Waller and Comptroller-General of Customs (Taxation)

[2024] AATA 1097

Waller and Comptroller-General of Customs (Taxation) [2024] AATA 1097 (16 May 2024)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2023/9149

Re:Jon Waller

APPLICANT

AndComptroller-General of Customs

RESPONDENT

DECISION

Tribunal:Senior Member G Lazanas

Date:16 May 2024

Place:Sydney

The decision under review is affirmed.

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

Senior Member G Lazanas

CATCHWORDS

TAXATION – luxury car tax (LCT) – whether importation of a car liable to LCT – whether exemption for LCT applicable to taxable supply of car relevant to taxable importation of car – where LCT imposed on an importation of a car is a duty of customs – where car more than 30 years old – whether customs duty exemptions apply to LCT – refund application rejected – reviewable decision affirmed

LEGISLATION

A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 9-10, 9-40, 195-1

A New Tax System (Luxury Car Tax) Act 1999 (Cth), ss 2-1, 2-5, 2-10, 5-10, 7-5, 7-10, 7-20, 13-20, 23-10, 25-1, 27-1.

A New Tax System (Luxury Car Tax Imposition – Customs) Act 1999 (Cth), s 3

Commonwealth of Australia Constitution Act 1900, s 55

Customs Act 1901 (Cth), s 163

Customs Regulation 2015 (Cth), regs 102-112, Schedule 6, item 6

Customs Tariff Act 1995 (Cth), Schedule 4, items 17, 36

SECONDARY MATERIALS

Explanatory Memorandum to the A New Tax System (Luxury Car Tax) Bill 1999 (Cth)

REASONS FOR DECISION

Senior Member G Lazanas

16 May 2024

INTRODUCTION

1. Mr Jon Waller, the applicant, is a motor vehicle enthusiast. On 24 May 2022, he purchased a 1973 Holden Torana Model GTR XU-1 in pristine condition from a dealer in New Zealand. The purchase price was NZ$180,000 which equated to AUD162,782.80. Mr Waller then arranged for his customs broker to import the vehicle into Australia on 20 August 2022 at which time he encountered an unexpected liability for luxury car tax (LCT) in the form of customs duty.

2. Mr Waller applied for a refund of the customs duty relating to LCT from the Comptroller-General on the basis that it was incorrectly imposed. Mr Waller argued the car was exempt from LCT on the basis of three claimed exemptions. The Comptroller-General agreed that the LCT when imposed on an importation of a car is a “duty of customs” within the meaning of s 55 of the Commonwealth of Australia Constitution Act 1900 (the Constitution) but argued that each of the three claimed exemptions were erroneous and misconceived.

3. The only issue in these proceedings is whether the Comptroller-General of Customs was correct to reject Mr Waller’s application for a refund of duty regarding LCT. That issue depends on whether the LCT was correctly imposed on the taxable importation of the car. Its resolution rests on, amongst other statutory provisions, the application of provisions in the A New Tax System (Luxury Car Tax) Act 1999 (Cth) (the LCT Act), the Customs Act 1901 (Cth) (the Customs Act), and the Constitution, no less.

4. As these reasons will explain, the Comptroller-General was correct to refuse the refund because all of Mr Waller’s arguments as to why he was not liable to pay duty regarding LCT were misconceived. The reviewable decision must, therefore, be affirmed.

5. Before addressing each of Mr Waller’s claimed exemptions for LCT, it is helpful to set out the relevant statutory provisions, followed by the facts which were not in dispute. The materials before the Tribunal comprised the T-Documents as well as the respective Statements of Facts, Issues and Contentions of the parties and written outlines of submissions.

   RELEVANT STATUTORY PROVISIONS

   Luxury Car Tax Overview

6. Division 2 of Part 1 of the LCT Act has the heading “Overview of the luxury car tax legislation”. Division 23 of Part 5 of the LCT Act has the heading “What forms part of this Act” and relevantly states that “explanatory sections” form part of the LCT Act but are not operative provisions and can only be considered for limited specified purposes: s 23-10(2). “Explanatory section” is defined in s 23-10(1) to be any section that is the first section in a Division and that has as its heading “What this Division is about” or any section in Divisions 2, 3 and 4 of the LCT Act.

7. Section 2-1 of the LCT Act (which is contained in Division 2 of Part 1 and is an explanatory section) sets out what this Act is about. Broadly, it states that the LCT Act is about the luxury car tax, and it is “a single stage tax that is imposed on supplies and importations of luxury cars and is in addition to any GST that may be payable”. The LCT “is only calculated on the value of the car that exceeds the luxury car tax threshold”.

