ATO telephone advice does not excuse wrong GST claim
The AAT has affirmed the Commissioner’s decision to impose on a taxpayer an administrative penalty at the rate of 50% for “recklessness” in relation to incorrectly claimed input tax credits (ITCs).
Background
The taxpayer was an importer of construction goods. On 16 July 2012, it lodged a business activity statement (BAS) claiming ITCs for the GST payable in relation to the importation of 50,000 LED lights from Hong Kong. The taxpayer was subject to a GST audit in July 2012, in which it was determined that the taxpayer was not entitled to the ITCs claimed in respect of the period 1 April to 30 June 2012. The ITCs were reduced by $72,317 to $2,512, resulting in a shortfall amount of $72,317. In addition, the Commissioner imposed an administrative penalty of $36,158.50, which represented 50% of the shortfall, on the basis that the taxpayer had displayed “recklessness” as to the operation of the tax law.
The AAT noted that total ITCs of $74,829 were claimed in the BAS, comprising: (a) $68,250 for GST payable to customers on purchases valued at $682,500; (b) $522 for GST payable on freight forwarding fees for the importation; (c) $3,545 in various unaccounted credits; and (d) $2,512 in various credits that had been properly accounted for. The Commissioner accepted that the taxpayer was entitled to claim ITCs for item (d). However, the Commissioner alleged that the taxpayer had falsely claimed ITCs for items (a), (b), and (c) for the balance of $72,317.
It was not disputed that the major component of the ITCs claimed, item (a) for $68,250 in respect of a creditable importation, was incorrectly claimed. The AAT noted that the subject goods “had not left the country of origin – and indeed had not been manufactured – and hence there was no taxable importation for GST purposes”. In respect of item (b), the amount of $522 claimed as a creditable acquisition in respect of the taxpayer’s freight forwarding charge, the taxpayer produced a document from a freight forwarder titled “tax invoice”. However, the AAT noted that it was in fact a “quote”. With respect to item (c), the amount of $3,545 in various credits unaccounted for, the AAT noted that no evidence was produced by the taxpayer in support of the claim, or of relevance to the imposition of a penalty in respect of the claim.
Accordingly, the only issue before the AAT was whether an administrative penalty of 50% of the shortfall amount, assessed pursuant to s 284-90(1) of Sch 1 to the Taxation Administration Act 1953 (TAA), had been correctly determined in respect of the taxpayer.
Decision
The AAT agreed with the Commissioner’s assessment that the taxpayer’s conduct was “reckless” within the meaning of s 284-90(1) of Sch 1 to the TAA. It said the “recklessness was exhibited by the [taxpayer] in filing a manifestly inaccurate BAS, completed by the [taxpayer’s] agent”. Further, it said that in claiming the existence of a creditable importation, a reasonable person in the taxpayer’s position would have identified a “real risk” that the content of the BAS was incorrect.
The AAT also did not accept the taxpayer’s contentions that it had relied on telephone conversations with the ATO in which the ATO had allegedly advised to the effect that the taxpayer could claim ITCs for the GST for a creditable importation in the circumstances described above. The AAT noted, among other things, that the discussions post-dated the filing of the BAS and, accordingly, any advice received at that time could not have influenced the making of a false or misleading statement. Further, the AAT noted that there was evidence that the Commissioner had advised the taxpayer that it had claimed the creditable importations incorrectly around the same time as those discussions. In conclusion, the AAT did not consider the penalty “harsh” and refused remission of the penalty in the circumstances.
Re AJJJ’s Emporium Pty Ltd and FCT [2013] AATA 501, www.austlii.edu.au/au/cases/cth/AATA/2013/501.html.
