GST decisions of the Federal Court and the Tribunal to see out 2019

As we come to the close of another year, the Federal Court and the Tribunal have handed down GST decisions. They are briefly discussed below.

In Melbourne Apartment Project Pty Ltd (as Trustee for Melbourne Apartment Project) v Commissioner of Taxation [2019] FCA 2118 the Federal Court found that the making of “supply of accommodation” in s 38-250(1)(b)(i) of the GST Act encompassed the supply of a freehold interest in an apartment. The proceeding was an appeal from a private ruling and the Court (at [1]) identified the question as whether the sale by a registered charity of an apartment to a person eligible to receive social housing on a non-commercial basis for consideration less than 75% of the GST inclusive market value of the property is exempt from the GST (as a GST-free supply).

Section 28.250(1) provides that a supply is GST-free if:

(a) the supplier is an endorsed charity…; and

(b) the supply is for consideration that:

(i) if the supply is a supply of accommodation – is less than 75% of the GST inclusive market value of the supply; or

(ii) if the supply is not of accommodation – is less than 50% of the GST inclusive market value of the supply.

The Commissioner contended that paragraph (b)(i) was not engaged because the expression “supply of accommodation” did not include the sale of a freehold interest in an apartment. This was because the word “accommodation” carried with it a temporal aspect that restricted the expression to a supply by way of lease or licence – it did not extend to a supply of a freehold interest. Therefore, paragraph (b)(ii) was the relevant paragraph and the sale would only be GST-free if the supply was for a consideration of less than 50% of the GST inclusive market value of the supply. The Applicant submitted that the expression “supply of accommodation” incorporated a spectrum of meaning, which includes the sale of an apartment.

The Court (at [68]) accepted the applicant’s submission that the ordinary and natural meaning of “accommodation” includes an apartment or any premises that are used by a person as their place of residence. The Court rejected the Commissioner’s submission that the ordinary and natural meaning of the word did not carry this meaning because of an inherent temporal limitation – the Court considered that in its ordinary sense, the word “accommodation” includes an apartment in which a person resides, whether their right of residency is conferred by licence, lease or ownership.

The Court found (at [78]) that there was nothing in the text of s 38-250 to support the Commissioner’s submission that the expression “supply of accommodation” was inapt to cover the supply of title to premises and instead contemplates only the supply of a right to occupy premises for the time being. The Court found (at [79]) that there was no contextual reasoning in the GST Act, read as a whole, that might suggest that this primary reading of the provision should not be applied.

In Jarvis-Lavery and Commissioner of Taxation [2019] AATA 5409 the Tribunal found that the applicant had not established that it was entitled to input tax credits for acquisitions from an associated entity and that the acquisitions were not of a private or domestic nature. The Tribunal observed (at [105]) that:

An applicant does not, by the mere production of a tax invoice issued by a supplier, prove an entitlement to an ITC for the acquisition of a supply. As already noted, there are other statutory requirements that must be satisfied including, relevantly here, that the acquisition was made in the course or furtherance of an enterprise and was not of a private or domestic nature.

The Tribunal observed that the applicant gave oral oral evidence that the acquisitions were for business and not private purposes but that evidence was uncorroborated by any contemporaneous records or by other witnesses. With respect to this statement, it is relevant to note the following observation of the Tribunal (at [107]):

All this is not to say that an applicant who produces a tax invoice and swears or affirms that the relevant supply was acquired for a creditable purpose may not by so doing prove their entitlement to an ITC without further corroborating evidence.

Accordingly, the Tribunal was not saying that a taxpayer can never discharge its onus of proof if it does not provide corroborating evidence. However, where, as here a taxpayer has a history of poor compliance with tax laws and has lodged returns and BASs in the past which he now says are inaccurate, the Tribunal considered that it was appropriate to approach his evidence with caution, In the particular circumstances of this case, where the applicant’s oral evidence was of a general nature, and without any business records relating to the acquisitions or more detailed explanation, the Tribunal was not persuaded that the acquisitions were creditable acquisitions.

I take this opportunity wish all my followers and readers the compliments of the season and I thankyou for your support.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s