8. A “luxury car” is a “car” whose “luxury car tax value” exceeds the “luxury car tax threshold” ss 25-1 and 27-1.

9. Section 2-5 of the LCT Act states that “Part 2 sets out the rules that establish liability for the LCT”. The tax applies to both supplies and importations of luxury cars (Divisions 5 and 7) and, further, that there is a system of quoting which is designed to prevent the tax becoming payable until the car is sold or imported at the retail level (Division 9).

10. Section 2-10 relevantly states that assessed luxury car tax on importations is paid with customs duty (where appropriate) (Division 13). Specifically, s 13-20 of the LCT Act, an operative provision, relevantly states that assessed LCT on a taxable importation is to be paid by the importer to the Commonwealth at the same time, at the same place, and in the same manner, as customs duty is payable on the car in question (or would be payable if the car were subject to customs duty).

    Taxable supplies of luxury cars

11. Although Mr Waller acknowledged that his situation only concerned the issue of LCT liability on the importation of a car, he nevertheless relied on provisions in Division 5 of Part 2 of the LCT Act concerning taxable supplies of luxury cars. In particular, he referenced provisions about when you do not make a taxable supply of a luxury car. It is necessary to briefly set out those provisions before addressing the directly relevant and operative provisions concerning taxable importations of luxury cars.

12. Division 5 of Part 2 of the LCT Act has the heading “Taxable supplies of luxury cars”.

13. Section 5-10 of the LCT Act provides:

    5-10 Taxable supplies of luxury cars

    (1) You make a taxable supply of a luxury car if:

    (a) you supply a *luxury car; and

    (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

    (c) the supply is *connected with the indirect tax zone; and

    (d) you are *registered, or *required to be registered.

    (2) However, you do not make a taxable supply of a luxury car if:

    (a) the *recipient *quotes for the supply of the car; or

    (b) the car is *more than 2 years old; or

    (c) you export the car in circumstances where the export is *GST-free under     Subdivision 38-E of the *GST Act.

    (3) A *car is more than 2 years old at the time of a supply if:

    (a) for a car that has not been *imported—the car was manufactured more           than 2 years before the time of the supply; or

    (b) the car was *entered for home consumption more than 2 years before the time of the supply.

    Taxable importations of luxury cars

14. Division 7 of Part 2 of the LCT Act has the heading “Taxable importations of luxury cars”. Section 7-5 states that you must pay the luxury car tax payable on any taxable importation of a luxury car that you make.

15. Section 7-10 of the LCT Act provides:

    7‑10 Taxable importations of luxury cars

    (1) You make a taxable importation of a luxury car if:

    (a) the *luxury car is *imported; and

    (b) you *enter the car for home consumption.

    Note: There is no registration requirement for taxable importations, and the importer need not be carrying on an enterprise.

    (2) The *importation of the car includes any *car parts, accessories or attachments that you import at the same time as the car and that could reasonably be expected to be fitted to the car.

    (3) However, you do not make a taxable importation of a luxury car if:

    (a) you *quote for the *importation of the *car; or

    (b) luxury car tax has already become payable in respect of the car; or

    (ba) you are *registered at the time of the importation, and the car:

    (i) is covered by item 7 in Schedule 4 to the *Customs Tariff; and

    (ii) is imported by the library, museum, gallery or institution to which it is consigned; and 

    (iii) is imported for the sole purpose of public display; or

    (c) the car is covered by item 10, 11, 15, 18, 21 or 24 in Schedule 4 to the Customs Tariff; or

    (d) the importation of the car is a *non‑taxable re‑importation.

    (4) To avoid doubt, a reference to a car that is covered by an item in Schedule 4 to the Customs Tariff includes a reference to a car to which that item would apply apart from the operation of subsection 18(1) of the Customs Tariff Act 1995.

    Non-taxable re-importation

16. As set out above, s 7-10(3)(d) of the LCT Act provides an exemption where the importation is a non-taxable re-importation which, as per the definition in s 27-1, has the meaning given by s 7-20.

17. Section 7-20 of the LCT provides:

    7‑20 Meaning of non‑taxable re‑importation

    (1) An *importation of a *car is a non‑taxable re‑importation if:

    (a) the car was exported from the indirect tax zone and is returned to the indirect tax zone, without having been subject to any treatment, industrial processing, repair, renovation, alteration or any other process since its export; and

    (b) the importer:

    (i) is the manufacturer of the car; or

    (ii) has previously acquired the car, and the supply by means of which the importer acquired the goods was a *taxable supply of a luxury car; or

    (iii) has previously imported the car, and the previous importation was a *taxable importation of a luxury car.

