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  • GST States and Territories Industry Partnership minutes 20 September 2018

    The Goods and Services Tax (GST) States & Territories Industry Partnership (STIP) meeting was held on Thursday 20 September 2018.

    A summary of topics discussed is provided below

    1. GST STIP minutes

    Presented by Brendan Sheen, ATO

    The minutes from the last GST STIP meeting held on 21 March 2018 have been published.

    2. Action Items

    ABR Update

    Presented by Anne-Maree Tattersall and Cheryl Manley, Australian Business Register

    Meeting discussion

    Presentation on the four ABR data channels available to members. To access non-public data from the ABR Explorer, ABR Connect, ABR data extract, and ABN Lookup tools government entities require an AUSkey and a signed partnership agreement. The website and email for government entities to enquire further is https://www.abr.gov.au/For-Government-agenciesExternal Link and abrenquiries@ato.gov.au respectively.

    Penalties under section 2B of the Taxation Administration Act 1953 (TAA)

    Presented by Martyn Lyons, ATO

    The ATO reminded the members of the effect of this provision for Crown entities (ie entities that enjoy the immunities of the Crown). Marty advised that most members have provided some data with one jurisdiction yet to do so.

    The ATO acknowledges that the identification of crown entities has at times been difficult with many uncertain situations. Determining that an entity is a Crown entity in a particular jurisdiction is the responsibility of that jurisdiction. However, the ATO may question whether or not an entity is indeed a crown entity especially if the relevant law in that jurisdiction clearly identifies if the entity is or is not a Crown entity.

    The ATO is investigating the ability to alter our system to prevent automatic imposition of penalties under the TAA for Crown entities. The ATO currently does a monthly sweep to cancel incorrectly imposed penalties. MT 2011/1 is to be updated and PSLA 2011/26 will be updated accordingly.

    Private Ruling Database

    Presented by James Francis, ATO

    The ATO reminded the members that edited versions (EVs) of private binding rulings (PBR) are published. However, they are not public rulings and are not binding on the Commissioner.

    Question: Will EVs be removed from the register?

    Answer: The ATO confirmed that all the information is currently still available and will be integrated with the ATO’s legal database (https://www.ato.gov.au/law), which has greater search functionality. The ATO advised that while EVs are not binding on the Commissioner they are published to be transparent about the PBRs issued. On that basis EVs over 5 years old will be archived but still available (to make default searches quicker) but EVs over 15 years old will be removed from the legal database. The treatment or availability of EVs does not impact the end date, if any, found in issued PBRs.

    3. Presentations

    BAS template on the ATO's Business Portal

    Presented by Martyn Lyons, ATO

    Question

    G13 (Purchases for Input-taxed sales) and G14 (GST-free purchases) are no longer reported on Business Activity Statements. Please advise the reasons for this change and also clarify what this means in terms of an audit. Is there now no requirement for these types of acquisitions to be tax coded correctly internally as they are now not reported on?

    Response

    Under Simpler BAS, small business entities (almost 99% of GST registered entities) have a simpler reporting requirement and only need to report G1, 1A and 1B. This may mean that their tax coding is simpler.

    However, you are still required to determine which of your acquisitions relate to making input taxed supplies and which of your acquisitions are GST-free. This is to ensure that you correctly claim input tax credits. If you are unable to identify these in your systems and incorrectly claim credits, your assessments will be amended if you are subject to an audit.

    The ATO has an Interactive GST calculation worksheet for the BAS on the ATO website which can be used to ensure that GST and ITCs are calculated correctly. This worksheet includes G13 and G14. However, not all figures used in the worksheet are reported on the BAS.

    Automatic payment of late fees to suppliers

    Presented by Martyn Lyons, ATO

    Question

    In cases where an incurred late fee charge is paid at the same time as the originally invoiced amount how is this treated for GST purposes?

    Background

    A particular government entity is proposing to implement arrangements where interest is automatically paid to suppliers where that payment is late. For example, an invoice is for $1000 and it is ‘x’ days late incurring a $23.00 late charge.

    Response

    The GST treatment of the additional payment will depend on whether it is consideration for the supply of an interest in a credit arrangement and this will depend on the facts.

