Commissioner of Taxation v CPG Group Pty Ltd [2025] FCAFC 147

FEDERAL COURT OF AUSTRALIA

Appeal from:		CPG Group Pty Ltd and Commissioner of Taxation [2024] AATA 199

File number:	VID 73 of 2024

Judgment of:	DERRINGTON, GOODMAN AND FEUTRILL JJ

Date of judgment:	24 October 2025

Catchwords:	TAXATION – goods and services tax – taxable supplies – GST liabilities – creditable acquisitions – input tax credits – precious metal – GST-free – input taxed – anti-avoidance provisions – third parties entered into or carried out dishonest scheme for creation of taxable supplies of precious metal ending with non-payment of GST liabilities – taxpayer got GST benefits from scheme – Administrative Appeals Tribunal found getting taxpayer a GST benefit from the scheme was not the dominant purpose or principal effect of the scheme – Tribunal found getting taxpayer a GST benefit was a facilitative purpose of an ultimate (dishonest) dominant purpose of non-payment of GST liability – Tribunal found that principal effect of scheme was changing the form of precious metal – whether Tribunal misconstrued and misapplied the statutory tests for dominant purpose and principal effect – whether the Tribunal failed to take into account the object or purpose of Div 165 as a mandatory relevant consideration – whether Tribunal failed to consider if getting taxpayer a GST benefit and non-payment of GST liability were composite dominant purposes – whether Tribunal failed to consider the importance of the taxpayer getting input tax credits to the economic feasibility of the scheme ADMINISTRATIVE LAW – appeal on a question of law – consideration of questions of law and questions of fact – whether notice of appeal raises a question of law

Legislation:	A New Tax System (Goods and Services Tax) Act 1999 (Cth) Administrative Appeals Tribunal Act 1975 (Cth) Administrative Review Tribunal Act 2024 (Cth) Income Tax Assessment Act 1936 (Cth) Taxation Administration Act 1953 (Cth)

Cases cited:	ACN 154 520 199 Pty Ltd (in liq) v Federal Commissioner of Taxation (2020) 282 FCR 455 Automotive Invest Pty Ltd v Federal Commissioner of Taxation (2024) 98 ALJR 1245 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Commissioner of Taxation of the Commonwealth of Australia v Consolidated Press Holdings Ltd (2001) 207 CLR 235 Commissioner of Taxation of the Commonwealth of Australia v Hart (2004) 217 CLR 216 Commissioner of Taxation of the Commonwealth of Australia v Spotless Services Ltd (1996) 186 CLR 404 Commissioner of Taxation v ACN 154 520 199 Pty Ltd (in liquidation) [2025] FCAFC 146 Commissioner of Taxation v Complete Success Solutions Pty Ltd (2023) 116 ATR 9 CPG Group Pty Ltd and Commissioner of Taxation (Taxation) [2024] AATA 199 Dranichnikov v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 197 ALR 389 Federal Commissioner of Taxation v Ludekens (2013) 214 FCR 149 Mills v Commissioner of Taxation of the Commonwealth of Australia (2012) 250 CLR 171 Minister for Immigration and Border Protection v SZMTA (2019) 264 CLR 421 Waterford v Commonwealth (1987) 163 CLR 54

Division:		General Division

Registry:		Victoria

National Practice Area:		Taxation

Number of paragraphs:	153

Date of hearing:	18 – 19 November 2024

Counsel for the Applicant:		Mr E Wheelahan KC with Ms C Pierce SC and Mr E Moore

Solicitor for the Applicant:		Australian Government Solicitor

Counsel for the Respondent:		Mr D McInerney KC with Mr A de Wijn SC and Mr G Redenbach

Solicitor for the Respondent:		Sladen Legal

ORDERS

		VID 73 of 2024

BETWEEN:	COMMISSIONER OF TAXATION Applicant
AND:	CPG GROUP PTY LTD ACN 164 269 023 Respondent

order made by:	DERRINGTON, GOODMAN AND FEUTRILL JJ
DATE OF ORDER:	24 October 2025

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. Paragraph 2 of the Administrative Appeals Tribunal’s decision of 5 January 2024 be set aside.

3. Except for that part of the applicant’s objection decision affirmed by paragraph 1 of the Administrative Appeals Tribunal’s decision of 5 January 2024, the respondent’s application for review of the applicant’s objection decision in respect of the operation of Division 165 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) and the imposition of scheme penalty under Sub-Division 284-C of Schedule 1 of the Taxation Administration Act 1953 (Cth) be remitted to the Administrative Review Tribunal for further hearing and determination according to law.

4. There be no order as to the costs of the appeal.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DERRINGTON J:

1 I have had the advantage of considering the respective draft reasons of both Goodman and Feutrill JJ. I agree with the orders proposed by Feutrill J for the reasons which his Honour gives.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Derrington.

Associate:

Dated: 24 October 2025

REASONS FOR JUDGMENT

GOODMAN J:

A. INTRODUCTION

2 This appeal concerns a decision of the Administrative Appeals Tribunal that Division 165 of the A New Tax System (Goods and Services) Tax Act 1999 (Cth) (GST Act) did not operate so as to deny the respondent taxpayer an entitlement to input tax credits in the order of $9.5 million.

3 The Tribunal’s reasons for doing so were published as CPG Group Pty Ltd and Commissioner of Taxation (Taxation) [2024] AATA 199 (Tribunal Decision, or T).

4 The Commissioner now appeals. The appeal was instituted under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act). The appeal was heard together with the appeal in proceeding NSD1580/2023 (the ACN 154 appeal). The Court’s reasons for judgment in the ACN 154 appeal have been published as Commissioner of Taxation v ACN 154 520 199 Pty Limited (in liquidation) [2025] FCAFC 146 (ACN 2025 FC).

5 The Commissioner’s grounds of appeal are set out in an amended notice of appeal, which the Commissioner was granted leave to file during the hearing of the appeal.

6 There are a number of areas of overlap between the ACN 154 appeal and the present appeal. These arise from:

(1) the similarity of the salient underlying facts;

(2) the fact that a Deputy President of the Tribunal published: (a) the Second Tribunal Decision considered in ACN 2025 FC (together with a senior member of the Tribunal); and (b) the Tribunal Decision the subject of this appeal (alone);

(3) the use of a number of common or similar paragraphs in the Second Tribunal Decision and in the Tribunal Decision. In this regard, the Tribunal, in the first footnote to the Tribunal Decision noted that the events underlying the Second Tribunal Decision and the Tribunal Decision were of a similar nature and that there is a commonality of reasoning in the two decisions;

(4) the Commissioner’s grounds of appeal in the present appeal being substantially similar to the first six grounds in the ACN 154 appeal; and

(5) the Commissioner’s submissions on those grounds in the ACN 154 appeal and the present appeal being substantially the same.

7 As a consequence, there is inevitably considerable overlap also between various aspects of these reasons for judgment and my reasons for judgment in ACN 2025 FC.

8 For the reasons set out below, the appeal should be dismissed.

B. THE GST ACT CONTEXT

9 The relevant GST Act context is set out at paragraphs [5] and [6] of my reasons for judgment in ACN 2025 FC. For the purposes of these reasons for judgment I adopt, without repeating, those paragraphs from ACN 2025 FC.

C. BACKGROUND

10 The relevant background is described in the reason for judgment of Justice Feutrill at [73] to [83], in terms which I gratefully adopt.

11 The scheme propounded by the Commissioner was, as the Tribunal explained at T[42], one involving the following steps:

(1) the supply by the taxpayer to Galaxy, and further or alternatively by Baird & Co to QN Traders, of gold as bullion in precious metal form that was not subject to GST, for an amount roughly equivalent to the spot price for gold;

(2) the supply by Galaxy or QN Traders to one or more Intermediaries of that gold as bullion in precious metal form that was not subject to GST;

(3) the transformation of that gold from a precious metal form that was not subject to GST, into gold in a non-precious metal form that was subject to GST;

(4) the supply by an Intermediary of that gold, if not directly to the taxpayer, then to a subsequent purchaser (an Intermediary);

(5) any on-sale of that gold by a subsequent purchaser (an Intermediary) to another subsequent purchaser (an Intermediary);

(6) the taxable supply of that gold by an Intermediary to the taxpayer, for an amount less than the spot price for gold before the addition of GST, which the taxpayer accounted for as an acquisition of scrap gold that was not in the form of precious metal;

(7) the transformation by the taxpayer of the gold it acquired from Intermediaries in non-precious metal form back into gold bullion taking the form of precious metal; and

(8) the supply by the taxpayer of that bullion to Galaxy as GST-free precious metal for an amount roughly equivalent to the spot price for gold.

D. THE TRIBUNAL DECISION

12 On 5 January 2024, the Tribunal delivered the Tribunal Decision. That decision occupies 150 pages. For present purposes, the following summary of the Tribunal Decision suffices, noting that the impugned aspects of that decision are described in greater detail in Part E below when the questions and grounds of appeal set out in the amended notice of appeal are addressed.

13 The summary below focuses upon the Division 165 aspect of the Tribunal Decision, noting that there were several other aspects of the Tribunal Decision which are not directly relevant to this appeal.

14 At T[41(c)], the Tribunal identified the issue concerning the application of Division 165 relevantly as:

… whether … [the taxpayer] obtained GST benefits to which s 165-5 of the GST Act applies as a result of claiming input tax credits for acquisitions of scrap gold from the Intermediaries. [It] concerns disputed ITCs entitlements of $9,457,634 … and … whether, taking into account the matters described in s 165-15, it is not reasonable to conclude that:

(i) an entity that entered into or carried out a scheme or part of the scheme did so with the sole or dominant purpose of [the taxpayer] getting a GST benefit - the Denied ITCs - from the scheme; or

(ii) the principal effect of the scheme, or of part of the scheme, was that [the taxpayer] got a GST benefit, being the Denied ITCs, from the scheme directly or indirectly.

15 The Tribunal next identified the scheme propounded by the Commissioner, at T[42] in the terms identified at [11] above.

16 At T[46] to [47], the Tribunal stated:

46. The essence of the Commissioner’s Division 165 case is that gold bullion supplied to [the taxpayer] had its origins in gold bullion acquired from [the taxpayer] and other sources which was artificially and uneconomically adulterated so that it became scrap gold, and then was sold to [the taxpayer] as taxable supplies at a GST-informed price to be refined to become bullion again. Those who sold the adulterated bullion to [the taxpayer] did not meet their GST obligations to the Commissioner and retained all of the GST informed prices paid to them by [the taxpayer] for the adulterated bullion.

47. Viewed holistically, the Commissioner’s review of [the taxpayer’s] and others business and financial records reveals purchases and sale of gold product suggesting a direction in the movement of that product. The [taxpayer], almost exclusively, sold the refined gold bullion it produced to its related party, Galaxy. Galaxy exclusively purchased from [the taxpayer]. Galaxy sold to three groups of purchasers: entities who sold gold to [the taxpayer] directly (the Direct Suppliers) and entities who sold gold to direct suppliers (the Indirect Suppliers) and other entities who did not sell any gold to either [the taxpayer] or Direct or Indirect Suppliers. The [taxpayer] acquired gold product from both Direct Suppliers and other suppliers. The Direct Suppliers to [the taxpayer] acquired gold from Galaxy, Indirect Suppliers and other suppliers.

17 Following a recitation of the evidence and other materials before the Tribunal (T[50] to [126]), the Tribunal set out various findings of fact (T[127] to [221]).

18 At T[259], the Tribunal turned to the Division 165 issue.

19 At T[267] to [270], the Tribunal set out some general views concerning “[t]he legislative scheme in which Division 165 sits”. The Tribunal noted that the general legislative scheme within the GST Act is varied by Division 165 where it applies (T[269]) and provided the following overview of Division 165:

270. It is readily apparent that the scheme of the GST anti-avoidance provisions is very similar to the scheme of the anti-avoidance provisions in Part IVA of the 1936 Assessment Act. Neither party disputes that the principles from the Part IVA authorities inform the construction of Division 165.

The legislation

271. Division 165, in particular s 165-40, allows the Commissioner to make a declaration negating the benefits obtained from a scheme where the Division operates. For Division 165 to operate, it is necessary that there be a scheme, that there be a GST benefit from the scheme and that either the sole or dominant purpose of a person who entered into or carried out the scheme, or part of it, was to get or obtain the GST benefit or the principal effect of the scheme, or part of it, was that the avoider got or obtained the GST benefit.

272. The Division operates where each of the four matters specified in s 165-5(1) are satisfied. They are:

(a) an entity (the avoider) gets or got a *GST benefit from a *scheme; and

(b) the GST benefit is not attributable to the making, by any entity, of a choice, election, application or agreement that is expressly provided for by the *GST law, the *wine tax law or the *luxury car tax law; and

(i) an entity that (whether alone or with others) entered into or carried out the scheme, or part of the scheme, did so with the sole or dominant purpose of that entity or another entity getting a *GST benefit from the scheme; or

(ii) the principal effect of the scheme, or of part of the scheme, is that the avoider gets the GST benefit from the scheme directly or indirectly; and

(d) the scheme:

(i) is a scheme that has been or is entered into on or after 2 December 1998; or

(ii) is a scheme that has been or is carried out or commenced on or after that day (other than a scheme that was entered into before that day).

(emphasis in original)

20 At T[273], the Tribunal described the task before it in the following terms:

The substantive aspect of the present task is to answer the question posed by s 165-5(1)(c). Recognising undeveloped propositions to the contrary, which have not been ignored, the parties have largely conducted the dispute on the footing that the battle ground lies in whether the requisite dominant purpose or principal effect ought to be found. That said, it is still necessary to identify the relevant scheme and GST benefit because without them any test of purpose or effect cannot be undertaken in the required way.

(emphasis added)

21 The Tribunal then addressed the questions of “scheme”, “benefit”, “purpose” and “effect”.

22 The Tribunal noted that there was no contest that the scheme propounded by the Commissioner was a scheme for the purposes of the GST Act against which the purpose and effect tests could be considered (T[274]).

23 As to “benefit”, the Tribunal recorded at T[275] that s 165-10(1) sets out the circumstances in which an entity gets a GST benefit from a scheme and that only s 165-10(1)(b) was relevant.

24 As to the test in s 165-5(1)(c) of the GST Act, the Tribunal stated at T[276] to [277]:

276. There are two limbs to the test, one of which, at least, must be satisfied before Division 165 can apply; the sole or dominant purpose limb (s 165-5(1)(c)(i)) and the principal effect limb (s 165-5(1)(c)(ii)).

277. The matters to be taken into account in determining purpose or effect are set out in s 165-15(1) of the GST Act in the following terms:

(1) The following matters are to be taken into account under section 165-5 in considering an entity’s purpose in entering into or carrying out the *scheme from which the avoider got a *GST benefit, and the effect of the scheme:

(a) the manner in which the scheme was entered into or carried out;

(b) the form and substance of the scheme, including:

(i) the legal rights and obligations involved in the scheme; and

(ii) the economic and commercial substance of the scheme;

(c) the purpose or object of this Act, … and any relevant provision of this Act … (whether the purpose or object is stated expressly or not);

(d) the timing of the scheme;

(e) the period over which the scheme was entered into and carried out;

(f) the effect that this Act would have in relation to the scheme apart from this Division;

(g) any change in the avoider’s financial position that has resulted, or may reasonably be expected to result, from the scheme;

(h) any change that has resulted, or may reasonably be expected to result, from the scheme in the financial position of an entity (a connected entity) that has or had a connection or dealing with the avoider, whether the connection or dealing is or was of a family, business or other nature;

(i) any other consequence for the avoider or a connected entity of the scheme having been entered into or carried out;

(j) the nature of the connection between the avoider and a connected entity, including the question whether the dealing is or was at arm’s length;

(k) the circumstances surrounding the scheme;

(l) any other relevant circumstances.

