Messenger Media and Information Technology Pty Ltd v FC of T

Tribunal:
Administrative Appeals Tribunal, Sydney

MEDIA NEUTRAL CITATION: [2023] AATA 752

Dr L Kirk (Senior Member)

BACKGROUND

1. Messenger Media and Information Technology Pty Ltd ('the Applicant') is a corporate entity which has been registered for GST from 2 January 2004 and reports GST annually. It accounts for GST on an accruals basis.^[1] Applicant’s Statement of Facts Issues, and Contentions (‘ASFIC’), [22].

2. The Applicant's core business activity relates to internet marketing, consulting and web design, but it also engages in some investment activity including investing in shares and undertaking property development.^[2] ASFIC, [75]. For the purpose of this review, it is not in dispute that the Applicant engaged in a property development enterprise and an information technology ('IT') enterprise during the 2012 and 2013 tax periods ('the Relevant Periods').^[3] Respondent’s Outline of Submissions, 5 December 2022, [3].

3. Since 24 February 2003, Mr Anthony Svasek ('Mr Svasek)' has been the sole director of Applicant.^[4] Supplementary T-Documents, ST4; ASFIC, [23].

4. On 15 February 2019, the Commissioner of Taxation ('the Respondent') issued the Applicant Notices of Amended Assessment for the annual activity statement periods from 1 July 2009 to 30 June 2012^[5] T-Documents, T4. 20-21. and for the 2013 tax period^[6] Ibid, T5, 22-23. (collectively, the 'Relevant Assessments').

5. On 17 July 2019, the Applicant lodged objections to the Relevant Assessments.^[7] Ibid.

6. On 19 December 2019, the Respondent disallowed the Applicant's objections for the Relevant Periods ('the Reviewable Decision').

7. The Respondent decided that the objection should be disallowed for the 2012 tax period as the Applicant did not notify the Respondent within the 4-year time limit in section 105-55 of Schedule 1 to the Tax Administration Act 1953 (Cth) ('TAA') of its entitlement to a refund or credit. Accordingly, the Applicant's entitlement to input tax credits ('ITCs') for this tax period had ceased.

8. The Respondent decided that the objection should be disallowed for the 2013 tax period because the Applicant did not include its claim for ITCs in its activity statement within the relevant period in section 93-5 of A New Tax System (Goods and Services Tax) Act 1999 (Cth) ('GST Act'). Accordingly, the Applicant's entitlement to ITCs for this tax period had ceased.

APPLICATION FOR REVIEW

9. On 4 February 2020, the Applicant lodged with the Administrative Appeals Tribunal ('the Tribunal') an application for review of the Reviewable Decision.^[8] Ibid, T1, 1-9.

10. The matter was heard by the Tribunal on 12 December 2022 via video-link. Mr Svasek gave oral evidence and was cross-examined at the hearing.

11. The material before the Tribunal consists of:

• • Respondent's Tribunal Book filed 7 December 2022, which comprises of:
  • - Applicant's Statement of Facts, Issues and Contentions filed 14 March 2021 attaching Appendix AA - F and 'A spreadsheet of income and losses'
  • - Applicant's Submissions filed 7 February 2022 attaching Appendix L - Q
  • - Applicant's Further Submissions filed 2 March 2022 attaching Appendix R - S
  • - Appendix U1 - U4 filed 20 July 2022
  • - Appendix V1 - V4 filed 15 August 2022
  • - Appendix W1 - W5 filed 18 October 2022
  • - Appendix Supplement A filed 18 October 2022
  • - Appendix Supplement B filed 24 October 2022
  • - Appendix X1 - Xe filed 24 October 2022
  • - Appendix W6 filed 15 November 2022
  • - Affidavit of Anthony Svasek filed 16 November 2022
  • - Appendix X14 - X16 filed 16 November 2022
  • - Appendix Y0 - Y22 filed 16 November 2022
  • - Section 37 T-Documents (T1 - T10, pp. 1 - 57) filed 16 April 2020
  • - Respondent's Statement of Facts, Issues and Contentions dated 19 February 2021
  • - Section 37 Supplementary T-Documents (ST1 - ST4, pp. 58 - 68) filed 19 February 2021
  • - Section 37 Further Supplementary T-Documents (ST5, p. 69) filed 21 May 2021
  • - Respondent's extract of SMART scripting - Activity Statement Lodgment Guidelines filed 1 March 2022
  • - Respondent's Outline of Submissions dated 5 December 2022

12. The Tribunal has reviewed the material before it and refers to relevant information below.

LEGISLATION

2012 Period

Time limit on entitlements to input tax credits

13. The version of section 93-5 and 93-10 of the GST Act applicable to the 2012 Period was introduced in 2010.

14. Section 93-5 of the GST Act relevantly provided:

• Time limit on entitlements to input tax credits
  • (1) You cease to be entitled to an input tax credit for a *creditable acquisition to the extent that you have not taken it into account in working out your *net amount for:
    • (a) the tax period to which the input tax credit would be attributable under subsection 29-10(1) or (2); or
    • (b) any other tax period for which you give to the Respondent a *GST return during the period of 4 years after the day on which you were required to give to the Respondent a GST return for the tax period referred to in paragraph (a).

