The Trustee for the NFTA Unit Trust and Commissioner of Taxation (Taxation)
[2022] AATA 4132
•5 December 2022
The Trustee for the NFTA Unit Trust and Commissioner of Taxation (Taxation) [2022] AATA 4132 (5 December 2022)
Division:SMALL BUSINESS TAXATION DIVISION
File Numbers:2020/7782, 2020/7783
Re:The Trustee for the NFTA Unit Trust
APPLICANT
AndCommissioner of Taxation
RESPONDENT
Decision
Tribunal:Member D Mitchell
Date:5 December 2022
Place:Brisbane
The Tribunal affirms the decision under review.
...............................[SGD]..............................
Member D Mitchell
Catchwords
TAXATION – goods and services tax (GST) – input tax credits (ITCs) – eligibility to claim input tax credits – taxpayer’s burden to prove assessment excessive or otherwise incorrect – lack of substantiation – GST applied in a blanketed manner – lack of corroborating evidence to link transaction to creditable purpose – ITCs properly disallowed – recklessness shown on the evidence – taxpayer’s burden to prove the decision should not have been made or should have been made differently - decisions under review affirmed.
Legislation
A New Tax System (Goods and Services Tax) Act 1999 (Cth)
A New Tax System (Goods and Services) Regulations 2019 (Cth)
Taxation Administration Act 1953 (Cth)
PRACTICE STATEMENTS
Goods and Services Tax Ruling 2013/01 – Goods and services tax: tax invoices (GSTR 2013/1)
Practice Statement Law Administration 2012/5 – Administration of the false or misleading statement penalty - where there is a shortfall amount (PSLA 2012/5)
Practice Statement Law Administration 2004/11 – Treating a document as a tax invoice or adjustment note (PSLA 2004/11)
CASES
Bayconnection Property Developments Pty Ltd and Commissioner of Taxation [2013] AATA 90.
Briginshaw v Briginshaw (1938) 60 CLR 336
George v Federal Commissioner of Taxation (1952) 86 CLR 183
H & B Auto Repair Centre Pty Ltd and Commissioner of Taxation [2022] AATA 2561
HFTS and Commissioner of Taxation [2019] AATA 5164
Kais Jewellery (Syd) Pty Ltd and Commissioner of Taxation [2022] AATA 425
Sanctuary Lakes v Federal Commissioner of Taxation (2013) 212 FCR 483; [2013] FCAFC 50
Singh and Commissioner of Taxation [2021] AATA 2125
Stewart and Commissioner of Taxation (2013) 97 ATR 963
Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63
REASONS FOR DECISION
Member D Mitchell
5 December 2022
INTRODUCTION
The Trustee for the NFTA Unit Trust (the Applicant) is seeking review of objection decisions of the Commissioner of Taxation (the Respondent) dated 25 September 2020.[1]
[1] Exhibit 1, T Documents, T2, pages 12-20, Reasons for Decision and T41, page 1350, Notice of Objection Decision.
The reviewable objection decisions relate to the Applicant’s claims for input tax credits (ITCs) for the quarterly tax period ended 31 March 2019 (the Relevant Period) and the associated shortfall penalties.
The parties agree that the ITCs in dispute before the Tribunal total $4487.00,[2] with a shortfall penalty amounting to $8,226.00.[3]
[2] Noting that at the conclusion of the objection ITCs in dispute amounted to $6,078.01, however the Applicant subsequently no longer pursues ITCs to the amount of $1,590.91.
[3] Exhibit 3, Joint Tribunal Book, Tab 3, Applicant’s response to the Respondent’s Statement of Facts, Issues and Contentions, page 3 and Tab 6, Respondent’s Statement of Facts, Issues and Contentions, page 2, paragraph 5.
BACKGROUND
The Applicant is a trustee for a fixed unit trust which has been registered for Goods and Services Tax (GST), reporting quarterly, on a cash accounting basis from 7 May 2010.[4]
[4] Exhibit 3, Joint Tribunal Book, Tab 6, Respondent’s Statement of Facts, Issues and Contentions, page 2, paragraph 6.
During the Relevant Period, the Applicant operated New Faces Talent Academy (NFTA). NFTA assists performers to break into the film and TV industry.[5]
[5] Exhibit 3, Joint Tribunal Book, Tab 3, Applicant’s response to the Respondent’s Statement of Facts, Issues and Contentions, page 3 and Tab 6, Respondent’s Statement of Facts, Issues and Contentions, page 3, paragraph 7.
During the Relevant Period, Mr Craig Bradley was the Applicant’s CEO, director and person responsible for its financials and reporting.[6]
[6] Exhibit 1, T Documents, T30, pages 1250-1260, Correspondence between the parties discussing a request for the GST Detail Report for the period 1 October 2018 to 31 December 2018.
On 5 April 2019, the Applicant lodged its quarterly Business Activity Statements (BAS) for the Relevant Period.[7] The Applicant reported GST on sales (1A) of $16,194.00 and GST on purchases (1B) of $56,394.00.[8]
[7] Exhibit 3, Supplementary T-Documents, ST3, , pages 1361-1365, BAS lodgement forms for the GST period 31 March 2019.
[8] Exhibit 3, Supplementary T-Documents, ST3, pages 1361-1365, BAS lodgement forms for the GST period 31 March 2019.
On 9 April 2019, the Respondent contacted the Applicant to advise that its BAS for the Relevant Period had not been processed and sought that it provide further information.[9]
[9] Exhibit 1, T Documents, T3, page 22, Correspondence containing Applicant’s voluntary disclosure.
On 10 April 2019, the Applicant voluntarily disclosed to the Respondent that its BAS for the Relevant Period was incorrect. It provided that GST on sales should have been $6,512.00 and GST on purchases should have been $18,660.00.[10] Mr Bradley advised that he had identified an error, namely that the report used to complete the Applicant’s BAS for the Relevant Period had included both the 31 December 2018 and 31 March 2019 quarterly figures.[11]
[10] Exhibit 1, T Documents, T3, pages 21-22, Correspondence containing Applicant’s voluntary disclosure.
[11] Exhibit 1, T Documents, T3, page 21, Correspondence containing Applicant’s voluntary disclosure.
On 10 April 2019, the Respondent provided the Applicant with notice that its BAS for the Relevant Period was being audited and made a request that further information be provided in relation to the quarterly tax periods ended 31 December 2018 and 31 March 2019.[12]
[12] Exhibit 1, T Documents, T4, pages 24-25, Audit confirmation letter for period ending 31 March 2019.
On 12 April 2019, pursuant to section 353-10 of Schedule 1 of the Taxation Administration Act 1953 (Cth) (TAA 1953) (section 353-10 notice), the Respondent issued a formal notice to Bendigo Bank for transaction records for the Applicant and related documents.[13]
[13] Exhibit 1, T Documents, T7, pages 34-36, section 353-10 Notice to Bendigo and Adelaide Bank.