(emphasis added)

25 At T[279] the Tribunal reiterated that the principal issue was whether it is reasonable to conclude that:

(1) the sole or dominant purpose of an entity that entered into the scheme or part of the scheme was for the taxpayer to get the entitlement to the input tax credits; or

(2) the principal effect of the scheme or part of the scheme was that the taxpayer got the entitlement to the input tax credits.

26 After describing the competing contentions of the parties, the Tribunal noted that “[t]he Part IVA authorities, and more recently Division 165 authorities” informed the “correct purpose and effect analysis” (T[308]). The Tribunal addressed Division 165 of the GST Act and those authorities in some detail and noted, of particular relevance, that:

(1) the inquiry as to purpose required consideration of the objective purposes of each person that entered into or carried out the scheme or part of the scheme (T[310]);

(2) following the decisions of the Full Court of this Court in ACN 154 520 199 Pty Ltd (in liq) v Federal Commissioner of Taxation [2020] FCAFC 190; (2020) 282 FCR 455 (Perram, Moshinsky and Thawley JJ) (Full Court ACN) and Commissioner of Taxation v Complete Success Solutions Pty Ltd [2023] FCAFC 19; (2023) 116 ATR 9 (Moshinsky, Thawley and Hespe JJ) (Complete Success Solutions), a matter for consideration was whether a supplier’s purposes of: (a) obtaining and not remitting GST (non-remittance of GST purpose); and (b) ensuring, by selling refining materials to the taxpayer, that the taxpayer was in a position to obtain input tax credits (input tax credits purpose) (together, the two purposes), should be found to be a single composite purpose (T[311] to [314]);

(3) in an appropriate case the two purposes might be regarded as a composite purpose. However, this did not exclude the possibility of the non-remittance of GST purpose being the dominant purpose (T[314]); and

(4) it considered that the Full Court in Complete Success Solutions at [85] contemplated the possibility of finding of such a single composite purpose, but did not mandate that such a finding be made (T[315]).

27 The Tribunal then (at T[316]) referred to paragraphs [64] and [66] of the judgment of Gageler J in Mills v Commissioner of Taxation of the Commonwealth of Australia [2012] HCA 51; (2012) 250 CLR 171. The Tribunal expressly recognised that the analysis therein was focussed on a different statutory setting and test.

28 The Tribunal next considered both the purpose and effect limbs of s 165-5(1)(c) by addressing each of the s 165-15(1) factors (at T[317] to [371]). This is described in greater detail in Part E below.

29 The Tribunal then made the following further observations concerning whether the two purposes should be regarded as a single composite purpose:

Purpose or effect – further observations

367. Some further observations are called for.

A single composite purpose or non-dominant incidental purposes facilitating a dominant purpose?

368. The passages from Ludekens and Complete Success Solutions extracted above indicate that a single purpose may appropriately be found in some circumstances. They did not go on and consider whether those purposes were facilitative of an ultimate purpose in the sense contemplated by Gageler J in Mills also noted above. The Mills analysis is apposite in the present circumstances for two reasons: first, creating taxable supplies that also produced GST-informed prices being paid and ITC entitlements to arise, was a necessary preliminary to an ulterior and ultimate goal as contemplated by His Honour’s analysis, and second because His Honour suggests that the text of the Explanatory Memorandum under discussion confirmed the ordinary meaning of language and natural reading of statutory text. Thus, the hierarchy of incidental and dominant purposes to which His Honour refers can and should have wider application. This analysis informs how facilitative steps in a wider design ought to be characterised. Viewed through this lens, any purpose of obtaining ITCs in the present circumstances, assuming there was one, was a purpose properly regarded as central to the design of a scheme directed to achieving an ulterior and ultimate purpose, and therefore any purpose of obtaining ITCs was incidental and not dominant.

369. In the present case, what was essential for the scheme to operate was the creation of a product that the marketplace traded at a GST-informed price, and the Direct Suppliers receiving that price and not paying the GST to the Commissioner, or more fundamentally, for the Direct Suppliers not to pay their GST liability having received a market driven price that assumed they would. As already noted, without that feature there would not have been ongoing sales by the suppliers, as they would have traded at a loss. The availability of the ITCs was an ordinary incident of a purchase of a taxable commodity on commercial terms by a GST-registered entity in the course of its enterprise.

370. In those circumstances, the non-payment of amounts referrable to GST stands aside from the creation of the GST liability and the entitlement to corresponding ITCs. The [taxpayer’s] entitlement to ITCs was dependent only upon the acquisition of gold in a taxable supply for which it paid a full commercial price for what it acquired.

371. In short, even if it would be correct to view the making of taxable supplies and obtaining of ITCs as a single purpose, that single purpose was a step in a wider process. The Tribunal sees the Direct Suppliers’ non-payment of GST as a separate and ulterior and ultimate purpose to any purpose of making taxable supplies and the [taxpayer] obtaining ITCs.

30 At T[381] to [382], the Tribunal expressed the following conclusions:

381. For the reasons indicated in the foregoing consideration of the s 165-15 factors, it would not be reasonable to conclude any entity entered into either scheme or a part of either scheme identified by the Commissioner with the sole or dominant purpose of, or that the principal effect of either scheme or any part of either scheme was, the [taxpayer] obtaining the Denied ITCs.

382. It follows that the power to make the declarations under s 165-40 negating the GST benefit being the Denied ITCs is not enlivened. That being the only basis contended for the remaining Disputed ITCs to be disallowed, the assessments of net amount are excessive.

E. THE APPEAL

E.1 Introduction

31 As noted above, during the hearing, senior counsel for the Commissioner was granted leave to file an amended notice of appeal. The extant questions and grounds of appeal challenge the following three aspects of the Tribunal’s decision:

(1) the Tribunal’s conclusion, for the purposes of s 165-5(1)(c)(i) of the GST Act, that it would not be reasonable to conclude that any entity entered into or carried out either scheme or part of either scheme with the sole or dominant purpose of the taxpayer receiving the income tax credits (questions 1 to 4; grounds 1 to 3 and 5);

(2) the Tribunal’s conclusion, for the purposes of s 165-5(1)(c)(ii) of the GST Act, that it would not be reasonable to conclude that the principal effect of either scheme or part of either scheme was that the taxpayer became entitled to receive the input tax credits (question 5 and ground 6); and

(3) the Tribunal’s treatment of s 165-15(1)(c) which requires that account be taken, when considering questions of purpose and effect under s 165-5(1)(c) of the GST Act, of the purpose and object of that Act (question 6 and ground 8).

E.2 Identification of questions of law

32 As this is an appeal under s 44 of the AAT Act, it is an appeal limited to questions of law. As with ACN 2025 FC, a central issue on this appeal is the extent to which the Commissioner’s amended notice of appeal raises any questions of law, or merely takes issue with the merits of the Tribunal’s conclusions as to purpose and effect. For the purposes of these reasons for judgment I adopt, without repeating, paragraphs [47] to [61] of my reasons for judgment in ACN 2025 FC, where I discussed the identification of questions of law.

33 The extant questions raised by the Commissioner and the attendant grounds of appeal set out in the amended notice of appeal are addressed below.

E.3 The first four questions – purpose

34 The first four questions posited by the Commissioner correspond to the first four questions in ACN 2025 FC and concern the Tribunal’s conclusions as to the purposes of participants in the schemes. Those questions are supported by the first to third and fifth grounds of appeal which are in relevantly identical terms to the correspondingly numbered grounds relied upon in ACN 2025 FC.

E.3.1 The Tribunal’s consideration of s 165-5(1)(c)(i) of the GST Act

35 As noted above, at T[319] to [371], the Tribunal considered each of the s 165-15(1) factors. In doing so, the Tribunal made the following observations relevant to the question of purpose:

(1) as to the manner in which the scheme was carried out (s 165-15(1)(a)):

319. In a case where the relevant competition or comparison is between pursuit of commercial ends and pursuit of a GST benefit with no illegal evasion involved, the existence of steps that are uncommercial or extraordinary in the manner or execution of the scheme might suggest pursuit of the GST benefit is dominant. However, where the relevant comparison is between pursuit of a dishonest end and pursuit of a GST benefit, extraordinary, or irrational or uncommercial steps might be expected in the sequence of events. In that setting such steps might more appropriately indicate, as part of the analysis of the manner of execution of a scheme, that that other goal was either the sole or dominant purpose of a participant in the scheme.

320. Absent adulteration of gold bullion, in many respects the relevant transactions were carried out in the way of ordinary transactions. The steps taken were largely as would be expected in arm’s length sales of scrap gold and gold bullion. Indeed, aside from the one respect noted immediately below, but for the non-payment of GST by the Direct Supplier the transactions would likely have been regarded as unremarkable from a fiscal perspective.

321. It was extraordinary that the Direct Suppliers adulterated bullion, destroyed some of its value and then, ignoring GST effects on prices, sold what had become scrap gold at prices that were less than their acquisition costs. But those prices at which they transacted were not remarkable as a bargain struck between the suppliers and the [taxpayer] for scrap gold.

322. The [taxpayer] paying dollar for dollar amounts as components of GST-informed purchase prices, in a setting where for the [taxpayer], only refining profits were generated, suggests the manner of execution test does not point to a dominant purpose of the [taxpayer] or any other participant in entering into or carrying out the scheme that the [taxpayer] obtain ITC entitlements.

323. The pricing issue is, of course, linked to the adulteration of bullion which is certainly out of the usual. However, in the Tribunal’s view that part of the scheme is explicable by the Direct Suppliers’ purpose of securing a GST-informed amount of money and its retention through evading GST liabilities. It does not suggest a separate dominant purpose of the [taxpayer] obtaining ITCs.

324. For these reasons, the manner in which the scheme was entered into or carried out does not support a conclusion that any entity entered into the scheme or any part of the scheme with the dominant purpose of the [taxpayer] obtaining the Denied ITCs. Even with the [taxpayer] turning a blind eye to others’ activities, the manner in which it was carried out supports a conclusion that the Direct Suppliers had a dominant if not sole purpose of securing a GST-informed amount of money and its retention through evading GST liabilities. It would not support a conclusion that any entity had a dominant purpose of the [taxpayer] obtaining the Denied ITCs. The [taxpayer] would still have obtained refining profits only.

(emphasis added);

(2) as to the form and substance of the scheme (s 165-15(1)(b)):

326. The legal form of the transactions was not consistent with the economic and commercial substance. What was precious metal in investment form was altered so that it no longer conformed to the “in investment form” standard. It was an alteration that facilitated a different attribute in the marketplace that attracted a different trading price structure which in turn facilitated a receipt of money that the Direct Suppliers would keep. Where an actual purpose is to effectuate illegal GST evasion, it can be expected that trickery or facades may be involved, and that form and substance might differ.

327. The Tribunal does not consider the form and substance of the scheme support a conclusion that any entity entered into or carried out the scheme or a part of the scheme with the dominant purpose of the [taxpayer] obtaining ITCs.

(emphasis added);

(3) as to the purpose or object of the GST Act (s 165-15(1)(c)):

330. So far as the [taxpayer] obtained the Denied ITCs on the acquisition of taxable supplies in the course of its enterprise, that is an unremarkable outcome under the GST Act. It is well-known that, with limited exceptions, GST on acquisitions is intended to have a neutral impact on a GST-registered taxpayer’s costs. That is a fundamental feature of value-added taxation systems throughout the world. It does not support a conclusion that any entity entered into the scheme or a part of the scheme with the dominant purpose of the [taxpayer] obtaining ITCs.

331. The artificial creation of a GST liability, and corresponding ITC entitlement, by defacing bullion may be seen as not an object of the GST Act. However, a liability arising on a taxable supply is an intended outcome under GST law regardless of the circumstances giving rise to the liability. Even illegal supplies may be taxable supplies. Once the gold was no longer precious metal its subsequent supply being taxable was unremarkable and an intended outcome under the GST Act.

332. The purpose or object of the GST Act includes, fundamentally, to create a liability for GST on taxable supplies. That is what occurred here. It is the failure to pay the GST that departs from the object of the GST Act, not the allowance of ITCs on business-to-business acquisitions which is the standard and intended object of value-added taxation.

333. This factor does not suggest a conclusion that producing the GST benefit was the dominant purpose of the scheme for these supplies.

(emphasis added) ;

(4) as to the timing of the scheme and the period over which it was entered into and carried out (ss 165-15(1)(d) and (e)):

335. The two tests can be considered together.

336. There does not appear to be any timing aspect of the scheme that suggests a dominant purpose or principal effect of securing the ITCs for the [taxpayer]. If anything, the timing aspects suggest the contrary.

337. To the extent it happened, the round robin nature of the movement of the same gold from the [taxpayer] to and through the Direct Suppliers and back to the [taxpayer], and the repetition of the cycle of transactions, and the timing of those steps suggest that the scheme was structured to be, to the extent of this circularity, self-contained and possibly self-perpetuating. The timing of the circular steps suggests, if anything, pursuit of securing a GST-informed amount of money and its retention through evading GST liabilities.

338. These factors do not suggest a conclusion that producing the GST benefit was the dominant purpose of any entity entering to or carrying out the scheme or any part of the scheme.

339. Effective discontinuance after the Commissioner stopped refunds goes to affordability. The [taxpayer] could no longer afford to pay market prices for scrap gold so stopped paying them. That prevented continued enjoyment of a normal refining profit.

(emphasis added) ;

(5) as to the effect that the GST Act would have in relation to the scheme apart from Division 165 (s 165-15(1)(f):

341. The conventional analysis is that this test necessarily reveals that, absent the operation of Division 165, less GST would be payable, or a bigger refund would ensue. Just because a transaction has an effect of lowering tax liability or increasing a credit does not necessarily attract an inference that the parties to the transaction entered into it or carried it out for the sole or dominant purpose of obtaining that tax consequence. This is particularly so when other benefits and taxation liabilities are also produced by the scheme identified. Under this conventional analysis, little weight would be attached to this factor. This is so because the mere fact of a GST benefit cannot lead to the result that the dominant purpose of the relevant scheme was to secure that benefit. If it did there would be no need for the other factors to be assessed.

342. An alternative approach rests on a premise that any test ought be capable of pointing in either a positive or negative way in the analysis required and should be capable of supporting or contradicting the requisite conclusion in different settings. There seems little point in having a test factor which can only point in one direction. Under the alternative approach, it is necessary to look to whether the outcome of the scheme transactions absent Division 165 applying is consistent with the operation as intended by the GST Act.

343. Here, the GST Act intends to allow an ITC to an entity carrying on an enterprise that has paid for an acquisition, and paid dollar for dollar for it, in a business-to-business transaction under a practical business tax system that places great reliance on the use and acceptance of tax invoices. On that footing, absent the operation of Division 165, the outcome in the present circumstances is entirely consistent with an intended outcome of the GST Act. This factor, analysed this way, suggests that the dominant purpose of participants in the scheme was not to secure a GST benefit. This is not a case where, by some artifice on the part of the taxpayer, a GST benefit ensues without the full cost of securing it having been paid.

344. The Tribunal considers that either little weight ought to be given to this factor, or it should suggest a non-GST benefit purpose.

345. It is true that if one considers only the part of the scheme that is the defacing of bullion before its sale to the [taxpayer], that part of the scheme causes a change in the GST status of the commodity and its subsequent sale. But that is a change that causes GST to become payable where it would not otherwise have been payable. And, more importantly, the economic impact is neutral because of the [taxpayer’s] entitlement to ITCs. That supports a conclusion that the dominant purpose of the Direct Suppliers was to secure for themselves money and to evade payment of GST rather than for any entity to obtain ITCs. It does not support a conclusion that the principal effect of the scheme or a part of the scheme was for the [taxpayer] to obtain ITCs.

