The impact of this case on ATO policy is discussed in Decision Impact Statement: Cyonara Snowfox Pty Ltd v Federal Commissioner of Taxation (QUD 69 of 2011 & QUD 70 of 2010 ).
CYONARA SNOWFOX PTY LTD v FC of TJudges:
Full Federal Court, Brisbane
MEDIA NEUTRAL CITATION:
 FCAFC 177
Greenwood, Collier and Middleton JJ
1. These proceedings concern an Application before the Full Court under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (the "AAT Act") on contended questions of law arising out of a decision of the Administrative Appeals Tribunal (the "Tribunal") constituted by Deputy President Hack SC given on 25 February 2011 by which the Tribunal affirmed a decision of the Commissioner of Taxation to disallow the taxpayer's objection to an assessment, arising out of an audit, of net amounts payable of Goods and Services Tax ("GST") for particular periods in connection with property transactions concerning the taxpayer's sale of allotments of land.
2. The Tribunal also made a formal order otherwise varying the objection decision to give effect to the Commissioner's concession that the taxpayer was entitled to input tax credits on its acquisition of Lot 202.
3. The Commissioner had also imposed an administrative penalty in relation to contended shortfall amounts for two periods (the September 2004 period and the October 2006 period). The Tribunal's decision also gave effect to the Commissioner's concession that the base penalty amount imposed for each period be reduced by 80% but otherwise the Tribunal affirmed the Commissioner's objection decision not to further remit the administrative penalty.
4. The background facts are these.
5. The taxpayer, now called Cyonara Snowfox Pty Ltd ("Cyonara"), in 1997 acquired a parcel of land at Springwood, close to Brisbane, and subdivided it into allotments including, relevantly for present purposes, Lots 1, 6, 9 and 10 on Plan SP150819, and Lot 8 on Plan SP131663: Tribunal decision . Mr Smits who describes himself as "the controlling mind, a director and minority shareholder of the applicant since August 1997" in his statement of 12 March 2010 says that Cyonara, which was incorporated on 29 July 1997, acquired the Springwood land on 15 April 1998.
6. Lot 1 was sold to Handii Pty Ltd. No contract of sale was produced to the Tribunal. However, Cyonara's solicitors produced a settlement statement to the Tribunal which suggested that settlement of the transaction occurred on 16 September 2004; the sale price was $1.5 million; and, $1,655,981.42 was paid on settlement to Cyonara which included an amount of $150,543.76 in respect of GST for the purposes of A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the "GST Act"). Cyonara did not account for GST on this sale in its Business Activity Statement for the quarter 1 July 2004 to 30 September 2004: Tribunal decision  and . The statement for the quarter was dated 31 December 2004 and lodged with the Commissioner on 10 January 2005.
7. Lot 9 was sold to Springwood Properties (Qld) Pty Ltd (in a trustee capacity) at a price of $1.5 million plus GST. A settlement statement contained in a letter dated 29 October 2004 from the solicitors for the purchaser to Cyonara's solicitors was produced in evidence to the Tribunal which suggested that settlement of the transaction occurred on 1 November 2004 and GST of $150,000 calculated on the sale price was payable by the purchaser. Cyonara accounted for GST of $150,000 on the supply (settlement of the sale) in its Business Activity Statement for November 2004 dated 6 January 2005 and lodged with the Commissioner on 12 January 2005. The net amount payable under the statement was paid to the Commissioner on 10 January 2005: Tribunal decision  and .
8. Lot 6 was sold by Cyonara to Norstorm Pty Ltd in January 2006 for $2,205,611.00 (excluding GST). In its January 2006 Business Activity Statement, Cyonara accounted for GST on the sale of Lot 6 on the basis of that sale price and paid the net amount of the Business Activity Statement to the Commissioner on 10 February 2006: Tribunal decision .
9. Lot 10 was sold to Trade Tools Direct Pty Ltd for $1,075,000 (excluding GST) by a contract dated 29 September 2006 which, according to the settlement statement produced to the Tribunal by the purchaser's solicitors, settled on 31 October 2006. GST of $107,966.86 was paid on settlement by the purchaser to Cyonara. Cyonara did not account for GST on the sale in its Business Activity Statement for October 2006: Tribunal decision  and .
10. Each buyer of Lots 1, 9, 6 and 10 was registered for the purposes of Part 2-5 of the GST Act.
11. Lot 8 was sold to 3435 Pacific Highway Pty Ltd ("3435 PHPL") (in a trustee capacity) for $3.7 million by contract dated 18 October 2005. The contract recites that the sale was a sale of a "going concern" and was subject to a condition that Cyonara would have a two year lease over Lot 8 commencing from 6 December 2005. Completion of the transaction occurred on 7 December 2005. The purchaser became registered for the purposes of Part 2-5 of the GST Act on 1 January 2006. On 31 March 2007, Cyonara issued a tax invoice to the purchaser of Lot 8 showing GST payable to Cyonara of $370,299.02: Tribunal decision  and .
12. Lot 202 concerned an acquisition by Cyonara rather than a supply. By contract dated 16 December 2005 Cyonara acquired Lot 202 for $3.4 million. Settlement occurred on 23 December 2005. On 21 March 2007, Cyonara lodged a Business Activity Statement for the month of February 2007 in which Cyonara claimed input tax credits on creditable acquisitions of $3.4 million: Tribunal decision  and .
13. After having completed an audit of Cyonara's Business Activity Statements, the Commissioner notified Cyonara by letter dated 24 May 2007 of the following six matters.
14. First, the GST payable for the quarter ending 30 September 2004 had increased from nil, as accounted for, to $150,543 to bring to account GST payable on the supply of Lot 1.
15. Second, the GST payable for the month of November 2004 had increased from $150,000 to $151,778 to bring into account the adjusted sale price for Lot 9 rather than the contract price.
16. Third, the GST payable for December 2005 had increased from nil to $370,299 to bring to account GST payable on the supply of Lot 8. The Commissioner brought GST to account on the footing that the Commissioner rejected Cyonara's contention that the supply of Lot 8 was GST-free as a supply of a "going concern" for the purposes of s 38-325 of the GST Act.
17. Fourth, the GST payable for January 2006 decreased from $220,561 to $215,561 to reflect an adjustment to take account of a price reduction for the supply of Lot 6 by $50,000.
18. Fifth, the GST payable for October 2006 increased from nil to $102,481 to bring to account GST on the supply of Lot 10.
19. Sixth, the input tax credits for February 2007 were reduced from $313,892 to nil on the footing that the Commissioner did not accept that Cyonara was entitled to claim input tax credits on the acquisition of Lot 202.
20. Apart from the letter dated 24 May 2007 setting out each of the above six matters, the Commissioner issued assessments on 24 May 2007, by way of a Notice of Assessment, of net amounts payable for each of the above periods.
21. In addition, the Commissioner imposed an administrative penalty for the following shortfalls. For the September 2004 quarter, the Commissioner imposed an administrative penalty of 50% which was then reduced by 20%. No penalty was imposed in respect of the November 2004 shortfall. A penalty of 25% was imposed in respect of the period December 2005. That penalty was remitted in full. A penalty of 50% was imposed for the period October 2006. That penalty was reduced by 20% and then remitted by 50%. A penalty of 25% was imposed in respect of the period February 2007. However, that penalty was remitted in full.
22. The penalties were the subject of a Notice of Assessment of penalty issued by the Commissioner on 25 May 2007.
23. Cyonara objected to the assessments by notice dated 24 July 2007. On 27 May 2008, the Commissioner disallowed the objection against the substantive assessments and disallowed the objection against the assessments of penalty. The Commissioner decided not to further remit the penalties so imposed. These decisions were the subject matter of the proceedings before the Tribunal. After the commencement of the proceedings before the Tribunal, the Commissioner conceded that Cyonara was entitled to input tax credits in respect of the acquisition of Lot 202. A Notice of Amended Assessment dated 4 February 2010 gave effect to that concession and para A(a) of the Tribunal's decision of 25 February 2011 gave effect to a formal variation of the Commissioner's objection decision.
The questions to be determined
24. Three questions fell for determination before the Tribunal on the substantive matters.
25. The first was whether, in respect of the supply of Lots 1 and 9 which occurred, by reason of the settlements, on 16 September 2004 and 1 November 2004 respectively, Cyonara was entitled to "choose", at the moment in time when it purported to make the choice, to apply the margin scheme in working out the amount of GST payable on the supply of each Lot (freehold interest in land), under Division 75 of the GST Act as it stood prior to the amendments to Division 75 introduced into the GST Act by the Tax Laws Amendment (2005 Measures No. 2) Act 2005 (Cth) (No. 78 of 2005) (the "Amending Act No. 78/2005"), which commenced on 29 June 2005. Cyonara purported to make a choice under s 75-5 of the GST Act to apply the margin scheme to the sale of Lots 1 and 9 in July 2007 (when Cyonara objected to the Commissioner's assessment), notwithstanding that at settlement of the sale of Lot 1 on 16 September 2004 Cyonara received the full purchase price plus an amount of GST on the supply of $150,543.76 representing 10% of the supply price and, at settlement of Lot 9 on 1 November 2004, Cyonara received the purchase price of $1.5 million plus an amount of GST on the supply of $150,000 representing 10% of the supply price. In other words, the choice to apply the margin scheme as the methodology for working out the amount of GST on each supply, was made approximately two years and eight months after Cyonara had, on the facts, otherwise worked out the amount of GST on each supply by selling each Lot for the relevant supply price plus GST at 10% in each case and had collected the GST, on that footing, in each case at settlement from the buyer.
26. The second question was whether Cyonara had discharged the onus of demonstrating, on the facts, that the sale of Lot 8 was a GST-free supply under Subdivision 38-J of the GST Act as a supply of a "going concern" for the purposes of s 38-325 of the GST Act and thus not a taxable supply (s 9-5 of the GST Act).
27. The third question was whether the Commissioner was not entitled to recover, or require the payment of, unpaid GST in respect of Lots 1, 8, 9 and 10 by operation of s 105-50(1) and s 105-50(3)(a) of Schedule 1 of the Taxation Administration Act 1953 (Cth) (the "Administration Act") on the footing that the contended unpaid GST had, in any event, ceased to be payable because four years had elapsed since it became payable (s 105-50(1)) and the Commissioner had failed within the four years to give Cyonara a notice requiring payment of the unpaid GST (s 105-50(3)(a)).
The statutory scheme
28. Before identifying the foundation upon which the Tribunal decided these three questions, the essential elements of the statutory scheme need to be recalled.
29. So far as relevant to these proceedings, GST is payable on taxable supplies, and entitlements to input tax credits arise on creditable acquisitions (s 7-1). A person who makes a taxable supply must pay the GST payable on that supply (s 9-40). Every entity that is registered or required to be registered for the purposes of the GST Act has "tax periods" that apply to it (s 7-10). The GST payable by a supplier of a taxable supply is attributable to the tax period in which any of the consideration for the supply is received (s 29-5(1)) or if, before any consideration is received, an invoice relating to the supply is issued, the GST is attributable to the period in which the invoice is issued (s 29-5(1)).
