Geocon Land Holdings No 5 Pty Ltd v FC of T

Judges:
Thawley J
Wheelahan J
Wheatley J

Court:

MEDIA NEUTRAL CITATION: [2025] FCAFC 172

Judgment date: 1 December 2025

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Thawley, Wheelahan and Wheatley JJ:

OVERVIEW

1. The applicant ( Geocon ) acquired a Crown Lease of land in the Australian Capital Territory ( ACT ) from the ACT Land Development Agency ( LDA ). Geocon gave monetary and non-monetary consideration in connection with the grant of the Crown Lease: (a) Geocon paid $5.4 million (monetary consideration); and (b) Geocon entered into a Project Delivery Agreement by which it undertook to provide Development Services (non-monetary consideration). The Development Services included building residential apartments or units for sale. The Development Services were carried out by a related entity ( Geocon Developments Pty Ltd). Construction works were provided by another related entity ( Geocon Constructors Pty Ltd).

2. Geocon calculated GST on the sales of the developed units on the basis of the GST margin scheme provided for in Div 75 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) ( GST Act ). Relevantly for present purposes, Div 75 contemplates a developer charging GST only on the "margin for the supply", namely the amount by which the consideration for the supply of the units exceeds the consideration for the acquisition of the interest: s 75-10(2). The GST payable is ¹/₁₁ of the margin for the supply: s 75-10(1). Geocon's invoices generally did not show what GST was payable and purchasers of units could not have known what GST Geocon was liable to pay because they could not have known the margin for the supply.

3. Geocon incorrectly failed to take the non-monetary consideration into account when calculating the margin for the sale of certain units. It therefore overpaid GST to the Commissioner.

4. Division 142 has the effect that, if a taxpayer has paid "excess GST" and "passed on" that GST to another entity, the excess GST is deemed by s 142-10 always to have been payable on a taxable supply until the taxpayer has reimbursed the other entity for the GST passed on. If s 142-10 applies, there is a power in s 142-15 to treat s 142-10 as not applying if its application "would be inconsistent with the principle that excess GST is not to be refunded if this would give an entity a windfall gain".

5. Geocon's principal position may be summarised as follows:

(a) Section 142-10 did not operate because the "excess GST" was not "passed on" within the meaning of s 142-10. Therefore, s 142-10 did not deem the overpaid GST to have always been payable on a taxable supply. The overpaid GST should therefore be refunded. This is the subject of Ground 4.
(b) Alternatively, if "excess GST" was passed on, the Commissioner should have applied s 142-15 to disengage the operation of s 142-10, because a refund would not result in Geocon receiving a "windfall gain" within the meaning of Div 142. This is the subject of Ground 5.

6. There was no dispute that Geocon received the market price for the residential units, being the price between parties dealing at arm's length. Geocon's principal contentions included that the development costs to Geocon, including the GST cost generally and the overpaid GST specifically, did not affect the sale price which Geocon received. Purchasers would have paid the same purchase price no matter the costs of development (including Geocon's GST liability) and no matter the correct margin for the supply. More specifically, Geocon contended that it did not pass on that part of the (economic burden of the) GST cost which it thought was not payable, namely the overpaid GST. Geocon paid that GST to the Commissioner to act "conservatively".

7. Geocon also argued that the excess GST was attributable to the tax period ended 30 September 2017, when the unit plan was registered and the unit titles came into existence, rather than the tax period ended 30 September 2015, when the Crown Lease was granted. This is the subject of Ground 1. According to Geocon, because the excess GST was attributable to the tax period ended 30 September 2017, the arrangements involved overpaid GST (on the taxable supplies of units under the margin scheme) and underpaid GST (on the taxable supplies of the Development Services) equal to the same amount, with the result that there was no "excess GST" within

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the meaning of s 142-5. This is the subject of Ground 2.

8. Geocon will succeed if it makes out Grounds 1 and 2 or Ground 4 or 5. Ground 4 was Geocon's principal case.

9. The last issue raised concerns the calculation of the correct margin. This is the subject of Ground 3. Geocon contended that the Tribunal erred in concluding that the non-monetary consideration for the Geocon's acquisition of the units was $103,145,685.

10. According to Geocon, the Tribunal ought to have concluded that the relevant amount was $113,460,254 (being the amount of $103,145,685, plus GST), which Geocon described as the "value" of the non-monetary consideration.

11. This "appeal" in the Court's original jurisdiction arises in the following way. Geocon objected to: (a) amended assessments issued by the Commissioner of Taxation in relation to Geocon's GST liabilities; and (b) the Commissioner's refusal to exercise the power in s 142-15. The Commissioner disallowed the objections and Geocon sought review in the Administrative Review Tribunal . The review was conducted by reference to five issues, which correspond to the five grounds supporting the questions of law said to arise on this application. Geocon was unsuccessful before the Tribunal on each issue.

12. An appeal to this Court is permitted on a "question of law": Administrative Review Tribunal Act 2024 (Cth) s 172(1) ( ART Act ). The grounds in support of the questions of law said to engage the Court's jurisdiction may be summarised as follows:

(1) The Tribunal erred in concluding that the GST payable on the Geocon's supply of the Development Services was attributable to the tax period ended 30 September 2015. It ought to have concluded that that GST was attributable to the tax period ended 30 September 2017.
(2) The Tribunal erred in concluding that there was an amount of excess GST for the purposes of s 142-10 of the GST Act for the tax period ended 30 September 2017. It ought to have concluded that there was no amount of excess GST for that tax period.
(3) The Tribunal erred in concluding that the amount of non-monetary consideration for Geocon's acquisition of the units was $103,145,685. It ought to have concluded that that amount was $113,460,254 (being the amout of $103,145,685, plus GST). Geocon also contends that a private ruling operates to prevent any different conclusion.
(4) The Tribunal erred in concluding that there was an amount of excess GST that was "passed on" by Geocon to another entity for the purposes of s 142-10 of the GST Act for the tax periods ended 30 September 2017, 31 December 2017 and 31 March 2018.
(5) The Tribunal erred in failing to be satisfied of the matter referred to in s 142-15(1)(a) of the GST Act - that "applying [s 142-10] would be inconsistent with the principle that excess GST is not to be refunded if this would give an entity a windfall gain" - for the tax periods ended 30 September 2017, 31 December 2017 and 31 March 2018.

13. For the reasons which follow, Geocon's application should be allowed on Ground 4. Grounds 1 and 2 do not strictly need to be determined, but would not have been made out. Ground 3 is dismissed. Ground 5 does not arise.

BACKGROUND

14. On 1 October 2014:

(a) Geocon entered into a "Commercial Contract for Sale" (of the leasehold interest), with the LDA as seller: T[21]. Special Condition 37.1 included that the "Contract is contingent upon the parties entering into the Project Delivery Agreement prior to or at the same time they entered into this Contract": T[23]. The price was $5.4 million. Geocon and the LDA agreed that the GST margin scheme applied to the supply of the land: cl 26.
(b) as anticipated by Special Condition 37.1, the LDA and Geocon entered into the Project Delivery Agreement: T[25]. Under cl 3 of that agreement, Geocon undertook to design and construct all buildings on the land consistent with: (a) all applicable laws; (b) the "Intended Development Design Outcomes"; and (c) the terms and conditions contained in the Project Delivery

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Agreement. The Project Delivery Agreement provided for the LDA to have input into the development: T[26].

15. Geocon acquired its interest in the land as lessee from the ACT Planning and Land Authority, pursuant to a Crown Lease dated 3 July 2015: T[29]. Clause 3(a) of the Crown Lease (parts of which were later varied) set out covenants that included that Geocon would, within 48 months, "complete the erection of an approved development on the land" in accordance with every applicable "Statute Ordinance or Regulation": T[30]. Thus, cl 3(a) of the Crown Lease (and the Contract) restricted Geocon from assigning or transferring the Crown Lease until it had completed the development: T[32]; Planning and Development Act 2007 (ACT) s 298(1)(d)(i).

16. Geocon engaged Geocon Developments under an agreement dated 17 May 2016: T[34]. Geocon was required to pay Geocon Developments a fee calculated in accordance with cl 14.

17. The planning approvals in respect of the development were granted between 17 September 2015 and 1 June 2017: T[40]. The construction works commenced on about 6 June 2016. The last certificate of occupancy and use was granted on 4 August 2017.

18. As is explained further below, from 22 June 2016, Geocon considered that it was highly likely that it could deduct the development costs in calculating the margin for its supply. Its state of comfort in that respect increased when a related entity received a confirmatory private ruling on 30 June 2017 and when it received a confirmatory private ruling on 13 December 2017.

19. The development was undertaken in two stages, with the object of achieving sufficient presales targets in order to obtain construction finance quickly: T[41], [42]. Each of stages one and two included the construction of about 180 residential apartments: T[41].

20. On 8 September 2017, the ACT Registrar-General registered an approved units plan in respect of the development: T[43]. The Crown Lease of the parcel came to an end and Geocon, as former lessee, became the holder of an estate in leasehold in each unit as if a separate lease of each unit had been granted to Geocon (as former lessee) by the Territory under the Planning and Development Act - see: T[43]; Unit Titles Act 2001 (ACT) s 33. The term of the leases on the units ends on the date on which the term of the lease of the parcel would have ended: s 33(5). The units plan specified that the term of the lease of each of the units expired on 2 July 2114: T[44].

21. Geocon offered stage one units for sale between March 2015 and 28 May 2021 and stage two units between November 2015 and 19 February 2021: T[45]. Contracts of sale in respect of these units were exchanged between 24 March 2015 and 28 May 2021: T[46]. The contracts settled between 15 September 2017 and 30 June 2021: T[46]. Geocon did not generally issue invoices showing any GST payable by purchasers: T[196].

22. On 22 June 2016, Geocon discussed with PwC matters relevant to the GST treatment of development services such as those relevant to its development of the land the subject of the Crown Lease: T[71]. On 25 July 2016, Geocon formally engaged PwC to provide advice on GST issues in respect of the development: T[73]. The Tribunal accepted that the director believed it was "highly likely" that Geocon would be able to include the cost of the Development Services when calculating the margin for the Development: T[20], [70], [73]. However, the director decided to act "conservatively" and lodge Geocon's Business Activity Statements without taking the Development Services into account when calculating the margin and the GST liability under the margin scheme: T[74].

23. On 30 June 2017, the Commissioner issued a private ruling (to a related entity) which confirmed that the non-monetary consideration could be deducted when calculating the margin, because the Development Services were consideration for the acquisition of a Crown Lease: T[76].

24. On 13 December 2017, consistently with the ruling issued on 30 June 2017, the Commissioner issued a private ruling to Geocon, ruling that (T[79]):

(a) Geocon made a taxable supply of Development Services to the LDA;

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(b) the Development Services constituted non-monetary consideration for Geocon's acquisition of the land;
(c) Geocon was entitled to take into account the value of the non-monetary consideration (the Development Services), for the purposes of the GST margin scheme calculation.

25. On 21 December 2017, Geocon issued a tax invoice for the Development Services to the ACT Suburban Land Agency ( SLA ), which was the successor agency to the LDA from 1 July 2017: T[80]. The tax invoice was for a total of $113,460,254.00 including GST of $10,314,568.50. Only an amount equal to the GST component of $10,314,568.50 was expressly stated as the "amount owing". SLA paid the GST to Geocon on 8 February 2018.

26. Geocon reported the taxable supplies and GST liabilities relating to the sale of the units in its BAS for the September 2017 quarter, and subsequently in each BAS for the December 2017 through to June 2019 quarters as the settlements occurred: T[83]. Geocon used the GST margin scheme in calculating its GST liabilities relating to the sale of the units.

27. For the September 2017, December 2017 and March 2018 quarters, Geocon worked out its "margin" for the purposes of the GST Act by accounting only for the monetary consideration for its acquisition of the land, namely the $5.4 million it paid to the LDA pursuant to the Commercial Contract, and did not take the non-monetary consideration into account: T[84]. Whilst Geocon did not generally include GST in its invoices to purchasers, it follows from the incorrect manner in which Geocon calculated the margin, that Geocon overpaid GST to the Commissioner from the amounts received from the purchasers.

28. Although Geocon had obtained the private ruling on 13 December 2017, it did not start to factor the non-monetary consideration in its GST margin scheme calculations until it lodged its BAS for the June 2018 quarter on 30 July 2018: T[85].

29. It is not in dispute that Geocon overpaid GST for the September 2017, December 2017 (lodged on 19 February 2018) and March 2018 quarters (lodged on 23 April 2018).

30. Geocon did not report its taxable supply of the Development Services or any GST payable in respect of that supply in any BAS as originally lodged: T[87].

31. The Commissioner commenced a review of Geocon's affairs on 24 October 2018: T[88]. During that review, the Commissioner inquired whether Div 142 of the GST Act had been considered: T[91]. PwC responded on 24 June 2019 to the effect that Div 142 had been considered, but was thought not to apply because the arrangements involved "overpaid GST (on the taxable supplies of developed properties under the margin scheme) and underpaid GST (on the taxable supplies of development services) equal to the same amount", with the result that there was no "excess GST": T[91].

32. The Commissioner commenced an audit on 15 August 2019: T[92]. On 15 April 2020, PwC requested that the Commissioner exercise the "discretion" in s 142-15 of the GST Act and treat s 142-10 as never having applied in respect of the September 2017, December 2017 and March 2018 quarters on the basis that it was inappropriate for s 142-10 to apply: T[95].