On 12 April 2019, the Applicant provided to the Respondent the information requested in the notice of audit, which included a GST Detail Report for the Relevant Period.[14]
[14] Exhibit 1, T Documents, T8, pages 37-75, Applicant’s correspondence to the Respondent dated 12 April 2019.
On 17 April 2019, the Respondent notified the Applicant that its GST refund for the Relevant Period would be retained pending the outcome of the audit and requested that the Applicant provide further information.[15]
[15] Exhibit 1, T Documents, T9, pages 76-78, Decision to retain refund for the tax period ended 31 March 2019.
During the period 1 May 2019 and 9 May 2019, the parties corresponded, with the Respondent clarifying the information requested and the Applicant responding with some of the information being sought.[16]
[16] Exhibit 1, T Documents, T10-T12, pages 79-92, Correspondence between the Applicant and Respondent.
On 9 May 2019, Bendigo Bank supplied the Respondent with a number of bank statements relating to the Applicant.[17]
[17] Exhibit 1, T Documents, T13-T14, pages 93-1043, Correspondence from Bendigo Bank and bank statements.
During the period 3 September 2019 and 1 October 2019, the parties exchanged correspondence regarding requests for further information to assist the audit.[18]
[18] Exhibit 1, T Documents, T18-T30, pages 1082-1260, Correspondence between the Applicant and Respondent.
On 11 October 2019, the Respondent issued the Applicant with a section 353-10 notice outlining a range of information that the Applicant was required to provide to the Commissioner by 15 November 2019.[19]
[19] Exhibit 1, T Documents, T32, pages 1263-1266, Section 353-10 Notice sent to the Applicant.
The Applicant did not respond to the section 353-10 notice.[20] The Applicant maintains that it did not get the notice.[21]
[20] Exhibit 1, T Documents, T33, pages 1267-1286, Audit finalisation letter.
[21] Exhibit 3, Joint Tribunal Book, Tab 3, Applicant’s response to the Respondent’s Statement of Facts, Issues and Contentions, page 7.
On 10 December 2019, the Respondent issued its audit findings and decision.[22] The Respondent:[23]
….. confirmed his view that the voluntary disclosure made by the Applicant in April 2019 was not supported by the Applicant’s material. In particular, the Applicant’s GST Detail Report for the period ended 31 March 2019 dated 12 April 2019 only recorded GST on purchases of $14,451.80.[24] The Commissioner took this amount as the starting figure for assessing the ITCs claimable by the Applicant. The audit decision went on to analyse the Applicant’s accounts that were available and found transactions relating to:
a)amounts that were not creditable acquisitions as they appeared to be the acquisition of input taxed supplies,
b)items acquired for a private purpose per section 11-15(2)(b) of the A New Tax System (Goods and Services) Act 1999 (GST Act), and
c)acquisitions of items related to entertainment per Taxation Ruling IT 2675: Income tax and fringe benefits tax: entertainment - morning and afternoon teas; light meals; and in-house dining facilities.[25]
[22] Exhibit 1, T Documents, T2, pages 12-20, Reasons for Decision.
[23] Exhibit 3, Joint Tribunal Book, Tab 6, Respondent’s Statement of Facts, Issues and Contentions, page 5, paragraph 20.
[24] Exhibit 1, T Documents, T8, page 59, Applicant’s correspondence to the Respondent dated 12 April 2019 and T33, page 1275, Audit finalisation letter.
[25] Exhibit 1, T Documents, T33, at pages 1277-1281, Audit finalisation letter.
As a result, the Respondent:
(a)made a downward adjustment of the Applicant’s GST on purchases from $14,451.80 to $7,749.00. A difference of $6,703.01;[26] and
(b)found that the Applicant’s GST on sales was $7,122.00.[27]
[26] Exhibit 1, T Documents, T33, page 1281, Audit finalisation letter.
[27] Exhibit 1, T Documents, T33, page 1276, Audit finalisation letter.
The Respondent found that the GST shortfall for the Relevant Period was $39,573[28] and imposed a 50% shortfall penalty amounting to $19,786.50, having found that the Applicant had recklessly made a false and misleading statement resulting in the shortfall.[29]
[28] Exhibit 1, T Documents, T33, page 1269, Audit finalisation letter.
[29] Exhibit 1, T Documents, T33, pages 1283-1286, Audit finalisation letter.
On 10 December 2019, in relation to the Relevant Period, the Respondent issued to the Applicant a notice of amended assessment of net amount[30] and notice of assessment of shortfall penalty.[31]
[30] Exhibit 1, T Documents, T34, pages 1287-1288, Notice of assessment of net amount for tax period 1 Jan 2019 to 31 March 2019.
[31] Exhibit 1, T Documents, T35, pages 1289-1290, Notice of assessment of shortfall penalty.
On 7 February 2020, the Applicant lodged an objection in relation to the assessments[32] on the basis that:[33]
My issue with the Audit in general is that if was very heavy handed for something that was just a typographical error. We disclosed the error and should have been given time to correct it.
Through the audit I felt that the case officer was constantly asking more questions than they needed to and asking for information that was unrelated to the audit period. This came across as a fishing exercise, trying to find something wrong so they could escalate the audit even further.
When making their findings, the case officer has worked off a number of assumptions, not facts. The communication was poor and did not explain what their concerns were or why they needed more information. They just proceeded to apply further pressure and coercion in order to obtain what they felt they needed.
Following is an explanation for some of the abnormalities the case officer would have encountered, these could have been explained through the process if the case offer had not been so secretive of their intentions and been more open to what their concerns were.
We have provided further details in separate attachment.
[32] Exhibit 1, T Documents, T36, pages 1291-1300, Applicant’s objection.
[33] Exhibit 1, T Documents, T36, page 1293, Applicant’s objection.
The Applicant provided a supporting letter with its objection in which it expanded on why it considered the audit decisions to be wrong and conceded that ITCs were not claimable in relation to invoices for JACH Properties.[34]
[34] Exhibit 1, T Documents, T36, page 1299, Applicant’s objection.
On 25 September 2020, the Respondent allowed the Applicant’s objection in part.[35] The objection decision:
(a)allowed a further $679 in ITCs in relation to acquisitions from Auto Visual Advertising and Stamford Plaza;[36] and
(b)reduced the shortfall penalty to $8,226.00 on the basis that it found that the shortfall amount should be calculated in two parts to take into consideration the Applicant’s initial voluntary disclosure.[37] While the Respondent continued to apply the base rate penalty of 50%, an 80% reduction in the penalty was provided in relation to the proportion of the tax shortfall that was identified on 10 April 2019.[38]
[35] Exhibit 1, T Documents, T2, pages 12-20, Reasons for Decision and T41, page 1350, Notice of Decision for Objection.
