LAWS5238 Exam Question 1

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Exam

Question 1

35 marks

Complete the judgment of Laure J.

In the Supreme Court of Western Australia

KRNH v The University of Western Australia [2022] Australian Tax Cases 30

Background
1. This case is a civil action by the international accounting firm KRNH against the University of Western Australia seeking an order requiring the University to issue a Tax Invoice to KRNH.  In June 2021, the tax partner at the Perth office of a large international accounting firm, KRNH after hearing positive accounts from several members of staff who had attended various tax units in the master program at UWA, proposed to his fellow partners that the firm should establish three prizes to support the tax program at the university for 10 years.  The graduate tax prize would be a $500 prize awarded each year to the student who obtained the highest grade in the GST unit and another to the student who obtained the highest grade in the International Tax unit.  The undergraduate prize would be a $500 prize awarded each year to the student who obtained the highest grade in the income tax unit.  The undergraduate winner would also be offered a two month summer internship at KRNH if they wished, but the offer was not a condition of the prize – that is, the winner could accept the prize and turn down the internship offer.  In the event of ties, the prize would be split between winners.  The fellow partners agreed and the firm contacted the Law School with the offer of sponsorship via the prizes.  

2. KRNH asked that Law School that if it accepted the prize offer, it would show include notice of the prizes on its graduate tax unit website, in the unit outline for each of the relevant units, and in the initial announcement posted on LMS and copied to students via an email.  The Law School agreed to the three conditions and upon receipt of the written agreement, KRNH transferred $15,000 to the University.  

3. In early 2022, KRNH wrote to the Law School asking for a tax invoice for $15,000 for the funds given to the university.  The university accountant responsible for tax invoices contacted the Law School and explained that if the university sent a tax invoice to KRNH, there would be a shortfall in the account from which the prizes were made of $1,363.64.  He indicated, however, that he thought the university should not issue a tax invoice as it had not made a taxable supply to KRNH and the funds should be treated as a gift.  The Law School agreed and the accountant wrote to KRNH indicating no tax invoice would be issued.  

4. KRNH has brought this action seeking an order requiring the University of Western Australia to issue a tax invoice indicating that the amount received of $15,000 included $1,363.64 of GST.  I understand the University’s solicitor informed the Australian Taxation Office of the case and the ATO indicated it would not seek to be joined as a party to the case.

Judgment
5. I have considered carefully the arguments raised by both parties in the course of reaching a decision and I shall explain these points and how they led me to the decision in this case.  [Complete the judgment].