33. On 15 October 2020, the Commissioner issued amended assessments for each of the September 2015 and September 2017 to June 2019 (inclusive) quarters: T[96]. On 16 October 2020, the Commissioner refused to exercise the "discretion" in s 142-15 and issued further amended assessments for the June 2018 and December 2018 to June 2019 quarters: T[97].

34. Geocon lodged objections against the amended assessments and against the Commissioner's refusal to exercise the discretion in s 142-15. Those objections were disallowed and Geocon sought review in the Tribunal, from whose decision it now "appeals" to this court in its original jurisdiction.

35. In the Tribunal review, evidence was given by the sole director of Geocon, who was also the sole director of Geocon Developments and Geocon Constructors. Amongst other things, that evidence addressed Geocon's "pricing policy and practice": T[18], [47]-[65], [70]. Evidence was also given by a senior development manager employed by the Geocon Group: T[19], [66]-[70]. The manager provided feasibility,

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marketing and sales pricing advice. The Tribunal accepted the evidence of the director and manager as reliable: T[20], [70].

36. Although the Tribunal concluded that Geocon failed to discharge its onus of proving that it did not pass on the economic burden of the overpaid GST, the Tribunal did not conclude that the amount Geocon received for the units was in any way affected by incorrectly paid GST. Indeed, the Commissioner accepted in argument that the Tribunal should be understood as concluding that Geocon was paid the market value and that the market value was not influenced by incorrectly paid GST.

37. Speaking generally, it may be said that the evidence distinguished between the pricing which the developer performed: (a) to determine whether the project was feasible or profitable; and (b) to set a list of prices for which the units would be offered for sale.

38. Although far from clear, it seems that the Tribunal accepted that the various factors affecting the cost of development, including GST, were relevant to working out the feasibility and profitability of the project, but did not affect the offer-pricing of the units: T[69], [70], [204]. The Tribunal's findings included:

(1) As to project feasibility:
- (a) all of the anticipated costs involved in carrying out a development were taken into account in determining whether or not the development was feasible: T[59];
- (b) one of the costs taken into account for the purposes of determining feasibility and profitability on an ongoing basis was liability for GST: T[59], [60].
(2) As to determining an offer price for the units to be sold, the Tribunal accepted evidence given by the manager that "prospective purchasers will pay market prices, but will not pay more, and that they are indifferent to the amount spent by the developer in order to bring the apartment into existence, such as costs of acquiring the land and building the apartment": T[67]. The director was the ultimate decision-maker on price. The Tribunal accepted that the offer pricing for the units:
- (a) was done according to what the market would bear: T[62];
- (b) was set by reference to the objective characteristics of the property intended to be sold, using comparable sales data from other properties, and considering the price that a purchaser was likely to pay for the relevant property: T[62], [63], [66];
- (c) (although not entirely clear) did not take into account factors affecting the cost of development, including GST: T[69], [204].

39. The Tribunal did not clearly address whether costs were taken into account when Geocon agreed to a sale. Further, the Tribunal did not make findings about whether GST which was considered by Geocon not to be payable was taken into account at any specific stage, whether in assessing feasibility or profitability, or in considering what prices to put in its price lists. This was in substantial part due to the evidence before the Tribunal and the way in which the case was argued.

GROUND 1

40. As mentioned, Geocon contended that the GST was attributable to the tax period ended 30 September 2017, being the tax period in which the unit plan was registered and the unit titles came into existence: AS[3].

41. The Tribunal concluded that the GST on Geocon's supply of Development Services to the LDA was attributable to the tax period ended 30 September 2015, being the tax period in which the Crown Lease was granted: T[138].

Further background

42. It is relevant to provide a little further background relevant to this issue. In its application for a private ruling, Geocon (through PwC) sought positive answers to the following questions (Pt C at 936):

a. Did Geocon make a supply of Development Services to the ACT Land Development Agency ( the LDA ) in relation to the development of real property located at Block 1, Section 76 in Greenway, Australian Capital Territory ( the Southport Site ) under the agreements entered into between Geocon and the LDA for the Project?

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b. Were the Development Services provided by Geocon to the LDA non-monetary consideration for Geocon's acquisition of the Southport Site from the LDA?

43. As mentioned earlier, it received a positive answer to those questions on 13 December 2017.

44. Geocon's position, with which the Commissioner agreed, was that the Development Services were consideration for the acquisition of the Crown Lease "on the basis that a sufficient nexus exists between the provision of the Development Services and the acquisition of the land": Pt C at 937. This position was more fully explained in PwC's submissions in support of the application: Pt C at 944-50.

45. Having obtained a ruling in its favour on that basis, the argument which Geocon put forward before the Tribunal (and before this Court) was that the Development Services were not consideration for the acquisition of the Crown Lease. Rather, according to Geocon, the Development Services were consideration for the leases of each of the individual units which later came to exist at the time the Crown Lease ceased to exist. The Commissioner was bound by the ruling given. The issue has been argued on the basis that the Development Services are consideration for either the acquisition of the Crown Lease or the acquisition of the leases in the individual units. Understandably, the Commissioner did not argue that the Development Services were not non-monetary consideration for the acquisition of either the Crown Lease or the individual leases of the units.

46. On Geocon's submission the choice was binary: either the Development Services were consideration for the Crown Lease or they were consideration for the leases of the units. According to Geocon, the Development Services could not be consideration for both, because both could not exist simultaneously. The leases in the units came into existence by operation of statute and the Crown Lease ceased to exist. The Commissioner, on the other hand, posited the possibility that the Development Services could be consideration for both the Crown Lease and the leases in the units. According to the Commissioner, if the Development Services were at least in part consideration for the Crown Lease, then s 29-5 operated to attribute the consideration to the quarter in which the Crown Lease was granted. The Commissioner's primary position, however, was that the Development Services were consideration for the Crown Lease, consistently with the private ruling and Geocon's position at that time.

Geocon's first contention

47. Geocon's first contention was that the consideration for the Development Services was "first received when the unit titles were issued on 8 September 2017": AS[4].

48. Geocon submitted (at AS[5]) that the Tribunal erred by asking itself "whether the Crown Lease was capable of being 'consideration', which is defined broadly in s 9-15", rather than "whether the Crown Lease was consideration 'for' the Development Services". In respect of this submission, Geocon focussed primarily on T[130] and [131]. At T[130], the Tribunal stated:

I agree with the Commissioner's submission that the grant by LDA of the Crown Lease on 3 July 2015 during the September 2015 quarter, was the consideration for the supply of the Development Services by SFQV. This was because there was a sufficient connection or relationship between the Development Services and the grant of the Crown Lease for the purposes of s 9-5(a) of the GST Act, as interpreted by the High Court in Qantas. This conclusion is founded on the broad, inclusive definition of consideration in s 9-15(1)(a) which expressly covers any payment, or any act or forbearance in connection with a supply. I also agree, in the alternative, the grant of the Crown Lease "induced" the supply of the Development Services as contemplated by the definition of consideration in s 9-15(1)(b) of the GST Act.

49. In the first sentence of T[130], the Tribunal stated its conclusion that the Crown Lease was the consideration for the supply of the Development Services. In the second sentence of T[130], the Tribunal explained that this conclusion was based on the sufficiency of the connection or relationship between the Development Services and the grant of the Crown

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Lease and referred to s 9-5(a) of the GST Act and the High Court's decision in
Commissioner of Taxation v Qantas Airways Ltd [2012] HCA 41; 247 CLR 286. Under the heading "Supply made for consideration", at T[108] to [113], the Tribunal had earlier considered the relevant principles relevant to whether a supply is made "for consideration", referring to Qantas;
AP Group Ltd v Federal Commissioner of Taxation [2013] FCAFC 105; 214 FCR 301; and
Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) [1948] HCA 28; 77 CLR 143.

50. In the third sentence of T[130], the Tribunal explained that the conclusion in the second sentence was founded on the broad definition of "consideration" in s 9-15. Section 9-5 provides that you make a "taxable supply", if "you make the supply for *consideration". It was necessary that the Crown Lease be capable of constituting consideration within s 9-15 for it to be consideration for the supply within s 9-5(1)(a).

51. At T[131], the Tribunal stated:

It is well established that a Crown lease that is automatically renewable is the most extensive property interest that can be held in the ACT with the Commonwealth holding the reversion. Granted, it is significant in the scheme of the arrangements between the LDA and SFQV that cl 3(a) of the Crown Lease required SFQV to complete the Development Services within a stipulated time. However, the fact that if SFQV did not satisfy that condition, the LDA as lessor had a right to terminate the Crown Lease under cl 5(a)(ii) does not detract from the grant of the Crown Lease itself being consideration for GST purposes. There is no requirement in the GST Act that consideration is unconditional. SFQV's assertion that SFQV did not obtain a "relatively unimpeachable right under the Crown Lease to the use and transfer of the Land" does not take account of the breadth of the definition of consideration in s 9-15. Moreover, taken as a whole, the contemporaneous transaction documents required the grant of the Crown Lease to allow the Development Services to be carried out. SFQV would not have been under a contractual obligation to supply the Development Services if the transaction documents had not provided for the grant of the Crown Lease, and the Crown Lease had not been granted.

52. None of the reasoning at T[130] or [131], or elsewhere, suggests that the Tribunal reached the conclusion that the Crown Lease was consideration for the Development Services solely on the basis that the Development Services was capable of constituting consideration. Geocon's submission to the contrary must be rejected.

53. In oral argument, Geocon submitted that the Tribunal did not grapple with its case that, properly analysed, the consideration for the supply was the unit titles. Rather, according to Geocon, the Tribunal approached the matter on the basis that the Crown Lease was capable of constituting consideration, and was necessary in a "but for" sense to carry out the development, with the result that the Crown Lease was the consideration for the supply of Development Services.

54. The Tribunal was correct to take into account questions of causation, including for example that "the grant of the Crown Lease was necessary so that [Geocon] could commence the Development and be able to pursue a profitable development, for itself": at [135]. The Tribunal set out Geocon's submissions from T[120] to [129] before then explaining why it preferred the Commissioner's submissions at T[130] to [138]. The Tribunal's reasoning included that:

(a) section 9-15(1)(a) contains a "broad, inclusive definition" of consideration and the granting of the Crown Lease was "consideration": T[130];
(b) the Crown Lease was the most extensive property interest that could be held in the ACT: T[131], [135];
(c) Geocon's contractual obligation to supply the Development Services under cl 3(a) of the Crown Lease only arose once the Crown Lease was granted, without which Geocon would not have supplied the Development Services: T[131], [135];
(d) the LDA's right to terminate under cl 5(a)(ii) of the Crown Lease for non-satisfaction of cl 3(a) did not detract from the Crown Lease being

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consideration because the GST Act does not require consideration to be unconditional: T[131];
(e) the contractual terms between the parties supported the "close connection" between the Crown Lease and the Development Services: T[132]; and
(f) the grant of the Crown Lease was necessary so that Geocon would become the "owner" of the Land, able to undertake a profitable development for itself: T[135], [136].

55. The Development Services were appropriately seen as a part of what "moved" the conveyance of the Crown Lease - see: Archibald Howie at 152;
Commissioner of State Revenue v Lend Lease Development Pty Ltd [2014] HCA 51; 254 CLR 142 at [49]-[62].

56. Geocon submitted that "the Crown Lease only gave [it] highly circumscribed rights" (at AS[9]) and that it did "not fairly reflect the whole of the relationship between [Geocon] and the LDA (cf AP Group at [42]) to describe [Geocon] undertaking to perform the Development Services as it having bargained for the Crown Lease so as to become the 'owner' of the Land", referring to T[136]: at AS[10]. According to Geocon, "[f]rom a practical business perspective, the Crown Lease provided [Geocon] with a permission and an obligation to perform the Development Services in the expectation that, if it completed those Development Services, it could bring about the registration of the unit plan that would extinguish that Crown Lease and bring into existence that which it self-evidently wanted, being the units it could sell": at AS[10].

57. The Crown Lease did not give Geocon only "highly circumscribed rights". It gave Geocon an interest in the land which is as close to ownership as one can get in the ACT. From "a practical business perspective", Geocon agreed to supply the Development Services in order to acquire the Crown Lease, necessary for it to undertake its profitable development, as the Tribunal concluded at T[135]. If Geocon had not promised to carry out the development by entering into the Project Delivery Agreement it would not have acquired the Crown Lease. That is not an answer in itself, because a causal connection between a supply and consideration is not necessarily sufficient to establish that something is consideration for a supply, but it is relevant and material.

58. Of course, the Crown Lease of the land would come to an end once the development was completed and transmogrify relevantly into leases of individual units. That does not mean that the Development Services were consideration for a later supply of leases in the units. Nor does it gainsay the fact that the consideration was for the acquisition of the Crown Lease, particularly in circumstances where the possibility remained that the leases in the units might not eventuate.

59. In oral submissions, Geocon sought to draw an analogy between the present circumstances and an assertedly analogous situation of a builder with a licence to enter land to develop it.

60. As is often the case, the alteration of important facts renders the analogy inapposite. Here, there was a transfer in "ownership" of the land as a matter of practical substance as opposed to legal form. That "ownership" was not akin to a temporary licence. The alteration by the posited analogy of this critical integer would require a myriad of other alterations, and raise a myriad of other considerations, each necessary to examine in order to compare the asserted analogy with the present circumstances. The comparison exercise is not useful in resolving the issues on this appeal.

