The AAT has held that a taxpayer was liable to GST in relation to the execution of a trust deed as it was a taxable supply under s 9-5 of the GST Act.

The taxpayer was a trustee of a unit trust constituting a managed investment scheme and involved in an infrastructure project and in 2009 it entered into a deed with other entities in an unincorporated joint venture in relation to design and construction of the project.

The deed provided for, amongst other things, the delivery of irrevocable proxies by which the taxpayer would appoint entities involved in the project to vote against resolutions to be considered at a meeting of unit holders in the trusts.  The primary issue in the case was whether the supply made by the taxpayer upon execution of that deed was a “financial supply” for GST purposes.

Following the execution of the deed, the taxpayer was paid $4.5m by the other entities but received no tax invoice in relation to the payment. Following an audit of the transaction, the Commissioner assessed the taxpayer as being liable for an additional $409,091 in GST and imposed a penalty of 50%, amounting to $204,545.50. Broadly, the taxpayer contended that the supply was a financial supply and therefore was input taxed.

The Tribunal found that the “interest” provided by the taxpayer upon execution of the deed was not a financial supply for the purposes of reg 40-5.09(3) of the GST Regulations. It said reg 4-5.09 was not concerned with an interest in or under matters that are the property of the acquirer immediately before the supply. Since it was not a financial supply, the AAT said it followed that the interest provided by the taxpayer was a taxable supply under s 9-5 and subject to GST. In relation to penalties, the AAT found that the taxpayer had been reckless, it had not proven the penalty assessment had been excessive, and that there was no basis for remission.

(AAT Case [2013] AATA 847, Re Australian Style Investments Pty Ltd as Trustee for the Australian Style Investments Unit Trust and FCT, AAT, Ref No 2011/4356, Alpins DP, 29 November 2013.)

[LTN 234, 3/12/13]

GST Regulation 4-05.9 – What supplies are financial supplies

(1)             The provision, acquisition or disposal of an interest mentioned in subregulation (3) or (4) is a financial supply if: [broadly all the usual elements of a taxable supply are present]

(2)             …

(3)             For subregulation (1), the interest is an interest in or under the matter mentioned in an item in the following table:

An interest in or under:

Item 9:       Securities [eg. the units in the trust]

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