H & B Auto Repair Centre Pty Ltd v FC of T

Members:
D Mitchell M

Tribunal:
Administrative Appeals Tribunal, Brisbane

MEDIA NEUTRAL CITATION: [2022] AATA 3561

Decision date: 25 October 2022

D Mitchell (Member)

INTRODUCTION

1. H & B Auto Repair Centre Pty Ltd (the Applicant) is seeking review of an objection decision of the Commissioner of Taxation (the Respondent) dated 15 June 2021.^[1] Exhibit 1, T Documents, T2, pages 6-9, Notice of Objection Decision and Reasons for Decision.

2. The reviewable objection decision disallowed the Applicant's objection to the amended assessments of net amount for the quarterly tax periods between 12 February 2016 and 30 June 2017 and allowed in part the amended assessments of net amount for the quarterly tax periods between 1 July 2017 and 31 December 2017.^[2] Exhibit 1, T Documents, T2, pages 6-9, Notice of Objection Decision and Reasons for Decision. The objection decision has the effect of disallowing certain claims made by the Applicant for Input Tax Credits (ITCs) to the amount of $91,239.^[3] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, page 8, paragraph 26.

BACKGROUND

3. The Applicant's Goods and Services Tax (GST) registration with quarterly reporting on a cash accounting basis has been in effect from 1 February 2016.^[4] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, page 2, paragraph 5.

4. On 16 October 2020, the Applicant lodged their quarterly Business Activity Statements (BAS) for the tax periods 1 February 2016 to 30 September 2017.^[5] Exhibit 1, T Documents, T3, BAS lodgement forms for the GST period 1 January 2016 to 30 September 2017 and Exhibit 3, Supplementary T-Documents, S1, BAS lodgement forms for the GST period March 2016 to September 2017.

5. On 22 October 2020, the Respondent contacted the Applicant's Tax Agent by phone and notified them that he was auditing the Applicant's recently lodged BAS.^[6] Exhibit 1, T Documents, T11, pages 226-227, ATO Audit Case Notes Report. The Respondent recorded that during that call the Applicant's Tax Agent provided the following:^[7] As summarised by the Respondent at Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, pages 2-3, paragraph 7.

7.1. The Applicant's business operates as a car repair workshop. The Tax Agent did not provide an actual address for the location of this business;

7.2. The Applicant had operated as a franchisee of Goodyear Dunlop Tyres Pty Ltd (Goodyear). The Applicant was currently involved in litigation proceedings with Goodyear. The Applicant's business temporarily closed down and the franchise ceased around December 2017 to early 2018;

7.3. The Applicant had since recommenced the business as an independent venture. The business was still operating as of the date of this call.

7.4. Expenses of the business were predominantly franchise fees, commercial rent, and purchases of specific parts for vehicle repairs as required and specified by the franchisor. The Tax Agent asserted that the Applicant was paying around $12,000 to $14,000 in rent for the business every month, which was part of the input tax

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credits the Applicant had reported in their BAS over the relevant tax periods;

7.5. The Applicant went to the Tax Agent for assistance in preparing the Applicant's financial records, at the suggestion of his lawyer. The Tax Agent had advised the Applicant that all BAS lodgements were outstanding. The Applicant provided the Tax Agent with all bank statements, invoices, and amounts that the Applicant had paid to the franchisor. The Tax Agent lodged the BAS on behalf of the Applicant; and

7.6. The Tax Agent expected to have the Applicant's BAS for the tax period ended 31 December 2017 lodged by the end of October 2020.

6. On 23 October 2020, the Respondent notified the Applicant of the GST audit in writing, outlining the reasons for conducting the audit and seeking the provision of information.^[8] Exhibit 1, T Documents, T4, pages 38-39, Notification of audit of BAS from 1 January 2016 to 30 September 2017.

7. On 29 October 2020, the Applicant's Tax Agent sought an additional week to provide the requested information.^[9] Exhibit 1, T Documents, T11, page 227, ATO Audit Case Notes Report.

8. On 11 November 2020, the Applicant lodged its BAS for the 31 December 2017 quarter.^[10] Exhibit 1, T Documents, T5, pages 40-43, BAS lodgement forms for the GST period 1 October 2017 to 31 December 2017; Exhibit 3, Supplementary T-Documents, S2, page 8, BAS as lodged by the Applicant on 11 November 2020 for the GST period ending December 2017.

9. On 18 November 2020, the Respondent wrote to the Applicant making a final request that additional information be provided by 30 November 2020 and advising that the audit had been extended to include the BAS lodgement for the 31 December 2017 quarter.^[11] Exhibit 1, T Documents, T6, pages 44-45, ATO letter of final request for additional information.

10. On 30 November 2020, the Applicant's Tax Agent provided the Respondent with additional information.^[12] Exhibit 1, T Documents, T8, pages 50-185, email correspondence between the Taxpayer’s Tax Agent and ATO Audit Officer.

11. On 10 December 2020, the Respondent advised the Applicant's Tax Agent that bank statements could not be accepted as evidence to substantiate the GST on expenses incurred as reported in the BAS for the relevant tax periods.^[13] Exhibit 1, T Documents, T11, page 230, ATO Audit Case Notes Report. The Respondent requested that updated GST transaction lists be provided that outlined only the details and amounts where actual invoices were held by the Applicant.^[14] Exhibit 1, T Documents, T11, page 230, ATO Audit Case Notes Report. The Applicant did not provide updated GST transaction lists.^[15] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, page 5, paragraph 13.

