Industry update: AAT's warning to the ATO in the latest GST case
The Administrative Appeals Tribunal (AAT) has recently overturned an ATO decision relating to a motor vehicle dealer’s entitlement to GST input tax credit (ITC) and luxury car tax (LCT). Mr Skourmallas claimed a GST ICT and LCT decreasing adjustment in relation to the acquisition of an Audi R8 Coupe bought for $263,750.01.
Jan 23, 2020
The Administrative Appeals Tribunal (AAT) has recently overturned an ATO decision relating to a motor vehicle dealer’s entitlement to GST input tax credit (ITC) and luxury car tax (LCT). Mr Skourmallas claimed a GST ICT and LCT decreasing adjustment in relation to the acquisition of an Audi R8 Coupe bought for $263,750.01. The basis of his claim was that the care was acquired as trading stock for his motor dealer business. The ATO didn’t accept that Mr Skourmallas was a motor vehicle dealer and said that even if he was, it was his company that had acquired the car and not Mr Skourmallas himself. By their decision dated 23 December 2019, the AAT found in favour of Mr Skourmallas and held that he was indeed entitled to the ICT and LCT decreasing adjustment. More interestingly, the ATO asserted that Mr Skourmallas was not a credible witness and that his testimony should not be given substantive weight in the absence of documentation verifying his claims. However, the AAT did not agree with this allegation and indeed warned the ATO that “care [is] needed in concluding that a taxpayer is honest”. In particular, the AAT took into consideration that Mr Skourmallas spoke English as a second language and his communication style. Ultimately, on the question of ITC, the tribunal found in favour of Mr Skourmallas on the basis that the vehicle was acquired by Skourmallas (rather than his company), that Mr Skourmallas was carrying on a business and therefore an ‘enterprise’, and that the Audi was acquired in carrying on the enterprise. On the question of LCT, the tribunal also found in favour of Mr Skourmallas because it was established that the Audi was supplied to him, that he only intended to hold the Audi as trading stock and for no other purpose, and that he did not use the vehicle other than as trading stock. Of course the case involved a number of intricacies and nuances which facilitated the court’s arrival at these findings. Despite this positive finding for Mr Skourmallas, the tribunal also offered some advice for Mr Skourmallas, and indeed others in similar positions, that “rather than being emboldened by his success in this review, Mr Skourmallas might prudently improve his record-keeping, for example, by maintaining complete and accurate logbooks of the use and marketing of any vehicles purchased for sale.” This is a timely reminder for all of us as to the importance of accurate and up-to-date record keeping! If you have any questions as to how the issues raised in this case may have a bearing on you or your business, feel free to contact the team at S & S Accounting & Business Services to chat through your needs!