This document contains answers to frequently asked questions about GST and machinery of government changes, including information on registration, GST groups and tax invoices.
Can GST branching assist government organisations following a machinery of government change?
GST branching requires a branch of an entity (the parent entity) to have both an independent system of accounting and to be identified separately by either:
- the nature of its activities
- its location.
A GST branch is also responsible for lodging its own activity statements. However, even though the branch may provide payment when it lodges its activity statement, the parent entity is liable for any amounts owed by the branch to us.
When registering a GST branch, we notify the parent entity of the GST branch registration number. This number will include the same Australian business number (ABN) of the parent entity together with a unique identifying extension.
A GST branch must show its GST branch registration number on tax invoices, including recipient created tax invoices (RCTIs) for taxable supplies that it makes.
A parent entity and its GST branches will need to consider impacts to their business systems and their obligations in relation to giving tax invoices.
GST branching can be used by an existing or newly formed government organisation which takes over the functions of another government organisation as a result of machinery of government (MOG) changes.
By treating the transferred functions to be undertaken by one of its branches, the existing or newly formed government organisation can register the branch as a GST branch.
How long should an abolished government organisation continue to account for transactions and complete activity statements after a MOG change?
An Administrative Arrangements Order (AAO) specifies the date on which a MOG change takes effect. If the AAO specifies the date on which a government organisation (the losing agency) is abolished, the losing agency does not exist on or after that date and its functions are transferred to another government organisation (the gaining agency). All transactions undertaken by the losing agency before this date need to be reported in its concluding activity statement. All transactions undertaken by the gaining agency from that date in administering the functions transferred from the losing agency must be reported by the gaining agency.
We understand that the implementation and changeover of transaction processing systems to accommodate a MOG change can take some time. However, a date should be arranged as soon as possible after the date of the MOG change for the gaining agency to undertake the administrative responsibilities in relation to the transferred functions (such as reporting in activity statements and issuing tax invoices).
The gaining agency must work out the extent to which it should report sales, purchases and any GST relating to the transferred functions in its activity statement, by working out what the abolished agency has already reported before the date of the MOG change.
The abolished agency will need to lodge a concluding activity statement but consideration should be given to the other tax obligations such as pay as you go withholding (PAYGW), fringe benefits tax (FBT) and fuel tax credits, which are also reported on activity statements.
The abolished agency should then cancel its ABN, GST registration and other tax registrations by completing the Application to cancel registration (NAT 2955) form.
Should an abolished government organisation cancel their registration?
If a government organisation is abolished as a result of a MOG change then it will cease to exist on and after a certain date. The abolished government organisation must cancel its GST registration after it has lodged its concluding activity statement.
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For more information on:
- government entities not required to cancel their registration, see section 149-20 of the GST Act
- cancelling GST registration, see Leaving the GST system (NAT 14829)
- procedures for cancelling ABNs, GST and other tax registrations of Commonwealth government entities, visit the Department of Finance and Deregulation website at www.finance.gov.au
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What happens when a member of a GST group or joint venture is subject to MOG changes?
We understand MOG changes usually take immediate effect which can make it difficult for government organisations to meet their GST obligations.
As of the first tax period after 1 July 2010, certain government organisations are able to form, change or dissolve a GST group or GST joint venture on any day during a tax period.
Consideration must be given to these structures following MOG changes and, if necessary, steps should be taken to notify us of any changes as soon as possible. The representative member of a GST group or the operator of a GST joint venture is responsible for notifying us of any changes to the GST group or joint venture as soon as possible.
For GST purposes the GST group representative member lodges a single activity statement and is liable for the GST payable on all taxable supplies. Despite this special rule, a GST group member is the entity making the taxable supply and as such must issue a tax invoice for a taxable supply when requested by the recipient. You may however authorise the representative member to issue tax invoices on your behalf. The tax invoice must include your details and not the details of the representative member of your group.
GST group members and GST joint venture participants will need to consider impacts to their business systems and their obligations in relation to tax invoices.
