Two taxpayers have been unsuccessful before the AAT in a matter concerning input tax credits (ITCs) claims in respect of purported acquisitions made in 2 property developments.
- The first taxpayer (a company) and the second taxpayer (a partnership of 2 individuals) claimed to have made acquisitions in relation to property development.
- The first taxpayer also claimed to have made acquisitions in relation to another property development.
- Both taxpayers were registered for GST.
- However, the Commissioner issued to both taxpayers amended assessments denying ITCs claimed on those purported acquisitions – in the first taxpayer’s case, for the tax periods April 2010 to June 2011, and in the second taxpayer’s case, for the tax periods April 2009 to December 2010.
The Commissioner’s position was that neither taxpayer carried on an enterprise at all, so that neither of them could be entitled to any ITCs. The Commissioner also imposed administrative penalty at the rate of 50% on the shortfall amount.
The Tribunal dealt mainly with the arrangements of the first property development as it was of the view the arrangements did not differ materially from the second property development. The Tribunal noted there had been some work done on the property; however, the parties disputed what that work consisted of, how much of it was done, who it was done for, and whether it had been paid for.
The Tribunal heard from the taxpayers that they were “principal contractors to the project”. The project was presumed by the Tribunal to be the development of the property for eventual subdivision. However, the Tribunal noted that exactly what the “principal contractors” did in respect of the property remained the subject of “quite profound mystery”. The Tribunal said the same observation applied in respect of what the “principal contractors” were supposed to have acquired from entities, described by the taxpayers as the “subcontractors”, who were said to have undertaken some of development activities.
The Tribunal said each taxpayer’s claim for ITCs failed “at the most basic level”. The Tribunal found, on the balance of probabilities, that there were “supplies” by the subcontractors; however, it was of the view that any supplies were not made by the subcontractors to the taxpayers.
The Tribunal also affirmed the penalty at 50% of the shortfall amount.
(AAT Case [2014] AATA 336, Re Dotrac Pty Ltd & Ors and FCT, AAT, Ref No: 2013/1392, Frost DP, 29 May 2014.)
[LTN 104, 2/6/14]