GH1 Pty Ltd, in Liquidation and Commissioner of Taxation (Taxation) [2017] AATA 1100 (14 July 2017)

Transcription

1 GH1 Pty Ltd, in Liquidation and Commissioner of Taxation (Taxation) [2017] AATA 1100 (14 July 2017) Division: TAXATION & COMMERCIAL DIVISION File Number: 2015/1958 Re: GH1 Pty Ltd, in Liquidation APPLICANT And Commissioner of Taxation RESPONDENT DECISION Tribunal: Deputy President Bernard J McCabe Senior Member CR Walsh Date: 14 July 2017 Place: Perth The Tribunal affirms the decision under review....[sgd]... Deputy President Bernard J McCabe Commonwealth of Australia 2017

2 CATCHWORDS GOODS AND SERVICES TAX existence of tax invoices insufficient to prove taxable supplies were made - whether Applicant entitled to input tax credits claimed for creditable acquisitions objection decision affirmed LEGISLATION A New Tax System (Goods and Services Tax) Act 1999 s 7-1, s 9-5, s 11-5, s 11-15, s 11-20, s 29-10(3), s Taxation Administration Act 1953 s 14ZZK(b)(i), Sch 1 s (1), Sch 1 s (3) CASES Australasian Jam Company Pty Ltd v Federal Commissioner of Taxation (1953) 88 CLR 23 Bayconnection Property Developments Pty Ltd and Ors and Commissioner of Taxation [2013] AATA 40 Binetter v Commissioner of Taxation [2016] FCAFC 163 Gashi v Federal Commissioner of Taxation (2013) 209 FCR 301 Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 PNGR and Commissioner of Taxation [2013] AATA 942 Kajewski v Federal Commissioner of Taxation (2003) 52 ATR 45 RV Investments (Aus) Pty Ltd as Trustee for the RV Unit Trust and Commissioner of Taxation (2014) 94 ATR 670 The Norwestern Trust and Commissioner of Taxation [2017] AATA 361 REASONS FOR DECISION Deputy President Bernard J McCabe Senior Member CR Walsh 14 July 2017 INTRODUCTION 1. This application concerns whether GH1 Pty Ltd (GH1) is entitled, under s of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), to claim input tax credits (ITCs), totalling $1,952,254.71, in respect of bulk earthwork and related services provided and invoiced to it by related entity Mammoth Nominees Pty Ltd, now called MNWA Pty Ltd PAGE 2 OF 31

3 (ACN ) (MNWA) in relation to four property developments in Southern River and Hocking, Western Australia. 2. A table summarising the tax invoices relied upon by GH1 and the ITCs claimed by GH1 in respect of each is attached as Annexure A to these Reasons for Decision. FACTUAL & PROCEDURAL BACKGROUND 1 Parties and GST registration 3. GH1 is a proprietary company limited by shares, incorporated in Australia on 7 January and until 4 November 2015, was called Gucce Holdings Pty Ltd. 4. The sole director, shareholder and secretary of GH1 at all material times was Ms Tina Michelle Bazzo (Ms Bazzo). 3 Mr Allen Bruce Caratti (Mr Caratti) was a director of MNWA between 17 January 2002 and 31 January Ms Bazzo and Mr Caratti shared a de facto relationship and resided at the same residence at all material times. 6. GH1 carries on a business of land development, commercial property development and dry hire of equipment in Western Australia. 7. On 1 July 2002, GH1 was registered for GST. 8. This application arises out of the purchase and development of at least 361 lots of land by GH1 in the calendar years from 2005 to The Factual & Procedural Background is, for the most part, a reproduction of the Statement of Agreed Facts filed by the parties on 24 March 2017 and tendered as Exhibit 3. 2 Exhibit 1 at T24, p Exhibit 1 at T24, p.106. PAGE 3 OF 31

4 Developments Lot 1600 Balfour Street, Southern River 9. Lot 1600 Balfour Street, Southern River, Western Australia (Lot 1600) was acquired by GH1 in its capacity as trustee for the Holmes Road Trust for $3,200,000 on 21 March GH1 says it holds Lot 1600 on trust for the Holmes Road Trust The Holmes Road Trust is not registered for taxation purposes. 12. There have been no sales of any lots derived from Lot MNWA issued the following tax invoices to GH1 in respect of work done on Lot 1600: Table 1 Date Invoice Amount GST Supply description Ref 09/08/ $2,085, $189, Claim for Clearing and Earthworks completed as detailed T57: p353 18/12/ $882, $80, Claim #2 earthmoving T58: p356 $2,968, $269, Exhibit 1 at T54, pp Exhibit 1 at T31, p.184, para 65. PAGE 4 OF 31

5 14. GH1 claimed ITCs totalling: $189, in its Business Activity Statement (BAS) for the quarterly period ended 30 September 2009; and $80, in its BAS for the quarterly period ended 31 December 2011; on the basis of the tax invoices set out in Table 1 above. 15. In net amount assessment issued on 20 November 2013 relating to the quarterly tax periods ended 30 September 2009 and 31 December 2011, the Commissioner disallowed those claims. 6 Sevenoaks 16. Lots 1742 and 1743 Holmes Road, Southern River, Western Australia, were acquired by GH1 at some time prior to March A total of 172 residential lots were derived from Lots 1742 and The development of these lots is known as Sevenoaks (Sevenoaks). 17. GH1 contracted with MNWA to undertake bulk earthworks and civil works in respect of the Sevenoaks development Tax invoices issued by MNWA to GH1, in respect of work done on Lots 1742 and 1743, included the following: Table 2 Date Invoice Amount GST Supply description Ref 20/08/ $2,145, $214, Project Lots 1742/1743 Holmes St Southern River T64: p625 10/12/ $4,889, $488, Claim for clearing and T65: 6 Exhibit 1 at T28, p.145, T29, p.170 and T30, p Exhibit 1 at T61, pp and T62, pp PAGE 5 OF 31

