For the reasons discussed in relation to whether Mr Skourmallas acquired the vehicle for GST purposes, I conclude that it was also supplied to Mr Skourmallas.
[2]
(b) Did Mr Skourmallas intend to hold the Audi R8 as trading stock and for no other purpose?
[3]
The expression 'trading stock' is not defined for LCT purposes. It is uncontroversial that trading stock means goods held by a trader for sale or exchange in the ordinary course of its trade.[28]
I have concluded that Mr Skourmallas was carrying on a business of trading, albeit in a small way, in luxury motor vehicles and that he acquired the Audi R8 in the course of that business. I have also concluded that the vehicle was acquired for sale and not for private or domestic purposes. It follows that I accept that the vehicle was acquired as trading stock. For Mr Skourmallas to be entitled to the decreasing adjustment, I must, though, be satisfied that he intended to hold the vehicle for no other purpose.
The LCT law is silent as to when the intention to hold the vehicle only as trading stock must be held and my attention was not drawn to any relevant authority that might cast light on this. It is clear that it would not be appropriate for me to test Mr Skourmallas's intention at the time of the hearing, as the LCT law contemplates adjustments upon subsequent changes of use occurring.[29] Arguably, it could be inferred that it is sufficient if the intention is held at the time the vehicle is acquired.
However, it is clear that in any case the time for testing the intention must be no later than the time at which the entitlement to the decreasing adjustment is required to be determined; that is, when the return of the net amount for the tax period in which the issue arises for consideration is required to be lodged.[30] As I would be persuaded on balance that Mr Skourmallas held the requisite intention when he acquired the vehicle and maintained that intention when he lodged or was required to lodge his return, it is not necessary for me to decide precisely when the intention is required to be tested.
In the ordinary course, I would have expected the return to have been due by late October or early November 2017.[31] However, an activity statement lodgement print out in evidence states that the return was due on 27 November 2017,[32] although it was in fact lodged early, on 28 September 2017.[33] It is clear that the vehicle had travelled no more than 168 kilometres after its purchase by the time the return was lodged. If it matters, given that it was advertised much later with 2,900 kilometres, I infer that the vehicle did not travel significantly further between 1 November 2017 when the Commissioner's officers inspected it and 27 November 2017. For the reasons already given, I accept that this small amount of driving of the vehicle is not inconsistent with an intention to hold the vehicle for sale in the context of the particular type of dealership operated by Mr Skourmallas.
Also for the reasons already outlined, I do not accept that the matters relating to insurance and the personalised number plate indicate that Mr Skourmallas intended to use the vehicle for private purposes inconsistent with it being held only for sale.
As already mentioned, the actual use of the vehicle may be indicative of its intended use. For the reasons already explained, I accept that the relatively low kilometres travelled by the vehicle for most of the period that Mr Skourmallas held the vehicle are not inconsistent with an intention to hold it only as trading stock. The only substantial use came much later; that the vehicle travelled a more significant distance but not until almost a year after it was acquired does not persuade me that it was intended, when it was purchased or when Mr Skourmallas claimed the decreasing adjustment or the later time by which his return was required to be lodged, to be used other than for trading stock.
For these reasons, I am persuaded on the balance of probabilities that Mr Skourmallas intended to hold the Audi R8 as trading stock and for no other purpose as he stated in his evidence.
[4]
(c) Did Mr Skourmallas use the Audi R8 other than as trading stock?
[5]
This element refers to the actual, rather than intended, use of the vehicle.
The LCT law is also silent on when the actual use of the vehicle is to be tested. For the reasons explained in relation to intended use, I consider that this must be no later than the due date for the relevant return. And for the reasons given in relation to intended use, I accept that Mr Skourmallas did not use the vehicle other than as trading stock before the date on which he was required to lodge his return. He may well have done so much later when the vehicle travelled more substantial kilometres, but this is not relevant to whether he had used the vehicle other than for trading stock at the relevant time.
For completeness, I note that written submissions filed on behalf of Mr Skourmallas drew attention the conclusion in the Davsa case that the vehicles there under consideration were used only for trading stock notwithstanding what the Senior Member described as 'minimalist use' of the vehicles,[34] which exceeded the distance travelled by the Audi R8 in the months immediately after Mr Skourmallas purchased it. Of course, this is not conclusive or even particularly persuasive because each matter turns on its own facts, but it is notable that the Senior Member did not find the amount which the vehicles had been driven to be remarkable for trading stock.
[6]
Mr Skourmallas is entitled to the decreasing adjustment.
[7]
Because I have accepted that Mr Skourmallas is entitled to both the ITC and the decreasing adjustment, he has no shortfall for the tax period and therefore no liability for an administrative penalty.
