In Sunlea Enterprises Pty Ltd As Trustee for Drummond Cove Unit Trust and FCT [2018] AATA 2792, the Administrative Appeals Tribunal (AAT) decided that the trustee of a unit trust was not entitled to input tax credits as there was insufficient evidence of a creditable acquisition and the relevant invoices did not comply with the requirements of a tax invoice for GST purposes. This case illustrates the importance of proper documentation to ensure that you are able to substantiate and claim the relevant tax credits.

In 2004, the trustee of the Drummond Cove Unit Trust (Trustee) became the registered proprietor of approximately 220 hectares of vacant land in Western Australia (Land).

In 2005, the Trustee, Sandpiper Asset Pty Ltd (Sandpiper) and a third company entered into a Heads of Agreement to create a joint venture to develop and sell the Land. A formal project management agreement setting out the terms was intended but never actually made. The joint venture fell through and in the course of the project, Sandpiper issued 17 invoices to the Trustee, two of which were disputed. The disputed invoices were for ’unrecouped project costs‘, with the first for over $12m, including $1.092m GST, and the second for $19m, including $1.727m GST.

The Trustee claimed the GST of various invoices issued as input tax credits. The Trustee argued that payment of the invoices were made by way of set-off against Sandpiper’s loan accounts in their books despite there being no formal loan agreement.

The AAT decided that there was insufficient evidence of a creditable acquisition by the Trustee. Although GSTD 2004/4 contemplates that a payment by way of set-off can constitute consideration, there was insufficient evidence of consideration because there was no agreement or evidence of Sandpiper’s entitlement to the payment. The disputed invoices were not expressed in terms of a supply, but rather, as a reimbursement or indemnity as a bare trustee or agent, which are transactions that do not attract GST. The invoices also did not comply with the requirements of a tax invoice under sections 29-70(1) of the A New Tax System (Goods and Services Tax) Act 1999 as they did not sufficiently identify what was supplied.