(emphasis added) ;

(6) as to any change in the taxpayer’s financial position that has resulted, or may reasonably be expected to result, from the scheme (s 165-15(1)(g)):

347. It is difficult to dispute the Commissioner’s contention that the [taxpayer’s] net asset position and cash flow depended on entitlements to the Disputed ITCs. Two observations are self-evident: first, in any arrangement where prices are paid for inputs equal to the ITCs claimed, net asset positions will be affected by ignoring half of the money flows or entitlements to money flows, and second, if margins are very tight, denying an entitlement to 10% of the revenue flows to a business without ignoring 10% of the expenses of the business is likely to affect profitability in a material way.

348. However, the test and necessary comparison is not:

any change in the avoider’s financial position that has resulted, or may reasonably be expected to result, from the GST benefit

349. Inviting a comparison of balance sheets with and without the GST benefits recognised might be permissible if the test were as stated. The test has to have regard to the scheme. Here the scheme includes payment of a GST-informed price.

350. From the [taxpayer’s] perspective, namely an enterprise that produced precious metal and sold it thus making GST-free supplies:

(a) ITC entitlements arose in respect of all of its inputs to that process that were taxable supplies to it including all of the supplies underlying the Disputed ITCs;

(b) for each of the taxable supplies it paid a price that was informed by the fact that they were taxable supplies and that exceeded the price that would have been payable had the supplies not been taxable, and that excess equalled the ITC entitlement mentioned in (a);

(c) the [taxpayer] enjoyed enhanced turnover from its participation in the scheme and resultant trading profits from that enhanced turnover.

351. Viewed globally, the only potentially measurable financial benefit was enhanced profitability from enhanced trading.

352. The Full Court ACN decision made clear that availability of ITCs has a neutral effect on profit which is determined net of GST considerations. Mere availability of ITCs cannot be regarded as a source of profit.

353. The Tribunal also considers this factor does not support a conclusion that the principal effect of the scheme or a part of the scheme was the [taxpayer] obtaining the Denied ITCs. The obtaining of the ITCs had a neutral impact on the [taxpayer] since it was matched by the obligation, which it met, to pay a price for the scrap gold that was informed by a corresponding GST amount.

(underline and bold emphasis in original; italic emphasis added) ;

(7) as to any change that has resulted, or may reasonably be expected to result from the scheme in the financial position of any entity connected to the taxpayer (s 165-15(1)(h)):

354. There is no question that the Direct Suppliers were financially disadvantaged by the scheme if the non-payment of GST, which does not form part of either of the Commissioner’s articulated schemes, is ignored. That is because their sales prices for the scrap gold were less than they paid for bullion in investment form.

355. The Commissioner’s submission, which stops there, analyses half the story, and ignores the facts revealed by the evidence he led.

356. It is artificial to ignore the non-payment of the evaded GST when that is undeniably the end goal of the scheme. It is objectively clear that without that non-payment the Direct Suppliers Intermediaries participation in the scheme would have made no sense, and would not have happened. The artificiality in ignoring the non-payment by the Direct Suppliers probably explains the extensive evidence led by the Commissioner of the financial affairs of the Intermediaries and their lack of GST compliance.

357. The Direct Suppliers were, if outstanding liabilities are not taken into account, enriched in a cash sense by not paying the GST they were liable to pay. That enrichment exceeded the spot price differential between what they paid for bullion and what they sold the scrap gold for. That suggests those entities had a dominant purpose of enriching themselves by collecting money but not paying GST – that was the sole source of their enrichment.

358. There are no identifiable financial changes for any other entity that could be regarded as supporting a conclusion that an entity had a dominant purpose of the [taxpayer] obtaining the Denied ITCs. It may be the case, that entities enjoyed an enhanced turnover and profitability from the scheme, but they continued to enjoy refining styled profits.

359. Accordingly, the Tribunal concludes that any changes in the financial position of the other parties would not support a conclusion that any entity entered into or carried out the scheme or a part of it with the dominant purpose of the [taxpayer] obtaining the ITCs.

(emphasis added) ;

(8) as to other consequences for the taxpayer or a connected entity of the scheme having been entered into or carried out, and the relevance of the connection between the taxpayer and the connected entity including whether the dealing is or was at arm’s length (s 165-15(1)(i) and (j)):

361. There is no suggestion that the dealings between the Direct Suppliers other than CFGA and the [taxpayer] were other than at arm’s length in both the relationship sense and in the sense that commercial prices were paid for the relevant supplies. The latter is not surprising since there is no common ownership between the Direct Suppliers and the [taxpayer] or Galaxy.

362. This factor does not support a conclusion that any entity entered into the scheme or a part of the scheme with the dominant purpose of, or that the principal effect of the scheme or any part of the scheme was, the [taxpayer] obtaining the Denied ITCs.

363. Any knowledge of activities of transacting parties as contended for by the Commissioner could be attributed to pursuit of the end goal of the GST evasion in any event.

(emphasis added) ; and

(9) as to the circumstances surrounding the scheme and any other relevant circumstances (ss 165-15(1)(k) and (l)):

364. One such circumstance, excluded by the Commissioner from his articulated scheme, is the illegal evasion by non-payment of the Direct Suppliers’ GST liabilities.

365. That circumstance points in favour of a conclusion that the dominant purpose of the Direct Suppliers participating in the scheme or a part of the scheme was those suppliers enriching themselves by evading liabilities to the Commonwealth. It does not support a conclusion that any entity entered into the scheme or a part of the scheme with the dominant purpose of, or that the principal effect of the scheme or any part of the scheme was, the [taxpayer] obtaining the Denied ITCs.

366. Creating a structure of separate refining company and bullion dealing company pointed to by the Commissioner is quite equivocal in what it suggests. The Commissioner’s private ruling suggests that that is a normal event. The GST system of taxing transactions in gold specifically provides for two types of sale by a refiner, input taxed and GST free, both of which do not involve a GST impost to the refiner. Creation of the GST free sale pathway is the measure intended so as to allow ITCs to be claimed by a refiner. Creating that structure does not of itself, as the Commissioner’s ruling suggests, involve any GST mischief.

(emphasis added)

E.3.2 The Commissioner’s challenge

36 The first four questions described in the amended notice of appeal are:

1. Whether the Tribunal applied the test required by s 165-5(1)(c) of the GST Act.

2. Whether in taking account of the matters described in s 165-15, and determining whether it was reasonable to conclude under s 165-5(1)(c) that one or more of the entities that entered into or carried out the scheme, or part of the scheme, did so with the sole or dominant purpose of the Respondent getting a GST benefit from the scheme, the Tribunal correctly applied Mills v Commissioner of Taxation (2012) 250 CLR 171 and distinguished ACN 154 520 199 Pty Ltd (in liquidation) v Federal Commissioner of Taxation [2020] FCAFC 190; (2020) 282 FCR 455 and Federal Commissioner of Taxation v Complete Success Solutions Pty Ltd ATF Complete Solutions Trust [2023] FCAFC 19.

3. Whether, on the authority of ACN 154 520 199 Pty Ltd (in liquidation) v Federal Commissioner of Taxation [2020] FCAFC 190; (2020) 282 FCR 455 and Federal Commissioner of Taxation v Complete Success Solutions Pty Ltd ATF Complete Solutions Trust [2023] FCAFC 19, the Tribunal erred in concluding (at [368]-[371]) that the purpose of making taxable supplies and creating entitlements to input tax credits in the Respondent was separate from and preliminary to an ulterior and ultimate purpose of the Direct Suppliers not paying GST.

4. Whether the Tribunal correctly took account of the matters described in s 165-15, as required by s 165-5(1)(c)?

37 The Commissioner relies upon the following grounds of appeal in support of the above questions:

1. The Tribunal failed to apply the test required by s 165-5(1)(c) of the GST Act.

2. In concluding that the purpose of making taxable supplies and creating entitlements to input tax credits in the Respondent was separate from and preliminary and incidental to an ulterior and ultimate purpose of the Direct Suppliers not paying GST, the Tribunal misapplied ACN 154 520 199 Pty Ltd (in liquidation) v Federal Commissioner of Taxation [2020] FCAFC 190; (2020) 282 FCR 455, Federal Commissioner of Taxation v Complete Success Solutions Pty Ltd ATF Complete Solutions Trust [2023] FCAFC 19 and Mills v Commissioner of Taxation (2012) 250 CLR 171.

3. On the authority of ACN 154 520 199 Pty Ltd (in liquidation) v Federal Commissioner of Taxation [2020] FCAFC 190; (2020) 282 FCR 455, Federal Commissioner of Taxation v Complete Success Solutions Pty Ltd ATF Complete Solutions Trust [2023] FCAFC 19, the Tribunal ought to have found that the Direct Suppliers’ purpose of obtaining (and not remitting) GST was not inconsistent with the conclusion that the dominant purpose was obtaining the relevant input tax credits for the Respondent and that the purpose of obtaining (and not remitting) GST and the purpose of obtaining input tax credits for the Respondent were one purpose.

…

5. Further or in the alternative, the Second Tribunal failed properly to address s 165-5(1)(c) by:

(a) failing to consider whether the purpose of obtaining (and not remitting) GST and the purpose of obtaining input tax credits for the Respondent were inextricably linked, as required by Federal Commissioner of Taxation v Complete Success Solutions Pty Ltd ATF Complete Solutions Trust [2023] FCAFC 19; and

(b) distinguishing between the pursuit of a dishonest end and the pursuit of a GST benefit as the relevant comparison at [319].

E.3.3 Consideration

38 The Commissioner’s submissions are to the same effect as the Commissioner’s submissions in the ACN 154 appeal. I adopt, without repeating, paragraphs [76] to [102] of my reasons for judgment in ACN 2025 FC.

39 More particularly, it is plain from the Tribunal’s reasons – at T[271] to [273], [276] to [277], [279] and [310] – that the Tribunal understood its statutory task. Those reasons also demonstrate that during the course of carrying out its statutory task the Tribunal reached the views that:

(1) most of the s 165-15 factors did not support a conclusion that any entity entered into the scheme with the dominant purpose of the taxpayer obtaining the input tax credits (see T[323], [324], [327], [333], [336], [338], [353], [362]); and

(2) some of the factors – namely s 165-15(1)(f), (k) and (l) – supported a conclusion that the non-remittance of GST purpose, and not the input tax credits purpose, was the dominant purpose of the suppliers (see T[343], [345], [365], [378] and [379]).

40 Further, the Tribunal did not find that any of the s 165-15 factors supported a conclusion that any entity entered into the scheme with the dominant purpose of the taxpayer obtaining the input tax credits.

E.4 The fifth question – principal effect

41 The fifth question posited by the Commissioner corresponds to the fifth question in ACN 2025 FC and concerns the Tribunal’s conclusions as to the principal effect of the scheme. It is supported by the sixth ground of appeal, which is in similar terms to the sixth ground of appeal in ACN 2025 FC.

E.4.1 The Tribunal’s consideration of s 165-5(1)(c)(ii) of the GST Act

42 The Tribunal addressed the task under s 165-5(1)(c)(ii) of the GST Act – of determining whether the taxpayer had proven, taking into account the s 165-15 factors, that it was not reasonable to conclude that the principal effect of the scheme (or part of it) was that the taxpayer became entitled to receive the inputs tax credits – in conjunction with its task under s 165-5(1)(c)(i) of the GST Act (see E.3.1 above). Thus, there is some overlap in the analysis which follows.

43 In considering the s 165-15 factors the Tribunal made the following observations relevant to the question of principal effect:

(1) as to the manner in which the scheme was carried (s 165-15(1)(a)):

…

325. Similarly, the Tribunal does not identify any aspect of the manner in which the scheme was entered into or carried out that supports a conclusion that the principal effect of the scheme or any part of the scheme was the [taxpayer] obtaining ITCs. The principal effects of the scheme as a whole were the change of ownership of very high values of gold and after that securing a GST-informed amount of money and its retention through evading GST liabilities. The principal effect of the adulteration aspect of the manner of execution was to transform the character of the relevant gold and to devalue it.

(emphasis added);

(2) as to the form and substance of the scheme (s 165-15(1)(b)):

328. Similarly, the Tribunal does not consider that the difference between the form and substance of the scheme leads to a conclusion that the principal effect of the scheme or any part of the scheme was for the [taxpayer] to obtain ITCs.

329. The system of levying GST on dealings in gold substances is very much form driven. Metal in substance, i.e., chemically and atomically, identical, may be treated differently depending on its presentation or its form. Producing something that is in form different to its substance and transacting in it, as has happened here, transformed the character and its sale transferred the ownership of the highly valuable commodity. This was the principal effect to be recognised.

(emphasis added);

(3) as to the purpose or object of the GST Act (s 165-15(1)(c)):

…

334. Nor is there anything in the object of the GST Act that suggests the principal effect of the scheme, or a part of the scheme was for the [taxpayer] to obtain ITCs.

(emphasis added) ;

(4) as to the timing of the scheme and the period over which it was entered into and carried out (ss 165-15(1)(d) and (e)):

336. There does not appear to be any timing aspect of the scheme that suggests a … principal effect of securing the ITCs for the [taxpayer]. If anything, the timing aspects suggest the contrary.

…

340. The Tribunal is unable to identify any basis on which timing matters could support a conclusion that the principal effect of the scheme or a part of the scheme was the [taxpayer] obtaining ITCs.

(emphasis added) ;

(5) as to the effect that the GST Act would have in relation to the scheme apart from Division 165 (s 165-15(1)(f):

…

346. The Commissioner’s propositions to the effect that the scheme made no sense without the Disputed ITC entitlements, and an inability to trade viably without them, in respect of this test seem misplaced. However, the Commissioner’s proposition under this test that:

After the Intermediaries obtained a GST inclusive price that depended on [the taxpayer’s] GST refunds for input tax credits (the GST benefits), many evaded their obligation to remit GST that [the taxpayer] paid them in the price of its scrap acquisitions.

The Tribunal ought to find that such evasion would not have occurred but for the creation of [the taxpayer’s] entitlement to GST refunds under the scheme, as it was uneconomical for the Intermediaries to acquire bullion, supply scrap and pay the GST on their scrap supplies to [the taxpayer].

reveals the facilitative nature of the payment of a GST-informed price and the taxable supplies that lead to it and any ITC entitlement associated with it in a scheme to acquire and keep money in an illegal evasion scheme.

(emphasis added) ;

(6) as to any change in the taxpayer’s financial position that has resulted, or may reasonably be expected to result, from the scheme (s 165-15(1)(g)):

348. However, the test and necessary comparison is not:

any change in the avoider’s financial position that has resulted, or may reasonably be expected to result, from the GST benefit

350. From the [taxpayer’s] perspective, namely an enterprise that produced precious metal and sold it thus making GST-free supplies:

(a) ITC entitlements arose in respect of all of its inputs to that process that were taxable supplies to it including all of the supplies underlying the Disputed ITCs;

(c) the [taxpayer] enjoyed enhanced turnover from its participation in the scheme and resultant trading profits from that enhanced turnover.

351. Viewed globally, the only potentially measurable financial benefit was enhanced profitability from enhanced trading.

(bold and underline emphasis in original; italic emphasis added) ;

(7) as to any change that has resulted, or may reasonably be expected to result from the scheme in the financial position of any entity connected to the taxpayer (s 165-15(1)(h)):

355. The Commissioner’s submission, which stops there, analyses half the story, and ignores the facts revealed by the evidence he led.

…

360. Similarly, this factor does not support a conclusion that the availability of the ITCs was the principal effect of the scheme or a part of the scheme. A financial effect of ITCs would be illusory when, as here, matched by a liability to pay a price that includes a corresponding amount of GST.

(emphasis added) ;

(8) as to other consequences for the taxpayer or a connected entity of the scheme having been entered into or carried out, and the reliance of the connection between the taxpayer and the connected entity including whether the dealing is or was at arm’s length (s 165-15(1)(i) and (j)):

363. Any knowledge of activities of transacting parties as contended for by the Commissioner could be attributed to pursuit of the end goal of the GST evasion in any event.

