Thompson v Commissioner of Inland Revenue

Thompson v Commissioner of Inland Revenue involves the taxpayer, Thompson, who sought to de-register from the goods and services tax (GST) under section 52 of the GST Act. The Commissioner of Inland Revenue contested this application, raising issues about the calculation of Thompson's future taxable supplies and the treatment of business assets retained at the time of de-registration. The matter was heard by the Federal Court of Australia, which was required to determine the correct interpretation and application of the relevant provisions of the GST Act concerning de-registration and the treatment of business assets.

The primary legal issue was the interpretation of section 52 of the GST Act, particularly in relation to the assessment of future taxable supplies for the purpose of determining eligibility for de-registration. The Court had to consider whether the provision required a forward-looking assessment of all likely taxable supplies, including sales of capital assets used in the business, in the 12 months following the proposed de-registration. Additionally, the Court needed to determine the applicability of section 6(2) and the treatment of business assets retained at the time of de-registration under sections 5(3) and 10(8) of the Act.

The Court held that section 52(1) and 52(3) required an assessment of all likely taxable supplies for the purpose of determining eligibility for de-registration. This included sales of capital assets used in the business, even if such sales occurred as a result of the cessation or winding down of the business operations. The Court rejected the argument that section 51(1)(c) excluded these sales from the calculation, finding that there was no compelling reason to exclude such supplies from the assessment. Regarding the treatment of business assets retained at the time of de-registration, the Court confirmed that these assets were subject to output tax under section 5(3), with the tax calculated on the lesser of the cost price or open market value under section 10(8).

The Court's decision clarified the interpretation of section 52 of the GST Act, ensuring that all likely taxable supplies, including sales of business assets, must be considered in the assessment for de-registration. This ruling has implications for taxpayers seeking to de-register from GST, as it mandates a comprehensive evaluation of future taxable supplies. The Court's decision also confirmed the application of sections 5(3) and 10(8) in relation to business assets retained at de-registration.