[2016] AATA
Division
TAXATION & COMMERCIAL DIVISION
File Number
2015/4116
Re
Taxology Pty Ltd
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal
Senior Member R W Dunne
Date
2 August 2016
Place
Adelaide
The Tribunal affirms the objection decision under review.
....................[Sgd].................................
Senior Member R W Dunne
© Commonwealth of Australia 2016
CATCHWORDS
TAXATION – goods and services tax – private ruling – attribution – function of the
Tribunal – consideration of the facts comprising the scheme the subject of the ruling –
objection decision under review affirmed.
LEGISLATION
Administrative Appeals Act 1975 (Cth), s 43
Income Tax Assessment Act 1997 (Cth), s 995-1
Taxation Administration Act 1953 (Cth), s 14ZZK(b)(ii), Division 359 of Schedule 1
A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 9-5, 9-10, 9-15 and 29-5
CASES
Re Bentivoglio and Commissioner of Taxation [2014] AATA 620
Re TBCL and Commissioner of Taxation [2016] AATA 264
SECONDARY MATERIALS
GSTR 2003/14 Goods and services tax: the GST implications of transactions between
members of a barter scheme conducted by a trade exchange
GSTR 2001/6 Goods and services tax: non-monetary consideration
REASONS FOR DECISION
Senior Member R W Dunne
2 August 2016
INTRODUCTION
1.
The applicant in this proceeding is Taxology Pty Ltd.
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2.
The proceeding involves an application for review of the objection decision of the
respondent (“Commissioner”) concerning a private ruling made under Division 359 of
Schedule 1 to the Taxation Administration Act 1953 (Cth) (“TAA”) with respect to goods
and service tax (“GST”) and barter transactions. In particular, the proceeding relates to
the timing of attribution of GST in the barter program in which the applicant was involved.
3.
I have decided that the Commissioner’s objection decision under review should be
affirmed, for the reasons that follow.
BACKGROUND
4.
The applicant is a corporate entity which provides professional services to the general
public.
The entity joined a business membership based barter scheme.
On
21 January 2015, the entity applied for a private ruling relating to GST and barter
transactions.
5.
The question posed in the ruling is whether the entity could attribute the GST payable on
its taxable supplies made under the barter scheme at the time it redeems its barter trade
credits for goods and services.
6.
On 18 February 2015, the entity received a response from the Commissioner stating that
it could not attribute the GST payable on its taxable supplies made under the barter
scheme at the time it redeems its barter trade credit for goods and services.
Consequently, on 23 February 2015 the entity lodged an objection.
RELEVANT LEGISLATION
7.
The legislation that is relevant to this review is that relating to private rulings under the
income tax law and to GST under the A New Tax System (Goods and Services Tax) Act
1999 (“GST Act”).
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8.
The provisions relating to private rulings are found in Division 359 of Schedule 1 to the
TAA. The provisions are best explained in the decision of Deputy President S E Frost in
Bentivoglio and Commissioner of Taxation,1 which relevantly reads:
“14. Section 359-5 provides that a private ruling is ‘a written ruling on the way in
which the Commissioner considers a relevant provision applies or would apply
to [a taxpayer] in relation to a specified scheme’. A private ruling must, among
other things, specify ‘the relevant scheme and the relevant provision to which
it relates’: s 359-20(2).
15. A person who is dissatisfied with a private ruling may object against it under
Part IVC of the TAA: s 359-60(1) in Schedule 1. The ruling is taken for the
purposes of Part IVC to be a taxation decision: s 359-60(2) in Schedule 1.
16. Section 14ZZK(b)(ii) of the TAA provides that the taxpayer has the burden of
proving that the private ruling ‘should have been made differently’.
