1. On 8 December 2000, South Steyne Hotel Pty Ltd (South Steyne) purchased the Sebel Manly Beach Hotel.
2. On 10 August 2006, each of the 83 individual apartments in the hotel, together with the "management lot" (consisting of the reception area, offices and car parking spaces), became separate lots of a strata plan (the Strata Plan).
3. On 29 September 2006, South Steyne transferred to Mirvac Hotels Pty Ltd (Mirvac Hotels) the management lot of the Strata Plan. On the same day, South Steyne granted to Mirvac Management Pty Ltd (Mirvac Management) a separate lease in respect of each of the 83 apartment lots of the Strata Plan. Each lease was in identical terms. Under each lease Mirvac Management was obliged to operate a scheme whereby each apartment was, together with all other apartments, to be operated as part of a serviced apartment business.
4. Pursuant to a separate Serviced Apartment Management Agreement entered into by Mirvac Hotels and Mirvac Management on 11 January 2006, Mirvac Hotels assumed exclusive control of the operation of the serviced apartment business. Also pursuant to the terms of the agreement Mirvac Management conferred upon Mirvac Hotels the benefit of its rights under the leases entered into on 29 September 2006.
5. By Contract for the Sale of Land dated 1 September 2006, South Steyne sold one of the 83 apartments (the First Apartment) to the Applicant for $508,000. The First Apartment was sold subject to the applicable lease that had been granted to Mirvac Management. The contract of sale permitted the Applicant to participate in a "Management Rights Scheme" (the Scheme) which mirrored the scheme provided for under the leases granted to Mirvac Management.
6. A Product Disclosure Statement (PDS) dated 16 March 2006 - which marketed the Scheme under the heading "The Sebel Manly Beach" - identified the following characteristics of the Scheme:
   • (a) Owners of apartments that were the subject of a lease to Mirvac Management could elect to participate in the Scheme by allowing Mirvac Management to use the apartment for "letting purposes in a Serviced Apartment Business";
   • (b) Owners who elected to participate in the Scheme would receive a "Fixed Owner's Return Amount" for a period up to two years from 1 July 2006 until 30 June 2008, calculated by reference to a "percentage of the Purchase Price";
   • (c) After the Fixed Return Period owners would receive income from the "Gross Pooled Apartment Revenue generated by the Serviced Apartment Business".
7. The Applicant elected to participate in the Scheme.
8. By Contract for the Sale of Land dated 18 January 2008, South Steyne sold a second apartment (the Second Apartment) to the Applicant, also for $508,000. Like the First Apartment, the Second Apartment was sold subject to the applicable lease that had been granted to Mirvac Management. As with the First Apartment, the Applicant elected to participate in the Scheme.

The GST treatment of the supplies of the apartments

1. Each sale contract had on page 1 a number of questions to answer in relation to GST. The questions were dealt with in the following way:
   • GST: Taxable supply - NO;
   • Margin scheme will be used in making the taxable supply - NO.
2. In addition to those answers, a box was checked to indicate that the supply was "GST-free because the sale is the supply of a going concern under section 38-325".

1. The sale contract for the First Apartment contained a number of Special Conditions, including the following:

GST

47.6.3 the parties agree that the sale of the Property comprises a supply of a going concern for the purposes of section 38-325 of the GST Act unless the Vendor by issuing a written notice no later than 28 days before the Completion Date, informs the Purchaser that the sale is not a supply of a going concern;

47.6.4 unless the Vendor issues the notice referred to in clause 47.6.3, completion of this Contract is conditional on the Purchaser becoming registered before the Completion Date and, providing satisfactory evidence to the Vendor of GST registration (for example, by way of a copy of the notification of GST registration), no later than 5 days before the Completion Date;

47.6.5 the Vendor shall use all reasonable endeavours to supply, or where that is not possible at law, to procure the supply by a third party to the Purchaser as at completion of all the things that are necessary for the continued operation of the leasing enterprise. The Purchaser agrees to acquire all of these things from the Vendor and/or, where applicable, the third party;

47.6.6 if page 1 of the Contract says that the supply is GST-free because the sale is the supply of the going concern but the Vendor gives a written notice to the Purchaser under clause 47.6.3 or there is a change in the GST Act which the Vendor determines has the effect of impacting the GST payable on the sale of the Property or related transactions, then the sale of the Property is a taxable supply and the parties agree that the margin scheme applies or, if completion has already occurred, the margin scheme is taken to have applied. For the avoidance of doubt, the Vendor acknowledges that if the margin scheme applies to the sale of the Property, the price is inclusive of any GST; and

47.6.7 for the avoidance of doubt, clauses 47.6.3 to 47.6.7 do not merge on completion.