[36] Exhibit 1, T Documents, T2, page 13-14, Reasons for Decision.
[37] Consequently, the shortfall penalty of $8,226.00 was calculated on a shortfall of $28,052.00 arising from the voluntary disclosure being calculated at 50% of that amount, then the penalty being reduced by 80% and a shortfall of $10,482.00 being the further shortfall between the voluntary disclosure and audit being calculated at 50% of that amount with no remissions or reductions.
[38] Exhibit 1, T Documents, T2, pages 14-17, paragraphs 36-68, Reasons for Decision.
On 24 November 2020, the Applicant made an application to this Tribunal for review of the objection decisions.[39] The reason the Applicant provided that it claims the decisions were wrong is as follows:[40]
The majority of the shortfall was declared as soon as we checked it after receiving a phone call from the ATO. It was caused by a simple typographical error as it was the first time I had done the BAS myself for the company.
I believe that the classification of the penalty being classed as reckless is overstated, unfair and not based on the facts.
Also, the ATO has applied the penalty to an amount to which they did not discover as incorrect during their findings.
If the penalty was applied on the correct amount and using the classification of “failing to take reasonable care” the penalty would be substantially reduced.
[39] Exhibit 1, T Documents, T1, pages 1-11, Application for Review of Decision.
[40] Exhibit 1, T Documents, T1, page 5, Application for Review of Decision.
A Hearing was held by Microsoft Teams on 16 November 2022. At the Hearing, the Applicant was represented by Mr Bradley who gave evidence under affirmation.
THE LAW
Goods and Services Tax
A New Tax System (Goods and Services Tax) Act1999 (the GST Act) provides that an entity carrying on an enterprise will generally be liable to pay GST on taxable supplies[41] and will be entitled to input tax credits on creditable acquisitions.[42] Amounts of GST and amounts of input tax credits are offset against each other to produce a net amount for a tax period.[43]
[41] See section 9-5 of the GST Act.
[42] See sections 11-5, 11-20 and 11-25 of the GST Act.
[43] Sections 7-5 and 17-5 of the GST Act.
Section 11-5 of the GST Act defines a creditable acquisition as follows:
You make a creditable acquisition if:
(a) you acquire anything solely or partly for a *creditable purpose; and
(b) the supply of the thing to you is a *taxable supply; and
(c) you provide, or are liable to provide, *consideration for the supply; and
(d) you are *registered, or *required to be registered.
An acquisition is any form of acquisition whatsoever and includes, but is not limited to, an acquisition of goods or services and the receipt of advice or information.[44]
[44] Section 11-10 of the GST Act.
A creditable purpose is a thing that has been acquired to the extent it is acquired in carrying on the entity’s enterprise.[45] A taxable supply is a supply for consideration that is made in the course or furtherance of an enterprise being carried on by an entity that is registered or required to be registered for GST, to the extent that the supply is not GST-free or input taxed.[46]
[45] Section 11-15(1) of the GST Act.
[46] Section 9-5 of the GST Act.
The ITCs to which an entity is entitled for a creditable acquisition is attributable to a tax period where the entity accounts on a cash basis in the period that the entity provides consideration for that creditable acquisition.[47] Consideration includes any payment, or any act or forbearance in connection with a supply of anything or in response to, or for the inducement of a supply of anything.[48]
[47] Section 29-10(2) of the GST Act.
[48] Section 9-15(1) of the GST Act.
To attribute an ITC to a tax period, the entity is required to hold a tax invoice for the creditable acquisition at the time that they lodge their GST return for that tax period.[49]
[49] Section 29-10(3) of the GST Act.
A compliant tax invoice, pursuant to section 29-70(1) of the GST Act, must:
(a)be issued by the supplier of the supply or supplies to which the document relates;
(b)be in the approved form;
(c)contain enough information to enable the following to be clearly ascertained:
(i)the supplier’s identity and ABN;
(ii)what is supplied (including the quantity if applicable) and the total price of the supply;
(iii)the extent to which each supply to which the document relates is a taxable supply;
(iv)the amount of GST payable on the supply;
(v)the date the document is issued; and
(d)be clear from the document that it was intended to be a tax invoice.
A document issued by an entity to another entity may be treated as a tax invoice if it would comply with the requirements for a tax invoice but for the fact that it does not contain certain information and all of that information can be clearly ascertained from other documents given by the entity to the other entity.[50]
[50] Section 29-70(1A) of the GST Act.
The Respondent has a discretion to treat as a tax invoice, a particular document that would not otherwise be a tax invoice.[51] Guidance in relation to when the Respondent will exercise its discretion to allow a document to be treated as a tax invoice is set out in Practice Statement Law Administration 2004/11 – Treating a document as a tax invoice or adjustment note (PSLA 2004/11).
[51] Section 29-70(1B) of the GST Act.
The Commissioner has determined that lesser record keeping requirements apply for purchases of $82.50 or under, however, there is still a requirement to keep some evidence of the transaction such as a receipt, cash register docket or diary of small purchases. Acquisitions under $75 do not need to be evidenced by tax invoices, however they must be shown to be creditable acquisitions.[52]
Avenues for review and onus of proof
[52] Section 29-80(1) of the GST Act; Regulation 29-80.01 of A New Tax System (Goods and Services) Regulations 2019 (Cth) and Goods and Services Tax Ruling 2013/01 – Goods and services tax: tax invoices (GSTR 2013/1)at paragraphs 69-71.
Where a taxpayer is dissatisfied with a reviewable GST decision, they may object to it in accordance with the requirements set out in Part IVC of the TAA 1953.[53] The Respondent must decide whether to allow, wholly or in part; or disallow, the taxpayer’s objection.[54]
[53] Section 110-50 of the TAA 1953.
[54] Section 14ZY of the TAA 1953.
A taxpayer dissatisfied with the Respondent’s objection decision may apply to the Tribunal for a review of the decision or appeal to the Federal Court against it.[55]
[55] Section 14ZZ of the TAA 1953.
Section 14ZZK(b) of the TAA 1953 relevantly, provides that:
On an application for review of a reviewable objection decision:
…….
(b) the applicant has the burden of proving:
(i) if the taxation decision concerned is an assessment—that the assessment is excessive or otherwise incorrect and what the assessment should have been; or
(ii) in any other case—that the taxation decision concerned should not have been made or should have been made differently.
Penalties
Administrative penalties may be imposed in a number of circumstances. Relevant to the present matter, section 284-75(1) of Schedule 1 to the TAA 1953 provides that administrative penalties may be imposed where:
284-75 Liability to Penalty
(1)you are liable to an administrative penalty if:
(a) you make a statement to the Commissioner or to an entity that is exercising powers or performing functions under a taxation law (other than the *Excise Acts); and
(b) the statement is false or misleading in a material particular, whether because of things in it or omitted from it.
