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Denial of property developer’s ITCs

The AAT has dismissed a taxpayer’s appeal and affirmed the Commissioner’s decision to disallow claims for input tax credits concerning several property developments in WA: GH1 Pty Ltd, in Liquidation and FCT [2017] AATA 1100 (AAT, McCabe DP and Walsh SM, 14 July 2017. Background The taxpayer company, a property developer, had claimed input tax credits (ITCs) totalling $1.9 million in respect of bulk earthwork and related services provided and invoiced to it by related entity Mammoth Nominees Pty Ltd in relation to 4 property developments in Western Australia. After an audit of BASs and tax returns covering a number of years, the Commissioner disallowed the ITCs claimed. The appeal arose out of the purchase and development of at least 361 lots of land by the taxpayer in the calendar years from 2005 to 2011. The taxpayer said it held a number of lots on trust. Some lots were transferred to other parties (some for no consideration) which held them as bare trustee for the taxpayer. Decision The Tribunal found the taxpayer failed to discharge its onus of showing the relevant assessments were excessive. The Tribunal said the taxpayer provided no explanation for why certain discrepancies existed, including why the contract price referred to in relevant invoices, and in the contract document provided by the taxpayer, was “significantly higher than the contract price referred to by the site superintendent, which also related to “earthworks”. There was also no documentation provided to explain the nexus between work performed and contractual documentation. The Tribunal found the relevant invoices were inconsistent and appeared to evidence duplicated claims. Apparent inflated invoice claims were also an issue. The Tribunal said that to the extent the invoices gave an appearance of a particular transaction having taken place, the significant discrepancies and anomalies “suggest the transactions (if any) were other than what they appeared to be on the invoices”. The Tribunal also did not accept the taxpayer was “carrying on an enterprise” in respect of one of the developments nor that it made a “creditable acquisition”, as the taxpayer was not the beneficial owner of the land in question. The Tribunal was also not satisfied that the taxpayer had discharged its onus of proving that the Commissioner should not have formed the opinion there was fraud and evasion.

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