6 Date Invoice Amount GST Supply description Ref earthworks p633 16/3/ $4,228, $422, Claim for work to date T66: p634 $11,263, $1,126, GH1 claimed ITCs totalling: $214, in its BAS for the quarterly period ended 30 September 2009; $488, in its BAS for the quarterly period ended 31 December 2009; and $422, in its BAS for the quarterly period ended 31 March 2010; on the basis of the tax invoices set out in Table 2 above. Lots 1-4 Holmes Road, Southern River 20. Lots 1, 2, 3 and 4 Holmes Road, Southern River, Western Australia are part of the land in Deposited Plan Lots 1 and 2 were acquired by GH1 for $3,050,000 sometime prior to 31 March On 29 June 2009, Lot 1 was transferred to 115 Cambridge Street Pty Ltd (115 Cambridge), for no consideration. 115 Cambridge holds Lot 1 as bare trustee for GH1 s benefit Lot 2 comprises two parcels in separate certificates of title. 11 On 29 June 2009, parcel 1, being the land in certificate of title volume 1401 folio 594, was transferred to Abernethy Land Company Pty Ltd (Abernethy) for no consideration. Abernethy holds parcel 1 of Lot 2 as bare trustee for GH1 s benefit Exhibit 1 at T28, p Exhibit 1 at T72, p Exhibit 1 at T28, p.154, T78 p.753 and T170, pp Exhibit 1 at T28, p.154, T79, p.757, T80, p.758 and T81, p Exhibit 1 at T28, p.154, T76, p.745 and T170, pp PAGE 6 OF 31

7 23. Parcel 2 of Lot 2, being the land in certificate of title volume 1401 folio 595, is held by GH1 as trustee for the Gucce Holdings Trust (Gucce Trust) Lot 3 was acquired by GH1 for $1,889, On 22 June 2010, Lot 3 was transferred to Ocean Keys (WA) Pty Ltd (Ocean Keys) as bare trustee for GH1 s benefit. 15 Ocean Keys is a related entity of GH1 and its sole director is Ms Bazzo. GH1 holds its interest in Lot 3 as trustee for the Gucce Trust Lot 4 was acquired by GH1 for $1,600, By declaration of trust made 22 June 2010, Lot 4 was transferred to Flynn Drive Holdings Pty Ltd (Flynn Drive), as bare trustee for GH1 s benefit. Flynn Drive is a related entity of GH1 and its sole director is Ms Bazzo. GH1 holds its interest in Lot 4 as trustee for the Gucce Trust Invoice 12046, issued by MNWA to GH1, related to work on parcel 2 of Lot GH1 claimed input tax credits of $51,400 in its BAS for the quarterly period ended 30 September 2009 based on this invoice. 19 Belvedere Hills Estate 28. GH1 undertook a residential development called Belvedere Hills Estate in Hocking, Western Australia (Belvedere Hills Estate). 29. Belvedere Hills Estate included the development of four master lots into 164 residential lots. 20 The master lots were Lot 20 Elliott Road, owned by GH1 (Lot 20), Lots 22 and 23 Elliot Road, owned by GH1 (Lots 22 & 23) and Lot 100 Elliott Road owned by Ms Bazzo as bare trustee for the benefit of GH1 (Lot 100). 13 Exhibit 1 at T170, pp Exhibit 1 at T28, p Exhibit 1 at T28, p.154, T70 pp Exhibit 1 at T28, p.154 and T170, pp Exhibit 1 at T28, p Exhibit 1 at T28, p.155 and T170, pp Exhibit 1 at T28, p Exhibit 1 at T28, p.139. PAGE 7 OF 31

8 30. Hocking Land Company Pty Ltd, now called HL Pty Ltd (Hocking Land) acquired one of the subdivided lots, Lot 57 Lenore Road, Hocking (Lot 57). Hocking Land is a related entity of GH1 and its sole director is Mr Caratti. 31. Ms Bazzo acquired one of the subdivided lots, Lot 58 Lenore Road, Hocking, as bare trustee for the benefit of Hocking Land (Lot 58) Lot 57 and 58 were developed into 14 sub-lots forming part of a development referred to as Hocking Stage 3D Phases 1 and MNWA, a related entity, issued the following tax invoices to GH1 in respect of Belvedere Hills Estate development, Hocking Stage 3D Phases 1 and 2: Table 3 Date Invoice Amount GST Supply description Ref 28/07/ $1,147, $104, Project Stage 3D Phase II Lot 103 Nicholas South Hocking Claim for works completed to title release 9 lots T84: /08/ $1,102, $100, Project Stage 3d Phase 1 Lot 103 T84: Exhibit 1 at T171, p PAGE 8 OF 31