1. The sale contract for the Second Apartment also contained a number of Special Conditions, including the following:

GST

47.6.3 the parties agree that the sale of the Property comprises a supply of a going concern for the purposes of section 38-325 of the GST Act;

47.6.4 completion of this Contract is conditional on the Purchaser becoming registered before the Completion Date and, providing satisfactory evidence to the Vendor of GST registration (for example, by way of a copy of the notification of GST registration), no later than 5 days before the Completion Date;

47.6.5 the Vendor shall use all reasonable endeavours to supply, or where that is not possible at law, to procure the supply by a third party to the Purchaser as at completion of all the things that are necessary for the continued operation of the enterprise as required under section 38-325 of the GST Act. The Purchaser agrees to acquire all of these things from the Vendor and/or, where applicable, the third party;

47.6.6 if page 1 of the Contract says that the supply is GST-free because the sale is the supply of the going concern but the supply of the Property under the Apartment Lease is a supply of residential premises (but not commercial residential premises), and the premises are also to be used predominantly for residential accommodation (regardless of the term of occupation), then the sale of the Property is a taxable supply and the parties agree that the margin scheme applies or, if completion has already occurred, the margin scheme is taken to have applied. For the avoidance of doubt, the Vendor acknowledges that if the margin scheme applies to the sale of the Property, the price is inclusive of any GST; and

47.6.7 for the avoidance of doubt, clauses 47.6.3 to 47.6.7 do not merge on completion.

1. While clauses 47.6.3 and 47.6.6 of the Special Conditions in the sale contract for the Second Apartment are identical to the corresponding clauses in the Special Conditions considered by the Federal Court in the South Steyne litigation (see [53] of the reasons of Stone J in the South Steyne case), clauses 47.6.3 and 47.6.6 in the sale contract for the First Apartment are in somewhat different terms.
2. Some of the language used in the Special Conditions has its origin in s 38-325 of the GST Act. It is convenient at this point to turn to those provisions, and other legislative provisions that are relevant to this dispute.

1. The relevant parts of the GST Act are ss 38-325 (dealing with supplies of going concerns) and 135-5 (dealing with increasing adjustments).
2. Section 38-325 provides as follows:

38325 Supply of a going concern

(1) The *supply of a going concern is GSTfree if:

(a) the supply is for *consideration; and

(b) the *recipient is *registered or *required to be registered; and

(c) the supplier and the recipient have agreed in writing that the supply is of a going concern.

(2) A supply of a going concern is a supply under an arrangement under which:

(a) the supplier supplies to the *recipient all of the things that are necessary for the continued operation of an *enterprise; and

(b) the supplier carries on, or will carry on, the enterprise until the day of the supply (whether or not as a part of a larger enterprise carried on by the supplier).

1355 Initial adjustments for supplies of going concerns

(1) You have an increasing adjustment if:

(a) you are the *recipient of a *supply of a going concern, or a supply that is *GSTfree under section 38480; and

(b) you intend that some or all of the supplies made through the *enterprise to which the supply relates will be supplies that are neither *taxable supplies nor *GSTfree supplies.

(2) The amount of the increasing adjustment is as follows:

where:

proportion of noncreditable use is the proportion of all the supplies made through the *enterprise that you intend will be supplies that are neither *taxable supplies nor *GSTfree supplies, expressed as a percentage worked out on the basis of the *prices of those supplies.

supply price means the *price of the supply in relation to which the increasing adjustment arises.

1. An asterisk in those provisions denotes a defined term. One such defined term, "enterprise", is relevant to this case. Section 9-20 provides as follows:

920 Enterprises

(1) An enterprise is an activity, or series of activities, done:

(a) in the form of a *business; or

(b) ...; or

(c) on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property; or

...

1. It will immediately be apparent from s 38-325 that a supply of a going concern is not always GST-free. It will only be GST-free if paragraphs (a), (b) and (c) of subsection (1) are satisfied.
2. It will also be apparent that the purpose of s 135-5 is to require a recipient of a going concern to pay extra GST, by way of an increasing adjustment, only if the supply of the going concern was GST-free in the first place. However, prima facie, it is engaged in any case where an entity is "the recipient of a supply of a going concern", not just where the supply of the going concern was GST-free. Nevertheless, the Commissioner appears to administer the provision as if it contained that qualification - a practice which is consistent with the Explanatory Memorandum that accompanied the Bill that introduced the GST law in 1998[3]:

Division 135 provides for an adjustment to ensure you account for GST in proportion to the private or input taxed use of a going concern that you acquire. The adjustment increases your net amount by an amount equal to the GST you would bear on the acquisition if it had been a taxable supply to you. The adjustment is equivalent to the difference between what would have been the GST on the supply and the input tax credit you would have been entitled to for the acquisition if the supply had been a taxable supply. This is the effect of s 135-5.

This means that you only get a going concern GST-free to the extent that you intend to make taxable supplies with it.