17. The ruling (which is the expression of the Commissioner’s opinion) is based
on the scheme as identified by the Commissioner. The Tribunal’s review of
the objection decision must also be based on the scheme as identified by the
Commissioner; the Tribunal is not empowered to redefine the scheme. But it
should be noted that in identifying the scheme, the Commissioner does not
examine whether the so-called ‘facts’ set out in the scheme are accurate or
not. Instead, the Commissioner takes the background information provided to
him by the taxpayer, formulates from that information a ‘scheme’, and then
provides his opinion on how the law applies to that scheme. If the facts
underpinning the scheme are inaccurate, or if the scheme is implemented by
the taxpayer in a way that is materially different from the way described in the
ruling, then the ruling is of no practical use to the taxpayer. These broad
concepts have been explained in earlier cases: see Commissioner of Taxation
v McMahon [1997] FCA 1087; (1997) 79 FCR 127 (McMahon’s case) at 132134, 140-141 and 149-150; Cooperative Bulk Handling Ltd v Commissioner of
Taxation [2010] FCA 508 at [13], [15] and [16]; and Re Cooper Bros Holdings
Pty Ltd trading as Triple R Waste Management and Commissioner of Taxation
[2013] AATA 99 at [4]-[8].”
THE PRIVATE RULING
9.
The notice of private ruling dated 18 February 2015 which was issued in this proceeding
reads:
“Notice of private ruling
This ruling applies to:
Client name
TAXOLOGY PTY LTD ABN […]
1
[2014] AATA 620.
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Question
Can you attribute the GST payable on your taxable supplies made under the barter
scheme at the time you redeem your barter trade credits for goods and services?
Answer
No
Relevant facts and circumstances
The ruling is basis on the facts stated in the description of the scheme that is set
out below. If your circumstances are materially different from these facts, this
ruling has no effect and you cannot rely on it. The fact sheet has more information
about relying on your private ruling.
Taxology Pty Ltd (you) is registered for GST and accounts for GST on a cash
basis.
You stated that you are carrying on an enterprise of providing professional
services to the general public.
You joined a trading program (barter scheme) operated by Bartercard Exchange
Ltd (Bartercard) and managed by Bartercard Operations Aus Pty Ltd (the
Manager).
Under the scheme, trades are conducted on a 100% barter basis unless consent is
obtained from the Manager to trade in cash or partly in cash.
For each member, Bartercard establishes an account (trade account) for recording
trades (transactions) entered into by them. Any trade duly entered into by the
members is recorded by:

crediting the trade account of the selling member with the trade dollar
amount of the transaction; and

debiting the trade account of the buying member with the trade dollar amount
of the transaction.
The trade dollars recorded in a trade account of a member which has a credit
balance do not constitute a liability or a debt payable by the Manager or
Bartercard.
Trade dollar is an accounting unit used to record the value of goods and services
traded. One trade dollar is equivalent to one Australian dollar and vice versa.
The Manager or Bartercard does not have any obligation to any member to
redeem or convert to cash or pay any amount for or in respect of trade dollars.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-15
A New Tax System (Goods and Services Tax) Act 1999 section 29-5
A New Tax System (Goods and Services Tax) Act 1999 section 195-1”
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APPLICATION FOR REVIEW AND HEARING
10.
Following the application for review, interlocutory directions hearings were conducted to
determine how best to manage the hearing of this matter. Initially, it was thought possible
for the review to be on the papers under s 43J of the Administrative Appeals Tribunal
Act 1975. However, when it became clear that an agreement could not be reached by the
parties in relation to certain relevant facts and procedures, a face to face hearing
eventually took place.
FUNCTION OF TRIBUNAL
11.
A private ruling is a written ruling on the way in which the Commissioner considers a
relevant provision applies or would apply to a taxpayer in relation to a specified scheme.
A private ruling is made on application by the taxpayer affected by the provision or their
legal representative.
In TBCL and Commissioner of Taxation2 Deputy President
Dr P McDermot RFD has outlined how the Tribunal functions when reviewing an objection
decision upon a private ruling. The outline reads as follows:
“16. Section s 14ZZK(b)(ii) of the TAA53 provides that the applicants bear the
burden of proof to establish that the private ruling should have been made
differently. The Tribunal is confined to a consideration of the stated facts in
the ‘scheme’ which is identified in the private ruling in reviewing an objection
decision upon a private ruling.