9 Nicholas Rd South Hocking Claim as completed $2,250, $204, GH1 claimed ITCs totalling $204,563 in its BAS for the quarterly period ended 30 September 2009, on the basis of the tax invoices set out in Table 3 above. 35. In a net amount assessment issued on 20 November 2013, relating to the quarterly tax period ended 30 September 2009, the Commissioner disallowed that claim. 22 Audit 36. On 24 March 2011, the Commissioner advised GH1 that he was commencing an audit of its BASs for the period 1 January 2010 to 31 December Subsequently: on 1 March 2012, the Commissioner broadened the audit period for the BAS to 1 July 2009 to 30 June 2011 and advised that he would also audit the income tax returns for the years ended 30 June 2010 and 2011; 24 on 2 November 2012, the Commissioner further broadened the audit of the BAS to include the period 1 July 2009 to 30 June 2012 and advised that he would audit the income tax return for the year ended 30 June 2012; 25 on 19 June 2013, the Commissioner further extended the audit of the BAS to include the period 1 July 2009 to 31 December 2012; and on 20 September 2013, the Commissioner further extended the audit of the BAS to include the period 1 July 2009 to 30 June Exhibit 1 at T29, p Exhibit 1 at T18, p Exhibit 1 at T23, p Exhibit 1 at T25, p.107. PAGE 9 OF 31

10 Audit decision and assessments 38. On 20 November 2013, the Commissioner issued his decision regarding the audit of GH1 s BASs for the periods 1 July 2009 to 31 May 2013 (Audit Decision) As a result of the Audit Decision, the Commissioner issued GH1 with: a Notice of Assessments for the quarterly tax periods ended 30 September 2009, 31 March 2010 and 30 June 2010 (Assessments); 27 and a Notice of Amended Assessments for the quarterly tax periods ended 31 December 2009, 30 September 2010, 31 December 2010, 31 March 2011, 30 June 2011, 30 September 2011, 31 December 2011, 30 June 2012, 30 September 2012 and 31 December 2012, and for the months of February 2013 and May 2013 (Amended Assessments). 28 Objection and objection decision 40. On 28 February 2014, GH1 lodged an objection to the Assessments and the Amended Assessments (Objection) On 23 February 2015, Commissioner issued GH1 with a Notice of Objection Decision in which he disallowed the Objection in part (Objection Decision). 30 Application for review 42. On 24 April 2015, GH1 applied to the Tribunal for review of the Objection Decision By letter dated 6 April 2017, GH1 s solicitors, as at the date of the hearing, Zafra Legal, notified the Tribunal that on 5 April 2017, GH1 appointed external administrators to administer its affairs. 26 Exhibit 1 at T28, p Exhibit 1 at T29, p Exhibit 1 at T30, p Exhibit 1 at T31, p Exhibit 1 at T1, p Exhibit 1 at T1, p.1. PAGE 10 OF 31

11 44. At a telephone directions hearing held on 23 June 2017, Mr Ben Dundas of HWL Ebsworth (solicitors for the liquidators of GH1) informed the Tribunal that Mr Rob Kirman and Mr William Harris had been appointed as the liquidators of GH1 on 22 May 2017 and that the liquidators were content to proceed to have the Tribunal s decision on this application published. ISSUES 45. Thirteen substantive issues were identified by the Commissioner in the Audit Decision. Only four of those issues are in dispute in these proceedings, being audit issues 8, 9, 10 and 11. Those issues are as follows: Issue 8 Whether GH1 is entitled to claim ITCs totalling $269,831 in respect of the development of Lot 1600; Issue 9 Whether GH1 is entitled to claim ITCs totalling $1,126,357 in respect of Sevenoaks; Issue 10 Whether GH1 is entitled to claim ITCs totalling $351,502 in respect of the development of parcel 2 of Lot 2 and Lots 3 and 4 Holmes Road, Southern River; and Issue 11 Whether GH1 is entitled to claim ITCs totalling $204,563 in respect of the Belvedere Hills Estate development (Phases 1 & 2 of Stage 3D). CONSIDERATION GST Act 46. Section 7-1 of the GST Act provides: 7-1 GST and input tax credits (1) GST is payable on taxable supplies and taxable importations. (2) Entitlements to input tax credits arise on creditable acquisitions and creditable importations. 47. Section of the GST Act provides: Who is entitled to input tax credits for creditable acquisitions? You are entitled to the input tax credit for any creditable acquisition that you make. 48. Section 11-5 of the GST Act provides: PAGE 11 OF 31

12 11-5 What is a creditable acquisition? You make a creditable acquisition if: (a) (b) (d) you acquire anything solely or partly for a creditable purpose; and the supply of the thing to you is a taxable supply; and you are registered or required to be registered. 49. Section of the GST Act provides: Meaning of creditable purpose (1) You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. 50. Section 9-5 of the GST Act provides: 9-5 Taxable supplies You make a taxable supply if: (a) (b) (c) (d) you make the supply for consideration; and the supply is made in the course or furtherance of an enterprise that you carry on; and the supply is connected with the indirect tax zone; and you are registered or required to be registered. 51. A tax invoice for a taxable supply must be issued by the supplier to the recipient of the supply, except in the case of recipient created tax invoices. A tax invoice is a document which complies with the various requirements set out in s of the GST Act. 52. Tax invoices are important because they record creditable acquisitions for which an ITC can be claimed by the recipient of a taxable supply. The recipient of a taxable supply will normally have to hold a valid tax invoice for the acquisition at the time they lodge their GST return for the period in which the credit is claimed. Relevantly, s 29-10(3) of the GST Act provides: (3) If you do not hold a tax invoice for a creditable acquisition when you give to the Commissioner a GST return for the tax period to which the input tax credit (or any part of the input tax credit) on the acquisition would otherwise be attributable: (a) the input tax credit (including any part of the input tax credit) is not attributable to that tax period; and PAGE 12 OF 31