    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 who is entitled to input tax credits for creditable acquisitions).

15. Section 93-10(3) of the GST Act set out an exception to the time limit on claiming ITCs. It relevantly provided:

• (3) You do not cease under section 93-5 to be entitled to an input tax credit to the extent that:
  • (a) the input tax credit arises out of circumstances that also gave rise to the whole or a part of a refund, other payment or credit in relation to which paragraph 105-55(1)(a) in Schedule 1 to the Taxation Administration Act 1953 applies; and
  • (b) you gave to the Respondent the notice referred to in that paragraph not later than 4 years after the end of the tax period to which the credit would be attributable under subsection 29-10(1) or (2) of this Act.

  Note 1: Section 105-55 in Schedule 1 to the Taxation Administration Act 1953 deals with the time limit within which you can claim amounts relating to indirect tax.

  Note 2: Section 93-15 of this Act may preclude this subsection from applying to the input tax credit, in which case section 93-5 of this Act will apply.

16. Under these provisions, if an entity notified the Respondent that it was entitled to ITCs that gave rise to a refund within 4 years after the end of the tax period, then the entity remained entitled to the credit or refund attributable to that tax period, notwithstanding the 4-year time limit in section 93-5.

Requirements for a section 105-55 notification

17. With effect from 1 July 2006, the statutory time limit for GST refunds and credits was inserted into section 105-55 of Schedule 1 to the TAA. The former subsection 105-55(1) of Schedule 1 to the TAA^[9] As amended by the Tax Laws Amendment (2008 Measures No. 3) Act 2008 (Cth) . which applied to tax periods starting on or after 1 July 2008, relevantly provided:

• 1) You not entitled to a refund, other payment or credit to which this subsection applied in respect of a tax period or importation unless:
  • a) Within 4 years after:
    • (i) The end of the tax period; or
    • …
    • … you notify the Respondent (in a GST return or otherwise) that you are entitled to the refund, other payment or credit;

    ('Section 105-55 Notification')

18. This section was repealed on 1 January 2017,^[10] This section was repealed on 1 January 2017 by Item 259 in Schedule 1 to the Indirect Tax Laws Amendment (Assessment) Act 2012 (Cth). However, during the 2012 tax period, it was not yet repealed. however the provision continued to apply for the 2012 Period and earlier periods.

19. The Respondent set out his guidance regarding the requirements of a Section 105-55 Notification in Miscellaneous Taxation Ruling MT 2009/1 Miscellaneous taxes: notification requirements for an entity under section 105-55 of Schedule 1 to the Taxation Administration Act 1953 ('MT 2009/1').^[11] MT 2009/1, [11].

20. MT 2009/1 relevantly states:

'There is no specific form that is required for a notification for the purposes of section 105-55. However, the notification must be received on or before the fourth anniversary of the end of the relevant tax period or the importation. The notification must also identify and assert the entitlement such that it brings to the Commissioner's attention the refund, other payment or credit to which the entity claims entitlement. This requires that the notification put the Commissioner on notice of the entitlement. If the notified entitlement is to be claimed at a later time, it needs to be possible to ascertain that the subsequent claim is covered by the notification.'^[12] Ibid.

21. A Section 105-55 Notification need not be in writing, however it does need to:

• • be received on or before the fourth anniversary of the end of the relevant tax period;
• • assert that the entity has an entitlement to a refund or credit. The assertion must be sufficiently prominent, an oblique reference will not suffice;^[13] Ibid, [23].
  • - If a notification is speculative in nature, in the sense that it is directed at reserving an entity's rights in relation to possible future claims, rather than being directed at one or more particular entitlements, then this will not be considered a notification as it is not specific enough;^[14] Ibid, [14].
• • provide a description of the entitlement to a refund, other payment or credit, which is sufficient to bring the entitlement to the Respondent's attention,^[15] Ibid, [23]. such that when a subsequent claim is made it could reasonably be identified as being covered by the notification; and
• • specify the tax period(s) or importation(s) to which the entitlement relates.^[16] Ibid, [12].