(emphasis added) ; and

(9) as to the circumstances surrounding the scheme and any other relevant circumstances (ss 165-15(1)(k) and (l)):

364. One such circumstance, excluded by the Commissioner from his articulated scheme, is the illegal evasion by non-payment of the Direct Suppliers’ GST liabilities.

(emphasis added)

E.4.2 The Commissioner’s challenge

44 The fifth question in the amended notice of appeal is:

Whether for the purposes of s 165-5(1)(c)(ii) the Tribunal correctly applied the meaning of the principal effect of the scheme, or part of the scheme.

45 That question is supported by the sixth ground of appeal:

6. Further or in the alternative, in concluding at [317], [325] and [329] that:

(a) the principal effects of the scheme were to transform the character of the gold, to transfer the ownership of it and after that the fraud on the Commissioner, and

(b) the creation of the input tax credits for the Respondent was an incidental and facilitative part of the scheme,

the Tribunal failed correctly to apply the meaning of the principal effect of the scheme, or part of the scheme under s 165-5(1)(c)(ii).

E.4.3 Consideration

46 The Commissioner’s submissions are to the same effect as the Commissioner’s submissions in the ACN 154 appeal. Subparagraph (b) of ground 6 (which was not part of the corresponding ground in the ACN 154 appeal) was not separately developed. For the reasons given in paragraphs [111] to [116] of my reasons for judgment in ACN 2025 FC – and substituting references to T[325] and [329] for T[172] and [176] – this question must fail.

E.5 The sixth question – treatment of the object and purpose of the GST Act

47 The sixth question posited by the Commissioner corresponds to the sixth question considered in ACN 2025 FC. It is supported by the eighth ground of appeal, which is in relevantly identical terms to the eighth ground of appeal in ACN 2025 FC.

48 The sixth question and the eighth ground of appeal described in the amended notice of appeal concern the Tribunal’s treatment of one of the s 165-15 factors, namely s 165-15(1)(c). That sub-section relevantly provides that when considering an entity’s purpose in entering into or carrying out a scheme and the effect of a scheme under s 165-5, account must be taken of the purpose or object of the GST Act and any relevant provision of that Act (whether the purpose or object is stated expressly or not).

E.5.1 The Tribunal’s consideration of s 165-15(1)(c) of the GST Act

49 At T[320], the Tribunal stated:

Absent adulteration of gold bullion, in many respects the relevant transactions were carried out in the way of ordinary transactions. The steps taken were largely as would be expected in arm’s length sales of scrap gold and gold bullion. Indeed, aside from the one respect noted immediately below, but for the non-payment of GST by the Direct Supplier the transactions would likely have been regarded as unremarkable from a fiscal perspective.

50 The Tribunal addressed s 165-15(1)(c) of the GST Act at T[330] to [334]:

330. So far as [the taxpayer] obtained the Denied ITCs on the acquisition of taxable supplies in the course of its enterprise, that is an unremarkable outcome under the GST Act. It is well-known that, with limited exceptions, GST on acquisitions is intended to have a neutral impact on a GST-registered taxpayer’s costs. That is a fundamental feature of value-added taxation systems throughout the world. It does not support a conclusion that any entity entered into the scheme or a part of the scheme with the dominant purpose of [the taxpayer] obtaining ITCs.

333. This factor does not suggest a conclusion that producing the GST benefit was the dominant purpose of the scheme for these supplies.

334. Nor is there anything in the object of the GST Act that suggests the principal effect of the scheme, or a part of the scheme was for [the taxpayer] to obtain ITCs.

51 These paragraphs are relevantly identical to paragraphs [166] and [177] to [181] of the Second Tribunal’s reasons in ACN 2025 FC.

E.5.2 The Commissioner’s challenge

52 The sixth question in the amended notice of appeal is:

Whether the Tribunal was correct in its determination and consideration of the policy and purpose of the GST Act.

53 That question is supported by the eighth ground of appeal:

Further or in the alternative, in determining and considering the purpose and object of the GST Act, the Tribunal erred by failing to take into account the purpose and object of Division 165 of the GST Act (being to deter schemes to give entities benefits by reducing GST, increasing refunds or altering the timing of payment of GST or refunds) and by failing to consider that object and purpose having regard to the matters set out in s 165-15(1)(c).

E.5.3 Consideration

54 The Commissioner’s question, grounds and submissions are relevantly the same as those advanced as the sixth question (supported by the eighth ground) in ACN 2025 FC. As noted above, the salient paragraphs of the Second Tribunal’s reasons in ACN 2025 FC and the present Tribunal Decision are relevantly identical. For the reasons given in my reasons for judgment at paragraphs [122] to [124] of ACN 2025 FC – and substituting references to T[330] to [334] for T[177] to [181] – this question must fail.

F. CONCLUSION

55 For the reasons set out above, the appeal should be dismissed.

I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Goodman.

Associate:

Dated: 24 October 2025

REASONS FOR JUDGMENT

FEUTRILL J:

INTRODUCTION

56 Division 165 of A New Tax System (Goods and Services Tax) Act 1999 (Cth) contained certain general anti-avoidance provisions aimed at negating the fiscal consequences of artificial or contrived schemes that reduce the GST tax base. Division 165 operated if an entity (avoider) got a GST benefit from a scheme and, taking into account certain mandatory matters, it was reasonable to conclude that either: (1) an entity that entered into or carried out the scheme did so with the dominant purpose of that entity or another entity getting a GST benefit from the scheme; or (2) the principal effect of the scheme was that the avoider got the GST benefit from the scheme: s 165-5(1)(c). If Div 165 applied, the applicant (Commissioner) had power to make a declaration that had the effect of negating a GST benefit of the avoider: s 165-40. The Commissioner also had power to make assessments or amended assessments of the amount payable by or to the avoider under certain provisions contained in Sch 1 to the Taxation Administration Act 1953 (Cth).

57 Initially for reasons unrelated to Div 165, the Commissioner exercised certain powers by which refunds in the total amount of $9,457,634 which the respondent (taxpayer) had received were disallowed and administrative penalties were imposed. The taxpayer objected to the assessments under the provisions of Pt IVC of the Taxation Administration Act. After a deemed disallowance of the taxpayer’s objections, the taxpayer sought review of the objection decision in the Administrative Appeals Tribunal. The Commissioner contended that the objection decision should be affirmed on the ground, amongst others, that Div 165 applied because the taxpayer had obtained refunds for input tax credits under a gold refining scheme entered into or carried out by a number of entities (referred to as the Direct Suppliers, Indirect Suppliers and collectively Intermediaries) which had supplied scrap gold to the taxpayer. The Tribunal affirmed part of the disallowance decision, including a shortfall penalty, on a separate ground, but, otherwise found that it was not reasonable to conclude that an entity had the s 165-5(1)(c)(i) ‘dominant purpose’ or the scheme had the s 165-5(1)(c)(ii) ‘principal effect’. As a consequence, the taxpayer was entitled to the majority of the refunds that the Commissioner had disallowed.

58 The Commissioner commenced an appeal from that decision under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth). The AAT Act has since been repealed and the Administrative Review Tribunal Act 2024 (Cth) enacted by which the Administrative Appeals Tribunal has been abolished and replaced by the Administrative Review Tribunal. Under certain transitional provisions this appeal continues as if it were an appeal under s 44 of the AAT Act and, if the Tribunal decision is set aside, the matter may be remitted to the Administrative Review Tribunal.

59 In the form in which it was ultimately pressed, the notice of appeal identifies six questions of law and six grounds in support of asserted errors of law. The overall question of law posed is whether the Tribunal correctly applied the legal test mandated in s 165-5(1)(c) of the GST Act and, thereby, correctly concluded that it was not reasonable to conclude that an entity had the statutory ‘dominant purpose’ or the scheme had the statutory ‘principal effect’ (Question 1). The answer to that question essentially turns on the answers to each of the other questions posed in the notice of appeal. The aspects of the Tribunal’s decision challenged and the issues raised in the appeal may be summarised as follows.

(1) The Commissioner challenges the conclusion, for the purposes of s 165-5(1)(c)(i), that it was not reasonable to conclude that an entity entered into or carried out the scheme or part of the scheme with the dominant purpose of getting the taxpayer a GST benefit from the scheme. There were a number of strands to the Commissioner’s contentions, but these largely boil down to two main issues. First, whether in the application of a facilitative purpose of an ultimate purpose analysis drawn from Mills v Federal Commissioner of Taxation [2012] HCA 51; 250 CLR 171 the Tribunal disregarded the statements of principle applicable to consideration of composite purposes in ACN 154 520 199 Pty Ltd (in liq) v Federal Commissioner of Taxation [2020] FCAFC 190; 282 FCR 455 and Federal Commissioner of Taxation v Complete Success Solutions Pty Ltd [2023] FCAFC 19; 116 ATR 9 and, thereby, misconstrued and misapplied the s 165-5(1)(c)(i) ‘dominant purpose’ test. Second, whether there was a failure to consider the importance of the taxpayer getting input tax credits to the economic feasibility of the scheme and, thereby, the Tribunal failed to exclude that potential importance in its consideration of which of the competing purposes was dominant (Questions 1 – 4, Grounds 1 – 3, 5).

(2) The Commissioner challenges the conclusion, for the purposes of s 165-5(1)(c)(ii), that it was not reasonable to conclude that the principal effect of the scheme or part of the scheme was that the taxpayer got the GST benefit. Here, there are also two issues. First, whether there was a misconstruction and misapplication of the s 165-5(1)(c)(ii) ‘principal effect’ test because the Tribunal incorrectly focussed on the general non-fiscal effects of the change in ownership and form of gold and the evasion of GST liabilities rather than on the fiscal effect of the particular scheme or part of the scheme. Second, as with dominant purpose, whether there was a failure to consider the importance of the taxpayer getting input tax credits to the economic feasibility of the scheme and, thereby, the Tribunal failed to exclude that potential importance in its consideration of the effect of the scheme, in particular, that part of the scheme in which the taxpayer participated (Question 5, Ground 6).

(3) The Commissioner challenges the manner in which the matter described in s 165-15(1)(c), the purpose or object of the GST Act or any provision of that Act, was taken into account in considering the statutory questions posed in s 165-5(1)(c). The relevant issue is whether the purpose or object of Div 165 to deter artificial or contrived schemes was a mandatory matter to be taken into account and that matter was disregarded in considering the statutory questions (Question 6, Ground 8).

60 This appeal was heard at the same time as a separate appeal the Commissioner commenced from a decision of the AAT (comprised of the same member) in the proceeding remitted to AAT as a consequence of the judgment of the Court in Full Court ACN 2020. That proceeding concerned the review of an objection decision of the Commissioner involving the negation of refunds under Div 165 in connection with a scheme entered into or carried out by a number of entities which had supplied scrap gold to the relevant taxpayer (also a refiner of precious metals). Although involving different parties and facts, the scheme the subject of the other appeal and circumstances in which that scheme was entered into and carried out were substantially the same as the scheme and circumstances applicable to this appeal. The Tribunal identified the same legal principles and applied them in the same manner as they were applied to the facts of this case. Questions 1 – 4 and grounds 1 – 3, 5, 6 and 8 in this appeal are common and raise the same issues as the corresponding questions and grounds considered in the other appeal. The Court allowed the Commissioner’s appeal in that proceeding and delivered reasons for its decision immediately before pronouncing judgment in this appeal: Commissioner of Taxation v ACN 154 520 199 Pty Ltd [2025] FCAFC 146.

61 The statutory context and provisions of Div 165 are set out, summarised, analysed and explained in the reasons for judgment in Full Court ACN 2025 at [144]-[153]. Those reasons also explain the principles applicable to identification of s 165-5(1)(c) ‘dominant purpose’ and ‘principal effect’ and the significance and applicable principles to be derived from the Full Court decisions in Full Court ACN 2020 and Complete Success and the High Court decision Mills: Full Court ACN 2025 at [193]-[228]. I adopt that summary and explanation and, except as is necessary to explain my reasons in this appeal, none of those matters need be repeated. However, due to the similarity and overlapping nature of the issues, in order to explain my reasons in this appeal, it has been necessary to duplicate in more-or-less the same terms significant parts of the reasoning in Full Court ACN 2025.

62 In short, in my view, in the application of the applicable principles to the facts as found in this case the Tribunal misconstrued and misapplied s 165-5(1)(c)(i) in adopting and applying a facilitative purpose analysis in its consideration of the ‘dominant purpose’ statutory inquiry mandated in Div 165. The Tribunal also misconstrued and misapplied the s 165-5(1)(c)(ii) ‘principal effect’ inquiry by failing to focus on the fiscal effect of the scheme. Further, the Tribunal misconstrued and misapplied s 165-5(1)(c) and s 165-15(1)(c) by disregarding that a purpose or object of Div 165 is to deter artificial or contrived schemes. Otherwise, I do not accept that any of the other matters the Commissioner raised involve errors of law. The Tribunal’s decision should be set aside for errors of law and the matter remitted to the Administrative Review Tribunal for determination according to law.

63 The relevant taxpayer in Full Court ACN 2025 also contended that the Commissioner’s notice of appeal failed to raise a question of law. The taxpayer in this appeal raised a similar contention in its written submissions and, to an extent, adopted the other taxpayer’s oral submissions on that topic. But, the taxpayer accepted that an error in the application of the legal principles to the facts as found is an appeal ‘on a question of law’ for the purposes of s 44 of the AAT Act. Having regard to the nature of the errors the Tribunal made in this case, for the reasons given in the other appeal regarding errors of the same kind, this is also an appeal ‘on a question of law’: Full Court ACN 2025 at [182]-[192].

STATUTORY CONTEXT

GST Act

64 In brief, the GST Act provided that GST is payable on ‘taxable supplies’ and entitlements to ‘input tax credits’ arise on ‘creditable acquisitions’: s 7-1. Amounts of GST and amounts of input tax credits are set off against each other to produce a ‘net amount’ for a tax period: s 7-5. The amount assessed as being the ‘net amount’ for a tax period is the amount that the entity must pay to the Commonwealth or the Commonwealth must refund to the entity in respect of the period: s 7-15. A person must pay GST on any taxable supply made by that person: s 9-40. A person is entitled to input tax credits on any creditable acquisition made by that person: s 11-20. The amount of the GST liability is 10% of the value of the taxable supply or one eleventh of the consideration for the taxable supply.

65 Relevantly, a taxable supply is made if the supply is for consideration, made in the course or furtherance of an enterprise the taxpayer carries on, and the taxpayer is registered or required to be registered. However, the supply is not a taxable supply to the extent that it is ‘GST-free’ or ‘input taxed’: s 9-5. A ‘creditable acquisition’ is made if anything is acquired solely or partly for a creditable purpose, the supply of the thing is a taxable supply, consideration is provided for the supply, and the acquirer is registered or required to be registered: s 11-5. A thing is acquired for a ‘creditable purpose’ to the extent that it is acquired in carrying on the acquirer’s enterprise: s 11-15. An ‘enterprise’ is an activity or series of activities, done in the form of a business or in the form of an adventure or concern in the nature of trade: s 9-20(1). A person is required to be registered under the GST Act if the person is carrying on an enterprise and the person’s GST turnover meets the registration turnover threshold: s 23-5.

66 Broadly, the GST Act assumes that a GST liability will be included in the consideration for a taxable supply and where the thing acquired is used in the course or furtherance of an enterprise the notional GST liability embedded in the consideration will be refunded through an entitlement to an input tax credit. Through this system of setting off GST liability against input tax credit and assessment and payment or refund of the ‘net amount’, the burden of the tax is borne by the ultimate consumer of goods and services.

67 There are special rules relating to certain supplies that are ‘GST-free’ or ‘input taxed’: Div 38, Div 40. These rules include certain supplies of ‘precious metal’. The expression ‘precious metal’ is defined to mean gold, silver or platinum in investment form of at least 99.5%, 99.9 or 99% fineness or any other substance in investment form of particular fineness specified in regulations: s 195-1.