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Government-related entities can become:
- members of GST groups under Divisions 48 and 149 of the GST Act
- participants in GST joint ventures under Division 49 of the GST Act.
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Is there a supply when staff and assets are transferred to the gaining agency following a MOG change?
There are generally no GST consequences if staff and assets are compulsorily transferred as a result of MOG changes. The transfers can be given effect by:
- gazettal of a notice
- specific legislation abolishing a losing agency
- proclamation such as in the case of local authorities.
However, in situations where the staff and assets are transferred as a result of MOG changes and the losing agency has taken action to cause those assets to be transferred to the gaining agency, then there may be GST consequences.
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For further information, see GSTR 2006/9 Goods and services tax: supplies (see paragraphs 71 to 91).
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Does a gaining agency make a taxable supply when it assumes the liabilities of a losing agency as a result of MOG changes?
Generally there are no GST consequences for either the losing agency or the gaining agency if assets or liabilities are transferred as a result of MOG changes, provided that the gaining agency assuming those liabilities has not acted to assume those liabilities
Will an appropriation continue to be 'specifically covered' when a government organisation is abolished as a result of a MOG change?
When a MOG change occurs, a new government organisation will usually take over the funding under an appropriation. For GST purposes, if a payment is made by a government-related entity to another government-related entity, it is not consideration for a supply if it is specifically covered by an appropriation under an Australian law.
To be 'specifically covered', the terms of the appropriation must specify that the payment can only be made to a government related entity or entities by name or generically. These requirements would not be affected by a MOG change.
Importantly the payment must only be made by a government-related entity to other government-related entities. For example, if a MOG change creates a new organisation which is not a government-related entity, the continuing payment is no longer considered to be specifically covered by an appropriation for GST purposes.
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For more information on appropriations, refer to:
- GSTR 2011/2 Goods and services tax: appropriations
- GSTR 2000/11 Goods and services tax: grants of financial assistance
- Paragraph 9-15(3)(c) of the GST Act.
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Can a government organisation, emerging from a MOG change, rely on items in a Treasurer determination that applied to a former government organisation?
The payment of any Australian tax, fee or charge that is specified in a written determination of the Treasurer is not subject to GST. This applies where such a tax, fee or charge is paid to a gaining agency after a MOG change.
Note that the Treasurer's determination will not apply from 1 July 2012.
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For more information, see the former subsection 81-5(2) of the GST Act which states that the payment of any Australian tax, fee or charge that is specified in a written determination of the Treasurer is not the provision of consideration.
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Is the Commissioner's discretion, in relation to treating a document that is not a tax invoice as a tax invoice, automatically exercised following every MOG change?
The Commissioner has the discretion to treat a document as a tax invoice even when it does not meet all the requirements of a tax invoice.
When a MOG change occurs, an affected government organisation can ask us to exercise the discretion. In exercising the discretion, we generally specify in the notice of decision a three month period during which certain documents will be treated as tax invoices.
These documents include:
- tax invoices issued to the losing agency for supplies received by the gaining agency
- tax invoices issued in the identity of the losing agency for supplies made by the gaining agency
- RCTIs issued in the identity of the losing agency for supplies received by the gaining agency.
These documents must comply with the other GST requirements for tax invoices.
These discretions are not automatically exercised following a MOG change unless the jurisdiction that the gaining agency belongs to has already obtained from us a notice of decision to exercise the discretion. Otherwise, the gaining agency should follow the procedures within their jurisdiction in relation to the requirement to request the Commissioner to exercise the discretion.
Under what circumstances will we allow an affected government organisation, in a MOG change, more time to treat certain documents that are not tax invoices as tax invoices?
The three month period specified in the notice of decision about treating certain documents as tax invoices usually commences on the date specified in the AAO or proclamation for the MOG changes to take place. Extensions of this time are considered on a case by case basis. Government organisations should contact us as soon as possible if they believe it may take longer than three months for them to have their tax invoices compliant.