12. On 5 February 2021, the Respondent issued the audit findings and decision.^[16] Exhibit 1, T Documents, T10, pages 216-225, ATO letter to Taxpayer: Finalisation of audit. The Respondent found that:^[17] Exhibit 1, T Documents, T10, pages 216-225, ATO letter to Taxpayer: Finalisation of audit.

• the Applicant was not entitled to the ITCs claimed on its BAS for the quarterly tax periods between 1 January 2016 and 30 June 2016 on the basis that the time limit to claim ITC for those periods had expired; and
• the Applicant did not report the correct amount of GST on purchases at label 1B on its BAS for the quarterly tax periods between 1 July 2016 and 30 September 2017.

13. The Respondent reduced the ITCs claimed by the Applicant to zero for all quarters other than for the 30 September 2016 quarter of which was reduced to $1,947. Essentially, the Applicant's ITCs claimed for the affected period were reduced by $92,113.^[18] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, page 6, paragraph 15.

14. On 8 February 2021, the Respondent issued a notice of amended assessments of net amount to the Applicant.^[19] Exhibit 1, T Documents, T12, pages 234-235, Notice of amended assessments of net amount.

15. On 15 March 2021, the Applicant's Tax Agent lodged an objection on behalf of the Applicant to the amended assessments of net amount.^[20] Exhibit 1, T Documents, T13, page 236, Objection form lodged on 5 February 2021.

16. In the objection, the Applicant's Tax Agent stated that most of the invoices and bank statements were provided to the Respondent during audit and submitted that should the claimed ITCs be refused, then the Respondent should also exclude the 1A amounts (GST on sales amounts) as the Applicant did not have records to substantiate those amounts.^[21] Exhibit 1, T Documents, T13, page 236, Objection form lodged on 5 February 2021.

17. The Respondent allowed the Applicant's objection in part for amounts claimed as ITCs for the quarters ended 30 September 2017 and 31 December 2017 and otherwise affirmed the audit decision.^[22] Exhibit 1, T Documents, T2, pages 6-9, Notice of Objection Decision and Reasons for Decision.

18. On 15 June 2021, the Respondent issued to the Applicant notice of the objection decision.^[23] Exhibit 1, T Documents, T2, pages 6-9, Notice of Objection Decision and Reasons for Decision.

19. On 19 November 2021, the Applicant made an application to this Tribunal for review of the objection decision.^[24] Exhibit 1, T Documents, T1, pages 1-5, Application for Review of Decision. The reason the Applicant's Tax Agent provided that they claim the decision was wrong is as follows:^[25] Exhibit 1, T Documents, T1, page 4, Application for Review of Decision.

With due respect, would urge to reverse ATO debts as per attached decision because all BASZ were lodged at one go when we educated client about their GST and TAX obligations. [W]e provided business bank statements, lease agreements and invoices. If

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ATO accepted bank credits then should accept GST credits too. Business is struggling financials and directly Impacted by lockdown restrictions.

20. The Respondent summarised the respective positions of the parties about the correct net amounts for the relevant quarterly tax periods as follows:^[26] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, pages 8-9, paragraph 26.

21. By consent, it was agreed that this matter could be adequately determined in the absence of the parties. The Tribunal agreed to review the reviewable decision in accordance with section 34J of the Administrative Appeals Tribunal Act 1975 (Cth). As such, a hearing was not conducted in this matter, the Tribunal's decision has been reached "on the papers" having considered the documents filed by the parties.

22. The Tribunal admitted into evidence and considered the following:

• Exhibit 1, T Documents - Section 37 T Documents (pages 1 to 258).
• Exhibit 2, Supplementary T-Documents - Supplementary Section 37 ST Documents (pages 1 to 8).
• Exhibit 3, Respondent's Statement of Facts, Issues and Contentions dated 11 March 2022 (pages 1 to 19).
• Exhibit 4, Applicant's Statement of Facts, Issues and Contentions dated 16 May 2022 and attachments.
• Exhibit 5, Applicant's documents received on 2 June 2022.
• Exhibit 6, Respondent's Statement in Reply dated 1 July 2022 (pages 1-5).
• Exhibit 7, Respondent's final written submissions dated 22 August 2022 (pages 1-14).

THE LAW

23. A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) provides that an entity carrying on an enterprise will generally be liable to pay GST on taxable supplies ^[27] See section 9-5 of the GST Act. and will be entitled to input tax credits on creditable acquisitions.^[28] See sections 11-5, 11-20 and 11-25 of the GST Act. Amounts of GST and amounts of input tax credits are offset against each other to produce a net amount for a tax period.^[29] Sections 7-5 and 17-5 of the GST Act.

24. Section 11-5 of the GST Act defines a creditable acquisition as follows:

You make a creditable acquisition if:

(a) you acquire anything solely or partly for a *creditable purpose; and

(b) the supply of the thing to you is a *taxable supply; and

(c) you provide, or are liable to provide, *consideration for the supply; and

(d) you are *registered, or *required to be registered.

25. A creditable purpose is a thing that has been acquired to the extent it is acquired in carrying on the entity's enterprise.^[30] Section 11-15(1) of the GST Act. A taxable supply is a supply for consideration that is made in the course or furtherance of an enterprise being carried on by an entity that is registered or required to be registered for GST, to the extent that the supply is not GST-free or input taxed.^[31] Section 9-5 of the GST Act.

26.

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The ITCs to which an entity is entitled for a creditable acquisition is attributable to a tax period where the entity accounts on a cash basis in the period that the entity provides consideration for that creditable acquisition.^[32] Section 29-10(2) of the GST Act. Consideration includes any payment, or any act or forbearance in connection with a supply of anything or in response to, or for the inducement of a supply of anything.^[33] Section 9-15(1) of the GST Act.

