Tribunal finds applicants not entitled to input tax credits as they were not carrying on an enterprise

In Bayconnection Property Developments Pty Ltd and Ors and Commissioner of Taxation [2013] AATA 40 the Tribunal affirmed the view of the Commissioner that the applicants were not entitled to input tax credits they had claimed.  This was because it was clear that none of the applicants were carrying on an enterprise, even taking into account the extended definition of “carrying on” that includes “doing anything in the course of the commencement or termination of the enterprise”. The Tribunal also upheld the imposition of penalties of 75% for intentional disregard of the taxation laws, plus an increase in penalties by 20%.

The input tax credit claims were made by a number of companies within a group and they related to the controller’s vision to establish an institution for vocational training. However, the applicant provided little, if any, evidence of the roles played by the applicants in the project which might suggest that they were carrying on an enterprise. The Tribunal found that the controller had merely formulated a structure as to where the applicants would “sit” within the structure if the project materialised – and that the applicants had not commenced any activities by the time they became registered for GST and had not done so during the period in which credits were claimed. The Tribunal was also concerned that the applicants had been generating refunds based on credit claims they knew to be unfounded and that the clear implication was that the payment of the credits was needed to assist the cash flow of the companies within the group.

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