Motel business refused GST tax credits

A motel business has been mostly unsuccessful before the Administrative Appeals Tribunal (AAT) in a dispute with the ATO concerning claims for input tax credits.

Following a tax audit, the Tax Commissioner refused the taxpayer’s input tax credit claims of around $88,500 for the quarterly tax periods from 1 January 2007 to September 2010. This was on the basis that there was a lack of documentation to substantiate the claims. The Commissioner had sought documentation from the taxpayer on various occasions, including sampling documentation for the June 2010 quarter. 

However, the representative of the motel business was unable to produce all of the relevant documentation. He argued that a substantial amount of the records sought were lost due to flooding of the motel office in December 2008 and that he had been unable to respond to the requests for information as he was overseas. 

Based on information provided before the proceedings, the Commissioner accepted that the taxpayer was entitled to some $16,000 of the original claim. The AAT found that this was acceptable in the circumstances. However, it affirmed the Commissioner’s stance on the balance of the claim. The AAT also rejected the taxpayer’s additional input tax credit claim of around $28,000. The AAT said the taxpayer had been given “every opportunity to produce documentation or other evidence to support his claims for imputation credits”. It further noted that the taxpayer was unable to produce documents or other evidence that demonstrated that the credits that the Commissioner had allowed were insufficient. 

TIP: It is essential for small businesses to have adequate record-keeping practices. A key consideration is to make sure that records can be understood by more than one person. Another consideration is to document how records are kept (ie paper records or electronically), what records are maintained and where they are located, and how back-up records are managed.