    If the agreement or some other mechanism (eg legislation) requires an additional payment to be made if the payment of the primary debt is late, and the additional payment is an entitlement that the supplier can enforce, then the additional payment is consideration for the supply of an interest in a credit arrangement and is therefore consideration for a financial supply which is input taxed (consistent with paragraphs 29 to 32 of GSTR 2000/19).

    If there is no such agreement or mechanism (eg the recipient simply chooses to make an additional payment but there is no requirement to do so and no entitlement that the supplier can enforce), the additional payment will be additional consideration for the underlying supply (see subsection 9-15(2) of the GST Act, paragraphs 107 to 111 of GSTR 2006/9 and paragraph 8 of GSTR 2014/2). The GST treatment of the additional payment must be apportioned on a fair and reasonable basis where the underlying supplies are a combination of taxable, GST-free and/or input taxed supplies (consistent with paragraph 9 of GSTR 2014/2).

    Where the additional payment forms part of the consideration for the underlying supply, to ensure that both the supplier and the recipient are treating the supply/acquisition correctly and consistently for GST purposes, either (see paragraph 57 of GSTR 2013/1):

    • a corrected tax invoice (or correct Recipient Created Tax Invoice) should be issued for the entire supply; or
    • an adjustment note (or Recipient Created Adjustment Note) should be issued for the change in consideration.

    Removal of trading names from the Australian Business Register (ABR)

    Presented by Martyn Lyons, ATO

    Questions:

    1. Trading names are being removed from the ABR and will not appear on the ABR from 1 November 2018. Where a government entity uses trading names, what should the government entity do to ensure that tax invoices are valid?
    2. As trading names are being removed from the ABR, what are the ATO’s expectations in terms of reviewing existing AP vendors and creating new ones in the accounting system?

    Background

    The A New Tax System (Australian Business Number) Act 1999 was amended with effect from 28 May 2012 and no new trading names could be added to the ABR. However, trading names that were on the ABR prior to 28 May 2012 could continue to be shown until 31 October 2018, after which time the trading names would be removed from the ABR. The lengthy transition period was to allow businesses using trading names to register business names.

    An entity must register a business name if they conduct business under a name other than their own. However, government bodies are not required to register a business name as government body names and names specified under a state or territory act or instrument can be protected. Also, government bodies are not liable to prosecution if they carry on business under a business name that is not registered pursuant to the Business Names Registration Act 2011.

    Response 1

    To be a valid tax invoice, certain things must be shown in the document. Pursuant to subsection 29-70(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and assuming all the other requirements of a tax invoice are satisfied, to be a valid tax invoice it must have information that clearly establishes:

    • the supplier’s identity, and
    • the recipient’s identity (if the total price of the supply or supplies is $1000 or more).

    Usually, the supplier’s and recipient’s identities are reflected on the ABR and, with effect from 1 November 2018, the only names shown on the ABR are either their legal name and their registered business name (if any).

    However, as discussed in paragraphs 21 to 24 of GSTR 2013/1, the identity is not limited to the supplier’s/recipient’s legal name or their registered business name for the purposes of the document being a valid tax invoice. This may include a name that is only permitted to be used by that entity. For example, if Queensland Treasury is a legal name but a tax invoice was in the name of Department of Treasury Qld, this would be sufficient to establish the identity of the party being Queensland Treasury.

    If the document does not clearly establish the identity of the supplier, the document can be treated as a valid tax invoice if that information can be clearly ascertained by other documents given by the supplier to the other entity (subsection 29-70(1A)). For example, if a government department maintains a list of its names on their website (including those which are neither their legal names nor their registered business names), the department could send a copy of the page to the other party if the issue of identity arises in respect of a tax invoice given to that other party.

    Where the issue is the identity of a government department as the recipient, it is not necessary for the government department to provide information to the supplier to cause the tax invoice to be valid. In this case, it will depend on whether the government department identity can be established from the name used on the tax invoice. In most situations, this will be clear. However, if the government department maintains a list of its names on their website (including those which are neither their legal names nor their registered business names) as discussed above, this should be sufficient.

    Response 2

    The ATO has no specific requirements in relation to reviewing existing accounts payable (AP) vendors and creating new ones in the accounting system.