68 Without special rules, dealers in precious metal would not be able to ‘pass on’ a liability incurred to pay GST on an otherwise taxable supply of a precious metal because the consideration for the supply of the precious metal would be fixed by the international price for that precious metal. To avoid that outcome, the first supply of precious metals after it is refined is ‘GST-free’ if the entity that refined the precious metal is a ‘refiner of precious metal’ and the recipient of the supply is a ‘dealer in precious metal’: s 38-385. Likewise, subsequent transactions involving precious metal where the consideration is also fixed internationally are ‘input taxed’: s 40-100. To the extent that a supply is both ‘GST-free” and ‘input taxed’, in general, the supply is GST-free and not input taxed for the purposes of the GST Act: s 9-30(3). See, also, Explanatory Memorandum to A New Tax System (Goods and Services) Tax Bill 1998 (Cth), paras 5.125 – 5.127.

General anti-avoidance provisions

69 Division 165 contains general anti-avoidance provisions that are in similar terms and operate in a similar way to other general anti-avoidance provisions in Commonwealth taxation legislation.

70 During the relevant period, ss 165-5, 165-10 and 165-15 of the GST Act provided:

165-5 When does this Division operate?

General rule

(1) This Division operates if:

(a) an entity (the avoider) gets or got a *GST benefit from a *scheme;

…

(ii) the principal effect of the scheme, or of part of the scheme, is that the avoider gets the GST benefit from the scheme directly or indirectly; …

…

165-10 When does an entity get a GST benefit from a scheme?

(1) An entity gets a GST benefit from a *scheme if:

(a) an amount that is payable by the entity under this Act apart from this Division is, or could reasonably be expected to be, smaller than it would be apart from the scheme or a part of the scheme; or

(b) an amount that is payable to the entity under this Act apart from this Division is, or could reasonably be expected to be, larger than it would be apart from the scheme or a part of the scheme;

…

What is a scheme?

(2) A scheme is:

(a) any arrangement, agreement, understanding, promise or undertaking:

(i) whether it is express or implied; and

(ii) whether or not it is, or is intended to be, enforceable by legal proceedings; or

(b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.

GST benefit can arise even if no economic alternative

(3) An entity can get a *GST benefit from a *scheme even if the entity or entities that entered into or carried out the scheme, or a part of the scheme, could not have engaged economically in any activities:

(a) of the kind to which this Act applies; and

(b) that would produce an effect equivalent (except in terms of this Act) to the effect of the scheme or part of the scheme;

other than the activities involved in entering into or carrying out the scheme or part of the scheme.

165-15 Matters to be considered in determining purpose or effect

(a) the manner in which the scheme was entered into or carried out;

(b) the form and substance of the scheme, including:

(i) the legal rights and obligations involved in the scheme; and

(ii) the economic and commercial substance of the scheme;

(c) the purpose or object of this Act, the Customs Act 1901 (so far as it is relevant to this Act) and any relevant provision of this Act or that Act (whether the purpose or object is stated expressly or not);

(d) the timing of the scheme;

(e) the period over which the scheme was entered into and carried out;

(f) the effect that this Act would have in relation to the scheme apart from this Division;

(g) any change in the avoider’s financial position that has resulted, or may reasonably be expected to result, from the scheme;

(i) any other consequence for the avoider or a connected entity of the scheme having been entered into or carried out;

(j) the nature of the connection between the avoider and a connected entity, including the question whether the dealing is or was at arm’s length;

(k) the circumstances surrounding the scheme;

(l) any other relevant circumstances.

(2) Subsection (1) applies in relation to consideration of an entity’s purpose in entering into or carrying out a part of a *scheme from which the avoider gets or got a *GST benefit, and the effect of part of the scheme, as if the part were itself the *scheme from which the avoider gets or got the GST benefit.

71 If Div 165 operated, the Commissioner had a discretion to negate a GST benefit by making a declaration about the avoider’s net amount for a specified tax period under s 165-40. Schedule 1 of the Taxation Administration Act contained provisions by which the Commissioner could make assessments and amended assessments based on the ‘net amount’ for a tax period.

72 The pre-conditions to the operation of Div 165 were: (1) there was a scheme; (2) an entity got a GST benefit from that scheme; and (3) taking into account the matters described in s 165-15, an entity entered into or carried out the scheme or part of the scheme with a s 165-5(1)(c)(i) ‘dominant purpose’ or a s 165(1)(c)(ii) ‘principal effect’.

BACKGROUND

73 Mr Salib was the sole director and shareholder of Cash for Gold Australia Pty Ltd, Galaxy Coins and Bullion Pty Ltd and the taxpayer.

74 Cash for Gold Australia was incorporated in 1996. From around 2002, in its capacity as trustee of the Salib Family Trust, it traded as a licensed second-hand gold dealer. In 2009, as trustee, it changed its business to acquire scrap gold and sell it to refiners.

75 Galaxy was incorporated and registered for GST under the GST Act in 2016. It was a dealer in precious metals.

76 The taxpayer was incorporated and registered for GST under the GST Act in 2013. Mr Salib established the taxpayer to refine ‘his own gold’ from his other entity to save money and grow the business. Mr Salib invested $935,000 in the taxpayer to enable it to acquire scrap gold and plant and equipment for use in the refining process. The funds were sourced from distributions of income from the Salib Family Trust.

77 The taxpayer’s business involved acquiring scrap gold and refining that gold into gold metal in investment form (precious metals). It used the ‘aqua regia’ refining process. That process requires hydrochloric acid, nitric acid and sulphur dioxide gas. The taxpayer secured the right to apply the registered C4G hallmark to the precious metal it produced from Cash for Gold Australia. The taxpayer sold the gold metal in investment form to Galaxy. Galaxy sold the gold (precious metal) to unrelated parties.

78 The Commissioner conducted an audit of the taxpayer and reached the following conclusions with respect to input tax credits the taxpayer had claimed for the tax periods July, August, September, October and November 2016.

(a) The taxpayer sold almost all the gold (precious metal) it produced to Galaxy.

(b) Galaxy sold the gold (precious metal) to parties that formed part of one or more of 11 supply chains. The supply chains involved eight parties referred to as the Direct Suppliers and 12 parties referred to as the Indirect Suppliers. Each supply chain had a Direct Supplier and one or more Indirect Suppliers. The Direct Suppliers and Indirect Suppliers were referred to collectively as the Intermediaries.

(c) Almost all the taxpayer’s scrap gold purchases during the relevant period were purchases from the Direct Suppliers. The Direct Suppliers were participants in one or more of the supply chains.

(d) Direct Suppliers acquired gold (precious metal) from Galaxy or Indirect Suppliers which had acquired gold (precious metal) from Galaxy.

(e) Somewhere within the supply chains gold metal in investment form was adulterated and became scrap gold.

(f) In nearly every supply chain culminating in a supply of scrap gold to the taxpayer, one Intermediary did not pay GST liabilities.

(g) There was insufficient evidence that the taxpayer had made creditable acquisitions from one of the Direct Suppliers.

(h) With respect to all Direct Suppliers the scrap gold acquired had been previously refined with the effect that the taxpayer was not entitled to input tax credits in respect of those acquisitions.

79 During the relevant period the taxpayer lodged business activity statement (or BAS) returns in which it claimed input tax credits on the acquisitions of scrap gold from the Direct Suppliers. The taxpayer treated its supplies of gold metal in investment form as input taxed under s 40-100 of the GST Act. Some of these returns resulted in assessments and refunds and other to prospective refunds that the Commissioner retained under s 8AAZLGA of the Taxation Administration Act.

80 Several Intermediaries failed to lodge a BAS return for the relevant period or lodged returns that understated the net amount of GST payable on supplies of scrap gold. Evidently, the Commissioner has not recovered the GST liabilities the Intermediaries incurred on notional taxable supplies of scrap gold during the relevant period.

81 On 5 December 2017, at the conclusion of the audit, the Commissioner issued amended assessments to the taxpayer in which he denied the taxpayer input tax credit claims to the extent of $9,457,634 for the tax periods July, August, September, October and November 2016. The Commissioner also issued assessments for shortfall penalties in the total sum of $5,371,390.40.

82 On 17 December 2017 the taxpayer objected to the amended GST and penalty assessments. On 17 July 2018 the Commissioner informed the taxpayer that pursuant to s 14ZYA of the Taxation Administration Act the Commissioner was taken, on 23 April 2018, to have disallowed the objections. The taxpayer then sought review of the objection decisions in the Tribunal. In the Tribunal proceeding the Commissioner refined the grounds for disallowing the input tax credit claims and included a contention that Div 165 applied and that the Tribunal should make or direct the Commissioner to make a declaration under s 165-40 of the GST Act negating the GST benefits the taxpayer obtained.

83 The Tribunal affirmed the decision to disallow $1,854,316 in input tax credits claimed and the shortfall penalty of $1,569,731.40 on the ground that the taxpayer had not demonstrated that it had made creditable acquisitions from one of the Direct Suppliers (Golden Angel supply chain). Otherwise, the Tribunal concluded that Div 165 was not applicable and, therefore, the taxpayer was entitled to the remaining $7,603,318 in claimed input tax credits.

TRIBUNAL DECISION

The scheme

84 The Tribunal made findings to the effect that the taxpayer acquired scrap gold from the Direct Suppliers through one or more of supply chains involving Indirect Suppliers. Many of the supply chains were somewhat complicated, but the common features were:

(1) a supply of gold (precious metal) from Galaxy to an Indirect Supplier;

(2) further supplies of gold involving one or more Indirect Suppliers and ending with a supply to a Direct Supplier; and

(3) a supply from a Direct Supplier to the taxpayer.

In the one exception, the gold (precious metal) was supplied to the Direct Supplier and the Direct Supplier supplied the taxpayer with scrap gold.

85 The supply chains included one in which Cash for Gold Australia was the party to which Galaxy supplied investment form gold metal. Cash for Gold Australia supplied that gold to various Indirect Suppliers. Cash for Gold Australia, in turn, acquired scrap gold from various Indirect Suppliers and supplied the scrap gold to the taxpayer. That is, Mr Salib was involved in the management of all parties in that supply chain except for the various Indirect Suppliers.

86 The Tribunal also made findings of fact consistent with essential elements of the scheme the Commissioner articulated. In substance, the scheme during the relevant period comprised the following steps:

(a) The taxpayer supplied gold metal in investment form to Galaxy for consideration based on the spot price for gold plus a small margin. Baird & Co (another refiner of precious metal) supplied gold metal in investment form to QN Traders (another dealer of precious metal) for consideration roughly equivalent to the spot price of gold.

(b) Galaxy supplied gold metal in investment form to Intermediaries for consideration of 100.50% to 101% of the prevailing spot price of gold. QN Traders supplied certain Indirect Suppliers with gold metal in investment form bearing the Baird & Co hallmark.

(c) An unascertained portion of gold metal in investment form acquired by Direct Suppliers or Indirect Suppliers was adulterated by Direct Suppliers or somewhere in the applicable supply chain so that it was no longer in investment form (scrap gold).

(d) Intermediaries supplied gold metal, if not directly to the taxpayer, then to a subsequent acquirer (another Intermediary).

(e) The Intermediary that supplied gold metal directly to the taxpayer was a Direct Supplier. The Intermediaries that supplied gold metal to another Intermediary were Indirect Suppliers. Indirect Suppliers supplied gold metal to Direct Suppliers through the various supply chains described earlier each ending with the supply of gold metal to a Direct Supplier.

(f) Direct Suppliers supplied scrap gold to the taxpayer. The consideration for the gold metal was 105.47% to 107.99% of the prevailing spot price for gold which equated to 95.89% to 98.18% of the prevailing spot price of gold plus a 10% margin for GST.

(g) The taxpayer refined the scrap gold acquired from the Direct Suppliers to produce gold metal in investment form.

(h) The taxpayer supplied to Galaxy gold metal in investment form for consideration based on the spot price for gold plus a small margin.

87 The total gold (precious metal) the taxpayer supplied to Galaxy through step (a) and step (h) of the scheme was 1.8 million grams representing all the 1kg hallmarked gold bars the taxpayer produced in the relevant period. The value of that gold metal was $103.1 million (excluding GST). The taxpayer received $79.6 million for the gold. (These amounts include the value and consideration received for transactions in the Golden Angel supply chain.)

88 The gold (precious metal) Galaxy supplied to the Direct Supplier was 771,000 grams and to the Indirect Suppliers was 1.02 million grams in the relevant period (1.79 million grams in total). The total supplied to the Direct Suppliers by Indirect Suppliers through the supply chains was 1.426 million grams.

89 The total scrap gold Direct Suppliers supplied to the taxpayer was 1,785,903 grams representing 99.39% of the taxpayer’s scrap gold acquisitions and 92.64% of the Direct Supplier’s supplies of scrap gold during the relevant period. The value of that scrap gold was $108.3 million (including GST). The taxpayer paid $83.6 million for the gold. (These amounts include the value and price of transactions in the Golden Angel supply chain.)

90 A considerable portion of the scrap gold the taxpayer acquired was already of a high percentage of fineness. An unascertained portion of gold metal that the taxpayer had refined found its way back to the taxpayer as scrap gold and was again refined into investment form.

91 The supply of scrap gold referred to in step (f) of the scheme was notionally a ‘taxable supply’ within the meaning of the GST Act. As a consequence, the Intermediaries incurred a liability to the Commonwealth to pay GST calculated as one eleventh of the consideration for the supply. At the same time, the acquisition of the scrap gold was notionally a ‘creditable acquisition’ within the meaning of the GST Act. As a consequence, the taxpayer was ultimately entitled to input tax credits calculated as one eleventh of the consideration for the taxable supply.

92 The difference between the value of the gold (precious metal) supplied and acquired and amounts received and paid for that gold was due to an offset agreement between the taxpayer and Galaxy and the participants in the Golden Angel supply chain. Given that the taxpayer failed to demonstrate that these transactions involved creditable acquisitions, the difference may be ignored. However, relevantly, as to the remaining transactions the consideration payable for the scrap gold (including GST) exceeded the consideration receivable for the refined gold (precious metal) (excluding GST). Therefore, the commercial viability of the acquisition and refining of the scrap gold, from the perspective of the taxpayer, depended upon an entitlement to refunds for input tax credits.

93 Although not part of the scheme as articulated, the Direct Suppliers failed to pay the GST liabilities incurred on the notional taxable supplies. The Tribunal described this ‘wider design’ (i.e., the whole design including the step of non-payment of GST liabilities) as dishonest or fraudulent and as a ‘missing trader or carousel fraud arrangement’.

94 If the notional effects of the GST Act are ignored, the Intermediaries made notional gains on the acquisition of gold in investment form as the consideration paid was based on the value of gold (precious metal) and it was supplied to the taxpayer for consideration that included a 10% markup on the value of gold metal in scrap gold. The taxpayer made notional losses because it acquired the scrap gold for consideration based on its value plus a 10% markup, refined it into investment form and then supplied it for consideration based on the value of the gold metal in investment form.

95 If the notional effects of the GST Act are taken into account, the opposite is the case. The Intermediaries made cash-flow losses if their GST liabilities were discharged and the taxpayer would make gains (depending on the movement in international value of gold metal) after refining the gold because the 10% markup included in the consideration paid for the scrap gold would be refunded to the taxpayer through input tax credits.

96 It is self-evident that no commercially rational refiner of precious metal would acquire scrap gold at a 10% markup to the value of the gold metal unless it believed it would recover the whole consideration as part of its enterprise. Therefore, the assumption the taxpayer would be entitled to input tax credits, objectively, was an inducement for the taxpayer to pay the Intermediaries the consideration it paid for the scrap gold.

97 It is equally self-evident that no commercially rational dealer of precious metal would acquire gold metal in investment form, change its form into scrap gold and thereby devalue the gold content and supply it to a refiner of precious metal at a loss. Therefore, objectively, the Intermediaries intended to supply the scrap gold for the value of the gold metal plus a 10% markup, but not discharge any GST liability they incurred.