17. The reasons of Logan J in Rosgoe Pty Ltd v Commissioner of Taxation [2015]
FCA 1231 and Deputy President Alpins in Re Cooper Bros Holdings Pty Ltd
and Commissioner of Taxation (2013) 59 AAR 165 reviewed a number of
decisions of the Federal Court of Australia under the former provisions in the
TAA53 prior to their migration to Schedule 1 to that Act and the present
legislative regime. Those decisions emphasise that the role of this Tribunal in
reviewing an objection decision regarding a private ruling is confined to
reviewing the correctness of the ruling premised on the specified scheme in
the private ruling.
18. In Rosgoe Pty Ltd v Commissioner of Taxation [2015] FCA 1231 Logan J
explained at [12]:
On a review of an objection decision in respect of a private ruling, the
Tribunal is not permitted to redefine the ‘arrangement’ as stated by the
Commissioner in his ruling. Put another way, the Tribunal may not itself
engage in a fact finding exercise. Rather, the Tribunal must form its
own view as to how a taxation law applies to an arrangement it takes
as a given.
2
[2016] AATA 264.
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19. In Re Cooper Bros Holdings Pty Ltd and Commissioner of Taxation (2013)
59 AAR 165 at 169, Deputy President Alpins explained the function of the
Tribunal in reviewing an objection decision upon a private ruling:
The Tribunal can only consider the stated facts comprising the scheme
the subject of the ruling. Furthermore, the Tribunal cannot ‘redefine’ the
scheme (see Commissioner of Taxation v McMahon (1997)
79 FCR 127 at 133, 141, 144-146, 150) – the Tribunal is confined by
the scheme as it has been described in the ruling and cannot depart
from that description in any respect. The Tribunal cannot create its own
description of the scheme, elaborate upon or make assumptions about
the scheme, nor can the Tribunal add further facts, substitute other
facts or otherwise alter the scheme (McMahon at 133-134, 140-146,
149-150; Bellinz v Federal Commissioner of Taxation (1998) 84 FCR
154 at 160; Reef Networks at [6]; Lamont at [21], [26]; Hastie Group
at [3]; Cooperative Bulk Handling at [16]).
20. Section 359-65 of Schedule 1 to the TAA53 deals with the circumstances in
which, for the purpose of an objection decision, the Commissioner may have
regard to additional information not considered by the Commissioner when he
made the private ruling. This Tribunal is vested with the authority of the
Commissioner under s 359-65 of to the TAA53 by virtue of the operation of
s 43(1) of the Administrative Appeals Tribunal Act 1975 (Cth) which provides
that ‘the Tribunal may exercise all the powers and discretions that are
conferred by any relevant enactment on the person who made the decision’.
This Tribunal may exercise the discretion which is vested in the Commissioner
under s 359-65 of the TAA53.
21. Section 359-65 does not permit this Tribunal to redefine the scheme. This
Tribunal should only consider additional information to the extent that it bears
upon the correctness of the ruling in issue. In issuing a private ruling the
Commissioner and this Tribunal does not necessarily accept the accuracy of
the factual substratum underpinning the scheme in a private ruling….”
CONSIDERATION
12.
The question ruled upon in this proceeding goes to the timing of when GST is payable by
the applicant on supplies it makes as a member of the Bartercard Trading Program. The
applicant has described this as a program to facilitate reciprocal barter trade amongst
members via a barter trade exchange. The Tribunal’s review is limited to the “scheme” as
ruled upon by the Commissioner.
13.
Under the GST Act, GST is payable on taxable supplies (s 7-1). Pursuant to s 9-5, a
taxable supply is made, if:
(a)
the supply is made for consideration; and
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(b)
the supply is made in the course or furtherance of an enterprise being carried on;
and
(c)
the supply is connected with the indirect tax zone (essentially Australia); and
(d)
the entity making the supply is registered or required to be registered.
However the supply is not a taxable supply to the extent that it is GST-free or input taxed.
14.
Section 9-10 defines “supply” very broadly.
The scheme clearly includes that the
applicant is registered, satisfying paragraph (d) of s 9-5.