22. In relation to oral notifications, MT 2009/1 provides:

'However, it would only be in rare circumstances that a statement made orally could sufficiently bring to the Commissioner's attention the matters necessary for a valid section 105-55 notification. Moreover, even if an oral statement were sufficient to constitute notification, there would potentially be formidable problems of proving the existence of the notification and determining what the parameters of the notification were. Accordingly, entities should only seek to make section 105-55 notifications in writing.'^[17] Ibid, [22].

Creditable Acquisitions

23. Section 7-1 of the GST Act provides that an entitlement to ITCs arises on creditable acquisitions.

24. Section 11-5 of the GST Act sets out when an acquisition is creditable. Relevantly, paragraph 11-5(a) of the GST Act states:

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. The term "creditable purpose" is defined in section 11-15 of the GST Act which provides:

Meaning of creditable purpose

• (1) You acquire to the extent that you acquire it in *carrying out your *enterprise.
• (2) However, you do not acquire the thing for a creditable purpose to the extent that:
  • (a) the acquisition relates to making supplies that would be input taxed; or
  • (b) the acquisition is of a private or domestic nature.

26. To the extent that an entity acquires something 'in carrying on its enterprise', then the thing is acquired for a 'creditable purpose' under subsection 11-15(1) of the GST Act.^[18] Provided that the acquisition does not relate to making input taxed supplies or is of a private or domestic nature in accordance with subsection 11-15(1) of the GST Act. For acquisitions that fulfil the requirements in section 11-5, an entity is, in accordance with section 11-20 and 11-25 of the GST Act, entitled to an ITC equal to the GST included in the cost of acquiring the thing acquired.

ISSUES FOR DETERMINATION

27. The issues for determination are:

• 1) Whether pursuant to Division 93 of the GST Act and section 105-55 of Schedule 1 to the TAA, the Applicant is within time to claim ITCs for each of the Relevant Periods (the 'Time Limits Issue'); and
• 2) If the claims were made within time, whether the Applicant has established an entitlement to those ITCs as required by section 11-5 and 29-10 of the GST Act (the 'Entitlement Issue').

EVIDENCE BEFORE THE TRIBUNAL

Lodgment of activity statements

28. Prior to the annual tax period ending 30 June 2010, the Applicant lodged its annual activity statements each year before the due date.^[19] ASFIC, [24]; Respondent’s Statement of Facts, Issues and Contentions (‘RSFIC’), [11]. The Applicant did not lodge its annual activity statements for the 2011 to 2015 tax periods by the due date.^[20] Ibid, [25]; Ibid, [12].

29. On 19 January 2017, following a prosecution action, the Applicant was issued with court orders^[21] Supplementary T-Documents, ST1, 58. for outstanding income tax returns for the 2011 to 2015 income years.

30. On 4 February 2019, the Applicant lodged annual activity statements for the tax periods from 1 July 2009 to 30 June 2015.^[22] RSFIC, [16]. This was completed to support compliance with court orders required of the Applicant by bringing all outstanding lodgments up to date.^[23] Ibid. At the hearing, Mr Svasek explained the reason for the late lodgment by the Applicant of these statements:

'… [t[here was a massive amount of work done on the lead-up to all of this to make that happen, and the soonest it could happen was that date.'^[24] Transcript of proceedings, 12 December 2022, 26.

31. In its' activity statement lodged on 4 February 2019, the Applicant claimed ITCs of $9,043 for the 2012 tax period.^[25] Supplementary T-Documents, ST2, 61. The Applicant did not provide written notice of its entitlement to these ITCs prior to lodging its activity statement.^[26] RSFIC, [18]. In its activity statement, the Applicant also claimed ITCs of $7,053 for the 2013 tax period.^[27] Ibid, [21].

32. The Applicant's evidence is that it did not lodge its activity statements before February 2019 as it was concerned it would incur penalties if it lodged incorrect statements.^[28] Ibid, [24]. At the hearing, Mr Svasek described phone conversations he had with ATO officers about submitting the Applicant's activity statements:

'This particular operator and the ones following were saying, "Do not submit" if the estimate - "If you're uncertain about this estimate" they threatened me about how I would be getting bigger fines. There was something about if I was over 20 per cent in error, which, you know, I knew that that was quite likely because I actually thought, yes, [$31,000] is very big. That's why I didn't submit it too, like don't get me wrong, I didn't want to go and claim money that I didn't think necessarily think that that was mine. But they pressed upon me and scared the bejesus out of me in terms of further threats, that I would be convicted of, you know, trying to defraud the Tax Office, and all the rest of it, …'^[29] Transcript of proceedings, 12 December 2022, 7.