1. The Commissioner identified the following questions as requiring an answer[4]:
   • First, the question posed by s 38-325(2)(b) of the GST Act - did the supplier of the apartments to the Applicant, South Steyne, carry on a relevant enterprise until the day of the supply of each of the apartments to the Applicant? If so, what was the nature of that enterprise?
   • Second, the question posed by s 38-325(2)(a) - did South Steyne supply to the Applicant all of the things necessary for the continued operation of the enterprise?
   • Third, the question posed by s 38-325(1)(c) - did South Steyne and the Applicant agree in writing, in each case, that the supply was of a going concern?
   • Fourth, the question posed by s 135-5(1)(b), but only if each of the first three questions is answered "Yes" - did the Applicant intend that some or all of the supplies made through the enterprise to which the supply relates would be supplies that are neither taxable supplies nor GSTfree supplies?
   • Fifth, the question posed by s 105-50 in Schedule 1 to the TAA, but again, only if each of the first three questions is answered "Yes" - when did any "unpaid net amount" (as a result of any increasing adjustment) for the tax period ending 31 December 2006 (the Commissioner mistakenly referred to "31 December 2007") become "payable" by the Applicant?
   • Sixth, the question posed by Subdivision 19-A of the GST Act (but only in respect of the First Apartment) - was there an event that had the effect of causing a supply to become, or stop being, a taxable supply?
2. I agree that they are six of the relevant questions, and I did not understand the Applicant to disagree. I will, however, reverse the order of the first two questions.
3. In relation to the fourth question, the Applicant concedes that, if the first three questions are answered "Yes", the Applicant has an increasing adjustment under Division 135 since, on the basis of the decision in the MBI case, the Applicant must be taken to have intended that supplies made through the enterprise would be supplies that are neither taxable supplies nor supplies that are GST-free.
4. There is a seventh question, which has arisen because of the judgment in the MBI case, but which did not find its way into the Commissioner's List of Q&A. That concerns an apportionment issue which the Applicant says arises in relation to the "proportion of non-creditable use" mentioned in s 135-5(2) of the GST Act. It will be dealt with as Question 7 below.

QUESTION 1 - DID SOUTH STEYNE SUPPLY ALL OF THE THINGS NECESSARY FOR THE CONTINUED OPERATION OF AN ENTERPRISE?

1. The Tribunal is not bound by the South Steyne litigation to answer this question or the following question in the affirmative. That is because the Court did not decide either of these questions; instead, it was common ground between the parties in the South Steyne litigation that the supplier made a supply of a going concern. The relevant question before Stone J and later before the Full Court was whether s 38-325(1)(c) was satisfied - in other words, whether there was an agreement in writing between the supplier and the recipient that the supply was of a going concern. It was assumed by the Court, rather than decided, both at first instance and on appeal, that the supply was a supply of a going concern within s 38-325(2).
2. As the Commissioner points out in his written outline of submissions (RWS), at [19], and citing Campbell JA in Muldoon v Church of England Children's Homes Burwood [2011] NSWCA 46; 80 NSWLR 282 at 290 [39]:

Reasons for judgment are not authority for a matter that has been assumed, rather than actually decided, in the course of those reasons for judgment ...

1. To answer the s 38-325(2)(a) question requires an identification of the enterprise that South Steyne was carrying on, and which it had decided not to carry on any longer. As Greenwood J said in Aurora Developments Pty Ltd v Commissioner of Taxation [2011] FCA 232 (cross-references omitted; emphasis in the original):

[253] ... Section 38-325(2) can only operate in circumstances where an "enterprise" has been identified comprised of particular activities (or a particular activity). An enterprise has content not just an objective. Once the content of the enterprise is isolated, a supply of a going concern arises if an arrangement is shown to subsist under which [the supplier] supplies to [the recipient] all of the things that are necessary for the continued operation of that enterprise as forensically isolated and [the supplier] carries on or will carry on that enterprise until the day of the supply.

[254] Until the content of the enterprise is isolated, it is not possible to say whether all of the things necessary for its continued operation have been supplied. Section 38-325(2)(a) calls for the identification of an enterprise the subject of the supply and s 38-325(b) [sic] calls for the supplier to carry on that enterprise until the day of the supply. The integers of the section are not satisfied by demonstrating that the recipient has selected or been supplied with only those things the recipient regards as necessary to enable it to undertake its enterprise. ...

1. The Commissioner identified the relevant enterprise carried on by South Steyne as "utilizing the apartment", and more fully as[5]:

the activity or series of activities involved in making the apartment available to Mirvac Management (MM), pursuant to the terms of a lease between [South Steyne] and MM (Lease), for use by MM in the serviced apartment business at the Sebel Manly Beach in accordance with the Product Disclosure Statement (PDS) and provisions of the Lease.

