Property Developer is denied input tax credits

The Administrative Appeals Tribunal (‘the Tribunal’) has upheld the Commissioner’s decision to disallow input tax credits relating to property developments.


The Taxpayer carried on a property development enterprise, and claimed about $1.95 million in input tax credits in relation to four property developments in Western Australia for earthworks and related services provided, and invoiced, by a related company in November 2013, after and audit of BASs ( And tax returns) covering the 2010 to 2013 income years, the commissioner disallowed certain input tax credits claimed (including $960,000 of input tax credits claimed in the taxpayer’s September 2009 BAS)

Some of the denied input tax credits related to the development of lots that’s the taxpayer held as trustee of various trusts, and some which were transferred to other parties (some for no consideration) and held as bare trustee for the taxpayer.


The Tribunal dismissed the taxpayer’s appeal and affirmed the Commissioner’s decision to disallow input tax credits claimed

Since the taxpayer bears the burden of proving that assessments are excessive, and must prove what they should have been in alternative to the commissioner’s assessments, the essence of the case came down to having appropriate documentation.

For each of the four developments, the Tribunal reviewed the tax invoices submitted by the tax payer, which were provided by the related party.

The commissioner submitted other evidence, including correspondence provided from independent site superintendents (who reviewed the work, and authorized it to be invoice by the related party)

However, there were various discrepancies which the taxpayer did not explain (or sufficiently explain,) including

  • Significant differences in the contract price for earthworks, as referred to in the invoices compared with those by the site superintendent;
  • Duplicated claims; and
  • Inflated invoice claims

The tribunal also did not accept that the taxpayer was ‘carrying on an enterprise’ in respect of one of the developments, nor that it made a ‘creditable acquisition’, as it was not the beneficial owner of the land in question.

The tribunal also agreed with the commissioner that he was not out of time to make the amended assessments, on the basis that there was fraud and evasion involved (for which there is no time limit for amendment)

The commissioner formed the view that a fraud had occurred for the following reasons;

  • Many of the claims were in respect to supplies by a related entity;
  • Many of the claims related to land of which the taxpayer was not the beneficial owner;
  • The pattern of overstatement of claims as compared to those certified by an independent third-party site superintendent;
  • The inaccuracy of the dates for which the works were claimed;
  • The arrangements entered appeared to be part of a sham, undertaken solely to obtain a tax benefit, and
  • The obstruction of the Commissioner during the audit, including failure to respond to enquiries, failure to provide adequate information, providing false or misleading information, and providing manufactured or altered documentation contradicted by evidence obtain from third parties.
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