61. The Tribunal did not err in applying the law to the facts as found in concluding that the Crown Lease was capable of constituting consideration for the Development Services (in relation to which it correctly referred to s 9-15) or in concluding that the Crown Lease was consideration "for" the supply of the Development Services for the purposes of s 9-5.

62. The Tribunal did not err in applying the law to the facts as found in concluding that the GST payable on Geocon's supply of the Development Services was attributable to the September 2015 quarter.

63. Section 29-5 of the GST Act provides:

29 - 5 Attributing the GST on your taxable supplies

(1) The GST payable by you on a *taxable supply is attributable to:

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(a) the tax period in which any of the *consideration is received for the supply; or

(b) if, before any of the consideration is received, an *invoice is issued relating to the supply-the tax period in which the invoice is issued.

64. Given that the Tribunal concluded that the Crown Lease was consideration for the supply of the Development Services, and was not shown to have erred in that respect, the GST was attributable to the September 2015 quarter.

65. It is unnecessary to decide whether the Development Services could have been consideration for both the Crown Lease (which existed for a period of time) and the leases in respect of the units (upon expiry of the Crown Lease) because, even if could be said that the Development Services were partly consideration for both, s 29-5(1) would attribute the consideration to the September 2015 quarter. However, as a matter of principle, it is not immediately obvious that a supply could never be consideration partly for (a) one thing whilst it exists and (b) another thing coming into existence when that first thing ceases to exist.

Geocon's second contention

66. Geocon argued, in the alternative, that the total consideration was not known until September 2017, when the Development Services were completed, because, until that time it was possible for the Crown Lease to be terminated (for failure to complete the development in time, breach of other ongoing covenants, or a failure to obtain approved development plans): AS[13]; T[127]; see, eg: cll 3(c)(iv), (d), (e), 5(a)(ii), (iv). It added that much of the work was to be performed by unrelated independent contractors (engaged by two of its related entities) that it could not control. Further, building hundreds of apartment buildings could be subject to delays, possibly leading to breach, and then to termination, of the Crown Lease: T[127].

67. In those circumstances, Geocon claimed that A New Tax System (Goods and Services Tax) (Particular Attribution Rules Where Total Consideration Not Known) Determination (No 1) 2000 (Cth) applied, such that the Development Services were not attributable to September 2015, but rather to September 2017. The Determination applies to taxable supplies in circumstances where the total consideration for the supply is not known and the ascertainment of the total consideration depends on future events not entirely within the supplier's control. It has the effect that the GST payable on a taxable supply in exchange for consideration unknown at the time is not attributed to a tax period until it is fully known.

68. Clause 3(1) provides:

This Determination applies where:

(a) you make a taxable supply;

(b) you do not know the total consideration for the supply when any consideration is received for the supply or an invoice is issued relating to the supply; and

(c) the ascertainment of the total consideration depends on a future event or events that is not entirely within your control;
and either:

(d) an invoice is issued relating to the supply; or

(e) any consideration is received for the supply.

69. Clauses 4(2) and (4) provide:

(2) Where, in a tax period before you know the total consideration, an invoice is not issued relating to the supply and:

(a) consideration is received for the supply in that tax period - the GST payable on the taxable supply is attributable to that tax period but only to the extent of the consideration received in that tax period; or

(b) no consideration is received for the supply in that tax period - none of the GST on the supply is attributable to that tax period

…

(4) However, the GST payable on the taxable supply is attributable to the tax period in which you first know the total amount of consideration for the taxable supply to the extent that it has not been attributed to an earlier tax period.

70. In relation to the application of these provisions, the Tribunal reasoned at T[137]:

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Finally, the total consideration was known upon the grant of the Crown Lease and did not depend on a future event or events not entirely within [Geocon's] control so as to attract the application of the special attribution rules in s 29-25 and the 2000 Determination. Besides, any termination of the Crown Lease would be an "adjustment event" under the GST Act if, for example, there was a change to the consideration for the supply: s 19-10. The fact that [Geocon] did not issue the tax invoice to SLA until December 2017 for the supply of the Development Services was irrelevant to determining when the GST was attributable.

71. Both parties repeated their submissions to the Tribunal on this issue on appeal.

72. It was necessary to engage both cll 3(1)(b) and (c) for the Determination to apply.

73. As to cl 3(1)(b) of the Determination, the Tribunal concluded at T[137] that Geocon knew "the total consideration for the supply when any consideration [was] received for the supply". It knew the total consideration included the Development Services when it received the Crown Lease. That was a question of fact, determined against Geocon by the Tribunal. Geocon has not articulated any question of law arising from the Tribunal's finding. The amount of the total consideration was not shown to be unascertainable and the Tribunal did not err in concluding that it was ascertainable.

74. The Tribunal also concluded that cl 3(1)(c) was not engaged: T[137]. The Tribunal was not shown to have erred in its conclusion that there was no relevant "future event" not entirely within Geocon's control upon which the ascertainment of total consideration depended. When the Determination refers to "entire control" over events upon which the ascertainment of total consideration depends, it is not inviting the identification of possible future events which might cause an ascertainment to be incorrect; it is asking whether Geocon has, as a matter of practical and commercial reality, control over the relevant variables that affect the total consideration that it stands to receive.

75. Whether Geocon breached the Crown Lease (and thus whether there was a possibility that it could be validly terminated) was always within its control in a practical and commercial sense. For example, Geocon had control over whether it obtained approved development plans because it was within its control to submit plans for approval that the government would be lawfully required to approve.

76. Likewise, Geocon had control over whether the Development Services were performed and over compliance with other covenants such as maintaining pathways and the like. Although it is strictly true that all of Geocon's independent contractors could have chosen not to perform the Development Services, that does not mean that Geocon did not retain control over whether the development was completed. It retained the ability to engage other persons or contractors to ensure the development was completed.

77. The abstract possibility of delay that Geocon observes is inherent in development projects, and that Geocon submits renders the total consideration unknown, is not the kind of contingency with which the Determination is concerned. Geocon retained control over any delay, including because it retained the ability to engage additional contractors.

78. Ground 1 is not made out.

GROUND 2

79. Given Geocon's failure on Ground 1, Ground 2 does not arise.

80. Nevertheless, it is appropriate to explain briefly that the better construction of s 142-5 is that the provision addresses excess GST from individual transactions. Section 142-5(1) provides:

142 - 5 When this Subdivision applies

(1) This Subdivision applies if, after disregarding any amounts covered by subsection (2), your *assessed net amount for a tax period takes into account an amount of GST exceeding that which is payable.

81. The reference to "your *assessed net amount for a tax period [taking] into account an amount of GST exceeding that which is payable" (emphasis added) is a reference to each individual amount of GST in relation to each relevant supply. Division 142 revolves around the question whether GST has been

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passed on. That question of fact can only be determined by reference to particular supplies, not by reference to supplies aggregated to determine a net amount for a tax period reported in a BAS.

82. Contrary to Geocon's submissions, s 142-5 is not a "gateway" provision which must be overcome before s 142-10 operates: T32.25. If Geocon's construction was right, s 142-10 would not apply to overpaid GST in relation to any transaction in a particular period, unless the entity happened to have an overall GST position that required it to pay some amount to the Commissioner in that quarter and then only to the extent of the net amount owed. That would be directly contrary to the statutory objective which is centrally concerned with whether GST in respect of particular supplies has been passed on. Geocon's construction would make a nonsense of the operation of s 142-10.

83. Given the foregoing conclusions, and Geocon's failure on Ground 1, it is unnecessary to address the notice of contention related to Ground 2.

GROUND 3

84. Ground 3 is directed to whether the non-monetary consideration (the Development Services) given by Geocon to acquire the Crown Lease includes the GST charged on the supply of the Development Services. Ground 3 concerns the proper construction of s 75-10(2), which includes:

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) Subject to subsection (3) and section 75-11, 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.

85. Geocon observed that s 75-10(2) provides that the "consideration for your acquisition of your interest" in land is an integer in the calculation of the margin, but that s 75-10(2) does not expressly refer to the value of that consideration or otherwise provide any rule for reckoning the quantum of the non-monetary consideration.

86. According to Geocon, in the absence of any such rule, the quantum of non-monetary consideration for the purposes of calculating the margin is the value of the consideration, referring to
Commissioner of Taxation v Energy Resources of Australia Ltd [1994] FCA 924; 54 FCR 25 at 61-2. According to Geocon, the value of the consideration includes GST.

87. The Commissioner submitted to the Tribunal, and the Tribunal accepted that: (a) the "price" of the supply of the Development Services was $113,460,254 (being the GST-inclusive market value of that supply, referring to s 9-75(1)); (b) the "value" of the supply of the Development Services was $103,145,685, being ¹⁰/₁₁ of the price, referring to s 9-75(1); and (c) the GST payable on the supply was $10,314,568.50, being 10% of the value, referring to ss 9-70, 9-75: T[167], [168].

88. The Tribunal concluded that Geocon had received $10,314,568.50 (from the LDA in respect of the GST in the relevant invoice) which did not represent consideration that Geocon had provided to the LDA for the acquisition of the Land and was not to be taken into account when calculating the margin for GST purposes on the sale of the units: T[168], [169].

89. Geocon submitted:

(a) that the general rules for working out the GST payable on a supply contained in Div 9 are put to one side and replaced with the formula "¹/₁₁ of the *margin for the supply": T40; and
(b) in particular, the meaning of "value" provided in s 9-75 did not provide the answer because s 9-75 provides a specific statutory conception of "value" for the specific purpose of calculating or determining the amount of GST on a supply: T[137].

90. Division 75 modifies the general rules of the Act and generally overrides the provisions of Ch 2, including Div 9, to the extent of any inconsistency: s 45-5 of the GST Act. That is, relevantly for present purposes, Ch 2 continues to operate, subject to modifications made by Div 75. The GST Act must be read as a

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congruent whole, with the language and concepts used in one part likely to bear the same meaning in other parts, subject to express or implicit contrary indication. Having said that, the word "value" (found for example in s 9-75) is not used in s 75-10(2).

91. Section 75-10(2) directs attention to two principal matters: (a) the consideration for the supply by a developer of land under the margin scheme; and (b) the consideration for the developer's acquisition of the interest in the land. It is the second matter that is presently significant, namely the developer's consideration for the acquisition of the Crown Lease.

92. Geocon gave two things by way of consideration for the Crown Lease: cash and services. Geocon did not give to the LDA an amount of GST on its services as consideration for its acquisition of the Crown Lease. Rather, the LDA was contractually obliged to pay GST to Geocon on the services provided by Geocon; and Geocon was obliged by statute to remit that GST to the Commissioner. The value of the services provided by Geocon was the market value of those services at the time, the best evidence of which is the amount of $103,145,685 charged for those services. GST in respect of those services was not consideration given by Geocon to the LDA for Geocon's acquisition of the Crown Lease. Section 75-10(2) permitted Geocon to reduce the margin on the supply by the Development Costs, but not by the GST on those Development Costs.

93. Geocon also submitted that the Commissioner had, by the answer to Question 2 in the ruling of 13 December 2017, ruled that the consideration for the acquisition included the GST inclusive amount of the Development Services. Contrary to that submission, the Commissioner did not rule on the amount of consideration at all, as the Tribunal correctly concluded at T[161].

94. Ground 3 is not made out.

GROUND 4

95. Grounds 4 and 5 concern Div 142 of the GST Act.

Statutory context

96. Division 142 contains a statutory code which provides relief in respect of overpaid GST to the exclusion of what otherwise could be a common law claim for money paid under mistake - see, by analogy:
Avon Products Pty Ltd v Commissioner of Taxation [2006] HCA 29; 230 CLR 356 at [3].

97. Section 142-1 states that Div 142 is about excess GST not being refunded "if this would give an entity a windfall gain". The term "windfall gain" is not defined. Section 142-1 is an "explanatory section" which forms a part of the GST Act, but is not an operative provision: ss 182-1, 182-10. It may only be considered in interpreting an operative provision in the ways identified in s 182-10(2). Section 142-1 provides:

Division 142 - Excess GST

…

142-1 What this Division is about

Excess GST is not to be refunded if this would give an entity a windfall gain.

Note: Refunding excess GST to a supplier will give it a windfall gain if it has already passed on the excess GST in the price of the supply (and not reimbursed the recipient).

98. Section 142-10 deems there to have been a taxable supply and deems GST to have always been payable on the supply if excess GST has been paid and all or part of it "passed on" to another entity, until the other entity is reimbursed for the passed-on GST. Section 142-10 provides:

142 - 10 Refunding the excess GST

For the purposes of each *taxation law, so much of the excess from subsection 142-5(1) (the excess GST ) as you have *passed on to another entity is taken to have always been:

(a) payable; and

(b) on a *taxable supply;
until you reimburse the other entity for the passed-on GST.

Note 1: If you reimburse the passed-on GST so that this section ceases to apply there will

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be an adjustment event under paragraph 19-10(1)(b) or (c). You will have a decreasing adjustment (see section 19-55) and the other entity may have an increasing adjustment (see section 19-80).

Note 2: Any excess GST you have not passed on will be refunded as described in section 155-75 in Schedule 1 to the Taxation Administration Act 1953.