30. If an entity is registered or required to be registered for the purposes of the GST Act, the entity must give to the Commissioner a GST return for each tax period relevant to it (s 31-5(1)). The entity must give the GST return whether or not the net amount for the tax period is zero or whether or not the entity is liable for an amount of GST on any taxable supply attributable to the period (s 31-5(2)). If the applicable tax period for the entity is a quarterly tax period, the GST return must be given to the Commissioner, in essence, by the 28th day of the month next following the end of the quarter: for the 30 September quarter, the due date is 28 October; for the 31 December quarter, 28 February (rather than 28 January); for the 31 March quarter, 28 April; and for the 30 June quarter, 28 July (s 31-8). If, however, the tax period is monthly, the GST return must be lodged by the 21st day of the following month (s 31-10).
31. The GST return must be in the approved form (s 31-15), subject to the qualifications in s 31-15(2) and (3) which entitle the Commissioner to require other arrangements. An approved form for a GST return has the meaning given to it by s 388-50, Schedule 1 to the Administration Act. By the approved GST return (or Business Activity Statement for the relevant period) the entity must identify to the Commissioner whether or not the entity is liable for GST on any taxable supply attributable to the period and whether or not the "net amount for the tax period" results in no GST being payable. The amount of GST payable by an entity for a period applicable to it (being the "net amount" of GST payable for the tax period) must be paid to the Commissioner, where a quarterly period applies, by the dates mentioned above next following the end of the relevant quarter: that is, 28 October, 28 February, 28 April and 28 July (s 33-3). If, however, the tax period is monthly, the net amount of GST for the tax period must be paid by the 21st day of the following month (s 33-5).
32. The GST Act contemplates that the amount the entity must pay to the Commonwealth (or the Commonwealth must refund) is the net amount for an applicable period (s 7-15; Div 31; Div 33) and the net amount is calculated, subject to adjustments, by setting off against amounts of GST payable on taxable supplies, amounts of input tax credits arising on creditable acquisitions (s 7-5). A sale of an interest in land in Australia in the course of carrying on an enterprise is a taxable supply (ss 9-5, 9-10, 9-15, 9-20). A supply, however, that is otherwise a taxable supply is GST-free if Div 38 is engaged. If not GST-free, the amount of GST payable by the supplier to the Commonwealth is 10% of the "value of the taxable supply" and the value of the taxable supply is 10/11ths of the supply price. In other words, the GST component of the supply price is 1/11th of the supply price (subdiv 9-C).
33. As to creditable acquisitions, put simply, if a person (buyer) makes an acquisition for consideration in carrying on an enterprise and that purchase involves a taxable supply to the buyer (and the buyer is registered for the purposes of the GST Act), the buyer has made a creditable acquisition which gives rise to an entitlement to an input tax credit equal to the GST payable on the supply of the thing acquired (ss 11-5, 11-10, 11-15, 11-20 and 11-25).
34. It follows that an entity that is registered or required to be registered for the purposes of the GST Act must lodge a GST return by a "due date" for a "tax period" that "applies" to the entity (quarterly or monthly or otherwise as the Commissioner determines); the GST return must identify the entity's liability for GST payable on any taxable supplies attributable to the tax period the subject of the return; the net amount taking account of input tax credits in respect of creditable acquisitions and any other allowable offsets from amounts of GST payable on taxable supplies must be identified; and the net amount of GST for the tax period payable by the supplier so worked out must be paid by the due date to the Commissioner.
35. These are the orthodox rules by which the amounts of GST and input tax credits are combined so as to enable the taxpayer to work out the net amount of GST payable to the Commissioner for the applicable tax period.
36. Cyonara acquired the parcel of land that was ultimately developed, subdivided and sold by individual subdivisional allotments, in 1997 before the commencement of the GST Act on 1 July 2000. Nevertheless, the sale (and more particularly the settlement of each sale) of each lot after the commencement of the GST Act, constituted a taxable supply at the settlement date for the reasons earlier described. GST would thus be payable by the supplier (developer) on the whole "value of the taxable supply" as earlier described, calculated in the way described. However, a supplier in such circumstances in carrying on its enterprise would not be entitled to any input tax credits on the acquisition of the original parcel of land as no GST had been paid by the buyer because there was no taxable supply to, in this case, Cyonara, as the GST scheme was not then in place. In order to ensure that a developer making a taxable supply of an interest in land in the course of its enterprise in such circumstances, is provided with an opportunity to pay GST on only the excess of the supply price over and above the consideration paid for the acquisition of the interest rather than the entire supply price (that is, the "margin"), Div 75 of the GST Act, as it stood prior to 29 June 2005, conferred upon the supplier an entitlement to choose to apply the margin scheme to a taxable supply of real property.
37. The core principles of the margin scheme are contained in ss 75-1, 75-5 and 75-10(1) and (2). Those sections were, for taxable supplies made up to 16 March 2005, in these terms:
- Division 75 - Sale of freehold interests etc.
- 75-1 What this Division is about
This Division allows you to use a margin scheme to bring within the GST system your taxable supplies of freehold interests in land, of stratum units and of long-term leases.
- 75-5 Choosing to apply the margin scheme
- (1) If you make a *taxable supply of *real property by:
- (a) selling a freehold interest in land; or
- (b) selling a *stratum unit; or
- (c) granting or selling a *long-term lease;
you may choose to apply the *margin scheme in working out the amount of GST on the supply.
- (2) However, you cannot choose to apply the *margin scheme if you acquired the freehold interest, *stratum unit or *long-term lease through a *taxable supply on which the GST was worked out without applying the margin scheme.
- 75-10 The amount of GST on taxable supplies
- (1) If a *taxable supply of *real property is under the *margin scheme, the amount of GST on the supply is 1/11 of the *margin for the supply.
- (2) The margin for the supply is the amount by which the *consideration for the supply exceeds the consideration for your acquisition of the interest, unit or lease in question.
- (3) ...
38. The reference to taxable supplies made up to 16 March 2005 recognises that s 75-5 was amended by Amending Act No. 78/2005commencing on 29 June 2005 but applying by reason of s 28 of Schedule 6 of that Act on and from 17 March 2005.
39. Section 75-10(3) as it stood makes provision for the use of valuation protocols in determining the value of the interest acquired by the supplier as at 1 July 2000 so as to enable the amount of the margin to be determined on which GST would be paid, on applying the margin scheme. Section 75-15 provides that if the relevant interest supplied is a subdivisional part of the land acquired, the consideration for the acquisition of the on-sold part is the corresponding proportion of the consideration for the land acquired. A supply of land under the margin scheme, however, does not give rise to a creditable acquisition of that land in the hands of the buyer (s 75-20).
40. Cyonara contended before the Tribunal, as it does in these proceedings in support of contended error of law on the part of the Tribunal in determining the question of construction of s 75-5, that because neither s 75-5 nor any other section of Div 75 expressly imposes a requirement that the choice conferred upon the supplier must be exercised at or by a particular time (and in particular at the time of making a taxable supply), the supplier is entitled to exercise the choice conferred by s 75-5 by applying the margin scheme to the taxable supply at any time up to the moment in time when the supplier ultimately has to "work out" the amount of the GST payable on the supply. That time, it is said, may be at the point of objecting to an assessment by the Commissioner or during the course of a review of an objection decision before the Tribunal. Cyonara says the critical words determining the limits of the making of the choice are "you may choose to apply the margin scheme in working out the amount of GST on the supply" [emphasis added] with the result that, properly construed, the supplier retains the statutory choice until the amount of GST on the taxable supply is finally "worked out".
41. The construction adopted by Cyonara, however, gives rise to this anomaly. Let it be assumed that the value of a parcel of land at 1 July 2000 but acquired prior to 1 July 2000 is $5,000 and the land is sold in 2005 for $10,000 plus GST of $1,000 which is paid on settlement by the buyer. By the date of supply the supplier has worked out the GST payable on the taxable supply and has recovered the GST payable (by the supplier) on the taxable supply from the buyer. The supplier then fails to account for the supply in its GST return by the due date after the relevant period in identifying the net amount of GST for the period and fails to pay the net amount due which may be $1,000 or something more or less than $1,000 having regard to the GST payable by the supplier on other taxable supplies and offsetting input tax credits in the relevant tax period. Some years later, the supplier elects or chooses to apply the margin scheme so that the GST is then said to be payable on only the margin of $5,000 resulting in GST of $500. As a principled approach to construction of s 75-5 serving the statutory purpose, Cyonara contends that such a supplier would then account to the Commissioner by the due date after the relevant period of working out the amount of the GST on the supply by applying the margin scheme and paying $500 by the due date (subject to other GST amounts and relevant offsets). The supplier would, on such a view, be entitled to retain (in effect, as a windfall) the other $500 of GST paid by the buyer on settlement when the supplier had chosen, at that moment in time, to work out the amount of the GST on the taxable supply of the interest in the land as 10% of the supply price.
42. The merits of Cyonara's approach to the question of construction of s 75-5 and the question of law said to be raised by the appeal as to that matter will be examined later in these reasons.
43. Finally, as to the statutory scheme, Div 38 contains a series of exemptions or GST-free supplies. Section 38-325 is in these terms:
- Subdivision 38-J - Supplies of going concerns
- 38-325 Supply of a going concern
- (1) The *supply of a going concern is GST-free if:
- (a) the supply is for *consideration; and
- (b) the *recipient is *registered or *required to be registered; and
- (c) the supplier and the recipient have agreed in writing that the supply is of a going concern.
- (2) A supply of a going concern is a supply under an arrangement under which:
- (a) the supplier supplies to the *recipient all of the things that are necessary for the continued operation of an *enterprise; and
- (b) the supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as a part of a larger enterprise carried on by the supplier)
The Tribunal's decision as to the first question
44. As to the first question, the Tribunal concluded at  that the scheme of the GST Act suggests that the time when a supplier would ordinarily "work out" the amount of GST on a taxable supply is the time of accounting to the Commissioner by lodging a Business Activity Statement identifying the net amount of GST payable for a relevant period. At or by that time, the taxpayer is required to have "worked out" the amount of GST payable on the taxable supply as part of the calculation of the net amount of GST for a tax period .
45. The Tribunal was reinforced in its view that the choice under s 75-5 was not capable of deferred application as Cyonara contended because, first, the liability of the supplier to pay the net amount for a tax period arises directly under the GST Act for successive tax periods (Div 31, s 9-40, Div 33 and ss 33-3 and 33-5) and is not dependent upon the issue of an assessment under the Administration Act ; second, Div 75 seems to contemplate a taxable supply "under" the margin scheme which, in effect, suggests that the margin scheme is to be engaged at the time of supply ; and third, the scheme of calculating the net amount for "a tax period" by setting off against each other amounts of GST and input tax credits (s 7-5) suggests that the supplier must determine or work out the amount of GST on the supply at the time of supply so as to isolate the amount of the GST liability on a taxable supply in order to calculate the net result of the offsets .
46. The ultimate conclusion of the Tribunal at  was that the choice must have been made by the taxpayer no later than the "time of supply". At , the Tribunal said this:
- 40. In the result I reject Cyonara's first contention. In my view the taxpayer's choice to apply the margin scheme must have been no later than the time of supply. I need not decide whether the choice is in the nature of a binding election. It is enough to decide that it is no longer open to Cyonara to choose to apply the margin scheme to the sales of Lot 1 and Lot 9.
