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  • 7. GST public advice and dispute management

    Public advice and guidance

    We offer public and private advice and guidance to help our clients understand their GST obligations, ensure a level playing field and address GST risks.

    In 2020–21, 614 GST-related private ruling requests were finalised, with 99% finalised within 28 calendar days of receiving all the necessary information. Private ruling requests in 2020–21 increased by 8% compared with the previous year. There were 3,941 guidance cases completed in 2020–21, a slight decrease from last year, continuing a decline since 2017–18.

    Table 19: Public advice and guidance

     

    2016–17

    2017–18

    2018–19

    2019–20

    2020–21

    Finalised GST-related private ruling requests

    748

    840

    641

    565

    614

    Completed GST-related guidance cases

    4,669

    5,492

    4,712

    3,966

    3,941

    Key advice topics included:

    • GST international and cross-border
    • core provision/special rules
    • real property transactions
    • food classification
    • GST registration.

    Some of our public advice and guidance (PAG) and consultation work had been paused due to COVID-19 in 2019–20 and we recommenced this work in 2020–21. Some PAG was part of a deliberate risk mitigation strategy, while others addressed emerging risks. The following PAG was progressed throughout 2020–21:

    • GSTD 2021/1 Goods and services tax: development works in the Australian Capital Territory – required to finalise the ATO view on the GST treatment of arrangements between government agencies and private property developers in the context of the development of land in the Australian Capital Territory.
    • GST apportionment for financial suppliers:
      • GSTR 2020/1 Goods and service tax: determining the creditable purpose of acquisitions in relation to transaction accounts.
      • GSTD 2020/1 Goods and services tax: when is the supply of a transaction account GST-free under table item 3 or table item 4(a) of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999?
      • Amendments to GSTR 2004/4 Goods and services tax: can consideration for a supply be provided or received without transferring money (such as where the parties only make book entries recording their agreement that the supply is paid for)?
       

    These products are necessary components of the ATO’s broader FSI risk strategy to address long-standing complexities around apportionment methodology and explain our view on the GST treatment for home loans and transaction accounts, and the extent to which the supply of a transaction account is GST-free where the account is issued outside of Australia.

    • GSTD 2001/D1 Goods and services tax: adjustable beds, pressure management mattresses and pressure management overlays – clarified when adjustable beds, pressure management mattresses and pressure management overlays meet the criteria to be GST-free.
    • GSTD 2001/D2 Goods and services tax: is the supply of a burial right in respect of a public cemetery subject to GST? – considers the GST consequences where an Australian Government agency supplies burial rights in respect of a public cemetery. This matter is still being consulted on.

    The following Legislative Instruments were also issued:

    • CRP 2021/1 Taxation Administration (Remedial Power - Certificate for GST free supplies of Cars for Disabled People) Repeal Amendment Determination 2021 – ensured continued access to GST-free supplies of cars and car parts for disabled people who meet certain requirements.
    • WTI 2021/1 Goods and Services Tax: Waiver of Tax Invoice Requirement (eftpos Interchange Services Reports) Determination 2021 and WTI 2020/3 Goods and Services Tax: Waiver of Tax Invoice Requirement (Corporate Card Statements) No.2 Determination 2020 – to allow waiver of tax invoice requirements for certain entities where the specified requirements have been met.
    • TPANI 2020/1 A New Tax System (Goods and Services Tax) Third Party Adjustment Note Information Requirements Determination 2020 – remade due to sun-setting provisions.

    Dispute management

    GST objections

    In 2020–21, GST objection receipts and the objection rate continued to decline. This may be linked to the ongoing impact of COVID-19 and its effect on businesses and audit activity. We continue to use our dispute resolution services and strategies, such as allowing further time to provide information or placing the issuing of adverse decisions on hold, to assist those clients affected by COVID-19.

    Figure 12: Number of objection cases created

    The graph shows the number of objection cases created each year. 
2016–17 1,036, 
2017–18 906, 
2018–19 643, 
2019–20 545, 
2020–21 407.

    There was a significant increase this year in the number of GST objections that were finalised; a result of concerted efforts to reduce our stock on hand. We had a particular emphasis on aged cases (greater than 365 days), and also implemented an active case management strategy to improve efficiency and timeliness in actioning objections.

    In 2020–21, the litigation rate of 49 per 1,000 objections improved compared to 2018–19 (108 per 1,000) and 2019–20 (117 per 1,000). Over half of the 2020–21 litigation cases were resolved prior to hearing through use of our different alternative dispute resolution methods.

    Table 20: GST dispute management

     

    2016–17

    2017–18

    2018–19

    2019–20

    2020–21

    Audit to objection rate (per thousand)

    68

    76

    52

    95

    56

    Audit to audit-related objection (per thousand)

    -

    -

    -

    62

    37

    Objection cases resolved (number)

    935

    774

    591

    512

    813

    Allowed in full

    280

    207

    165

    108

    104

    Allowed in part

    188

    173

    108

    91

    97

    Disallowed

    202

    178

    121

    125

    405*

    Either withdrawn following initial contact, or invalid and unable to be altered to be treated as valid objections

    265

    216

    197

    188

    207*

    Objections which result in litigation (per thousand)

    50

    65

    108

    117

    49

    GST litigation cases completed (number)

    61

    59

    45

    52

    52

    Favourable

    13

    6

    6

    11

    6

    Unfavourable

    -

    3

    2

    2

    4

    Partly favourable

    -

    1

    1

    -

    1

    Conceded (whole or in part)

    13

    5

    18

    22

    9

    Settled

    16

    8

    4

    4

    20

    Withdrawn by taxpayer

    14

    17

    9

    11

    9

    Dismissed by court or AAT

    3

    16

    4

    2

    3

    Other

    2

    3

    1

    -

    -

    Note: The process for identifying GST-related objections changed in 2020–21 to capture all GST-related work items more accurately. The new methodology identifies any case where GST is in dispute; not just where it is the primary revenue product in dispute.In 2019–20, of the 545 objections created, 421 (77%) relate to audit decisions. This equates to 62 objections per thousand audit adjustment cases. In 2020–21, of the 407 objections created, only 267 (66%) relate to audit decisions. This equates to 37 objections per thousand audit adjustment cases.*Most of the disallowed outcomes (217 or 53.5%) relate to a cluster of self-objections on Division 111, and 58 (28%) of the withdrawn or invalid outcomes also relate to the Division 111 cluster.