GST benefit

98 The Tribunal found that the taxpayer obtained a GST benefit from the scheme. The Tribunal found that if the scheme had not been carried out the taxpayer would not have been entitled to input tax credits for acquisitions of scrap gold from the Direct Suppliers and, as a consequence, the refunds the taxpayer received in the relevant period were larger than they would have been but for the scheme: T [216], [275], [283]-[288].

Dominant purpose and principal effect

99 Having made findings, in effect, that the scheme the Commissioner articulated was entered into and carried out by the Intermediaries and that the taxpayer was a participant in that scheme and obtained a GST benefit, the Tribunal was required to decide if, taking into account the matters described in s 165-15, it was not reasonable to conclude that either: the Intermediaries (or the taxpayer) entered into or carried out the scheme or part of the scheme with the sole or dominant purpose of the taxpayer getting a GST benefit from the scheme; or the principal effect of the scheme or part of the scheme was that the taxpayer got the GST benefit from the scheme directly or indirectly.

100 The objective consequence of the steps described in steps (c) and (f) of the scheme were as follows.

(1) To change the form of the gold metal from investment form into scrap gold. That step changed the way a supply of the gold metal would be treated under the GST Act and placed the Direct Suppliers in a position in which they could obtain consideration from the taxpayer based on the value of the scrap gold plus a 10% markup.

(2) To supply scrap gold to the taxpayer. That step involved a notional ‘taxable supply’ of the scrap gold.

(3) The Direct Suppliers became liable to pay a GST liability of 10% of the value of the scrap gold and the taxpayer became entitled to an input tax credit of 10% of the value of the scrap gold.

101 It is self-evident that an intended consequence of that part of the scheme was for the Direct Suppliers to secure consideration for the supply of scrap gold that included a 10% markup on the value of the gold metal. The GST Act or fiscal consequence was to ‘create’ a notional ‘taxable supply’ of gold metal. That, in turn, had the fiscal consequences of the Direct Suppliers incurring a GST liability and the taxpayer becoming entitled to input tax credits. It is also self-evident that without creating a notional ‘taxable supply’ the taxpayer would not have paid consideration that included a 10% markup on the value of the scrap gold and the Direct Suppliers would not have secured that consideration and the scheme would have been loss-making. It was within that factual and legal context that the Tribunal was called upon to address the statutory questions posed in s 165-5(1)(c).

102 In the proceeding before the Tribunal the taxpayer contended, amongst other things, that the dominant purpose of the Intermediaries was to obtain and retain for themselves the cash flow profit by collecting GST-informed prices from the taxpayer but not paying their GST liabilities to the Commonwealth and that receiving the enhanced price and failing to pay GST liabilities (in combination) was the principal effect of the scheme. Amongst other things, the Commissioner contended that there was no dichotomy between a goal of obtaining a GST-informed price and absconding without paying the GST liability and a dominant purpose of getting the taxpayer input tax credits. Further, adulterating the gold in investment form could only be explained as a means to ‘embed GST into the on-sale of the metal’, and create a market for scrap gold. It was embedding the GST in the on-sale of the metal that ‘gives life to a market for the transactions, because [it is] the refund from the Commissioner to the refiner that adds value to the whole transaction’: T [296].

Tribunal reasoning on dominant purpose

103 After the oral hearing the Full Court delivered judgment in Complete Success Solutions and the Tribunal gave the parties the opportunity to make further submissions on the application of that judgment which they did. Although the Tribunal’s reasons do not directly address the parties’ submission on that judgment, it is evident that the arguments regarding dominant purpose were refined to raise the issue of whether creating creditable acquisitions with entitlements to input tax credits formed part of a single composite purpose with creating taxable supplies or was incidental to a purpose of obtaining GST-informed consideration for the scrap gold.

104 The Tribunal set out the relevant parts of Div 165 and principles applicable to consideration of dominant purpose: T [267]-[277], [308]-[316]. Relevantly, the Tribunal made the following observations regarding single composite purpose and incidental purpose:

A single composite purpose or non-dominant incidental purposes facilitating a dominant purpose?

311. Following the Full Court ACN and Complete Success Solutions decisions, it is necessary to address whether purposes of a supplier creating a taxable supply and therefore creating (or creating and not paying) a GST liability and for the recipient of the supply of a corresponding ITC entitlement are effectively different sides of the one coin, so to speak, such that they could be regarded as a single composite purpose. Both decisions involved Division 165 declarations negating ITCs where taxable supplies of gold materials were made after defacing gold bullion and the suppliers failed to pay the GST on those supplies.

312. The Full Court ACN decision expressed the principle in this way [ACN 154 520 199 Pty Ltd (in liquidation) v Federal Commissioner of Taxation [2020] FCAFC 190, [224]]:

Insofar as ACN 154 submits that the dominant purpose of the scheme was for the Direct Suppliers to obtain the GST (which they would fail to remit to the Commissioner), rather than for ACN 154 to obtain input tax credits, this submission seems to go to the merits of the Tribunal’s conclusion. In any event, we consider that it was open to the Tribunal to view the obtaining (by ACN 154) of the input tax credits and the obtaining (by the supplying entities) of the GST as comprising one purpose, in circumstances where the two were inextricably linked: cf Federal Commissioner of Taxation v Ludekens (2013) 214 FCR 149 at [243].

313. The cited passage from Ludekens included:

In assessing the purpose and evaluating its importance, and whether it is dominant, one must appreciate that it is the scheme in question to which the enquiry is directed, not a general state of affairs other than the scheme. Persons engaged in trade and commerce do so for personal gain. The purpose of all commercial arrangements is, in a broad sense, the making of profit . . . Here the respondents undoubtedly wished to make profits from the purchase of woodlots and from running a foreign exchange business. They chose the Plan to effect that. Integral to the Plan was that the entities acquiring woodlots on 30 June 2007 ... would obtain scheme benefits from the GST refunds from the purchase of the woodlots and that the Secondary Investors would obtain scheme benefits from tax deductions and tax refunds from their participation. Those are not two purposes: they comprise one purpose – that scheme benefits in terms of lowered tax-related liabilities and increased amounts that the Commissioner must pay or credit (s 284-50(1)(a) and (b)) would flow to them and others. Those two streams of funding, together with the commission from Gunns, were to be used to prop up the foreign exchange business ...

314. It is, perhaps, not difficult to contemplate purposes of creation of a taxable supply, a GST liability and a corresponding ITC entitlement, in appropriate circumstances, being regarded as a single purpose. But that, of course, would not exclude the possibility of non-payment of the GST liability and retaining the relevant cash being the dominant purpose. The first three events, so to speak, might be seen as a means to an end. However, Complete Success Solutions takes the matter a little further:

Indeed, it would be open to conclude that the purpose of obtaining (and not remitting) GST and the purpose of obtaining input tax credits for CSS were one purpose if the facts showed them to be inextricably linked: ACN FC at 513 [224]. Such a conclusion might be open, for example, if it were concluded that it was important to Manila Exchange that the scheme end with a GST-free supply by an entity that would be refunded input tax credits, so that the scheme as a whole would work by being sufficiently funded.

(Emphasis added [in original].)

315. There, the Full Court contemplates the possibility of the obtaining and not remitting amounts referrable to GST and the obtaining of ITCs being collectively a single purpose. The Court did not mandate that there was such a purpose.

316. Recognising the analysis is focused on a different statutory setting and test, Gageler J’s comments in Mills regarding the standing of facilitative steps toward an ulterior and ultimate goal inform the characterisation of steps in a linked chain of events. There his Honour said:

64 There is, in the Explanatory Memorandum for s 177EA as originally inserted into the ITAA 1936 in 1998, already quoted, a very clear statement that "[a] purpose is an incidental purpose when it occurs fortuitously or in subordinate conjunction with another purpose, or merely follows another purpose as its natural incident." The statement, repeated in the Supplementary Explanatory Memorandum, employed the word "or" disjunctively because a purpose may be in subordinate conjunction with another purpose or may do no more than follow another purpose as the natural incident of that other purpose without necessarily being fortuitous. The statement accords with standard definitions of the word "incidental" to be found in mainstream dictionaries and with a natural reading of the statutory text, "an incidental purpose", in the context of s 177EA(3)(e). The adoption of the meaning conveyed by the statement as the proper construction of the statutory text produces the result that a purpose of a person, in entering into or carrying out the scheme for the disposition of equity interests, of enabling a holder to obtain a franking credit is "an incidental purpose" outside the scope of s 177EA(3)(e) if that purpose does no more than further some other purpose or follow from some other purpose. …

…

66 [A] purpose can be incidental even where it is central to the design of a scheme if that design is directed to the achievement of another purpose. Indeed, the centrality of a purpose to the design of a scheme directed to the achievement of another purpose may be the very thing that gives it a quality of subsidiarity and therefore incidentality. That is not impermissibly to confine the scope of s 177EA(3)(e) to a dominant purpose: the categories of "dominant" and "incidental" are not exhaustive. The parenthesised words in s 177EA(3)(e) make clear that a dominant purpose of enabling a holder to obtain a franking credit is sufficient but not necessary for the requisite jurisdictional fact to exist, but it does not follow that a purpose which does no more than further or follow from some dominant purpose is incidental. Second, counterfactual analysis is not antithetical to the statutory inquiry mandated by s 177EA(3)(e). Purpose is a matter for inference and incidentality is a matter of degree. Consideration of possible alternatives may well assist the drawing of a conclusion in a particular case that a [requisite] purpose … does or does not exist and, if such a purpose exists, that the purpose is or is not incidental to some other purpose.

105 The Tribunal next began its analysis of the matters described in s 165-15 by expressing the following conclusion:

317. Viewed holistically as is permitted the s 165–15(1) factors lead to a conclusion that the dominant purpose [and] principal effect of the scheme was to create a taxable supply, a GST informed price, payment of that price to the Direct Suppliers to facilitate the Direct Suppliers receiving and retaining that price for their own use, uses that include further participation in repeat efforts of the same scheme, and evading their GST liabilities to the Commissioner. An incidental and facilitative part of the scheme and achievement of that purpose was that taxable supplies would be made creating input tax credit entitlements for the applicant.

The Tribunal then addressed the individual s 165-15 matters in a manner that was consistent with that conclusion: T [318]-[366].

106 Earlier in its analysis, the Tribunal correctly identified the legal principle that Div 165 may operate even if the ultimate objective of the transaction is not a tax objective or the transaction producing the GST benefit also delivers a desired non-tax outcome and referred to Federal Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34; 186 CLR 404 and Federal Commissioner of Taxation v Hart [2004] HCA 26; 217 CLR 216 (T [309]). However, in its application of that principle it drew a distinction between an honest non-tax outcome and a dishonest non-tax outcome and evidently considered the principle to be of diminished significance in circumstances in which the desired non-tax outcome is a dishonest end. In the context of considering the manner in which the scheme was entered into or carried out, the Tribunal observed:

107 The Tribunal analysed the uncommercial and extraordinary step in the scheme involving the adulteration and deliberate devaluation of the bullion and observed that the transactions downstream of devaluation were not remarkable as a bargain struck between the Direct Suppliers and the taxpayer for scrap gold and the taxpayer only generated refining profit on those transactions: T [320]-[322]. The Tribunal then said:

108 In the context of considering the form and substance of the scheme the Tribunal said:

109 The Tribunal continued with the theme that a pursuit of a dishonest end was separate and distinct from pursuit of a GST benefit in its consideration of the purpose or object of the GST Act (T [331]-[332]), the timing of the scheme and period over which it was entered into or carried out (T [337]), the effect of the GST Act apart from the scheme (T [345]-[346]), change in the financial position of connected entities (T [357]) and circumstances surrounding the scheme and other relevant circumstances (T [354]-[365]).

110 After addressing the s 165-15(1) matters, the Tribunal returned to the topic of single composite purpose and non-dominant incidental purposes facilitating a dominant purpose and said:

370. In those circumstances, the non-payment of amounts referrable to GST stands aside from the creation of the GST liability and the entitlement to corresponding ITCs. The applicant’s entitlement to ITCs was not dependent on that action, only upon the acquisition of gold in a taxable supply for which it paid a full commercial price for what it acquired.

Tribunal reasoning on principal effect

111 In the course of addressing the manner in which the scheme was entered into and carried out and the form and substance of the scheme the Tribunal identified what it described as the ‘principal effect’ of the scheme in the following way.

325. Similarly, the Tribunal does not identify any aspect of the manner in which the scheme was entered into or carried out that supports a conclusion that the principal effect of the scheme or any part of the scheme was the applicant obtaining ITCs. The principal effects of the scheme as a whole were the change of ownership of very high values of gold and after that securing a GST-informed amount of money and its retention through evading GST liabilities. The principal effect of the adulteration aspect of the manner of execution was to transform the character of the relevant gold and to devalue it.

…

329. The system of levying GST on dealings in gold substances is very much form driven. Metal in substance, i.e. chemically and atomically, identical, may be treated differently depending on its presentation or its form. Producing something that is in form different to its substance and transacting in it, as has happened here, transformed the character and transferred the ownership of the highly valuable commodity. This was the principal effect to be recognised.

112 The Tribunal said that the other s 165-15 matters also did not suggest or support a conclusion that the principal effect of the scheme or part of the scheme was for the applicant to obtain input tax credits: T [334], [340], [345], [353], [360], [362]. Later, in the course of addressing its ultimate conclusions on dominant purpose, the Tribunal said that if an alternative principal effect of the scheme or part of the scheme was that the Direct Suppliers benefit from their evasion, or to place an inflated, GST-informed, price or amount of money into their hands so as to set up the possibility of the evasion being executed profitably, it was unlikely that it would be reasonable to conclude that the scheme had the requisite principal effect: T [377].

Tribunal reasoning on purpose of the GST Act

113 The Tribunal’s reasons suggest that it considered that the GST Act operated largely as intended with respect to the activities of the scheme: e.g., T [320], [330], [343]. In that context, when addressing s 165-15(1)(c) of the GST Act the Tribunal said:

331. The artificial creation of a GST liability, and corresponding ITC entitlement, by defacing bullion may be seen as not an object of the GST Act. However, a liability arising on a taxable supply is an intended outcome under GST law regardless of the circumstances giving rise to the liability. Even illegal supplies may be taxable supplies [s 9-10(3)]. Once the gold was no longer precious metal its subsequent supply being taxable was unremarkable and an intended outcome under the GST Act.

The Tribunal’s ultimate conclusion

114 Ultimately, the Tribunal concluded that it would not be reasonable to conclude that any entity entered into the scheme or part of the scheme with the sole or dominant purpose of, or that the principal effect of the scheme or part of the scheme was, the taxpayer obtaining input tax credits: T [381].

THE APPEAL

115 The three aspects of the Tribunal’s decision that are challenged are set out and summarised earlier in these reasons.

116 As to the challenge to the conclusion that it was not reasonable to conclude that the Intermediaries had the s 165-5(1)(c)(i) dominant purpose, the core of the Commissioner’s contentions in the appeal centres on the manner in which the Tribunal disregarded the observations about composite purpose in Full Court ACN 2020, citing Federal Commissioner of Taxation v Ludekens [2013] FCAFC 100; 214 FCR 149, and Complete Success Solutions and applied a facilitative of ultimate purpose analysis drawn from Mills.

117 The Commissioner contends that the Tribunal disregarded Full Court ACN 2020 and Complete Success Solutions without explanation. And, explanation was necessary given that the observations in Full Court ACN 2020 and Complete Success Solutions were made on facts involving the same core elements. Further, in disregarding Full Court ACN 2020 and Complete Success Solutions the Tribunal gave no consideration as to whether the purpose of obtaining (or obtaining and not paying) GST and the purpose of obtaining input tax credits for the taxpayer were inextricably linked. The Tribunal’s finding that the purpose of obtaining input tax credits was incidental to the purpose of non-payment of GST liabilities was made without excluding the possibility it was important to the Intermediaries that the scheme end with a GST-free supply by an entity which would be refunded by input tax credits so that the scheme as a whole would work by being sufficiently funded.

