AAT tells ATO to take care when branding taxpayers as dishonest

The AAT has ruled that a motor vehicle dealer was entitled to GST input tax credit (ITC) of $19,809 and a luxury car tax (LCT) decreasing adjustment of $45,843 in relation to the acquisition of an Audi R8 Coupe for $263,750.01, after the ATO commissioner disallowed the claim.

Anastassios Skourmallas claimed that as a motor vehicle dealer he is entitled to the ITC and decreasing adjustment because he acquired the Audi R8 as trading stock for his motor dealer business.

The ATO, however, did not accept that Mr Skourmallas was in fact a dealer or that the Audi R8 was acquired for business purposes. In fact, the counsel appearing for the commissioner argued that Mr Skourmallas was ‘not a credible witness’ and branded him dishonest.

AAT senior member Robert Olding dismissed these claims, instead telling the ATO that it needed to take more care when concluding that a taxpayer is dishonest.

“Several of the examples cited by the commissioner as suggesting dishonesty, upon close examination took on a more benign complexion, especially when considered in the light of Mr Skourmallas speaking English as his second language, his communication style, and the nature of his activities as he explained them,” he said.

Mr Olding said that he could understand how an impression of belligerence might be formed, but explained that this does not make Mr Skourmallas dishonest. 

“His responses were certainly agitated and argumentative at times, but that has to be considered against the background already mentioned and the context in which the questions were asked,” he said.

In concluding the case, Mr Olding said that he is “persuaded on balance that Mr Skourmallas acquired the Audi R8 in the course of his enterprise and the acquisition was not of a private or domestic nature”.

He noted that Mr Skourmallas had demonstrated he intended to use the Audi as trading stock and for no other purpose, despite not having a show room, car yard or other such indicia of a conventional motor vehicle dealership.

“It is important to remember that Mr Skourmallas says he has not set out to establish a conventional motor dealership but rather a business involving low volume, high value sales, operated at low cost from his home and targeting a niche market," Mr Olding said. 

In his final address, he advised Mr Skourmallas to "prudently improve" his record-keeping by maintaining complete and accurate logbooks of the use and marketing of any vehicles purchased for sale.