33. On 7 February 2019, the Respondent commenced an audit of the Applicant's activity statements for the Relevant Periods.^[30] Respondent’s Outline of Submissions, [25].

4-year limit and notification requirement

34. The Applicant's evidence is that it was not aware of the 4-year time limit on entitlements to ITCs until February 2019.^[31] Appendix L, [52]. Mr Svasek confirmed this during cross-examination at the hearing:

'It's true, I did not know about the four-year rule, absolutely, one hundred per cent; never once doubted it, never once said that I did; I never ever knew that GST tax credits could expire after four years, one hundred per cent correct'.^[32] Transcript of proceedings, 12 December 2022, 25.

35. Mr Svasek told the Tribunal he also was unaware of the notification requirement:

'One hundred per cent correct, yes, that's right, in terms of the notification method and the - yes, that oral could be considered, but it's absolutely true, one hundred per cent, yes. I said that the whole time, yes; never once pretended that I knew.'^[33] Ibid.

36. When made aware of the 4-year time limit and the notification requirement, the Applicant's accountant indicated his belief that the prosecution action brought against the Applicant in 2016 may have constituted notification for the purposes of section 93-10 of the GST Act.^[34] Supplementary T-Documents, ST5, 69; Respondent’s Outline of Submissions, [25]. The ATO systems do not contain records of any such notification.^[35] See paragraph [11] of Appendix A to Respondent’s Outline of Submissions.

Phone calls made to ATO

37. The Applicant's evidence is that Mr Svasek made a number of calls to the Australian Taxation Office ('ATO') which are not recorded in the Respondent's records. On 26 November 2012, he called the ATO advising that the Applicant was experiencing difficulties meeting its lodgment obligations as a result of losing the relevant financial data.^[36] Mr Svasek provided handwritten notes that he claims are from the time of the call, T-Documents, T9, 53. On 22 May 2013, he called the ATO to advise that the Applicant had incurred penalties for overdue lodgments and to enquire about what assistance was available.^[37] Ibid, T9, 50.

38. The Applicant's evidence is that Mr Svasek had a discussion with a representative of the Respondent on 4 November 2013,^[38] The Applicant has provided an Optus phone bill for the period 15 October 2013 to 14 November 2013 showing that the number 13 11 42 was called on 4 November 2013 and that the duration of the phone call was 47 minutes. during which he stated that the Applicant:

• • Was under hardship to lodge income tax and GST returns.
• • Since 2009, had its cash at bank decreased by $85,000, sold shares to value of $125,000 and accumulated an estimated taxable loss of $210,000.
• • Required debt payment plans for penalties from overdue lodgments.
• • Needed guidance regarding what was available to prevent further penalties.^[39] ASFIC, [33a].

39. Following this conversation, the Applicant concluded that it would investigate if it was possible to make an estimate and produce the values that could be used to lodge the outstanding income tax and GST returns.^[40] Ibid, [33c].

40. The Applicant had a discussion with its tax agent on 17 December 2013^[41] C2, AB, 11 and E13 notes. in relation to how to best develop a reasonable estimate^[42] E4 notes, 17 December 2013. using available information that would permit the lodgment of the income tax and GST returns. The Applicant then proceeded to complete the calculations of this reasonable estimate.^[43] ASFIC, [34]. Mr Svasek prepared an estimate of the Applicant's GST liability for the Relevant Periods being $31,748 of credit.^[44] Transcript of proceedings, 12 December 2022, 6; E13, E15.

41. The Applicant's evidence is that Mr Svasek had a discussion with a representative of the Respondent on 20 December 2013,^[45] The Applicant provided an Optus phone bill from 15 December 2013 to 14 January 2014 showing that Mr Svasek called 131 142 on 20 December 2013 for a period of 43 minutes. It also provided what it says are handwritten contemporaneous notes of this conversation with the tax agent. The Applicant further points to the properties of an Excel document file which show the date last saved as ‘19December 2013 3.42pm’,60 as support for his claim that this file was created and updated at or around the time of the call to the ATO in December 2013. during which he stated:

• • Lodging the outstanding income tax and GST returns to exact amounts would take at least 6 weeks of work over one year for the Applicant to re-input data.
• • The Applicant was confident of avoiding bankruptcy and would eventually trade out of financial hardship if it was able to defer this re-input for at least several years.
• • Penalties for outstanding lodgments were only adding pressure and stress to the Applicant in progressing to trade out of hardship.
• • The Applicant had followed guidance provided on 4 November 2013 that a reasonable estimate could be used to lodge the outstanding returns and stop further penalties.
• • A method had been developed with the tax agent to estimate reasonable values for the outstanding lodgments.
• • The Applicant had completed this estimate and the calculation that was broken into monthly quarterly and annual totals for the 2009 to 2013 tax periods.
• • the GST payable, the ITCs claimed and the net amount for the annual totals for each of the years from 2009 to 2013, and that the Applicant wished to claim the refund of $31,748.^[46] ASFIC, [46].

