The Federal Court has dismissed a taxpayer’s application to set aside a statutory demand for payment of a GST debt and associated penalties of some $6.9m in relation to a purported capital purchase which occurred on 31 December 2011.
The taxpayer is a small law firm which in 2011 executed an agreement with a third party to purchase the exclusive right to represent a group of clients for 10 years for a fee of $45m plus GST. It then claimed the GST related to the purchase in its BAS for the period 1 October to 31 December 2011, which resulted in a net refund of some $4.5m to the taxpayer. The Court said the Commissioner was concerned about the transaction and the claim for input tax credits and froze the taxpayer’s bank accounts. Shortly after, the Commissioner audited the taxpayer. As a result, in May 2012, the Commissioner issued an assessment for $4.5m for GST, although the taxpayer disputed the period to which the assessment related. The Commissioner then issued a penalty assessment notice for $2.5m. On 4 July 2012, the Commissioner issued a statutory demand seeking payment by the taxpayer of $6.9m being the RBA deficit debt as at that date. In September 2012, the Commissioner sent a letter to the taxpayer enclosing another notice of assessment. The letter sought to address the fact that the wrong tax period was specified in the first Notice of Assessment.
The taxpayer contended there was a genuine dispute under s 459H of the Corporations Act 2001 in relation to the debt asserted by the Commissioner. Broadly, the taxpayer argued that the demand should be set aside due to an error in the first notice of assessment, and due to the conduct of the Commissioner.
The Court held that the error in the first notice of assessment did not affect the assessment itself, and in any event, the Commissioner corrected the error in the first notice of assessment by way of the second notice of assessment.
In addition, after considering various submissions by the taxpayer, the Court said it did not consider “the Commissioner’s actions, considered individually or collectively, are unconscionable, oppressive, or abusive or productive of substantial injustice”. Therefore, the Court refused to exercise its discretion to set aside the statutory demand for the debt.
[FJM Note: The Commissioner has the benefit of ‘conclusivity’ provisions for GST liabilities, and thus, the Statutory Demand provisions cannot be set aside under the High Court’s decision in Broadbeach Properties case (which was about the income tax equivalent provisions) – save perhaps under the type of grounds underlined in the final paragraph about the Commissioner’s conduct amounting to an abuse of his powers.]
(HC Legal Pty Ltd v DCT [2013] FCA 45, Federal Court, Murphy J, 5 February 2013.)
[LTN 25, 7/2/13]