27. To attribute an ITC to a tax period, the entity is required to hold a tax invoice for the creditable acquisition at the time that they lodge their GST return for that tax period.^[34] Section 29-10(3) of the GST Act. A compliant tax invoice, pursuant to section 29-70(1) of the GST Act, must:

(a) be issued by the supplier of the supply or supplies to which the document relates;
(b) be in the approved form;
(c) contain enough information to enable the following to be clearly ascertained:
- (i) the supplier's identity and ABN;
- (ii) what is supplied (including the quantity if applicable) and the total price of the supply;
- (iii) the extent to which each supply to which the document relates is a taxable supply;
- (iv) the amount of GST payable on the supply;
- (v) the date the document is issued; and
(d) be clear from the document that it was intended to be a tax invoice.

28. A document issued by an entity to another entity may be treated as a tax invoice if it would comply with the requirements for a tax invoice but for the fact that it does not contain certain information and all of that information can be clearly ascertained from other documents given by the entity to the other entity.^[35] Section29-70(1A) of the GST Act.

29. The Respondent has a discretion to treat as a tax invoice a particular document that would not otherwise be a tax invoice.^[36] Section 29-70(1B) of the GST Act. Guidance in relation to when the Respondent will exercise his discretion to allow a document to be treated as a tax invoice is set out in Practice Statement Law Administration 2004/11 - Treating a documents as a tax invoice or adjustment note (PS LA 2004/11).

30. Entitlement to ITCs for creditable acquisitions cease unless they are included in an entity's assessed net amount within a limited period, generally 4 years.^[37] Section 93-1 of the GST Act.

31. Section 93-5 of the GST Act provides that there is a time limit on entitlements to ITCs and sets out that:

(1) You cease to be entitled to an input tax credit for a *creditable acquisition to the extent that the input tax credit has not been taken into account, in an *assessment of a *net amount of yours, during the period of 4 years after the day on which you were required to give to the Commissioner a *GST return for the tax period to which the input tax credit would be attributable under subsection 29-10(1) or (2).
Note: Section 93-10 sets out circumstances in which your entitlement to the input tax credit does not cease under this section.
(2) This section has effect despite section 11-20 (which is about entitlement to input tax credits).
Note: You must hold a valid tax invoice relating to a creditable acquisition to be entitled to have an input tax credit for that acquisition taken into account in working out your assessed net amount for a tax period: see subsection 29-10(3).

32. There are a number of exceptions set out in section 93-10 of the GST Act to the application of section 93-5(1). However, none of the exceptions applied in the Applicant's case.

33. Section 31-8 of the GST Act sets out when GST returns must be given to the Respondent in relation to quarterly tax periods. Section 31-8 of the GST Act provides:

(1) If a tax period applying to you is a *quarterly tax period, you must give your *GST return for the tax period to the Commissioner:

(a) as provided in the following table; or

(b) within such further period as the Commissioner allows.

*When quarterly GST returns must be given*
*Item*	*If this day falls within the quarterly tax period …*	*Give the GST return to the Commissioner on or before this day:*
1	1 September	the following 28 October
2	1 December	the following 28 February
3	1 March	the following 28 April
4	1 June	the following 28 July

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(2) A tax period is a quarterly tax period if:
- (a) it is a period of 3 months; or
- (b) it would be a period of 3 months but for the application of section 27-30 or 27-35.

34. As such, an entity will no longer be entitled to an ITC if it has not been taken into account in an assessment during the period of four years commencing the day after the entity was required to lodge a GST return for the tax period to which the ITC would be attributable under sections 29-10(1) and (2) of the GST Act.

35. Where a taxpayer is dissatisfied with a reviewable GST decision, they may object to it in accordance with the requirements set out in Part IVC of the Tax Administration Act 1953 (Cth) (TAA 1953).^[38] Section 110-50 of the TAA 1953. The Respondent must decide whether to allow, wholly or in part; or disallow, the taxpayer's objection.^[39] Section 14ZY of the TAA 1953.

36. A taxpayer dissatisfied with the Respondent's objection decision may apply to the Tribunal for a review of the decision or appeal to the Federal Court against it.^[40] Section 14ZZ of the TAA 1953.

37. Section 14ZZK(b)(i) of the TAA 1953 provides that on application for review of a reviewable objection decision concerning an assessment, the Applicant has the burden of proving that the assessment is excessive or otherwise incorrect and what the assessment should have been.

38. As such, to be successful in this matter, the onus falls on the Applicant to prove that the amended assessments of net amount are excessive or otherwise incorrect and what the assessment should have been for the quarterly tax periods between 1 January 2016 and 31 December 2017.

ISSUES

39. The issue before the Tribunal is whether or not the Applicant has discharged its onus to prove that the amended assessments of net amount made by the Respondent in relation to the claimed ITCs for the quarterly tax periods between 1 January 2016 ^[41] Noting that the Applicant’s GST registration commenced on 1 February 2016. and 31 December 2017 as lodged on 16 October 2020 and 11 November 2020 are excessive or otherwise incorrect.

40. In considering that issue, the Tribunal must determine whether the Applicant was entitled to the ITCs claimed in the lodged BAS.

41. Given the facts of this matter, the primary question to be considered by the Tribunal in relation to the quarterly tax periods between 1 January 2016 and 30 June 2016 is whether or not the Applicant's entitlement to the ITCs claimed in the BAS lodged on 16 October 2020 for those periods has ceased due to the operation of the 4 year time limit prescribed by section 93-5 of the GST Act.

