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The Full Federal Court (Dowsett, Bennett and Greenwood JJ) has, by majority, upheld the taxpayer's appeal from the decision of the AAT in The Taxpayer and FCT [2010] AATA 497 (2 July 2010). In that case, the AAT applied the anti-avoidance provisions in Div 165 of the GST Act to negate GST benefits in excess of $21m in the context of the application of the margin scheme.

The taxpayer was the representative member of a GST group 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.

In applying Div 165 negating the GST benefits, the Commissioner alleged that the sale of the partially completed apartments from Simnat to either Blesford or Mooreville was part of a scheme which gave a higher value for the purposes of the margin scheme and thus reduced the amount of GST payalble.

The AAT held that for supplies up to and including 16 March 2005 (when Div 75 of the GST Act was amended), the taxpayer was entitled, subject to the potential application of Div 165, to apply the margin scheme on the basis that the consideration for the acquisition was the sale price between Simnat and Blesford and Simnat and Mooreville.

However, the AAT held that Div 165 applied to supplies up to and including 16 March 2005 insofar as they were made pursuant to contracts entered into between Simnat and members of the public before the sale, by Simnat, of the partially complete apartments to either Blesford or Mooreville. In contrast, Div 165 had no application to supplies made pursuant to contracts entered into between either Blesford or Mooreville and members of the public, after the sale by Simnat.

The AAT further held that for supplies on and from 17 March 2005, the taxpayer ought to be given the opportunity to produce to the Commissioner an approved valuation of the apartments as at 1 July 2000. Div 165 had no application to these supplies, as the sale from Oldco to either Newco 1or Newco 2 could not affect this valuation.

On appeal the Full Federal Court, Bennett and Greenwood JJ held that for all settlements up to and including 16 March 2005, 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).

Their Honours said, at para 204:

"The Tribunal...fell into error in concluding that for settlements up to and including 16 March 2005 the GST benefit was not explained by the choices, elections etc made by Unit Trend, as the GST benefit deriving from the scheme was properly explained by each choice, election and agreement made by Unit Trend in the transactions central to the scheme (and therefore the 'getting' of the GST benefit), and also to the end purchaser transactions on which the amount of the GST benefit was ultimately calculated."

Their Honours held that it also followed that the AAT’s decision affirming the Commissioner’s objection decision in relation to settlements by Simnat of Simnat contracts up to and including 16 March 2005 must be set aside.

Their Honours held, in relation to settlements from 16 March 2005 to 30 November 2005, that these were governed by Commissioner determinations MSV 2000/2 and MSV 2005/1 and, in relation to the period on and from 1 December 2005, Commissioner determination MSV 2005/3 applied. These determinations related to approved valuations for the purposes of the margin scheme.

Unit Trend Services Pty Ltd v FCT [2012] FCAFC 112 (Full Federal Court; Dowsett, Bennett and Greenwood JJ; 17 August 2012).


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