An administrative penalty is generally imposed on a shortfall amount. Relevantly, a taxpayer has a shortfall amount where “an amount the Commissioner must pay or credit a taxpayer under a taxation law worked out on the basis of the statement is less than it would be if the statement were not false and misleading”.[56]
[56] Item 2 of section 284-80(1) of Schedule 1 to the TAA 1953.
Section 284-85 of Schedule 1 to the TAA 1953 outlines how the amount of penalty is to be calculated.
For current purposes, section 284-90 of Schedule 1 to the TAA 1953 provides that the base penalty is 50% of the shortfall amount or part of the amount that resulted from recklessness by the taxpayer or their agent as to the operation of a taxation law.
The meaning of recklessness was described by the Tribunal in HFTS and Commissioner of Taxation [2019] AATA 5164 at [144]:
[144]The “recklessness” criterion referred to in TAA Schedule s 284-90(1) has been regarded as involving “gross carelessness” to the extent of indifference to, or actual disregard, of a risk that would be foreseeable to a reasonable person. This is the view that has been consistently taken of the concept in the taxation context:- see Federal Commissioner of Taxation v R & D Holdings Pty Ltd [2007] FCAFC 107; (2007) 160 FCR 248 at [70]. In Hart v FC of T [2003] FCAFC 105; (2003) 131 FCR 203 Hill and Hely JJ said this about the concept:
[43] Recklessness is a concept well known to the law, particularly in the fields of tort and criminal law. In those fields, recklessness will usually be found to have been established if the person’s conduct shows disregard of, or indifference to, consequences foreseeable by a reasonable person. In some contexts a subjective test is applied, but in others the test is objective. In BRK (Bris) Pty Ltd v Commissioner of Taxation (2001) ATC 4111 at 4129 Cooper J made the following observations in relation to recklessness in the context of s226H;
Recklessness in this context means to include in a tax statement material upon which the Act or regulations are to operate, knowing that there is a real, as opposed to a fanciful risk, that the material may be incorrect, or be grossly indifferent as to whether or not the material is true and correct, and that a reasonable person in the position of the statement-maker would see there was a real risk that the Act and regulations may not operate correctly to lead to the assessment of the proper tax payable because of the content of the tax statement. So understood, the proscribed conduct is more than mere negligence and must amount to gross carelessness.
Section 284-225 of Schedule 1 to the TAA 1953 provides for reductions in the base penalty amount where a taxpayer has made a voluntary disclosure. In this case, the Respondent has applied an 80% reduction to the base penalty amount with regards to the shortfall that resulted from the Applicant’s voluntary disclosure.
Section 298-20 of Schedule 1 to the TAA 1953 provides that the Commissioner, and therefore the Tribunal, has the power to remit all or a part of the penalty. Although the power to remit all or part of the penalty is unfettered, the discretion must be exercised for a proper purpose and in accordance with the objects of the TAA 1953 and according to law.[57]
[57] Sanctuary Lakes v Federal Commissioner of Taxation (2013) 212 FCR 483 at 521.
ISSUES
The parties agreed that the issues for determination by the Tribunal are:
(1)Is the Applicant entitled to ITCs greater than those allowed by the Respondent at Objection for the Relevant Period? This requires the Tribunal to consider whether:
a) the Applicant has provided tax invoices, or similar to support its claims; and
b) the Applicant’s acquisitions were creditable acquisitions for a creditable purpose.
(2)Was the administrative penalty for recklessness in making a false and misleading statement properly imposed? This requires the Tribunal to consider whether the:
a) Applicant made a false and misleading statement; and
b) Applicant’s conduct in making the statement amounted to recklessness.
(3)If a shortfall penalty arises, should it be remitted in part or in full.
The burden lies with the Applicant to establish that the amended assessment of net amount and assessment of shortfall penalty for the Relevant Period were excessive or otherwise incorrect, and what they should have been and to establish that the decision not to remit the penalty should have been made differently.
evidence and contentions
Input Tax Credits
On 29 April 2022, the Respondent provided a Statement of Facts, Issues and Contentions outlining that:[58]
[58] Exhibit 3, Joint Tribunal Book, Tab 6, Respondent’s Statement of Facts, Issues and Contentions, pages 9-20, paragraphs 39-43.
39.The ITCs that the Commissioner understands to be at issue comprise the following claims that were disallowed at audit (Disallowed Claims):
a) $1,906.36 in ITCs on the Applicant’s ‘Melbourne Admin Account (104090)’ comprising:
(i)$1,300.00 for payments to Damian Gigilietta;
(ii)$181.80 for payments to Jenni Bradley;
(iii)$143.18 for payments to Dianna Sculli; and
(iv)$281.36 for miscellaneous transactions described in the table at page 19 of T2.
b) $400.00 (of a total of $625.28) of ITCs claimed in relation to expenses for the three motor vehicles owned by the Applicant;
c) $630.60 (of a claim of $3,940.15) of ITCs that were disallowed by the Commissioner as an estimate of ineligible entertainment expenses; and
d) $1,550.36 (of a claim of $3,940.15) in ITCs for miscellaneous acquisitions that included transactions such as food and financing that the Commissioner disallowed as not being creditable acquisitions or transactions which were not supported by bank account records to evidence that they were actually paid.[59]
Absence of tax invoices
40. The Commissioner contends that the Applicant has not provided tax invoices where required to support that the Disallowed Claims. The GST Act is strict in that an ITC cannot be attributed where there is no substantiation. The Tribunal previously considered this issue in Singh and Commissioner of Taxation.[60] In that matter Senior Member Manetta found that when claiming an ITC, a taxpayer:
…had not merely to be honest but had also to comply with the regulatory requirements necessary to substantiate his claims. These requirements are imposed so that claims for ITCs may be readily verified by the respondent’s officers as appropriate.
41.The Commissioner has made numerous attempts to obtain tax invoices from the Applicant at each stage of this dispute, including through the use of his formal information gathering powers. This is particularly so in relation to the claims related to payments to Damian Gigilietta and Dianna Sculli which would be assisted by the provision of invoices. Notwithstanding these attempts, no tax invoices have been produced to address the Disallowed Claims.
42.Section 29-70 of the GST Act provides the discretion to accept partial invoices where missing information can be ascertained from other material, or to take documents that are not tax invoices as being so for the purposes of the Act. The Commissioner does not consider this provision to apply here as the Applicant has not identified documents for each of the Disallowed Claims that could be substituted for a tax invoice in the proper form.