42. Should the Tribunal find that the Applicant's entitlement to the claimed ITCs had not ceased, further consideration of whether the Applicant had otherwise established that the amended assessments of net amount for the quarterly tax periods between 1 January 2016 and 30 June 2016 are excessive or otherwise incorrect and what they should have been, would be required. This will require the Tribunal to consider whether or not the Applicant is entitled to the claimed ITCs for those periods.

43. In relation to the quarterly tax periods between 1 July 2016 and 31 December 2017, the question to be considered by the Tribunal is whether or not the Applicant has established that the amended assessments of net amount issued in relation to those periods are excessive or otherwise incorrect and what they should have been. This will require the Tribunal to consider whether or not the Applicant is entitled to the claimed ITCs those that periods.

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EVIDENCE AND CONTENTIONS

44. On 11 March 2022, the Respondent provided a Statement of Facts, Issues and Contentions outlining that:^[42] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, page 14, paragraphs 48-49.

48. The Commissioner maintains his view that the Applicant is entitled to claim input tax credits in the amount of $2,821 as he is satisfied the relevant acquisitions were made, that they were creditable, and they satisfied the attribution rules in section 29-10 including the requirement to hold a tax invoice at the time of lodging the GST return pertaining to the tax period.
49. However, the Commissioner contends that the Applicant has failed to keep and provide records to the Commissioner that are sufficient to evidence that the Applicant has made creditable acquisitions to which their claim for input tax credits relate, and that these amounts are properly attributable to the tax periods in which these amounts were claimed.

45. The Respondent contended that:^[43] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, pages 15-16, paragraphs 51-58.

• To date a full coherent outline of the Applicant's claim for entitlement for the ITCs claimed had not been provided.
• The bank statements, deposits and withdrawal receipts are not sufficient to be deemed documents that can be treated as tax invoices as they do not contain all of the required information for a tax invoice.
• It is unclear which transactions within the bank statements pertain to which creditable acquisitions, nor is it clear whether these bank statements list all the transactions that encompass the total amount of ITCs the Applicant has sought to claim in their BAS for the relevant tax periods.
• The bank statements do not contain sufficient information about the transactions for the Respondent to be satisfied that the transactions are, in fact, for a creditable purpose.
• The debits listed on the bank statements do not identify the supplier's identity or ABN, nor what was supplied, nor the extent to which each supply is a taxable supply.
• The GST amounts are unable to be verified from the transactions listed on the bank statements.
• The monthly rental payments made to Goodyear between 1 March 2017 and 1 November 2017 in the Applicant's bank statements appear to have been reversed. Further, the rental payment instalment amounts as set out in the rental sub-lease agreement are not consistent with the amounts which were paid and subsequently reversed. As such, it is unclear whether the amounts listed in each transaction related entirely to rental payments. Consequently, the bank statements cannot be treated as tax invoices for the purposes of substantiating the rental payments and any related GST.
• The Applicant has not provided records evidencing that the ITCs claimed in respect of security deposits paid pursuant to the rental sub-lease agreement with Goodyear had been applied as consideration for a supply or had been forfeited due to failure to perform the obligation on which the security deposit is held. Nor has the Applicant provided records evidencing the tax period(s) to which the ITCs would otherwise be attributable.
• The Applicant appears to have claimed ITCs in respect of GST paid on costs associated with their legal proceedings involving Goodyear, however, has not provided a clear explanation as to whether and how these legal costs relate to the carrying on of the Applicant's car repair enterprise or that they related to taxable supplies made to the Applicant. It is unclear to what extent, if any, the Applicant is entitled to claim ITCs in respect of costs associated with the legal proceedings.

46. In relation to information provided by the Applicant in relation to the claimed ITCs and the Respondent's discretion under section 29-70(1B) of the GST Act, the Respondent provided the following contentions:^[44] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, pages 17-18, paragraphs 59-62.

Lack of information

59. The Applicant has not provided any further supporting information or documents to enable the Commissioner to be satisfied that the relevant acquisitions were made (beyond those already conceded by the Commissioner), and that the attribution rules in section 29-10 of the GST Act were satisfied.

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60. During the audit, the Applicant's Tax Agent asserted that the input tax credits being claimed "predominantly" relate to "franchise fees, commercial rent" and the "purchase of specific parts for vehicle repairs".55 However, due to the lack of information provided to substantiate these claims the Applicant has failed to outline:

60.1. The transactions that encompass the Applicant's claim for input tax credits;

60.2. Whether these transactions are in respect of creditable acquisitions;

60.3. Whether consideration has been provided by the Applicant for all these purported acquisitions, and

60.4. Whether the Attribution requirements of section 29-10 (particularly subsection 29-10(3)) have been satisfied.

61. Accordingly, due to the many shortcomings and omissions within the Applicant's information, the Commissioner contends that the current evidence is insufficient to confirm the input tax credits sought by the Applicant.

The Commissioner ' s discretion - 29-70(1B) of the GST Act

62. As outlined under section 29-70(1B) of the GST Act, the Commissioner has the discretion to otherwise permit a document, that otherwise fails to comply with the requirements of a tax invoice under section 29-70(1), to be treated as a tax invoice. As guided by section 5 of the PS LA 2004/11, the Commissioner contends that it is inappropriate to exercise that discretion as:

62.1. The Applicant has not made a reasonable and genuine attempt to obtain valid tax invoices from the supplier. It is unclear what steps, if any, the Applicant took to obtain valid tax invoices outside of the email correspondence between the Applicant and Goodyear between 9 November 2021 and 12 November 2021.