1. The issue was addressed in detail in RWS as follows:

[24] First, the applicant purchased the apartments subject to lease and elected to participate in the management rights scheme in exchange for a fixed owners return amount. As a result of it doing so, the applicant continued to make the apartments available to Mirvac Management for use in the serviced apartments business conducted by Mirvac Management (and its manager Mirvac Hotels) at the Sebel Manly Beach. Making the apartments available and thereby participating in the serviced apartments business constitutes an activity (or series of activities) done in the form of a business for the purposes of s 9-20(1)(a) of the GST Act. The fact that the day to day operations of the 'serviced apartment business' (the business carried on using all of the scheme apartments, including the applicant's apartments) was, in effect, managed by Mirvac Management for a fee does not change that analysis.

[25] When South Steyne supplied the apartments to the applicant subject to the leases granted in favour of Mirvac Management and the rights to participate in the management rights scheme, South Steyne did supply to the applicant all the things necessary for the continued operation of the enterprise (participation in the serviced apartment business) for the purpose of s 38-325(2)(a).

[26] Secondly, by virtue of the same fact, the Commissioner maintains that the enterprise carried on by the applicant is an activity (or series of activities) done on a regular or continuous basis in the form of a lease under s 9-20(1)(c) of the GST Act. The applicant elected to participate in the management rights scheme and continue to make its apartments available to Mirvac Management in accordance with the terms of the leases relating to the scheme and the serviced apartment business.

[27] It does not matter that the applicant did not grant the lease to Mirvac Management. Nothing in s 9-20 compels the view that the applicant in order to be carrying on an enterprise under s 9-20(1)(c) must have granted the lease. As Griffiths J said in MBI Properties, 14,464 [36], 'the leases are intrinsically linked with the serviced apartment business which constitutes the relevant "enterprise" for the purposes of s 135-5(1)(b) of the GST Act.'

[28] Once again, South Steyne clearly supplied to the applicant all the things necessary for the continued operation of an enterprise under 9-20(1)(c).

1. In the Commissioner's reasons for the objection decision (T3), the "enterprise" appears to have been identified as the "serviced apartment business". At page 8 (T3-21) it was said:

You elected to participate in the Management Rights Scheme, and you knew that on and after your acquisition of [the First and Second Apartments], the same supply as made by South Steyne to Mirvac Management by way of lease would continue. We are of the view that these things evidence your intention to continue carrying on the serviced apartment business.

1. The Applicant in its Amended Statement of Facts, Issues and Contentions (AASFIC) is critical not only of that conclusion, but also of the following statements in the reasons for the objection decision[6]:
   • "That Mirvac Management, as a result of your election, managed the daily operation of the serviced apartment business in exchange for a fee, does not detract from the fact that you derived income from the business, and, to the extent that the business encompassed your properties, were its owner";
   • "From your actions in purchasing [the Apartments] and electing to participate in the Scheme, we therefore consider that at and just after the time of acquiring the properties, you carried on an enterprise in the form of a serviced apartment business"; and
   • "By supplying [the Apartments] to you subject to a 10 year lease to Mirvac Management, and providing you with the ability to participate in the Management Rights Scheme, we consider that South Steyne supplied you all things necessary for the continued operation of the enterprise discussed above".
2. The AASFIC notes:

[81] This process of reasoning misunderstands that the managed investment scheme interest purchased by the partnership involves no carrying on, by the investors, of the serviced apartment business. On the contrary, there is merely a financial interest in its fruits, pooled and reduced by collective expenses, which is supplied. That is made plain by the extensive analysis of the interlocking documents above.

1. The Commissioner's initial identification of South Steyne's "enterprise" as the "serviced apartment business" ([37] above) is difficult to sustain, even in circumstances where Emmett J in the Full Court in the South Steyne appeal appears not to have been troubled by the parties' identification of the relevant enterprise in that way: see [44] of the Full Court judgment.
2. It seems clear that any "serviced apartment business" that was being carried on was carried on not by South Steyne but by either Mirvac Management or Mirvac Hotels.
3. What, then, might have been South Steyne's enterprise, that it was looking to dispose of? To answer that question requires an identification of the "activities, or series of activities", that were being done by South Steyne.
4. The Commissioner says it was the activity of "utilizing the apartment", of "making [it] available"[7], of "participating in the serviced apartment business"[8], all of them "in the form of a business" for the purposes of s 9-20(1)(a) of the GST Act. Alternatively, says the Commissioner, it was the activity done "on a regular or continuous basis in the form of a lease"[9], for the purposes of s 9-20(1)(c).
5. Owning an apartment (as South Steyne did) and leasing it to a company (as South Steyne did) that was obliged to include the apartment in the operation of a serviced apartment business, in the expectation of a regular income flow, in respect of that apartment, from the lessee, are, in South Steyne's circumstances, not only activities done in the form of a business, but also activities done on a regular or continuous basis in the form of a lease.
6. When South Steyne sold the First Apartment, and then again when it sold the Second Apartment, it supplied all the things necessary for the continued operation of each relevant enterprise. This is because, upon sale of each apartment, it was no longer possible for South Steyne to undertake the "continued operation" of the identified enterprise since all of the things necessary for that to happen had been disposed of. That is precisely the state of affairs contemplated by s 38-325(2)(a) and it is precisely the state of affairs achieved.
7. It follows that s 38-325(2)(a) is satisfied.