118 The Commissioner also contends that the Tribunal failed to characterise ‘purpose’ in the manner that s 165-5(1)(c)(i) requires. In substance, the Commissioner contends that the Tribunal focussed on the remote and fiscally irrelevant (dishonest) purpose of non-payment and evasion of notional GST liabilities whereas it was required to focus on the fiscal purpose of getting the taxpayer input tax credits from the scheme. In so doing, the Tribunal failed to appreciate that the remote and fiscally irrelevant purpose was not necessarily inconsistent with a dominant purpose of getting the taxpayer input tax credits. The Tribunal expressed no rationale for concluding that the purpose of evasion was separate, discrete and dominant over the input tax credit purpose. The Commissioner contends that the asserted errors in failing to consider if the purposes were inextricably linked and failing to distinguish between the purposes also affected the Tribunal’s consideration of the matters described in s 165-15(1)(a) and s 165-15(1)(b).

119 As to the challenge to the conclusion that it was not reasonable to conclude that the effect of the scheme or part of the scheme was the s 165-5(1)(c)(ii) ‘principal effect’, the Commissioner contends that the Tribunal failed to correctly apply the statutory test. In this respect, the Commissioner submits that the Tribunal failed to recognise the effect of change of form and ownership of the gold metal was not inconsistent with the effect of creation of a taxable supply and corresponding GST liabilities and entitlements to input tax credits. Further, as with dominant purpose, the Tribunal did not undertake an assessment of the importance of the refunds to the scheme and each part of the scheme.

120 As to the treatment of the matters described in s 165-15(1)(c), the Commissioner contends that the object or purpose of Div 165 was a mandatory matter to be taken into account in the consideration of the statutory questions under s 165-5(1)(c). The Commissioner contends that the Tribunal disregarded that mandatory matter in error of law because it failed to take into account that a purpose or object of Div 165 is to deter artificial or contrived schemes.

CONSIDERATION

The applicable statutory tests

121 For the reasons set out in Full Court ACN 2025 (at [206]-[228]), the statutory inquiries under s 165-5(1)(c) required the Tribunal to consider if it was not reasonable to conclude that:

(a) getting the taxpayer a GST benefit was the dominant purpose of the Intermediaries entering into or carrying out the particular scheme or part of the scheme the Commissioner articulated as the means by which the Intermediaries chose to make gain or profit; and

(b) if getting the taxpayer the GST benefit was the principal effect of utilising the particular scheme or part of the scheme as the means of the Intermediaries making gain or profit.

Were Full Court ACN, Ludekens and Complete Success Solutions disregarded without explanation?

122 The Tribunal’s analysis of composite purpose versus incidental purpose starts with a recognition that Ludekens, cited with approval in Full Court ACN 2020, and Complete Success Solutions stand for the proposition that ‘a single purpose may be appropriately found in some circumstances’ (T [368]). After citing Full Court ACN 2020 and Ludekens, it had earlier said that in appropriate circumstances the creation of a taxable supply, a GST liability and corresponding entitlement to input tax credit could be regarded as a single purpose, but that would not exclude a purpose of non-payment of the GST liability and retaining the whole consideration being the dominant purpose. It had also cited Complete Success Solutions and noted that the Full Court contemplated the possibility of obtaining and not remitting amounts referrable to GST liability and obtaining input tax credits as a single purpose, but the Full Court had not mandated that there was such a purpose (T [312]-[315]). None of that explanation of Full Court ACN 2020, Ludekens or Complete Success Solutions is indicative of any misunderstanding of the correct legal principles. The Tribunal’s observation that neither Ludekens nor Complete Success Solutions considered whether the purposes were facilitative of an ultimate purpose in the sense contemplated by Gageler J in the passages from Mills set out earlier in the reasons is also accurate (T [368], [316]). The Tribunal then applied a facilitative purpose of an ultimate purpose analysis and reached the conclusion that any purpose of obtaining input tax credits was incidental and not dominant.

123 On a fair reading of the Tribunal’s reasons, it considered that the purpose of creating a taxable supply was a necessary preliminary to an ulterior and ultimate (dominant) goal of non-payment (evading payment) of notional GST liabilities. Consequently, the Tribunal considered that the purpose of creating a taxable supply was incidental to the purpose of evasion and was not dominant. On that reasoning, it was not necessary for the Tribunal to consider if the purpose of creating the taxable supply with resulting GST liability and input tax credit entitlements and obtaining GST-informed consideration were part of a single composite dominant purpose because the Tribunal had found that the purpose of creation of the taxable supply was incidental and not dominant. The ‘different sides of the one coin’ question the Tribunal had identified earlier in its reasons did not need to be answered because, on the Tribunal’s facilitative purpose reasoning, the purpose of obtaining and not remitting GST and the purpose of obtaining input tax credits were not inextricably linked.

124 It follows that I do not accept the Commissioner’s submission to the effect that the Tribunal disregarded the relevant observations in Full Court ACN 2020, Ludekens and Complete Success Solutions without proper or adequate explanation or failed to consider if the applicable purposes were inextricably linked. The real question is whether adopting and applying the Mills facilitative purpose analysis was an error of law that resulted in the Tribunal disregarding the principles expressed in Full Court ACN 2020, Ludekens and Complete Success Solutions and avoiding a fulsome consideration of the inextricably linked issue for erroneous reasons.

Was a facilitative purpose analysis apposite and applicable?

125 In my view, the analysis in Mills is inapposite and inapplicable to the statutory inquiry required under s 165-5(1)(c). The Tribunal’s adoption and application of that analysis involved an error of law and misconstruction and misapplication of the statutory dominant purpose test. In its application of the analysis in Mills the Tribunal also fell into error in failing to focus on the particular scheme as the means utilised by the Intermediaries to achieve the more remote and fiscally irrelevant (dishonest) end. Instead of asking the statutory question s 165-5(1)(c)(i) posed, the Tribunal asked itself if the scheme was facilitative of a wider and fiscally irrelevant end. Further, in so doing the Tribunal treated the statutory question as if the non-fiscal end and fiscal purpose were competing or contesting objectives when they are not inconsistent or mutually exclusive.

126 For the reasons given in Full Court ACN 2025 (at [213]-[227]), the meaning given to ‘incidental purpose’ in Mills is confined to its particular statutory context, purpose and object. Contrary to the Tribunal’s reasons, the ‘hierarchy of incidental and dominant purposes’ to which reference is made in Mills does not have wider application than the construction of s 177EA of the Income Tax Assessment Act 1936 (Cth). The particular construction of s 177EA that was declared and applied in Mills was that ‘a purpose of a person, in entering into or carrying out the scheme for the disposition of equity interests, of enabling the holder to obtain a franking credit is “an incidental purpose” outside the scope of s 177EA(3)(e) if that purpose does no more than further some other purpose or follow from some other purpose’. That notion of ‘incidental purpose’ has no bearing on the statutory meaning of ‘dominant purpose’ in s 165-5(1)(c)(i) of the GST Act.

127 Further, contrary to the Tribunal’s reasons, that construction of s 177EA(3)(e) does not inform ‘how facilitative steps in a wider design ought to be characterised’ for the purposes of Div 165 of the GST Act. A scheme or part of a scheme will inevitably be facilitative of some wider objective of an entity that enters into or carries out the scheme. The statutory question posed in s 165-5(1)(c)(i) is not directed to the purpose of a wider design or whether the scheme or part of the scheme facilitates that design, it is directed to the dominant purpose of the scheme or part of the scheme even though that scheme may form part of a wider design.

128 The Tribunal identified the ‘ulterior and ultimate purpose’ as non-payment of the GST liability: T [371]. That was little more than a conclusion that a purpose of the Direct Suppliers was gain or profit through supplies of scrap gold for GST informed consideration. Non-payment of the GST liability was said to ‘stand aside from the creation of the GST liability and the entitlement to corresponding [input tax credits]’: T [370]. The Tribunal said that the ‘analysis informs how facilitative steps in a wider design ought to have been characterised’ (emphasis added): T [368]. The Tribunal also said that even if the making of taxable supplies and obtaining of input tax credits were a single purpose ‘that single purpose was a step in a wider process’ (emphasis added): T [371].

129 While it was permissible for the Tribunal to consider the wider design or process in order to understand and explain the scheme and the 12 matters described in s 165-15, the statutory inquiry was confined to the dominant purpose of an entity that entered into or carried out the particular scheme or part of the scheme the Commissioner articulated. It will inevitably be possible to characterise part of an articulated scheme as a step that furthers, follows, or facilitates the scheme as a whole. It will also inevitably be possible to characterise a narrowly articulated scheme as steps that further, follow or facilitate a wider overall transaction. Characterising part of a scheme from which an entity gets a GST benefit as necessarily preliminary to an ulterior or ultimate goal or facilitative step in a wider design is inconsistent with the construction of s 165-5(1)(c)(i) set out earlier in these reasons. It is also inconsistent with and undermines the object of Div 165.

130 The Tribunal’s reasoning has echoes of an argument the High Court rejected in Commissioner of Taxation v Consolidated Press Holdings Ltd [2001] HCA 32; 207 CLR 235 as to the artificiality of the Commissioner selecting part of the overall transaction as the scheme. In so doing, the Court said:

96 … The fact that the overall transaction was aimed at a profit making does not make it artificial and inappropriate to observe that part of the structure of the transaction is to be explained by reference to a s 177D purpose. Nor is there any inconsistency involved, as was submitted, in looking to the wider transaction in order to understand and explain the scheme, and the eight matters listed in s 177D.

131 The point may be illustrated by adapting the example of an athlete competing at the Olympics given in Automotive Invest Pty Ltd v Federal of Commissioner of Taxation [2024] HCA 36; 98 ALJR 1245 by which the difference between ultimate purpose, means and motive were explained. (For the reasons given in Full Court ACN 2025 (at [208] that explanation is related to the identification of purpose ‘at the proper level of generality’ regulating the fiscal consequence to which s 165-5(1)(c)(i) is directed.) There, a majority of the High Court said ‘an athlete might engage in a sporting activity for the purpose or end of competing at the Olympics. The motive for that end might be personal fulfillment, profit, or glory. And the means to achieve that end might be many hours of training’: Automotive Invest at [111]. But, accepting all those elements of that example will not answer the question of whether particular medication taken by the athlete during training (means) was taken for the dominant purpose of enhancing performance at the Olympics (ends). The relevant question for that inquiry would be: what was the dominant purpose of the athlete in taking the medication even though taking the medication formed part of the means (training) to a more remote end (competing at the Olympics)? That question cannot be answered by asking if taking the medication was the means of achieving (furthered, followed or facilitated) a wider and more remote end (competing at the Olympics). That question would be meaningless because it is self-evident that that means facilitated that end. In the case of s 165-5(1)(c)(i), the statutory question concerns the dominant purpose of the means (scheme or part of the scheme) utilised to achieve (facilitate) the end (gain or profit). Therefore, asking the question of whether the scheme or part of the scheme facilitates a wider design of gain or profit (whether honest or dishonest) is meaningless in the context of the statutory object of Div 165.

132 The Tribunal’s reasoning regarding s 165-15 and its further observations on purpose or effect are also indicative of error in that they suggest that the Tribunal was of the view in the first instance that, typically, the nature of the statutory inquiry under s 165-5(1)(c)(i) involves a comparison between a commercial end (honest gain or profit), on the one hand, and a tax benefit end (obtaining a GST benefit), on the other. For the reasons given in Full Court ACN 2025 (at [248]), the focus of the inquiry is on the fiscal purpose of the scheme not any comparison between that purpose and a more remote and fiscally irrelevant purpose like gain or profit. Thus, the Tribunal’s reasoning in this regard is suggestive of acceptance of a false dichotomy of the kind identified Spotless Services (at 415). Likewise, the statutory inquiry does not require a comparison between obtaining a fiscally irrelevant dishonest gain or profit and obtaining a GST benefit.

133 Drawing a distinction between honest and dishonest ends is also suggestive of a false dichotomy of a different kind. Division 165 is aimed at artificial or contrived schemes whether they be in the pursuit of honest commercial ends or dishonest ends. A scheme comprised of extraordinary, irrational or uncommercial steps is just as much artificial or contrived because it is entered into or carried out for dishonest gain or profit as is a scheme with such features entered into or carried out for legitimate commercial gain or profit. A particular course of action may be both ‘tax driven’ and bear the character of a dishonest design. The presence of the latter characteristic does not determine the answer to the question, within the meaning of s 165-5(1)(c)(i), whether an entity entered into or carried out a scheme for the dominant purpose of getting another entity a GST benefit: Spotless Services at 416.

134 It follows that, irrespective of the inapplicability of the Mills analysis, in the context of the purpose and object of Div 165, identifying gain or profit through evasion of GST liability as the ultimate goal or end is indicative of a failure to focus on the statutory questions posed in s 165-5(1)(c) and the object sought to be achieved from the particular scheme that is of fiscal consequence. Here, the Tribunal failed to focus on that object and, instead, focussed almost entirely on the more remote and fiscally irrelevant object of gain or profit. The Tribunal’s misconstruction and misapplication of the statutory inquiry is, perhaps, best illustrated in its ultimate conclusions about dominant purpose when it said (footnotes omitted):

376. Ultimately, the Intermediaries entered into the arrangements to profit, and did profit in precisely the way they intended to profit, by failing to pay GST on the taxable sales they made to the applicant. In this regard, the term profit is used in a cash flow profit sense only. Properly calculated, they made no profit from their scheme because profit ought be determined net of the impact of GST. To make their profit, the Direct Suppliers needed to create or procure a system or process where they outlaid less money than they received. In the present setting that entailed two steps: first, they needed to acquire the goods they sold at a price not informed by GST, and second, they needed to sell those goods at GST-informed prices. It can be accepted that the applicant would not rationally have paid GST-informed priced for the scrap gold in question had there not been an entitlement to ITCs. In those circumstances, is it reasonable to conclude that the dominant purpose of any entity entering into the scheme or a part of the scheme, or the principal effect of the scheme or part of the scheme, was for the applicant to obtain, or that the applicant did obtain, the Denied ITCs?

377. While a search for an alternative purpose is not the Division 165 test, the existence of such a purpose throws light on whether the requisite GST benefit purpose conclusion should be reached. When looking at a scheme, or a part thereof, if there is an alternative dominant purpose of any participant, or an alternative principal effect, then it is unlikely that the dominant purpose test will be satisfied in respect of that participant or that the principal effect test will be satisfied. If that alternative dominant purpose of a participant in, or alternative principal effect of, a scheme or a part thereof was that the Direct Suppliers benefit from their evasion, or to place an inflated, GST-informed, price or amount of money into the hands of the Direct Suppliers so as to set up the possibility of the fraud being executed profitably, it is unlikely that it would be reasonable to conclude that that participant had the requisite dominant purpose or that the scheme had the requisite principal effect.

378. In summary, in the Tribunal’s view, the proper conclusion is that the dominant purpose of the Direct Suppliers was to execute their scheme to profit by first obtaining and then retaining the GST-informed prices they charged the applicant. Their participation in the transactions made no sense unless they committed that.

379. Even if the creation of the taxable supplies to the applicant and the applicant’s entitlement to ITCs are viewed as a single purpose, that would, in itself, achieve no benefit for either the applicant or the Intermediaries. As already noted, for the Intermediaries, it would achieve a loss because they were selling gold at a price (before GST considerations) that was less than they paid for it. It was only by failing to pay their GST liabilities that the Intermediaries were able to profit in any way that explains the scheme. While it is not the statutory question to be addressed, an alternative purpose suggested by the weighing of the requisite factors assists the requisite process. In the present circumstances there is an alternative purpose suggested by the requisite factors. It is reasonable to conclude that evading debts due to the Commonwealth was the Intermediaries’ dominant purpose. Taking into account the required factors, it is not reasonable to conclude that the dominant purpose of any entity was for the applicant to obtain the Denied ITCs.