42. In his oral evidence at the hearing, Mr Svasek confirmed that he did not make contemporaneous notes of these conversations:

'Yes, I wrote little scribbles and as I was interacting with the ATO over time I realised I needed to take more scribbles because it was lack of consistency of their advice.'^[47] Transcript of proceedings, 12 December 2022, 26.

43. The ATO records of interactions with the Applicant do not contain notes of a conversation with Mr Svasek on 20 December 2013, nor do they contain records for the claimed conversations on 26 November 2012, 22 May 2013 or 4 November 2013.^[48] Appendix A, [9] and [19].

Notification of entitlement to ITCs for 2012 Period

44. The Applicant's evidence is that the call made to an ATO contact centre by Mr Svasek on 20 December 2013 constituted a valid oral Section 105-55 notification of an entitlement to ITCs for the 2012 Period that would result in a refund.^[49] ASFIC, [47]; Appendix A, [9] and [19].

45. During his oral evidence at the hearing, Mr Svasek conceded that he could not provide verification of the notification:

'Now, not only that, and this is where my problem is, and I'll be perfectly upfront about this; unfortunately I do not have any independence (sic) from the ATO information systems that verify that I said this, yes, that I let them know. It was never taken down in notes, it was never recorded in an audio file, and I used FOI three times to scrub all the records'.^[50] Transcript of proceedings, 12 December 2022, 8.

46. Mr Svasek told the Tribunal that although he was unaware of the 4-year rule, he nevertheless gave oral notification:

'My actions clearly show that I served a notification. I do not need to know the four-year rule in order to complete oral notification. [When] the ATO, turned around and said that we're not paying this GST because of the out of time rule, is when I then looked in terms of what I'd done and found out that, okay, I actually satisfied this particular rule …'^[51] Ibid, 28.

CONTENTIONS

Applicant

47. The Applicant provided a valid Section 105-55 Notification for the 2012 tax period during the call with the Respondent's representative on 20 December 2013.^[52] ASFIC, [78]. It stated the GST payable, the ITCs claimed and the net amount for the annual totals for each of the years from 2009 to 2013, and that it wished to claim the refund of $31,748.^[53] ASFIC, [79]. The Applicant claims that:

• a) These claims of entitlement of refunds and payment were specific, clear and to the point so not to be mistaken for conversation in passing.
• b) The description of the entitlement, refunds and payment were sufficient to bring the entitlement to the Respondent's attention, such that when a subsequent claim would be made, it would be reasonably be identified as being covered by the notification.
• c) The tax periods for the entitlement of refunds and payment were clearly specified.
• d) The descriptions, together with the tax periods, satisfy the condition required for notification of entitlement to ITC as stated in MT 2009/1 as it was:
  • (i) Received before the fourth anniversary of the end of the relevant tax period.
  • (ii) Identified and asserted such that it brought to the Respondent's attention the refunds to which the Applicant claimed entitlement.
  • (iii) Put the Respondent on notice of the entitlement.
  • (iv) Possible to ascertain the subsequent claim was covered by the notification if the notified entitlement was to be claimed at a later time.^[54] ASFIC, [79].

Respondent

2013 Period

48. The Respondent contends that the Applicant's entitlement to ITCs has ceased because the relevant ITCs were not taken into account in an assessment of GST net amount within the 4-year period set out in section 93-5 of the GST Act.^[55] Respondent’s Outline of Submissions, [37].

49. No discretion exists to extend the 4-year time limit. Accordingly, the decision under review for the 2013 Period must be affirmed.^[56] Ibid, [8] citing H & B Auto Repair Centre and Commissioner of Taxation [2022] AATA 3561 .

2012 Period

50. The Respondent contends that the Applicant is no longer entitled to any ITCs that would be attributable to the 2012 Period as they were not taken into account in an assessment of net amount within the 4-year period set out in section 93-5 of the GST Act at the relevant time, as it applied for the 2012 tax period.^[57] Ibid, [9].

51. While an exception to the 4-year time limit existed in paragraph 93-10(3) of the GST Act, the Applicant did not make a valid notification to the Respondent in accordance with the former section 105-55 of Schedule 1 to the TAA of its entitlement to ITCs, and therefore is out of time to claim ITCs for the 2012 Period.^[58] Ibid, [10].

