Compliance program 2011-12

Financial supplies and GST

Businesses making financial supplies may face uncertainty in determining their entitlement to claim GST credits. Our strategies continue to focus on providing clarity and certainty in characterising transactions and determining entitlement to input-tax credits.

We will do this through ongoing engagement and consultation with taxpayers, industry groups and advisers to increase our common understanding using forums, client relationship managers and compliance activity.

Businesses engaging in capital raising activities (for example, initial public offerings, mergers and acquisitions, rights issues and share buy backs) remain a particular focus area given the potential for GST credits to be over-claimed on related costs. A recently issued GST guide Claiming input tax credits on acquisitions made in connection with merger and acquisition activity gives practical guidance to businesses on how to treat specific transactions through the various phases of the acquisition and or merger process.

We will send letters to taxpayers involved in mergers and acquisitions including a copy of the GST guide and ask them to ensure they are correctly treating transactions for GST purposes during the process. We will also undertake 50 risk reviews on these activities to ensure they have properly complied with the GST law correct decisions. We will follow up with targeted communications to those involved in such transactions, reminding them of their responsibilities.

We remain concerned about a small number of businesses engaged in merger and acquisition transactions adopting non-commercial arrangements to claim input-tax credits which they would not normally be entitled to. We have issued a taxpayer alert (TA 2010/11) outlining our concerns about these arrangements and will follow them up with appropriate action.

Sections within Large businesses

Last Modified: Friday, 1 July 2011