Winkler and Commissioner of Taxation

[2008] AATA 401

ADMINISTRATIVE APPEALS TRIBUNAL          № 2007/1822

TAXATION       APPEALS        DIVISION

Re:           ALLAN WINKLER

Applicant

And:COMMISSIONER OF TAXATION

Respondent

CORRIGENDUM [2008] AATA 401

Tribunal:       The Hon Robert Nicholson, AO, Deputy President

Date:27 May 2008

Place:Melbourne

The Tribunal made a Decision under s 43 of the Administrative Appeals Tribunal Act1975 (the Act) on 16 May 2008.

The Tribunal has now been advised by the respondent of an error in his submissions which necessitates correction of portion of the Tribunal’s reasons based on the incorrect submission.

In accordance with s 43AA(1) of the Act, the Tribunal directs that the Registrar alter the text of the Reasons for Decision in the following respect:

In paragraph one delete the second sentence and substitute:

The application concerned creditable acquisitions for the purposes of the Goods and Services Tax and the legislative requirement to meet the attribution rules, including holding a tax invoice at the time that an input tax credit is claimed.

(sgd) Robert Nicholson
  Deputy President

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 401

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/1822

TAXATION          APPEALS       DIVISION		)
Re		ALLAN WINKLER

Applicant

And COMMISSIONER OF TAXATION  

Respondent

DECISION

Tribunal The Hon Robert Nicholson, AO, Deputy President

Date16 May 2008

PlaceMelbourne

Decision The Tribunal affirms the decision under review. 

(sgd) Robert Nicholson

Deputy President

TAXATION ‑ goods and services tax – input tax credits ‑ acquisition of property – whether property purchased by sole trader or partnership ‑ payment of a matrimonial settlement ‑ payments for sub‑contractors and materials for property development ‑ whether creditable acquisitions ‑ whether other acquisitions for creditable purpose ‑ whether attribution rules satisfied.

Taxation Administration Act 1953

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

REASONS FOR DECISION

16 May 2008 The Hon Robert Nicholson, AO, Deputy President       

1.      The applicant seeks review of an objection decision in respect of his objection against an assessment made on 13 May 2004 that related to issues arising in the quarter ended 31 March 2003.  The application is brought under Part IVC of the Taxation Administration Act 1953 (the TAA Act) seeking review of the decision of the respondent to disallow the applicant’s objection against a private ruling: s 14ZZK of the TAA Act. The applicant has the burden of proving that the decision under review should not have been made or should have been made differently: s 14ZZK(b)(iii) of the TAA Act.

2.      The relevant circumstances have largely been set out in the respondent’s written submissions from which, when they are not in dispute, they have been taken.

3.      The applicant has been registered for the Goods and Services Tax (GST) from 1 July 2000 and for all relevant tax periods since, and accounts for GST quarterly and on a cash basis.

4.      The applicant was selected by the Australia Taxation Office (ATO) for a GST field review.

5.      As a result of that review the following revisions were made:

(a)For the tax period ending 31 March 2003 the previously advised claim for input tax credits of $59,176 was disallowed.

(b)A penalty of $14,794 for making a false and misleading statement was imposed.

(c)The base penalty rate was assessed at 25 per cent.

6.The amounts that were disallowed are divided into four categories:

(a)Payment for the acquisition of a property at Station Street, Bayswater.

(b)Payments made to a former spouse as part of a matrimonial settlement.

(c)Payment made to sub-contractors and for materials in relation to the development of the property at Station Street.

(d)Payments made for other acquisitions reported in the Business Activity Statement (BAS).

7.      On 12 May 2004 the respondent issued an assessment of net amount in respect of the relevant tax period.  On 13 May 2004, the applicant lodged an objection with the respondent.  On 8 September 2004 the respondent informed the applicant that his objection had been allowed in part.  A further $76.00 in input tax credits was allowed and the penalty was remitted in full.

RELEVANT LEGISLATIVE FRAMEWORK

8.      Provisions relating to the entitlement to input tax credits in respect of GST, and the attribution of them, are set out in s 11-5 and s 29-10 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act). Section 11-5 states that 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.

9.Section 11-15 of the GST Act states:

(1)You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.

(2)However, you do not acquire the thing for a creditable purpose to the extent that:

(a)the acquisition relates to making supplies that would be *input taxed; or

(b)the acquisition is of a private or domestic nature.

10.Section 11-20 of the GST Act states:

You are entitled to the input tax credit for any creditable acquisition that you make.

11. Subsection 29-10(2) of the GST Act states that if you account on a cash basis, then:

(a)if, in a tax period, you provide all of the consideration for a creditable acquisition—the input tax credit for the acquisition is attributable to that tax period; or

(b)if, in a tax period, you provide part of the consideration—the input tax credit for the acquisition is attributable to that tax period, but only to the extent that you provided the consideration in that tax period; or

(c)if, in a tax period, none of the consideration is provided—none of the input tax credit for the acquisition is attributable to that tax period.