52. Should the Tribunal find, contrary to the Respondent's contentions, that the Applicant made a valid oral notification, the Tribunal must then consider whether the Applicant has substantiated that it made creditable acquisitions for which ITCs of $9,043 are attributable to the 2012 Period.^[59] Ibid, [11]; Whether tax invoices for acquisitions over $82.50, or some other records for acquisitions under $82.50. The Respondent notes that a finding of a valid notification would then require the Tribunal to consider both the $590 in GST on sales reported by the Applicant in addition to any ITCs for which an entitlement is established when calculating any refund.^[60] Ibid, [11]. At audit the Commissioner revised both the Applicant’s GST on sales and GST on purchases to nil for the 2012 Period by virtue of the lack of a notification under section 105-55 of the TAA.

53. The Respondent contends that the Applicant has only provided evidence to substantiate GST on acquisitions totalling $6,504 for the 2012 Period. Even then, the Respondent contends that the Applicant must still establish that the acquisitions were creditable acquisitions.^[61] Ibid,[12].

CONSIDERATION AND REASONS

1) Time Limits issue

a) 2013 Period

54. For the reasons that follow, the Tribunal finds that the Applicant's ability to claim ITCs for the 2013 period ceased on 3 June 2018.

55. The evidence before the Tribunal is that the Applicant lodged its activity statement for the 2013 Period on 4 February 2019.^[62] Supplementary T-Documents, ST2, 61. The due date for lodgment of the Applicant's GST return for the 2013 Period was 3 June 2014. Pursuant to section 93-5, the Applicant's entitlement to claim ITCs for the 2013 Period ceased on 3 June 2018.

56. In
Rosebridge Nominees Pty Ltd (in liq) v Commissioner of Taxation,^[63] [2019] AATA 426 . the Tribunal held that section 93-5 makes it 'abundantly clear that entitlement to input tax credits is extinguished' when the 4-year period ends.^[64] Ibid, [44]. Senior Member Lazanas noted that the use of the word 'ceases' is unequivocal.^[65] Senior Member Lazanas also cites with approval the decision S.E Sedgwick & Y.E. Sedgwick and Commissioner of Taxation [2015] AATA 690 and The Trustee for the SBM Trust and Commissioner of Taxation [2015] AATA 174 .

57. The definitive operation of section 93-5 of the GST Act was further affirmed by the Tribunal in its more recent decisions JHKW and Commissioner of Taxation^[66] [2022] AATA 2875 , [49]. and H & B Auto Repair Centre Pty Ltd and Commissioner of Taxation.^[67] [2022] AATA 3561 , [58]. In the latter decision, Member Mitchell confirmed that there is no discretion for the Respondent, or the Tribunal, to circumvent the operation of section 93-5.^[68] Ibid, [64]

58. Accordingly, the Tribunal is satisfied that any entitlement the Applicant may have had to ITCs ceased to exist well before the Applicant's GST return was lodged on 4 February 2019. The Tribunal has no discretion to extend this 4-year time limit and accordingly the Applicant's entitlement to ITCs has ceased.

2012 Period

59. For the reasons that follow, the Tribunal finds the Applicant is no longer entitled to claim credits or refunds pursuant to Division 93 of the GST Act and section 105-55 of Schedule 1 to the TAA, nor was it entitled to claim those credits or refunds at the time it lodged its activity statements on 4 February 2019.

60. For the 2012 Period, section 93-5 of the GST Act provided that an entity ceased to be entitled to an ITC for a creditable acquisition 4 years after the day on which it was required to give to the Respondent a GST return for the period. For the purposes of section 93-5, the last day of the 4-year period was 3 June 2017. At the relevant time, section 93-10(3) provided that if an entity notified the Respondent that it was entitled to ITCs that give rise to a refund within 4 years after the end of the tax period, then it remained entitled to the credit or refund attributable to that tax period notwithstanding the 4-year time limit in section 93-5.

61. The evidence before the Tribunal is that the Applicant did not lodge its activity statement until 4 February 2019. The Applicant's entitlement to ITCs for the 2012 Period had therefore ceased, unless it can establish that it had provided a valid Section 105-55 Notification of an entitlement to ITCs prior to 30 June 2016.

62. It is not in dispute that the Applicant did not make a written Section 105-55 Notification. The Applicant contends that it made an oral Section 105-55 Notification to the Respondent on 20 December 2013. The Respondent contends that no oral Section 105-55 Notification was made, and the exception in subsection 93-10(3) does not apply, therefore section 93-5 extinguishes the Applicant's entitlement to ITCs for the 2012 period.

What is required for an oral Section 105-55 Notification?

