Wynnum Holdings No 1 Pty Ltd and Federal Commissioner of Taxation; FD Dunn & JW Dunn and MAM Sky Superannuation Fund and Federal Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2008/5986; 2011/5618)
Judgment date: 5 May 2011
Date published: 19 June 2013

Summary of decision:
Outlines the ATO's response to related cases concerning recovery restrictions where a ruling was issued and whether the issues went to substantive liability, which entity carried on the enterprise, and whether premises were commercial residential premises.

Overview of facts:
In 2003, a number of parties (called 'Joint Venturers') formed a syndicate to invest in a retirement village. The Joint Venture Deed and Deed Poll contained provisions which indicated that Wynnum Holdings No 1 Pty Ltd (Wynnum Holdings) was the nominee and bare trustee of the real property for the Joint Venturers. The Joint Venturers also agreed that the leasing and management of the property was the main goal. | The property was purchased by Wynnum Holdings for $4.27m including GST of $388,182. The contract referred to the purchaser as "Wynnum Holdings No 1 Pty Ltd A.C.N. 103 394 716 as trustee for the Wynnum Holdings No 1 Joint Venture Trust". | The premises consisted of six buildings, five of which were accommodation units. The other one contained a community centre and a manager's private apartment. Ten car parking spaces were available for the general use of visitors and residents. The premises also included extensive landscaped grounds. | Various services were also provided - linen and towels, washing, meals and optional 24-hour emergency call monitoring. Accommodation was on a basis that matched pension income. Residents also had to not require higher care nursing facilities. They entered into "Standard Residential Services Agreements" (SRSAs) prior to occupation, which set out the terms and conditions of residency. | Wynnum Holdings was registered for GST. Between 1 October 2003 and 7 October 2003, it lodged a business activity statement (BAS) for the period 1 July 2003 to 30 September 2003 and claimed input tax credits for the purchase of the property, resulting in a refund net amount of $388,182. This was credited to its running balance account on 31 October 2003 and later paid to Wynnum Holdings. | On 23 October 2007 (more than four years after the lodgment of the relevant BAS), the Commissioner issued a 'Notice to Repay and incorrectly paid refunds for the tax period 1/07/2003 to 30/09/2003', claiming from Wynnum Holdings repayment of the $388,182. An assessment issued on 28 April 2008 for the tax periods from 1 July 2003 to 31 December 2007 specifying an assessed net amount of $0 for each period. | Objections were disallowed and Wynnum Holdings sought a review by the Tribunal. | Issues decided by the court | The following issues arose: • whether the Commissioner was prevented under section 105-50 in Schedule 1 to the Taxation Administration Act 1953 (TAA) from recovering the $388,182 payment (the "timing issue"); • whether the Commissioner was prevented from recovering the amount due to a previous ruling made (the "ruling issue"); • whether the above two issues went to the substantive liability of Wynnum Holdings and, therefore, to excessiveness of an assessment (the "excessiveness of the assessment issue"); • whether the Joint Venturers or Wynnum Holdings was the entity carrying on the enterprise at the relevant time (the "enterprise issue"); and • whether the premises were commercial residential premises (the "commercial residential premises issue"). | • whether the Commissioner was prevented under section 105-50 in Schedule 1 to the Taxation Administration Act 1953 (TAA) from recovering the $388,182 payment (the "timing issue"); • whether the Commissioner was prevented from recovering the amount due to a previous ruling made (the "ruling issue"); • whether the above two issues went to the substantive liability of Wynnum Holdings and, therefore, to excessiveness of an assessment (the "excessiveness of the assessment issue"); • whether the Joint Venturers or Wynnum Holdings was the entity carrying on the enterprise at the relevant time (the "enterprise issue"); and • whether the premises were commercial residential premises (the "commercial residential premises issue"). | The Tribunal's decisions concerning the first three issues are set out in [2011] AATA 296 (and subsequently incorporated into [2012] AATA 616 at [4]). The Tribunal's decisions concerning the final two issues are set out in [2012] AATA 616. | 1. The "timing issue" | The Tribunal decided that section 105-50, as it was then enacted, did not prevent the Commissioner from recovering the relevant amount. Section 105-50 states that any unpaid net amount or amount of indirect tax ceases to be payable in certain circumstances. The relevant amount was not an 'unpaid net amount'. The Tribunal also said at [28] that the relevant amount was not an 'unpaid amount of indirect tax'. | The Tribunal concluded at [35] that 'indirect tax' does not include amounts claimed as input tax credits because they are not tax payable under the GST law and imposed as goods and services tax. The Tribunal noted the Commissioner's submissions at [36] that the liability for incorrectly claimed credits arose under subsubsection 8AAZN(1) as the payment to Wynnum Holdings was an administrative overpayment. While not expressly endorsing this position, the Tribunal did not cast doubt on it. | 2. The "ruling issue" | The Tribunal did not accept at [43] that the Commissioner had provided any ruling to Wynnum Holdings and was therefore prevented from recovering the amount under section 37 of the TAA (as it then applied). Subsection 37(4) stated that a 'ruling' means any ruling or advice given or published by the Commissioner, including one that has been previously altered, but does not include one given orally or an assessment. The Tribunal observed at [43] that '[t]o post an amount to a taxpayer's running balance account is not to "give" or "publish" a "ruling" or "advice".' Any information the Commissioner may have given to Wynnum Holdings by phone was specifically excluded from the definition of a 'ruling'. | 3. The "excessiveness of the assessment issue" | In joint submissions, the Commissioner and Wynnum Holdings submitted that section 105-50 and section 37 affect, or go to, the substantive liability of a taxpayer and, therefore, to excessiveness of an assessment. The Tribunal agreed and observed at [47-48] that, if Wynnum Holdings had been successful on either the timing issue or the ruling issue, it would have shown the assessment to be excessive. | 4. The "enterprise issue" | The Tribunal found at [37] that Wynnum Holdings and the Joint Venturers agreed that Wynnum Holdings held 'the Assets', including the property, as nominee and bare trustee of the Joint Venturers. The Tribunal concluded at [40] that Wynnum Holdings was not carrying on the enterprise when it purchased the property. The fact that Wynnum Holdings, rather than the Joint Venturers, entered into an agreement with a third party to manage the premises did not matter. The Tribunal agreed at [41] that it was the Joint Venturers who carried on the enterprise at the relevant time. | 5. The "commercial residential premises issue" | The property would satisfy the definition of 'commercial residential premises' in section 195-1 if it was a hotel, motel, inn, hostel or boarding house under paragraph (a), or was anything similar to these types of premises under paragraph (f). | The Tribunal decided that the property was not a hotel, motel or inn (at [69-70]), and was not, nor similar to, a boarding house (at [71]). The Tribunal observed at [72] that the property seemed to have some attributes of a hostel and, at least in some respects, was similar to a hostel. However, it concluded at [76-77] that the presence of certain factors meant the property was not a hotel, motel, inn, hostel, boarding house, or similar premises, and therefore not commercial residential premises. | The Tribunal considered at [78-82] views expressed in GSTR 2000/20, concerning the relevance of eight attributes common to a hotel, motel, inn, hostel or boarding house. It observed that only considering the presence of those characteristics may not lead to the right outcome and demonstrates the difficulty in prescribing factors that are relevant to determining whether premises are commercial residential premises. | The Tribunal affirmed the disallowance of the objections at [84].

