The Tribunal hands down decision on Division 93 and GST grouping

Two recent decisions of the Tribunal have dealt with the perennial issue of taxpayers seeking to recover input tax credits after the expiration of the 4 year period in s 93-5 of the GST Act and the membership requirements for a GST group.

In JHKW and Commissioner of Taxation [2022] AATA 2875 the applicant, as a partner of a partnership formed with their spouse sought review of an objection decision of the Commissioner disallowing a claim for input tax credits for the quarterly tax periods between 1 July 2012 and 31 March 2017 on the basis that the business activity statements (BAS) for those tax periods were lodged outside of the four year time limit in s 93-5 of the GST Act.

The Partnership had failed to lodge GST returns for the tax periods commencing July 2012 and the Commissioner had issued a number of letters in relation to the lodgement of those GST returns. On 23 May 2016, the partnership’s ABN was cancelled. On 21 June 2021, the applicant lodged GST returns for the quarterly tax periods between July 2012 and March 2017, claiming input tax credits of $16,361. The Commissioner reversed the claims on the basis that they were claimed outside of the four-year-time-limit within which ITCs can be claimed.

At the hearing, the applicant gave evidence that they had understood that they had been given an extension of time to lodge the BAS and they were not aware of the 4 year time limit – nor were they informed of the limit by the Commissioner.

The Tribunal found that the partnership’s entitlement to input tax credits had ceased by reason of the operation of s 95-3. The Tribunal referred to the following observation of the operation of s 93-5(1) by SM Lazanas in Rosebridge Nominees Pty Ltd (In Liq) v Federal Commissioner of Taxation  [2019] AATA 426,  109 ATR 988 at [998-44]:

With respect to tax periods following 1 July 2012, s 93-5(1) of the GST Act similarly makes it abundantly clear that the entitlement to the ITCs is extinguished in certain circumstances. The use of the word “ceases” is unequivocal in describing the end of the entitlement to claim ITCs, unless certain events have occurred. This conclusion is consistent with the following decisions describing the operation of Division 93: Re Trustee for the SBM Trust and FCT [2015] AATA 174;  (2015) 101 ATR 191 and Re SE Sedgwick and YE Sedgwick and FCT [2015] AATA 690;  (2015) 97 ATR 696.

The Tribunal found that there was no evidence to suggest that the Commissioner granted an extension of time for the partnership to lodge its BAS. In the absence of an extension, the operation of s 93-5 means that after the expiry of 4 years after the day on which the BAS was required to be given to the Respondent, the entitlement to ITCs immediately ceases. Further, the provision of further time within which to give a BAS to the Commissioner cannot be provided retrospectively outside of the relevant 4 year period. There is no discretion to get around the operation of s 93-5.

The decision is a further illustration of the harsh operation of Division 93 of the GST Act.


In Adcon Resources Vic Pty Ltd and Commissioner of Taxation [2022] AATA 2629 the Tribunal found that the applicant and a related entity did not meet the GST group membership requirements for the period 1 July 2018 to 30 June 2021 and the parties were therefore not entitled to form a GST group for that period.

The applicant was incorporated on 12 March 2018 and registered for GST on a cash basis. On 10 July 2019 the applicant gave notice to the Commissioner that it was seeking to form a GST group with Adcon Contracting Pty Ltd (Adcon Contracting) with a date of effect of 1 July 2018. Adcon Contracting was registered for GST on 25 July 2018, with effect from 1 July 2018, on an accruals basis.

The Commissioner queried the GST group on the basis that it appeared that the companies were not part of the same 90% owned group. ASIC searches disclosed that the shares in the applicant were held by DI, who was also sole director of the applicant. The shares in Adcon Contracting were held by Chale Pty Ltd which was recorded as not being the beneficial owner of the shares. The shares in Chale Pty Ltd were all held by DI.

The applicant said that Chale Pty Ltd held the shares in Adcon Contracting as trustee for a Chale Asset Trust and that it was intended that the shares in the applicant were to also be held by Chale Pty Ltd as trustee for the trust. Due to an error by the accountant, DI was made the shareholder of the applicant and a notice had been lodged with ASIC to correct the shareholding of the applicant. DI also contended that he held the shares in the applicant as trustee pending transfer of the legal title in the shares to Chale Pty Ltd.

At the hearing, the Commissioner contended that at all material times, DI was the sole shareholder of the applicant and Chale Pty Ltd was the non-beneficial shareholder of the shares in Adcon Contracting – and as such, no single company held a 90% stake in both companies. The Commissioner also contended that the GST Act does not allow a trustee for a trust to be the 90% owner – it requires a company to be the 90% owner.

The Tribunal observed that the basis of the applicant’s contentions is that an error was made during the setup of the applicant and as such, its shares were not meant to have been owned by DI. Consequently, he must have been holding them as a nominee or on trust for Chale Pty Ltd. The difficulty for the applicant was the lack of evidence to support this position. For example: there was no evidence before the Tribunal that DI acted on behalf of Chale with regards to the operations or sale of the applicant; there was no evidence that as to the actual submission of the Form 492 to ASIC or any subsequent correspondence between ASIC and the applicant; the share register was not produced; there was no evidence as to whether the applicant paid dividends or who they were paid to. Based on the lack of evidence, the Tribunal was not satisfied that the applicant had discharged its onus.

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