The scheme says that the
applicant provides “professional services to the general public” at least some of whom
must be inferred to be in Australia. Whilst it is not necessarily clear what the professional
services are, it must be further inferred that these are not solely GST-free or input taxed
supplies. These inferences are permissible because s 9-5 is not at issue in the ruling.
Rather, the provisions at issue are s 9-15 (what is consideration?) and s 29-5 (attributing
GST on taxable supplies). Section 195-1 provides definitions relevant to both s 9-15 and
s 29-5. It defines consideration, for a supply or acquisition, as:
“…any consideration, within the meaning given by sections 9-15 and 9-17, in
connection with the supply or acquisition.”
15.
Section 9-15 includes within the definition of consideration at paragraph (1)(a):
“…any payment, or any act or forbearance, in connection with a supply of
anything…”
Consideration is not limited to the payment of money and can include non-monetary
consideration, as envisaged by the definition of “price” in s 9-75, which relevantly reads:
“price is the sum of:
(a) so far as the consideration for the supply is consideration expressed as an
amount of money – the amount (without any discount for the amount of GST (if
any) payable on the supply); and
(b) so far as the consideration is not consideration expressed as an amount of
money – the GST inclusive market value of that consideration.”
16.
The scheme explains that the barter operator establishes trade accounts for the members
of the barter program and credits “trade dollar amounts” to this account where a member
trades/sells to another member. Further, that the trade dollar is the accounting unit to
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record the value of goods and services traded with one trade dollar being equivalent to
one Australian dollar.
17.
Relevantly, s 195-1 includes in the definition of “money” at paragraph (e):
“…whatever is supplied as payment by way of:
18.
(i)
credit card or debit card; or
(ii)
crediting or debiting an account; or
(iii)
creation or transfer of a debt.”
The crediting of trade dollars to the applicant’s trade account falls within the above
definition of “money” and must be consideration, being a payment for the taxable supply
that is made when the applicant provides professional services (as a “selling member”) to
other barter scheme (“buying”) members.
19.
Although the operation of s 9-75 was not the subject of the ruling, given that trade dollars
are equal to Australian dollars, the amount of trade dollars credited to the applicant’s trade
account will be consideration expressed as an amount of money. It follows that the value
of the taxable supplies made will equal the amount of trade dollars credited to the
applicant’s trade account.
20.
Subsection 29-5(2) provides that if an entity accounts for GST on a cash basis, the GST
payable on a taxable supply is attributable to the tax period in which all or part of the
consideration is received (but only to the extent that the consideration is received in that
tax period). As seen in the scheme, the applicant accounts on a cash basis. This means
that GST will be attributable to or in the tax period when consideration is received.
Consideration is received when the applicant’s trade account is credited. Therefore, the
applicant must attribute GST payable in respect of taxable supplies made to or in the tax
period when the applicant’s trade account is credited for those taxable supplies. In other
words, the applicant cannot defer attributing GST payable on taxable supplies made:
(a)
to a later or subsequent tax period;
(b)
when the trade dollars (that have been credited to the applicant’s trade account)
are subsequently redeemed and debited to the applicant’s trade account;
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(c)
for an acquisition that the applicant makes (as a “buying member”) from another
barter scheme (“selling”) member.
21.
The above analysis is consistent with the Commissioner’s views set out in Goods and
Services Tax Ruling GSTR 2003/14. This Public Ruling outlines the GST implications of
transactions between members of a barter scheme conducted by a trade exchange, and
states that payment by way of crediting the account of a barter scheme member’s account
is consideration expressed as an amount of money for the purposes of the GST Act.
22.
I note that subsection 255-10(1) of the TAA does not enable the Commissioner to alter the
attribution rules in the GST Act. This provision is for deferral of liabilities, which means
that if the entity has a tax debt, the Commissioner can defer the due date for payment. In
relation to the scheme in the applicant’s case, it is an attribution issue; where the GST
payable on the entity’s supplies under the scheme is attributable when the entity trades
dollars that are redeemed for goods and services, instead of at the time the entity’s barter
account is credited. In these circumstances, the entity must attribute the GST on the
taxable supplies that it makes under the barter scheme to the tax period in which the
entity receives consideration (to the extent that consideration is received in that tax
period) and not to the tax period in which the entity redeems its barter trade credits for
goods and services.