QUESTION 2 - DID SOUTH STEYNE CARRY ON THE ENTERPRISE UNTIL THE DAY OF THE SUPPLY?

1. The Applicant did not contend in its statement of facts, issues and contentions or in its written submissions that s 38-325(2)(b) was not satisfied; its complaint in relation to s 38-325(2) was confined to paragraph (a). However, during the hearing the following exchange took place[10]:

DEPUTY PRESIDENT: As far as the going concern provision is concerned, you say that that - 38-325(2)(a) and (b) - neither of them is satisfied?

MR PARISI: Neither.

DEPUTY PRESIDENT: Neither?

MR PARISI: Neither.

1. Nevertheless, the paragraph (b) point was not developed any further.
2. It is plain that any enterprise that South Steyne was carrying on prior to the day of the supply was carried on until the day of the supply. This question must be answered "Yes".

QUESTION 3 - DID SOUTH STEYNE AND THE APPLICANT AGREE IN WRITING, IN EACH CASE, THAT THE SUPPLY WAS OF A GOING CONCERN?

1. The judges involved in the South Steyne litigation came to different conclusions on the corresponding question (as it related to the apartments involved in those transactions).
2. At first instance Stone J concluded "that the contingency in special condition 47.6.6 has been met; and that the supplies to MBI made under the contracts of sale are not GST-free"[11].
3. In the Full Court, Emmett J concluded[12]:

I do not consider that the garbled language of Clause 47.6.6 overrides the clear statements contained on page 1 and in clause 47.6.3 of the Contract for Sale. It follows that the supply consisting of the sale to Properties was GST-free under s 38-325. The primary judge concluded that the Sale Category was not GST-free. I consider that her Honour erred in that respect.

1. Finn J, while agreeing with the reasons and conclusions of Emmett J[13], added the following[14]:

Secondly, the sale of apartments to Properties as a going concern. For the reasons given by Emmett J, cl 47.6.6 of the Contract of Sale was inconsistent in its effects both with the "Tax information" provided on page 1 of the Contract (which indicated that the sale was "GST-free because the sale is the supply of a going concern under section 38-325" of the A New Tax System (Goods and Services Tax) Act 1999 (Cth)) and with the provisions in cl 47.6.3 (which were to like effect). This clearly is a case where cl 47.6.6 destroys the effect of the statement on page 1 and of cl 47.6.3. It should be rejected as repugnant: on "internal inconsistency" see generally, Lewison, The Interpretation of Contracts_, 9-08 (4th ed, 2007)._

1. Edmonds J, like Stone J, thought that the contingency in clause 47.6.6 was satisfied[15], and concluded[16]:

... certainly there would seem to be no longer any agreement in writing to satisfy the requirement of para (c) of s 38-325(1). For that reason, I agree with the primary judge that the supplies to MBI made under the contracts for sale are not GST-free.

1. The majority in the Full Court therefore concluded that the words of clause 47.6.3, "the parties agree that the sale of the Property comprises a supply of a going concern for the purposes of section 38-325 of the GST Act", were not undone by the provisions of clause 47.6.6, which were described by Emmett J as "garbled", and by Finn J as "repugnant".
2. The Applicant contends as follows[17]:

... On this point, the Investors are confronted by a majority holding of the Full Federal Court (reversing the primary judge) inconsistent with their contention. At the core of their argument is the fact that a critical contextual factor, the Original PDS, deemed to be part of the contract, in the light of the GST reforms proposed and regulatory treatment of the Commissioner, was not considered in the litigation.

1. However, in my view, nothing in the PDS can assist the Applicant.
2. The fact is that the parties agreed in writing, in each case, that the supply was "a supply of a going concern for the purposes of section 38-325 of the GST Act". If it was in fact a supply of a going concern (as I have found) under s 38-325(2), then it was GST-free under s 38-325(1). But what clause 47.6.6, in each case, purports to do is to turn a supply that is a GST-free supply into a taxable supply. The problem with that approach is that parties cannot, by agreement, make a supply a taxable supply (South Steyne appeal, at [49], per Emmett J). Nor, for that matter, can parties, by agreement, determine that a supply is GST-free. As Greenwood J said in Aurora Developments at [5]:

Plainly enough, the parties to an agreement cannot, by agreement, determine that a particular supply is GST-free for the purposes of the GST Act. That is a conclusion which arises as a matter of law having regard to the factual foundation for the operation of the statutory integers properly construed.