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For more information on ATO discretion to treat documents as tax invoices, see Practice Statement Law Administration PS LA 2004/11 The Commissioner's discretions to treat a particular document as a tax invoice (as at 1 July 2000).
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What treatment should be given to RCTIs issued under a written RCTI agreement with an abolished government organisation?
A MOG change usually takes immediate effect which can make it difficult for either the supplier or recipient to an RCTI agreement to meet the requirements for issuing an RCTI.
In these circumstances, an abolished government organisation will no longer be the supplier or recipient of a supply referred to in an existing RCTI agreement. New RCTI agreements must be entered into by the gaining agency and other suppliers or recipients as soon as possible.
If an abolished government organisation was the recipient in an RCTI agreement, the new government organisation will need to request that the Commissioner exercise his discretion to treat a document issued under the existing RCTI agreement as a RCTI. This will enable the new government organisation to claim GST credits on the supply it receives.
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For more information about RCTIs, see:
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Does the notice of decision, to treat a document that is not a tax invoice as a tax invoice, apply to a RCTI?
Suppliers or recipients to RCTI agreements may need to enter into new agreements following MOG changes.
We have the discretion to treat a document as a tax invoice even though the document does not meet all the requirements of a tax invoice.
When a MOG change occurs, an affected government organisation can ask us to exercise the discretion. In exercising the discretion, we generally specify in the notice of decision a three month period during which certain documents will be treated as tax invoices.
The notice of decision in relation to treating certain documents as tax invoices will also apply to RCTIs issued in the identity of a losing agency for supplies received by a gaining agency.
That is, a gaining agency will only be required to make one request to the ATO to exercise the discretion to treat specified documents as tax invoices.
Does a notice of decision, issued to one jurisdiction in relation to treating a document (that is not a tax invoice) as a tax invoice, under a MOG change, extend to another jurisdiction?
A notice of decision issued to one jurisdiction about treating a document (that is not a tax invoice) as a tax invoice under a MOG change specifies the relevant legislation governing the MOG change.
Therefore, the notice cannot treat documents that are generated in relation to MOG changes in another jurisdiction under different legislations and which are not tax invoices, as tax invoices.
Can a gaining agency, in a MOG change, rely on a private ruling issued to the losing agency?
Private rulings issued to a losing agency cannot be relied upon by a gaining agency. GST private rulings can only apply to the entity the ruling was given to.
Therefore, if a gaining agency (who is not the ruling recipient) relies on a private ruling that was issued to the losing agency and as a result underpays a net amount, the gaining agency will be liable for this amount unpaid.
It is expected that government organisations risk assess to determine whether it is necessary to reapply for a private ruling depending on the changes. This risk assessment process is inherent to the nature of the self-assessment taxation regime and, in particular, when relying on our publications or rulings (public or private) due to the individual circumstances and any changes to those circumstances.
What are the PAYG withholding obligations for government organisations that undergo a restructure, merge or change of name at short notice?
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This information only applies to government organisations.
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When a government organisation undergoes a restructure, merge or change of name at short notice, it is often difficult to change systems to quickly reflect this new structure, for example, payroll.
In these circumstances where staff have moved between entities and continue to perform essentially the same role, the guidelines outlined in PAYG withholding information for government organisations (NAT 72457) will apply.
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For more information, refer to:
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For more information:
- visit our website at www.ato.gov.au
- phone us on 13 28 66
- write to us at PO Box 9935 in your capital city.
If you don't speak English well and need help from us, phone the Translating and Interpreting Service on 13 14 50.
If you are deaf, or have a hearing or speech impairment, phone us through the National Relay Service (NRS) on the numbers listed below:
- TTY users, phone 13 36 77 and ask for the ATO number you need
- Speak and Listen (speech-to-speech relay) users, phone 1300 555 727 and ask for the ATO number you need
- internet relay users, connect to the NRS on www.relayservice.com.au and ask for the ATO number you need.
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Last Modified: Tuesday, 27 March 2012