Tony Denny’s Gosford Classic Car Museum wins epic court fight against ATO over luxury tax
Gosford’s car museum was only ever an elaborate sales ploy to flog second-hand cars at higher prices — now taxpayers have been left with an “absurd” bill, a bombshell legal case has heard.
Central Coast
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Rich lister Tony Denny got the idea for a boutique luxury second-hand car dealership from a hotel he stumbled across during a trip to Nevada’s sin city in 2013.
On his return to the Central Coast, Mr Denny set about creating the Gosford Classic Car Museum as an “elaborate and extensive marketing exercise” to convince well-heeled buyers into paying more than they otherwise would.
He even told a court he jacked up the entry price to his West Gosford dealership at one point from $16 to $20 to discourage “tyre kickers”.
But that was the only bit of evidence the Federal Court of Australia rejected from Mr Denny, whose company Automotive Invest Pty Ltd took the Commissioner of Taxation all the way to the highest court in the land — and won.
The High Court of Australia last week upheld Mr Denny’s appeal against a decision in the Federal Court in August last year that found his marketing schtick of a car museum was a little too real and constituted a “second purpose”.
The court heard Mr Denny’s fight with the Australian Taxation Office (ATO) began not long after he purchased the old Bunnings site at West Gosford and began filling it with $70m worth of luxury, vintage, sports and all manner of eclectic vehicles.
He registered the business with the ATO in February 2016 as a luxury car dealership and documented the purpose of the museum as promotion only.
The showroom opened in April, 2016, and was quickly lauded as the Central Coast’s hottest new tourism attraction, which even saw then Prime Minister Malcolm Turnbull hold his 62nd birthday celebrations surrounded by 500 friends and family.
But when the ATO audited the business in December 2016, they decided that the business should be classified as both a luxury car seller and a museum, making it a “dual-purpose venture”.
Importantly this change meant Automotive Invest Pty Ltd wouldn’t be able to claim luxury car tax and GST exemptions, which Mr Denny said made the whole venture “unprofitable”.
After two years of back-and-forth, the ATO ordered Mr Denny undertake a swath of changes including removing the word “museum” from any branding and stop charging admission so he closed.
“There was no suggestion that continuation of the ‘museum concept’ as an independent venture was even considered,” the High Court judgement read.
“The obvious inference is that, in the absence of a business of selling cars, the appellant no longer had any use for a museum.”
The High Court ruled in favour of Mr Denny’s appeal that he had only ever set out to sell cars and the museum served to fulfil that purpose.
“For the ‘museum concept’ to be effective, the museum had to be as real as possible,” the High Court judgement read.
“The signage, the presentation of the cars, the gift shop, the diner, the marketing and the available staff were all dedicated to those means. But this activity, large as it was to be, was not intended by Mr Denny to be an ‘independent’ purpose, end or object.
“It was an elaborate and extensive marketing exercise designed to promote the appellant’s business of being a car dealer; it was precisely a means to an end. In short, selling cars was the business Mr Denny intended to pursue and the museum was his means of achieving that purpose.”
In an affidavit, Mr Denny explained he came across the novel way of marketing vehicles in Las Vegas around 2013 where a car dealership had cordoned off a section of a hotel and identified it as a “museum”.
The vehicles were arranged to highlight the changing look of the models over the years and Mr Denny formed the view that a potential buyer might consider them having “a greater provenance and value” than they might otherwise and be more willing to pay a higher price.
“It’s all about moving the metal, selling the cars,” Mr Denny told the court.
The ATO countered and submitted that Mr Denny’s museum made $1.32m in admission fees in its first year.
Mr Denny told the court he jacked up the admission fee to discourage “tyre kickers” but the Federal Court rejected that evidence, finding it was a “spectacular and justifiable” tourism attraction where the “overwhelming majority of visitors” were not there to “consider a potential purchase of a car at all”.
However the High Court found the museum was never separately accounted for under Automotive Invest’s books and if the gross revenue from admission fees had been maintained over four years it would have totalled $5.28m.
The High Court found this sum was “negligible when compared to the gross revenue of $114m from the sale of cars” over the same period.
“At no point, based upon the accepted evidence of Mr Denny, did the museum concept become an end in itself,” the judgement states.
“The museum concept never ceased to be subjugated to, or the means of achieving, the
goal of selling cars.”
The High Court awarded Mr Denny costs.
After the judgement Mr Denny told this publication that he wouldn’t rule out opening another museum and quite a few car enthusiasts had already contacted him to offer their assistance.
He said he didn’t blame the ATO staff, who he described as always polite and professional.
“They were just doing their job in attempting to enforce a very ambiguous law,” he said.
“It was definitely a bitter sweet victory but nonetheless very welcomed.
“The most annoying thing about this whole process is that I really wish the ATO would take a more commercial view of such a situation and settle on some amount they believed they were due so the museum could have stayed open, and the 60 employees retained.”
He said the total legal bill for both sides was more than $4m.
“This was simply madness and an absurd waste of money,” he said.
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