Case analysis – Brookdale Investments Pty Ltd and Commissioner of Taxation

In Brookdale Investments Pty Ltd and Commissioner of Taxation [2013] AATA 154 the Tribunal agreed with the Commissioner that the sale of land by the applicant was not GST-free as the supply of a going concern because there was no evidence that the parties so agreed in writing prior to the supply being made (ie, prior to settlement).

Was there an agreement in writing?

The Tribunal rejected the applicant’s contention that it was sufficient that the agreement be made after the supply was made (the vendor and purchaser each made statutory declarations some 5 years after settlement to the effect that the supply was of a going concern) – in doing so, the tribunal agreed with the previous views of the Tribunal that the agreement must be made before the supply is made: see:

The Tribunal accepted that an agreement may be evidenced in writing by two or more documents, but agreed with the Commissioner that there was real doubt whether the declarations could together constitute an agreement for the puproses of s 38-325(1)(c) – even if they had been executed before Settlement. The Tribunal also noted that the applicant had failed to call the deponents of the declaration, but failed to do so. Interestingly, the Tribunal did not appear to reject the possibility that an agreement may be able to be established by documents entered into by the parties after settlement – the Tribunal referred to the agreement being “evidenced in writing” – it may be that in some circumstances the existence of an agreement by the parties before settlement (eg, an oral agreement) can be properly “evidenced” by documents brought into existence after settlement. However, this was clearly not such a case.

Was the Commissioner’s s 105-50 notice valid?

The Tribunal also rejected the applicant’s contention that the Commissioner’s notice issued under s 105-50 of Schedule 1 to the TAA was invalid because it failed to identify the amount of unpaid GST. The Tribunal made the following findings on s 105-50:

  • s 105-50 does not stipulate that any particular formality is required, provided the notice brings to the taxpayer’s attention that the Commissioner claims an entitlement to an unpaid net amount: referring to Federal Commissioner of Taxation v Prestige Motors Pty Ltd [1994] HCA 39;
  • s 105-50 is directed at providing notice, not a formal claim or demand. All that is required is to bring to the taxpayers attention that the Commissioner is of the view that there is an unpaid net amount and sufficient information must be given that the Commissioner is claiming an amount due in respect of a particular tax period and for a specified period: referring to Revlon Manufacturing Ltd v Federal Commissioner of Taxation (1995) 96 ATC 4031 at 4053;
  • A notice is not rendered invalid by reason of some later variation to an amount stated in it to be payable: referring to Cyonara Snowfox Pty Ltd v Commissioner of Taxation [2012] FCAFC 177 at 135.

In my view, these principles also apply to a notice lodged by a taxpayer under s 105-55.

GST neturality?

The applicant contended that the Commissioner assessed GST on the sale of land by the applicant, but at the same time determined that the acquisition by the purchaser was GST-free. In doing so, the applicant contended that the Commissioner failed to apply the GST legislation consistently and also acted in “bad faith”.

The Tribunal also found that Commissioner’s treatment of the purchaser was not relevant to the application. That view is undoubtedly correct, although it does appear strange that the Commissioner could maintain a different GST treatment for the parties. I note that the applicant’s BAS was lodged on 13 November 2006 and the Commissioner’s s 105-50 notice was issued on 9 November 2010.

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