Full Federal Court dismisses taxpayer’s appeal in GST refund case

Yesterday the Full Federal Court (Gilmour, Perram & Jagot JJ) dismissed the taxpayer’s appeal in MTAA Superannuation Fund (RG Casey) Building Property Pty Ltd v Commissioner of Taxation [2012] FCAFC 89.  The appeal was against the decision of the Tribunal (Downes P and SM O’Loughlin) which can be found at [2011] AATA 769.

The judgment discloses that following the decisions of the Full Federal Court in Commissioner of Taxation v DB Rreef Funds Management Ltd [2006] FCAFC 89 and Westley Nominees Pty Ltd v Coles Supermarkets Australia Pty Ltd [2006] FCAFC 115, MTAA claimed a refund of GST paid in respect of a lease between a partnership (constituted by MTAA and one other) and the Department of Foreign Affairs and Trade.

The central question in the case was whether the lease was “GST-free” pursuant to s 13 of the GST Transition Act.  The Court agreed with the Tribunal that s 13(1) of the Transition Act did not apply because, as the parties agreed to increase the rent by 10 percent on account of GST, the supplies made under the lease were not “satisfactorily identified” in the lease as it was prior to the date of royal assent.  Further, the Court found that it was open to the Tribunal to find that there was a “review opportunity” under the lease for the purposes of s 13(5) in circumstances where approximately 97 per cent of the whole consideration payable under the lease was reviewable.

A residual question agitated before the Tribunal was whether, if the lease was GST-free, the Commissioner was entitled to rely on the discretion in s 105-65 of Schedule 1 to the Taxation Administration Act.  The Court did not consider this question as no discretion had actually been exercised by the Commissioner.

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