12.Subsection 29-10(3) of the GST Act states:

If you do not hold a tax invoice for a creditable acquisition when you give to the Commissioner a GST return for the tax period to which the input tax credit (or any part of the input tax credit) on the acquisition would otherwise be attributable:

(a)the input tax credit (including any part of the input tax credit) is not attributable to that tax period; and

(b)the input tax credit (or part) is attributable to the first tax period for which you give to the Commissioner a GST return at a time when you hold that tax invoice.

However, this subsection does not apply in circumstances of a kind determined in writing by the Commissioner to be circumstances in which the requirement for a tax invoice does not apply.

PAYMENT FOR THE ACQUISITION OF A PROPERTY AT STATION STREET BAYSWATER

13.     In respect of this, it is the respondent’s submission that the property at Station Street was not purchased by the applicant as a sole trader but was purchased by a partnership which included the applicant (being a different entity for GST purposes). The submission is that only the entity that makes the creditable acquisition is entitled to any input tax credit.

14.     At the hearing at the Tribunal the applicant accepted that it was the case that his wife was a partner with him and that the partnership purchased the property.  This concession by him received support from the exhibiting by the respondent of a copy of a Transfer of Land under the Transfer of Land Act 1958, accepted as relating to the Station Street, Bayswater property, where the transferors were shown as the applicant and his wife but the transferee was the applicant and the date of the transfer was 7 May 2003, after the date of the quarter in issue.

15. Following the hearing and pursuant to leave to do so, the respondent filed with the Tribunal and served the applicant with a copy of a transfer of the Station Street property to Mr and Mrs Winkler. It was dated 30 June 2000. It records a ‘total sale price’ of $245,000 but makes no reference to payment of any GST. The date of the contract recorded as giving rise to the transfer was 14 April 2000. The GST Act came into operation on 1 July 2000, so that, in the absence of anything to the contrary from the applicant, it is not apparent that GST would in fact have been paid on this transfer of the Station Street property.

16.     The respondent accepted that there was a possibility that the partnership of the applicant and his wife could lodge a claim in respect of the GST paid on the original purchase. 

17.     The respondent also submitted that:

Additionally, no documentary evidence (including a contract of sale or tax invoice) has been provided either during the course of the review or to the date of this submission. Therefore, it is unclear if the supply included any GST (e.g. whether the supply was subject to GST as it may have been made ‘pre GST’ or whether the supplier was registered for GST) or whether there were other factors such as the margin scheme applied (Division 75 of the GST Act) which means there is no entitlement to an input tax credit.

18.     The applicant referred to the tender by him of documents relating to the loan made in respect of the acquisition of the property and other documents arising from the holding of the property in relation to matters such as rates and mortgages.

19.     After further examination of these documents at the hearing, the applicant stated that he had previously expressed the view that what the respondent said on this issue could be correct and that he cannot produce actual proof of payment of the GST, although it is his view that it was paid.  In his supplementary written submissions concerning the search of the transfer of the Station Street property to he and his wife, the applicant accepted the possibility that his solicitor at the time of the transfer would not have paid GST if it was not applicable.  The applicant stated he was confused and just did not know whether he had paid GST on this transfer or not.  He also accepted that the transfer may have been executed on the day before the commencement of GST.

20.     In my view, in those circumstances the applicant has not discharged the onus upon him of establishing that the decision under review on this issue should not have been made or should have been made differently.

PAYMENTS MADE TO A FORMER SPOUSE AS PART OF A MATRIMONIAL SETTLEMENT

21.     In respect of this disputed input tax credit, the respondent submits that the payment to his former spouse (here in issue) does not relate to a creditable acquisition made by the applicant for GST purposes as there is no taxable supply made and hence no GST included in the price.

22. In particular, the respondent’s contention is that paragraph 11-5(b) of the GST Act is not satisfied as there has been no supply for consideration as required by paragraph 9-5(a) of the GST Act. Furthermore, if there has been any supply, it would not have been in the course or furtherance of an enterprise conducted by the applicant, as required by paragraph 9-5(b) of the GST Act.

23.     Alternatively, if the payment was made for the property and not as part of the matrimonial settlement, there has been no documentary evidence to show that the supply was a taxable supply or that the supplier was registered for GST and that the applicant held a tax invoice at the relevant time.

24. In addition, the applicant made the payment in dispute in May 2003 and so, if in the event there has been a creditable acquisition, the amount is not attributable to the March 2003 tax period as per s 29-10(2) of the GST Act.

25.     In response, the applicant relied upon a letter dated 8 May 2003 from a conveyancing firm to him, stating that the amount of $81,297.23 had been paid to his spouse following settlement and the sum of $4,243.73 had been paid to her legal advisers.

26. However, the applicant accepted that even if the payments on which he relied did relate to GST they were made outside the March 2003 quarter, so that they were not attributable to that quarter: s 29-10(2) of the GST Act.