Note 3: While this section applies, paragraph 11-5(b) (about taxable supplies) is satisfied for the corresponding acquisition by the other entity.

99. The term "passed on" has a meaning affected by s 142-25: GST Act s 195-1. Section 142-25 also contains a "prima facie evidence" clause. Section 142-25 provides:

Subdivision 142-C-Passed-on GST

142-25 Working out if GST has been passed on

(1) Some or all of an amount of GST may have been passed on to another entity even if:

(a) a *tax invoice is not issued to or by that other entity; or

(b) a tax invoice issued to or by that other entity relates to that GST, but does not contain enough information to enable that GST to be clearly ascertained.

(2) If:

(a) you issue a *tax invoice or a notice under section 84-89 to another entity, or another entity issues a *recipient created tax invoice to you; and

(b) the invoice or notice contains enough information to enable some or all of an amount of GST to be clearly ascertained; and

(c) in a case where you must pay the *assessed net amount for a tax period to which the invoice or notice relates-you have paid that assessed net amount to the Commissioner;
the invoice or notice is prima facie evidence of that part of that GST having *passed on to that other entity.

100. Whether or not GST has been "passed on" by a taxpayer is a matter for determination according to the ordinary meaning of that term - see, by analogy: Avon Products at [6].

101. The question whether GST has been passed on is a question of fact: Avon Products at [20].

102. If excess GST is "passed on", the deeming effected by s 142-10 can be disengaged by a further deeming provided for by s 142-15. Section 142-15(1) provides:

142-15 When section 142-10 does not apply

Commissioner satisfied it is inappropriate for that section to apply

(1) Treat section 142-10 as never having applied to the extent that the Commissioner is satisfied that:

(a) applying that section would be inconsistent with the principle that excess GST is not to be refunded if this would give an entity a windfall gain; and

(b) you have requested a decision under this subsection in the *approved form.

Note: Refusing to make the requested decision is a reviewable GST decision (see Subdivision 110-F in Schedule 1 to the Taxation Administration Act 1953).

Consideration

Sales tax and GST

103. Avon Products concerned sales tax. A central feature informing the character of sales tax "is that the economic burden of the impost is generally not intended to be borne by the person liable to remit it; it is to be passed on": Avon Products at [7]. That is, a "central element" of the regime is "the imposition of the tax in respect of some dealing with goods by way of sale … in the expectation, or with the intention, that the taxpayer will not bear the incidence of the tax but will indemnify himself or herself by passing it on to a purchaser or consumer": Avon Products at [8], quoting
Deputy Commissioner of Taxation v State Bank (NSW) [1992] HCA 6; 174 CLR 219 at 225-6.

104. A convenient explanation of the sales tax regime was provided by Dixon J in
Deputy Federal Commissioner of Taxation (SA) v Ellis & Clark Ltd [1934] HCA 54; 52 CLR 85 at 89-93. The tax was designed to be levied on one transaction in respect of goods, after the

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goods were imported into or produced in Australia, but before the goods reached the retail consumer: Ellis at 89. Justice Dixon stated at 92:

The whole plan of the legislation suggests that it is concerned only with the course of commercial dealing in goods between the time they first appear in Australia, either as a result of manufacture or importation, and the time when they are retailed. It takes them at the point of importation and manufacture and provides a scheme for following them to that point at which, in the actual course of commerce in the particular articles, they go into the retail market, and then, as nearly as possible, tax is imposed either upon the antecedent sale by wholesale or upon the immediately antecedent wholesale value which they possessed.

105. Thus, "[i]n principle and policy [sales tax] is a tax on sale by wholesale", not retail: Ellis at 93. It was levied on the final sale of goods by wholesale before goods entered the retail market or - in particular circumstances - upon the immediately antecedent wholesale value.

106. Given the design and structure of the sales tax regime, in the ordinary course, a retailer of goods would have purchased the goods wholesale, at a price which included sales tax. The final cost to the retailer would ordinarily include the economic burden of the sales tax.

107. There are similarities between the sales tax regime considered in Avon Products and the GST regime. Nevertheless, some of the observations made in Avon Products do not find equal or equivalent application in respect of all supplies made under the GST Act in all situations. As is discussed further below, general observations on the facts of one case, in one 'indirect' tax regime, should not be treated as propositions of universal application on different facts in a different 'indirect' tax regime.

108. GST is a value-added system of consumption tax, which is generally payable at each stage of commercial dealings on the making of "supplies". GST is a tax on supplies, not a tax on transactions as such. It is not confined to supplies in respect of goods. It is a tax on "any form of supply whatsoever": s 9-10(1). The tax is not confined in its operation to supplies in particular markets or to particular 'levels' within those markets. In all of these respects, the GST regime is different to the sales tax regime.

109. Under the GST regime, an entity (the "recipient" of a supply) that acquires goods or services as a result of a "taxable supply" made to it is allowed an "input tax credit" for the GST paid if its acquisition is a "creditable acquisition". Although a recipient of a supply pays GST on the supply, it is the supplier who is obliged to pay GST to the Commissioner: s 9-40. In colloquial terms, the suppliers 'collect' and remit the GST. In remitting the GST, the suppliers take into account any available input tax credits. The system of input tax credits seeks to ensure that: (a) tax is only payable by each supplier in a chain on the value added by that supplier; and (b) it is the end consumer who ultimately bears the economic burden of the tax. End consumers bear the economic burden of GST because the consumer's acquisition is not a "creditable acquisition" made in the course of carrying on an enterprise - see: Div 11. Such consumers cannot claim input tax credits in respect of the GST they paid to the supplier when acquiring goods or services.

110. As a general proposition, it may be said that the GST regime contemplates that GST will be passed on because the entity liable to pay the tax is expected to indemnify itself for the tax at the expense of another. In its essential design, the GST can be regarded as a tax on consumers with suppliers 'collecting' tax and consumers bearing the burden of it. In sales of goods under the GST regime, for example, each supply (effected by a sale transaction) attracts GST, which should be identified in each tax invoice. The economic burden of the GST is passed on. In this example, the GST regime is at least similar to the sales tax regime.

Avon Products

111. Avon Products concerned the sale of cosmetics, fragrances and toiletries. These were not unique products, the purchase of which was individually negotiated. The underlying facts in Avon Products included:

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(a) Avon would assign each product a "regular price", which was benchmarked wherever possible against prices charged by competitors for comparable products, or at a price which the market would bear. Avon would consider introducing a product only if the regular price exceeded the maximum estimated cost by an acceptable profit margin. Avon did not change the regular price in any way in response to the various reductions in the applicable taxable values for its goods: at [14].
(b) The "regular price" was not the price at which Avon generally retailed its products. Avon conducted 18 standardised marketing campaigns each year. The sales campaigns were controlled by Avon's marketing department. Each campaign had a separate gross profit margin target. Integral to each campaign was the discounting of the "regular price" to a price or prices which were attractive to customers and would also enable Avon to meet the gross profit margin for each campaign and other campaign targets, while still covering costs (including sales tax): at [15].
(c) The actual price at which Avon sold was commonly the discounted price. Perhaps as much as 70% of sales were at the discounted price. The discounted price almost invariably covered Avon's costs (including sales tax): at [16].

112. Presumably, amongst other matters, discounting increased Avon's volume of sales. Avon Products was not a case which involved 'loss leading' (sales purposefully made at a loss) or 'loss minimisation' (discounted sales to minimise expected losses), in which situations additional issues might be expected to arise in determining whether a tax was passed on.

113. At trial, in
Avon Products Pty Ltd v Federal Commissioner of Taxation [2004] FCA 475; 55 ATR 520 at [63] ( Avon FCA ), Hill J concluded that "the extent of discounting was determined by reference to cost overall [including sales tax], even if not by reference to the individual cost of each item" and that it was "difficult to see what the real difference is between ensuring a particular overall profit margin and pricing at cost plus a profit margin". His Honour stated that "[o]ne is only another way of saying the other". His Honour's reasoning at [63] was:

Certainly it is true that the actual discount prices themselves were based upon information from previous sales history, and in particular the price elasticity of the product. However despite this, and despite the fact that the applicant did set its regular prices without much regard to cost, the fact is that the applicant targeted a profit margin for each sales campaign. It follows that the overall campaign objective and the extent of discounting was set to achieve an overall profit margin, that is to say an overall margin over cost including sales tax. In other words the extent of discounting was determined by reference to cost overall, even if not by reference to the individual cost of each item. It is difficult to see what the real difference is between ensuring a particular overall profit margin and pricing at cost plus a profit margin. One is only another way of saying the other. Accordingly, the applicant has failed to show that its prices were not set with regard to cost. They were. That being the case, the tax was passed on. …

114. Central to this reasoning was that the discounted price was set by reference to an overall margin over costs, including sales tax, such that sales tax formed a part of the cost structure of doing business and was taken into account in setting the discounted price. The calculation of the discounted price was critical in the analysis, because the practical commercial reality was that the discounted price set the amount which was to be received on the sale of the goods. The question of what occurred in the sale transaction itself was not particularly important, because the sale transaction simply involved purchases of standard goods at the offer price.

115. Although the sale transaction itself did not warrant particular attention in Avon Products, that was because the matter of critical importance was the setting of the discount price which controlled the sale price. The identification of an asking price does not control, or necessarily influence, the sale price in all markets.

116.

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In Avon Products at [20], the High Court summarised Hill J's reasoning in the following way:

… [H]is Honour canvassed the evidence in great detail and relied heavily upon the finding referred to earlier that the goods were always priced at a figure which exceeded cost plus sales tax and ensured a profit to Avon. His Honour held that, although the regular prices were not calculated as a function of cost, the undeniable significance of discounting in Avon's operations (which was done so as to produce an overall margin over cost for each campaign) was such that Avon had failed to prove that its prices were not set with regard to cost. The ultimate decision of Hill J was based upon the failure by Avon to satisfy the burden of proof imposed by s 14ZZO of the Administration Act.

117. The High Court observed that Hill J's findings of fact, including on price setting, were accepted by a majority of the Full Court (Ryan and Merkel JJ): at [21]. The High Court stated that the "essence of the majority decision was … that, where the facts disclose that the taxpayer has set prices at a level to ensure that they exceed cost (including sales tax), it will be difficult for the taxpayer to satisfy its onus under s 14ZZO of the Taxation Administration Act 1953 (Cth) ( TAA 1953 ) to show that it has borne the tax burden itself": at [21]. The High Court held that "the approach and conclusion of the majority were correct": at [22].

118. The High Court stated (at [9]) that, in the ordinary course, it is to be expected that the final wholesaler passes on the sales tax. The High Court stated:

That sales tax is expected to be passed on depends upon the circumstance that sales of goods occur within an economy geared to making profit. It is the profit-making motive of business which, in the nature of things, generally results in sales tax being passed on. This is because, leaving aside rare cases where sales tax is separately identified and superadded to the invoice price after sale, sales tax can only be passed on indirectly through the price mechanism. In a profit-making structure, businesses will set prices so as to ensure at least that all foreseeable costs are recovered, anything above this being conceptualised as a margin of profit. Because sales tax is levied upon the vendor prior to the ultimate sale by retail … it forms part of the cost structure of doing business. There is nothing extraordinary in the proposition that in the usual course of things sales tax will be passed on.

119. The High Court observed (at [10]) that, in order to show that sales tax has not been passed on, the taxpayer must "establish a circumstance out of the ordinary, namely that the amount of the overpayment of sales tax has not been passed on" and that the starting point for the inquiry "must be the seller's pricing policy and practice":

As has been explained, it is for the taxpayer to establish a circumstance out of the ordinary, namely that the amount of the overpayment of sales tax has not been passed on. Where the whole or part of the economic burden of sales tax may have been passed on indirectly through prices, the inquiry in this regard is likely to be complex. The complexity arises because prices may be set with reference to a wide range of factors (including considerations of cost of production, competitive advantage, operational cash flow and customer goodwill). However the starting point must be the seller's pricing policy and practice.

120. After stating that "the starting point must be the seller's pricing policy and practice", the High Court explained (at [11]) that the "the question is to be approached with reference to the actual conduct of the seller in setting prices based upon its actual knowledge at the relevant time" (emphasis in original):

In this way, the question is to be approached with reference to the actual conduct of the seller in setting prices based upon its actual knowledge at the relevant time. That knowledge includes the belief that the component of sales tax which later proves to have been an overpayment is a real cost of doing business. Accordingly, it is unsurprising that a seller's intention, whether subjective or objectively ascertained, will generally be to pass the burden of the impost on to the purchaser. Since the onus of proof lies

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upon the taxpayer, it will be for it to establish that a price which is set so as to ensure that it recovers its cost does not include the economic burden of the sales tax.

121. The High Court observed that, because "it is in the nature of sales tax to be passed on, there is nothing remarkable in the consequence that proof to the contrary will occur comparatively seldom": at [12].

122. Avon's contention before the High Court was recorded as being "that a tax is only passed on if the price at which the goods are sold is increased by the amount of the tax": at [23]. The contention had been expressed somewhat differently before the Full Court as being "that a tax will have been passed on if the seller made a profit less than (or sustained a loss greater than) had it not been overpaid": at [23]. The High Court considered that "[e]ach proposition actually represents the inverse function of the other": at [23].

