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Property developer denied input tax credits

The AAT has dismissed a taxpayer company’s appeal and held that the taxpayer had not discharged the burden of proving that the Commissioner’s amended assessments denying it input tax credits (ITCs) totalling $817,207 for earthwork services in relation to a development project were excessive: GH1 Pty Ltd, in Liquidation and FCT [2017] AATA 1063, AAT, McCabe DP and Walsh SM, 5 July 2017. The taxpayer carries on a business of land development, commercial property development and dry hire of equipment in Western Australia. It claimed ITCs in its BASs for the periods ended 31 December 2009 and 31 March 2010 of $912,216 and $812,142, respectively. These were stated to be for the acquisition of services solely for a creditable purpose including site works, earthworks, road works, sewer reticulation, stormwater drainage, water reticulation and retaining walls. After an audit of the 2009 to 2013 years, the Commissioner issued amended assessments disallowing $817,207 for ITCs in respect of 2 stages of a development project in WA. The Commissioner disallowed the taxpayer’s objection noting, among other things, that relevant invoices were dated after the relevant stages of the development were completed. The Commissioner claimed the relevant invoices did not evidence any actual of the relevant supplies to the taxpayer and that evidence showed that all development works for the relevant stages of the development was completed prior to the dates of the purported invoices. The Tribunal agreed with the Commissioner’s position. It said the evidence established that the ITCs should not be allowed because:

  • the deposited plans relating to the land the subject of the development work were created before the date of the purported tax invoices;
  • the taxpayer reported most of the property sales from the development of the land the subject of the development work before the date of the purported tax invoices;
  • the cost breakdown schedules for the development work for the stages in question showed that the development works were either partially completed or fully completed by the date of the purported tax invoices;
  • evidence from the site superintendent and the Water Corporation for the stages showed that construction of them was completed before the date of the purported tax invoices;
  • the value of the work certified by engineers as being completed at the stages almost exactly corresponds with the ITCs claimed by the taxpayer in its earlier BAS for the tax periods ended 30 September 2008 and 31 December 2008; and
  • the taxpayer had already claimed the ITCs in its BAS for the tax periods ended 30 September 2008 and 31 December 2008.

Further evidence provided by the taxpayer could not explain the underlying transaction, the Tribunal said. In the Tribunal’s view, as contended by the Commissioner, the evidence presented did no more than prove that book entries were made at some time. “Book entries do not prove the underlying taxable supply to the applicant in the absence of any evidence of the supply itself”. The Tribunal said it did not assist the taxpayer’s case to “merely point to MYOB records and identify where the transactions are recorded, when the issue that requires proof is whether the supplies, in fact, took place at all”. Consequently, the Tribunal placed no weight on that evidence and affirmed the Commissioner’s objection decision.

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