27.     Again, in these circumstances I consider that the applicant has been unable to discharge the onus upon him of establishing that this aspect of the decision under review should not have been made or should have been made differently.

PAYMENTS MADE TO SUB‑CONTRACTORS AND FOR MATERIALS IN RELATION TO THE DEVELOPMENT OF THE PROPERTY AT STATION STREET

28.     The respondent first contended that there was no satisfactory evidence to show that there had been a creditable acquisition by the applicant in this regard and further that the invoices, of themselves, were not evidence that there had been a supply or acquisition.  However, in the course of further submissions, the respondent confined those two points by saying they arose at a time before the provision by the applicant of invoices.  These invoices were copies of originals which the applicant claimed to have made out and passed to an officer of the respondent, on the occasion of a second interview with him on 3 October 2003.

29.     In relation to these invoices the respondent further submits that:

If the services provided by the sub-contractors are found to be creditable acquisitions by the Applicant then pursuant to subsection 29-10(2) of the GST Act, no satisfactory evidence has been provided to show that the consideration was provided during the relevant tax period.

Alternatively, if the services provided by the sub-contractors to the Applicant are found to be creditable acquisitions by the Applicant then pursuant to subsection 29-10(3) of the GST Act they remain unclaimable in the January to March 2003 quarter because at the time of lodging the BAS, the Applicant did not hold the relevant tax invoice.

The Respondent submits that as these tax invoices came into existence outside of the March quarter and after the relevant BAS was lodged on 27 May 2003 and to the extent they are creditable acquisitions, then they are properly ascribed to the relevant tax period pursuant to subsection 29-10(3) or 29-10(4) of the GST Act.

To date, the Applicant has not lodged BAS for these periods.

Additionally, these ‘supplies’ are not covered by any determination of the kind set out in section 29-10(3) providing an exemption for the requirement to hold a tax invoice.

30.     The best evidence which the applicant relies upon to establish the delivery of the invoices is the supply by him to the investigating officer of the respondent of the originals of the invoices on 3 October 2003.  That, however, does not establish that he was in fact in possession of the originals in the March quarter.

31.     Additionally, there is evidence of a notation by the applicant on a copy of the decision under review, in which he asserted the truth of a paragraph in which it was stated that he did not hold a valid tax invoice for the claims he had when he lodged the March 2003 BAS.  The applicant asks that this be construed as affirming the truth of other portions of the paragraph. However, it is also the case that on a date near 15 April 2004 he was advised that he had failed to produce necessary documents to enable testing of the integrity of his acquisition claim.

32.     The applicant did not support his view of this issue in the decision under review by calling or presenting any evidence from the sub-contractors (his son and daughter).

33.     In my opinion, it is again the case that the applicant has not discharged the onus of proof on him to show that this aspect of the decision under review should not have been made or should have been made differently.

PAYMENTS MADE FOR OTHER ACQUISITIONS

34. The respondent has allowed input tax credits to the extent of $76 for other payments (the invoices for which are set out in documents before the Tribunal) where he has been satisfied there has been a creditable acquisition and the attribution rules, including holding a tax invoice when lodging the BAS, have been met. The other payments are for acquisitions that are not for a creditable purpose as, by their very nature, they were not acquired in carrying on the enterprise and so s 11-15(1) and therefore paragraph 11-5(1)(a) of the GST Act is not satisfied.

35.     The payments in relation to which input tax credits were allowed were ones with respect to which invoices had been made available by the applicant to the respondent.  The applicant told the Tribunal that he had no further invoices which he could produce.  Nevertheless, he asserted that some or all of the remaining payments should be accepted although he did not produce or lead any supporting evidence.

36.     The applicant has here also failed to discharge the burden of proving that the decision under review, in this respect, should not have been made or should have been made differently.

CONCLUSION

37.     It is apparent that the applicant is a person who has found the intricacies of the law relating to the GST confusing to him.  His initial approaches to the respondent for advice as to how he should proceed resulted in him being subjected to a field review; and perhaps added to difficulties which he was experiencing at the time due to a matrimonial break-up.  At the conclusion of the hearing he read to the Tribunal a list of matters on which he still sought advice and guidance from the respondent, some of those matters included assertions of fact which may not necessarily have been sustainable.

38.     The hearing made apparent that at least in two cases, namely, the payments for the acquisition of the Station Street property and the payments in relation to sub-contractors, it may be open to the applicant to file a BAS for the relevant period. However, the applicant has not filed any further BAS.

39.     For these reasons, the Tribunal must affirm the decision under review.

I certify that the thirty‑nine [39] preceding paragraphs are a true copy of the reasons for the decision of

The Hon Robert Nicholson, AO, Deputy President

(sgd)       Olympia Sarrinikolaou

Clerk

Date of hearing:  10 April 2008
Date of decision:  16 May 2008

Advocate for applicant:                Self‑represented

Advocate for respondent:            Mr S. Sexton, ATO Legal Services Branch