Issues decided:
The following issues arose: • whether the Commissioner was prevented under section 105-50 in Schedule 1 to the Taxation Administration Act 1953 (TAA) from recovering the $388,182 payment (the "timing issue"); • whether the Commissioner was prevented from recovering the amount due to a previous ruling made (the "ruling issue"); • whether the above two issues went to the substantive liability of Wynnum Holdings and, therefore, to excessiveness of an assessment (the "excessiveness of the assessment issue"); • whether the Joint Venturers or Wynnum Holdings was the entity carrying on the enterprise at the relevant time (the "enterprise issue"); and • whether the premises were commercial residential premises (the "commercial residential premises issue"). • whether the Commissioner was prevented under section 105-50 in Schedule 1 to the Taxation Administration Act 1953 (TAA) from recovering the $388,182 payment (the "timing issue"); • whether the Commissioner was prevented from recovering the amount due to a previous ruling made (the "ruling issue"); • whether the above two issues went to the substantive liability of Wynnum Holdings and, therefore, to excessiveness of an assessment (the "excessiveness of the assessment issue"); • whether the Joint Venturers or Wynnum Holdings was the entity carrying on the enterprise at the relevant time (the "enterprise issue"); and • whether the premises were commercial residential premises (the "commercial residential premises issue"). The Tribunal's decisions concerning the first three issues are set out in [2011] AATA 296 (and subsequently incorporated into [2012] AATA 616 at [4]). The Tribunal's decisions concerning the final two issues are set out in [2012] AATA 616. | 1. The "timing issue": The Tribunal decided that section 105-50, as it was then enacted, did not prevent the Commissioner from recovering the relevant amount. Section 105-50 states that any unpaid net amount or amount of indirect tax ceases to be payable in certain circumstances. The relevant amount was not an 'unpaid net amount'. The Tribunal also said at [28] that the relevant amount was not an 'unpaid amount of indirect tax'. The Tribunal concluded at [35] that 'indirect tax' does not include amounts claimed as input tax credits because they are not tax payable under the GST law and imposed as goods and services tax. The Tribunal noted the Commissioner's submissions at [36] that the liability for incorrectly claimed credits arose under subsubsection 8AAZN(1) as the payment to Wynnum Holdings was an administrative overpayment. While not expressly endorsing this position, the Tribunal did not cast doubt on it. | 2. The "ruling issue": The Tribunal did not accept at [43] that the Commissioner had provided any ruling to Wynnum Holdings and was therefore prevented from recovering the amount under section 37 of the TAA (as it then applied). Subsection 37(4) stated that a 'ruling' means any ruling or advice given or published by the Commissioner, including one that has been previously altered, but does not include one given orally or an assessment. The Tribunal observed at [43] that '[t]o post an amount to a taxpayer's running balance account is not to "give" or "publish" a "ruling" or "advice".' Any information the Commissioner may have given to Wynnum Holdings by phone was specifically excluded from the definition of a 'ruling'. | 3. The "excessiveness of the assessment issue": In joint submissions, the Commissioner and Wynnum Holdings submitted that section 105-50 and section 37 affect, or go to, the substantive liability of a taxpayer and, therefore, to excessiveness of an assessment. The Tribunal agreed and observed at [47-48] that, if Wynnum Holdings had been successful on either the timing issue or the ruling issue, it would have shown the assessment to be excessive. | 4. The "enterprise issue": The Tribunal found at [37] that Wynnum Holdings and the Joint Venturers agreed that Wynnum Holdings held 'the Assets', including the property, as nominee and bare trustee of the Joint Venturers. The Tribunal concluded at [40] that Wynnum Holdings was not carrying on the enterprise when it purchased the property. The fact that Wynnum Holdings, rather than the Joint Venturers, entered into an agreement with a third party to manage the premises did not matter. The Tribunal agreed at [41] that it was the Joint Venturers who carried on the enterprise at the relevant time. | 5. The "commercial residential premises issue": The property would satisfy the definition of 'commercial residential premises' in section 195-1 if it was a hotel, motel, inn, hostel or boarding house under paragraph (a), or was anything similar to these types of premises under paragraph (f). The Tribunal decided that the property was not a hotel, motel or inn (at [69-70]), and was not, nor similar to, a boarding house (at [71]). The Tribunal observed at [72] that the property seemed to have some attributes of a hostel and, at least in some respects, was similar to a hostel. However, it concluded at [76-77] that the presence of certain factors meant the property was not a hotel, motel, inn, hostel, boarding house, or similar premises, and therefore not commercial residential premises. The Tribunal considered at [78-82] views expressed in GSTR 2000/20, concerning the relevance of eight attributes common to a hotel, motel, inn, hostel or boarding house. It observed that only considering the presence of those characteristics may not lead to the right outcome and demonstrates the difficulty in prescribing factors that are relevant to determining whether premises are commercial residential premises. The Tribunal affirmed the disallowance of the objections at [84].

