On 11.3.222, the AAT held that ‘input tax credits’ claimed in relation to alleged purchases of scrap gold, totalling just over $2.34m, were denied as the “purchaser” failed to prove that the purchases occurred.
The facts were these.
- Mr K was a jeweller who operated his business through a company (Kais Jewellery), which claimed input tax credits in relation to purchases of scrap gold from Coin D’Or (for just over $1.03m) and Too Nite (just over $1.31m).
- The ATO, however, denied the claim as it contended that the acquisitions never occurred. The ATO also assessed Mr K on the basis that the cash withdrawn from Kais Jewellery’s bank account to allegedly pay for the scrap gold was his ordinary income.
- Mr K was the sole signatory to the account.
The AAT concluded that there was insufficient independent evidence to support Kais Jewellery’s assertions that it had purchased the scrap gold and agreed with the ATO that the input tax credits should be denied. Relevant factors included:
- there were no financial accounts or other records supporting Kais Jewellery’s case;
- Mr K did not offer a convincing rationale for conducting such high value transactions in cash;
- the AAT was not prepared to give weight to a witness statement from the sole director and shareholder of Too Nite (who died before the hearing);
- Mr K’s evidence that Kais Jewellery had purchased scrap gold from Coin D’Or was not corroborated by the sole director and shareholder of that company; and
- Coin D’Or and Too Nite had not disclosed the acquisitions of scrap gold in GST returns.
In the absence of a satisfactory explanation for the cash withdrawals from Kais Jewellery’s bank account, the AAT also decided that Mr K had not discharged the burden of proving the withdrawals were not his ordinary income.
(Kais Jewellery (Syd) Pty Ltd v CofT [2022] AATA 425, AAT, Olding SM, 11 March 2022.) [LTN 48, 14/3/22]
[Tax Month – March 2022 – Previous Month, 14.3.22]