123. Taking into account the way in which the products were priced and discounted, Avon submitted that "since the buyer was no worse off when sales tax was overpaid than it would otherwise have been, and the seller was worse off, the tax was absorbed by Avon": at [24].

124. The High Court rejected this submission. It stated that the "tests" (referring to the contention put to the High Court and the contention put to the Full Court) "merely restate the question using words different from the statutory language, and thus distract attention from the real task of the court": at [25]. The High Court then rejected the "test" which has been put to that court (recorded in the first sentence of [23]), stating at [26]:

Avon's "test" is unsatisfactory at a more basic level. It assumes that, if a cost is being passed on, removing it from the entire system will have an immediate correlative effect upon price and profit. That assumption is in conflict with the more complex reality of price determination referred to earlier in these reasons. Indeed, the complexity of Avon's own pricing mechanisms belies that assumption. The Act requires proof of "the extent that the claimant has not passed [the overpayment] on". This question is not to be answered merely by pointing to price as the sole indicator of passing on.

125. The end result is that Avon failed to show that there was any error in the conclusion of Hill J at trial, upheld by majority on appeal, that it had failed to discharge its burden of proving that the sales tax had not been passed on.

Further observations

126. Before turning to the present case, it is relevant to make the following further observations.

The nature of the present "appeal" differs from those in Avon Products

127. The proceeding heard by Hill J was an application in this Court's original jurisdiction under s 14ZZ(1)(a)(ii) of the TAA 1953. Section 14ZZ(1)(a)(ii) provides for an "appeal" to this court from an objection decision. In such an "appeal" in the Court's original jurisdiction, the Court makes findings of fact and applies the law to the facts so found. Justice Hill accepted that whether sales tax had been passed on was a question of fact and stated that each case must depend on its own circumstances: Avon FCA at [56], [58]. This was endorsed as correct by the High Court: Avon Products at [20].

128. The appeal to the Full Court from Hill J's decision was an appeal by way of rehearing. The Full Court was also concerned with questions of fact as well as law.

129. The appeal to the High Court from the Full Court's decision also necessarily turned on questions of fact as well as law. The High Court held that the term "passed on" in the relevant sales tax legislation bore its ordinary meaning: Avon Products at [6]. The High Court made a number of comments or observations at [7] to [12] about the fact-finding process in the context of the indirect nature of sales tax, where the legislative intent was that it was to be passed on. The High Court reviewed the findings of fact below at [13] to [22].

130. An "appeal" from the Tribunal (or the former Administrative Appeals Tribunal), which is a part of the Executive and makes administrative decisions, is also an appeal within the Court's original jurisdiction. Such an appeal is a form of statutory judicial

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review confined to questions of law. In such an appeal, the Court cannot make findings of fact except in closely confined circumstances prescribed by statute - see: Administrative Appeals Tribunal Act 1975 (Cth) s 44(7); ART Act s 177.

The question of law in the present case

131. Accordingly, the Court's jurisdiction depends upon the existence of a question of law.

132. Geocon's notice of appeal is expressed in terms which appear to be drawn from the kinds of errors provided for in s 5 of the Administrative Appeals (Judicial Review) Act 1977 (Cth). Within the bounds of fairness, the Court is not confined to the manner of expression in the notice of appeal, but may look to the substance of what is claimed:
Haritos v Commissioner of Taxation [2015] FCAFC 92; 233 FCR 315 at [62(6)], [94], [99].

133. For the reasons given below, the Tribunal erred in undertaking the factual inquiry required by Div 142 and the question of whether excess GST had been "passed on". It did so by employing a form of 'presumption' that Geocon had passed on the overpaid GST because it was profitable overall, and that Geocon could only negate this 'presumption' or discharge its burden of showing the overpaid GST had not been passed on if it could show something out of the ordinary or unusual. The Tribunal adopted the wrong approach to the task by misapplying the inquiry required by Div 142, resulting in the term "passed on" bearing something other than its ordinary meaning. This raises a question of law:
Sharp Corporation of Australia Pty Ltd v Collector of Customs [1995] FCA 707; 59 FCR 6 at 12;
Comptroller-General of Customs v Pharm-A-Care Laboratories Pty Ltd [2020] HCA 2; 270 CLR 494 at [44].

134. Given the Tribunal's heavy reliance on statements made by the High Court in Avon Products, it should be emphasised that observations made by judges in the course of deciding issues of fact should not be treated as laying down rules of law and that one cannot reason from the factual conclusion in one case to a factual conclusion in another.

135. As the Full Court stated in
Landrey v Nine Network Australia Pty Ltd [2024] FCAFC 76; 305 FCR 246 at [74] (see also
Fiddes v The King [2025] VSCA 141 at [169(3)]):

[O]bservations in other cases about the application of the applicable principles to the facts of those cases cannot be elevated into inflexible rules of general application. This is a theme that runs through the law. Factual findings in other cases are not binding, and one should not reason from factual conclusions in one case to a factual conclusion in another. The scope and extent of a principle of law may be illustrated by showing the way it has been applied in other cases, but databases of decided cases "should not be ransacked and sentences apt to the facts of one case extracted from their context and treated as propositions of universal application":
Teubner v Humble (1963) 108 CLR 491 at 503 (Windeyer J), quoted in
Bus v Sydney County Council (1989) 167 CLR 78 at 89 (Mason CJ, Deane, Dawson and Toohey JJ).

136. As the passage above states, whilst one cannot elevate observations about the application of law to facts in one case to inflexible rules of general application, that is not to deny that "wisdom can be drawn from previous examinations of similar problems":
CRS20 v Secretary, Department of Home Affairs [2024] FCA 619 at [82], quoting
Scott v Copenhagen Reinsurance Co (UK) Ltd [2003] 2 All ER (Comm) 190 at [33].

137. However, in the present case, the Tribunal elevated general observations made by the High Court in Avon Products, in the specific context of a sales tax imposed on the final transaction for the discounted sale of goods by wholesale, to have the effect of legal principle or to erect what were in effect presumptions or hurdles which were neither express nor implied in Div 142.

138. In the reasons which follow, there are various observations about the Tribunal treating relevant evidence as "not to the point" (or irrelevant). The reason it treated such evidence as "not to the point" lies in its wrong approach. Ultimately, it is the Tribunal's wrong approach or "process" which engages this court's jurisdiction, not the Tribunal's conclusion as such that evidence was "not to the

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point" - see:
Abebe v Commonwealth [1999] HCA 14; 197 CLR 510 at [195].

The Tribunal's reasoning

139. The Tribunal concluded that Geocon failed to discharge its onus of establishing that the excess GST had not been "passed on". It summarised its conclusion at T[215] in the following way:

In summary, while it may be accepted that [Geocon] was pricing units to what the market would bear and was focused on maximising the gross realisation of the Development, it did not thereby discharge the burden of proving that it did not pass on the excess GST to the purchasers of the units.

140. The Tribunal's reasoning on this issue began with an examination of the legislation and relevant cases, including Avon Products, from T[170] to [198]. The Tribunal turned to consider Geocon's case more specifically from T[199]. The Tribunal stated at [201] (footnotes and references omitted):

It is undeniable, notwithstanding any pricing complexities, that it is in the nature of sales tax, and GST, to be passed on and it will be "comparatively seldom" that a taxpayer will succeed in proving, on the balance of probabilities, that excess GST was not passed on. The "usual position" is that profitable businesses recover all of their costs, which includes amounts paid as GST, in the prices charged to their customers. A business that does not price its product at a level that recovers its costs will incur losses, contrary to the very reason for embarking upon the business. [Geocon] was, by all accounts, operating a profitable business and it undertook the Development to make a profit.

141. This reasoning relied (in the footnotes) in particular on Avon Products. Its reasoning at T[201] may be summarised as follows:

(a) it is in the nature of GST that it will be passed on and it is "comparatively seldom" that "a taxpayer will succeed in proving, on the balance of probabilities, that excess GST was not passed on";
(b) "[t]he 'usual position' is that profitable businesses recover all of their costs, which includes amounts paid as GST, in the prices charged to their customers" and "[a] business that does not price its product at a level that recovers its costs will incur losses, contrary to the very reason for embarking upon the business" and "[Geocon] was, by all accounts, operating a profitable business and it undertook the Development to make a profit".

142. As to the reasoning in (a), it is true that - speaking generally - the statutory scheme is that GST is passed on to the end consumer. Starting with a general presumption that those who have overpaid GST will rarely succeed in proving that overpaid GST has not been passed on distracts attention away from the particular facts and is not required by the statutory language. It is necessary to begin and end with how the statutory language applies to the particular facts.

143. Whilst the Tribunal's statement was drawn from what was said by the High Court in Avon Products, the High Court's comments were directed to a regime which was far narrower in its target (the final wholesale transaction in goods) than the GST regime which is a broad-based value-added consumption tax which operates in relation to all taxable supplies. There are endless kinds of supplies, at any number of levels, in any number of different markets which operate in ways different to the wholesale market for the sale of goods. The application of broad statements about what might be expected or "usual" in the context of businesses operating in markets to which the sales tax regime was relevant is likely inappropriately to misdirect and interfere with a critical analysis of what occurred in relation to the particular supply in question in the particular circumstances involved. What might be "usual" in the wholesale and retail market for the sale of standard cosmetic products across large parts of Australia, might not be so unusual in a different context such as the supply of newly developed residential units. Having commenced with a presumption about the "usual" position, the Tribunal did not then purport to examine whether it was "usual" for developers to pass on overpaid GST in the context of the market conditions at the time of sale.

144.

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In summary, starting with an assumption that a taxpayer can "rarely" prove that overpaid GST was not passed on, or that the taxpayer necessarily must show something "unusual" to discharge its burden, risks applying a presumption that is not required by the statutory language and which may not be true in relation to the particular transactions involved.

145. On a fair reading of the Tribunal's reasons, it approached the resolution of the Div 142 issues partly on the basis of an assumption that it "is in the nature of" (overpaid) GST that it is passed on, irrespective of the particular supply and the circumstances surrounding that supply, and irrespective of whether the overpaid GST was thought not to be payable. There was no evidentiary foundation for an assumption that overpaid GST is ordinarily passed on by property developers in circumstances such as those being considered by the Tribunal and it is not an assumption that can find safe refuge in the reasoning of the High Court in Avon Products.

146. As to the reasoning in (b), it is true that - speaking generally - a profitable business is one which receives more through sales than the costs it has incurred. It might not cover the costs attributable to each sale, or to each product line, or it might engage in 'loss leading' for a time to gain market recognition and share, but to be profitable the business must over time receive more in sale proceeds than its costs of doing business. Whilst again the Tribunal's reasoning was based on the High Court's observations in Avon Products, the statutory and factual context of that case cannot be ignored. If a particular cost is taken into account in setting a discounted sale price of a product sold at the discounted price set (as in Avon Products), then - following Avon Products - the cost would typically be regarded as passed on because the amount received in sales proceeds was necessarily a function of costs which included the particular cost under consideration. However, the fact that a business is profitable, whilst relevant, does not necessarily supply the answer to whether overpaid GST was passed on in relation to a particular supply, particularly where that GST was thought not to be payable or was thought to be recoverable.

147. In the context of 'knowingly' overpaid GST, it should be emphasised that it is common for a taxpayer to overpay GST thought not to be payable (or where there is some residual doubt about whether it is payable) in order to avoid the potential for penalties and interest in the event the taxpayer's belief turns out to be incorrect. A taxpayer might overpay GST in these circumstances, believing it not to be payable, but seeking certainty on the issue by pursuing recovery of the overpayment through the Pt IVC objection process. As will be seen further below, the Tribunal was heavily influenced in its conclusions by the mere fact that the developer was profitable. On a fair reading of the reasons as a whole, this led the Tribunal into treating evidence directly relevant to whether the overpaid GST was passed on as "not to the point" or as being without relevance or significance to the required analysis. Why the mere fact of profitability led to the irrelevance of the evidence was not clearly explained.

148. In the real estate market, a developer would not carry out a development if the developer's assessment of the probable costs exceeded the developer's assessment of what it would be likely to receive from sales, according to its prediction of the probable market conditions at the time the development is likely to be completed.

149. A developer would always seek to cover its costs. If the developer's assessment of costs and what it would achieve in sales is correct, the developer would be profitable and will have covered its costs. It does not inexorably follow from that proposition that it passed on or "recovered" each and every cost, including costs thought not to be payable or costs which it thought would be recovered.

150. A developer's assessment of what it would be likely to obtain by way of sale price would not ordinarily be calculated by reference to its anticipated costs, plus a mark-up (as might be expected with respect to discounted sales of goods such as in Avon Products), because it would be self-defeating to assume, for the purposes of determining feasibility, that the proceeds of sale will exceed the costs. That is not to say that a developer may not be influenced in setting sale prices by its desired

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internal rate of return. A rational developer will assess its likely sale proceeds, and therefore its feasibility, by reference to what the market will bear. No rational purchaser will be particularly interested in the developer's costs. When the appropriate time comes, purchasers may seek to negotiate in the prevailing market conditions by reference to other options open to them and having regard to the purchaser's preferences and means. A development seeking sales "off-the-plan" may have a somewhat inflexible price list, but that too will depend on the particular circumstances and will inevitably be influenced by prevailing market conditions.