62.2. Despite the Commissioner's multiple requests, the Applicant did not provide any further evidence that otherwise demonstrates an entitlement to claim input tax credits in lieu of a valid tax invoice.

62.3. The Applicant has a poor compliance history in respect of their BAS lodgements. Further, it is evident that the majority of the claimed input tax credits do not have a corresponding invoice. As such, the Commissioner must conclude that the Applicant has failed to keep sufficient records to satisfy the Commissioner as to the Applicant's entitlement to input tax credits.

62.4. While the Applicant only commenced business in 2016 and may have had a poor understanding of the requirement to specifically obtain tax invoices, the Applicant should nevertheless have recognised the importance of keeping adequate business records to enable it to meet its taxation obligations. The Applicant has not only failed to provide tax invoices but has failed to provide other records that may serve to evidence the purported acquisitions.

47. On 16 May 2022, the Applicant's Tax Agent provided a Statement of Facts, Issues and Contentions and supporting documents.^[45] Exhibit 4, Applicant’s Statement of Facts, Issues and Contentions. Outside of a copy of the franchise agreement the Applicant entered into with Goodyear on 12 June 2016, three images of a receipt for a deposit of $4,000 made into a bank account and an image of an email that provides the same details of the bank account to which the deposit was made (labelled July 2017), the other documents provided were already contained in the T Documents.

48. In the Applicant's Statement of Facts, Issues and Contentions, its Tax Agent provided:^[46] Exhibit 4, Applicant’s Statement of Facts, Issues and Contentions.

STATEMENT OF ISSUES

Client was ignorant about his goods and Tax Services (GST) and Income tax obligations. Client first approached us in Sept 2020, and we educated about GST & Tax compliance. All outstanding quarterly

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business Activity Statements (BAS') from March2015 were lodged at one go. Australian Taxation Office (ATO) conducted an audit which took 6 to 8 months, and no closure letters were received. On following up with ATO on various occasions, representatives escalated the matter, and no one would call back. ATO amended lodged BASZ, reversing all (1B) GST on Purchases and accepting all GST on Sales (1A).

FACTS

• ATO accepted 1A figures and disregarded 1B figures.

• Client has been hit will ATO debt of $99,829.

CONTENTIONS

• If ATO accepted 1A figures, should accept 1B figures too as all lodgments were done based on provided business statements.

• Invoices were provided for most of fixed expenses like rent, franchise fee and Parts or materials.

• Based on 4 years rule for BAS' lodgments, if ATO doesn't allow GST on Purchases then should not accept GST on Sales too.

• Client is struggling financially and cannot lodge further outstanding BAS' as waiting for result of this appeal.

Its pleading request to waive off 1A GST On Sales figures.

49. On 17 June 2022, the Applicant's Tax Agent provided further evidence that included the following:^[47] Exhibit 5, Applicant’s documents received on 2 June 2022.

• An image of an online transaction receipt made from the bank account of the Applicant's director to Goodyear on or around 24 February 2016 for the amount of $218,999.
• An invoice from Goodyear dated 31 March 2016 that outlines a purchase from Goodyear for an amount of $100,000, which includes GST to the amount of $9,090.91.
• Three documents that outline the transactions and the Applicant's calculations relating to the ITCs being claimed for the quarters ended 30 September 2016, 31 December 2016 and 31 December 2017.

50. On 1 July 2022, the Respondent filed a statement in reply to the evidence and submissions provided by the Applicant.^[48] Exhibit 6, Respondent’s Statement in reply. The Respondent continued to rely on the contentions outlined above and contended that a substantial amount of the ITCs claimed by the Applicant in their BAS lodgements remain unsubstantiated by a corroborating invoice, or by documents that may otherwise be treated as a tax invoice.^[49] Exhibit 6, Respondent’s Statement in reply, page 3, paragraph 7.

51. In relation to the Applicant's contention that if the claimed input tax credits are not accepted, then the 1A amounts entered on its BAS should also not be accepted, the Respondent contended that there is no equivalent provision in relation to Division 93 of the GST Act, nor section 29-10 of the GST Act in respect of the 1A amounts. The Respondent further contended that the Applicant had not provided any evidence that demonstrates that the 1A amounts listed on their BAS lodgements are not correct.^[50] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions,, pages 18-19, paragraph 64.

52. The Respondent contended that in relation to the new material provided by the Applicant that:^[51] Exhibit 6, Respondent’s Statement in reply, pages 3-5, paragraphs 8-10.

(a) The Applicant is not entitled to claim ITCs on the February 2016 payment or March 2016 invoice due to the operation of the four-year rule as the payments related to the GST periods ended 31 March 2016 and 30 June 2016 respectively. Regardless of this point, the other requirements to claim the ITCs were not met.
(b) The July 2017 receipt is insufficient to meet the attribution requirements as most of the information contained is not legible and a date of the transaction cannot be identified on the receipt.
(c) It is unclear as to the reliance the Applicant places on the Franchise Agreement or how it is said to overcome, or substitute for, a compliant tax invoice under the attribution requirements in respect of any payment made to Goodyear for which the Applicant has sought to claim input tax credits.
(d) The BAS workings do not satisfy the attribution requirements as the vast majority of the listed transactions within the BAS workings rely solely upon bank statements as the basis for corroborating these transactions. Bank statements alone are

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insufficient and further bank statements have not been provided for all periods in question. The total GST amounts listed within the BAS workings are inconsistent with the amounts claimed as ITCs in the BAS lodged by the Applicant for the GST periods ended 30 September 2016, 31 December 2016 and 31 December 2017 respectively.
(e) The Tribunal should affirm the objection decision.