47. The Tribunal appears to have concluded, as a matter of construction of s 75-5 in the context of the overall scheme of the GST Act that the taxpayer's choice to apply the margin scheme must be made no later than the time of supply. That conclusion seems to follow from the reasoning of the Tribunal set out from  to . The Tribunal also seems to have concluded that in the context of the decisions made by Cyonara, it is no longer open to Cyonara to now choose to apply the margin scheme to the sales of Lot 1 and Lot 9.
The Tribunal's decision as to the second question
48. As to the second question, Cyonara contended before the Tribunal that the supply of Lot 8 was a "supply of a going concern" as each integer of s 38-325 was, on the facts, engaged and established as Cyonara was carrying on an "enterprise" consisting of the leasing of property; Cyonara entered into an arrangement under which it carried on the enterprise until the date of supply to the recipient, 3435 PHPL; Cyonara supplied to the recipient all of the things necessary for the continued operation of the enterprise so described; and the supplier and the recipient had agreed in writing that the supply is a supply of a going concern. The Tribunal notes the Commissioner's contention that although the integers of s 38-325 might in principle be engaged, Cyonara had failed to establish, on the facts, each of those integers and thus Cyonara had failed to discharge the burden of proof falling upon it under s 14ZZK(b) of the Administration Act of demonstrating that the assessment is excessive.
49. The Tribunal then examined the evidence put on by Cyonara going to each of those integers. The Tribunal's analysis of the evidence involved the following considerations.
50. The allotment in issue is Lot 8. Lot 8 is one of nine lots within the Springwood development. Lot 8 is 3894m2 and is located at 3435 Pacific Highway, Springwood. A retail and/or wholesale showroom, partitioned into three units, was constructed on Lot 8 in 2003 comprised of 1857m2 space. Cyonara engaged real estate and marketing agents to find a lessee of the premises. Mr Smits gave evidence that the premises were first leased to three different lessees nominated and controlled by entities described at para 15 of his statement of 12 March 2010 as the "Swiss Group of Entities" for a term of seven years commencing on 1 January 2004 with two 5 year options. At , the Tribunal notes Mr Smits's evidence that three leases were executed by Cyonara on or about 5 December 2003; each lessee entered into possession and erected partitions; each lessee "defaulted entirely upon the monetary covenants"; and, Cyonara ejected each lessee from the premises.
51. The Tribunal observes at  that no evidence was put before it that the leases were registered and only one of the three leases was produced in evidence by Cyonara. At , the Tribunal observes that a "poorly copied document, unstamped and unregistered" was in evidence which "appeared" to be a lease of "Shop 2/B" within Lot 8 to an entity described as Austrubbertech Pty Ltd ("Austrubbertech") for a term of nine years commencing on 1 January 2004. The Tribunal drew an inference from other facts referred to by Mr Smits that this lease was one of the three leases entered into on 5 December 2003 which commenced on 1 January 2004.
52. In May 2008, Cyonara made a statutory demand upon Austrubbertech for unpaid rents under the 5 December 2003 lease. The Tribunal notes Mr Smits's evidence that the Swiss Group of Entities were apparently controlled by a fraudster who induced Cyonara to enter into the leases and also enter into a sale contract for Lot 8. At , the Tribunal notes Mr Smits's evidence that Cyonara was the victim of a "scam" which caused Mr Smits to eject the lessees from the premises. At , the Tribunal notes the valuation report of R V Diamond (Properties) Pty Ltd dated 10 April 2004 put into evidence by Mr Smits on the footing that the valuation corroborates the leasing of Lot 8. The report at p 7 (para 8.1) refers to advice given to the valuer that there is an agreement "in principle (copy attached)" for a seven year lease of the property at $420,000 per annum, plus GST, with 4% annual rent reviews. No copy of the in principle lease appears to be attached to the valuation report.
53. At , the Tribunal notes, according to the evidence of Mr Smits, that after having continued to search for a lessee of Lot 8, an entity called Solartech Solutions Pty Ltd ("Solartech"), controlled by Mr Hastings, executed a lease in registrable form for a term of seven years commencing on 1 July 2004 at an initial rental of $420,000 per annum, guaranteed by Mr Hastings. At , the Tribunal observes that Solartech went into possession until December 2005; paid no rent at all; and, the guarantor failed to make good any of the rental payments and became bankrupt.
54. At , the Tribunal observes that no executed copy of the Solartech lease was put into evidence by Mr Smits because (according to para 23 of Mr Smits's statement) Cyonara's solicitor had "unlawfully" retained the lease although an email dated 27 July 2004 from Cyonara's former solicitor, Mr Loel, to Mr Lynch (a valuer) under the reference "Lease - Lot 8 Springwood" acknowledges that Mr Loel holds a lease of Lot 8 "duly executed by both the Lessor & Lessee". The email makes reference to a document described as "Lease Smits to Solartech.Doc". At , the Tribunal notes that the valuation letter subsequently produced by the valuer fails to make clear whether the copy of the lease document was an executed copy. On 30 September 2004, Mr Smits sent Mr Hastings an email requesting payment of outstanding rent and vacant possession of Lot 8. At , the Tribunal notes Mr Smits's evidence (at para 24 of his statement) that on 2 December 2004 Cyonara issued Default Notices and a Notice to Remedy Breach of Covenant under s 124 of the Property Law Act 1974 (Qld) to Solartech; and, that as a result of a conversation with Mr Smits, Mr Hastings had agreed that Solartech would release "possession of the demised premises" voluntarily to the applicant by 6 December 2005.
55. At , the Tribunal notes Mr Smits's evidence that he was prepared to put up with a defaulting tenant because he hoped to recover some money from Mr Hastings under the guarantee; having a tenant provided security for the premises; and, he had no other tenant in any event.
56. Lot 8 was sold under a contract dated 18 October 2005 to 3435 PHPL (in a trustee capacity). It was due for completion on 7 December 2005. The contract records that the sale is a sale of a "going concern"; no amount of GST is included in the purchase price; Cyonara warrants that between the date of contract and the date of completion Cyonara "will carry on the Enterprise"; and, "the Property (together with any other things that must be provided by the Vendor to the Purchaser at the Date for Completion under a related agreement for the same Supply) is all of the things necessary for the continued operation of the Enterprise". The purchaser also warrants that it is registered for the purposes of the GST Act.
57. The Tribunal notes that the contract contained special conditions rendering the contract of sale conditional upon, first, Cyonara as lessee of Lot 8 delivering a lease in the form of Annexure A, duly signed by Cyonara and the guarantor, to the purchaser's solicitor together with an unconditional bank guarantee of particular lease obligations, by 5 December 2005 (plus payment of stamp duty) and, second, an acknowledgement that the buyer entity, as lessor to Cyonara, is entitled to lease the premises on such terms as "she in her absolute discretion sees fit" in which case, the vendor as lessee "shall be released from its obligations given by the Lease, the Guarantee and the Bank Guarantee" in respect of any area so leased.
58. At , the Tribunal identifies the reference to "she" in the special conditions on the footing that Mr Smits gave evidence that the lease annexed to the contract of sale is an unexecuted lease between Ms Lyndall Eve Smouha as lessor and Cyonara as lessee (in its former name Zonebar), commencing on 6 December 2005 and expiring on 7 December 2007. At , the Tribunal notes that Ms Smouha was, relevantly, "the controlling mind" of 3435 PHPL. The Tribunal also notes that the lease schedule forming part of the contract of sale to that buyer recites a lease to Zonebar reflecting those terms. At , the Tribunal observes that no lease from 3435 PHPL to Cyonara was produced in evidence. Nor was such a lease ever registered, although the Commissioner requested a copy of the executed lease in November 2007. On 19 December 2007, Mr Smits said that he was attempting to procure a copy of the executed lease from the solicitor then acting for 3435 PHPL.
59. At , the Tribunal addresses further aspects of the evidence and observes that the draft lease apparently attached to the contract of sale contemplated that Cyonara would provide a bank guarantee of two years rental plus GST. A further document was executed by 3435 PHPL and Cyonara (including Ms Smouha, as guarantor of 3435 PHPL's obligations), dated 10 November 2005. That document recites the contract of sale of Lot 8 to 3435 PHPL and Ms Smouha's guarantee of the buyer's obligations. Clause 5 of the further document addresses the unconditional bank guarantee to be provided by Cyonara as recited in the draft lease. The Tribunal observes that the effect of cl 5 of the further document is that the parties agreed to replace the bank guarantee (referred to in the draft lease) with a new arrangement whereby 3435 PHPL was irrevocably entitled to deduct from the purchase price a sum required to satisfy the bank guarantee and to deposit that sum into a bank account in its name.
60. The Tribunal observes at  that cl 5.1 of the further document recites that special condition 1 of the contract of sale required the delivery by Cyonara of an unconditional bank guarantee, but that in fact special condition 1 did not require such a thing. The Tribunal notes that the contract, so far as the Tribunal can tell, contains no requirement for the provision of a bank guarantee and that the obligation arose under cl 18 of the draft lease attached to the contract not the contract itself. The language of special condition 1 may be a little inelegant but it clearly refers to an unconditional bank guarantee to be provided by Cyonara under the lease constituted by Annexure A, but the contract by special condition 1 rendered the contract subject to the delivery of the lease in any event.
61. At , the Tribunal, because cl 5.1 seemed to assume that special condition 1 of the contract itself required the delivery of an unconditional bank guarantee whereas special condition 1 recognised such an obligation arising under the lease, observes that it was not clear to the Tribunal whether cl 5.1 of the 10 November 2005 deed was wrongly worded or whether the contract of sale by Cyonara to 3435 PHPL, in evidence, was not the operative document or whether there was "some other explanation for the inconsistency".
62. At , the Tribunal observes that the lack of clarity on this question seemed ultimately not to matter in any particular sense although the Tribunal observes that "in a general sense, it is illustrative of the deficiencies in Cyonara's evidence" [emphasis added].
63. At , the Tribunal finds that the contract was completed on 7 December 2005 and the settlement statement shows a transfer to 3435 PHPL and a deduction of $575,160 from the purchase price as a "rental set off account" to be deposited to a bank account in the name of Zonebar with monthly draw downs thereafter from January 2006 to December 2007 of $23,965.
64. At , the Tribunal notes the Commissioner's contention that Cyonara's evidence does not discharge the onus of demonstrating that it was carrying on a leasing enterprise prior to the sale of Lot 8 to 3435 PHPL either at all or up until the day of supply and nor does the evidence make out the proposition that Cyonara supplied everything necessary for the continued operation of the leasing enterprise to the purchaser. At , the Tribunal observes that there is no evidence directly contradicting the evidence given by Mr Smits. However, the Commissioner contended before the Tribunal that the evidence of Mr Smits ought not to be accepted concerning the history of the various leases of Lot 8 and moreover, the failure by Cyonara to call witnesses such as Mr Hastings gave rise to a
Jones v Dunkel (1959) 101 CLR 298 inference that ought to be drawn. Cyonara resisted the drawing of a
Jones v Dunkel inference as Mr Smits had not been put on notice that submissions would be made that his evidence be rejected, and since Mr Smits's evidence was not contradicted, it ought to be accepted.
