Courtney Ensor recently appeared for the successful Commissioner of Taxation in Ian Mark Collins & Mieneke Mianno Collins ATF The Collins Retirement Fund v Commissioner of Taxation [2022] AATA 628. The case raised previously untested issues concerning the extent to which income tax jurisprudence on the distinction between capital and revenue assets is relevant for GST purposes, and as to the proper application of s 188-25(b) of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act).
The case concerned whether a self-managed super fund was liable for GST on c.$10 million in sales of subdivided real property. In particular, the Administrative Appeals Tribunal considered whether the supplies were excluded from the SMSF’s registration turnover threshold as supplies made, or likely to be made by the SMSF:
- by way of transfer of ownership of a capital asset of the SMSF (s 188-25(a));
- solely as a consequence of ceasing to carry on an enterprise (s 188-25(b)(i)); or
- solely as a consequence of substantially and permanently reducing the size or scale of an enterprise (s 188-25(b)(ii)).
The Tribunal (Senior Member Olding) held that none of these exclusions applied to the subject supplies.
The Tribunal accepted the Commissioner’s submission that, for the purpose of s 188-25(a) of the GST Act, the character of an asset is required to be determined at the time the supply is made or likely to be made. As recognised by the Tribunal, this is distinct from the income tax context where, in determining whether the proceeds of sale of an asset are on revenue or capital account, attention is focussed on whether the seller had an intention at the time of acquisition of the asset that the asset would be sold at a profit.
In considering s 188-25(b), the Tribunal emphasised the need for care to be taken in the task of statutory construction to avoid inversion of the natural application of the statutory words. The Tribunal acknowledged that the central objective of a land development venture occurs as part and parcel of the ongoing conduct of the enterprise, such that sales do not occur solely as a consequence of the enterprise ceasing, or substantially and permanently reducing in size or scale.
A copy of the Tribunal’s reasons can be found here.
