Yacoub v Federal Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (NSD 1600 & 1601 of 2001)
Judgment date: 29 June 2012
Date published: 27 June 2013

Summary of decision:
Outlines the ATO's response to this case, which concerned whether certain agreements had resulted in formation of a partnership for GST purposes.

Overview of facts:
A husband and wife conducted a construction business through a registered partnership (Yacoub Partnership). Four properties were acquired by Yacoub Partnership and a construction company as tenants-in-common (specified interests: company 75%, Yacoub Partnership 25%) for the construction of 30 villas. | A syndicate agreement entered into by the parties increased Yacoub Partnership's interest to 50%, and provided for the parties to be vested with title to individual villas on completion. This agreement specifically denied creation of any partnership but provided for several liability on loan repayments between the parties. | A later agreement between the parties provided for the properties to be held in equal shares as tenants in common and for the parties "to share equally all costs, liabilities, mortgages, and proceeds derived from any sale arising from the property". | Another entity, Myej Lydbrook (ML), was GST registered by the husband as a 'limited partnership' for project purposes. Yacoub Partnership carried out the construction work and the husband (acting on behalf of ML) lodged eight business activity statements (BAS), the first seven of which resulted in refunds totalling $336.260. Villa sale proceeds were paid first to a financier and second to the company. | ML was assessed for GST of $611,203 of which Yacoub partnership met half. The company, however, did not pay the other half and went into administration. The Commissioner sought to recover the balance from Yacoub Partnership on the basis that a partnership had been created between the parties by the later agreement. | Issues decided by the court | The Court held that the later agreement prevailed over the syndicate agreement to make Yacoub Partnership and the company a partnership both at general law and for tax purposes, with the result that Yacoub Partnership was liable for the balance of the GST debt. Denial of partnership by the syndicate agreement was no longer consistent with the objective intention of the parties. The Court also agreed with the Commissioner that no 'non-entity joint venture' had been created.

Issues decided:
The Court held that the later agreement prevailed over the syndicate agreement to make Yacoub Partnership and the company a partnership both at general law and for tax purposes, with the result that Yacoub Partnership was liable for the balance of the GST debt. Denial of partnership by the syndicate agreement was no longer consistent with the objective intention of the parties. The Court also agreed with the Commissioner that no 'non-entity joint venture' had been created.

ATO view of decision:
The decision of the Court is consistent with public views of the Commissioner on the issues which were decided, and there is no need to amend GSTR 2004/2.

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 s 9-5 s 23-5 s 9-20 s 184-1 s 195-1 Income Tax Assessment Act 1997 s 995-1 Taxation Administration Act 1953 s 444-30
Case references: Amadio Pty Ltd v Henderson (1998) 81 FCR 149 [1998] FCA 823 ARM Constructions Pty Ltd v FCT 87 ATC 4790 19 ATR 337 Birtchnell v Equity Trustees, Executors & Agency Co Ltd (1929) 42 CLR 384 Fenston v Johnston (1940) 23 TC 29 Momentum Production Pty Ltd v Lewarne (2009) 174 FCR 268 [2009] FCAFC 30 United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 [1985] HCA 49 Whywait Pty Ltd v Davidson [1997] 1 QdR 225
Subject references: Goods and services tax Partnerships GST joint ventures Taxable supply Carrying on an enterprise GST registration Non-entity joint venture