13 (b) the input tax credit (or part) is attributable to the first tax period for which you give the Commissioner a GST return at a time when you hold that tax invoice. 53. The mere existence of a tax invoice is not, by itself, sufficient to establish that a taxable supply (under s 9-5 of the GST Act) and corresponding creditable acquisition (under s 11-5 of the GST Act), has, in fact, occurred. 54. As DP Frost commented in Bayconnection Property Developments Pty Ltd and Ors and Commissioner of Taxation [2013] AATA 40 (Bayconnection) at [86]: the reality is that a tax invoice does not create a taxable supply; it records one. If a taxable supply did not take place, then a tax invoice is meaningless. In other words, documents that are so called tax invoices cannot substantiate a creditable acquisition, if in fact there was no supply or acquisition. It must follow that the scrutiny of transactions is always essential, particularly transactions between related parties. [emphasis added]. 55. Further, in RV Investments (Aus) Pty Ltd as Trustee for the RV Unit Trust and Commissioner of Taxation (2014) 94 ATR 670, DP Forgie observed (at [72]) that: an invoice is not itself a creditable acquisition but only part of the evidentiary material of a creditable acquisition. It is not conclusive evidence of the acquisition because, for example, the invoice might have been prepared in error or there may [sic] other evidence showing that events changed and there was ultimately no acquisition. An invoice may have some indication of purpose on it but it may well not have. All that can be said of an invoice is that it is evidentiary material but its relevance and probity will be considered and weighed like all other evidentiary material and an assessment made of the whole. 56. Similarly, the production of accounting records is not by itself determinative of the existence of a taxable supply or corresponding creditable acquisition. Onus of proof 57. GH1 bears the onus of establishing that the Assessment is excessive: s 14ZZK(b)(i) of the Tax Administration Act 1953 (TAA). The burden on GH1 is twofold: to prove, on the balance of probabilities, that the Assessment is excessive and what the correct assessment ought to be. PAGE 13 OF 31

14 58. There is no onus on the Commissioner to show that the Assessment is reasonable or supported by evidence: Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 (Gauci) at 89 per Mason J: The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with s 190(b) for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail. 59. The position was authoritatively summarised by the Full Federal Court in Gashi v Federal Commissioner of Taxation (2013) 209 FCR 301 (Gashi) at [61]: In seeking to establish in Pt IVC proceedings that an assessment issued under s 167 is excessive, the ultimate question was and remains whether the amount of each assessment was excessive: Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 623. Section 14ZZO of the TAA places the burden of proving each assessment is excessive on the taxpayer: Dalco at 623 citing George at 189. The TAA does not place any onus on the Commissioner to show that the assessments were correctly made: Dalco at 624 citing Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89. Indeed, absent agreement with the Commissioner to confine the issues for determination in a Pt IVC proceeding, the Commissioner is entitled to rely upon any deficiency in the taxpayer s proof of the excessiveness of the amount assessed in seeking to uphold the assessment: Dalco at 624. [emphasis added]. Lot 1600 (Audit Issue 8) 60. GH1 claimed ITCs of $189,566 in its September 2009 BAS and $80,265 in its December 2011 BAS on the basis of the following tax invoices issued to it by MNWA in relation to Lot Date Invoice Amount GST Supply description 9/8/ $2,085, $189, Claim for Clearing and Earthworks completed as detailed 18/12/ $882, $80, Claim #2 - earthmoving PAGE 14 OF 31

15 61. In the Objection, GH1 asserted that these invoices related to earthworks" which were performed in or about 2008 to 2009 and further earthwork services provided in GH1 relied upon a contract with MNWA, dated 10 November 2008, with a contract price of $4,036, Documentation provided by site superintendent 62. On 7 August 2013, the Commissioner wrote to GH1 requesting copies of, inter alia, progress claim certificates for all claims and variations, including bulk earthworks for the Lot 1600 development. GH1 responded on 3 September 2013 stating that: an engineer was not engaged to certify the works in the claims you referred to However, a letter from the site superintendent, WestCoast Engineering (WA) (WestCoast Engineering), to the Commissioner, dated 3 September , states: Progress Claims We have processed only one progress claim for the bulk earthworks (filling of the site). Variation There were no variations raised by the contractor for this project. 64. Under cover of a letter from WestCoast Engineering to GH1, WestCoast Engineering provided GH1 with a Progress Payment Certificate for Lot 1600 which related to bulk earthworks (Progress Payment Certificate). 34 That letter states: RE: PROPOSED SUBDIVISION OF LOT 1600 BALFOUR STREET, SOUTHERN RIVER We enclose a copy of the Progress Payment Certificate No. 1 for work completed to the end of January 2009 on the above project. We have assessed the claim for the work completed and recommend payment of $1,102, to Mammoth Nominees [i.e. MNWA]. [emphasis added]. 65. The Progress Payment Certificate refers to a corresponding contract amount of $1,102,766.50: Exhibit 1 at T184, p Exhibit 1 at T27, p Exhibit 1 at T27, p Exhibit 1 at T27, p.111. PAGE 15 OF 31

