The AAT has affirmed an administrative penalty imposed on a property development company for failing to take reasonable care by not including the proceeds from the sale of an apartment in the relevant BAS.
- In July 2010, the taxpayer entered into an “off the plan” contract to sell an apartment for about $3.095m.
- In early December 2011, the purchaser threatened to rescind the contract, but on 28 December 2011 she paid the balance of the purchase price (about $3.085m).
- As part of the arrangement, the taxpayer and the purchaser entered into a contract for the sale of a further car parking spot.
- The taxpayer’s BAS for December 2011 was lodged on 23 December before the office closed for Christmas (and thus did not include the sale proceeds of $3.085m).
- The BAS was prepared and lodged by its tax agent, using information provided by the taxpayer’s bookkeeper.
- Although the taxpayer accounted for GST on a cash basis, its managing director believed that settlement of the contract for the sale of the apartment would not occur until settlement of the contract for the sale of the car parking spot and, therefore, the company would not need to account for GST on the $3.085m until then.
- He advised the bookkeeper accordingly. She recorded the $3.085m as sales revenue but did not inform the tax agent.
Following an audit of the taxpayer’s BAS for [in?] January 2012, the Tax Office became aware at the end of March 2012 that the sale proceeds from the apartment had not been reported in the December 2011 BAS. As a result, the Tax Office assessed the taxpayer for additional GST and imposed an administrative penalty. The penalty was originally calculated on the basis that the shortfall resulted from an intentional disregard of the law. However, by the time of the AAT hearing, the Tax Office accepted that the penalty should be calculated on the basis that the taxpayer or its agent had failed to take reasonable care.
The AAT affirmed the administrative penalty, stating that the taxpayer should have sought legal or accounting advice about whether the $3.085m should have been accounted for in the month it was received. It should also have informed its tax agent that the money had been received so that he could consider whether an amended BAS should be lodged or other steps be taken so as to fulfill the taxpayer’s obligations, the AAT said. A submission that the penalty should be reduced because the taxpayer had disclosed the shortfall voluntarily was dismissed as information about the relevant transaction was only provided after the Tax Office requested it. The AAT also decided there were no grounds for remitting the penalty.
(AAT Case [2013] AATA 922, Re Mathoura Property Pty Ltd as Trustee for the Mathoura Property Trust and FCT, AAT, Alpins DP, Ref: 2012/3606, 20 December 2013.)
[LTN 6, 10/1/14]