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Australia – Australia Pacific Pty Ltd & Ors v Building and Construction Industry Authority [2014] QMC 4.

9 April, 2014

 

Legal News & Analysis – Asia Pacific – Australia – Tax

 

The Queensland Magistrates’ Court (QMC) in Australia Pacific Pty Ltd & Ors v Building and ConstructionIndustry Authority [2014] QMC 4 has held that the cost of a building project included GST paid by a construction company on the supply of goods or services in Australia for the purpose of determining its levy liability under the Building and Construction Industry (Portable Long Service Leave) Act 1991 (Qld) (Act).

 
Facts

 
Australia Pacific Pty Ltd (APL) and its nine wholly owned subsidiaries appealed a 2011 determination by the Building and Construction Industry (Portable Long Service Leave) Authority (Authority) on the amount that APL was required to pay under certain levies imposed on APL’s construction of local coal seam gas and liquefied natural gas projects (Projects) under the Act.

 
The Authority assessed the cost of APL’s Projects as including amounts paid for GST in connection with the supply of goods or services in Australia for the Projects, as well as including GST paid on goods imported to Australia. Consequently, APL received a levy bill of AUD 85,445,240.

 
Under the Act, the various levies payable are expressed as a percentage of the cost of the building and construction work. Cost of building and construction work is defined as “the total cost of all costs that relate to the work directly or indirectly”.

 
APL argued that because any GST it paid on the supply of goods both from within and imported into Australia was offset by the receipt of an input tax credit to the same value, no GST “cost” was incurred by it in connection with the Projects.

 
The Authority argued that the Act used a phrase of wide import and the applicable GST was part of the cost for the purposes of the Act. Specifically on the question of GST paid on offshore supplies, the Authority argued that GST liability is actually incurred by the importer of the goods. Accordingly, APL incurred the GST liability – and by extension a cost towards the building and construction work on the Projects – on every taxable importation of goods.

 
Held

 
The QMC held in favour of the Authority.

 
On the question of whether GST paid on domestic supplies should form part of the cost of the Projects, the QMC agreed with the Authority. Acknowledging that its decision produced the “inappropriate” result of “taxing the GST tax”, the Court noted that the Act itself made no distinction between the types of costs that make up the cost of the building and construction work in question. Specifically addressing APL’s argument on the effect of input tax credits, the Court called them immaterial to the cost.

 
The Court found that GST paid on offshore supplies also formed part of the cost of the Projects under the Act, irrespective of how APL treated it amongst its subsidiaries.

 
APL has appealed this decision to the Industrial Court of Queensland.

 

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For further information, please contact:

 

Geoffrey Mann, Partner, Ashurst
[email protected]

 

Jadie Teoh, Ashurst
[email protected]

 

Kristina Popova, Ashurst

[email protected]

 

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