16 66. The documentation submitted by MNWA to the site superintendent includes items for siteworks ($67,800) and earthworks ($934,715) and lists the contract sum as being $1,002, Amounts claimed in respect of invoices and There are significant discrepancies between the work certified by the site superintendent, as described above, and that claimed in invoices and Further, there are internal inconsistencies and apparent duplication of amounts claimed even as between these two invoices. 68. The following table compares the documentation provided to the Commissioner by the site superintendent to that provided by GH1: Documents provided by site superintendent Detail Documents provided by GH1 $1,102, Contract price $4,036, # of claims 2 $1,102, Claim #1 amount $2,085, September 2008 Claim #1 completed 9 August 2009 N/A - 100% completed in Claim #1 Claim #2 amount $882, GH1 has provided no explanation regarding why these discrepancies exist, including why the contract price referred to in the invoices, and in the contract document provided by GH1 at objection, is significantly higher than the contract price referred to by the site superintendent, which also related to earthworks. 36 Exhibit 1 at T27, p.112. PAGE 16 OF 31

17 70. Importantly, no evidence has been adduced by GH1 as to why further work was performed over and above the work certified by the site superintendent as complete in 2008, or to explain the nexus between work performed and contractual documentation. 71. On the contrary, at objection, no mention was made by GH1 of any earthworks which had previously been certified by the site superintendent. Rather, as stated above, GH1 advised the Commissioner that there were no progress claim certificates. This is notwithstanding that MNWA, a related entity of GH1, had submitted documentation to the site superintendent in support of its payment claim. As submitted by the Commissioner, GH1 s failure to produce these documents at the objection stage, despite the Commissioner s request, casts significant doubt upon the veracity of GH1 s claims. 72. Further, the invoices themselves are internally inconsistent and appear to evidence duplication of claims. The costs breakdown schedule in respect of Claim #1, attached to Invoice 12052, itemises various amounts, including, relevantly, item 2.7a placed compact clear sand fill ($485,702.27) and item 2.8 removal of contaminated material and disposal of site ($269,910.34). 37 Invoice also attaches a costs breakdown schedule which itemises amounts claimed for each of Claims #1 and #2. In that schedule, items 2.7a and 2.8 show a zero value for Claim #1. Instead, these items are claimed again as part of Claim #2, in very similar amounts of $493, and $242, As contended by the Commissioner, this tends to suggest a duplication of claims even as between Invoices and 13145, particularly in the absence of any countervailing evidence from GH No witnesses have been called by GH1 to substantiate the amounts claimed in the invoices, nor to explain the discrepancies which appear on the face of these documents. That is surprising. Further, no explanation has been provided as to why the contract documentation relied upon by GH1 does not accord with the contract amount referred to by the site superintendent. In the absence of such evidence, the Tribunal cannot be satisfied it should rely upon the invoices and contract document at face value, or that the "supply was made as claimed in the invoices. The existence of such invoices does not in itself prove that any supply or acquisition was made within the meaning of the GST Act: Bayconnection. In such circumstances, the Tribunal finds GH1 has failed to discharge its onus of showing the relevant assessment was excessive. 37 Exhibit 1 at T57, p.355. PAGE 17 OF 31

18 Sevenoaks (Audit Issue 9) 74. Audit Issue 9 concerns GH1 s entitlement to claim ITCs totalling $1,126,357 on three transactions in its September 2009, December 2009 and March 2010 BAS s as follows: BAS period Invoice Date Invoice No Invoice Amount GST claimed Details work of Sept /8/ $2,360, $214, Civil works - Claim #2 Dec /12/ $5,378, $488, Site works & Earthworks Mar /3/ $4,651, $422, Civil works - Claim #1 75. As set out above, in the Factual & Procedural Background, Lots 1742 and 1743 Holmes Road, Southern River, were acquired by GH1 some time prior to March A total of 172 residential lots were derived from Lots 1742 and The development of these lots is known as Sevenoaks. 76. GH1 contends it contracted with MNWA to undertake bulk earthworks and civil works. As was the case with Lot 1600, GH1 informed the Commissioner there were no progress claim certificates for this development. However, the Commissioner obtained certified progress claim certificates from BSD Cardno Pty Ltd (Cardno), the Sevenoaks development site superintendent, as well as documentation provided to Cardno by MNWA supporting the progress claim (including tax invoices and cost breakdown schedules). Cardno also provided project and progress reports it had sent to Bankwest. Based on documentation provided to the Commissioner by GH1 and Cardno, there are significant discrepancies between the work certified by Cardno and the work purportedly supplied by MNWA to GH1. Further, an analysis of the cost breakdown schedules suggests substantial duplication and inflation of the claims in the relevant invoices. PAGE 18 OF 31

19 Duplication and inflation of claims in invoices and Invoices and purport to relate to Claims #1 and #2. However, Claims #1 and #2 were already certified by Cardno in 2007 and Claim #1 was the subject of a payment claim certified by Cardno on 7 May The certificate recommended payment of $2,878, plus GST. Based on GH1 s GST ledger, it appears this amount was claimed by GH1 as an ITC in its September 2007 BAS The amount the subject of this payment claim was reflected in an invoice submitted by MNWA to Cardno in support of its claim (see tax Invoice dated 16 March 2007 for the amount of $3,198, plus GST in respect of Claim #1). 39 GH1 posted this amount to a development account for the Sevenoaks development. 80. Claim #2 was the subject of a payment claim certified by Cardno on 4 July The certificate recommended payment of $573, plus GST. According to GH1 s GST ledger, it appears that this amount was claimed by GH1 as an ITC in its September 2008 BAS The amount the subject of this payment claim was reflected in an invoice submitted by MNWA to Cardno in support of its claim (see tax Invoice dated 2 July 2008 for the amount of $670, plus GST in respect of Claim #2). 41 GH1 posted this amount to the work in progress account for the Sevenoaks development. 82. The Invoice cost breakdown schedule for Claim #1 shows this included items in the amounts of $66,500 (preliminary and mobilisation), $347, (siteworks) and $2,784, (earthworks). 42 Invoice issued on 16 March 2010 also included amounts for Claim #1. 43 Relevantly, this invoice for Claim #1 44 included disaggregated 38 Exhibit 1 at T161, p Exhibit 1 at T145, p Exhibit 1 at T162, p Exhibit 1 at T140, p Exhibit 1 at T145, p See invoice at T66, pp issued by MNWA to GH1 in the amount of $4,228, for Claim #1. PAGE 19 OF 31