1. Part of the factual foundation that the parties had created was the agreement in writing that the supply was of a going concern. To make the supply taxable they would have had to remove that part of the factual foundation. But they did not do that - they left the foundation in place, but tried to agree, between themselves, a conclusion that the factual foundation necessarily put out of reach. Mr Wigney SC, for the Commissioner, was probably correct to describe the parties' objective as having "misfired"[18].
2. Question 3 must be answered "Yes".

QUESTION 4 - DID THE APPLICANT INTEND THAT SOME OR ALL OF THE SUPPLIES MADE THROUGH THE ENTERPRISE TO WHICH THE SUPPLY RELATES WOULD BE SUPPLIES THAT ARE NEITHER TAXABLE SUPPLIES NOR GSTFREE SUPPLIES?

1. As already mentioned, the Applicant concedes that the answer to this question is "Yes".

QUESTION 5 - WHEN DID ANY "UNPAID NET AMOUNT" (AS A RESULT OF ANY INCREASING ADJUSTMENT) FOR THE TAX PERIOD ENDING 31 DECEMBER 2006 BECOME "PAYABLE" BY THE APPLICANT?

1. Section 105-50 in Schedule 1 to the TAA is headed "Time limit on recovery by the Commissioner". In subsection (1) it provides, among other things, that "[a]ny unpaid net amount ... ceases to be payable 4 years after it became payable by you". Subsection (3), however, provides that subsection (1) does not apply to any such amount if "within those 4 years the Commissioner has required payment of the amount ... by giving a notice to you". The question is whether the notice that the Commissioner gave the Applicant on or about 15 February 2011 (T9-103/104 - the Notice to Repay), to the extent that it related to the increasing adjustment for the December 2006 quarter, was within the prescribed 4 year period.
2. The provisions relating to the payment of GST, for quarterly taxpayers such as the Applicant, are found in s 33-3 of the GST Act. At the relevant time that section provided that "you must pay the net amount to the Commissioner as follows" and then set out the following table:

If this day falls within the quarterly tax period ...

Pay the net amount to the Commissioner on or before this day:

1. Clearly, a quarterly taxpayer was required to pay ("you must pay") the net amount for the tax period ending on 31 December 2006 "on or before" 28 February 2007.
2. That fact leads the Commissioner to submit that, for the purposes of s 105-50 in Schedule 1 to the TAA, the net amount did not become "payable" until that date, and so the Notice to Repay was given within the 4 year period.
3. It will not do justice to the Commissioner's submissions for me to attempt to paraphrase them here. It is preferable that I set them out in detail, and I do so (emphasis in the original):

[41] The applicant's liability under s 135-5 of the [GST Act] gave rise to a positive net amount. The combined effect of ss 7-5, 7-15, 17-10(a) and 33-3 of the GST Act is that a net amount, if positive by virtue of including an increasing adjustment, must be paid to the Commissioner.

[42] It is artificial to divorce s 105-50(1) from the context of the broader recovery provisions in Ch 4 of Sch 1 to the TAA 1953 on the basis that it is concerned with placing a time limit on recovery and not on initiating recovery.

[43] Under s 255-5, what is recoverable within the four year time limit, however measured, is a net amount to the extent it remains unpaid. To be recoverable that net amount must be a tax-related liability under s 255-1.

[44] Note 1 to s 255-5 directs attention to s 250-10 for an index of tax-related liabilities. Item 5 to the table in s 250-10(1) identifies the net amount as a tax-related liability.

[45] Section 250-10(1) states that item 5 identifies the key provision specifying when the liability becomes due and payable. In this case item 5 identifies section 33-3 of the GST Act. Section 250-5 states that a tax-related liability can arise before it becomes due and payable. However s 255-5(2) provides that a tax-related liability cannot be recovered unless it remains unpaid after it has become due and payable.

[46] The applicant's contention in relation to s 105-50 proceeds on the basis that the net amount for the relevant tax period became payable under s 33-3 of the GST Act immediately after the end of 31 December 2006, being the end of the relevant tax period. The applicant does not dispute that the last day on which the net amount must have been paid by applying s 33-3 of the GST Act was 28 February 2007: see AASFIC, [127].

[47] In essence, the applicant maintains the net amount became payable for the purposes of s 105-50, before it became due.

[48] That is however inconsistent with item 5 to the table in s 250-10(2) given that it specified that it is the date established by application of s 33-3 of the GST Act, on which the net amount becomes both due and payable.

[49] Section 255-5 specifies that it is only after the passing of that date that the Commissioner can recover the net amount to the extent it remains unpaid.

[50] The text of s 105-50, when read in this context supports the construction that the time for recovery ceases 4 years after the unpaid net amount became payable, and that for the purposes of s 105-50, the date on which the net amount became payable is also the date by which it had become both due and payable.

[51] Sections 33-3 of the GST Act together with ss 250-5 and 255-1 are open to a reading that the net amount will if positive, arise as a pecuniary liability at the end of a tax period. Indeed, this is the Commissioner's view expressed in PSLA 2012/2, [23].

