The AAT has affirmed the Commissioner’s decision to deny a taxpayer wine producer rebates under the WET regime for the March 2010 and June 2010 quarters and impose a 25% shortfall penalty. It did so on the basis that the taxpayer was an associate producer of a related third party.
The taxpayer was a producer of rebatable wines for the purposes of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) and its sole director and shareholder was a Mrs Buller. During the March 2010 and June 2010 quarters the taxpayer purchased grapes from independent third parties and paid a company (R L Buller), which was owned and operated by Mrs Buller’s husband*. It then sold all the wine in one transaction to R L Buller and claimed the producer rebate on the wine. The Commissioner denied the rebate claims for the relevant periods and imposed a shortfall penalty. He broadly argued that the taxpayer was an associate producer and was not entitled to claim the producer rebate. The taxpayer broadly argued that it was not an associate producer as the 2 businesses were separately owned and separate ownership presumes independence.
The AAT held that the taxpayer was an associated producer as it lacked true independence. Among other things, it pointed out that the taxpayer was totally reliant on the work of R L Buller and its employees and did not have funds to pay for the purchase of grapes.
In relation to penalties, it held that the taxpayer was liable to the 25% shortfall penalty as it lodged false or misleading BASs containing claims for producer rebates and hence did not take reasonable care.
In addition, it held that the taxpayer had not identified any basis for a full or partial remission of the administrative penalty imposed. In conclusion, the AAT affirmed the Commissioner’s decision to deny the taxpayer producer rebates for the relevant period and the imposition of the 25% shortfall penalty.
(AAT Case [2013] AATA 617, Re S J Buller Pty Ltd and FCT, AAT, Ref No 2012/1570, O’Loughlin SM, 30 August 2013.)
[*FJM Note: RL Buller was owned by and controlled by Mrs Buller’s husband’s mother, with whom she had a huge falling out. Her husband did run the vineyard the taxpayer used to make her wine, and her husband’s brother ran RL Buller’s other vineyard.]
[LTN 169, 2/9/13]