151. An example of where a tax in the nature of GST might be found not to have been passed on is demonstrated by the facts and result in
National & Provincial Building Society v Customs and Excise Comrs [1996] V&DR 153 (noting that the relevant statutory regime is different in significant respects), summarised by Michael Rush in The Defence of Passing On, (1^st ed, Hart Publishing, 2006) at pp 71-2 (footnotes omitted):

In
National & Provincial Building Society v Customs and Excise Comrs [[1996] V&DR 153] the appellant was in the business of taking deposits of money and making loans to members of the public. Those who borrowed money from the appellant generally did so to assist in the purchase of a dwelling-house. In these circumstances the appellant took a mortgage over the property and retained the title deeds. Borrowers sometimes sought to inspect and copy the title deeds pertaining to their property. The appellant imposed a 'deeds production fee' on such occasions, charging a reasonable sum for expenses incurred in retrieving and copying the deeds. It was thought that VAT was chargeable on such fees.

In 1990 the Customs and Excise Commissioners, the respondents in the case, issued a ruling stating that VAT was not chargeable on fees imposed for retrieving and copying title deeds. Subsequently, the appellants sought repayment of £393,194.45 for overpaid VAT during the period between 1979 and 1989. Though acknowledging the sums paid by the appellant were not due, the Commissioners refused recovery on the basis that it would 'unjustly enrich' the appellants. The premise of their argument being that the appellants had shifted the cost of the overcharge to the relevant borrowers without incurring a loss.

The VAT and Duties Tribunal upheld the appeal, requiring the Commissioners to repay the £393,194.45 of overcharged VAT. In reaching this conclusion the Tribunal chairman, Mr Simpson, correctly focused on what effect restitution would have on the appellant's financial position. He stated that:

In my judgment the Appellant suffered loss by being compelled, as it thought, to account for VAT on the fees which it had fixed without reference to VAT, and the claimed repayment will make good that loss. … [T]he supposed impact of VAT merely reduced the amount which it would otherwise have received by way of the fees.

Mr Simpson came to the conclusion that the appellant was a 'price taker', and had therefore suffered a financial loss as a result of the tax, for two main reasons. The first was because of the nature of the market in which the claimant operated. In this regard he said: 'It is clear to me, and I find, that in fixing its deeds production fees, along with its other fees, the Appellant's primary consideration was what the market would stand.'

The second reason was that, after the Commissioners ruled that the deeds production fees were not subject to VAT, the appellant nonetheless did not reduce the price which was charged to borrowers. In Mr Simpson's words, the appellant 'merely ceased to account for VAT in respect of them.'

152. The fact that indirect taxes are not always passed on was also made by the Privy Council in
Bank of Toronto v Lambe (1887) 12 App Cas 575 at 581-2:

Probably it is true of every indirect tax that some persons are both the first and the final payers of it; and of every direct tax that it affects persons other than the first payers …

153. In making that observation, the Privy Council adopted at 582 the definition of direct

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and indirect taxes given by John Stuart Mill in Principles of Political Economy (7^th ed, vol 2, Longmans, Green, Reader and Dyer, 1871) in Book V, Ch III, §1 at p 415:

Taxes are either direct or indirect. A direct tax is one which is demanded from the very persons who it is intended or desired should pay it. Indirect taxes are those which are demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another; such are the excise or customs. The producer or importer of a commodity is called upon to pay a tax on it, not with the intention to levy a peculiar contribution upon him, but to tax through him the consumers of the commodity, from whom it is supposed that he will recover the amount by means of an advance in price.

154. In summary, the fact that Geocon was ultimately profitable - consistently with its ongoing assessment of feasibility - and in that sense covered all of its costs, did not necessarily mean that it passed on the overpaid GST or that it should be presumed to have done so absent pointing to some "unusual" circumstance.

155. At [202], the Tribunal stated:

It follows that a taxpayer faces "a difficult challenge" in proving it has borne the burden of excess GST itself in circumstance[s] where it has sold units at prices that ensured the taxpayer exceeded its costs (including amounts payable as GST). The evidence of both the Director and the Manager was that [Geocon's] pricing of units recovered the costs of the Development including amounts ostensibly on account of GST. While [Geocon] was at pains to argue that there was no evidence the price of any unit sold by it showed an amount as GST being a material factor in the pricing, that was not to the point. The fact that it did not explicitly take into account costs in setting its prices for the sale of the units was irrelevant in circumstances where [Geocon] was, by any measure, always recovering its costs including the excess GST.

156. As to the first sentence and leaving aside whether or not Geocon faced "a difficult challenge", the conclusion that Geocon "sold units at prices that ensured [Geocon] exceeded its costs (including amounts payable as GST)" was not sufficiently explained by reference to findings of fact. Geocon could not "ensure" it sold units at prices which exceeded its costs. A developer can set its price list above its costs, including by reference to a desired return and market conditions. The developer would conclude that the project was feasible if it considered that those prices were likely to be achieved because the market would bear those prices. Geocon proceeded with the development because it assessed it was feasible and profitable, but it could not "ensure" it sold units at prices which exceeded its costs.

157. It is not entirely clear whether or not the Tribunal ultimately concluded that Geocon took GST (generally) into account in preparing its price lists by which it marketed the units for sale - see, for example: T[204]. The Tribunal did not directly address whether the price list was informed by the overpaid GST specifically. On the material before this Court, that is probably explained by the fact that the taxpayer did not adduce specific evidence addressing that question. Even if Geocon prepared its marketing price list in some part by reference to GST costs (including overpaid GST), the Tribunal did not consider whether those costs were a material factor in determining whether to enter into a sale contract.

158. As to the second sentence, as has been mentioned, the fact that the development proceeded and that all costs were covered by the proceeds of sale was relevant, but it was erroneous to rely on the different circumstances in Avon Products to elevate the mere fact of profitability to the practical point of determining the very issue of whether the overpaid GST was in fact passed on to the purchasers.

159. As to the third sentence, it was erroneous to conclude that it "was not to the point" that "there was no evidence the price of any unit sold by [Geocon] showed an amount as [sic - of] GST being a material factor in the pricing". The fact that there was no evidence that the sale price of the units was affected by GST generally (a fortiori, by overpaid GST) was directly relevant to whether the overpaid

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GST was passed on in the sale transaction, irrespective of any role the overpaid GST may (or may not) have played in assessing feasibility or in preparing a price list by which the units were marketed.

160. As to the fourth sentence, it was erroneous to conclude that "[t]he fact that [Geocon] did not explicitly take into account costs in setting its prices for the sale of the units" was "irrelevant in circumstances where [Geocon] was, by any measure, always recovering its costs including the excess GST". As mentioned, it was erroneous to treat Geocon's ultimate profitability as rendering irrelevant any evidence to the effect that Geocon did not take costs (a fortiori, overpaid GST) into account in setting the price list by which the units were marketed. Despite the Tribunal's earlier reference to Geocon's desired or internal rate of return (T[68]), there is no consideration of this evidence, in this context.

161. A central aspect of the Tribunal's reasoning, if not its dispositive reasoning, is contained at T[203] to [205]:

[203] [Geocon's] main argument was that its pricing policy and practice did not have regard to GST as a cost in pricing the units and that its pricing was driven by the market. Also, purchasers were indifferent to the costs of the development, including the supplier's GST liability. The Director's evidence was that he wanted to sell the units at the highest price that the market would bear …

[204] However, the fact that that strategy was what drove pricing decisions and that [Geocon] generally pursued it throughout, does not mean that excess GST was not passed on to the purchasers. Similarly, it was not to the point that [Geocon] did not set prices of the units by specific reference to costs such as GST or that it worked out its price lists using a "bottom up" methodology focused on the objective characteristics of the units. There was simply no evidence adduced to suggest that [Geocon] absorbed the excess GST itself.

[205] Accordingly, I have concluded that [Geocon] failed to prove that it did not pass on the excess GST in its pricing of each of the units sold at all times. [Geocon's] evidence that it set its prices at the maximum that the market would bear and had no regard to the GST in formulating its price list does not engage with the statutory question in s 142-5(1) [sic - s 142-10] of showing that it did not pass on amounts as GST to the purchasers of the units. The High Court statement in Avon HCA that the extent to which tax has been passed on "is not to be answered merely by pointing to price as the sole indicator of passing on" is of significance in this context.

162. The Tribunal recorded at T[203] that Geocon's "main argument was that its pricing policy and practice did not have regard to GST as a cost in pricing the units and that its pricing was driven by the market". In considering this, at T[204], the Tribunal:

(a) addressed Geocon's strategy of wanting to sell at the highest price the market would bear, stating that this did not mean that excess GST was not passed on; and
(b) stated that it "was not to the point" that Geocon did not set prices by reference to costs such as GST (see also T[205]) and that it worked out price by reference to the objective characteristics of the units (and the market price of those units); and
(c) stated that there was "no evidence adduced to suggest that [Geocon] absorbed the excess GST itself".

163. The first two matters - (a) and (b) above - were centrally relevant to the question of fact which had to be determined. Whilst the conclusion in (a) is strictly correct, it was a matter of importance in determining the question of fact whether the excess GST was passed on. Contrary to the Tribunal's conclusion in (b) above, it was relevant that Geocon marketed its units through a price list set by reference to what the market would bear, after the internal rate of return was met (T[68]) and not then expressly by reference to costs, including GST. There was no consideration by the Tribunal of this evidence, which had been accepted, in this context. Depending on the Tribunal's findings about that, it would be expected to be relevant. It might be expected to follow from a conclusion that GST was not taken into account in setting prices in the price list that GST and overpaid GST were not

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taken into account in any particular sale. However, this depends upon the Tribunal's findings.

164. As to the matter in (c) above - that there was no evidence that GST was "absorbed" - three observations should be made. First, if T[204] is to be understood as accepting that Geocon did not take GST into account in setting the price list for marketing the units, and therefore that it was unlikely that overpaid GST was taken into account in accepting an offer, both these matters inform a conclusion about whether overpaid GST was "absorbed".

165. Secondly, whilst it is relevant to look at whether there was evidence that a cost was "absorbed" (Avon Products at [24]) or whether there was an intention to "absorb" a cost, it should be steadily borne in mind that the ultimate issue in this respect is whether there was evidence that (overpaid) GST was "passed on". An absence of direct evidence that a particular cost was "absorbed" does not necessarily equate to an absence of evidence that something was not "passed on". There was evidence from which it could have been concluded that GST was not passed on if it had not been treated as not to the point.

166. Thirdly, the director's evidence was that, from 22 June 2016, Geocon did not consider that the overpaid GST was payable. The Tribunal considered this evidence not to the point: T[211]. However, the evidence was relevant both to whether overpaid GST was passed on, and to whether there was evidence of an intention to "absorb" the overpaid GST. A belief that a development cost is not payable (or that it will be recovered on the basis that it is an overpayment) is probative of whether that cost is likely to have been passed on. By way of example, even if costs generally were in some relevant way considered by Geocon in marketing the units, it might nevertheless be considered unlikely that, in deciding whether to sell a unit at a particular price, Geocon would take into account a cost which was not considered to be payable or which was considered to be recoverable otherwise than through the sale. If the evidence of belief had been taken into account, rather than regarded as irrelevant or inconsequential, it was capable (together with other evidence) of supporting an inference or conclusion that Geocon decided to take the risk that overpaid GST would not be recovered if paid over to the Commissioner. This would be equivalent to "absorbing" the cost should it transpire that the GST was payable.

167. The Tribunal's conclusion in the first sentence at T[205] is said to be based on T[203] and [204]. The conclusion proceeds on the apparent basis that: (a) there was no evidence that Geocon absorbed the excess GST itself; and (b) Geocon's evidence that its asking prices were not set by reference to GST was irrelevant or "not to the point". The Tribunal's statement at T[205] that "[Geocon's] evidence that it set its prices at the maximum that the market would bear and had no regard to the GST in formulating its price list does not engage with the statutory question" is wrong. The statement appears to have been made because of its earlier conclusion that Geocon's profitability supplied the answer to the statutory question when read with the general observations made in Avon Products. Geocon's evidence that "it set its prices at the maximum that the market would bear and had no regard to the GST in formulating its price list" was directly relevant to, and engaged with, the statutory question. The High Court's observation in Avon Products at [26] that price is not "the sole indicator of passing on", to which the Tribunal referred at T[205], does not mean that price is irrelevant or unimportant.

168. It is not clear that the reasoning at [206] was integral to the conclusion reached at [205]. Nevertheless, it should be addressed. The Tribunal stated at [206]:

[Geocon], at no stage, adduced any evidence or suggested that particular sales by it, or sales in particular periods were unprofitable and or that its prices did not recover all costs, including the excess GST. It was the Director's evidence that the objective was to "maximis[e] revenue" and he was concerned to "maximise the gross realisation of the development". He also expressly referred to the "cost to [Geocon] of carrying out the development" as one of the matters to which he had regard in pricing the units. Granted, it had a lower order of priority but that was because maximising the gross

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realisation was the top priority and achieving that meant recovery of costs was taken care of. Likewise, the Manager's evidence was that he was aware of the "desired rate of return" and "conscious that it was desirable not to recommend pricing that was likely to have the result that [Geocon] would not meet its desired rate of return". [Geocon's] expectation was that its anticipated costs, including amounts on account of GST (whether correct or not), would be recovered at all times and there was no suggestion that it did not recover all of its costs.

