST is not payable it will not be passed on, this submission is also rejected. Conceptually, there is no reason why a taxpayer cannot pass on GST in the price of a supply even though the taxpayer does not believe that it is liable to pay it. The issue turns on whether the excess GST was reported to the Commissioner and not whether SFQV believed that the GST in issue was a genuine cost of doing business. The concept of passing on in Division 142 of the GST Act refers to the economic burden of the excess GST being transferred from the supplier to another entity. Even if a taxpayer’s beliefs as to whether the GST is payable were relevant, evidence about a taxpayer’s beliefs would be insufficient to discharge the burden that it did not pass on the excess GST in the price of the supply. It follows, that evidence about SFQV’s beliefs, including as to when it reached its position as to the proper GST treatment of Development Services and whether it needed to have certainty in the form of a Private Ruling are not to the point.
Accordingly, it is unnecessary to examine whether SFQV formed its beliefs about the proper GST treatment of Development Services at the time of the Director’s meeting with PwC in June 2016 or at some time before SFQV ultimately obtained the Private Ruling in December 2017. In all the circumstances, SFQV’s beliefs are inconsequential and do not assist it in discharging its burden, particularly as there was no evidence to suggest that its beliefs affected its actual pricing policy and practice. It follows that it is unnecessary to deal with the alternative positions put by SFQV as to the different times it formed its beliefs as to the GST treatment of the Development Services and to differentiate any different outcomes.
Furthermore, SFQV’s proposition that it was “acting conservatively” also does not assist as its prices for sale of the units were mostly set before the Private Ruling was obtained. In WYPF, the Tribunal recognised that “the applicant’s submissions noted that by the time the applicant completed the sales of the apartments, it was aware from private rulings it had received from the ATO that Preparatory Works could be deducted when working out the margin on its sales. However, it did not adjust its prices as a result of receiving the rulings. That is consistent with the value of Preparatory Works being able to be taken into account in calculation of the margin and GST on that amount not being passed on. However, it does not otherwise assist the applicant in those cases where contracts for sale of the apartments were entered into, and prices therefore set, before the rulings were received.”[161] As the vast majority of the contracts for sale (279) were entered into prior to SFQV receiving the Private Ruling, any non-adjustment of prices following the Private Ruling would not assist SFQV in respect of those units. SFQV only occasionally changed the purchase prices of units after sale contracts had been exchanged.
[161] WYPF at [73].
For completeness, SFQV’s contention that it was “acting conservatively” was, in any event, at odds with the fact that SFQV did not change its GST treatment of Development Services until 30 July 2018, even though it obtained the Private Ruling in December 2017.
In summary, while it may be accepted that SFQV was pricing units to what the market would bear and was focused on maximising the gross realisation of the Development, it did not thereby discharge the burden of proving that it did not pass on the excess GST to the purchasers of the units.
ISSUE 5 - WOULD GIVING SFQV A REFUND IN RESPECT OF GST IT PASSED ON TO PURCHASERS BE INCONSISTENT WITH THE PRINCIPLE THAT TAXPAYERS SHOULD NOT RECEIVE A WINDFALL GAIN?
The fifth and final issue is the “windfall gain” issue which necessitates an analysis of s 142-15 of the GST Act.
Subsection 142-15(1) of the GST Act states:
Treat section 142-10 as never having applied to the extent that the Commissioner is satisfied that:
(a) applying that section would be inconsistent with the principle that excess GST is not to be refunded if this would give an entity a windfall gain; and
(b) you have requested a decision under this subsection in the *approved form.
Section 142-15(1) of the GST Act provides the Commissioner with a power to treat s 142-10 (which restricts refunds of passed on excess GST) as never having applied, to the extent that the Commissioner is satisfied of the specified circumstances. While the test is expressed in the negative, the submissions of the parties proceeded on the basis that it applies, and the Tribunal can be satisfied, where the excess GST has been passed on, provided the taxpayer has not enjoyed a windfall gain.
The taxpayer bears the onus of proving that, although it has passed on excess GST, refunding the excess GST to the taxpayer would not give the taxpayer a windfall gain.[162]
[162] M3K at [60], [84].
SFQV urged the Tribunal to consider the following propositions in interpreting and applying s 142-15. First, it is necessarily implicit in s 142-15(1) that there can be a satisfaction that applying s 142-10 would not give an entity a windfall gain, even though the entity has passed on GST and not reimbursed the recipient.[163] Secondly, “windfall gain” is not defined in the GST Act. The ordinary meaning of “windfall” is something blown down by the wind, or “an unexpected piece of good fortune.”[164] A “windfall gain” is defined as an “[u]nexpectedly large or unforeseen profit.”[165] Thirdly, in the context of Division 142, a “windfall gain” should be understood to refer to a gain obtained by the making of a refund in circumstances where the taxpayer could not reasonably have expected that it would receive a refund.
[163] It was not in dispute that SFQV had not reimbursed any of the purchasers the passed-on GST.
[164] Macquarie Dictionary Online, Pan Macmillan Australia, 2024.
[165] Oxford English Dictionary Online, Oxford University Press; M3K at [75].
SFQV contended that the Tribunal should be satisfied that applying s 142-10 would be inconsistent with the principle that excess GST is not to be refunded if it would give SFQV a windfall gain. SFQV argued that obtaining a refund would not give it an unexpected or unforeseen profit. It argued that it was foreseeable at all material times that SFQV would obtain a refund because the calculation of the GST under the margin scheme was not a significant factor in SFQV’s pricing of units. It was also foreseeable because, from around the date of the meeting with PwC it was SFQV’s understanding that it could include the cost of the Development Services when calculating the margin.
SFQV further contended that the Commissioner’s approach to interpreting s 142-15(1) to the effect that it is reserved for “unusual cases” was based on substituting the text of that section with ‘cherry-picked’ extracts from the 2014 Explanatory Memorandum. In any event, SFQV also took issue with the Commissioner suggesting SFQV’s case was not unusual or exceptional. SFQV argued that it was unusual because it had incorrectly lodged its BASs on the basis that GST was payable despite believing that GST was not payable.
SFQV also submitted that the Commissioner’s case did not explain why SFQV would obtain a windfall gain in circumstances where refunding the GST would not affect the prices ultimately charged, and which ultimately reflected the correct GST payable under the margin scheme having regard to the fact that SFQV was entitled to apply the Private Ruling.
Finally, SFQV submitted that the focus of s 142-15 is on whether the seller would receive a windfall gain; not whether the purchaser would bear the economic burden of the excess GST.
I was not satisfied that SFQV discharged the burden of proving that the Commissioner’s decision to refuse to exercise the discretion in s 142-15(1) should not have been made or should have been made differently.
Generally, refunding an amount of GST to a taxpayer who has passed on the burden of that amount to another entity will result in the taxpayer having a windfall gain.[166] This is supported by s 142-10 of the GST Act, which states that excess GST that is passed on remains payable to the Commissioner, until it is reimbursed to the other entity, which SFQV did not do. It is clear from the statutory context that s 142-15(1) is intended to provide the Commissioner with the flexibility to deal with “more unusual cases” where “denying a refund may result in unintended consequences”.[167]
[166] 2014 Explanatory Memorandum, p 38 [2.56]; M3K at [79], [82].
[167] 2014 Explanatory Memorandum, p 38 [2.58].
I do not accept that SFQV expected nor could it have reasonably held the expectation that it would be entitled to a refund of excess GST which it had passed on to its purchasers and not reimbursed. This assumes, for present purposes, that SFQV’s expectation is relevant to the meaning of windfall gain in s 142-15(1). SFQV’s actions were contrary to any such expectation of a refund when it initially lodged its BASs. It later purported to have set off the over-stated GST against the under-stated GST amount in its BASs for the September 2017, December 2017 and March 2018 quarterly tax periods as can be seen from the chronology of events and correspondence with the Commissioner during the course of the GST review and audit (see [90] above).
SFQV had no intention of requesting a decision by the Commissioner pursuant to s 142-15(1)(b) to obtain the refund. The PwC explanation provided to the Commissioner (referred to at [91] above) indicates that the view previously adopted was that Division 142 of the GST Act did not apply on the basis there was no excess GST. It was only after the Commissioner started his GST audit on 15 April 2020 that PwC, on behalf of SFQV, requested that the Commissioner exercise the discretion in s 142-15(1) and treat s 142-10 as never having applied and then, only in reliance on an example in the 2014 Explanatory Memorandum (see [95] above). That example was not relied on at the hearing.