20 amounts for items described as preliminary & mobilisation" ($62,155), "siteworks ($347,734.77), "earthworks ($2,784,337.05), "sewerage reticulation ($455,134.81), sewerage main to pump station ($351,194.76) and "contingency ($227,631.05). 45 It is clear from these documents that the amounts claimed for siteworks and earthworks correspond identically to those previously claimed for Claim #1 in 2007 and for which an ITC had already been claimed. Further, the amount claimed for preliminary & mobilisation" is also almost identical. 83. The additional amounts claimed relate to sewerage reticulation and sewerage main to pump station. Amounts for "sewerage reticulation ($153,997.61) and sewage main to pumpstation ($516,757.00) were included as part of Claim #2 in Invoice 10580, dated 2 July 2008, which, as stated above, was submitted to the site superintendent for certification of Claim # The amounts relating to Invoice 12054, were posted to GH1 s "Cost of Goods account for 2010 rather than its development account for the Sevenoaks development. 85. Invoice for Claim #2, made in the September 2009 BAS, was invoiced 6 months prior to the invoice for Claim #1, made in the March 2010 BAS referred to above. As submitted by the Commissioner, no explanation has been provided as to why, if these invoices are to be taken at face value, Claim #2 would precede Claim # As contended by the Commissioner, an analysis of cost breakdown schedules attached to subsequent invoices also casts doubt on whether Invoices and can be taken at face value. For example, Invoice 12716, dated 1 September 2010, attached a costs breakdown schedule which itemised amounts for Claim #1, Claim #2 and Claim #3. An analysis of the amounts listed for Claims #1 and #2 demonstrates that the individual amounts listed for each item differ from that set out in previous invoices, although the total for each claim at the foot remains the same. This is illustrated in the following table: 44 Exhibit 1 at T66, p Exhibit 1 at T66, p Exhibit 1 at T165, p PAGE 20 OF 31

21 Item Invoice (T166, p.1399) Claim #1 Claim #2 Invoice (T64, p.626) Invoice (T166, p.1399) Invoice (T64, p.626) Preliminary and mobilisation $62,155 $62,155 $138,345 $138,345 Siteworks $347, $347, Earthworks $2,784, $2,784, Roadworks 0 0 $689, $601, Sewerage Reticulation $682, $455, Sewerage Main to Pumpstation $351, $351, $165, $165, Stormwater drainage 0 0 $786, $786, Water Reticulation 0 0 $286, $132, Public Utilities Underground Power 0 0 $78, $78, Uniform Fencing $150, Landscaping $36, Contingency 0 $227, $55, Total $4,228, $4,228, $2,145,633 $2,145, At the hearing, GH1 sought to rely on Exhibit 2, being a bundle of documents which were said to comprise evidence of further work required to be undertaken for the Sevenoaks PAGE 21 OF 31

22 development. Submissions were made by GH1 s representative about these documents, at a high level of generality, without identifying with any level of specificity the nexus to the invoices to which the purported work related. Again, GH1 did not seek to rely upon any witness evidence to explain the documentation, attest to the work that was undertaken or explain how the work related to each of the items claimed in the relevant invoices. Furthermore, the documentation relied upon by GH1 does not explain the discrepancies and anomalies which appear on the face of the documentation, as outlined above. Further discrepancies and anomalies - Invoice An analysis of the costs breakdown schedule for Invoice dated 10 December 2009 in the amount of $4,889,553.25, and the supporting documentation submitted by GH1, also reveals significant discrepancies and anomalies. 89. The invoice includes an amount for site works (item 2 of the costs breakdown schedule) totalling $2,952, However, the sum total of the individual sub-items listed (that is, $1,232,220, $64,000 and $1,254,825) totals only $2,551,045. As such, it appears the costs of the site works have been overstated in the invoice by at least $401, The documentation provided by GH1 to evidence the preliminary works does not substantiate the amounts of coffee rock and excavated material that was excavated as per the cost breakdown schedule attached to the tax invoice. For example, the schedule shows (at item 3.6) 99,258 cubic metres of earthworks. 48 However, the disposal dockets supplied evidence of disposal of a sum total of only 460 cubic metres of soil No evidence has been adduced as to why these amounts were only invoiced in December 2009 if these were preliminary works carried out several years beforehand (as contended by GH1). Further, various purchases from MNWA appear on GH1 s GST reports for the 2007 financial year (including amounts of $197,500 on 21 February 2007 and $97,240 on 25 June 2007). The development account for the Lot 1600 development shows a residual amount of $249, as development expenses incurred as at 1 July As 47 Exhibit 1 at T117, p Exhibit 1 at T117, p Exhibit 1 at T117, pp PAGE 22 OF 31

