Tax dodgems a no- go

Townsville Bulletin - - NEWS -

A RE­CENT tri­bunal case ( Cri­te­rion Pres­tige Pty Ltd) high­lighted the mis­chief some peo­ple get up to.

In the present case a Doc­tor Hirst de­sired to own a Lam­borgh­ini mo­tor ve­hi­cle with an ini­tial all- in­clu­sive price of $ 461,387.

The prob­lem is the ve­hi­cle at­tracted lux­ury car tax and GST. So the doc­tor, with the aid of his ac­coun­tant, set up a com­pany to con­duct a car deal­er­ship busi­ness avoid­ing the need to pay the lux­ury car tax and also be­ing able to claim back the GST on the pur­chase, thereby sav­ing the good doc­tor some­where in the range of $ 110,000.

The pur­chase oc­curred some­time in March 2013. The prob­lem for the doc­tor is the com­pany re­ally didn’t do any­thing. The ve­hi­cle was housed at the doc­tor’s home, and there didn’t ap­pear to be any real busi­ness of buy­ing and selling ve­hi­cles.

How­ever, the doc­tor stated he did take a num­ber of po­ten­tial pur­chasers on a test drive, but with him be­hind the wheel.

All of these po­ten­tial pur­chasers were friends and as­so­ci­ates and none were brought be­fore the tri­bunal to give ev­i­dence on the doc­tor’s be­half. In 2013 Ca­lyn, 7, pushed his brother Kya out of the way of a car, sav­ing the four- year- old’s life. In the process Ca­lyn was hit by the car, frac­tur­ing his skull and re­sult­ing in brain dam­age. For his heroic ac­tions Ca­lyn re­ceived the 2014 Pride of Aus­tralia Child of Courage Medal. Ad­di­tion­ally, all of the test drives were con­ducted af­ter the doc­tor be­came aware of the ATO’s in­ter­est in his scheme.

The doc­tor also drove the ve­hi­cle to two winer­ies claim­ing the win­ery was the venue for a den­tists’ con­fer­ence, and he thought some of the den- tists might be in­ter­ested in pur­chas­ing the car. On the sec­ond oc­ca­sion, the win­ery was host­ing a pro­fes­sional con­fer­ence which he was at­tend­ing and to which he wished to dis­play the ve­hi­cle.

In Septem­ber 2013, the doc­tor be­came aware of the ATO’s in­ter­est in his scheme and soon af­ter the ATO amended his BAS to disal­low the GST claim and de­mand the lux­ury car tax be paid along with a 50 per cent penalty. The ve­hi­cle was even­tu­ally sold to another dealer in Jan­uary 2014.

Un­sur­pris­ingly, the doc­tor was un­able to con­vince the tri­bunal that he was op­er­at­ing a car deal­er­ship.

There­fore, the tri­bunal dis­al­lowed the doc­tor’s ap­peal and agreed with the 50 per cent penalty. Sur­pris­ingly, the ATO hadn’t im­posed a 75 per cent penalty when they orig­i­nally dis­al­lowed the claim. Sur­pris­ing also is the fact that the doc­tor and his ad­viser thought they could set this scheme in place and ac­tu­ally pull it off.

His ini­tial $ 110,000 tax sav­ings turned into a tax bill of more than $ 165,000 plus in­ter­est.

I sus­pect by the time you take into ac­count the cost to set the com­pany up, his agent’s fees and the le­gal fees in fight­ing the case, he would have been out of pocket at least equal to what he had ad­di­tion­ally saved.

Email your ques­tions to David. Hall@ crowe­hor­wath. com. au

This ad­vice is gen­eral in na­ture, the per­sonal opin­ion of the writer; read­ers should seek spe­cial­ist ad­vice be­fore mak­ing de­ci­sions.

townsvillebulletin. com. au/ pride­o­faus­tralia

2014 CHILD OF COURAGE MEDAL­LIST

STALLED: A scheme to avoid pay­ing lux­ury car tax on a Lam­borgh­ini has come un­done at sig­nif­i­cant cost.

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