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26 Jun 13 Decision Impact Statement – Unit Trend Services (High Court)

The ATO has released a Decision Impact Statement on the decision of the High Court in FCT v Unit Trend Services Pty Ltd [2013] HCA 16. The case involved the application of the general anti-avoidance provisions in Div 165 of the GST Act to a scheme that sought to reduce GST payable on sales of new residential premises.

The issue before the High Court was whether a declaration under Div 165 operated to negate the GST benefit that the taxpayer got from the scheme because the GST benefit was “not attributable to” the making of a choice, election, application or agreement that was expressly provided for by the GST Act.

The Court unanimously held in a joint judgment that Div 165 operated to negate the GST benefit obtained by the taxpayer in relation to pre-17 March 2005 sales of unitsas part of the scheme. The Court 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.

In the ATO’s view, the High Court decision has broad application to all GST, Wine Equalisation Tax (WET) and Luxury Car Tax (LCT) schemes involving one or more statutory choices. The decision means that inclusion of a statutory choice or choices as an integer or step in a GST, WET or LCT scheme does not automatically preclude the operation of the general anti-avoidance provisions in Div 165.

Section 165-5(1)(b) will only preclude the operation of the general anti-avoidance provisions in Division 165 to a GST, WET or LCT schemes that include statutory choices in cases where the GST benefit got from the scheme is the particular benefit or benefits that the taxpayer is entitled to access as a result of an exercise of the statutory choice or choices in question.

In cases where a scheme includes a statutory choice and the GST benefit got from that scheme is the benefit that the taxpayer is entitled to as a result of the exercise of the statutory choice, Division 165 may still operate if the conditions stated in s 165-5(3)(a) and 165-5(3)(b) are met.

Having regard to the analogous purpose of the provisions and in the absence of contrary authority, the Commissioner will apply s 177C(2) ITAA 1936 in the same general way as the High Court applied s 165-5(1)(b) in the present case.

GSTR 2005/4 and GSTR 2005/5 will be reviewed, and PS LA 2005/24 will be updated, in light of the High Court’s decision.

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