Further, in my view, the question of whether a windfall gain arises, does not turn solely on the subjective expectations of a supplier about the application of the GST laws. This is because if a seller expects that it has a lower GST liability but nevertheless reports to the Commissioner a higher amount based on the amount recovered from a purchaser, there would be a windfall gain to the taxpayer if the excess GST were refunded to the seller but the economic burden was on the purchaser. Even so, this of itself is not sufficient to “take the matter outside the usual case” where a refund would result in a windfall gain.[168] The meaning of windfall gain is something which is unexpectedly large as in a windfall profit. Furthermore, it is not for the Commissioner to prove that the taxpayer would obtain a windfall gain from a refund. The burden of proof lies on the taxpayer.
[168] M3K at [82].
In all the circumstances, I conclude that SFQV would obtain a windfall gain if the excess GST were to be refunded to it. SFQV was an astute property developer operating a profitable business which recovered all of its costs including amounts overpaid by it to the Commissioner as GST. SFQV did not discharge the burden of proving that these amounts on account of GST had not been passed on to the purchasers of the units. Moreover, SFQV continued to over-state its GST liabilities to the Commissioner, even after it obtained the Private Ruling. The inference to be drawn from this course of action is that the economic burden of that excess GST has been borne by, and remains with, the purchasers.[169]
[169] WYPF at [56].
In all the circumstances, no part of SFQV’s case suggests that “denying a refund [would] result in unintended consequences”.[170] Accordingly, SFQV has not established any basis on which an exercise of the discretion in s 142-15 would be warranted in the circumstances.
[170] 2014 Explanatory Memorandum, p 38 [2.58].
DECISION
SFQV has not discharged the burden of proving that the assessments of net amounts of GST are excessive and, therefore, the GST Assessments Objection Decision is affirmed.
SFQV has also not discharged the burden of proving that the Commissioner’s decision to refuse to exercise the discretion to allow a refund of excess GST should not have been made or should have been made differently. It follows that the Section 142-15 Objection Decision is affirmed.