    (1A) An *importation of a *car is a non‑taxable re‑importation if:

    (a) the car was exported from the indirect tax zone and is returned to the indirect tax zone; and

    (b) the car has been subject to any treatment, industrial processing, repair, renovation, alteration or any other process since its export; and

    (c) the ownership of the car has not changed in the period beginning immediately before the car was exported and ending at the time it is returned to the indirect tax zone.

    (2) An importation of a *car is a non‑taxable re‑importation if:

    (a) the importer had manufactured, acquired or imported the car before 1 July 2000; and

    (b) the car was exported from the indirect tax zone before, on or after 1 July 2000; and

    (c) the car is returned to the indirect tax zone on or after 1 July 2000, without having been subject to any treatment, industrial processing, repair, renovation, alteration or any other process since its export; and

    (d) the ownership of the car when it is returned to the indirect tax zone is the same as its ownership on 1 July 2000.

    Note: An importation covered by this section may also be duty‑free under item 17 of Schedule 4 to the Customs Tariff Act 1995.

    LCT is a duty of customs on taxable importation

18. It was not in dispute that the LCT when imposed on an importation of a car is a “duty of customs” within the meaning of s 55 of the Constitution.

19. Section 55 of the Constitution requires that: “[l]aws imposing taxation shall deal only with the imposition of taxation” and that “[l]aws imposing taxation, except laws imposing duties of customs or of excise, shall deal with one subject of taxation only; but laws imposing duties of customs shall deal with duties of customs only, and laws imposing duties of excise shall deal with duties of excise only, and laws imposing duties of excise shall deal with duties of excise only.”

20. In order for LCT to be imposed in accordance with s 55 of the Constitution, three separate imposition Acts were enacted, in near identical terms at the time of the introduction of LCT. Relevantly, for present purposes, s 3 of the A New Tax System (Luxury Car Tax Imposition – Customs) Act 1999 (Cth) states:

    (1) The tax that is payable under the A New Tax System (Luxury Car Tax) Act 1999 is imposed by this section under the name of luxury car tax.

    (2) This section imposes luxury car tax only so far as that tax is a duty of customs within the meaning of section 55 of the Constitution.

    Refunds of Duty under Customs Laws

21. Section 163 of the Customs Act relevantly provides that refunds of duty may be made “in such circumstances, and subject to such conditions and restrictions… as are prescribed”.

22. The Customs Regulation 2015 (Cth) prescribe such circumstances and conditions in regulations 102 – 112 and in Schedule 6. The Comptroller-General acknowledged that Mr Waller’s refund application complied with the conditions for a valid refund application, since it was lodged electronically in the correct form, and within the period of time allowed. The Comptroller-General stated, and Mr Waller did not challenge the proposition, that the only refund circumstance that could potentially apply, is the circumstance prescribed by item 6 of the table in Schedule 6 which states:

    Duty has been paid on goods because of manifest error of fact or patent misconception of the law.

23. However, the Comptroller-General argued the claimed exemptions do not demonstrate any error in paying that duty relating to LCT, let alone any “manifest error of fact or patent misconception of the law”.

    THE FACTS

24. On 9 August 2022, Mr Waller lodged import declaration AER7RXWGT in respect of the importation of a 1973 Holden Torana car. An amount of $33,015.13 as LCT was assessed based on the declared value of the car and other declared details, and this was paid on the importation of the car which occurred on 20 August 2022.

25. On 15 September 2023, Mr Waller’s broker applied for a refund of the duty relating to the LCT paid, by lodging an application for a refund of duty. Three separate exemptions from LCT were claimed.

26. The three claimed exemptions from LCT were summarised in Mr Waller’s application for review, as follows:

    It is considered that the vehicle is exempt LCT on three different legal bases.

    (i)The first exemption is for vehicles that were more than two years old at the date of supply (purchase) pursuant to sec. 5-10 of A New Tax System (Luxury Car Tax) Act 1999 (“the LCT Act”) which defines “taxable supplies of luxury cars”.

    (ii)The second (and separate) exemption is provided by section 3 of the A New Tax System (Luxury Car Tax Imposition - Customs) Act 1999 (which provides that LCT on imported vehicles is a duty of customs) which, read together with Item 17 in Schedule 4 of the Customs Tariff Act 1995, provide that Australian-made goods (as prescribed by by-law) exported and returned to Australia in an unaltered condition are exempt customs duty if the transaction complies with By-Law No. 0176871. This transaction falls within the terms of By-Law No. 0176871.