63. MT 2009/1 provides an example of what may constitute a sufficient oral notification:

'Specter Bank (Specter) is a small retail bank that makes both financial supplies and taxable supplies. During the course of an audit, ATO officers investigate whether certain supplies Specter treated as input taxed financial supplies in tax periods from 1 January 2011 until 31 March 2011, are in fact taxable supplies. Specter's tax manager informs the auditors during a meeting that on the basis of the auditors' preliminary view that the supplies are taxable supplies, Specter is entitled to input tax credits for creditable acquisitions the bank made in relation to those supplies. The tax manager says that Specter intends to claim the further input tax credits for that period, but will wait until the audit is completed and the Respondent's position on whether the supplies are taxable supplies or input taxed supplies is finalised. One of the officers notes Specter's statement in their record of the meeting.

In this case, the tax manager's oral statement constitutes a section 105-55 notification as the statement identifies the relevant transactions (the supplies that are subject to the audit) and the relevant tax periods. It also explains the reason why Specter considers that it is entitled to the input tax credits. The fact that the notification has been noted in the contemporaneous record of the meeting will assist in proving the existence of the notification and its parameters. Whether an oral statement is sufficient to constitute a notification will depend on the facts and circumstance of each individual case.''^[69] MT 2009/1, [22A] – [22B].

64. Four requirements for a valid oral Section 105-55 notification can be noted from this example:

• a) the relevant tax period is identified;
• b) the ITCs to be claimed are identified;
• c) the intention to claim the ITCs is notified; and
• d) there is a record of the notification.

65. The case law surrounding what constitutes a valid Section 105-55 Notification is consistent with the four requirements detailed in [64]. In
Central Equity Limited v Commissioner of Taxation ('Central Equity')^[70] [2011] FCA 908 . the Court discussed the requirements for a valid Section 105-55 Notification. Gordon J stated in obiter as follows in relation to a written notification:

'I accept that the Notification must fulfil its purpose and convey the information which it is intended to convey: cf
Deputy Commissioner of Taxation v Woodhams 2000 ATC 4141; (2000) 199 CLR 370 at [33]. In the present case, the Notification achieved its objectives. It identified the period of the claim. The fact that the claim spanned eight years does not detract from the fact that the time period was specified. Next, although the legislation did not provide for a specific form of notification, the form used stated that details of the refund claim including "the specific nature of the refund" and "the circumstances under which the refund arise" were to be provided. Item 4 of the Notification (see [72] above) contained that information. The specificity sought by the respondent (see [76] above) was unnecessary. Moreover, the third of the respondent's complaints is wrong. The Notification did specify that the entitlement arose from supplies having been made under real property contracts before 1 July 2000. If that assertion was correct, then it was at least arguable that it took them outside the GST regime: see [38] above. Finally, the fact that CEL had alternate, albeit inconsistent, claims was the fact. That both were made does not detract from the fact that the Notification identified both claims.'^[71] Ibid, [77].

66. In
Commissioner of Taxation v Travelex Limited,^[72] [2020] FCAFC 10 . the Full Federal Court cited with approval the observations made by the Court in Central Equity. Steward J stated (Kenny J agreeing) as follows:

'In reliance on the obiter of Gordon J in
Central Equity Ltd v Federal Commissioner of Taxation (2011) 214 FCR 255 at 270-271 (Central Equity), it was accepted by the Commissioner that no specific form of notification was required for the purposes of s 105-55 and that it can be constituted by a letter or completed form. In that case her Honour held that the notification was sufficient if it achieved the objects required by the statute. In the matter before her Honour the notification satisfied s 105-55 because it identified the period of the claim (even if it also identified other periods), and the details of the refund claim had been specified as well as the circumstances under which the claimed refund arose.'^[73] Ibid, [138].

67. This view was confirmed in
North Sydney Developments Pty Ltd v Federal Commissioner of Taxation^[74] [2014] AATA 363 . which involved a review by the Tribunal of an unfavourable private binding ruling regarding acquisitions related to the development of a substantial but incomplete property. The Respondent accepted that the company was entitled to ITCs in relation to the acquisitions reported if a valid notification had been made. In this case, a representative of the company wrote a letter to the Respondent after being placed into receivership. The Applicant's letter and subsequent contact merely requested that the Respondent suspend system generated documents so that automated penalties and interest could be avoided. The Applicant argued that while the letter might not constitute sufficient notification in isolation, it was sufficient in light of the information that had been provided to the Respondent in relation to previous periods. Senior Member Taylor disagreed, stating:

'I do not accept North Sydney's contention. Whatever informality may be permissible for the purpose of an effective notification, it is the communication relied on as the notification that must provide the requisite information. It may be the case that information previously provided to the Respondent disclosed the general nature of its activities. It may even have disclosed a basis for inferring the likelihood that North Sydney would be make (sic) purchases, which would give rise to input tax credits for December 2005 and January 2006. But expectation and inference are not the same as notification. And if (contrary to the finding I have previously made) the 3 September 2009 letter was deficient (by failing to provide details of the input tax credit entitlement for those particular months) that deficiency could not relevantly be overcome by pointing to information that had been provided to the Respondent in relation to previous tax periods.'^[75] Ibid, [35].