65. As to these matters, the Tribunal took this position.
66. At , the Tribunal notes that the Commissioner's reasons accompanying the objection decision of 27 May 2008 put Cyonara on notice that it had failed to provide any "formal or informal documentation" showing that a lease existed between Cyonara and Solartech for Lot 8 and that Cyonara had not been able to demonstrate to the Commissioner that, as supplier, it carried on an enterprise until the day of supply to the purchaser. At , the Tribunal observes that it had been plain "all along" that the Commissioner was contending that Cyonara's evidence was "insufficient to discharge its onus". At , the Tribunal said this:
Mr Smits is an experienced solicitor and was, throughout, represented by solicitors. It may be accepted that some dispute had arisen with the former solicitor which may have made it difficult to obtain documents from that solicitor voluntarily, however no attempt was made to use the summons power of the Tribunal to obtain relevant documents from either the former solicitor or any other relevant parties. The absence of relevant witnesses and documents was raised directly with Mr Smits in the witness box and what was implicit in the questioning was made explicit in the Commissioner's written submissions, exchanged with Cyonara in advance of the final day of the hearing. No application was made to adjourn the hearing to allow further witnesses to be called or documents to be obtained.
67. At , the Tribunal concluded that it was not "unfair" to draw appropriate inferences from the absence of appropriate witnesses and, "perhaps more importantly, critical documents" [emphasis added].
68. At , the Tribunal observes that a critical element of Cyonara's case was that it leased Lot 8 to Solartech. The Tribunal found at  that it could not be satisfied that Cyonara did so. At , the Tribunal observes that it appreciated that Mr Smits had given evidence that there was a lease and that his evidence was "not directly contradicted". The Tribunal rejected Mr Smits's evidence for two reasons. The first, described as the most important reason, was that the words and actions of Mr Smits and Cyonara at the time, as demonstrated by contemporaneous documents, were inconsistent with the proposition that there was a lease in place for Lot 8 between 1 July 2004 and 6 December 2005. Second, the Tribunal observes at  that "[a]dditionally, no executed copy of the lease was produced and its absence was not adequately explained" [emphasis added]. The Tribunal identified five factors relevant to these observations.
69. As to the first factor, at , the Tribunal observes that as to the inconsistency, it was apparent that negotiations were conducted between Mr Smits and Mr Hastings in the first half of 2004 and that attempts were being made to reach agreement on the terms of a contract of sale of Lot 8 and that "an arrangement of some sort" existed between Mr Smits and Mr Hastings as an email of 23 October 2004 from Mr Smits to Mr Hastings made reference to Mr Smits's urgent need for Mr Hastings to deliver the keys for Lot 8 to a particular person. The Tribunal observes at  that the email demonstrates that Mr Hastings had the keys to the premises in October 2004 which, as a matter of inference, seemed consistent with Mr Smits's evidence that Solartech was "in possession" of the Lot 8 premises. At , the Tribunal observes however that the language of the email of 23 October 2004 "is not ... the language of lessor to lessee" in the Tribunal's view. That followed for this reason, at :
Had there been a lease on foot in the terms claimed by Mr Smits, Solartech was entitled, fundamentally, to quiet possession. The lease reserved a right of entry to effect works and to view ... but the inspection contemplated by the email did not come within either of those reservations.
70. As to the second factor, at , the Tribunal refers to an email from Mr Smits to a "prospective tenant" dated 23 August 2004 which asked the prospective tenant whether it would want "a direct lease from Zonebar P/L or a Sub-lease from SolarTech [sic]". At , the Tribunal observes that the notion of a sub-lease from Solartech "lends support to the notion of a head lease from Cyonara, however the email demonstrates that Mr Smits was apparently of the belief that Cyonara was in a position to lease the entire area without regard to any existing lease".
71. As to the third factor, at , the Tribunal observes that it is apparent from the material that throughout the period when, on Cyonara's case, Solartech had a lease of Lot 8, Mr Smits on behalf of Cyonara, was seeking to find other tenants. The Tribunal refers to an email from Mr Smits to Mr Selby dated 30 October 2004 in which Mr Smits refers to two entities said to be negotiating long term leases for Lot 8 with Mr Smits. Also in October 2004, Mr Smits gave detailed instructions to a real estate agent for the preparation of a brochure advertising Lot 8 as a site available for leasing, describing the building as being "complete and ready for fit-out to the requirements of the client". The Tribunal observes that the brochure makes reference to the uses being made of the adjoining premises but makes no reference to Solartech's occupancy of premises nor, in particular, any reference to a lease in registrable form for a term of seven years which was said, by Mr Smits, to then be in existence.
72. As to the fourth factor, at , the Tribunal notes that in January 2005 Mr Smits sent an email to a real estate agent saying that Lot 8 was still available and that negotiations were in progress with BHP which was seeking the lease of a similar area. At , the Tribunal notes that further negotiations with other prospective tenants took place in May 2005 and that in July 2005 at a time when a real estate agent was seeking to show Lot 8 to a prospective tenant, the keys to the premises were held by another real estate agent.
73. As to the fifth factor, at , the Tribunal notes that in May 2008, Mr Smits gave affidavit evidence supporting a creditor's statutory demand directed to Austrubbertech that that company was liable to Cyonara for rent for part of Lot 8 from 1 January 2004 to 7 December 2005. The later date was the date on which Lot 8 was transferred to 3435 PHPL. At , the Tribunal observes that the existence of an affirmed liability for the period 1 January 2004 to 7 January 2005 was inconsistent with the existence of any lease to Solartech of the premises from 1 July 2004.
74. Apart from these five factors, the Tribunal also made these observations.
75. First, at , it seemed odd to the Tribunal that in responding to the Commissioner's contention that the sale did not satisfy the requirements of s 38-325, Mr Smits made no reference to the existence of the Solartech lease subsisting during the period 1 July 2004 to 7 December 2005 when talking about events operating from 18 October 2005 and a lease from 6 December 2005.
76. Second, the Tribunal at  emphasised again that "no executed copy of a lease to Solartech has been produced". Moreover, no summons to produce the best evidence of the lease, namely the documents, was ever sought to be served on the former solicitor, Mr Loel or Mr Hastings who, the Tribunal observed, might be expected to have had a copy of the executed lease. At , the Tribunal observes that neither person had been called to give evidence of "the fact of execution". Also at , the Tribunal observes that on Cyonara's case, at one point in time, a valuer made reference to the lease and that person was not called. The Tribunal observes that no suggestion had been put that Mr Loel, Mr Hastings or the valuer were prevented from giving evidence in the proceedings. Those observations led to the conclusion at  that the "absence of all of them tells against there being a lease to Solartech".
77. Third, the Tribunal recognised that Mr Loel's email referred to a copy of the lease held by him, executed by the lessor and the lessee. The Tribunal also referred at  to the reference to the lease by the valuer. However, at , the Tribunal concluded that these references represented a hearsay assertion by a person not called to give evidence and because the question of the existence of the lease and the production of probative evidence of it had been in controversy for a long time, it would not be appropriate to rely upon those references as satisfying the burden of proof when the party having the burden failed to call either author to give direct probative evidence of the fact in issue.
78. At , the Tribunal concluded:
I am then not satisfied of two of the factual elements of the case for Cyonara, that it leased Lot 8 to Solartech in July 2004 and that Solartech occupied Lot 8 as tenant until 6 December 2005 when it surrendered possession.
79. Apart from this collection of factors which led to the conclusion at , the Tribunal was reinforced in its view by this consideration. At , the Tribunal found there to be "some considerable doubt" about the transaction between Cyonara and 3435 PHPL. The Tribunal found that there was undoubtedly a sale and "some arrangement" whereby Cyonara paid money on a monthly basis to 3435 PHPL. However, the Tribunal observes that the draft lease attached to the contract of sale shows Ms Smouha as the proposed lessor. The Tribunal observes that if it be assumed, favourably to Cyonara, that a contract of sale was executed by Cyonara and 3435 PHPL which attached a draft lease between 3435 PHPL as lessor and Cyonara as lessee, a question nevertheless arose about the consequences of an agreement to grant and take a lease "expressed to take effect on the day prior to completion of the conveyance [on 7 December 2005]" [emphasis added]. Thus, at , the Tribunal found it "impossible to conclude" that there could be a valid lease granted from 6 December 2005, and that the lease contended for, would operate as a lease commencing from the time when the lessor first became able to grant a lease, that is, when the legal title was conveyed to it.
80. At , the Tribunal found it unnecessary to ultimately answer the "interesting questions" posed by the issue of the lease being expressed to take effect on the day prior to completion or the question of legal capacity, because Cyonara had failed to satisfy each of the requirements for the supply of a going concern, in any event. At , the Tribunal found that if the "enterprise" be regarded as the leasing of Lot 8 (recognising that no other enterprise was contended for) the Tribunal was not satisfied that Cyonara had "carried on" that enterprise until the day of supply. At , the Tribunal added that it was not satisfied that Cyonara "carried on the enterprise of leasing at any time within the period of many months prior to the day of supply" [emphasis added]. The Tribunal recognised that Cyonara was "at various times, attempting to obtain a tenant to take a lease but Cyonara did not suggest that the enterprise of leasing could be carried on merely by seeking to obtain a tenant" [emphasis added].
81. Apart from all of these considerations, the Tribunal found at  that "no things necessary for the continued operation of the enterprise were supplied to the purchaser". Thus, it followed as a conclusion at  that the Tribunal could not be satisfied that the sale of Lot 8 was a supply of a going concern by operation of s 38-325 and thus the supply was a taxable supply because it was not rendered GST-free as s 38-325 was not engaged, on the facts.
The Tribunal's decision as to the third question
82. As to the third question concerning the limitation point, the Tribunal dealt with the question in a preliminary determination (
Cyonara Snowfox Pty Ltd v Commission of Taxation  AATA 137 on 24 February 2010). Cyonara did not invite the Tribunal to reconsider the earlier decision. However, a further argument in support of a contended prohibition upon the Commissioner seeking to recover any unpaid GST was put to the Tribunal for determination. Section 105-50(1) of Schedule 1 to the Administration Act which commenced on 1 July 2008 provides that any unpaid GST together with any relevant general interest charge under the Administration Act "ceases to be payable four years after it became payable by you". However, s 105-50(3) provides that subsection (1) "does not apply to an amount ... if: (a) within those four years the Commissioner has required payment of the amount ... by giving a notice to you; or (b) the Commissioner is satisfied that: (i) the payment of the amount was avoided by fraud or evaded".
83. In the preliminary determination, the Tribunal concluded that the Notice of Assessment dated 24 May 2007 constituted a notice satisfying the requirements of s 105-50(3) and thus the Commissioner was not prevented by reason of s 105-50(1) from claiming payment of the amounts in issue in the proceeding before the Tribunal.