    (iii)The third exemption category is provided by Item 36 in Schedule 4 of the Customs Tariff Act 1995 which simply applies to "Vehicles of an age of 30 years or more". Item 36 is a stand-alone provision for which no separate by-law provision is prescribed.

27. The refund was rejected by the Comptroller-General on the basis that no exemption from LCT applied.  This is the decision under review by the Tribunal.

    THE ISSUE

28. The only issue for determination by the Tribunal is whether Mr Waller’s importation of the car by Mr Waller was exempt from LCT due to any exemptions.

    WAS MR WALLER’S IMPORTATION OF THE CAR EXEMPT FROM LCT?

29. The first claimed exemption was on the basis that the car was more than two years old and, therefore, not a taxable supply.

30. Mr Waller’s argument was that as of 24 May 2022, being the date of purchase (which he equated to a supply), the car had not been imported into Australia. The importation of the car occurred on 20 August 2022, after the date of his purchase. Mr Waller submitted that the exemption in s 5-10(3)(a) of the LCT Act applied, namely, that the car was more than 2 years old as it had been manufactured more than 2 years before the date of the supply. It was not in dispute that the car had been manufactured by General Motors-Holden in Australia in 1973.

31. The first difficulty with Mr Waller’s argument is that the first claimed exemption addresses the provisions regarding taxable supplies of luxury cars which are not applicable to his situation which involved a taxable importation. That is, the first claimed exemption is misconceived since LCT is payable on both taxable supplies and taxable importations of luxury cars and his reliance on exemptions relating to taxable supplies is misplaced. The second difficulty is he did not make any taxable supply of the car in circumstances where he was the purchaser of the car. His separate, further argument that as the transaction is not a taxable supply, it is therefore also not a taxable importation, is plainly misconceived because the LCT contemplates two different taxing points and, in any event, there was no taxable supply.

32. As stated above, Division 5 of Part 3 of the LCT Act sets out the rules that establish liability for LCT on taxable supplies of luxury cars while Division 7 of Part 3 of the LCT Act sets out separate rules that establish liability for LCT on taxable importations of luxury cars. The relevant provisions are all operative provisions.

33. Mr Waller was assessed and paid LCT on the import declaration of the car on the basis that a taxable importation of a luxury car had occurred: ss 7-5 and 7-10 of the LCT Act. That is, he did not have liability to LCT on the basis that he made a taxable supply of a luxury car, nor could there have been any such liability in circumstances where he purchased the car: see s 5-10(1) of the LCT Act.

34. The first claimed exemption based on s 5-10(2)(b) of the LCT Act which is premised on cars more than 2 years old being excluded from a taxable supply is, therefore, irrelevant to whether LCT was payable by Mr Waller on the taxable importation of the car. Sub-section 5-10(2), on its terms, states when you do not make a taxable supply and, read in context, is an exemption to when an entity makes a taxable supply of a luxury car as per s 5-10(1). Section 5-10(2) does not assist in determining whether or not there was a taxable importation of a luxury car. Sub-section 5-10(3) which defines when a car is more than 2 years old at the time of a supply is similarly irrelevant and inapplicable, as that definition is relevant only to s 5-10(2)(b) of the LCT Act, that is, it only applies in relation to determining whether or not an entity makes a taxable supply of a luxury car.

35. Mr Waller’s references to extracts from the Explanatory Memorandum relating to the A New Tax System (Luxury Car Tax) Bill 1999 (Cth), including paragraph 2.4 to the effect that “a supply of a luxury car that is more than 2 years old is not a taxable supply of a luxury car and will not attract the tax” are, similarly, of no assistance as the explanation is confined to taxable supplies and says nothing about taxable importations of cars. In any event, an Explanatory Memorandum cannot displace clear and unambiguous statutory provisions which apply on their terms.

36. Mr Waller’s submission that the definition of “supply” includes a purchase is also erroneous. “Supply” is defined in s 27-1 of the LCT Act to have the meaning given by s 9-10 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act). Section 9-10(1) of the GST Act defines “supply” as any form of supply whatsoever while s 9-10(2) relevantly states that, without limiting s 9-10(1), a supply includes a supply of goods and a supply of services. That is, the concept of “supply” involves the supplier providing something to the recipient of the supply. This is reinforced by the definition of “recipient”, in relation to a supply, which is defined in s 195-1 of the GST Act to mean the entity to which the supply was made. Additionally, the general rule of liability in the GST Act is that the supplier is liable to pay GST on taxable supplies under s 9-40 which states "[y]ou must pay the GST payable on any taxable supply that you make".