Did the Applicant make a valid oral Section 105-55 Notification?

68. For the reasons that follow, the Tribunal finds that the Applicant did not make a valid Section 105-55 Notification to the Respondent in relation to its entitlement to ITCs for the 2012 Period.

69. The Applicant's evidence is that neither its accountant nor Mr Svasek were aware of the requirements for a valid Section 105-55 Notification prior to February 2019. Accordingly, the Tribunal finds that the Applicant did not make a conscious Notification prior to this time, in particular before the expiry of the 4-year period in June 2016. Mr Svasek's evidence is that despite being unaware of the Section 105-55 Notification requirements, he nevertheless satisfied these requirements during his undocumented telephone conversation with a representative of the Respondent on 20 December 2013. He claims that during this call, he had stated the GST payable, the ITCs claimed, and the net amount for the annual totals for each of the years from 2009 to 2013, and that the Applicant wished to claim the refund of $31,748.^[76] ASFIC, [79].

70. Even if the Tribunal accepts Mr Svasek's evidence of the content of the conversation he had with the Respondent's representative on 20 December 2013, it finds that it is insufficient to meet the requirements of a valid Section 105-55 Notification. MT2009/1 and the authorities cited in paragraphs [65]-[67] recognise that whereas there is no specific form of notification required for the purposes of section 105-55, it is only in rare circumstances that a statement made orally could sufficiently bring to the Respondent's attention the matters necessary for a valid Section 105-55 Notification.^[77] MT 2009/1. Amongst the matters that must be included in the Notification, whether written or oral, are the period of the claim (even if it also identifies other periods), the details of the claim, and the circumstances under which the claim arose.^[78] [2020] FCAFC 10 , [138]. The content of the notification Mr Svasek claims he made on 20 December 2013 does not meet these requirements, as it did not identify the details or the circumstances of the claimed ITC. Accordingly, even if the Tribunal accepts that the Applicant can establish that it made an oral Section 105-55 Notification, the evidence does not support a finding that the parameters of the Notification satisfy the requirements of section 105-55, and accordingly it cannot be satisfied that the Notification was valid.

71. In making this finding, the Tribunal notes that Mr Svasek's recollection of the detail of the information he provided during the conversation he had with the ATO officer on 20 December 2013 has become more specific as he has learned more about the requirements for a valid Section 105-55 Notification. Neither the Applicant nor the Respondent has written notes or records to corroborate what Mr Svasek claims was the information he conveyed to the ATO officer during the phone call. Despite the requirements for a Section 105-55 Notification not being overly prescriptive, the Tribunal cannot be satisfied, based on the evidence before it, of the content of the conversation between Mr Svasek and the ATO officer on 20 December 2013 and therefore that a valid Section 105-55 Notification was made.

72. Accordingly, the Tribunal finds that exception in subsection 93-10(3) of the GST Act does not apply, and the Applicant ceased to be entitled to ITCs that would be attributable to the 2012 Period.

2) Entitlements Issue

73. As the Tribunal has found that the Applicant's entitlement to ITCs has ceased for the Relevant Periods, it is not necessary for it to consider its entitlement to ITCs.

CONCLUSION

74. The Applicant's entitlement to ITCs for the Relevant Periods ceased as a result of the 4-year time limit imposed under Division 93 of the GST Act, as it applied in each of the Relevant Periods.

75. For the 2013 Period, the Applicant's entitlement to ITCs ceased on 3 June 2018. The Tribunal does not have any discretion to extend the 4-year time period.

76. For the 2012 Period, the Applicant did not provide a valid notification, either in writing or orally, of an entitlement to ITCs within 4 years of the end of the 2012 Period. Therefore, the exception in section 105-55 of Schedule 1 to the TAA (as it then was) is not applicable.

77. The Applicant has not discharged its burden of proving that the Respondent's GST assessments for the Relevant Periods are excessive or what they otherwise should be.^[79] H & B Auto Repair Centre and Commissioner of Taxation [2022] AATA 3561 , [38].

DECISION

78. Pursuant to section 43 of the Administrative Appeals Tribunal Act 1975 (Cth), the Tribunal affirms the Reviewable Decision dated 19 December 2019.