Badaoui and Konig and Commissioner of Taxation [2011] AATA 672 (29 September 2011)

Facts

The applicants were a husband and wife partnership.  The issue before the Tribunal was whether the partnership was entitled to input tax credits on three tax invoices which were issued to the partnership by companies associated with the brothers of the male applicant.  The questions considered by the Tribunal were whether the partnership made the claimed acquisitions and paid for the acquisitions.  A residual issue was whether an administrative penalty of 50% on the GST shortfall was appropriate.

Consideration

The Tribunal found that on the evidence it was satisfied that the services described in the first two invoices were provided to the partnership and were paid for.  The Tribunal was satisfied that the services described in the third invoice were provided to the partnership, but not that the partnership paid for the services.  Further, simply holding the tax invoice at the time of claiming the input tax credit was not sufficient.

I note that the Tribunal declined to have regard to new material sought to be filed with written submissions, claimed to be from the “external accountant”.  In declining to take this information into account, the Tribunal noted that the applicants were directed to file all documents on which they intended to rely some three months before.  This is a salutary lessor for taxpayers seeking to run proceedings before the Tribunal to get their evidence in order early.

Regarding penalties, the Tribunal found that the actions of the partnership in claiming input tax credits for the third tax invoice (the claims for the first two invoices being accepted) did not result from recklessness on the part of the partnership of their agent.  Further, the Tribunal found that the actions of the applicant did not amount to failure to take reasonable care.  Accordingly, the penalty was removed in its entirety.  When regard is had to the approach of the Tribunal on the issue of penalty, one must think that the applicant was very close in satisfying the Tribunal that the third tax invoice was validly claimed.