1. The second and third claimed exemptions relied on by Mr Waller are based on the application of s 3 of the A New Tax System (Luxury Car Tax Imposition – Customs Act 1999 (Cth) read together with the exemptions under item 17 and item 36 of Schedule 4 to the Customs Tariff Act 1995 (Cth) (Customs Tariff).

2. Broadly, item 17 of Schedule 4 to the Customs Tariff relevantly refers to goods prescribed by by-law that have been exported from Australia and returned to Australia without having been subject to any treatment, repair, renovation, alteration or any other process since their export. Item 36 of Schedule 4 to the Customs Tariff relevantly refers to passenger motor vehicles aged 30 years or more.

3. As set out above, s 7-10(3) of the LCT Act relevantly provides that you do not make a taxable importation of a luxury car if the car, relevantly, “is covered” by certain enumerated items in Schedule 4 to the Customs Tariff. However, neither item 17 nor 36 are listed in the enumerated items in s 7-10(3)(c) of the LCT Act. It follows that they do not apply to Mr Waller’s importation of the car.

4. Mr Waller’s argument was, however, that s 3 of the A New Tax System (Luxury Car Tax Imposition – Customs) Act 1999 (Cth) when read together with items 17 or 36 nevertheless provided an exemption from LCT for the taxable importation of his car. Specifically, in relation to item 36 (which did apply to exempt the importation of the car from customs duty), Mr Waller argued that item 36 was introduced in the Customs Tariff in the original Customs Tariff Act (No 147 of 1995). That is, item 36 preceded the introduction of the LCT Act in 1999 and prevailed.

5. The problem, however, is that neither the LCT Act nor the A New Tax System (Luxury Car Tax Imposition – Customs) Act 1999 (Cth) make any reference to the priority of the Customs Tariff. Nor is there anything to suggest that the LCT statutory provisions must be “read together with” items 17 or 36 of Schedule 4 to the Customs Tariff as claimed by Mr Waller. Moreover, Mr Waller’s further submission was that as s 3 of the A New Tax System (Luxury Car Tax Imposition – Customs) Act 1999 (Cth) imposes tax that is payable under the LCT Act as a “duty of customs”, an exemption applies for LCT on the basis of an exemption for customs duty. This too was erroneous. The LCT Act prescribes the basis for liability to LCT and is a separate statute to the Customs Tariff. There is no provision in the Customs Tariff (or elsewhere) which provides any operative effect for items 17 or 36 in respect of any customs duty other than that imposed by the Customs Tariff.

6. For completeness, it is noted that the importation of the car by Mr Waller was not a non-taxable re-importation as defined in s 7-20 of the LCT Act. As set out above, s 7-10(3)(d) of the LCT Act provides an exemption from LCT where the importation of the car is a non-taxable re-importation. The requirements for a non-taxable re-importation for LCT purposes are different to the requirements of item 17 in Schedule 4 to the Customs Tariff. None of the alternative requirements for a non-taxable re-importation specified in s 7-20 of the LCT Act applied to Mr Waller’s importation of the car in August 2022. Section 7-20(1) is inapplicable since, amongst other reasons, Mr Waller as the importer was not “the manufacturer of the car” nor had he “previously acquired the car” through a “taxable supply of the luxury car”. Section 7-20(1A) is inapplicable since the ownership of the car had changed after the car was exported. Section 7-20(2) is inapplicable since Mr Waller as the importer had not “manufactured, acquired or imported the car before 1 July 2000”.

   CONCLUSION

7. The importation of the car was a taxable importation of a luxury car as provided by s 7-10(1) of the LCT Act as none of the exemptions in s 7-10(3) of the LCT Act applied. It follows that duty regarding LCT was properly payable. It was not paid on the car by Mr Waller “because of manifest error of fact or patent misconception of the law”.

   DECISION

8. The decision under review is affirmed. Consequently, Mr Waller is not entitled to a refund of the duty paid regarding the LCT.  

I certify that the preceding 44 (forty-four) paragraphs are a true copy of the reasons for the decision herein of Senior Member G Lazanas

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

Associate

Dated: 16 May 2024

Date(s) of hearing:	Hearing on the papers
Date final submissions received:	6 May 2024
Advocate for the Applicant:	Mr I Rodda, Rodda Coburn & Co
Solicitors for the Respondent:	Mr R Northcote, Department of Home Affairs