Seasons Greetings and farewell to another busy year in GST – High Court refers Unit Trend special leave application to enlarged bench

This is my last post for 2012.  I will be taking a break from chambers (and posting) and I will be back in the new year.  I would like to wish everyone a great holiday season.

The High Court has heard the Commissioner’s application for special leave to appeal from the decision of the Full Federal Court in Commissioner of Taxation v Unit Trend Services Pt Ltd [2012] FCAFC 112 – the transcript of the application has just appeared on austlii can be found here.

The application dealt with the proper construction of the anti avoidance provisions in Division 165 of the GST Act and particularly the “choice provisions” providing that the provisions do not apply if the GST benefit arises because of a choice, agreement, election etc arising under the GST Act.  The Commissioner summarised his contention as follows:

It is our submission that the division of opinion within the Full Court of the Federal Court as to the proper interpretation of the section justifies the grant of special leave.  The section applies easily enough if the taxpayer makes a single choice, or a single agreement under an express provision of the statute and confers a benefit.  The problem with the application of the section arises where the taxpayer engages in a scheme involving a series of steps or actions, which are integrated and which together combine to produce the GST benefit.

The Commissioner argued that the dissenting view of Dowsett J in the Full Federal Court was correct, namely that the test is to be applied to a discrete choice – as opposed to the majority, which found that the test could be applied to more than one choice.

The Commissioner also contended that where the scheme involves things which are not choices or agreements under the GST Act, being commercial choices or commercial actions which are necessary integers to produce the GST benefit, the question arises whether you can say that the GST benefit is “attributed” to the statutory choice.  In this context, the question was the proper meaning of the word “attributable” – being “how tight does the nexus need to be between the choice and the GST benefit”?

The High Court (French CJ and Gageler J) referred the application to an enlarged bench for further hearing – that will likely be a bench of five or seven judges.  This is an unusual course of action, but the Court took a similar approach in hearing the special leave application by the taxpayer  against the decision of the Full Federal Court in Commissioner of Taxation American Express Wholesale Currency Services [2010] FCAFC 122.

My analysis of the Full Federal Court decision in Unit Trend can be found here.

GST in 2012

It has been another busy year in GST.  We have seen a decision of the High Court on GST (Qantas), three decisions of the Full Federal Court (MTAA, Unit Trend and Cyonara Snowfox) one of which the Commissioner is applying to take to the High Court (Unit Trend) and number of Federal Court and Tribunal decisions.

In legislative issues, self assessment was introduced in July 2013 and s 8AAZLG of the TAA was introduced in the wake of the Multiflex case to allow the Commissioner to retain refunds pending verification.  Also, Treasury looks to have given up on section 105-65 of Schedule 1 to the TAA and is looking to replace the existing discretion it with Division 36 of the GST Act.

Looking overseas, we have had decisions of the highest court in Canada (City of Calgary) and New Zealand (Stiassny) on GST issues

Looking at 2013, we are looking at two Full Federal Court appeals in the February/March sittings (Yaccoub and Central Equity) and the Special Leave application in Unit Trend before an enlarged bench.  We are also awaiting the appeals in A P Group (son of holdback). More details on these appeals is set out below.

Appeals Update

The Federal Court portal provides the following information on the GST matters heading towards the Full Federal Court.

The taxpayer’s appeal in Yacoub v Commissioner of Taxation  has been set down for hearing by the Full Federal Court on 26 February 2013 before the Full Federal Court in New South Wales.

The taxpayer’s appeal in Central Equity Limited v Commissioner of Taxation has been set down for hearing on 26 February 2013 before the Full Federal Court in Victoria.

The appeal by the taxpayer and the cross-appeal by the Commissioner in A P Group and Commissioner of Taxation is awaiting a decision by the Chief Justice of the Federal Court as to whether the appeal is to be heard by a single judge or a Full  Court of the Federal Court.  Both parties have been asked to provide reasons why the matter should be heard by a Full Court.  As the Tribunal was constituted by a Presidential Member, in appropriate matters the Chief Justice can order that the matter be heard by a Full Court (where the Tribunal is constituted by a judicial member, the appeal is to the Full Court as of right – Qantas was a recent example).

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