TKGY and Commissioner of Taxation (Taxation)

[2020] AATA 1839

TKGY and Commissioner of Taxation (Taxation) [2020] AATA 1839 (18 June 2020)

Division: SMALL BUSINESS TAXATION DIVISION

File Number(s):      2019/5384

Re:TKGY

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Member D Mitchell

Date:18 June 2020

Place:Sydney

The Tribunal affirms the decision under review.

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

Member D Mitchell

CATCHWORDS

TAXATION – goods and services tax – input tax credits – four year rule to claim input tax credit – eligibility to claim input tax credits – adjustment event – taxpayer’s burden to prove assessment excessive or otherwise incorrect – decision under review affirmed.

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth)

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

Taxation Administration Act 1953 (Cth)

REASONS FOR DECISION

Member D Mitchell

18 June 2020

INTRODUCTION

1. TKGY (the Applicant) is seeking review of an objection decision of the Commissioner of Taxation (the Respondent) dated 26 August 2019.[1]

   [1] Exhibit 1, T Documents, T12, page 81, Notice of Objection Decision.

2. The reviewable decision disallowed the Applicant’s objection to the notice of assessments of net amount for the tax periods from 1 July 2011 to 30 June 2012 and notice of amended assessments of net amount for the tax periods from 1 July 2012 to 30 September 2014 which were issued on 18 December 2018.[2]

   [2] Exhibit 1, T Documents, T2, pages 13-16, Reasons for Decision; and T12, page 81, Notice of Objection Decision.

3. The Tribunal notes at this juncture that both during the Hearing and in emails sent to the Tribunal post hearing, the Applicant advised the Tribunal that if the decision reached was not favourable to the Applicant that they did not wish to receive a written decision. The Tribunal recognising the stress the ongoing matter has had and clearly continued to have on the Applicant, outlined that pursuant to section 43 of the Administrative Appeals Tribunal Act 1975 (Cth) it is required to provide reasons for its decision and that as oral reasons would not be provided at Hearing a written decision would be required to be provided, however any such decision could be kept brief.

4. As such only the pertinent facts and evidence provided will be discussed in this decision.

   BACKGROUND

5. The Applicant was incorporated on 29 July 2010 in order to conduct the business of the provision of tax accountancy services.[3]

   [3] Exhibit 1, T Documents, T11, page 74, Applicant’s notice of objection with supporting documentation.

6. The Applicant was involved in civil litigation in the New South Wales Supreme Court between July 2012 and March 2017.[4] 

   [4] Exhibit 2, page 1, paragraph 1, Applicant’s submissions dated 11 February 2020.

7. The Applicant contacted the Respondent by way of letter dated 15 November 2012 requesting a suspension of all system generated documents so that automatic penalties and interest could be avoided due to unforeseen circumstances affecting their business activities.[5] The Respondent granted the Applicant’s request until 28 February 2013 for the September 2011 to September 2012 quarterly business activity statements (BASs).[6]

   [5] Exhibit 1, T Documents, T3, pages 17-18, Letter from the Applicant to Respondent.

   [6] Exhibit 1, T Documents, T4, page 19, Letter from Respondent to Applicant.

8. On 22 March 2016, a further suspension of all outstanding income tax returns and BASs was sought and granted until 22 September 2016 due to ongoing legal proceedings.[7]

   [7] Exhibit 1, T Documents, T5, page 20, Respondent’s contemporaneous telephone file notes.

9. On 22 December 2013, the Applicant was involuntarily deregistered by the Australian Securities and Investment Commission (ASIC).  After the conclusion of the legal proceedings the Applicant sought to be reinstated by ASIC which occurred on 9 October 2018 with retrospective effect.[8]

   [8] Exhibit 1, T Documents, T11, page 74, Applicant’s notice of objection with supporting documentation.

10. On 28 November 2018, the Applicant lodged 29 BASs on a cash accounting basis for the periods between 1 July 2011 and 30 September 2018 claiming a number of input tax credits attributable to various periods.[9]

    [9] Exhibit 1, T Documents, T11, pages 59-80, Applicant’s notice of objection with supporting documentation.

11. The BASs that are the subject of the objection decision relate to the periods between             1 July 2011 and 30 September 2014.[10]  The total input tax credits claimed during this period was $8,497. The Applicant did not disclose any supplies in respect of these periods.[11]

    [10] Exhibit 1, T Documents, T6, pages 21-33, Business Activity Statements lodged by the Applicant.

    [11] Exhibit 1, T Documents, T2, page 13, Reasons for Objection Decision.

12. On 18 December 2018, the Respondent disallowed the Applicant’s GST refund for credits claimed during the period 1 July 2011 to 30 June 2012 pursuant to section 105-55 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (TAA 1953) and during the period 1 July 2012 to 30 September 2014 pursuant to Division 93 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act)[12] on the basis that the claims were made more than four years after the end of the tax period, for the tax periods ending on or before                1 June 2012, or the due date of the returns, for tax periods ending after 1 July 2012[13] (the four year rule).