23.
I note further that the scheme does not include detail of the various ways that members
may transact with each other, nor exactly how these different transaction types are
affected. The scheme only refers to the crediting and debiting of the members’ trade
accounts. The applicant has contended that the crediting of the barter trade account does
not constitute monetary or non-monetary consideration. The meaning of “consideration” is
also discussed by the Commissioner in Goods and Services Tax Ruling GSTR 2001/6 at
paragraphs 11 to 14 as follows:
“11. Under section 195-1, ‘consideration, for a supply or acquisition, means any
consideration, within the meaning of given by sections 9-15 and 9-17, in
connection with the supply or acquisition.’ Subsection 9-15(1) provides that
consideration includes:
(a)
any payment, or any act or forbearance, in connection with a supply of
anything; and
(b)
any payment, or any act or forbearance, in response to or for the
inducement of a supply of anything.
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Under subsection 9-15(2), it does not matter whether the payment, act or
forbearance was voluntary, or whether it was by the recipient of the supply.
12. A ‘payment’ is not limited to a payment of money. It includes a payment in a
non-monetary or in an ‘in kind’ form, such as:
o
providing goods;
o
granting a right or performing a service (an act); and
o
entering into an obligation, for example to refrain from selling a particular
product (a forbearance).
Throughout this Ruling, unless otherwise stated, a payment includes an act or
forbearance.
13. The amount of GST on a taxable supply is 10% of the value of the taxable
supply. Under subsection 9-75(1), the value of a taxable supply is the price
x 10/11, where the price is the sum of:
(a)
so far as the consideration for the supply is consideration expressed as
an amount of money – the amount (without any discount for the
amount of GST (of any) payable on the supply); and
(b)
so far as the consideration is not consideration expressed as an
amount of money – the GST inclusive market value of that
consideration.
14. In some transactions, particularly those involving money only, the
consideration is readily apparent. However, where there is monetary consideration
for a supply, it does not necessarily follow that there is no other consideration for
that supply. If you receive any non-monetary consideration for a supply, the price
includes the GST inclusive market value of that consideration.”
24.
The applicant has made reference to provisions in the Personal Property Securities Act
2009 (“PPSA”). The PPSA involves “security interests”. A security interest is an interest
in relation to personal property provided for by a transaction that secures payment or
performance of an obligation without regard to the form of the transaction or the identity of
the person who has title to the property. Although the PPSA has a definition of the term
“account” in it, the legislation relates to security interests. In my view it is not relevant to
the attribution of GST which is specifically dealt with in the rules in the GST Act.
25.
The applicant has also made reference to provisions in the Acts Interpretation Act 1901.
In my view, the references to the provisions of s 15AA and s 15AB are inappropriate. The
legislative intent of subsection 255-10(2) of the TAA is clear, and the use of extrinsic
material is not necessary as there is no absurdity in the GST Act.
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SUMMARY AND CONCLUSION
26.
It is the Commissioner’s contention that, based upon and limited to, the detail set out in
the identified scheme, the private ruling is correct and no other conclusion is possible. I
am satisfied that the Commissioner is correct in this contention. It follows that the
applicant is not able to discharge the onus of proving that the private ruling should have
been made differently, pursuant to subparagraph 14ZZK(b)(ii) of the TAA.
DECISION
27.
For the reasons outlined above, the Tribunal affirms the objection decision under review.
I certify that the preceding 27 (twenty
-seven) paragraphs are a true copy
of the reasons for the decision herein
of Senior Member R W Dunne
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Administrative Assistant
Dated 2 August 2016
Date(s) of hearing
10 May 2016
Advocate for the Applicant
Mr M Spano, Director, Taxology Pty Ltd
Counsel for the Respondent
Mr B O'Neill
Advocate for the Respondent
Mr C Ziersch
Solicitors for the Respondent
ATO Dispute Resolution
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