135 These passages confirm that the singular focus of the Tribunal was upon the motive it attributed to the Intermediaries or Direct Suppliers for entering into or carrying out the wider design or process it had earlier identified and not the purpose of the scheme or part of the scheme as articulated (T [368], [371], [376]). Specifically, it is evident that the Tribunal focussed on whether ‘evasion’ was the dominant reason for the Direct Suppliers entering into or carrying out the wider design or process. Whereas, the correct statutory inquiry was whether the object of getting the taxpayer input tax credits from the scheme or part of the scheme was the ruling, prevailing, or most influential intended consequence of the Intermediaries entering into or carrying out that particular scheme or part of that scheme as the particular means by which they chose to achieve the ultimate end.

136 The analysis in Mills also does not require that ‘a necessary preliminary to an ulterior and ultimate goal’ must be characterised as an incidental purpose or that the ultimate goal must be characterised as dominant for at least three reasons. First, as Gageler J observed ‘it does not follow that a purpose which does no more than further or follow from some dominant purpose is incidental’: Mills at [66]. Therefore, a necessary preliminary need not be incidental. Second, the analysis of one purpose furthering or following another is described in Mills in circumstances in which one purpose was already designated or identified as the dominant purpose. The concept of a necessary preliminary to an accepted dominant purpose is not necessarily a useful tool for identifying at the outset which of the competing purposes is dominant. Further, and in any event, merely because one purpose furthers or follows another purpose does not require that the purpose furthered or followed is dominant. Third, and relatedly, the Tribunal’s reasoning is founded on an implicit but unstated assumption that ‘ulterior and ultimate purpose’ is a synonym for dominant purpose. This is indicative of circular reasoning.

137 The Tribunal’s explanation of its reasons for concluding that any purpose of obtaining input tax credits was incidental started by identifying the creation of a product that the marketplace traded at a GST-informed price and the Direct Suppliers receiving that price and not paying the GST liability as ‘essential for the scheme to operate’. In that context, the Tribunal observed that ‘availability of the [input tax credits] was an ordinary incident of a purchase of a taxable commodity on commercial terms by a GST-registered entity in the course of its enterprise’: T [369]. In substance, that is no more than an observation that an ordinary incident of the operation of the GST Act, in circumstances in which the Intermediaries adulterated the gold in investment form and sold scrap gold to the taxpayer, was that the sale of the scrap gold was a ‘taxable supply’. Next, the Tribunal identified non-payment of amounts referrable to GST embedded in the GST-informed consideration as separate from the creation of the taxable supply. The Tribunal then observed that the creation of taxable supplies was a step in a wider process and the non-payment of GST liabilities was a separate and ulterior and ultimate purpose to the creation of taxable supplies: T [371]. That analysis also illustrates that the Tribunal failed to ask itself the statutory question posed in s 165-5(1)(c)(i); namely, what was the dominant purpose of performing the step that created the taxable supply as the means by which it achieved the ultimate end it had identified in the wider process.

138 The Tribunal’s observation that any purpose of obtaining input tax credits ‘was properly regarded as central to the design of a scheme directed to achieving an ulterior and ultimate purpose’ draws on the first of two reasons that Gageler J gave in Mills for disagreeing with the construction Jessup J had given to s 177EA(3) of the 1936 Income Tax Assessment Act: Mills at [66]. The second reason Gageler J gave for his disagreement was that ‘counterfactual analysis is not antithetical to the statutory inquiry’ and that consideration of possible alternatives may well assist the drawing of a conclusion in a particular case that a particular purpose does or does not exist and that it is incidental to some other purpose. As observed in Full Court ACN 2025 (at [222]), the existence of possible alternatives all of which had the consequence of imputation benefits was central to the conclusion in Mills that enabling the taxpayer to obtain imputation benefits was an incidental purpose in that case. In the Tribunal’s analysis and application of Mills it ignored and overlooked that important and, on the facts of Mills, decisive consideration that assists to draw conclusions about the relative importance of competing purposes.

139 The Tribunal made no findings identifying any alternative possibilities that could have resulted in the taxpayer getting the same or substantially the same refunds from input tax credits as those the scheme or part of the scheme delivered to the taxpayer. Moreover, it is implicit in the Tribunal’s acceptance that the taxpayer obtained GST benefits from the scheme or part of the scheme that it found, contrary to the findings in Mills, that there were no alternative possibilities to the scheme. Therefore, there was no foundation for the Tribunal to reach the conclusion (equivalent to the conclusion in Mills that all means of issuing Tier 1 capital would result in the same tax benefit) to the effect that the consequence of the taxpayer getting GST benefits from the scheme was merely the natural incident to the consequence of supplying and acquiring scrap gold for GST informed consideration.

140 Last, applying the natural and ordinary meaning of ‘incidental purpose’ described in Mills to the facts as the Tribunal found them, the creation of a taxable supply could not possibly be described as ‘fortuitous’. The creation of a taxable supply was manifestly not a consequence that happened by chance. Further, to describe the creation of a taxable supply as a consequence that was a ‘subordinate conjunction’ to the purpose of non-payment of GST liabilities or obtaining and retaining GST-informed consideration is also inapposite because without a notional taxable supply the Direct Suppliers would not have received GST informed consideration. The purpose of creating a notional taxable supply could not be described as a minor or insubstantial purpose that happened in mere conjunction with the purpose of obtaining GST-informed consideration. It is also not possible to characterise the creation of a taxable supply as the natural incident of obtaining and retaining GST-informed consideration. If anything, obtaining GST-informed consideration is the natural incident of the creation of a notional taxable supply. Therefore, the Tribunal cannot be taken to have applied the ordinary meaning of ‘incidental’ as a means of explaining its conclusion that a purpose of obtaining input tax credits for the taxpayer was incidental to a dominant purpose of obtaining GST-informed consideration. Rather, the Tribunal asked itself the question of whether a purpose of obtaining the taxpayer input tax credits from the scheme was incidental to a dominant purpose of evading GST liability and in so doing applied the meaning of ‘incidental purpose’ in s 177EA(3)(e) of the 1936 Income Tax Assessment Act.

Conclusion on application of statutory dominant purpose test

141 It follows that, contrary to the Tribunal’s reasoning, the analysis from Mills is inapposite and does not inform the statutory inquiry required under s 165-5(1)(c)(i). The Tribunal’s application of that analysis in its consideration of dominant purpose was an error of law.

142 Having regard to the conclusion I have reached on questions 1 – 4 and grounds 1 – 3, it is not necessary to address the other questions, grounds and issues raised in the supplementary notice of appeal. However, as these matters were fully argued, I will explain my reasons for accepting there were two further errors and rejecting the other asserted errors.

Was the importance of the taxpayer getting input tax credits considered?

143 The Tribunal clearly considered the economic feasibility of the scheme and considered, accepted or rejected aspects of the Commissioner’s relevant arguments about the relative importance of input tax credits to the scheme. The Tribunal acknowledged and accepted that the taxpayer was induced to pay GST-informed consideration for scrap gold (T [376]). The Tribunal found that the taxpayer had only made additional refining profits (T [322], [324], [351]). It rejected the Commissioner’s contention that the taxpayer had profited from the refund of GST and without that refund the transactions made no sense (T [351]-[353]). It had regard to the ‘round robin’ nature of the movement of gold metal and noted the scheme was structured to be ‘self-contained and possibly self-perpetuating’ (T [337]). In substance, the Tribunal found that the economic feasibility of the scheme depended upon the Direct Suppliers’ non-payment of the notional GST liabilities they incurred because the transactions involved losses if the GST Act consequences for the Direct Suppliers were taken into account (T [356], [370], [376], [379]). The Tribunal found, in effect, that the input tax credit in itself achieved no benefit for the taxpayer or the Direct Suppliers (T [379]).

144 In general, there is no error of law in failing to make a finding of fact: see, e.g., Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156 (Glass JA). An assertion that the Tribunal failed to make a finding of fact is tantamount to an assertion that it made a ‘wrong’ finding which is no error of law: Waterford v Commonwealth [1987] HCA 25; 163 CLR 54 at 77 (Brennan J). Otherwise, the Commissioner made no assertion that the Tribunal made an error of law for failing to identify, understand and evaluate a substantial and clearly articulated argument of the Commissioner such as might support an error of law in the performance of the tribunal’s review function: Dranichnikov v Minister for Immigration and Multicultural and Indigenous Affairs [2003] HCA 26; 197 ALR 389 at [24]-[32] (Gummow and Callinan JJ), [95] (Hayne J); Minister for Immigration and Border Protection v SZMTA [2019] HCA 3; 264 CLR 421 at [13] (Bell, Gageler and Keane JJ), at [105] (Nettle and Gordon JJ).

145 In any event, I am not persuaded that the asserted failure to expressly consider and make findings on the importance of the input tax credits to the economic feasibility of the scheme was in and of itself an error. If anything, the absence of full or complete consideration of the importance of input tax credits is an illustration or indication of the Tribunal’s erroneous approach to dominant purpose rather than a standalone error. The absence of direct consideration of the potential importance of input tax credits to the economic feasibility of the scheme is best explained by the Tribunal not having to fully engage with the inextricably linked issue. If the Tribunal had not erroneously applied a facilitative purpose analysis and, thereby, sidestepped direct consideration of composite purpose at the level of taxable supply, it would have been required to directly confront the importance of the creation of notional taxable supplies, entitlements to input tax credits and inducement to the taxpayer paying GST-informed consideration for the scrap gold. That forensic enquiry was avoided because the Tribunal concluded that creation of taxable supplies was an incidental purpose to gain or profit.

Was there error in the application of the s 165-5(1)(c)(ii) principal effect test?

146 The Commissioner contends that the Tribunal applied the wrong s 165-5(1)(c)(ii) ‘principal effect’ test for two reasons. First, it failed to recognise the benign and mechanical non-fiscal effects of the scheme were not inconsistent with a principal effect of getting the taxpayer input tax credits. Second, it did not undertake an assessment of the importance of the creation of refund entitlements to the scheme and each part of the scheme. I accept the first contention, but not the second.

147 In the passages dealing with the s 165-15 matters in which the Tribunal identifies what it considers to be the ‘principal effects’ of the scheme (T [325], [329]) there is no explanation of the reason(s) for considering those effects to be of the highest rank or importance except for the association between changing the form of the gold metal and transferring it to the taxpayer in exchange for GST-informed consideration so as to place the Direct Suppliers in a position to evade paying notional GST liabilities. Therefore, as with dominant purpose, the focus of the Tribunal is on the ‘effect’ of the wider design or process and the consequence of gain or profit through evasion which the Tribunal considered to be the principal effect of that wider process. As with dominant purpose, identifying an effect of the wider design or process as gain or profit does not answer the question posed in s 165-5(1)(c)(ii) because that effect is not inconsistent or incompatible with a ‘principal effect’ of the scheme or part of the scheme of getting the taxpayer input tax credits.

148 The effect of changing the form of the gold metal and transferring ownership of the gold metal to the taxpayer and the effect of creating a taxable supply with corresponding GST liabilities and entitlements to input tax credits were both effects of the scheme or part of the scheme that placed the Direct Suppliers in a position to evade payment of GST liability and retain the GST-informed consideration. Thus, the question posed for the purposes of s 165-5(1)(c)(ii) was whether the principal effect of the particular scheme or part of the scheme by which the Direct Suppliers were placed in that position was the exchange of gold metal (as would be the case in an ordinary legitimate transaction) or getting the taxpayer input tax credits. It is evident from the Tribunal’s reasons that it did not ask itself that question but rather asked if the principal effect of the wider process was to place the Direct Suppliers in a position to evade payment for gain or profit. Thereby, the Tribunal applied the wrong statutory test.

149 Otherwise, for the reasons already given with respect to consideration of the dominant purpose, mere failure to consider and make express findings about the importance of input tax credits is not directly indicative of an error of law but more illustrative of the primary error and incorrect focus of the statutory inquiry.

Was there an erroneous failure to take into account the purpose or object of Div 165?

150 In substance, the Commissioner contends that the passages of the Tribunal reasons in which it dealt with the purpose or object of the GST Act (T [331]-[332]) reveal that it failed to take into account the purpose or object of Div 165; namely, to deter schemes to give entities benefits by reducing GST, increasing refunds or altering the timing of payment of GST or refunds. Specifically, its focus on non-payment of GST liabilities as the element of the wider design that departed from the object of the GST Act indicates that it failed to fully and completely take into account the steps in the scheme that included the adulteration of bullion and deliberate devaluation of the gold metal that resulted in an artificial creation of taxable supplies and that Div 165 is aimed at such artificial or contrived schemes. I largely accept these submissions.

151 On the facts as found, the activities of the Intermediaries could only be said to have been carried on with a view to profit or gain if the GST liabilities arising from notional taxable supplies of scrap gold are ignored. As taxable supplies, the activities were loss-making and there was manifestly no expectation that they would ever produce a profit or gain when the notional GST liabilities are taken into account. Therefore, taking into account the notional effect of the GST Act on the supplies of scrap gold tends to undermine any assumption that the Direct Suppliers made the supplies in the course of or furtherance of a genuine enterprise. The uncommercial nature of the activities calls into question the extent to which there were any genuine taxable supplies that would support genuine entitlements to input tax credits. At the heart of the scheme was the ‘creation’ of taxable supplies, but these were not genuine transactions undertaken as part of a genuine enterprise because gold in investment form was deliberately devalued, sold at a loss based on the ‘value’ of the gold metal content of the refining materials, and the ‘profitability’ of the transactions depended upon non-payment of the notional GST component of the consideration. As the Full Court observed in Complete Success Solutions ‘it is not consistent with the object or policy of the [GST] Act for GST to become embedded in supply of goods that has been deliberately devalued’: Complete Success Solutions at [103]. To the extent that there were taxable supplies within the meaning of the GST Act, these were clearly artificial or contrived resulting in artificial or contrived GST liabilities and corresponding artificial or contrived input tax credits. The Commissioner aptly characterised the effect of the scheme as creating an artificial market for gold.

152 While the Tribunal acknowledged that the artificial creation of taxable supplies may not be regarded as an object of the GST Act, it evidently considered that, irrespective of the circumstances in which these taxable supplies came into existence, it was consistent with the object of the GST Act to impose GST liabilities on those taxable supplies. But, that is to ignore that a purpose or object of Div 165 is to deter artificial or contrived schemes from which an avoider gets a GST benefit. Moreover, the example of the GST Act imposing a GST liability on illegal transactions is not to the point. An illegal transaction may be genuine in the sense that it is neither artificial or contrived and is made in the course or furtherance of a genuine enterprise. It is consistent with the purpose or object of the GST Act that illegal transactions in the course or furtherance of a genuine enterprise attract a GST liability and result in increased taxation revenue. The same cannot be said of artificial or contrived transactions not made in the course or furtherance of a genuine enterprise which operate to decrease taxation revenue. Transactions of that character are a target of Div 165. Thus, the Tribunal’s reasons indicate that it failed to take into account that a purpose or object of Div 165 is to deter artificial or contrived schemes of which the scheme as articulated by the Commissioner was an example par excellence.

DISPOSITION

153 For the reasons given, I would allow the appeal and set aside the Tribunal’s decision. The matter should be remitted to the Administrative Review Tribunal for determination according to law. On the basis that the applicant has decided to provide funding under the ATO Test Case Litigation Program to assist the taxpayer to meet the costs of the appeal the Commissioner has sought an order that there be no order as to the costs of the appeal. In accordance with the Commissioner’s position, I would make no order as to the costs of the appeal.

I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill.

Associate:

Dated: 24 October 2025

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