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Administrative Appeals Tribunal considers the exercise of discretion under s 29-70(1B) of the GST Act

In BSRJ v Federal Commissioner of Taxation [2021] AATA 333, in which Courtney Ensor appeared for the Commissioner led by Kristen Deards SC, the Administrative Appeals Tribunal considered a property developer’s entitlement to input tax credits arising on creditable acquisitions made from a construction company in respect of a development project.

The Tribunal (Senior Member Olding) affirmed the objection decisions under review as to primary tax.  In doing so, the Tribunal declined to exercise the discretion under s 29-70(1B) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) to treat a progress claim issued pursuant to the construction contract as a tax invoice.  The applicant had claimed the corresponding input tax credit in two tax periods, with the Commissioner now out of time to amend in respect of the second period.  A tax invoice had issued in the second period, but only the progress claim in the first.  In those circumstances, the Tribunal held that it would be contrary to the evident statutory purpose for the discretion to be exercised in circumstances where that course was not only unnecessary to facilitate the applicant obtaining the benefit of the input tax credit, but would also result in the obtaining of a substantial unintended benefit.

In respect of a separate period under consideration, the Tribunal considered whether an adjustment event in the form of an increasing adjustment had occurred and, if so, when.  Following a particular progress claim being issued, negotiations between the applicant and the construction company resulted in over $2.6 million worth of adjustments being made to that progress claim in the applicant’s favour.  Although the applicant had already claimed input tax credits by reference to the original amount of the progress claim, the applicant never sought to subsequently bring an increasing adjustment to account with the Commissioner for the renegotiated figure.  At hearing the applicant did not deny that it was liable for an increasing adjustment, instead contending that such adjustment was not attributable to the tax period subject to review.  In holding that the increasing adjustment was attributable to the subject tax period, the Tribunal found it unnecessary to determine whether the applicant received credit notes in respect of the adjustments from the construction company, instead finding that email correspondence between the applicant and the construction company requesting and agreeing to reduce the amount payable constituted an adjustment event.

A copy of the Tribunal’s reasons may be found here.

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