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  • Applying the code of compliance

    The following information will assist you in applying the scrap metal code of compliance:

    The $82.50 threshold

    Under the code of compliance, the no-ABN withholding rule must be applied for transactions of $82.50 or more.

    There is no need to withhold payment from transactions of $82.50 or less, but the code requires you to record a description of the:

    • material purchased
    • amount paid
    • date of the transaction.

    See also:

    Acquisitions from entities not quoting an ABN

    If you acquire scrap metal in any of the following categories, and the supplier has not quoted a valid ABN, the no-ABN withholding rule must be applied.

    1. Scrap material (for transactions over $82.50) purchased from an enterprise or from someone acting on behalf of an enterprise – for example, employees.
    2. Scrap material (for transactions over $82.50) picked up from commercial premises, including factories, warehouses, work sites, demolition sites and any other places of business.
    3. Scrap material (for transactions over $82.50) delivered in commercial vehicles, including light trucks, tippers, trucks, prime movers and semi trailers.
    4. Scrap material (for transactions over $82.50) that is of an obvious commercial nature, including industrial by-products, decommissioned industrial equipment or quantities inconsistent with domestic output.
    5. Transactions over $300. Collusion to break up transactions to avoid this limit will be penalised at the highest penalty rates.
    6. Any pattern of transactions exceeding $3,000 annually.

    Exception – Statement by a supplier

    An exception exists where a specific reason as to why the no-ABN withholding rule does not apply is included in a Statement by a supplier and you have made reasonable enquiries to verify the reason provided.

    A Statement by a supplier should be completed for all transactions over $82.50 where no ABN is provided. The supplier can:

    In either case, the following supplier details must be captured:

    • full name and address
    • payment amount in dollars
    • quantity of material (by weight)
    • description of material (for example, ferrous/non-ferrous/mixed)
    • proof of identity with traceable identifier (ideally a drivers licence number)
    • registration of vehicle and vehicle type that delivered the material (relevant only to deliveries by supplier)
    • general reason for exemption from the no-ABN withholding rule where a supply has been made in a circumstance not covered by (b) to (f) above. Where a circumstance arises under (b) to (f), a specific reason must be documented and reasonable enquiries must be made to verify the reason provided
    • signature of supplier
    • date of transaction.

    See also:

    Acquisitions from entities quoting an ABN

    Where an entity quotes an ABN or is required to quote an ABN, the following information must be documented in the dealer's invoicing system:

    • ABN
    • name and address
    • payment amount in dollars
    • quantity of material (by weight)
    • description of material (for example, ferrous/non-ferrous/mixed)
    • date of transaction
    • proof of identity with traceable identifier (ideally a drivers licence number and relevant only to deliveries by supplier)
    • registration of vehicle and vehicle type that delivered the material (relevant only to deliveries by supplier).

    Where the entity is registered for GST, the dealer must have a recipient-created tax invoice (RCTI) agreement in place prior to the issue of the RCTI.

    Notes to the code of compliance

    1. The following component to the code has been 'frozen' while we assess improvements in industry compliance:
      'All transactions over $300 must be paid by electronic funds transfer (EFT) or by cheque made out to an individual or to an entity (cash cheques are not acceptable).'
    2. There is no need to withhold for transactions under $82.50, but evidence of the purchase is required, including a description of goods, the amount paid and the date.
    3. Acceptance of a Statement by a supplier in circumstances detailed in parts (b) to (f) of the code is expected only in exceptional circumstances. We will intensely scrutinise both parties to the transaction to verify the information provided.
    4. All sales are to be reported to us, including circumstances where the purchaser issues an RCTI.

    Flow chart: applying the code of compliance

    If the transaction is for more than $82.50, you can use the flow chart below to work out your obligations.

    There is no need to withhold payment from transactions of $82.50 or less. But the code requires you to record a description of the material purchased, the amount paid and the date of the transaction.

    Flow chart: how to apply the code of compliance

    Question

    Action if ‘No’

    Action if ‘Yes’

    1. Has the supplier quoted the correct ABN? (a)

     

    Proceed to Question 2

    Record:

    • the supplier’s ABN, name and address
    • the amount paid
    • the quantity of material you purchased
    • a description of the material you purchased
    • the supplier’s proof of identity, vehicle registration and vehicle type, and
    • the date of the transaction.

     

    1. Is the material being supplied by:  
      • an enterprise
      • an employee of an enterprise, or
      • someone acting on behalf of an enterprise?
       

     

    Proceed to Question 3

    Apply 47% (from 1 July 2017) no ABN withholding (b)

    1. Is the material:  
      • being supplied from commercial premises
      • delivered by a commercial vehicle, or
      • commercial by nature or volume?
       

     

    Proceed to Question 4

    Apply 47% (from 1 July 2017) no-ABN withholding, unless an exception applies AND specific reasons have been provided in a valid Statement by a supplier

    1. Is the total payment to the supplier more than:  
      • $300 for this transaction, or
      • $3,000 annually?
       

     

    Proceed to Question 5

    Apply 47% (from 1 July 2017) no-ABN withholding, unless an exception applies AND specific reasons have been provided in a valid Statement by a supplier

    1. Has the supplier completed a valid Statement by a supplier? (c)

     

    Apply 47% (from 1 July 2017) no-ABN withholding

    Do not apply 47% no-ABN withholding

    (a) Where the supplier is registered for goods and services tax (GST), a recipient-created tax invoice (RCTI) agreement must be in place before an RCTI is issued. An RCTI must not be issued to a supplier who quotes an ABN and is not registered for GST.

    (b) If you withhold amounts where no-ABN withholding applies, you must report and pay these amounts to us.

    (c) A statement by a supplier must be retained for five years.

      Last modified: 30 Jun 2017QC 17300