84. The net amount payable as shown in the Commissioner's Notice of Assessment of 24 May 2007 included a disallowed claim by Cyonara of the amount of input tax credits related to Cyonara's acquisition of Lot 202 in an amount of $313,892. Thus, the Notice of Assessment asserted that the total amount payable to the Commissioner was an amount that incorrectly included and thus incorrectly inflated by $313,892 the total amount applied to Cyonara's "running balance account" with the Commissioner, of $933,993. The Commissioner conceded before the Tribunal that Cyonara was entitled to input tax credits on the acquisition of Lot 202. As a result, Cyonara contended that whilst the Notice of Assessment dated 24 May 2007 was capable of constituting a "notice" to Cyonara for the purposes of s 105-50(3), it could not constitute a valid notice since it did not give notice to the taxpayer of "the amount" of GST "payable" as it failed to require payment of the correctly payable amount. Cyonara contended that the relevant analogical principle is to be found in the invalidity of bankruptcy notices which overstate the amount due to the creditor (subject to particular considerations under the Bankruptcy Act 1966 (Cth)).
85. The Tribunal concluded in reliance upon principles derived from
Walsh v Deputy Commissioner of Taxation (1984) 156 CLR 337 and, a decision of the Court of Appeal in Queensland in
Deputy Commissioner of Taxation v McArdle  QCA 282;  2 Qd R 495, that the function of the notice is to inform the recipient of the amount of the debt then known by the Commissioner to be payable notwithstanding that the amount may change by reason of concessions made later by the Commissioner. At , the Tribunal said this:
A notice of assessment of GST net amount performs at least three functions. It notifies the recipient of the amount of GST that the Commissioner contends is due and, in that regard, it will be expected to differ from the amount that has already been accounted for by the recipient in a BAS. In the ordinary case, a notice of assessment will be the product of dissatisfaction by the Commissioner with the accounting provided (or not provided, if no BAS has been lodged in circumstances where the Commissioner contends that one should have been lodged). Next, it operates as conclusive evidence, except in review or appeal proceedings under Part IVC of the Administration Act, that the assessment was properly made and that the amount and particulars in the assessment are correct ... Finally, it originates the process by which the recipient may contest the asserted liability by first objecting to the assessment and thereafter, if required, seeking a review or appeal of the objection decision.
86. At , the Tribunal considered that the validity of the notice was not affected by the Commissioner's subsequent conduct of changing position on the question of Cyonara's entitlement to input tax credits and thus the Tribunal concluded that the Commissioner is not precluded by s 105-50(1) of Schedule 1 to the Administration Act from recovering the unpaid amount of GST payable by Cyonara.
The Notice of Appeal
87. By the Notice of Appeal, Cyonara contends for error of law on the part of the Tribunal on the following grounds:
- 4.1 The Tribunal erred in finding that the taxpayer must choose to apply the margin scheme by no later than the time of supply.
- 4.2 The Tribunal misdirected itself at law in relation to its assessment of the evidence and in particular:
- (a) incorrectly applied the principles in
Jones v Dunkel (1959) 101 CLR 298 where those principles were not applicable to the applicant in the proceeding;
- (b) if at all, ought to have applied a
Jones v Dunkel inference against the [Commissioner] who failed to call any evidence to contradict [Cyonara's case];
- (c) failed to identify the inferences said to be drawn against [Cyonara] and where such inferences were necessarily inconsistent with the evidence of Mr Smits;
- (d) required corroboration of the evidence of Mr Smits where such corroboration was not required as a matter of law;
- (e) wrongly rejected the uncontradicted evidence of Mr Smits;
- (f) incorrectly required [Cyonara] to meet a standard of proof higher than the balance of probabilities;
- (g) having admitted [Cyonara's] evidence without objection from the [Commissioner], proceeding to reject the same evidence by reason of hearsay, constituting an error of law and a breach of procedural fairness;
- (h) ought to have applied the rule in
Browne v Dunn against the [Commissioner] who failed to put to Mr Smits in cross-examination that his evidence to the Tribunal was false and failed to make such allegation in its Amended Statement of Facts and Issues in Contention or in submissions until the close of evidence.
- (a) incorrectly applied the principles in
- 4.3 The Tribunal ought to have found that the sale of Lot 8 constituted the supply of a going concern under s 38-325 of the GST Act.
- 4.4 The Tribunal erred in finding that the notice of assessment dated 24 May 2007 was a valid notice for the purposes of s 105-50(3)(a) of Schedule 1 of the Taxation Administration Act 1953 (Cth) notwithstanding that the notice failed to correctly state the amount.
The contended questions of law
88. A number of contended questions of law are said to be raised by the application and they are:
- • whether a taxpayer is entitled to apply the margin scheme after the date of the relevant supply;
- • whether the principles derived from
Jones v Dunkel ought to have been applied and whether those principles were correctly applied;
- • whether a taxpayer is required to corroborate un-contradicted evidence;
- • whether the Tribunal was entitled to reject the un-contradicted evidence of Mr Smits; whether the Tribunal was entitled to reject evidence on the grounds of hearsay when the evidence was said to have been admitted without objection, and without the Tribunal first identifying an intention to do so and inviting submissions from Cyonara;
whether the rule in Browne v Dunn ought to have been applied against the Commissioner;
- • whether the sale and leaseback of commercial premises constituted a sale of a going concern for the purposes of s 38-325 of the GST Act; and
- • whether the validity of a notice under s 105-50(3)(a) is to be assessed at the date of the notice and whether an over or understatement of the amount demanded has the effect of rendering the notice invalid.
The construction of s 75-5 of the GST Act for taxable supplies up to and including 16 March 2005
89. Section 75-5 as it stood prior to the Amending Act No. 78/2005 conferred a unilateral choice on a taxpayer to apply the margin scheme to a taxable supply of real property up to 16 March 2005. The contextual statutory purpose of the margin scheme is explained at  of these reasons.
90. Section 75-5 speaks directly to the taxpayer and postulates a hypothetical forward-looking transaction by telling the taxpayer that if you make, in the future, a taxable supply of real property, you may choose to apply the margin scheme in working out the amount of GST on the supply. A taxpayer who makes a taxable supply of real property might do so on the footing that the amount of GST on the supply will be worked out at 10% of, put simply, the whole of the supply price, on terms that the buyer pays the purchase price plus GST so worked out in which case, the supplier will have worked out the amount of GST on the supply by the date of executing the contract which is necessarily anterior to the date of supply which, as a matter of law, is the date of settlement or completion.
91. Alternatively, as unlikely as it may seem in relation to a supply of real property, the amount of GST on the supply might otherwise be worked out as 1/11th of the supply price (that is, 10% of the "value of the supply" calculated as 10/11ths of the supply price). In such a case, the transaction, in truth, represents a sale of property, in the case, for example, of a property at a GST-inclusive price of $50,000, of $45,454.54 and GST of $4,545.45. In such a case, the amount of GST on the supply is again worked out by the date of executing the contract and, necessarily, by the date of supply, being settlement or completion. The contract would be likely to oblige the buyer to pay, at settlement, any amount of GST attributable to the supply which would then involve total payments by the buyer of $54,545.45 rather than $55,000.
92. Alternatively again, the supplier in making a taxable supply of real property may choose to work out the amount of GST on the supply by choosing to apply the margin scheme under s 75-5 so that the amount of GST on the supply is 1/11th of the margin. The contract might well require the buyer to pay at settlement an amount equal to the GST applicable to the supply on that footing, that is, 1/11th of the excess of the supply price over the determined value at the date of acquisition.
93. Section 75-5 has a clear purpose of providing a supplier with a choice of a method of calculating or "working out" the amount of GST payable in making a taxable supply of real property that avoids the unfairness of the amount of GST being worked out on the whole of the supply price where no input tax credits arise on the upstream acquisition, with a view to providing for the calculation of the GST on only the margin as described at  of these reasons. The section is directed to a facultative methodological calculation in making a taxable supply, if the taxpayer chooses to engage the calculus of the method when making the taxable supply. The Tribunal correctly determined the construction of s 75-5.
94. The Explanatory Memorandum ("EM") for the Tax Laws Amendment (2005 Measures No. 2) Bill 2005 (Cth), before the House of Representatives, circulated by the Treasurer, explains that one of the vices of the unilateral choice available to a supplier under s 75-5 as it stood prior to 29 June 2005 (and prior to 17 March 2005 as applied by s 28 of Schedule 6 of the Amending Act No. 78/2005), was that purchasers of real property under the margin scheme were not necessarily aware whether the margin scheme had been applied by the supplier and whether they were able to claim input tax credits on their acquisition. Plainly enough, purchasers had an interest in knowing whether, at the date of acquisition by them (at least by completion or settlement), being the date of taxable supply by the supplier, the margin scheme had been applied as that question determined whether input tax credits were then available to the purchasers. Buyers of real property under the margin scheme are not entitled to claim input tax credits for GST remitted by the supplier. These considerations are reflected at EM, paras 6.4, 6.7 and the Comparative Table at p 40.
95. Under the amended form of s 75-5, the use of the margin scheme must be agreed in writing between the supplier and the recipient of the supply. The vice addressed by the amendment and the adoption of the new provision are both consistent with an underlying notion that the margin scheme, if it is to apply, was and is to apply at least by the date of supply, being the date of settlement. Cyonara's contention that the phrase in s 75-5(1) qualifying the right to choose to apply the margin scheme, "in working out the amount of GST on the supply" [emphasis added], necessarily gives rise to a construction that the right to make the choice can be deferred beyond, and well beyond, the supply, fails, however, to recognise the essential enabling purpose of s 75-5 in providing a concessional method of calculating the amount of GST on the supply when made.
96. The references in Div 75 to the making of a taxable supply "under the margin scheme" also suggests a supply under an engaged margin scheme.
97. The notion that the phrase relied upon has the effect of conferring a right on the supplier to choose to apply the margin scheme well beyond the event of supply fails to recognise that the section is directed to conferring a choice to apply a scheme to a particular supply event (a property completion) as the means of mathematically working out the amount of GST to be paid by the supplier on that supply. The relevant inter-relationship is the immediacy of the choice and the method of fixing the amount derived from that choice.
98. Apart from these matters of construction of s 75-5 in the context of the GST Act and its purpose and objective, Cyonara had, on the facts, worked out the amount of GST payable on the supply of Lots 1 and 9 by the date of supply, in any event.
99. Cyonara settled the supply of Lot 1 on 16 September 2004. At settlement it received from the buyer an amount in respect of GST on the supply of $150,543.76. Cyonara was required to account to the Commissioner for the supply of Lot 1 in its quarterly Business Activity Statement for the period 1 July 2004 to 30 September 2004. The Statement was dated 31 December 2004 and lodged with the Commissioner on 10 January 2005.
100. Cyonara did not account for GST on the transaction even though it had chosen to work out GST on the supply on the basis of the supply price and had received the amount in respect of GST from the purchaser. Cyonara settled the supply of Lot 9 on 1 November 2004 and worked out the amount of GST on the supply as $150,000 calculated on the supply price. An amount in respect of that GST was paid by the purchaser. Cyonara accounted for GST of $150,000 on the supply in its November Business Activity Statement dated 6 January 2005 lodged with the Commissioner on 12 January 2005. It follows that by the time Cyonara lodged each Business Activity Statement, it had well and truly completed "working out" the GST on each supply. It was not until July 2007 that Cyonara purported to then exercise a choice to apply the margin scheme to each transaction. By then, it had already determined, calculated and worked out, the amount of GST payable on the supply.
101. In effect, Cyonara seeks to now apply the margin scheme to each transaction so that the amount of GST on the supply is calculated on the excess of the supply price over the relevant valuation which results in a lesser sum payable to the Commissioner notwithstanding that Cyonara has received on settlement from the buyer an amount of GST calculated by the supplier on the whole of the supply price. This is the expression of the anomaly described at  of these reasons.
