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01 May 13 Commissioner's appeal on GST anti-avoidance provision upheld - Unit Trend Services

The High Court (French CJ, Crennan, Kiefel, Gageler and Keane JJ) has unanimously allowed the Commissioner's appeal from the decision of the Full Federal Court in Unit Trend Services Pty Ltd v FCT [2012] FCAFC 112 (17 August 2012) concerning the interpretation of s 165-5(1)(b) of the GST Act.

The taxpayer was the representative member of a GST group of companies which included Simnat Pty Ltd ("Simnat"), Blesford Pty Ltd ("Blesford") and Mooreville Investments Pty Ltd ("Mooreville").

Simnat acquired land prior to 1 July 2000 with the intention of developing the land and selling to members of the public completed apartments in a resort development.

Prior to the sale of completed apartments to members of the public, a sale of some of the apartments whilst partially completed had taken place between Simnat and Blesford on the one hand, and Simnat and Mooreville on the other hand. The sales were completed in 2004. The Commissioner conceded that these were supplies of a going concern and thus were GST-free.

In the subsequent sales of the completed apartments to the public, Blesford and Mooreville elected to invoke the provisions of the margin scheme under Div 75, and used the stepped up consideration of the respective acquisitions from Simnat to calculate the margin.

The Commissioner issued a declaration to Unit Trend under the anti-avoidance provisions in Div 165 of the GST Act negating a total GST benefit in excess of $21 million. This declaration was contested by the taxpayer in the AAT, which found in favour of the Commissioner.

The AAT found that the companies were engaged in a "scheme" under s 165-10(2) of the GST Act. The GST benefit got from the scheme, which Div 165 was being invoked to negate, was the benefit obtained as a result of intermediate sales by Simnat to Blesford and Mooreville of a going concern. The GST benefit reflected the amount agreed to be paid to Simnat by Blesford and Mooreville as the consideration for the intermediate sales, which brought about an uplift in the intermediate cost base of the units supplied by them to buyers of the units. As a result, the amount of GST payable by the taxpayer was less than it would have been had the scheme not existed.

On appeal the Full Federal Court (Bennett and Greenwood JJ, Dowsett J dissenting) held that for all settlements up to and including 16 March 2005 (when the margin scheme provisions were amended), Division 165 did not operate because it was excluded as the GST benefit on the end purchaser transactions was attributable to the choices or elections made by the taxpayer in relation to going concern, grouping and the margin scheme, as provided for in s 165-5(1)(b).

The High Court disagreed. The High Court unanimously held that the phrase "not attributable to" in s 165-5(1)(b) is concerned with whether the GST benefit in question is not one to which the taxpayer was entitled by exercise of a statutory choice. Reference to the undisputed facts showed that the GST benefit in question was not attributable to the making of a statutory choice by the taxpayer provided for by the GST Act. The choice made by Blesford and Mooreville under s 75-5 of the GST Act to apply the margin scheme in respect of supplies to end buyers was the same choice as would have been made, albeit by Simnat, without the scheme.

The GST Benefit was, therefore, negated by the anti-avoidance provisions in Div 165.

FCT v Unit Trend Services Pty Ltd [2013] HCA 16 (High Court; French CJ, Crennan, Kiefel, Gageler and Keane JJ; 1 May 2013).


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