The AAT has affirmed a decision of the Commissioner to refuse a taxpayer’s claim for input tax credits (ITCs) claimed for the relevant period, but reduced the penalty imposed on the shortfall amount.
The taxpayer conducted a product development and commercialisation business. It contended that, pursuant to 2 agreements, it purchased intellectual property and debtors from related parties, and was entitled to ITCs relating to those purchases.
The Commissioner refused the ITCs and levied an administrative penalty at the rate of 75% of the shortfall amount for “intentional disregard” of the law.
The purchase prices payable under the agreements were $881,288 (for debtors and IP) and id=”mce_marker”,789,700 (for various IP and related items), respectively. The taxpayer contended that payment was made under the agreements when it assumed the liabilities of the vendors.
The AAT held the evidence did not disclose that the taxpayer paid the purchase price in full by way of debt assumption or by cash under either agreement. As a result, it held the evidence did not establish that property had been passed from the vendors to the taxpayer in relation to the period, and further, it held there could be no “supplies” for which there would be ITCs available.
However, in relation to penalties, the Tribunal said the taxpayer’s submissions “were genuinely made and demonstrate the mistaken, as opposed to reckless or worse, foundation upon which [it] proceeded”. Accordingly, it held that penalty for “failure to take reasonable care” was appropriate in the circumstances.
(AAT Case [2013] AATA 624, AAT, Ref No: 2012/2949, O’Loughlin SM, 30 August 2013.)
[LTN 170, 2/9/13]