• 8.9. If you are a recipient accounting for GST on a non-cash basis and you claim an input tax credit for an acquisition but do not provide all or a part of the consideration for the acquisition, do you need to make an increasing adjustment under Division 21?

    Non-interpretative – straight application of the law

    Yes. You make the increasing adjustment when the debt is overdue by 12 months or more. (Note, if you are the debt factor, you are not entitled to a decreasing adjustment under Division 21 for the amount written off or overdue.)

    Example

    A makes a taxable supply of goods to B for $110. A then sells the debt (owed to him by B in relation to the taxable supply) to a debt factor for $95. B claims an $11 input tax credit but later only pays the debt factor $99.

    But for the factoring arrangement, B would ordinarily account for a $1 increasing adjustment when A writes off as bad the outstanding amount of $11 or when the $11 amount is overdue for 12 months or more. This outcome does not change because of the factoring arrangement. B makes a $1 increasing adjustment when the debt factor writes off as bad the outstanding amount of $11 or when the $11 amount is overdue (to the debt factor) for 12 months or more.

    The debt factor is not entitled to a decreasing adjustment in respect of the amount written off or overdue for 12 months or more.

    If the agreement you have entered into is different to the general cases outlined above, you may want to request a private ruling.

    End of example
      Last modified: 24 Jun 2015QC 16359