Property developer foils IRD GST charges

By ANNE GIBSON

Inland Revenue has been foiled from bringing legal proceedings against a string of companies associated with Auckland property developer Andrew Krukziener after they went into voluntary liquidation.

IRD had intended to claim hundreds of thousands of dollars in goods and services tax from the companies.

But Krukziener, who initially indicated he would oppose the IRD claims, pre-empted the action in time to stop the hearing, which was due to start yesterday afternoon.

The issue of GST on property development is understood to be one of increasing concern for the IRD.

Property developers can claim back a portion of the purchase price of real estate as a tax refund when they buy, but in turn must pay 12.5 per cent GST on their subsequent sales transactions.

Inland Revenue is claiming that the properties traded by the companies associated with the Krukziener legal proceedings charged purchasers the 12.5 per cent GST at the time of the sale of their real estate, but failed to pass that money back to Inland Revenue.

National policy manager Marie Pallot said the department never commented on particular cases.

But she confirmed that the treatment of GST and property development had been a difficult area historically, particularly where tax rebates were sought.

The court listed the companies involved in the latest case - acting as trustees for entities involved in building, buying and selling Auckland real estate - as Courthouse No 1, AK Oriental, Metropolis A, 88 Cook Street and Krukziener Judges Bay.

Courthouse No 1 has been previously reported as owning the assets of the Metropolis tower development.

The Commissioner of Inland Revenue filed for a hearing in the High Court at Auckland seeking a court-appointed liquidator to investigate the companies and find out what happened to money the department was claiming.

An official involved in the proceedings said Inland Revenue had expected that PricewaterhouseCoopers would be appointed and the books of the five companies would be opened to show how deals involving property transactions had unfolded.

But Krukziener opposed the moves and claimed he was a victim of Inland Revenue.

He challenged its case and sought a full hearing on the matter, which was due to start yesterday.

Frustrated Inland Revenue officials were surprised when just a few days before the court proceedings they were trumped.

The five companies went into voluntary liquidation instead.

Auckland law firm Meredith Connell is acting for Inland Revenue and one of its partners, Cyril Wood, was due to appear as the Crown solicitor in the case yesterday.

Wood, who also acts for the Registrar of Companies, said yesterday he could not discuss the matter.

Krukziener was also unavailable for comment.

This is not Krukziener's first brush with the taxman.

This month he was convicted and fined $500 for failing to file tax returns on time, and claimed then that he was being persecuted by Inland Revenue.

One News reported that Krukziener, who built Auckland's Metropolis apartment tower, on which investors are still owed $34 million, would appear in court again this month when Inland Revenue tried to liquidate the companies.

A defended hearing was set down in the High Court at Auckland involving the five Krukziener trustee companies.

Three other Krukziener companies are listed as owing GST.

On July 29, Taupki liquidator Bryan Williams was appointed to the three companies - AK No 7, Opportunity Ltd and Glenn Innes - and in his initial report on Glenn Innes, he predicted a payout of less than 20c for every $1 owed. Inland Revenue is listed as a creditor owed $186,543.99 in GST by Glenn Innes which Williams said could have a deficiency against all claimants of $499,514.90.

But Williams said yesterday that he was not involved with the latest five Krukziener companies.

"I've been approached by another newspaper in the Auckland region and I am not going to discuss this issue because it's a contentious file," Williams said.

Glenn Innes was a corporate trustee of a trust "which has become insolvent from volatility factors common to the property industry," Williams wrote in his first report.

The initial report on Opportunity lists Inland Revenue as a preferential claimant owed $167,617.49 in GST.

Metropolis debt

Property developer Andrew Krukziener is best known for the $200 million, 38-storey Metropolis hotel/apartment tower in Auckland, completed in December 1999.

In May 2001 Krukziener defaulted on a $25.5 million bond payment to 1755 investors in the Metropolis tower. They have yet to receive any money. They are now owed $34 million.

This month he was convicted and fined $500 for failing to file tax returns on time.