ATO view of decision:
The Tribunal's decisions on the timing issue, ruling issue and excessiveness of the assessment issue are consistent with the Commissioner's submissions. | Subsection 105-50(2), which took effect from 1 July 2008, introduced a four year time limit for recovery of amounts paid as refunds in relation to net amounts in certain circumstances. Prior to this, the Commissioner had an administrative practice of not pursuing incorrectly paid refunds (negative net amounts) after four years from the date on which the net amount became payable unless a notification that was the equivalent of a section 105-50 notice had been given before the end of the relevant four year period. | Section 37 was repealed with effect from 1 July 2006. Rules concerning rulings issued by the Commissioner now appear in Division 357. | The Tribunal's decision on the enterprise issue is consistent with views set out in GSTR 2008/3 Goods and services tax : dealings in real property by bare trusts . | While deciding that the property was not 'commercial residential premises', the Tribunal's reasoning for this conclusion differs to some extent with the preliminary views expressed in GSTR 2012/D1. The Tribunal's views in this regard have been reflected in GSTR 2012/6, which replaced GSTR 2000/20.

Administrative treatment:
Implications for ATO precedential documents (Public Rulings & Determinations etc) | Not Applicable

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 The Act Taxation Administration Act 1953 The Act
Case references: ECC Southbank Pty Ltd as trustee for Nest Southbank Unit Trust v Commissioner of Taxation [2012] FCA 795 2012 ATC 20-336 Herdegen v Commissioner of Taxation [1988] FCA 699 20 ATR 24 88 ATC 4995 Marana Holdings Pty Ltd v Commissioner of Taxation [2004] FCAFC 307 2004 ATC 5068 57 ATR 521 Meridien Marinas Horizon Shores Pty Ltd v FCT [2009] FCA 1594 2009 ATC 20-158 74 ATR 787 Lergou and Commissioner of Taxation [2009] AATA 292 72 ATR 812 Russell v Commissioner of Taxation [2009] FCA 1224 2009 ATC 20-143 74 ATR 466 Wynnum Holdings No 1 Pty Ltd and Commissioner of Taxation [2011] AATA 296 2011 ATC 10-180 83 ATR 444
Subject references: Goods and services tax Whether the Commissioner's claim for recovery is out of time Whether amount paid is an 'unpaid net amount' or 'unpaid indirect tax' Whether Commissioner is prevented from recovering amount by a previous ruling Overclaimed input tax credits Commercial residential premises Enterprise Creditable purpose and creditable acquisition Trustee as nominee and bare trustee