Tribunal sets aside amended assessment aimed at recovering GST refund paid to applicant

On Friday the Tribunal handed down its decision in Swanbat Pty Ltd and Commissioner of Taxation [2013] AATA 891 where the Tribunal found that the Commissioner could not issue an assessment to recover a GST refund paid to the taxpayer more than 4 years after the relevant tax period, even though the taxpayer’s entitlement to the refund was exhausted by the operation of s 105-55 of Schedule 1 to the TAA.

This is yet another decision of the Tribunal dealing with the interaction between the GST Act and the recovery provisions in Schedule 1 to the TAA. Interestingly, the decision appeared to result in a partial win to both parties although it is likely that the taxpayer will be ultimately required to pay back the refund under the mistaken payment provisions in s 8AAZN of the TAA. My analysis of the decision can be accessed here.

The Tribunal also handed down its decision in The Married Couple and Commissioner of Taxation [2013] AATA 888. In this case the applicants purchased a rural property, which was vacant land, having been used as a cattle station. The couple constructed a residential building on the property and also did some other works, including clearing of some of the land. They intended to make the building available for short-term holiday letting. They also intended to grow olive trees on the property for production of table olives and olive oil. At one stage, Mr and Mrs C also intended to farm goats.

In or about early October 2009, Mr and Mrs C executed a partnership agreement and became registered for GST purposes, initially with a date of effect of 29 September 2009. However, the partnership’s registration was subsequently backdated by the Commissioner of Taxation, at the request of the Married Couple’s accountant, to 1 January 2007. This was because Mr and Mrs C wanted to claim input tax credits (ITCs) for their acquisitions, including in relation to the construction of the residential building.

The Commissioner conducted an audit shortly after backdating the GST registration of the Married Couple as a partnership and concluded that the Married Couple was not a partnership and was not carrying on an enterprise within the meaning of the GST Act. Also, the input tax credits that had been claimed by the partnership in respect of the tax periods between 1 January 2007 and 30 June 2010 (Relevant Period) were incorrect because the Married Couple was not carrying on an enterprise. Even if the Married Couple was carrying on an enterprise during the Relevant Period, the Commissioner stated that the acquisitions were not made in the course of carrying on an enterprise or even if they were, they were excluded from being acquired for a creditable purpose because they related to making supplies that would be input taxed supplies of residential premises.

The Tribunal found that the activities of Mr and Mrs C were essentially preparatory in nature, while there was an intention to carry on a business in the future. Similarly, their evidence reflected an intention that they were to carry on business as partners, but the business activities had not yet commenced. Accordingly, no enterprise was being carried on and input tax credits could not be claimed. The Tribunal also found that the property constructed was not commercial residential premises.

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