No corroborating evidence that acquisitions were creditable acquisitions
43. A tax invoice alone does not establish a creditable acquisition or taxable supply, it merely records a transaction.[61] The Commissioner contends that even if tax invoices were supplied, or not otherwise required, the Applicant has not established that each of the acquisitions in dispute were creditable acquisitions, being obtained in the course of its enterprise.
[59] Exhibit 1, T Documents, T33, page 1280, Audit finalisation letter.
[60] Singh and Commissioner of Taxation [2021] AATA 2125 at [22].
[61] Kais Jewellery (Syd) Pty Ltd and Commissioner of Taxation [2022] AATA 425 at [74] citing Bayconnection Property Developments Pty Ltd and Commissioner of Taxation [2013] AATA 90.
The Respondent further provided specific submissions in relation to each ITCs claim in issue[62] and contended that the Applicant had either failed to supply required supporting documentation such as tax invoices or had been unable to establish that the disallowed claims related to creditable acquisitions.
[62] Exhibit 3, Joint Tribunal Book, Tab 6, Respondent’s Statement of Facts, Issues and Contentions, pages 10-11, paragraphs 44-48.
The Respondent contended that no further ITCs should be allowed and submitted that:[63]
20. Similar to the circumstances in a recent decision of this Tribunal regarding unsubstantiated claims for input tax credits, H &B Auto Repair Centre,[64] the Commissioner contends that the material that has been provided by the Applicant to date is unhelpful and does not discharge its burden of establishing that the ITC claims in dispute relate to creditable acquisitions made by the Applicant.
[63] Exhibit 4, Respondent’s Outline of Submissions, page 5, paragraph 20.
[64] H & B Auto Repair Centre and Commissioner of Taxation [2022] AATA 3561.
The Applicant’s submissions both in writing and at the Hearing were consistent in that it contended that the Respondent had no evidence to support its claims with regards to the ITCs claimed and as the bank statements clearly show the transactions took place, they should be allowed.[65]
[65] Exhibit 1, T Documents, T1, pages 1-11, Application for Review of Decision attachment and T36, pages 1291-1300, Applicant’s objection; Exhibit 3, Joint Tribunal Book, Applicant’s response to the Respondent’s Statement of Facts, Issues and Contentions, page 22.
At the Hearing and in previously filed submissions,[66] Mr Bradley, on behalf of the Applicant, explained that:
[66] Exhibit 1, T Documents, T1, pages 1-11, Application for Review of Decision attachment and T36, pages 1291-1300, Applicant’s objection and Exhibit 3, Joint Tribunal Book, Tab 1, Applicant’s response to 55 transactions outlined in the objection decision and bank statements; Tab 2, Applicant’s response to the other items in dispute and Tab 3, Applicant’s Response to the Respondent’s Statement of Facts, Issues and Contentions.
·NFTA provides opportunities for young people to get up on stage and present themselves. This occurs through a talent search with auditions and those that are selected would enrol in a training course with NFTA to get agent ready. At the end of the training program, showcase events would be held by NFTA.
·At the showcases, NFTA would invite agents to attend. They could go for 12 hours and those that were judging, scouting or assisting in the events were provided with food and drinks throughout the day.
·He completed and lodged the BAS for the Relevant Period.
·
The difference between the BAS lodged and the voluntary disclosure amounts was due to a typographical accounting error whereby he had in the accounting software Xero initially based the Relevant Periods BAS reporting off the period
1 October 2018 to 31 March 2019.
·The difference between the voluntary disclosure and the amounts showing on the GST Detail Report is due to the fact that the Xero system is fluid, so the figures change once corrections are made. What occurred in this case was that after the voluntary disclosure, he had realised that the accounts were not reconciled up to 31 March 2019. There were 4 or 5 days outstanding, so he performed a reconciliation and that is why the amounts differed.
·He was the CEO of the Applicant since NFTA started and while he stated he was responsible for the financials from that time, what he meant was that he was responsible for managing the cashflow and who got paid. He was not previously in charge of financials, he would just be told the BAS was done. He drove revenue and followed up debts and kept the teaching going. They had an inhouse bookkeeper and administration person who looked after all of the administration.
·Up until mid-March 2019, the accounts were being done by their inhouse bookkeeper who was a registered accountant. However, due to financial difficulties, they had to let her go and he took over that role.
·In doing the Relevant Period’s accounts, he looked at the previous quarter and created a new report, which was where the error occurred, he had not changed the date range back to the Relevant Period.
·Even though he submitted the BAS for the Relevant Period, he relied on the inhouse bookkeeper as they had entered most of the data. It was a rookie error for which he has been quick to learn from.
·NFTA had not engaged with an accountant for a number of years.
·Outlined each of the items to which the ITCs in dispute related and why he said they related to creditable acquisitions.
·The references to gift vouchers relate to prizes given to young people who need some encouragement after not having won a major prize at the showcases.
·Some expenses related to the provision of costumes to those students who could not afford to buy them and to equipment that assist the students to get stage ready.
·At the end of each year, a major showcase was held where the winners of the smaller showcases came together. This event does not of itself generate income, however, incurs large expenses. It was undertaken to generate future business by showcasing what NFTA does and the talent it produces.
·The vehicles are 100% for business use, however no invoices for the expenses or logbooks in relation to use have been kept. They were used by teachers and support persons to drive to and from lessons and to pick up and drive around agents or students.
·Due to a dispute at their previous premises, they were locked out and had information destroyed – that is why they do not hold invoices or receipts.
·He had not been told by the Respondent which specific amounts were being challenged so he could not provide invoices – “it is like a needle in a haystack”.
·He is unable to get invoices in relation to people who used to do work for NFTA as it owes them money and they are not in communication.
·No invoices had been kept in relation to the 55 transactions that had been listed and “they fade in 6 months”. He does not think there is a dispute that the transactions took place, the dispute is if they were creditable acquisitions and he thinks he had established that.
·When they are spending $20,000 on a showcase, something worth $20 does not come to mind to make a diary note. Rather, the way they operated was that if you charge the item on the card, they would know that it was a business expense and it would be reconciled and expensed later.
·Things were moving so fast, they did not get a show box full of receipts and bring it in for reimbursement.