    [12] Noting section 105-55 of Schedule 1 to the TAA 1953 was replaced by Division 93 of the GST Act with minimal amendment.

    [13] Exhibit 1, T Documents, T8, pages 38-41, Respondent’s audit finalisation letter.

13. On 18 December 2018, the Respondent issued the Applicant with:

    (a)Nil assessments which identified a total GST shortfall amount of $2,250 for the tax periods between 1 July 2011 and 30 June 2012.[14]

    (b)Nil amended assessments which identified a total GST shortfall amount of $6,247 for the tax periods between 1 July 2012 and 30 September 2014.[15] 

    [14] Exhibit 1, T Documents, T7, pages 34-35, Applicant’s Notice of assessments of net amount and Notices of amended assessments of net amount.

    [15] Exhibit 1, T Documents, T7, pages 36-37, Applicant’s Notice of assessments of net amount and Notices of amended assessments of net amount.

14. On 7 June 2019, the Applicant objected to the assessments and amended assessments.[16]

    [16] Exhibit 1, T Documents, T11, pages 59-80, Applicant’s notice of objection with supporting documentation.

15. On 26 August 2019, the Respondent disallowed the Applicant’s objections.[17]

    [17] Exhibit 1, T Documents, T2, pages 13-16, Reasons for Decision; and T12, page 81, Notice of Objection Decision.

16. On 29 August 2019, the Applicant made an application to this Tribunal for review of the objection decision.[18]

    [18] Exhibit 1, T Documents, T1, pages 1-12, Application for review of decision.

17. A Hearing was held by videoconference on 27 May 2020.  At Hearing the Applicant was represented by its public officer who gave evidence under affirmation.

    THE LAW

18. Where a taxpayer is dissatisfied with an assessment, they may object against it in accordance with the requirements set out in Part IVC of the TAA 1953.

19. The Respondent must decide whether to allow, wholly or in part; or disallow, the taxpayer’s objection.[19]

    [19] Section 14ZY of the TAA 1953.

20. 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.[20]

    [20] Section 14ZZ of the TAA 1953.

21. Section 14ZZK(b)(i) of the TAA 1953 provides that on application for review of a reviewable objection decision concerning an assessment, the Applicant has the burden of proving that the assessment is excessive or otherwise incorrect and what the assessment should have been.

22. As such, to be successful in this matter the onus falls on the Applicant to prove that the assessments are excessive or otherwise incorrect and what the assessment should have been in relation to the BASs for the tax periods from 1 July 2011 to 30 September 2014.

    ISSUES

23. To determine whether the assessments made by the Respondent in relation to the Applicant’s claims for input tax credits for the tax periods from 1 July 2011 to 30 September 2014 are excessive or otherwise incorrect, the issues that the Tribunal must consider are:

    (a)       was the Applicant entitled to the input tax credits claimed in the BAS; and, if so

    (b)as a result of the time that has elapsed between the period in which the input tax credits were claimed and when the BASs were lodged is the Applicant no longer entitled to those input tax credits?

24. These issues necessarily require examination of the activities of the Applicant and the operation of the GST Act in relation to carrying on an enterprise, creditable acquisitions, attribution and relevant records. Further, the timeframes in which input tax credits can be claimed pursuant to the TAA 1953 and GST Act require consideration.

    CONSIDERATION

25. In reviewing the documents before it, in particular the Respondent’s Complaint Resolution Report,[21] Letter from the Inspector-General of Taxation,[22] Applicant’s notice of objection with supporting documentation[23] and Applicant’s submissions dated 11 February 2020,[24] two things were clear to the Tribunal.

    [21] Exhibit 1, T Documents, T9, pages 42-50, Respondent’s Complaint Resolution Report.

    [22] Exhibit 1, T Documents, T10, pages 51-58, Letter from Inspector-General of Taxation.

    [23] Exhibit 1, T Documents, T11, pages 59-80, Applicant’s notice of objection with supporting documentation.

    [24] Exhibit 2, Applicant’s submissions dated 11 February 2020.

26. Firstly, the Applicant is dissatisfied with the conduct of officers of the Respondent throughout the review process.

27. Secondly, it appeared that the Applicant understood the basis of the Respondent’s objection decision and while not agreeing that it was not entitled to the input tax credits, did agree that the claimed input tax credits were not attributed to the periods in which they were claimed but rather should have been claimed in 2017.   The Applicant being a provider of accounting services is well abreast of GST and income tax obligations.