[8]
Because Mr Skourmallas has persuaded me that the assessments are excessive in not allowing the ITC and decreasing adjustment in full, and the Commissioner accepts that there are no other issues with the net amount as returned by Mr Skourmallas, the objection decisions must be set aside and substituted with decisions wholly allowing the objections.
[9]
The difference between the submissions made on behalf of the Commissioner in this case and my own reaction to the evidence of Mr Skourmallas underlines, with respect, the care needed in concluding that a taxpayer is dishonest. Several of the examples cited by the Commissioner as suggesting dishonesty, upon close examination took on a more benign complexion, especially when considered in the light of Mr Skourmallas speaking English as his second language, his communication style, and the nature of his activities as he explained them.
Having said that, I consider the evidentiary issues concerning the ITC and decreasing adjustment to be finely balanced. Regrettably, notwithstanding earlier standard directions made before the hearing for the production of evidence on which the parties intended to rely, Mr Skourmallas produced several items of documentary evidence for the first time during the hearing, which I admitted, helpfully without objection by Mr Brennan. Additionally, and in particular, I note that Mr Skourmallas's case was not assisted by the absence of contemporaneous records regarding his use of the vehicles, such as for test drives or in marketing the vehicles to dealers. Rather than being emboldened by his success in this review, Mr Skourmallas might prudently improve his record-keeping by, for example, maintaining complete and accurate logbooks of the use and marketing of any vehicles purchased for sale.
It may also be the case that Mr Skourmallas's success in this review has to an extent a Pyrrhic quality. In his evidence, Mr Skourmallas advised that, pending resolution of the dispute and consistent with the Commissioner's position, he had not accounted for GST on the sale of the Audi R8. Further, the use of the vehicle in 2018, amounting to over 4,000 kilometres, may evidence use other than for creditable and quotable purposes and may give rise to increasing adjustments for GST and LCT purposes in another tax period or periods. But these issues are not before the Tribunal. They are matters for the Commissioner.
I conclude by recording my appreciation of the helpful written submissions lodged on behalf of Mr Skourmallas and the Commissioner.
[10]
I certify that the preceding 117 (one hundred and seventeen) paragraphs are a true copy of the reasons for the decision herein of Senior Member R J Olding
[2] For this and the preceding propositions, see, for example: Imperial Bottleshops Pty Ltd and Egerton v Commissioner of Taxation(1991) 22 ATR 148, 155; and FederalCommissioner of Taxation v Cassaniti[2018] FCAFC 212.
[21] ST3, page 128, Email from Audi Centre Perth dated 18 May 2018.
[22]
[22] The Commissioner's submissions summarised Mr Skourmallas's oral evidence relating to the use of the Audi R8 in the final few weeks of his ownership in these terms: 'because he was apparently disillusioned with the Commissioner's investigation and decision-making process'. That rather prosaic summary does not do justice to Mr Skourmallas's evidence. I do not share the Commissioner's sentiment that Mr Skourmallas's 'evidence should be rejected as being so implausible that it defies any common sense' and accept that a protracted investigation and dispute resolution process that effectively required Mr Skourmallas's business to be put on hold pending resolution of the tax issues would be productive of considerable stress and despair.
[30] This is broadly analogous with the requirement to make the choice to apply the margin scheme for GST purposes by the time the GST needs to be worked out to prepare a return, although the contextual indicators for that view are stronger: Cyonara Snowfox Pty Ltd v Commissioner of Taxation [2012] FCAFC 177, [95].
[29]
[31] The Commissioner at this time allowed a short extension for taxpayers lodging electronically.
[30]
[34]Davsa Forty-Ninth Pty Ltd as Trustee for the Krongold Ford Business Unit Trust and Commissioner of Taxation[2014] AATA 337 [55], [60]
[31]
[35] The sale and purchase prices and profit/loss figures in this appendix differ somewhat from those presented by both Mr Skourmallas and the Commissioner. This is because, consistent with conventional accounting treatment and to present a more accurate reflection of profits/losses, where the information could be identified I have adjusted them to GST-exclusive prices. The kilometre readings and other information are mainly based on a schedule prepared by the Commissioner's auditors and invoices in evidence.
Legislation Cited (1)
New Tax System (Goods and Services Tax) Act 1999
Cases Cited (5)
Bayconnection Property Developments Pty Ltd and Commissioner of Taxation[2013] AATA 40
Cyonara Snowfox Pty Ltd v Commissioner of Taxation[2012] FCAFC 177
Davsa Forty-Ninth Pty Ltd as Trustee for the Krongold Ford Business Unit Trust and Commissioner of Taxation[2014] AATA 337