Date(s) of hearing: 20, 21 and 23 August 2024

Counsel for the SFQV: Ms C Burnett SC, Mr D Hume, Mr D Lewis

Solicitors for the SFQV: MinterEllison

Counsel for the Respondent: Ms C Ensor, Mr M Gioskos

Solicitors for the Respondent: Australian Taxation Office Litigation & Legal Services

Tax period (quarter)	Date lodged	Amount reported at label 1A (GST on Sales)	Amount reported at label 1B (GST on Purchases)	Assessed net amount
September 2015	16 October 2015	$0	$247	$247 CR
September 2017	17 October 2017	$6,604,049	$6,224,069	$379,980 DR
December 2017	19 February 2018	$1,404,944	$1,332,031	$72,913 DR
March 2018	23 April 2018	$576,258	$759,327	$183,069 CR
June 2018	30 July 2018	$35,312	$580,092	$544,780 CR
September 2018	16 October 2018	$59,796	$481,157	$421,361 CR
December 2018	27 February 2019	$68,641	$519,482	$450,841 CR
March 2019	17 April 2019	$14,713	$192,463	$177,750 CR

Agreed project costs (inclusive of GST)	$91,300,000
Variations	$0
Margin	24.27%
Project costs x Margin	$22,160,253.83
Development Fee (inclusive of GST)	$113,460,253.83
GST at 1/11th	$10,314,568.50
Development Fee (excl GST)	$103,145,685

Tax period (quarter)	Amended amount at label 1A (GST on Sales)	Amount at label 1B (GST on Purchases)	Amended assessed net amount of GST
September 2017	$10,268,955	$6,224,069	$4,044,886 DR
December 2017	$12,338	$1,332,031	$1,319,693 CR
March 2018	$45,225	$759,327	$714,102 CR
June 2018	$34,007	$580,092	$546,085 CR
December 2018	$94,314	$519,482	$425,168 CR
March 2019	$15,611	$192,463	$176,852 CR

Date(s) of hearing:	20, 21 and 23 August 2024
Counsel for the SFQV:	Ms C Burnett SC, Mr D Hume, Mr D Lewis
Solicitors for the SFQV:	MinterEllison
Counsel for the Respondent:	Ms C Ensor, Mr M Gioskos
Solicitors for the Respondent:	Australian Taxation Office Litigation & Legal Services