169. Four observations should be made. First, as mentioned, whatever the general position which might have applied with respect to sales tax, it is an oversimplification which distracts attention from undertaking the statutory task required by Div 142, to assert that the fact that a business is profitable, or charges an amount which exceeds its total costs, means that a particular GST cost is passed on. That is not to deny that the natural consequence of the profit-making motive of businesses generally is that the business's actual or anticipated costs are sought to be recovered through the ultimate sale price, either directly (for example adding GST to an invoice) or indirectly through the price mechanism: Avon Products at [9].

170. Secondly, the reference to the director's evidence that the costs of the development was a factor in setting prices, is likely a reference to the Tribunal's reasons at [57], in turn based on an affidavit made by the director: Pt C at 391 [45]. The director's evidence was:

I was the final decision-maker on the pricing of units. The matters to which I had regard in pricing units were:

(a) above all, the maximum price the market would bear;

(b) initially, the need to maximise sales to obtain debt finance;

(c) after debt finance was obtained, the desire to maximise the overall gross realisation from the development;

(d) the advice I received from external consultants about pricing; and

(e) the cost to [Geocon] of carrying out the development.

171. This evidence appears to concern the setting of prices in the price list for marketing the units. It does not concern the ultimate prices for the units. On any view, it does not specifically address that part of the GST which, from 22 June 2016, Geocon considered was not payable.

172. Although not entirely clear, the better understanding of the Tribunal's reasons is that it ultimately accepted that Geocon "did not set prices of the units by specific reference to costs such as GST": at [204]; see also [205]. The Tribunal seems implicitly to have proceeded on the basis that: (i) the sale prices of the units were generally those provided in the price lists by which units were marketed for sale and that those prices reflected what the market would bear; and (ii) overpaid GST was not a relevant consideration in Geocon accepting any particular offer. To the extent the reasoning at T[206] may be seen to be inconsistent with the reasoning in T[204] (and perhaps T[205]), the reasoning in T[204] appears to be the dispositive reasoning.

173. Thirdly, the Tribunal stated that Geocon's "expectation was that its anticipated costs, including amounts on account of GST (whether correct or not), would be recovered" and "there was no suggestion that it did not recover all of its costs". This must be understood as meaning that Geocon expected that it would receive more from the sales of units than the total amount of its expenditure, not that Geocon expected to "recover", in a direct sense, each and every individual cost. The project was considered feasible irrespective of whether the excess GST was correctly or incorrectly paid. That does not necessarily mean that the excess GST was passed on.

174. Fourthly, the reference to the manager's evidence is a reference to the Tribunal's reasons at T[68]. However, at T[69] (read with T[20] and [70]) the Tribunal accepted the manager's evidence that "the various factors affecting the cost of development, including GST, are relevant to working out the feasibility of a project and profit margins, but they did not affect the pricing advice [he] gave to [Geocon] for the … Development or more generally because that pricing advice was a reflection of the pricing that [he] considered the market could bear using

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the 'bottom up' methodology".

175. At [207], the Tribunal stated (footnotes omitted):

[Geocon's] submission that the critical issue was [Geocon's] pricing policy and practice in respect of determining prices for units by purchasers, and not how [Geocon] formed the view the project was feasible in the first place is also not to the point. It is acknowledged that the evidence of the Director was consistent that the driver for pricing was the market, not internal feasibility analyses. However, the Director also deposed that feasibility studies were done from prior to purchase through to delivery of the project to measure profitability of the Development. The evidence of the Manager was also clear in that he "was aware that GST was one of those factors than formed part of the feasibility of the development" even though "[he] did not have regard to this in providing advice … for the [REDACTED] Development or more generally." The distinction between internal feasibility analyses and external pricing can only take the position so far and, significantly, does not assist in [Geocon's] case, to prove that it did not pass on excess GST to purchasers. Both the Director and the Manager were very candid in their responses given in cross-examination about the use of feasibility studies and that GST was a known cost in property developments.

176. Contrary to what the Tribunal stated, the distinction drawn by Geocon between its assessment of feasibility (which took costs into account) and its "practice in respect of determining prices for units by purchasers" (in which it decided the price at which the units would be marketed by reference to a "bottom up" methodology and what the market would bear) was relevant and to the point. The Tribunal's conclusion that the distinction did not assist Geocon to prove that it did not pass on the overpaid GST was unexplained and incorrect. Again, the statement appears to be based on the conclusion that Geocon's profitability supplied the answer to the statutory question when read with the general observations made in Avon Products.

177. The fact that GST was taken into account in assessing feasibility was to be expected. That fact does not lead inexorably to the conclusion that the GST was passed on. Geocon's case was that - whilst GST was taken into account in working out the total costs of the development - GST did not form a material role in the pricing for marketing the units. Geocon did not clearly focus, either in its evidence or submissions before the Tribunal or its submissions before this Court, on the final sales prices. Notwithstanding, it was sufficiently clear that Geocon's case was that its GST cost (a fortiori, GST it thought was not payable) was not taken into account in any material way on sales of units.

178. Geocon submitted on this appeal, as it did to the Tribunal, that the "object [of s 142-10] is not engaged if, irrespective of the excess GST, the supplier would have charged the recipient the same amount for the supply": AS[27].

179. The Tribunal addressed Geocon's submission at T[208], stating (footnote omitted):

Turning to the argument submitted in Avon HCA that "a tax is passed on only if the price at which the goods are sold is increased by the amount of the tax", the High Court specifically rejected that submission. [Geocon's] submission to the effect that the "burden of a tax is not passed on if, irrespective of the incidence of the tax, the consumer would have paid the same amount for the supply" is similar to the "test" contended for by the taxpayer in Avon HCA, that "a tax is only passed on if the price at which the goods are sold is increased by the amount of the tax". The High Court held that "the 'tests' merely restate the question using words different from the statutory language, and thus distract attention from the real task of the court." The fact that purchasers of units at the Development would have paid the market price and been indifferent to the GST implications do not assist [Geocon's] position.

180.

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Contrary to the final sentence at T[208], the fact that purchasers of units "would have paid the market price and been indifferent to the GST implications" may assist Geocon's position, both on the question of whether the overpaid GST was passed on and on the question of whether there would be a "windfall gain". The latter question is relevant to s 142-10 (given the object of Div 142 in s 142-1) and, more directly, to the question under s 142-15(1)(a) (given its express terms).

181. The significance of a purchaser's position may be expected to vary according to the particular supply and the particular circumstances, including the nature of the underlying asset being supplied and the way in which the asset's price is either set by the vendor or priced by the market irrespective of the vendor's costs and desired margin. As the decision in Avon Products demonstrates, in the context of a tax imposed on the final wholesale transaction of household goods before entry into the retail market, the fact that a purchaser would have been charged the same amount for the item, is not sufficient to discharge the onus of establishing that sales tax was not passed on in a discounted set price at which the goods were in fact sold. The High Court rejected the proposition that "since the buyer was no worse off when sales tax was overpaid than it would otherwise have been, and the seller was worse off, the tax was absorbed by Avon": Avon Products at [24]. The High Court did not state that the matter was irrelevant to the inquiry about whether a cost was passed on, in all circumstances.

182. Whether or not a purchaser would have paid (or a vendor would have accepted) the same price was relevant and probative in answering the question whether, as a matter of fact, GST had been passed on in respect of the particular supplies in the particular market. If purchasers were worse off because of a GST overpayment, it is difficult to see how it could be argued that the tax (or some of it) was not passed on. If purchasers would not have been worse off, it invites the question whether the economic burden of the GST was in fact passed on.

183. A point of distinction between this case and Avon Products is that, on the preferable view of the Tribunal's findings here, the overpaid GST was not taken into account in setting the price list for marketing the units and it was not taken into account in agreeing the final sale price. It was not suggested that overpaid GST (or mistaken payments more generally) was somehow factored into market price. In Avon Products, the sales tax was factored into the price for which goods were in fact sold, via the discount. Avon thus failed to discharge its onus of proving that the tax was not passed on.

184. The Tribunal appears to have accepted that Geocon would have charged the purchasers of the units the same amount for the units irrespective of Geocon's costs and irrespective of whether Geocon thought that the overpaid GST was in fact payable. The Tribunal appears to have proceeded on the basis that the purchasers were no worse off because GST was overpaid than they would have been if it had not been overpaid. The Tribunal erred in treating this fact as not to the point or irrelevant to the statutory inquiry. The error stems from the erroneous approach referred to earlier.

185. At [209], the Tribunal stated (footnote omitted):

The High Court also stated that "Avon's 'test' is unsatisfactory at a more basic level. It assumes that, if a cost is being passed on, removing it from the entire system will have an immediate correlative effect upon price and profit. That assumption is in conflict with the more complex reality of price determination … Indeed, the complexity of Avon's own pricing mechanisms belies that assumption. The Act requires proof of 'the extent that the claimant has not passed [the overpayment] on. This question is not to be answered merely by pointing to price as the sole indicator of passing on.'" Again, the Tribunal is reinforced in its view that [Geocon] did not discharge its burden, by virtue of its singular focus on the pricing of units sold by reference to what the market would bear.

186. The High Court's observations in this regard have been referred to earlier. The High Court's statement was directed squarely at Avon's submission, in the sales tax context, that sales tax could only be passed on

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"if the price at which the goods are sold is increased by the amount of the tax": Avon Products at [23]. The High Court rejected the submission, stating that "[t]he question is not to be answered merely by pointing to price as the sole indicator of passing on": at [26] (emphasis added). Geocon's "singular focus on the pricing of units sold by reference to what the market would bear" may not of itself have been sufficient to discharge its onus, but its evidence and submissions on that issue were relevant and probative to a degree different to that which obtained on the very different facts and context in Avon Products.

187. At T[210], the Tribunal stated (footnote omitted):

[Geocon] also did not persuade me that there were other comparable developments and units for sale by competing developers at or around the same time, and that the market prices of those other units were substantially the same as [Geocon's] units. Nor was [Geocon] able to proffer the basis of their GST treatment on the sale of units and whether they included non-monetary consideration in their GST margin calculations. In this regard, the information that the Director did give about the competitor developments (see [53] above), was that the units were being offered to the market at prices which he "considered to be very low." That evidence was inconclusive, but it is possible the competitor developers had property taken into account any development works in calculating the GST margin and were not passing on excess GST.

188. As to the first sentence, the Tribunal accepted that, in determining that side of the feasibility equation which assessed likely income, and in determining its price lists for marketing the units for sale, Geocon had regard to comparative sales - see: T[20], [53], [57], [62], [64], [66], [70]. It would have been inherently unlikely that Geocon would not have looked at comparative sales. As to the second part of the first sentence, the prices of comparative sales do not need to be "substantially the same" as Geocon's sales to provide a useful comparator. The point of a comparative sale is to facilitate a view about whether a unit is above, below or equal to the comparator such that a view can be taken as to the likely market price or what the market will bear.

189. The terms of T[210] suggest that it was directed to the question of whether other developers priced their marketing lists by taking overpaid GST into account. In circumstances where it would have been next to impossible for Geocon to adduce evidence of how other developers set their price lists for marketing units and whether their marketing price lists somehow took account of overpaid GST, the issue does not take matters significantly further.

190. At T[211], the Tribunal stated:

To the extent that [Geocon] submitted that if a taxpayer "believes" that excess GST is not payable it will not be passed on, this submission is also rejected. Conceptually, there is no reason why a taxpayer cannot pass on GST in the price of a supply even though the taxpayer does not believe that it is liable to pay it. The issue turns on whether the excess GST was reported to the Commissioner and not whether [Geocon] believed that the GST in issue was a genuine cost of doing business. The concept of passing on in Division 142 of the GST Act refers to the economic burden of the excess GST being transferred from the supplier to another entity. Even if a taxpayer's beliefs as to whether the GST is payable were relevant, evidence about a taxpayer's beliefs would be insufficient to discharge the burden that it did not pass on the excess GST in the price of the supply. It follows, that evidence about [Geocon's] beliefs, including as to when it reached its position as to the proper GST treatment of Development Services and whether it needed to have certainty in the form of a Private Ruling are not to the point.

191. It may be accepted that, as a matter of principle, "there is no reason why a taxpayer cannot pass on GST in the price of a supply even though the taxpayer does not believe that it is liable to pay it". However, contrary to the Tribunal's reasons at T[211], the issue does not solely turn on "whether the excess GST was reported to the Commissioner and not whether [Geocon] believed that the GST in issue was a genuine cost of doing business". The

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Tribunal's conclusion in this respect was not explained.

192. Further, it was erroneous to reason that:

(a) "if a taxpayer's beliefs as to whether the GST is payable were relevant, evidence about a taxpayer's beliefs would be insufficient to discharge the burden that it did not pass on the excess GST in the price of the supply"; and
(b) it therefore "follows that evidence about [Geocon's] beliefs, including as to when it reached its position as to the proper GST treatment of Development Services and whether it needed to have certainty in the form of a Private Ruling are not to the point".

193. The evidence about Geocon's belief was relevant, material and to the point. If a taxpayer does not believe a cost is payable, or believes that it is a cost which (albeit paid) will be recovered from the person to whom it is paid, the taxpayer might not include the cost in an asking price, if the asking price was determined by reference to costs at all. Just as in Avon Products, perhaps even more so in the present context, a seller's belief is relevant. Indeed, as the High Court stated at [11] in terms applicable to the present context: "the [statutory] question [whether a tax is "passed on"] is to be approached with reference to the actual conduct of the seller in setting prices based upon its actual knowledge at the relevant time".

