Property developers denied GST margin scheme

The AAT has affirmed the Commissioner's decision concerning the GST liability of two taxpayers associated with the sale of real property between 2008 and 2009.

The taxpayers had purchased the property, which was eventually subdivided and on-sold. They contended, among other things, that they "never had an intention of not including GST in returns or defrauding the Commissioner” and that “they wanted their returns to be correct". They also claimed they were "lay people" who relied on "legal people" to assist in the sale of the subdivided parcels of the property. The taxpayers claimed there was no profit in the property and there was therefore an assumption that no GST would be payable.

The AAT noted that the taxpayers' submissions were just that – submissions – and were not supported by evidence and could not be accepted as facts before it. It said the relevant dispute concerned the applicability of the margin scheme pursuant to s 75-5 of the A New Tax System (Goods and Services Tax) Act (GST Act). The AAT held that documents provided to it concerning the agreements for the sales of the property did not reflect any agreement in writing between the vendor and purchaser to which the margin scheme was to apply as required by s 75-5. The AAT noted the documents provided to it concerning the agreements for the sales of the property took two forms. The first form "left GST and whether the margin scheme was to apply to the vendors’ absolute discretion" and the second form "simply had a provision that the price was inclusive of GST".

The AAT therefore held that the taxpayers' case concerning primary tax must fail. It also affirmed the 12.5% penalty imposed as not being harsh in the circumstances.

Re Chen and FCT [2012] AATA 884, www.austlii.edu.au/au/cases/cth/AATA/2012/884.html.