    GST litigation

    As of 30 June 2021, there were 91 current Part IVC litigation cases, a 6.2% decrease from June 2020. This can largely be attributed to a decrease in cases containing property and penalty issues.

    The number of cases settled by the Commissioner increased significantly in 2020–21 to 37% of all finalised cases, compared to 7% in 2019–20. This is consistent with the Commissioner’s initiative of only progressing those cases where it is strategically important and appropriate, where law clarification is required, or we need to send messages about behaviour to a taxpayer and the community. The number of cases conceded in whole or in part by the Commissioner decreased significantly in 2020–21 to 18% of all finalised cases, compared to 43% in 2019–20, indicating a significant improvement in the quality of the decisions resulting in litigation.

    Strategic case decisions for 2020–21 include:

    • Crown Melbourne Ltd & Anor v Commissioner of Taxation [2020] FCA 1295. The Federal Court allowed the appeal by the taxpayers. The issue in dispute was whether payments made by the taxpayers to junket tour operators should be included in the global GST amount for Division 126 purposes. The Commissioner is of the view these payments are a fee for service and should not be included in the Division 126 calculation, however the Court accepted these payments should be included in the Division 126 global GST amount.
    • ACN 154 520 199 Pty Ltd (In Liq) v Commissioner of Taxation [2020] FCAFC 190. The Full Federal Court (FFC) allowed the appeal on the meaning of refining under section 38-385 of the GST Act and reached what it said was the “unpalatable result” of sending the Division 165 scheme issue back to the Administrative Appeals Tribunal (AAT) for rehearing. The Commissioner lost the refining issue on technical points. The FFC agreed with the Commissioner that refining under section 38-385 means making gold purer by removing metallic impurities but found that when the taxpayer melted 99.99% pure gold it presumably increased the purity, even if only by 0.001%. The Commissioner was unsuccessful on the Division 165 scheme issue on procedural grounds, as the AAT considered material not put to the managing director in cross examination.
    • Commissioner of Taxation v ACN 154 520 199 Pty Ltd (In Liq) [2021] HCASL 64. The High Court refused the Commissioner’s special leave application. Consequently, the case will return to the AAT for a new hearing on whether the GST general anti-avoidance rule cancels $72.9m in GST refunds the taxpayer received for acquiring scrap gold between February 2012 and June 2014.
    • Commissioner of Taxation v Travelex Limited [2021] HCA 8. The High Court handed down a favourable decision on 10 March 2021. This case considered whether a credit allocated by the Commissioner to Travelex’s running balance account (RBA) gave rise to an RBA surplus (and therefore a delayed refund interest (DRI) entitlement), where the taxpayer was not entitled to that credit under a taxation law. The High Court agreed with the Commissioner that a credit on a taxpayer’s RBA will not result in an RBA surplus unless that credit reflects an amount to which the taxpayer is legally entitled. It followed that as no credit had arisen at law from Travelex’s revised BAS, there was no RBA surplus to which DRI could apply. The finding that Travelex was not entitled to a credit is based on the FFC’s finding that the Commissioner’s historical practice of ‘revising’ a taxpayer’s BAS for self-actuating periods without issuing an assessment had no legal effect. The Commissioner is currently considering the administrative implications of the decision.

    The ATO has reported the implications of the decision in its financial statements for the year ending 30 June 2021. For more information, refer to Schedule C.

    Strategic cases on hand for 2020–21 include:

    • An appeal to the FFC by the Commissioner against the decision in Crown Melbourne Ltd & Anor v Commissioner of Taxation [2020] FCA 1295, outlined above.
    • An AAT appeal that seeks to test the Commissioner’s view on the GST treatment of development leases in the ACT and the passing on of excess GST refund issues.
    • An AAT appeal against the Commissioner’s objection decision in respect of a private ruling on a crowdfunding issue. The Commissioner determined that tips made by platform users to the taxpayer are consideration for a taxable supply and therefore GST is payable on these amounts.
    • An AAT appeal against the Commissioner’s decision that the taxpayer, a complying super fund, was required to be registered in respect to the subdivision and sale of vacant lots. The taxpayer argues that the sale of the lots should be excluded from the calculation of their projected GST turnover as it is the transfer of a capital asset, solely as a consequence of ceasing to carry on their enterprise or substantially and permanently reducing the size or scale of their enterprise.
    • A Federal Court appeal in respect to the extent of creditable purpose of acquisitions made by the taxpayer for supplies of re-insurance from its related entity. This matter also raises issues of whether the apportionment methodology used by the taxpayer to calculate its input tax credit entitlement is fair and reasonable.
    • A Federal Court appeal, firstly, in respect to whether the Court has jurisdiction to hear the matter, given the applicant is a state entity and the matter relates to notional GST. If the Court does have jurisdiction, the second issue is whether the supplies of separate lots constitute a single supply for the purposes of the margin scheme, specifically item 4 in subsection 75-10(3) of the GST Act.
      Last modified: 07 Feb 2022QC 67817