53. By way of a direction dated 12 July 2022, the Tribunal required that the parties advise by 22 July 2022 whether they agreed that the application be heard on the papers and further directed that:

(a) On or before 1 August 2022, the Applicant must give to the Tribunal and the Respondent, any final written submissions upon which it intends to rely.
(b) On or before 22 August 2022, the Respondent must give to the Tribunal and the Applicant, any final written submission upon which it intends to rely.

54. The Applicant did not provide any further submissions.

55. The Respondent provided final written submissions dated 22 August 2022.^[52] Exhibit 7, Respondent’s final written submissions dated 22 August 2022. These submissions were consistent with the contentions outlined above. The Respondent submitted that the Applicant had not discharged their burden of proof in establishing that the Respondent's amended assessments of net amount are excessive or otherwise incorrect within the meaning of section 14ZZK(b)(i) of the TAA 1953 for the following reasons:^[53] Exhibit 7, Respondent’s final written submissions dated 22 August 2022, page 13, paragraph 26.

(a) The Applicant has contended in the Applicant's SFIC that most of the invoices for "fixed expenses like rent, franchise fee and Parts or materials" were provided. The Commissioner rejects this contention and maintains that a substantial amount of the input tax credits claimed in the Applicant's BAS lodgements remain unsubstantiated by a valid tax invoice under section 29-70 of the GST Act.
(b) The Applicant has contended in the Applicant's SFIC that if the 1B amounts on the BAS lodgements are not accepted, then 1A amounts should also not be accepted. This argument must be rejected, as the 1A amounts are not subject to Division 93 of the GST Act, nor is there any equivalent provision providing the same effect for these 1A amounts. Further, the 1A amounts are not subject to the requirements under sections 29-10(2) and (3) of the GST Act, and the Applicant has not evidenced what the attribution of these 1A amounts purportedly should have been, pursuant to section 29-5(2) of the GST Act.
(c) The Applicant has outlined the following further contentions in the Applicant's SFIC:
- (i) The Applicant was ignorant about their GST compliance obligations and required assistance with lodging their BAS;
- (ii) The Applicant is struggling financially; and
- (iii) The ATO audit took 6 to 8 months and no closure letters were received. Further, the Applicant's representatives escalated the matter and no one would call back.
  The above contentions are not factors that are within the Commissioner's discretion to otherwise allow an entitlement to input tax credits. Nor are these factors relevant to establishing that the Commissioner's assessment was "excessive or otherwise incorrect".

56. The Respondent further submitted that the Applicant had not discharged their burden of proof in establishing what the assessments should have been within the meaning of section 14ZZK(b)(i) of the TAA 1953 for the following reasons:^[54] Exhibit 7, Respondent’s final written submissions dated 22 August 2022, page 14, paragraph 27.

(a) It is unclear whether the Applicant seeks to claim the originally sought input tax credits, to the amounts as outlined within their BAS lodgements, as their basis of what the assessments should have been; and
(b) The Applicant has only provided BAS Workings in respect of the tax periods ending on 30 September 2016, 31 December 2016 and 31 December 2017. Notwithstanding, the total quantum for the input tax credits outlined within those BAS Workings is inconsistent with the amounts outlined in the Applicant's BAS lodgements.

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CONSIDERATION

Quarterly tax periods between 1 January 2016 and 30 June 2016

57. In relation to the Applicant's claimed ITCs in the quarterly tax periods between 1 January 2016 and 30 June 2016, the Tribunal notes that the Applicant lodged the relevant BAS on 16 October 2020.

58. The GST Act is clear in that the entitlement to an ITC ceases if it has not been included in a BAS during the period of 4 years after the day on which the BAS was required to be given to the Respondent.

59. As set out by this Tribunal in its recent decision in
JHKW and Commissioner of Taxation [2022] AATA 2875, Senior Member Lazanas, with whom this Tribunal agrees, addressed the clarity of the operation of section 93-5(1) of the GST Act in
Rosebridge Nominees Pty Ltd (In Liq) and Commissioner of Taxation [2019] AATA 426, (2019) 109 ATR 988 at [44] as follows:

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) 101 ATR 191 and
Re SE Sedgwick and YE Sedgwick and FCT (2015) 97 ATR 696.

60. The day on which a BAS is required to be given to the Respondent is set out in the GST Act or alternatively is a day otherwise allowed by the Respondent.

61. In the present application, the Applicant's BAS in relation to the quarters ended 31 March 2016 and 30 June 2016 were required to be lodged by 30 May 2016 and 25 August 2016 respectively.^[55] Exhibit 1, T Documents, T7, page 49, BAS Analyser for BAS lodgements as at 18 November 2020. Unless a further period is allowed, the BAS for those periods were required to be filed by those dates or within 4 years thereof, otherwise the entitlement to claim ITCs for those quarters would cease on 30 May 2020 and 25 August 2020 respectively.

62. There is no evidence before the Tribunal that any such further period to lodge the 31 March 2016 and 30 June 2016 BAS was granted, nor has the Applicant suggested that such had occurred.

63. The operation of section 93-5 of the GST means that if an extension of time to lodge a BAS has not been granted prior to the expiry of 4 years after the day on which it was required to be given to the Respondent, the entitlement to ITCs immediately ceases. Consequently, the provision of further time within which to give a BAS to the Respondent cannot be provided retrospectively outside of the relevant 4 year period.

64. There is no discretion to circumvent the operation of section 93-5 of the GST Act. The operation of Division 93 of the GST Act in circumstances such as the Applicant's is clear and unambiguous and leaves no room for the operation of a discretion.^[56] Trustee for the SBM Trust and Commissioner of Taxation [2015] AATA 174 ; (2015) 101 ATR 191 .