23 contended by the Commissioner, these entries suggest the ITCs claimed in respect of Invoice had already been claimed for the same work prior to 1 July 2007 (which would better accord with the timing of when the work is said to have been performed). Again, GH1 has not adduced any evidence to explain the source of these other items which appear in its accounts. Conclusion 92. As set out in paragraphs [57] to [59] above, it is not for the Commissioner to produce evidence in support of its assessment. In light of the significant unexplained inconsistencies and discrepancies highlighted above, which are not explained by any witness evidence, GH1 has failed to substantiate its claims in a manner sufficient to discharge its onus. 93. As contended by the Commissioner, to the extent that the invoices give an appearance of a particular transaction having taken place, the significant discrepancies and anomalies outlined above, which remain unexplained, suggest the transactions (if any) were other than what they appeared to be on the invoices. In such circumstances, the Tribunal does not accept these invoices at face value. Parcel 2 of Lot 2 and Lots 3 and 4 Holmes Road (Audit Issue 10) 94. For the reasons provided in paragraphs [96] to [101] below, the Tribunal considers GH1 wrongly claimed ITCs totalling $351,502 on two tax invoices for development work said to have been performed by MNWA in relation to Parcel 2 of Lot 2 and Lots 3 and 4 Holmes Road in September The Tribunal does not accept GH1 was carrying on an enterprise in respect of this development and that it made a creditable acquisition as GH1 is not the beneficial owner of the land. 50 Belvedere Hills Estate, Phases 1 & 2 of Stage 3D (Audit Issue 11) 95. For the reasons provided in paragraphs [96] to [101] below, GH1 wrongly claimed ITCs totalling $204,563 in its September 2009 BAS on 2 tax invoices (i.e. invoices and 50 As reflected in correspondence between David Ward of MNWA and GH1 s financier Suncorp at Exhibit 1 at T170, pp : See in particular dated 9 September 2009, p This is reflected in the document at Exhibit 1 at T85, p PAGE 23 OF 31

24 12049) for development work said to have been performed by MNWA in relation to Stage 3D of the Hocking Development (i.e. Lots 57 and 58 Lenore Road). The Tribunal does not accept GH1 was carrying on an enterprise in respect of this development and that it made a creditable acquisition as GH1 is not the beneficial owner of the land. 51 Whether GH1 was carrying on an enterprise (Audit Issues 8, 10 and 11) 96. As set out in paragraph [46] above, entitlements to ITCs arise on creditable acquisitions. 52 For an acquisition to be a creditable acquisition, s 11-5(1) relevantly requires that you acquire anything solely or partly for a creditable purpose. Section 11-15(1) of the GST Act provides you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. It is not possible to claim for some other entity s creditable acquisitions A common issue in relation to audit issues 8, 10 and 11 is whether GH1 was relevantly carrying on an enterprise in respect of the developments concerned such that it was entitled to claim the ITCs, in circumstances where GH1 was not the beneficial owner of the relevant land (being Lot 1600, the Holmes Road Development and the Belvedere Estate, respectively). GH1 does not dispute it is not the beneficial owner of the land. Rather, GH1 s position is that it entered into various agreements with the beneficial owner of the land. GH1 relies upon various documents which are said to evidence those agreements in support of its contention it was carrying on an enterprise Each of the purported agreements involve transactions between related parties. Moreover, there are aspects of these documents which are, on their face, unusual. In particular, with respect to each of the joint venture agreements relied upon with respect to Lot and the Holmes Road development 56, the documents are signed by only Ms Bazzo (purporting to act both on behalf of GH1 as trustee for the Holmes Road Trust and 51 As reflected in correspondence between Mr David Ward of MNWA and GH1 s financier Suncorp, T170, pp : see in particular dated 9 September 2009 at p This is reflected in the document at T85, p s 7-1 of the GST Act. 53 s 11-20(1) of the GST Act. 54 Applicant s Outline of Submissions, dated 29 March 2017 at [16] and [29], 55 Exhibit 1 at T55, pp Exhibit 1 at T73, pp PAGE 24 OF 31

25 Gucce Holdings Trust respectively, and on behalf of GH1 in its personal capacity). The trust deed for the Holmes Road development predates the trust deed which has been supplied dated 16 May No evidence has been provided, whether from Ms Bazzo or any other person involved in the purported transaction, to explain these documents, including the circumstances of their execution or the nexus between these arrangements and the invoices pursuant to which it claimed ITCs. That is troubling. GH1 is best placed to explain the documents and transactions upon which it relies and it has failed to do so In the absence of such evidence, the Tribunal is not satisfied that it should rely upon these documents at face value. As submitted by the Commissioner, each of the purported agreements are transactions between related non arm s-length entities In conclusion, as stated in paragraphs [57] to [59] above, the onus is on GH1 to show the relevant assessments are excessive and what the correct assessments should be. It has not discharged that onus. Fraud and evasion 102. Section (1) of Schedule 1 of the TAA 58 provides a general 4 year time limit within which the Commissioner can recover any unpaid net amount A further issue in dispute in this case is whether the Notice of Assessment issued by the Commissioner to GH1 for the quarterly tax period ending 30 September 2009 (September 2009 Assessment) was out of time pursuant to s (1) of Schedule 1 to the TAA. This relates to $960, of the total amount in dispute However, the limitation period does not apply to an amount if the Commissioner (or, in his shoes, the Tribunal) has come to the view it was avoided by fraud or evasion Exhibit 1 at T56, p Repealed by Indirect Tax Laws Amendment (Assessment) Act 2012 (No. 39, 2012), effective 1 January s (3) of Schedule 1 of the TAA repealed by Indirect Tax Laws Amendment (Assessment) Act 2012 (No. 39, 2012), effective 1 January PAGE 25 OF 31