102. There is no error of law demonstrated in the Tribunal's approach to the construction of s 75-5. Cyonara's application on these grounds is to be dismissed.
Lot 8 and the Tribunal's determination of Cyonara's claim of a GST-free supply of a "going concern"
103. The Commissioner's assessment of GST (at 10% of the supply price) on the supply of Lot 8 of $370,299 was made on the footing that Cyonara had made a taxable supply of Lot 8 to 3435 PHPL on 7 December 2005 for $3.7 million. Cyonara contended before the Tribunal that the assessment was excessive for the purposes of s 14ZZK of the Administration Act because the supply was GST-free as a supply of a going concern. Cyonara therefore bore the onus before the Tribunal of affirmatively proving each of the integers of s 38-325 on the balance of probabilities by adducing before the Tribunal relevant, admissible evidence probative of facts in issue.
104. Before the Tribunal, Cyonara contended that it was engaged in an "enterprise" of leasing commercial property. Emblematic of that enterprise was the leasing of Lot 8 to the three entities associated with (or under the control of) the group described as the "Swiss Group of Entities" on 5 December 2003 for seven years commencing on 1 January 2004, although only one of the three leases was put into evidence and that lease seemed to be for a term of nine years. Those arrangements suffered from the difficulties already described at  -  of these reasons. More particularly, the enterprise was said to be evidenced by the leasing of Lot 8 by Cyonara to Solartech for seven years commencing on 1 July 2004 until 6 December 2005 when Solartech surrendered position. Mr Smits gave evidence that Solartech paid no rent; the guarantor failed to make good any of the rental payments and became bankrupt; and, by force of a conversation between Mr Smits and Mr Hastings after the issue of default notices, Solartech agreed to deliver up vacant position on 6 December 2005.
105. The difficulty confronting Cyonara is that on the evidence of the facts in issue adduced by Cyonara, the Tribunal was not persuaded on the balance of probabilities that Cyonara had leased Lot 8 to Solartech from 1 July 2004 to 6 December 2005 or at all. There were a number of reasons identified by the Tribunal in its exposed reasons for decision, and they included the failure, at the most fundamental level, of Cyonara to put the executed lease into evidence. The executed lease is the best evidence of the contended document that is said to go to the foundation of its leasing enterprise. Mr Smits gave oral evidence of the lease, the arrangements with Mr Hastings, the conversation (in or about December 2004 it seems) for Solartech's surrender of the premises on 6 December 2005 and the surrounding contextual circumstances.
106. The Tribunal, however, is not bound to accept Mr Smits's evidence as determinative of the question in issue and Cyonara cannot necessarily discharge its persuasive burden by Mr Smits simply "swearing the issue". The proof of the issue is made good in discharge of the dispositive burden by Cyonara adducing evidence that satisfies the Tribunal, on the balance of probabilities, that such a lease was entered into, for the relevant term, on particular conditions. The Tribunal was confronted with a contention as to three earlier leases only one of which was put into evidence, and the later critical executed Solartech lease was not put into evidence at all.
107. The discharge of Cyonara's burden before the Tribunal is not made good simply as a function of a director giving oral narrative evidence of a contended fact (without producing to the tribunal of fact the central document that speaks to critical aspects of the matter in issue), on the contended footing that oral narrative evidence must be persuasive because the Commissioner has not adduced evidence to contradict the director's oral evidence.
108. Cyonara bears the burden of persuading the tribunal of fact that a lease of Lot 8 subsisted from 1 July 2004 until 6 December 2005. It is true that the failure to produce the executed lease (or even a secondary copy of the executed version of the lease) was explained on the footing of inter-se issues between Cyonara (Mr Smits) and the company's former solicitor. However, it is equally true that Cyonara had the most engaged interest in compelling the attendance before the Tribunal of those witnesses who could give direct evidence of the lease. That interest subsisting in Cyonara was a more natural or preponderant interest as it bore the onus of persuading the Tribunal as to the executed document and the subsistence of the Solartech tenancy under it until 6 December 2005.
109. Cyonara seeks to agitate in these proceedings a challenge to the Tribunal's findings of fact on the footing that the question raised by the challenge is "a question of law" going to a ground of "error of law", as the Tribunal failed to observe legal principle in making the challenged findings. For example, it is said that, as a matter of law, a director's evidence on the questions in issue is necessarily dispositive of the taxpayer's burden in the absence of contradictory evidence adduced by the Commissioner. It is also said that a taxpayer bears no obligation to corroborate the un-contradicted evidence of a director.
110. The Tribunal is a tribunal of fact charged with the statutory role of determining questions of fact by assessing the merits of the evidence said to be probative of the fact in issue, according to the dispositive burden. The Tribunal identified the factors that caused it to make the findings of fact on the s 38-325 integers as described at  to  of these reasons.
111. These findings were open on the evidence.
112. An appeal (or more properly put, an application in the original jurisdiction) lies from a decision of the Tribunal to this Court "on a question of law" and once properly arising (and properly framed) that question (including other questions of law) is the subject matter of the appeal. This narrow sense in which an appeal from a decision of the Tribunal lies to the Federal Court is entirely consistent with a statutory intention to limit the Court's review of factual findings. Moreover, a mixed question of law and fact is not "a question of law" within the meaning of s 44(1) of the AAT Act.
113. Of course, a determination of a question of fact by the Tribunal may give rise to "a question of law". Some examples are whether the Tribunal has identified the relevant legal test to be applied; whether the Tribunal has applied the correct test even if the reasons suggest that the correct test has been identified; whether there is evidence to support a finding of fact; whether facts found fall within the statutory provision; and whether the Tribunal has adopted a manner of decision-making which fails to discharge its "obligations according to law".
114. As to these principles at  and , see:
TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 19 ATR 1067 at 1069-1070; 82 ALR 175 at 177-179;
Comcare v Etheridge and Others (2006) 149 FCR 522 at  to ;
Price Street Professional Centre Pty Ltd v Commissioner of Taxation (2007) 243 ALR 728 at  to ;
Federal Commissioner of Taxation v Trail Bros Steel & Plastics Pty Ltd (2010) 186 FCR 410 at  to ;
Collins v Administrative Appeals Tribunal and Another (2007) 163 FCR 35 at ;
Minister for Immigration and Multicultural Affairs v Al-Miahi (2001) 65 ALD 141 at .
115. One particular example of whether there is evidence to support a finding of fact is whether an inference drawn from facts found or not in issue is open as to a fact in issue. In
Minister for Immigration and Multicultural Affairs v Al Miahi, Sundberg, Emmett and Finkelstein JJ said this at :
The question whether there is any evidence of a particular fact is a question of law. Likewise, the question whether a particular inference can be drawn from facts found or agreed is a question of law. That is because, before the inference is drawn, there is a preliminary question as to whether the evidence reasonably admits a different conclusion. Accordingly, in the context of judicial review, the making of findings and the drawing of inferences in the absence of evidence is an error of law. On the other hand, there is no error of law simply in making a wrong finding of fact. Even if the reasoning whereby the court reached its conclusion of fact were demonstrably unsound, that would not amount to an error of law. A party does not establish an error of law by showing that the decision-maker inferred the existence of a particular fact by a faulty process, for example by engaging in an illogical course of reasoning. Thus, at common law, want of logic is not synonymous with error of law. So long as the particular inference is reasonably open, even if that inference appears to have been drawn as a result of illogical reasoning, there is no place for judicial review because no error of law has taken place ...
116. These observations are consistent with the orthodoxy of the observations of Mason CJ in
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 355 and 367 that the question of "whether a particular inference can be drawn from facts found or agreed is a question of law" and whether "there is any evidence of a particular fact is a question of law". In this context, Cyonara says that the Tribunal drew an inference not open to it as a matter of law that Cyonara's failure to call evidence from Mr Loel or the valuer or Mr Hastings was "some evidence" that the "circumstance or document or witness if brought would have exposed facts unfavourable to [Cyonara]" in the sense explained by Windeyer J in
Jones v Dunkel at 320-321. Windeyer J recognised that these inferences that might be drawn cannot "fairly" be drawn "except in certain circumstances" and, in any event, the proposed inference is "open always to explanation by circumstances which make some other hypothesis a more natural one than the party's fear of exposure". See the considerations discussed in
Commonwealth and Another v Fernando (2012) 200 FCR 1 at  to . Also see
Payne v Parker  1 NSWLR 191;
Earle v Castlemaine District Community Hospital  VR 722.
117. In this case, the Tribunal made its findings of fact on the s 38-325 integers on all of the matters described at  to  of these reasons. Independently of any
Jones v Dunkel inference, the Tribunal relied particularly on the factors at  to . It was open to the Tribunal to draw the inference and take it into account in the context of all of the other factors. In any event, there was a clear basis upon which the Tribunal could reach the findings reached. As to the
Jones v Dunkel inference, since Cyonara bore the onus of demonstrating that the Commissioner's assessment was excessive for the purposes of the Administration Act, it was more "natural" for Cyonara to take steps to bring the absent evidence consisting of the particular witnesses and the document before the Tribunal rather than simply allowing its case to rest upon oral assertions by a director whilst not putting the best evidence before the Tribunal. The Tribunal was entitled not to rely upon the hearsay evidence reflected in the emails in place of the best evidence of the lease. There was, put simply, evidence upon which the Tribunal could reach its findings of fact.
118. The applicant's appeal in relation to the issues concerning Lot 8 must be dismissed. The contentions on this ground rise no higher than an attempt to re-agitate the merits of the factual findings.
The limitation question
119. At ground 4.4 of the Notice of Appeal, Cyonara contends that the Tribunal erred in finding that the Notice of Assessment dated 24 May 2007 was a valid notice for the purposes of s 105-50(3)(a) of Schedule 1 of the Administration Act notwithstanding that the notice failed to correctly state the amount of GST payable. As already mentioned at  to , the Tribunal had determined by its preliminary decision of 24 February 2010 that the Notice of Assessment dated 24 May 2007 constituted a notice satisfying the requirements of s 105-50(3)(a) but a further argument had been put to the Tribunal to the effect that the notice could not be a valid notice since it did not give notice to the taxpayer of the amount of GST payable as it failed to require payment of the correctly payable amount. The Tribunal decided that question adversely to Cyonara as explained at  of these reasons and particularly having regard to the extract of the Tribunal's reasons set out at  (being para  of the Tribunal's reasons).
120. Ground 4.4 does not raise any question going to the matter decided by the Tribunal in its preliminary decision. As to the contended questions of law (noted at  of these reasons), Cyonara at [2.8] of the Notice of Appeal contends for a question of law in these terms:
Whether the validity of a notice under s 105-50(3)(a) of Schedule 1 of the Taxation Administration Act 1953 (Cth) is to be assessed at the date of the notice, and whether the over or understatement of the amount demanded renders the notice invalid.
121. Thus, the question of law related to the ground of appeal said to give rise to the orders sought is confined to the question of whether an overstatement or understatement of the amount demanded renders the Notice of Assessment, which constitutes a notice for the purposes of s 105-50(3)(a) of Schedule 1 of the Administration Act, invalid.