[52] However, the net amount will not be due and payable until the day specified in the third column of the table to s 33-3. The words 'on or before' as they refer to that day in the heading of that column 'have work to do' on the Commissioner's construction.

[53] Those words permit an entity to pay the liability that has arisen as at the end of the tax period, before the time it becomes a recoverable debt. Payments made before that time will reduce the amount the Commissioner can recover under s 255-5, and the amount of the general interest charge (GIC) that will apply to the recoverable amount.

[54] This is entirely consistent with the self-actuating system that applied to GST during the tax period in dispute. Under s 17-15 the net amount for a tax period worked out using the form of a Business Activity Statement (BAS) is treated as the net amount for the tax period.

[55] The aligned timeframes for BAS lodgement in s 31-8 and payment of a positive net amount in section 33-3 enabled an entity to pay the net amount upon lodgement of its GST return or otherwise before the net amount becomes a recoverable debt.

[56] An entity can thereby discharge the liability that calculation of its net amount using the BAS and lodgement of that BAS actuated, without the Commissioner having to make the net amount due by a process of assessment and service of a notice specifying when the amount became payable.

[57] Hence, s 105-50 does not seek to measure the time limit on recovery from when the unpaid net amount arose as a liability (to the extent that this occurs before it becomes due and payable) because it was not recoverable at that time. Rather, being concerned with recovery, it measures the time limit from when the liability became payable and hence recoverable as a debt that could be sued for under section 255-5. The liability becomes payable no earlier than the time at which it has become both due and payable. In this case, the Commissioner issued his notice to the applicant within four years from that time.

[58] Ultimately, there is no magic in the word 'due' or the words 'due and payable'. 'Payable' means 'due': see Southern Cross Interiors Pty Ltd v Deputy Commissioner of Taxation [2001] NSWSC 621; 53 NSWLR 213, 219 [26] (Palmer J) and the definitions of "payable" in the Macquarie and Oxford Dictionaries. In the context in which it appears in s 105-50, that is the meaning that should be given to the word "payable".

[59] The inclusion of the words 'due and payable' in s 95A of the Corporations Act 2001 (Cth) has long since proved problematic. There is however a simple answer, as Andrew Marshall has explained in his article 'Is Due and Payable a Magic Phrase' (2007) 15 Insolvency Law Journal 115, 124:

There is a simple way to prevent the problem is that these two words have caused from returning in the future: use only one and drop the other completely. As Mellish LJ first set out and Palmer J recently reinforced, it is clear that the relevant word in this context is "payable". "Due" may have a long history of judicial consideration, but only because judges have used it as a stepping-stone on the (often tortuous) path to considering the real issue of "payable". And much of that case law is at best irrelevant and at worst downright confusing.

[60] The same can be said of s 105-50. There is no reason why payable ought not be construed as meaning 'due'.

1. Let me deal with those submissions by first referring to what Palmer J actually said in Southern Cross Interiors at [26], as cited by the Commissioner in RWS [58]. What his Honour said was this (underlining in the original):

The proposition that a contract debt may "become due" on the date stipulated for payment in the contract but not "become payable" on that date may seem a surprising one. In ordinary usage, "due" and "payable" are often synonymous. According to the Shorter Oxford English Dictionary_, the primary definition of "due" is_ "owing or payable as an obligation or debt" and the primary definition of "payable" is "falling due (usually at or on a specified date)".

1. I emphasise his Honour's statement that "due" and "payable" are often synonymous - in ordinary usage. But I am concerned here not with the meaning of either of those words in ordinary usage, but with the meaning of one of them - "payable" - in s 105-50 in Schedule 1 to the TAA.
2. The fact that Division 250 - the general "collection and recovery" provision - draws a distinction between the concepts of "payable" and "due and payable", on the face of it, weighs against the Commissioner's submission that the point in time at which an amount "became payable" by a taxpayer is actually the point in time at which it "became due and payable". Nevertheless, for the Applicant to succeed on the point raised in Question 5, it must establish that its net amount for the December 2006 quarter "became payable" more than 4 years prior to the issue of the Notice to Repay.
3. The instant that it fixes upon as the instant at which the net amount "became payable" is the instant when the tax period ended: in other words, immediately after the end of 31 December 2006. Paragraph 23 of the Commissioner's practice statement PS LA 2012/2, referred to in the Commissioner's submissions, appears to support that position; it says:

For GST purposes, a liability arises at the end of a tax period notwithstanding that payment of a net amount becomes due and payable at a later time (generally on the 21st day of the month following the end of a tax period).

1. But the source of that proposition is not identified.
2. Section 7-15 of the GST Act does not support the Applicant's position. At the relevant time it simply provided:

The *net amount for a tax period is the amount that the entity must pay to the Commonwealth, or the Commonwealth must refund to the entity, in respect of the period.