65. As such, as the Applicant lodged the BAS for the quarterly tax periods between 1 January 2016 and 30 June 2016 on 16 October 2020, being outside 4 years after they were required to have been given to the Respondent, there is no entitlement to claim the associated ITCs for those periods.

66. As the Tribunal has found that the Applicant's entitlement to the claimed input tax credits for the quarterly tax periods between 1 January 2016 and 30 June 2016 had ceased by the time the associated BAS were given to the Respondent by the Applicant on 16 October 2020, there is no need to consider whether the Applicant was entitled to the ITCs claimed in relation to those periods.

Quarterly tax periods between 1 July 2016 and 31 December 2017

67. The BAS in relation to the quarterly tax periods between 1 July 2016 and 31 December 2017 were lodged within 4 years of the date they were required to be given to the Respondent. Consequently, the entitlement to ITCs for that period continue to exist.

68. In order to be entitled to claim ITCs, the Applicant, as it is reporting GST on a cash basis, must be able to establish that it made creditable acquisitions that can be attributable to a particular tax period.

69.

ATC 10775

In this matter, the Applicant is required to have held on 10 October 2020 and 11 November 2020 (being the dates on which the BAS were lodged for the tax periods in question), a tax invoice for the creditable acquisition that meets the requirements of section 29-70(1) of the GST Act or documents when read together can be taken to contain all details required by a tax invoice for the purposes of section 29-70(1A) of the GST Act, or a document which is capable of being treated as a tax invoice due to the excising of the discretion provided by section 29-70(1B) of the GST Act.

70. The Applicant is also required to be able to show that it provided consideration for any creditable acquisition made and when such consideration was made for attribution purposes.

71. Based on the evidence before the Tribunal, it is clear that the Applicant has been given a number of opportunities to provide evidence that it holds the required tax invoice documents and provided consideration for the creditable acquisitions it made to support the claimed ITCs in question. The Applicant has failed to take advantage of such opportunities.

72. The documents provided by the Applicant are, as the Respondent contended, unclear or unhelpful. To a large extent, documents outside of bank statements have not been provided in a form required by the GST Act to evidence that the creditable acquisitions for which ITCs are being claimed have been made. The Tribunal agrees with the Respondent's contention that the provision of bank statements in the absence of sufficient evidence to explain transactions sought to be relied upon is not sufficient to meet the substantiation requirements of the GST Act.

73. The Tribunal notes that the Applicant provided one BAS working sheet for the December 2017 tax period which is based predominately on its bank statements. The Applicant did not provide such working sheets for the other quarterly tax periods between 1 July 2016 and 30 September 2017.

74. Having reviewed the evidence before it, the Tribunal agrees with the Respondent's contentions outlined above in relation to the evidence provided by the Applicant throughout the audit, objection and Tribunal processes. The Tribunal finds that a substantial amount of the ITCs claimed (being those ITCs still in contention) in the Applicant's BAS lodgements for the quarterly tax periods between 1 July 2016 and 31 December 2017 remain unsubstantiated by a valid tax invoice under section 29-70 of the GST Act.

75. Further, the Tribunal finds that the evidence provided by the Applicant does not provide adequate details to allow the discretion in section 29-70(1B) of the GST Act to be exercised to treat a particular document as a tax invoice.

76. The Tribunal notes that the contentions made by the Applicant's Tax Agent in this matter are of limited assistance. The Applicant has not clearly outlined the basis on which it says the amended assessments of net amount are excessive or otherwise incorrect and certainly does not clearly articulate what the Applicant says the assessments should have been.

77. As such and based on the totality of the evidence before it, the Tribunal accepts the contentions and submissions outlined by the Respondent above. The Tribunal, therefore, finds that the Applicant has not established that it was entitled to the claimed ITCs that have been disallowed by the Respondent for the quarterly tax periods between 1 July 2016 and 31 December 2017.

Should amounts reported at 1A of the BAS be disregarded?

78. The Tribunal notes that the Applicant's Tax Agent submitted that in circumstances where the Applicant is found not to be entitled to claim ITCs for the periods in question, then the 1A figures, being GST on sales should also not be accepted. The Tribunal agrees with the Respondent's contentions in this regard. There is no provision in the GST Act or the TAA 1953 that provides that where ITCs in relation to GST on purchases are disallowed, then GST on sales should also be disallowed or not considered by the Respondent.

79. The timeframe within which to lodge a BAS in order to maintain an entitlement to claim ITCs outlined in Division 93 of the GST Act does not apply to liability to remit GST collected on sales. The requirements under

ATC 10776

section 29-10(2) and (3) of the GST Act do not apply to matters outside of eligibility to claim ITCs.

80. Further, in the present circumstances, there is no evidence before the Tribunal to indicate that the 1A amounts reported in the Applicant's BAS for the quarterly tax periods in question were incorrect. As such, the Tribunal does not accept the Applicant's contention that in circumstances where the Tribunal finds that it was not entitled to the claimed ITCs, then the figures recorded at 1A on the BAS should also be disregarded. While the Tribunal accepts that the Applicant may be experiencing financial difficulties, that does not change the operation of the GST Act.

CONCLUSION

81. Based on the evidence before it, the Tribunal finds that the:

(a) BAS lodged by the Applicant for the quarterly tax periods between 1 January 2016 and 30 June 2016 were given to the Respondent on a date that exceeded 4 years after they were required to have been given and as such the Applicant is no longer entitled to claim ITCs in relation to those periods.
(b) Applicant was not entitled to claim the ITCs in dispute in the quarterly tax periods between 1 July 2016 and 31 December 2017 as claimed in the BAS lodged on 10 October 2020 and 11 November 2021.