28. In the Applicant’s written submissions dated 11 February 2020, it provided that it disputed the Respondent’s narrow interpretation of the GST legislation and in particular:[25]

    In the applicant’s case, the start due date for lodgement of Business Activity Statement albeit somewhat related to prior period legal matters and their abrupt termination, should therefore be interpreted as 7^th March 2017 rather than 2011-2013 as being alleged by the respondent, as the Court Order of 7^th March 2017 just prior to the applicant’s reinstatement as a Company provided some clarity on GST refund claim, albeit not comprehensive as was being hope. This will mean that the last date for lodgement of refund claim under the statutory limitation period of four years, should be interpreted as February 2021 fully complying with section 105-55 of Schedule 1 of TAA 1953 read with Section 35-5 of the GST Act 1999 being currently relied upon by the respondent in their position of GST refund claim denial founded on erroneous judgment of facts.

    [25] Exhibit 2, page 5, paragraph 14, Applicant’s submissions dated 11 February 2020.

29. The Applicant told the Tribunal that the BASs in question were lodged on a cash basis and that was an honest mistake made because the Respondent generated 29 BASs for one event rather than a single BAS. It submitted that entitlement for input tax credits became clear in 2017. The Applicant confirmed that it understood the four year rule regarding lodgement of BASs and how it works in relation to the periods in question. The Applicant confirmed that its position is that based on the adjustment event that it says happened in 2017, the input tax credits should have been attributed to 2017 meaning that the four year rule would not apply.

30. The Applicant told the Tribunal that the BASs were incorrectly completed, that the same amounts claimed should have been claimed however the accrual basis should have been used meaning that the claims should have been made in the 2017 BASs. The Applicant said that instead of putting zeros for all the past periods it actually simply incorrectly accounted the GST, back dating it to 2011 because it got confused. 

31. The Tribunal asked the Applicant if it agreed that for the BASs between 1 July 2011 to         30 September 2014 the input tax credit claims should have been zero and the input tax credits should have been claimed at the later date in 2017. The Applicant said: “yes, the same – I mean the presentation was – the amounts would have remained the same.  The presentation was put differently. That is what the whole issues is about.”

32. The Tribunal, in acknowledging the Applicant’s evidence that it was in agreement that the BASs lodged between 1 July 2011 to 30 September 2014 should have all had zero amounts for input tax credits claimed and that the four year rule was understood – and given this being in fact what the objection decision had done, asked the Applicant what decision it was seeking from the Tribunal. 

33. The Applicant told the Tribunal the decision being sought was straightforward: it wants all the unprocessed refunds to be issued and that the four year rule should start from 2017.

34. The Applicant told the Tribunal that the way to fix the issue before the Tribunal is for amended BASs to be lodged. The Applicant indicated it wanted the Tribunal to order amended BASs to be lodged because it had made an honest mistake.

35. Based on the evidence of the Applicant outlined above the Tribunal finds itself in a position where by virtue of the operation of section 14ZZK of the TAA 1953 the objection decision must be affirmed.

36. The Respondent contended that the Applicant did not establish an entitlement to the input tax credits or that associated timeframes that allow for the refund of input tax credits were met for the BAS for the periods between 1 July 2011 and 30 September 2014. [26] However, engagement with whether the Applicant was entitled to the input tax credits claimed is not necessary in the present situation as the Applicant is in agreement that the assessments made by the Respondent as a result of its objection decision were correct.  The Applicant contended that the input tax credits should have been claimed not during the periods in question but rather in 2017 after an adjustment event occurred.  As such the Applicant has not discharged its burden to prove that the assessments made were excessive or otherwise incorrect and has instead agreed that the assessment were correctly made.

    [26] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions.

37. It is not within the Tribunal’s jurisdiction to make orders in relation to further amendments of BASs from either a procedural or resulting entitlement to input tax credit refund perspective.

38. The Tribunal notes that the Respondent filed an Outline of Submissions for the Hearing the evening prior to the Hearing.  The Applicant objected to the Tribunal taking the document into consideration. Throughout the Hearing the Applicant made it difficult for the Respondent to present its case orally and as such it sought to rely on the Statement of Facts, Issues and Contentions filed on 13 March 2020[27] and the Outline of Submissions.[28]  The Tribunal exhibited both documents.  The Tribunal notes however that the primary basis of its decision in this matter arises from the evidence provided by the Applicant. As such although the Tribunal did not accept the Applicant’s objections to the Respondent’s Outline of Submissions, the document having been exhibited at the Hearing has caused no prejudice to the Applicant.

    [27] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions.

    [28] Exhibit 4, Respondent’s Outline of Submissions for Hearing on 27 May 2020.

    CONCLUSION

39. The Applicant has not discharged its onus to prove that the assessments for the tax periods between 1 July 2011 to 30 September 2014 were excessive or otherwise incorrect.

40. Accordingly, the decision under review is affirmed.

I certify that the preceding 40 (forty) paragraphs are a true copy of the reasons for the decision herein of Member D Mitchell

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

Associate

Dated: 18 June 2020

Date(s) of hearing:	27 May 2020
Applicant:	By videoconference
Solicitors for the Respondent:	D Ong, Australian Taxation Office by videoconference