1. It does not fix upon a particular point in time. Indeed, there does not appear to be any legislative provision to support the Applicant's submission that its net amount for the December 2006 quarter "became payable" immediately after midnight on 31 December 2006.
2. It seems clear that the purpose of s 105-50 in Schedule 1 to the TAA is to give the Commissioner 4 years to recover unpaid net amounts. It is consistent with that purpose for the word "payable" to be given a meaning equivalent to "capable of being recovered" on the two occasions on which it is used in the section. The unpaid net amount for the December 2006 quarter was not capable of being recovered by the Commissioner until immediately after 28 February 2007, in accordance with the instruction in s 33-3 of the GST Act requiring that a taxpayer "must pay" the net amount on or before that date (and it follows that if the taxpayer did not do so, then the Commissioner was entitled to recover it).
3. The Commissioner had until the end of 28 February 2011 to issue the Notice to Repay. The notice issued within time.
4. The answer to Question 5 is "immediately after 28 February 2007".

QUESTION 6 - WAS THERE AN EVENT THAT HAD THE EFFECT OF CAUSING A SUPPLY TO BECOME, OR STOP BEING, A TAXABLE SUPPLY?

1. This question is only relevant in relation to the supply of the First Apartment.
2. The Applicant's submission is that s 38-325(1)(c) of the GST Act was satisfied at the time of completion, but that position was reversed by a condition subsequent. In AASFIC it was put this way:

[141] The key factual inference that needs to be made to sustain the argument is that, for the purposes of cl 47.6.6 of the First Sale Contract, "there [wa]s a change in the GST Act which the Vendor determine[d] ha[d] the effect of impacting the GST payable on the sale of the Property or related transactions". This would have the effect that the agreement for a GST-free supply of a going concern was defeated by a condition subsequent, and possibly also that "the parties agree[d] that the margin scheme ... is taken to have applied" within the meaning of that clause.

1. There is no evidence before the Tribunal that the Vendor - South Steyne - made any such determination and, in any event, the "change in the GST Act" that might be thought to have had any bearing on the transaction - the so-called Marana amendments[19] - were enacted prior to the parties' entry into the contract. Furthermore, nothing occurred to reverse the "agreement in writing" that the supply was of a going concern: see [58]-[59] of these reasons. The supply was, and remained, GST-free.
2. This question must be answered "No".

QUESTION 7 - WHAT IS THE "PROPORTION OF NON-CREDITABLE USE"?

1. This was an issue that arose as a result of the judgment of Griffiths J in the MBI case. It had not been raised as a ground of objection and so the Applicant required leave to agitate it. The Commissioner did not oppose the granting of leave and the Applicant was permitted to proceed on the basis that leave was granted.
2. The thrust of the submission is that the calculation that is specified in s 135-5(2) of the GST Act requires an identification of "all the supplies made through the enterprise", as a total against which those supplies that are "neither taxable supplies nor GSTfree supplies" are to be measured. Since the "supplies made through the enterprise" include supplies to guests (which the Full Court held by majority were taxable supplies[20]), the increasing adjustment under s 135-5 cannot be the full 10 per cent of the "supply price".
3. The problem with the Applicant's submission is that the "enterprise" referred to in the definition of "proportion of non-creditable use" is the "enterprise to which the supply relates" as referred to in s 135-5(1)(b). The "supply" referred to there is each individual supply of an apartment by South Steyne to the Applicant. The enterprise to which that supply relates does not include the enterprise carried on by Mirvac Management. And it is through that enterprise that the taxable supplies to the guests are made.
4. The only supplies made through the "enterprise to which the supply relates" are the input taxed supplies that continue under the leases granted by South Steyne to Mirvac Management: MBI case at [32]. The "proportion of non-creditable use" in s 135-5(2) is therefore 100 per cent.

I certify that the preceding 85 (eighty -five) paragraphs are a true copy of the reasons for the decision herein of Deputy President S E Frost.

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[1] A New Tax System (Goods and Services Tax) Act 1999

[2] Taxation Administration Act 1953

[3] A New Tax System (Goods and Services Tax) Bill 1998, Explanatory Memorandum at [6.256]-[6.257]: see MBI Properties Pty Ltd v Commissioner of Taxation [2013] FCA 56 at [25](a)

[4] Commissioner's List of Questions of Answers (sic) that resolve the relevant issues (Commissioner's List of Q&A)

[8] [36] of these reasons; RWS [24]

[9] [36] of these reasons; RWS [26]

[12] South Steyne appeal, at [50]

[15] South Steyne appeal, at [92]

[16] South Steyne appeal, at [93]

[19] Inserted by the Tax Laws Amendment (2006 Measures No. 3) Act 2006

[20] South Steyne appeal, at [4] per Finn J; at [42] per Emmett J