At the Hearing, the Tribunal asked Mr Bradley why, regardless of what the transaction was for or where it occurred, the GST amount was calculated by applying a blanket 1/11th to all transactions. The Tribunal made this enquiry after Mr Bradley had explained that the transactions from the listed supermarkets were for food provided to agents and people assisting at the showcase and may include items to make up platters and the like and after he explained that the transactions labelled medication related to his personal medication for which he has a present Workcover claim underway for. The Tribunal raised that some components were likely to be GST free. In response, Mr Bradley told the Tribunal that the Xero program reconciles from the bank statement and as such, he did not enter the individual amount of GST, it was instead calculated. The following exchange occurred:
MEMBER: Okay. All right. I think I understand what they all relate to, and I think I understand what it is that you’re telling me. I think part of the difficulty is that, without the receipts, then, to get over not having the receipts - there just - there’s not, at the moment, the supporting things to go with and corroborate what it is that you’ve - that you’re saying that it is. And the difficulty, on some of the bigger things, is then, it’s difficult to know exactly what was purchased, or even - some of the smaller food things - to know what had GST and what didn’t, because some of the - even just the food ones - it looks like, potentially, the GST has been worked out by just doing the eleventh of whatever the invoice was, but I don’t know that - when I’ve purchased groceries at Woolworth’s - that there’s ever been GST on everything. So it doesn’t work out, necessarily, to be that strict eleventh, because not everything that you purchase has GST on. So that, I guess, is the difficulty?
MR BRADLEY: I guess, that’s a - that’s a fair call to make, but I will also look at the probability of - of - of - that it’s more than likely and what a reasonable person would think - expect, and it - it would be that case. And again, you spend $20,000 on a - on a showcase in one day, and someone runs - you know - runs out, and you’re not going to sit there with that little receipt for $20 and go through and say, “Oh, there’s seven - seven cents there of GST. That’s not right.” So, again, I understand tax law, and what the requirement is, but I just - I’m trying to, sort of, show that, you know, these - these things, should they be penalised for, or - well, based on, you know, what is quite reasonable, I would - I’ve ran many, many businesses, and for - for many, many years, and in - in the - what I - what happens in businesses - I know there’s reasonable expectations and certain things.
MEMBER: Well, yes. From my experience, I have seen boxfuls and boxfuls of receipts, and it’s the receipts that are given to - in your case, it would have been Diana - that get inputted into the system and linked up and reconciled with the bank statements. So even just the $20, or the five lots of $20, on a day where it’s a huge event and it’s cost a lot of money - some unfortunate person still would end up with those five bits of paper, so that it all married up?
MR BRADLEY: Well, that - that - that’s not the way Xero works, though. Xero doesn’t work that way. Xero works off uploading your bank statements and reconciling those into - into accounts, and you don’t input receipts.
MEMBER: No, but I would have thought that you - when you reconcile them to the accounts, that you would be doing that against the receipts, so that you properly attributed the GST to them, because, just from the bank statements, the person is not going to know what the GST necessarily was on the item. For example, if you’ve gone to Woolies and all you’ve bought is fruit and fruit, because you’re making a fruit platter, then there’s not going to be any GST. So, yes, just - it just depends, I guess. But I do understand why all of these amounts were expended.
Shortfall Penalties
The Respondent contended that the shortfall penalties have been appropriately applied and that there are no grounds on which they should be remitted in part or in whole. The Respondent submitted the following in support of its contentions:[67]
[67] Exhibit 4, Respondent’s Outline of Submissions, pages 5-7, paragraphs 22-29.
22. The Applicant made a false or misleading statement by claiming ITCs in its BAS that it was not entitled to, and which could not be reconciled with its financial records. While the Applicant made a voluntary disclosure, the disclosure only reflected part of the shortfall and did not accord with its GST detail report. This in turn created a shortfall between the voluntary disclosure and the amount assessed at audit.
23. The portion of the penalty at issue that related to the voluntarily disclosure has otherwise already been decreased under subsection 284-225(5) of the TAA to account for the disclosure and to treat it as having been made before the commencement of audit.
Remission of penalty
24.Subsection 298-20(1) in Schedule 1 to the TAA provides an unfettered discretion to remit all or part of a penalty.
25.Law Administration Practice Statement 2012/5: Administration of the false or misleading statement penalty - where there is a shortfall amount (PS LA 2012/5) provides the Commissioner’s guidance on the matters to be considered when looking at the issue of remission, including:
a) that the purpose of the penalty provisions is to encourage entities to take reasonable care in complying with their taxation obligations;
b) that the penalty regime aims to promote consistent and equitable treatment of taxpayers by reference to the specified penalty rates; and
c) whether there are any specific circumstances that would make the imposition of the penalty unjust.[68]
[68] Practice Statement Law Administration 2012/5 – Administration of the false or misleading statement penalty – where there is a shortfall amount (PSLA 2012/5) at pages 12-13.
26.The Commissioner contends that the level of shortfall penalty here is appropriately applied at a base rate of 50% for recklessness. Drawing from the factors set out in the Commissioner’s SFIC at [59] - [60]:
a) The claims made in the Applicant’s BAS were inconsistent with its director’s own statements regarding how it was performing as a business and steps were not taken to confirm its claims before lodgement. Instead, the Applicant’s director states that he ‘…did try to rush the BAS through, as I noticed it was a refund that would have assisted the company at the time’;[69]
b) The Applicant did not confirm that all of its claimed ITCs related to creditable acquisitions before lodgement, particularly where those claims related to acquisitions from entities connected with its director(s);[70]
c) The Applicant does not appear to hold invoices for all of the ITCs it claimed, despite being required to do so;
d) The error voluntarily disclosed by the Applicant led to a significant shortfall and was so obvious that it was noticed almost immediately after lodgement.[71] Had the Applicant performed its due diligence prior to lodging the shortfall would have been significantly smaller or eliminated;
e) To the extent that the Applicant’s director may have been unsure about how to correctly fulfil reporting obligations, there is no evidence that steps were taken to seek advice prior to lodging, from either a tax professional or the ATO;
f) The actual claim made in the BAS for the Relevant Period and the error voluntarily disclosed by the Applicant cannot be easily reconciled with the Applicant’s GST Detail Report dated 12 April 2019 and does not to appear to have arisen from a simple typographical error.[72]
27.The Applicant clearly disregarded or was indifferent to the foreseeable risk that its reporting was incorrect. Given the knowledge that the Applicant’s director had of its business, the errors in the Applicant’s reporting would have been obvious had reasonable care been exercised.
28.On the material before the Tribunal, there is nothing to suggest that the imposition of the penalty is unjust or that the Applicant’s circumstances somehow prevented it from reporting correctly. Rather, the Applicant’s evidence suggests that its director should have had the skill or knowledge to enable it to report correctly or to seek advice if required.[73] Instead, its director failed to perform due diligence in reviewing its claims before lodgement. As such, no further remission is warranted.
The ‘safe harbour’ exception does not apply
29. For completeness, the Commissioner notes that the ‘safe harbour’ exception in subsection 284-75(6) of Schedule 1 to the TAA does not apply to the Applicant. On the Applicant’s evidence,[74] the relevant statement was made by the Applicant’s director and not a registered tax agent or BAS agent.
[69] Exhibit 1, T Documents, T1, page 9, Application for Review of Decision.
[70] Exhibit 1, T Documents, T33, page 1277, Audit finalisation letter and T36, page 1299, Applicant’s objection.