26 105. The following authorities which provide some guidance on the meaning of fraud or evasion" in the context of s (3) of Schedule 1 of the TAA: fraud has been described as the making of a statement which the maker knows or believes to be false, or is recklessly careless whether it is true or false: Kajewski v Federal Commissioner of Taxation (2003) 52 ATR 45; in The Norwestern Trust and Commissioner of Taxation [2017] AATA 361 at [33] - [36], DP Deutsch said evasion has been described as contemplating some blameworthy act or omission on the part of the taxpayer or those for whom he is responsible ; evasion may encompass an intentional withholding of information : Australasian Jam Company Pty Ltd v Federal Commissioner of Taxation (1953) 88 CLR 23; and in PNGR and Commissioner of Taxation [2013] AATA 942, SM McCabe (as he then was) observed (at [71]) that the expression certainly refers to a situation in which a taxpayer consciously withholds information from the Commissioner or deliberately misstates other information in order to reduce the amount of tax which he or she is liable to pay Pursuant to s 14ZZK of the TAA, GH1 bears the onus of showing that, on the balance of probabilities; there was no fraud or evasion. At the hearing of this application, on 29 March 2017, GH1 s representative stated that he did not seek to make submissions on the fraud or evasion issue As Perram and Davies JJ stated in Binetter v Commissioner of Taxation [2016] FCAFC 163 at [93] (Siopis J agreeing): Although the Tribunal re-examines whether, on the evidence before it, there was an avoidance of tax due to fraud or evasion, and is able to substitute its opinion for the Commissioner, the issue for the Tribunal is whether the taxpayer has discharged the onus of showing that the opinion that there was fraud and evasion should not have been formed, and therefore, that the statutory condition for the power to amend is not satisfied Their Honours also observed (at [93]) that: Unless the taxpayer discharges that onus, the assessments are not shown to be excessive and the effect of s 14ZZK is that the Tribunal must affirm the amended assessments, such assessments having been made by the Commissioner in compliance with the statutory requirements. PAGE 26 OF 31

27 109. In that case, their Honours rejected Mrs Binetter s submission that the Tribunal had erred by affirming the amended assessments without forming the opinion that there was fraud or evasion For the following reasons, the Tribunal is not satisfied that GH1 has discharged its onus of proving that the Commissioner should not have formed the opinion that there was fraud and evasion: the significant experience of GH1 in property development; the fact that many of the claims made were in respect to supplies by a related entity, namely MNWA; the fact that many of the claims made related to land of which GH1 is not the beneficial owner; the pattern of overstatement of claims as compared to those certified by an independent third party site superintendent; the inaccuracy of the dates for which the works were claimed, including claims for works undertaken some years earlier than when claimed; the arrangements entered into appeared to be part of a sham, undertaken solely to obtain a tax benefit; and the obstruction of the Commissioner during the audit, including failure to respond to enquiries, failure to provide adequate information, providing false or misleading information, and providing manufactured or altered documentation contradicted by evidence obtain from third parties. DECISION 111. For the above reasons, the Tribunal affirms the Objection Decision. I certify that the preceding 111 (one hundred and eleven) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe & Senior Member CR Walsh PAGE 27 OF 31

28 ...[sgd]... Administrative Assistant Dated: 14 July 2017 Dates of hearing: 29 & 30 March 2017 Representative for the Applicant: Solicitors for the Applicant: Counsel for the Respondent: Mr M Sunits Zafra Legal Ms M Ellicott PAGE 28 OF 31

29 ANNEXURE A TABLE OF TAX INVOICES AND DISPUTED CLAIMS FOR ITCs Invoice Amount GST Claimed as input tax credit BAS period Fraud or evasion in issue (i.e. amount claimed in September 2009 BAS) Audit Issue 8 Invoice dated 9 August 2009 (T57, p.353) $2,085, $189, September 2009 Yes Invoice dated 18 December 2011 (T58, p.356) $882, $80, December 2011 No Audit Issue 9 Invoice dated 20 August 2009 (T64, p.625) $2,360, $214, September 2009 Yes Invoice dated 10 December 2009 (T65, p.633) $5,378, $488, December 2009 No Commonwealth of Australia 2017

30 Invoice Amount GST Claimed as input tax credit BAS period Fraud or evasion in issue (i.e. amount claimed in September 2009 BAS) Invoice dated 16 March 2010 (T66, p.634) $4,651, $422, March 2010 No Audit Issue 10 Invoice dated 15 July $4,523, $411, September Yes 2009 (T181, p.1568) (GST credit of 2009 $257,002 disallowed at objection) Invoice dated 28 August 2009 (T182, p.1570) $1,039,500 $94,500 September 2009 Yes Audit Issue 11 Invoice dated 28 July 2009 (T84, p.1015) $1,147, $104, September 2009 Yes PAGE 30 OF 31

31 Invoice Amount GST Claimed as input tax credit BAS period Fraud or evasion in issue (i.e. amount claimed in September 2009 BAS) Invoice dated 28 August 2009 (T84, p.1024) $1,102, $100, September 2009 Yes Total ITCs in dispute $1,952, Total ITCs in dispute relating to September 2009 BAS $960,195.1 PAGE 31 OF 31