122. Although the Notice of Appeal is framed in the way described, the submissions on behalf of Cyonara seek to re-agitate the question of whether the notice of 24 May 2007 should be characterised as requiring payment of unpaid GST within the meaning of s 105-50(3)(a). The Tribunal in its decision of 25 February 2011 expressly records at  that Cyonara did not seek to re-agitate that matter before the Tribunal but rather sought to agitate the further matter already described.
123. The question in relation to whether the Notice of Assessment of 24 May 2007 is properly described as a notice requiring payment of unpaid GST for the purposes of s 105-50(3)(a) is not properly alive either as a ground of appeal or as a question of law relevantly connected to a ground of appeal. Nevertheless, to the extent that it is sought to be agitated, we can find no error in the reasoning of the Tribunal reflected in the exposed reasons for decision of 24 February 2010 (
Cyonara Snowfox Pty Ltd v Commissioner of Taxation  AATA 137). Nevertheless, the question is simply not raised by the Notice of Appeal. However, the question is raised by Cyonara's application for an Order of Review and Notice of Appeal filed on 11 March 2010 and will be addressed in that context later in these reasons.
124. As to the appeal in relation to the validity of the notice having regard to whether the notice overstates or understates the amount of GST payable, we make these observations.
125. Notice of the various assessments was issued by the Commissioner on 24 May 2007. At , the Tribunal summarises the content of a letter by the Commissioner to Cyonara dated 24 May 2007 setting out the results of the Commissioner's audit. That letter, as described at  to  of these reasons, identified six matters forming the basis of the additional amounts of GST payable to the Commissioner in respect of Lots 1, 8, 9 and 10 as well as the amount of $313,892 said to be payable in respect of Lot 202 by reason of the disallowance of input tax credits for Lot 202.
126. At  of the Tribunal's decision of 24 February 2010, the Tribunal identifies the content of "Schedule A" attached to the letter under the heading "Notice of Assessment of Net Amount". The schedule was in these terms:
|Column A||Column B||Column C||Column D|
|Tax period||Original net amount||Assessed net amount||Difference (Col C - Col B)|
|1/9/2004 to 30/9/2004||- $966||$149,577||$150,543|
|1/11/2004 to 30/11/2004||$149,010||$150,788||$1,778|
|1/12/2005 to 31/12/2005||- $8,043||$362,256||$370,299|
|1/1/2006 to 31/1/2006||$215,634||$210,634||- $5,000|
|1/10/2006 to 31/10/2006||- $22,251||$80,230||$102,481|
|1/2/2007 to 28/2/2007||$0||$313,892||$313,892|
|The total amount applied to your running balance account is:||$933,993|
127. Accordingly, on 24 May 2007, the Commissioner gave notice to Cyonara of assessments which required Cyonara to pay to the Commissioner $150,543 in respect of Lot 1 ; $370,299 in respect of Lot 8 ; $1,778 in respect of Lot 9 ; $102,481 in respect of Lot 10 and, $313,892 in respect of Lot 202 . The aggregate amount said to be payable to the Commissioner by the notice (as explained by the letter) was $933,993.
128. In the proceedings before the Tribunal in 2010, the Commissioner conceded that Cyonara was entitled to input tax credits on the purchase of Lot 202.
129. On 24 May 2007, the amount that the Commissioner ought to have correctly demanded from Cyonara in respect of unpaid GST was $620,101 assuming that the view adopted by 2010 had been the view adopted on 24 May 2007 as to Lot 202. At the date of the notice, the Commissioner asserted that unpaid GST was payable in respect of Lots 1, 8, 9 and 10 apart from any question in relation to Lot 202. The amounts demanded in respect of Lots 1, 8, 9 and 10 were amounts found to be properly payable before the Tribunal in the sense that the Commissioner's objection decision was not varied in respect of those amounts as the taxpayer had failed to prove that the assessments were excessive.
130. It is true that at 24 May 2007 the Commissioner made demand for a further amount of $313,892 which was subsequently accepted by the Commissioner as not payable on the footing that Cyonara was entitled to the claimed input tax credits arising out of the creditable acquisition in the relevant tax period.
131. Two things, however, follow from the provisions of the GST Act discussed and the provisions of the Administration Act in relation to Notices of Assessment.
132. First, the Commissioner in the exercise of his or her statutory powers may, as a result of an examination of the GST returns of the taxpayer for the relevant tax periods, form a view as to the amount of unpaid GST payable by a taxpayer under the GST Act in the relevant tax period and issue a Notice of Assessment giving notice to the taxpayer of the amounts of unpaid GST payable to the Commissioner for those tax periods. The Commissioner makes that assessment and gives notice, as the Commissioner determines, acting in good faith in discharge of the functions and powers conferred upon the Commissioner. The taxpayer may contend, and may seek to demonstrate, on the balance of probabilities, that the assessment in relation to one or more taxable supplies or creditable acquisitions in the relevant tax period is "excessive".
133. Second, against the background of further facts that emerge either as a result of the exercise of powers conferred upon the Commissioner or by reason of the taxpayer putting on material or providing further information to the Commissioner (or both), the Commissioner may reassess the assessment as to the amount of unpaid GST payable by the taxpayer and make the kind of concessions made in this case. The exercise of powers by the Commissioner in making the assessment and giving notice to the taxpayer of the unpaid amount of GST said to be payable, and in subsequently making a concession as to aspects of that assessment, does not prevent the Notice operating as a notice for the purposes of s 105-50(3)(a) in respect of those amounts of unpaid GST which remain properly so characterised and in respect of which the taxpayer is unable to demonstrate that the assessment, as to those amounts, is excessive.
134. Plainly enough, a taxpayer who demonstrates that an assessment is excessive in respect of an amount which is shown not to be payable to the Commissioner, is entitled to a variation of the objection decision concerning that amount and equally, of course, the Notice of Assessment cannot operate as a notice in respect of that amount under s 105-50(3)(a) as that amount of unpaid GST is not payable. However, the Notice of Assessment, giving a taxpayer notice for the purposes of s 105-50(3)(a) in respect of other amounts the subject of the notice for the relevant tax periods, not the subject of a variation of the objection decision, remains a valid notice as to those amounts for those periods.
135. It would be an odd result if a Notice of Assessment and thus a notice for the purposes of s 105-50(3)(a) was rendered invalid in respect of every aspect of its content at the date of issue, by reason of the Commissioner's assertion in the Notice of Assessment that an amount of unpaid GST was payable which is later shown not to have been payable at the issue date, or is otherwise conceded by the Commissioner, at a later date, not to have been payable at the date of issue.
136. In other words, overstatement of the net amount payable in the Notice of Assessment (based upon a collection of transactions in a relevant tax period giving rise to offsets of amounts of GST payable on taxable supplies and entitlements to input tax credits), by the amount of the disallowed input tax credits for the month of February 2007 of $313,892 does not render invalid every aspect of the notice addressing transactions in the other four tax periods relating to Lots 1, 8, 9 and 10. There is nothing in the statutory provisions which suggest that should the Commissioner overstate the net amount payable by any amount in a particular tax period, the Notice of Assessment (and thus a notice for the purposes of s 105-50(3)(a)) is rendered invalid in respect of all aspects of its content as a notice to the taxpayer of unpaid amounts of GST payable to the Commissioner in the relevant tax periods.
137. Cyonara contends that the Notice of Assessment of 24 May 2007 claims an incorrect amount of unpaid GST on the basis of the point concerning Lot 202 already discussed; on the further basis that should the margin scheme apply, the amount claimed is necessarily incorrect; and also on the further basis that since the notice did not calculate or demand interest in relation to the amended net amounts, the amount claimed as unpaid GST and interest is necessarily incorrect resulting in the Commissioner making an invalid demand.
138. The notion that a claim of an incorrect amount in the Notice of Assessment renders notice of the claim invalid is said to derive from s 105-50(1) and s 105-50(3) of Schedule 1 to the Administration Act on the footing that any unpaid GST (together with any general interest charge) ceases to be payable four years after it became payable (sub (1)) unless within those four years the Commissioner has "required payment of the amount ... by giving a notice to you" (sub (3)) [emphasis added]. Section 105-50(3) also refers to the Commissioner requiring, by notice, payment of the amount of any excess of a refund or overpayment by the Commissioner as contemplated by s 105-50(2). That part of s 105-50(3) addressing a demand for, in effect, repayment of an excess or overpayment has no application in these proceedings.
139. The contention is that, as a matter of construction of s 105-50(3), notice of a requirement to pay the amount of any unpaid GST must necessarily mean notice to pay the correct amount of any unpaid GST and, like a bankruptcy notice issued under the provisions of the Bankruptcy Act 1966 (Cth) (the "Bankruptcy Act"), as the most appropriate analogue, a failure to recite a claim in the notice for the correct amount owing, renders the notice invalid. Since there is no savings provision in the Administration Act (like the provision in the Bankruptcy Act) which preserves the validity of a notice which is otherwise invalid, the notice remains invalid by reason of a demand being made for an incorrect amount.
140. There is no substance in the analogical argument based on a comparison with the legal consequences flowing (or not) from errors in the amount recited in a bankruptcy notice. First, as already noted, s 105-50 in the context of the Administration Act and the GST Act does not suggest that an overstatement of the amount of unpaid GST in a notice renders the notice invalid. Second, the statutory purpose and objectives of the Administration Act and the GST Act on the one hand are entirely different to the statutory purposes and objectives of the Bankruptcy Act on the other hand. The Notice of Assessment is subject to an objection process; objection decision-making by the Commissioner; review of the objection decision before the Tribunal or, alternatively, the subject of proceedings before the Federal Court, in which the taxpayer in either forum has the opportunity to show and burden of showing that the assessment is excessive.
141. A bankruptcy notice, however, issued under s 41(1) of the Bankruptcy Act is predicated upon a final judgment or final order (s 41(3)), and a failure to comply with the requirements of the notice (or otherwise make good the qualifying elements of s 40(1)(g)) gives rise to the commission of an act of bankruptcy under s 40(1) which, in turn, would be likely to result in the Court making a sequestration order against the estate of the debtor under s 43(1) (on a creditor's petition for such an order) having the serious consequences or effects set out under Division 4 of Part IV of the Bankruptcy Act.
142. Accordingly, the statutory scheme of the Bankruptcy Act bears no relevant analogical comparison with the role of the Notice of Assessment and its role as a notice to the taxpayer under the Administration Act of a claim by the Commissioner for payment of unpaid amounts of GST.
143. Section 41(5) of the Bankruptcy Act provides that a bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor, exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of misstatement. Such a provision is not necessary in the Administration Act as reciting an amount in excess of an amount of unpaid GST does not give rise to invalidity as the scheme of the Administration Act and the GST Act does not have the analogical consequences of the Bankruptcy Act.
144. Accordingly, Cyonara's application on this ground must be dismissed.
145. For these reasons, it follows that Cyonara's application must be dismissed with an order that Cyonara pay the respondent's costs of and incidental to the application.