[71] Exhibit 1, T Documents, T3, pages 21-23, Correspondence containing Applicant’s voluntary disclosure.
[72] Exhibit 1, T Documents, T36, page 1296, Applicant’s objection.
[73] Exhibit 1, T Documents, T30, pages 1250-1260, Correspondence between the parties discussing a request for the GST Detail Report for the period 1 October 2018 to 31 December 2018.
[74] Exhibit 1, T Documents, T1, page 9, Application for Review of Decision.
The Applicant’s submissions both in writing and at the Hearing were consistent in that it contended that a penalty should not be applied as this situation occurred due to a simple typographical error and should a penalty have to be imposed, it should not be calculated on the basis of reckless behaviour.[75]
[75] Exhibit 1, T Documents, T1, pages 1-11, Application for Review of Decision attachment and T36, pages 1291-1300, Applicant’s objection; Exhibit 3, Joint Tribunal Book, Applicant’s response to the Respondent’s Statement of Facts, Issues and Contentions page 23.
At the Hearing and in previously filed submissions,[76] Mr Bradley, on behalf of the Applicant, explained that:
[76] Exhibit 1, T Documents, T1, pages 1-11, Application for Review of Decision attachment and T36, pages 1291-1300, Applicant’s objection; Exhibit 3, Joint Tribunal Book, Applicant’s response to the Respondent’s Statement of Facts, Issues and Contentions.
·At the time that he lodged the Applicant’s BAS, he was under extreme stress.
·The COVID pandemic had caused financial stress and the business to stop operating.
·If there are some ITCs that the Applicant is not entitled to, he accepts that, however, does not consider the penalty to be fair in the circumstances.
·No penalty should be applied to the shortfall that arises between the lodgement of the BAS and the voluntary disclosure reporting.
·The amounts disclosed in the BAS were not false, they were what he believed to be the case at the time.
·This was his first attempt at a BAS statement as all previous BAS were done by the inhouse bookkeeper’s person or accountants. However, at that time due to its financial situation, they could not afford to continue to engage them.
·There was no disregard to the risk of submitting the lodged BAS as it was his first attempt and was derived from transactions reconciled by trained professionals.
·The high expenses in January and February were due to the major event that was held.
·By being in charge of all of the Applicant’s financials meant that as the CEO, he made the financial decision, approved quotes and payments of wages and suppliers and was responsible for the financial performance of the company.
·The Applicant employed an in-house accountant/bookkeeper to handle the day-to-day financial and ATO obligations right up to the middle of March 2019.
·The Applicant also engaged an accounting firm to finalise and lodge every BAS prior to the period of February 2019.
·Safe harbour exemptions should be considered as although he lodged the BAS for the Relevant Period, the bank reconciliations which provided the underlying GST Detail Report were conducted by an in-house tax professional.
·He undertook due diligence.
·“The Applicant was trying to resurrect the business and was struggling at the time, after a very nasty dispute with the new landlord, the applicant was illegally evicted in May 2019. A full re assessment of the business was carried out in Nov/Dec to see if the business could relaunch its operations and in Feb 2020, the applicant began to explore restarting its training operations, but from hotels instead of a rented premises, 2 weeks later, Covid hit Victoria, and the business has effectively been on hold. The business now has no cash flow, and the outcome of this application will determine if the business can recommence or have to be wound up. Any penalty imposed with [sic] have a significant impact on the business and create financial hardship.”[77]
·He lodged the BAS for the Relevant Period because he knew that they normally got a credit at that time of year and it would help with the business cashflow, so he actioned it quickly. He lodged early and there was still a long period of time before lodgement was actually required.
[77] Exhibit 3, Joint Tribunal Book, Applicant’s response to the Respondent’s Statement of Facts, Issues and Contentions, page 33.
consideration
Input tax credits
In order to be entitled to claim ITCs, the Applicant, as it is reporting GST on a cash basis, must be able to establish that it made creditable acquisitions that are attributable to a particular tax period.
In this matter, it is not disputed that the expenses to which the ITCs in dispute were incurred, the primary issue is whether or not those expenses amount to creditable acquisitions, namely whether or not they were acquired solely or partly for a creditable purpose and are a taxable supply.
Based on the evidence before it, the Tribunal largely accepts that the acquisitions were at least, if not fully, were in part, made for a creditable purpose, in that they related to the business being carried on by the Applicant. However, in the absence of any substantiation or corroborating evidence, the Tribunal cannot be satisfied of the extent that any of the expenses in question were made in the course or furtherance of the enterprise being carried on by the Applicant or the extent that the supply is not GST-free or input taxed. This is particularly the case in circumstances where there is no evidence as to whether people providing services to the Applicant were registered for GST and where Mr Bradley indicated that the accounting system applies the GST across items reconciled with the bank statement with no checking on input being undertaken with regards to the actual GST status of the supply.
The Tribunal notes that Mr Bradley’s evidence was that for the Relevant Period, the majority of the entries had been made by the Applicant’s previous inhouse bookkeeper. However, the transactions in question to which the blanket GST calculation have occurred extend across the full quarterly period, they do not just relate to the reconciliation items he said he was responsible for, being the last 4 or 5 days of the quarter.
The onus is on the Applicant to prove that the amended assessment of net amount for the Relevant Period was excessive or otherwise incorrect and what it should have been. Based on the evidence before it, it is clear that the Applicant does not hold the records or engage in an accounting process that assists it to meet this onus.
Mr Bradley made many assertions that the Applicant had not been given enough information by the Respondent in order to know what it needed to provide. Given the number of notices provided to the Applicant, the tables and questions put to it by the Respondent throughout the Tribunal process, the Tribunal does not accept that assertion.
The Tribunal is not bound by the rules of evidence and it may inform itself on any matter in such a manner as it thinks appropriate.[78] However, in Briginshaw v Briginshaw (1938) 60 CLR 336, Dixon J (as he then was) considered the relevance of the civil or balance of probabilities standard of proof in Tribunal proceedings. For the Applicant to persuade this Tribunal of the facts it offers to demonstrate that the amended assessments were excessive and as such, incorrect and what the assessments should have been:[79]
…. the tribunal must feel an actual persuasion of its occurrence or existence ... It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality… it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony, or indirect inferences.
[78] Section 33(1)(c) of the Administrative Appeals Act 1975 (Cth).
[79] Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362.
The discharge of the Applicant’s evidentiary burden in this matter must be considered, keeping in mind that the evidence said to support the Applicant’s position is uniquely within the Applicant’s possession or control.[80] It is up to the Applicant to prove its case and establish what the assessments should have been.
[80] Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63, per Latham CJ at 87-88.
