Three GST decisions handed down in recent days

Over the last few days three decisions relating to GST have been handed down. One by the Full Federal Court on the GST treatment of gambling supplies (allowing the Commissioner’s appeal) and two by the Tribunal, one on development leases and whether excess GST has been “passed on” (partially in favour of the taxpayer and partially in favour of the Commissioner) and the other on whether the taxpayer was required to be registered for GST (in favour of the Commissioner).

In Commissioner of Taxation v Burswood Nominees Limited as Trustee for the Burswood Property Trust [2021] FCAFC 151 the question was how the special rules in Division 126 of the GST Act for “gambling supplies” applied to amounts paid between junket tour operators and the casino. Section 126-10 provides for the calculation of a “global GST amount” for gambling supplies, being calculated by taking the “total amount wagered” and subtracting the “total monetary prizes”. The resulting amount is then multiplied by 1/11. The effect of the provision is that GST on gambling supplies is to be applied to the margin of the person providing the gambling supplies.

The expression “total amount wagered” is defined as meaning the sum of the “consideration for all of [the taxpayer’s] gambling supplies” that are attributable to the relevant tax period. The word “consideration” is defined by reference to s 9-15 of the GST Act – being “in connection with” the supply. The expression “total monetary prizes” is defined as meaning the sum of (relevantly) “the monetary prizes [the taxpayer] is liable to pay, during the tax period, on the outcome of gambling events…”.

The primary judge ([2020] FCA 1295) agreed with the taxpayer that the special rules in Division 126 of the GST Act applied to the total amount payable between the parties. On appeal, the Full Court agreed with the Commissioner’s contention that the special rules did not apply to commissions and rebates, those being dealt with under the ordinary GST rules. The Full Court concluded that commissions and rebates did not form a part of “total monetary prizes” or “total amount wagered” and were not to be taken into account in calculating the taxpayer’s “global GST amount” under s 126-10.

With respect to commissions and rebates payable by the casino to the junket operator, the Full Court concluded that these amounts were not “monetary prizes” and observed as follows:

  • the commission is payable for the marketing, promotion and arrangement of junkets by the junket tour operator to the casino.
  • the commissions and rebates are not “prizes” within the ordinary meaning of the word – they are amounts payable by the casino to the junket operator referable to the commercial relationship between them and additional to any amount referable to winnings
  • the commissions and rebates are not payable “on the outcome of gambling events” – they re payable as consideration for the provision or marketing and other services of the junket tour operator.

With respect to rebates payable by the junket tour operator to the casino, the Full Court observed that these amounts were not part of the “total amount wagered”, observing as follows:

  • the rebates payable by a junket tour operator to the casino are payments to be made as part of, and in connection with, the commercial arrangements for the junket agreed between the casino and the junket tour operator
  • the rebates are not payments to be made in consideration for the gambling supplies.

In WYPF and Commissioner of Taxation [2021] AATA 3050 (as I appeared in this matter I provide no comment and merely outline the essential findings) the Tribunal found that certain works constructed by the applicant (Preparatory Works) formed part of the consideration for the acquisition of development land (as non-monetary consideration) but other works (Building Works) did not form part of the consideration for the acquisition of the development land. The applicant chose to to account for GST on its sales of the apartments under the margin scheme conservatively and in calculating the GST the applicant treated the monetary consideration paid for the land as consideration for the acquisition of the land, but did not include the value of the Preparatory Works or the value of the Building Works in calculating the margin on the sales. The Tribunal found that to the extent of the Preparatory Works, the applicant had paid excess GST that it did not pass on to the recipients of its supplies so s 142-20 of the GST Act did not apply to prevent the excess GST being refunded to the applicant.

In Royal Lion Capital Pty Ltd and Commissioner of Taxation [2021] AATA 3049 the Tribunal affirmed the Commissioner’s decision to to register the applicant for GST on the basis that it had exceeded the GST registration turnover threshold of $75,000 from 1 April 2018 and that it was carrying on an enterprise of providing investment services. The Commissioner formed this view based on information obtained in relation to 22 deposits into two bank accounts, from which the Commissioner calculated the applicant’s quarterly sales and corresponding GST payable. The Commissioner did not allow input tax credits in respect of withdrawals amounts from the bank accounts. The Applicant conceded that 8 transactions $91,305.87 were commission and should be classified as GST income. Of the other transactions the Applicant submitted that they related to loans to the applicant from individuals or were interest income received from a loan between other entities for which the applicant acted as intermediary. At the hearing, the Tribunal accepted the contention of the Commissioner that the evidence provided by the applicant was properly described as lacking and unreliable – the applicant had not been able to provide a clear picture of the arrangements between it and the parties with whom it interacted. Critically, the applicant had produced no documentary evidence to support its contention that it did not meet the $75,000 threshold and that effectively the applicant was asking the Tribunal to accept its contentions, based on the word of the applicant. In the absence of corroborating evidence to the contrary, the Tribunal found that the applicant was required to be registered for GST and that the applicant had failed to discharge its onus to prove that the assessments were excessive.

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