194. At T[212], the Tribunal stated:

Accordingly [that is, because the taxpayer's belief is irrelevant or not to the point], it is unnecessary to examine whether [Geocon] formed its beliefs about the proper GST treatment of Development Services at the time of the Director's meeting with PwC in June 2016 or at some time before [Geocon] ultimately obtained the Private Ruling in December 2017. In all the circumstances, [Geocon's] beliefs are inconsequential and do not assist it in discharging its burden, particularly as there was no evidence to suggest that its beliefs affected its actual pricing policy and practice. It follows that it is unnecessary to deal with the alternative positions put by [Geocon] as to the different times it formed its beliefs as to the GST treatment of the Development Services and to differentiate any different outcomes.

195. As mentioned, the evidence was relevant, it was not necessarily "inconsequential", and it could have assisted Geocon in discharging its burden. The Tribunal stated that "there was no evidence to suggest that [Geocon's] beliefs affected its actual pricing policy and practice". However, it must be said that - despite a lack of clarity in Geocon's evidence in this respect - it was clearly a part of Geocon's case that it did not incorporate overpaid GST into its setting of marketing price lists or its final sales decisions, in part because it believed the GST was either not payable or would be refunded. To the extent that was not the cumulative effect of the evidence given, it was an inference capable of being appropriately drawn from the evidence which was given. However, the Tribunal did not embark upon such a consideration of the evidence or the appropriate inferences to be drawn.

196. Geocon's case in this respect should have been addressed, because it was relevant and material to the determination of the statutory question. It should be observed in this regard, as is clear from what the Tribunal stated at T[21], that Geocon's belief may have changed from time to time. It had received some "pretty robust advice from PwC", presumably in June or July 2016: Pt C at 4153 at T57.19-20. A related entity was later given a ruling on 30 June 2017 confirming the effect of that advice. Geocon received its own ruling, also confirming that advice, on 13 December 2017. Contracts for units were exchanged from 24 March 2015 through to 28 May 2021 and price lists were prepared at various times, being updated to take into account of such matters as market feedback and the sales prices in fact being achieved. It follows that Geocon's belief about whether the overpaid GST was a true irrecoverable cost may differ in its significance to the answer to the statutory question depending on the particular unit sold.

197. The evidence showed that Geocon considered the project feasible and profitable, including if the overpaid GST was payable. That was because Geocon's assessment of market prices showed that it could

ATC 30771

expect to receive more in sales than the development would cost. That matter was relevant to, but by no means determinative, of the statutory question. The following matters pointed towards the economic burden of the overpaid GST not being passed on to the purchasers of the units:

(a) The evidence of the director (which was found to be reliable at T[20] and [70]) supported a conclusion that Geocon initially (from 22 June 2016) thought it "highly likely" that the GST was not payable: T[73]. The director then received rulings (30 June 2017 and 13 December 2017) which confirmed as much: T[76], [79].
(b) Whilst Geocon continued to assess feasibility and ongoing profitability by reference to costs, it seems that the Tribunal ultimately accepted that Geocon did not set the price lists by reference to Geocon's GST costs: T[204]. It may be (although not considered by the Tribunal) all the more unlikely that Geocon set its price lists for marketing by reference to GST costs which it thought would not ultimately be payable or which it thought would be recovered.
(c) It seems that the Tribunal ultimately accepted that the price lists were determined by reference to what Geocon considered the market would bear: T[204].
(d) In the ordinary course, sales of newly developed off-the-plan residential real estate would generally be expected to occur (consistent with the Manager's evidence, accepted at T[20] but not expressly referred to by the Tribunal) by reference to price lists, ultimately determined by what the market would bear. Such sales may not ordinarily occur at a price which directly represents a return on a developer's costs, although a developer's internal rate of return may factor in setting prices, at some level. The Tribunal accepted at T[67], "prospective purchasers will pay market prices, but will not pay more … they are indifferent to the amount spent by the developer in order to bring the apartment into existence".
(e) It is unclear how the Tribunal reasoned to the conclusion that Geocon could ensure a sale price which exceeded its costs: T[202].
(f) Consistently with the Tribunal's implicit conclusion that the sale price was not a function of costs or overpaid GST, the evidence did not suggest that Geocon adjusted its prices downwards after it received a binding private ruling that the Development Services could be deducted when determining the margin.
(g) The Tribunal proceeded on the basis that the sale price of the units would have been the same irrespective of whether Geocon had paid the overpaid GST. The Tribunal appears to have accepted that the purchasers were no worse off because GST was overpaid than they would have been if it had not been overpaid. It follows that a "reimbursement" (s 142-10) of the overpaid GST to the purchasers would result in the receipt by the purchasers of a windfall gain at the expense of Geocon. The express () and implicit object of Div 142 is to deny a refund of overpaid GST to the extent that it would result in a windfall gain, because some or all of the overpaid GST has been passed on to others without reimbursement - see: ss 142-1, 182-10(2)(a).
(h) To the extent it might be said that developers' costs more generally inform market price (because developments will only be undertaken if profitable), it would typically be actual costs which potentially inform market price, not amounts thought not to be payable. There might be situations where that is not true - for example, if the same sort of mistaken payment is made by multiple developers - but that might be thought to be unusual and was not demonstrated in the present case.

198. What pointed to the economic burden of the excess GST being passed on to the purchasers? Ultimately, the Tribunal only referred to two matters. First, it referred to the fact that the development was profitable and that its prices (presumably a reference to its list prices, but perhaps the actual sale prices) "recovered" all costs: T[201], [202] [206], [230]. Secondly, it concluded that "there was simply no evidence adduced to suggest that [Geocon] absorbed the excess GST itself" and treated evidence relevant to whether the overpaid GST costs had been passed on as not to the point: T[204]. For

ATC 30772

the reasons given above, the reasoning underlying both conclusions reveal the adoption of an erroneous approach to the statutory question. These two matters, individually or cumulatively, could not be determinative of the issue in light of the matters referred to earlier.

Conclusion

199. The Tribunal distorted the factual inquiry required by Div 142 and the question of whether excess GST had been "passed on", by employing a form of presumption that Geocon had passed on the overpaid GST because it was profitable overall, which it could only negate by showing something out of the ordinary or unusual. This wrong approach led the Tribunal to treat relevant evidence as not to the point and, as a matter of substance, to give the term "passed on" a meaning different to its ordinary meaning.

200. Geocon urged this Court to conclude that the only reasonable conclusion on the facts found was that the overpaid GST was not passed on. The fact finding is not sufficiently clear or complete for this Court to conclude that no other conclusion was available other than that the overpaid GST was passed on. The proceeding should therefore be remitted for redetermination according to law. It would be appropriate to direct that the parties be permitted to adduce further evidence on the remittal - see: ART Act s 177(2)(b).

GROUND 5

201. Section 142-15(1) has been set out earlier, but is repeated for convenience:

142-15 When section 142-10 does not apply

Commissioner satisfied it is inappropriate for that section to apply

(1) Treat section 142-10 as never having applied to the extent that the Commissioner is satisfied that:

(a) applying that section would be inconsistent with the principle that excess GST is not to be refunded if this would give an entity a windfall gain; and

(b) you have requested a decision under this subsection in the *approved form.
Note: Refusing to make the requested decision is a reviewable GST decision (see Subdivision 110-F in Schedule 1 to the Taxation Administration Act 1953).

202. Section 142-15 requires the Commissioner to be "satisfied" about the matters in (a) and (b). Geocon submitted by reference to T[225] that the Tribunal erred in approaching s 142-15 as involving a "discretion". The Tribunal's description at T[225] and [231] of s 142-15 as containing a "discretion" adopted language used by the parties during their dispute. The Tribunal correctly approached the task on the basis that, if it was satisfied about (a) and (b), then s 142-15(1) applied to disengage s 142-10: T[218]. Nothing turns on the labelling by the parties and the Tribunal of the power in s 142-15 as a discretion.

203. There was no dispute that the circumstance in (b) of s 142-15 existed. Accordingly, if the Tribunal considered that s 142-10 applied because the excess GST had been passed on, the next question for the Tribunal was whether it was satisfied that the circumstance in (a) of s 142-15(1) existed.

204. Geocon submitted to the Tribunal that a "windfall gain" in paragraph (a) should be understood to refer to "a gain obtained by the making of a refund in circumstances where the taxpayer could not reasonably have expected that it would receive a refund": T[220]. The Tribunal essentially accepted this submission, stating at T[229]: "The meaning of windfall gain is something which is unexpectedly large as in a windfall profit".

205. The term "windfall gain" has its ordinary meaning. Whilst questions of "expectation" might, and perhaps often would, inform the answer to the question of fact whether there was a windfall gain, an absence of expectation that a refund would be obtained is not a necessary criterion for s 142-15(a) to be satisfied.

206. The Tribunal concluded that Geocon would obtain a windfall gain if the excess GST were to be refunded to it, because it: (a) "was an astute property developer operating a profitable business which recovered all of its costs including amounts overpaid by it to the Commissioner as GST"; and (b) "did not discharge the burden of proving that these amounts on account of GST had not been

ATC 30773

passed on to the purchasers of the units": T[230].

207. As to the reasoning in (a), the question of whether a refund will result in a "windfall gain" is not answered by concluding that the business was profitable in the sense that all costs were covered by the amounts received on sale. That is not to say that such a conclusion is irrelevant to the question.

208. As to the reasoning in (b), two observations should be made. First, it follows from the structure of Div 142 that it must be possible for the matter in s 142-15(a) to be satisfied if excess GST was passed on. The possibility of disengaging the deeming which would have been effected by s 142-10, through the deeming effected in s 142-15, implies that s 142-10 would otherwise apply.

209. One circumstance in which it might apply was provided at Example 2.12 in the Explanatory Memorandum to the Tax Laws Amendment (2014 Measures No 1) Bill 2014 (Cth) at 39:

Entities Lintoned and Benwell own a commercial property as tenants in common. Each carries on a separate enterprise and is registered for GST.

Entities Lintoned and Benwell each sell their 50 per cent interest in the property (with vacant possession) to Neville Co for a price of $50,000 plus $5,000 GST each. Entities Lintoned and Benwell each remit GST of $5,000.

Neville Co is registered for GST and claims two input tax credits of $5,000 each.

The Commissioner reviews the transaction and decides that Entities Lintoned and Benwell are operating an enterprise as a tax law partnership. The tax law partnership is a separate entity for GST purposes. The Commissioner therefore assesses the partnership for underpaid GST of $10,000. The partnership duly pays the $10,000.

Entities Lintoned and Benwell have each overpaid GST of $5,000 and they have each passed on that excess GST to Neville Co. However, in effect, Lintoned and Benwell have remitted the passed-on GST twice, once through remitting the GST in their own names, and once through remitting it in the name of the tax law partnership.

In these circumstances it is appropriate for the Commissioner to exercise the discretion where the Commissioner is satisfied that the refund of excess GST to Lintoned and Benwell will not result in a windfall gain for either entity.

210. Secondly, and more importantly, the Tribunal's conclusion that s 142-15 did not apply because Geocon did not discharge the burden of proving that the excess GST had not been passed on was affected by the errors identified in respect of Ground 4.

211. As mentioned, s 142-15 can only apply where it has been concluded that excess GST was passed on. The questions of whether excess GST was passed on, and whether there would be a "windfall gain" if the excess GST was refunded, raise many of the same considerations. If neither the price for the units, nor the amount Geocon received, was affected by Geocon's GST costs generally, or its overpayment of GST specifically, and the purchasers would not have been any worse off whatever the amount of GST Geocon had paid, then the question fairly arises whether the overpaid GST was passed on. If Geocon would have received the same amount from the purchasers irrespective of the overpaid GST, then Geocon would have been more profitable. Unless that overpaid GST was passed on, that increased profitability could not properly be characterised as involving a "windfall gain":

(a) A refund of the excess GST would result in Geocon receiving back that which it should never have paid. The refund would not provide Geocon a relevant "gain" as opposed to restoring Geocon to the profit position it would have been in had it not made the mistaken payment.
(b) There is nothing else about a refund in those circumstances which would point to it properly being described as a "windfall gain" in the sense of a gain for which nothing had been done or which was, by way of example, fortuitous, unmeritorious, unexpected, undeserved or unearned. The refund would not relevantly be at the expense of either the Commissioner or the purchasers.

212.

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At a practical level, if the economic burden of excess GST has been passed on by a taxpayer to a third party, then a refund of the excess GST to the taxpayer by the Commissioner will generally involve a "windfall gain". The taxpayer would have both passed on the economic burden of the mistaken payment and been made good in respect of it. If the economic burden of the excess GST has not been passed on, then s 142-10 does not apply, and a refund must be made. In that circumstance, s 142-15 has no possible or relevant application.

CONCLUSION

213. The appeal should be allowed with costs and the matter remitted to the Tribunal for redetermination according to law in accordance with the directions set out in the orders to which these reasons relate.

THE COURT ORDERS THAT:

1. The application be allowed.
2. The notice of contention be dismissed.
3. The matter be remitted to the Tribunal with a direction that the parties be permitted to adduce further evidence on the remittal.
4. The constitution of the Tribunal on remitter be a matter for the Tribunal.
5. The respondent pay the applicant's costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

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