82. As such, the Tribunal finds that the Applicant has not discharged its onus to prove that the amended assessments of net amount made by the Respondent in relation to its claimed ITCs for the quarterly tax periods between 1 January 2016 and 31 December 2017 as lodged on 16 October 2020 and 11 November 2020 are excessive or otherwise incorrect.

83. Accordingly, the decision under review is affirmed.

Footnotes

^[1] Exhibit 1, T Documents, T2, pages 6-9, Notice of Objection Decision and Reasons for Decision.
^[2] Exhibit 1, T Documents, T2, pages 6-9, Notice of Objection Decision and Reasons for Decision.
^[3] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, page 8, paragraph 26.
^[4] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, page 2, paragraph 5.
^[5] Exhibit 1, T Documents, T3, BAS lodgement forms for the GST period 1 January 2016 to 30 September 2017 and Exhibit 3, Supplementary T-Documents, S1, BAS lodgement forms for the GST period March 2016 to September 2017.
^[6] Exhibit 1, T Documents, T11, pages 226-227, ATO Audit Case Notes Report.
^[7] As summarised by the Respondent at Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, pages 2-3, paragraph 7.
^[8] Exhibit 1, T Documents, T4, pages 38-39, Notification of audit of BAS from 1 January 2016 to 30 September 2017.
^[9] Exhibit 1, T Documents, T11, page 227, ATO Audit Case Notes Report.
^[10] Exhibit 1, T Documents, T5, pages 40-43, BAS lodgement forms for the GST period 1 October 2017 to 31 December 2017; Exhibit 3, Supplementary T-Documents, S2, page 8, BAS as lodged by the Applicant on 11 November 2020 for the GST period ending December 2017.
^[11] Exhibit 1, T Documents, T6, pages 44-45, ATO letter of final request for additional information.
^[12] Exhibit 1, T Documents, T8, pages 50-185, email correspondence between the Taxpayer’s Tax Agent and ATO Audit Officer.
^[13] Exhibit 1, T Documents, T11, page 230, ATO Audit Case Notes Report.
^[14] Exhibit 1, T Documents, T11, page 230, ATO Audit Case Notes Report.
^[15] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, page 5, paragraph 13.
^[16] Exhibit 1, T Documents, T10, pages 216-225, ATO letter to Taxpayer: Finalisation of audit.
^[17] Exhibit 1, T Documents, T10, pages 216-225, ATO letter to Taxpayer: Finalisation of audit.
^[18] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, page 6, paragraph 15.
^[19] Exhibit 1, T Documents, T12, pages 234-235, Notice of amended assessments of net amount.
^[20] Exhibit 1, T Documents, T13, page 236, Objection form lodged on 5 February 2021.
^[21] Exhibit 1, T Documents, T13, page 236, Objection form lodged on 5 February 2021.
^[22] Exhibit 1, T Documents, T2, pages 6-9, Notice of Objection Decision and Reasons for Decision.
^[23] Exhibit 1, T Documents, T2, pages 6-9, Notice of Objection Decision and Reasons for Decision.
^[24] Exhibit 1, T Documents, T1, pages 1-5, Application for Review of Decision.
^[25] Exhibit 1, T Documents, T1, page 4, Application for Review of Decision.
^[26] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, pages 8-9, paragraph 26.
^[27] See section 9-5 of the GST Act.
^[28] See sections 11-5, 11-20 and 11-25 of the GST Act.
^[29] Sections 7-5 and 17-5 of the GST Act.
^[30] Section 11-15(1) of the GST Act.
^[31] Section 9-5 of the GST Act.
^[32] Section 29-10(2) of the GST Act.
^[33] Section 9-15(1) of the GST Act.
^[34] Section 29-10(3) of the GST Act.
^[35] Section29-70(1A) of the GST Act.
^[36] Section 29-70(1B) of the GST Act.
^[37] Section 93-1 of the GST Act.
^[38] Section 110-50 of the TAA 1953.
^[39] Section 14ZY of the TAA 1953.
^[40] Section 14ZZ of the TAA 1953.
^[41] Noting that the Applicant’s GST registration commenced on 1 February 2016.
^[42] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, page 14, paragraphs 48-49.
^[43] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, pages 15-16, paragraphs 51-58.
^[44] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, pages 17-18, paragraphs 59-62.
^[45] Exhibit 4, Applicant’s Statement of Facts, Issues and Contentions.
^[46] Exhibit 4, Applicant’s Statement of Facts, Issues and Contentions.
^[47] Exhibit 5, Applicant’s documents received on 2 June 2022.
^[48] Exhibit 6, Respondent’s Statement in reply.
^[49] Exhibit 6, Respondent’s Statement in reply, page 3, paragraph 7.
^[50] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions,, pages 18-19, paragraph 64.
^[51] Exhibit 6, Respondent’s Statement in reply, pages 3-5, paragraphs 8-10.
^[52] Exhibit 7, Respondent’s final written submissions dated 22 August 2022.
^[53] Exhibit 7, Respondent’s final written submissions dated 22 August 2022, page 13, paragraph 26.
^[54] Exhibit 7, Respondent’s final written submissions dated 22 August 2022, page 14, paragraph 27.
^[55] Exhibit 1, T Documents, T7, page 49, BAS Analyser for BAS lodgements as at 18 November 2020.
^[56] Trustee for the SBM Trust and Commissioner of Taxation [2015] AATA 174 ; (2015) 101 ATR 191 .

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