Tribunal finds taxpayer not entitled to input tax credits for the purchase of vehicles and equipment from a related entity

In Byron Pty Ltd and Commissioner of Taxation [2019] AATA 2042 the Tribunal found that the applicant was not entitled to claim input tax credits with respect to the purchase of vehicles and equipment, most of which was said to have been acquired from a related entity. While the Tribunal was not satisfied that the applicant made the creditable acquisitions, in the course of its reasons the Tribunal made some observations about the breadth of  the concepts of “taxable supply” and “creditable acquisition” in the context of the GST Act. In particular, the Tribunal saw merit in the applicant’s contention that the vendor was required to own, control or possess the assets before it could make a taxable supply.

The Tribunal found that it was not persuaded that the applicant was entitled to claim the credits, essentially because of the lack of evidence put before the Tribunal. In this context, the Tribunal observed as follows (at [4]):

The factual details of the arrangements concerning the taxpayer, such as they were before the Tribunal, were sketchy and unreliable and, significantly, there was no written sale agreement nor evidence of the terms of any oral agreement about the supply and acquisition of the vehicles and equipment in question. The individuals who could have probably shed light on the agreement (if any) and what any payments made by the Company were for, did not give evidence in these proceedings. In all the circumstances, I am not persuaded that the Company is entitled to claim the ITCs as it failed to discharge the burden of proving that the assessments issued to it were excessive…

While the applicant was not able to adduce sufficient evidence to satisfy the Tribunal that it made the creditable acquisitions claimed, in the course of its reasons, the Tribunal made some observations about the broad scope of the concepts of “taxable supply” and “creditable acquisition” in the context of the GST Act.

The Commissioner contended that as the vendor was not the lawful owner of the of the vehicles and equipment, it was not able to on-sell the vehicles and equipment and thereby make a taxable supply to the Company. Consequently, the Company did not make creditable acquisitions. Additionally, the Commissioner contended that the Company did not have the capacity to pay for the vehicles and equipment and did not provide consideration nor was it liable to provide consideration.

The Tribunal referred to the following submission of the applicant (at [76]):

The Company’s counsel submitted that the requirements to establish a “taxable supply” set out in s 9-5 of the GST Act do not specify that the supplier must be the owner of the thing supplied, but that the provision relevantly focuses on whether there is a genuine agreement between the supplier and the recipient for the supply of anything for consideration. It was also submitted there is nothing in the definition of “consideration” in s 9-15 that entails ownership but that it is equally broadly defined, like the statutory definitions of “supply” and “acquisition”.

The Tribunal found there to be “considerable merit” as to the legal arguments of counsel for the Company as to the meaning of “supply”, “acquisition” and “consideration”. The Tribunal observed that:

77. Undoubtedly, the definition of “supply” in s 9-10 of the GST Act is extremely broad. Section 9-10(1) expressly states “[a] supply is any form of supply whatsoever” and s 9-10(2) then proceeds with the expression, “[w]ithout limiting subsection (1), supply includes any of these…” to list things which may not even be the subject of ownership or exclusive ownership. It specifically references in paragraph (e) of s 9-10(2) “a creation, grant, transfer, assignment or surrender of any right” and in paragraph (g) of s 9-10(2) “an entry into, or release from, an obligation: (i) to do anything: …” Section 9-10(3) further expands the boundaries of the definition of “supply” by expressly stating, “[i]t does not matter whether it is lawful to do, to refrain from doing or to tolerate the act or situation constituting the supply”.

79. Correspondingly, the meaning of “acquisition” in s 11-10, which mirrors the definition of supply, is equally very broad and it also readily covers things where legal ownership is not required. Rather, applying the High Court’s interpretation, the acquisition could be the acquiring of anything of value received by the recipient, by any means. On the taxpayer’s submission, it was therefore, immaterial whether as a matter of fact the Byron Trust legally owned the assets that it purported to sell to the Company and all that was required was for the Byron Trust to genuinely agree to furnish the assets to the Company so that it had physical possession and or control over the assets.

The Tribunal also found that there was merit in the applicant’s submission that it had provided “consideration” for the supplies by making payment to the third party financiers – being payments “in connection with” the supply. The Tribunal observed that “consideration” in the context of the GST Act takes on a wider meaning than contractual consideration.

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