Notice of Motion filed in QUD 69/2011
146. On 28 March 2011, Cyonara filed a Notice of Motion in which it seeks the following relief:
1. Alternatively to the relief sought by way of appeal from the decision of the Tribunal in this proceeding, it be declared that any GST in relation to the applicant's sale of properties referred to as Lot 1 and Lot 10 in the decision of the Tribunal is not recoverable by the respondent by operation of s 105-50 of Schedule 1 of the Taxation Administration Act 1953 (Cth).
147. The Commissioner contends that the Notice of Motion should be dismissed as the procedure adopted by Cyonara of seeking a declaration by Notice of Motion is inappropriate when Cyonara has filed an application by way of an appeal under s 44 of the AAT Act. The Notice of Motion is said to be superfluous. Cyonara contends that relief was sought in this way in the alternative only in the event that the Court finds that the Commissioner is not entitled to recover the contended unpaid amounts of GST in respect of Lots 1 and 10, but that the AAT did not have jurisdiction to determine the limitation point in question. Cyonara contends that in those circumstances it would be proper for the Court to make the declaration sought.
148. Those circumstances do not prevail. The Notice of Motion is an inappropriate procedure in the circumstances and ought to be dismissed.
149. By this proceeding filed on 11 March 2010, Cyonara made application for an Order of Review and Notice of Appeal (the "Review Application") challenging the decision of the Tribunal of 24 February 2010 being the preliminary decision on the limitation point (see  to  of these reasons). In addition, on 11 March 2010 Cyonara filed a Notice of Motion seeking a stay of the proceedings before the Tribunal pending the determination of the Review Application. On 15 March 2010, the Commissioner filed a Notice of Objection to competency on the footing that the decisions the subject of the Review Application were not judicially reviewable under s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the "ADJR Act") as the decisions were not decisions to which the ADJR Act applied and the orders sought exceeded the powers of the Federal Court under s 16(2) of that Act.
150. The Notice of Motion seeking a stay of the Tribunal proceedings was heard by Dowsett J on 16 March 2010. The application was adjourned to a date to be fixed having regard to particular matters. Cyonara did not obtain an order staying the proceedings before the Tribunal with the result that the Tribunal hearing took place as to the substantive matters on 7, 8 and 23 December 2010.
151. A decision was published by the Tribunal on 25 February 2011.
152. On 21 February 2011, the Commissioner filed a Notice of Motion seeking dismissal of the Review Application filed by Cyonara, with costs. The Commissioner contends that Dowsett J heard that motion shortly after the Tribunal handed down its decision on 25 February 2011. The Commissioner also contends that Dowsett J adjourned the hearing of the motion on the basis that Cyonara proposed to file a Notice of Appeal from the Tribunal's final decision of 25 February 2011 and that all matters would be consolidated and heard together on the hearing of the appeal.
153. The Commissioner now contends that the Review Application ought to be dismissed for the following reasons.
154. First, the proceeding is said to be superfluous as all matters raised by the Review Application have been addressed in the appeal (QUD 69/2011).
155. Second, the Commissioner contends that a Notice of Appeal filed under s 44(1) of the AAT Act lies only from a decision of the Tribunal which constitutes the effective or determinative decision of the application made to the Tribunal, whereas the decisions sought to be challenged by Cyonara in the Review Application, were only "preliminary decisions" although they were subsequently incorporated into the Tribunal's 2011 decision (at ) and no challenge was made to the preliminary decision (at ). A further ground of challenge advanced by Cyonara on the limitation issue was addressed by the Tribunal at  to .
156. Third, the Commissioner contends that Cyonara's contention of a denial of natural justice is unfounded. The factual basis of the Review Application is said to be entirely misconceived. The Commissioner says that the Tribunal gave notice to the parties on 4 February 2010 that the Tribunal would hear and, if necessary, determine the limitation issue on 17 February 2010. On that day, the parties provided the Tribunal with oral and written submissions on the limitation issue and Cyonara was given leave to file additional written submissions. The Commissioner also says that in accordance with the Tribunal's statement to the parties on 17 February 2010, the Tribunal determined the issue by 26 February 2010. The Tribunal handed down its written decision on 25 February 2011.
157. Fourth, the Commissioner contends that the Review Application seeks relief that the Federal Court has no jurisdiction to grant in that Cyonara by ground 4(b) of the Review Application asks the Court to determine for itself the issues the subject of the Tribunal's 2010 decision. The Commissioner contends that s 16 of the ADJR Act outlines the Court's powers on review which do not confer power to determine the subject matter of the decision for itself.
158. Fifth, the Review Application ought to have been made after the handing down of the final decision.
159. Sixth, the Tribunal's decision on the limitation question on 24 February 2010 was not a separate question to be decided independently of the final decision as Cyonara was, it is said, unable to rely upon the limitation issue in challenging the objection decision of the Commissioner and reliance could not be placed upon the limitation point until such time as the Tribunal granted Cyonara leave to amend its original grounds of objection to the assessments pursuant to s 14ZZK(a) of the Administration Act, and leave was not granted until 25 October 2010.
160. Cyonara contends that the Review Application is not superfluous as Dowsett J, in effect, consolidated the Review Application with the appeal under s 44(1) of the AAT Act, or at least made directions that both applications be heard and determined together. The Review Application challenges the preliminary decision of the Tribunal in relation to the question of whether the Notice of Appeal operates as a notice for the purposes of s 105-50(3)(a), and the related construction questions addressed in the Tribunal's decision of 24 February 2010.
161. Whilst it is true that the appeal under s 44(1) does not frame a ground of error of law or a related question of law directed to the characterisation questions decided by the Tribunal on 24 February 2010, the Review Application seeks an Order of Review (coupled with a so-called Notice of Appeal) of the decisions of the Tribunal on the construction questions concerning Schedule 1 of the Administration Act, on the footing that the 24 February 2010 decision is a truly separate decision (although called a "preliminary" decision) which the parties agreed to treat as finally dispositive of the limitation point arising out of the construction of s 105-50(1), s 105-50(3)(a) and s 105-15.
162. Cyonara says that by its written submissions at the substantive hearing before the Tribunal leading to the decision of 25 February 2011, it made it plain that it did not seek to re-open the Tribunal's ruling of 24 February 2010 that the Notice of Assessment of 24 May 2007 constituted a notice for the purposes of s 105-50(3)(a) but that the right to agitate the question on appeal was reserved. Cyonara also says that this position taken before the Tribunal as reflected in the written submissions is consistent with the preliminary decision being a separate reviewable decision and the parties having treated the decision as separately dispositive of that aspect of the matter.
163. The procedural mechanism by which Cyonara seeks to agitate that question is not the vehicle of the appeal under s 44(1) but the hearing and determination of the Review Application.
164. Cyonara contends that the Tribunal decision of 24 February 2010 is a decision of an administrative character made under an enactment for the purposes of ss 3 and 5 of the ADJR Act and, that being so, the decision is subject to an order of review under s 5 on the ground of a denial of natural justice in relation to the making of the decision (s 5(1)(a); ground 3(a)-(d)) and on the further ground that the decision involved an error of law (s 5(1)(f); ground 3(e)). The Review Application contains grounds of appeal going to "questions of law" concerning the construction of s 105-50(1), s 105-50(3)(a) and s 105-15 of Schedule 1 of the Administration Act.
165. The Commissioner contended, by the Notice of Objection, that the Tribunal decision of 24 February 2010 is not susceptible of an order of review under the ADJR Act as the Act has no application to the decision. That is said primarily on the footing that the decisions of the Tribunal (in this case at least) are not severable and cannot be "fragmented" with the result that the earlier decision is not "a decision" under ss 3 and 5 of the ADJR Act until the decision is finally made.
166. We propose to proceed on the footing that the Tribunal's decision of 24 February 2010 seems to have been treated by the parties as a final determination of the separate construction question which caused Cyonara not to seek to re-open the construction of the relevant provisions at the substantive hearing and, further, Dowsett J seems to have proceeded on the footing accepted by the parties that the issues raised by the Review Application and the s 44(1) appeal would be addressed together on the hearing of the appeal.
167. Thus, we now turn to the question of whether the construction adopted by the Tribunal in its preliminary decision was reached in error of law.
The construction question
168. Part 3-10 of Chapter 3 of Schedule 1 of the Administration Act deals with provisions in relation to indirect taxes. An indirect tax is defined for the purposes of the Administration Act to include GST, by reference to s 995 of the Income Tax Assessment Act 1997 (Cth).
169. Division 105 of Part 3-10 provides for "General rules for indirect taxes". Section 105-5(1)(a) provides that the Commissioner may, at any time, make an assessment of the taxpayer's net amount, or any part of the taxpayer's net amount, of GST for a tax period. Moreover, the Commissioner may make an assessment under s 105-5 even if he or she has already made an assessment for the tax period (s 105-5(3)). Section 105-15(1) provides that the taxpayer's liability to pay GST and the time by which an amount of indirect tax must be paid, do not depend on, and are not in any way affected by, the making of an assessment under subdivision 105-A of Division 105.
170. Section 105-20(1) provides that the Commissioner must give the taxpayer notice of an assessment as soon as practicable after the assessment is made, although, failing to do so does not affect the validity of the assessment. The Commissioner may amend an assessment at any time and an amended assessment is an assessment for all purposes of any indirect tax law. If there is an inconsistency between assessments that relate to the same tax period, the later assessment prevails to the extent of the inconsistency (s 105-30).
171. The taxpayer may object in the manner set out in Part IVC against a decision the taxpayer is dissatisfied with that is a reviewable indirect tax decision and an assessment decision under s 105-5 or an amendment decision under s 105-25 is a reviewable indirect tax decision. Section 105-50 addresses the topic of time limits on recovery by the Commissioner and, as already extensively discussed, s 105-50(1) provides that any unpaid net amount of GST (together with any relevant general interest charge under the Administration Act) ceases to be payable four years after it became payable by the taxpayer. However, s 105-50(1) has no application to an amount if within those four years the Commissioner has required payment of the amount by giving a notice to the taxpayer.
172. As s 105-15(1) makes plain that the taxpayer's liability to pay an amount of GST and the time by which the amount must be paid, does not depend on and is not in any way affected by the making of the assessment. The liability and the obligation to pay arises under the GST Act. The Administration Act confers power upon the Commissioner to make an assessment of the net amount of GST at any time notwithstanding any earlier assessments which might have been made and the Commissioner may, at any time, amend an assessment. Importantly, the Commissioner is required to give the taxpayer notice of an assessment as soon as practicable.
173. As a matter of construction of these provisions taken in conjunction with the GST Act it follows that a liability and an obligation to pay arises under the GST Act and the provision of a Notice of Assessment operates as "notice" by the Commissioner of his or her requirement that the taxpayer pay to the Commissioner on behalf of the Commonwealth the net amount of any unpaid GST (arising as already described) together with any relevant general interest charge under the Administration Act, payable as contemplated by s 105-50(1). Thus, the Notice of Assessment operates as a notice for the purposes of s 105-50(3) so as to displace the prohibition otherwise arising under s 105-50(1).
174. We can see no error of law in the construction adopted by the Tribunal on this question. As to the denial of natural justice contention, the Tribunal's reasons for decision make plain that Cyonara was provided with an opportunity to make written submissions and supplementary written submissions. It follows that the application must be dismissed with costs. It also follows that the Review Application must be dismissed with costs. Cyonara's Notice of Motion filed 28 March 2011 is to be dismissed with costs.