Having considered all of the evidence before it and in particular that provided at the Hearing by Mr Bradley, the Tribunal agrees with the Respondent’s contention that[81] “the Applicant has not taken steps to present a positive case or to present evidence to support its contentions – the Applicant’s contentions merely seek to reverse the burden of proof and disregard that its tax affairs are peculiarly within its own knowledge, not the Respondents.”[82]
[81] Exhibit 4, Respondent’s Outline of Submissions, page 2, paragraph 6.
[82] George v Federal Commissioner of Taxation (1952) 86 CLR 183 at 201.
The Tribunal agrees with the Respondent’s submission that analogous to H & B Auto Repair Centre Pty Ltd and Commissioner of Taxation [2022] AATA 2561, the material provided by the Applicant in this case to date is unhelpful and does not discharge its burden of establishing that the ITC claims in dispute relate to creditable acquisitions made by the Applicant.[83]
[83] Exhibit 4, Respondent’s Outline of Submissions, page 5, paragraph 20.
Consequently, the Tribunal finds that the Applicant has not discharged its onus to prove that the amended assessment of net amount for the Relevant Period was excessive, or otherwise incorrect and what that assessment should have been.
Shortfall penalty
Based on the evidence before it, the Tribunal considers that the Applicant is liable to an administrative penalty as in lodging its BAS and providing its voluntary disclosure to the Respondent, it made statements to the Respondent that because of things in or omitted from those statements, were false or misleading. This is the case given that Mr Bradley readily admits that the lodged BAS for the Relevant Period was incorrect, subsequently a voluntary disclosure was made and after audit, further the Applicant made a further concession that it was not entitled to some of the ITCs that it had claimed.
While the Tribunal understands the Applicant’s contentions in relation to the reconciliation issue between its voluntary disclosure and subsequent GST Detail Report provided to the Respondent at audit, this does not change the fact that it made further amendments to its accounts after the voluntary disclosure that in of themselves created a further GST shortfall. As such, the Tribunal agrees that there were two shortfall amounts to which penalties apply.
The Applicant contended that should a penalty be imposed, it should not be calculated on the basis of reckless behaviour as the initial shortfall was predominately the result of what he considers to be a simple typographical error, that occurred on his first time completing and lodging a BAS.
As set out above, Mr Bradley told the Tribunal that there were a number of reasons the Applicant’s behaviour did not amount to being reckless, however the Tribunal considers that he subsequently contradicted that position. For example, Mr Bradley submitted that the figures were derived from transactions reconciled by trained professionals, however also said that he had to let his inhouse bookkeeper go prior to the end of the Relevant Period and that he subsequently found that there were 4 or 5 days that were not reconciled. It was unclear from Mr Bradley’s evidence, what the level of involvement was by his previous tax agent.
Mr Bradley also gave evidence that he lodged the BAS quickly after the end of the Relevant Period to assist with the Applicant’s cash flow and considered that the initial refund was not out of the ordinary for that period when comparing with previous periods. To that end, given the balance of Mr Bradley’s evidence, it appears that he did not undertake checks and balances to ensure that the information he was submitting in the BAS as lodged on
5 April 2019 was correct, rather he took the risk on the overall result looking reasonable. In circumstances where it was Mr Bradley’s first time in completing a BAS, the Tribunal considers that it would have been reasonable for him to have taken more care with ensuring that he was doing so correctly.As such, the Tribunal agrees with the contentions made by the Respondent as set out at paragraph 56 above that the Applicant disregarded or was indifferent to the foreseeable risk that its reporting was incorrect. As such, the Tribunal does not consider the Applicant took reasonable care in connection with the making of a false or misleading statement and did so in a manner that is properly classified as being reckless.
On the basis that Mr Bradley’s evidence confirmed that he completed and lodged the BAS for the Relevant Period personally, in the absence of either his accountant or inhouse bookkeeper, the Tribunal finds that the safe harbour exception does not apply.
In such case, the legislative calculations provide that the base rate of the applicable shortfall penalty to be imposed is 50% of the shortfall amount of which may be appropriately reduced as a result of voluntary disclosures that occur in the prescribed manner. The Tribunal considers that the 80% reduction of the penalty imposed in relation to the shortfall that arose as a result of the Applicant’s voluntary disclosure was reasonable.
Consequently, for the reasons outlined above, the Tribunal finds that the Applicant did not discharge its onus to prove that the assessment of shortfall penalty was excessive or otherwise incorrect. As such, in accordance with its findings above with regards to the amended assessments of net amount for the Relevant Period, the Tribunal finds that the short fall penalty was correctly imposed.
The evidence before the Tribunal is clear that Mr Bradley completed and lodged the BAS for the Relevant Period. As such, the safe harbour exemptions do not apply.
The Tribunal acknowledges that the Mr Bradley told the Tribunal that he does not consider the penalty imposed to be fair and that it not being remitted may have further impacts on the future viability of the Applicant. However, the Tribunal considers that there is no evidence before it that the refusal to remit the administrative penalties will result in an outcome that is harsh or produces an unjust, inappropriate or unreasonable outcome.[84] For the reasons set out above, the Tribunal agrees that the evidence before it instead shows that Mr Bradley failed to perform due diligence in reviewing its BAS for the Relevant Period before lodgement.
[84] Sanctuary Lakes Pty Ltd v Commissioner of Taxation [2013] FCAFC 50, Griffiths J with whom Edmonds J agreed at [248]-[249]; Stewart and Commissioner of Taxation [2013] AATA 845, per Middleton J and Senior Member O’Loughlin at [104].
Consequently, the Tribunal finds that the Applicant has not discharged its onus to prove that the Respondent’s decision not to remit the shortfall penalty should not have been made or should have been made differently.
conclusion
Based on the evidence before it, the Tribunal finds that the Applicant has not discharged its burden to prove that:
(a)it was entitled to claim the ITCs in dispute in the Relevant Period.
(b)it was not reckless in making a false and misleading statement to the Respondent in relation to the BAS for the Relevant Period.
(c)the penalty imposed should be further remitted.
As such, the Tribunal finds that the Applicant has not discharged its onus to prove that the amended assessments of net amount made by the Respondent in relation to its claimed ITCs for the Relevant Period or that the related assessment of shortfall penalty were excessive or otherwise incorrect. Further, the Tribunal finds that the Applicant has not discharged its onus to prove that the decision made in relation to remission of the imposed shortfall penalty should have been made differently.
Accordingly, the decision under review is affirmed.
I certify that the preceding 84 (eighty-four) paragraphs are a true copy of the reasons for the decision herein of Member D Mitchell
.....................[SGD]........................
Associate
Dated: 5 December 2022
Date of hearing: 16 November 2022 Applicant: Mr Craig Bradley
Solicitors for the Respondent: Mr Preesan Pillay
Australian Taxation Office
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