    If an entity receives a tax invoice in an alternate name of a supplier (i.e. a trading name) then they are required to hold a separate document which has been provided by the supplier in which the supplier identifies their business name and any relevant trading names. It is insufficient for an entity to issue their own purchase order including the alternate name of the supplier. While there is a mismatch between the GST Act and the Business Names Registration Act 2011, this position exists not to deny otherwise legitimate GST credits to an entity just because the supplier does not register a business name.

    However, entities should consider reviewing AP vendor files to identify which suppliers are using their legal name or business name (as per the Business Names register) and those which are still using “Trading Names” as per the ABR. This may be a proactive strategy that they can undertake to identify which vendors may provide them with “invalid” tax invoices from 1 November 2018 when trading names are removed from the ABR. Otherwise, they may need to check tax invoices as they are received to determine if they are valid tax invoices.

    Post meeting update

    A New Tax System (Australian Business Number) Amendment (Display of Trading Names) Regulations 2018External Link has been made to amend the A New Tax System (Australian Business Number) Regulations 1999 to prescribe that trading names that were on the Australian Business Register (ABR) before 28 May 2012 can continue to be displayed on the ABR until 31 October 2023.

    Transitional BAS reporting through Machinery of Government changes

    Presented by Martyn Lyons, ATO

    Question

    Can old government entities continue to report GST for the period in which the accounting systems for the new government entities are not in place following machinery of government changes?

    Response

    The ATO’s Machinery of Government guide and FAQs set out that the new agency and the old agency each have to report their respective supplies/acquisitions.

    The ATO understands that certain MoG changes can result in significant and sudden changes, however these are usually at the Department level, which are Crown entities, so no penalties under the TAA can be imposed pursuant to section 2B of the TAA. Non-department entities would usually have some lead time before these kinds of changes and would need to consider on an entity by entity basis whether they are crown entities for penalty/section 2B TAA purposes.

    A member raised the possibility of using the Commissioner’s Discretion to allow continued lodgement by the old entity.

    The ATO advised that the Commissioner’s Discretion does exist to accept certain documents as tax invoices but does not extend to allow entities which no longer exist to continue reporting. In that regard the Commissioner has no discretion.

    4. ATO updates

    Unimproved Land

    Presented by Martyn Lyons, ATO

    The ATO has consulted on amendments to GSTR 2006/6 Goods and services tax: improvements on the land for the purposes of Subdivision 38-N and Division 75 and intends to publish them by the end of 2018.

    The draft addendum makes clear that the focus on improvement is measured by usefulness (ie useful to any occupier) or value. The improvement need not, but might, increase the market value of the land. An improvement need not be relevant to the highest and best use of the land, which is a financial valuation concept. Contamination itself is not an improvement, but a contaminated improvement is possible (e.g. a dwelling containing asbestos).

    With respect to subdivisions, where an englobo lot had improvements as at 1 July 2000, the draft addendum makes clear that item 4 will not apply if any of the improvements on the englobo lot as at 1 July 2000 (or parts of those improvements) are on the subdivided lot being supplied.

    Where a number of lots with individual titles are supplied together as a single supply of land, the draft addendum states that it is necessary to consider whether there are improvements on that single piece of land as a whole rather than considering each title separately.

    Submissions have been received and are being addressed in respect of individual titles being supplied together as being a single supply of land. These submissions disagree with the position as expressed in the draft addendum.

    Taxable payments reporting system

    Presented by Donna Crowley, ATO

    The first Taxable Payments Annual Report (TPAR) was due 28 August 2018. ATO provided an update as to how the first lodgement period has gone and how the data is being used.

    One State is already using data provided for payroll tax and WorkCover data.

    The ATO has noted some teething issues with the way information was collected and reported under the new requirements. For example, a payer incorrectly including cents in all the lodged figures.

    The GST payments data is not yet available. Some payees have contacted the ATO to correct data reported by payers. The ATO is seeing similar issues as when the construction industry was first required to lodge their TPAR.

    The lodged payment information is auto-filled to the payee’s myTax (which they can amend if need be). The lodged information is also advised to tax representatives.

    A question was raised about whether the ATO is advising payees that the payer is lodging this data. The ATO confirmed that the expectation is that that conversation would be had between the payer lodging the information and the payee. The discussion included whether or not a policy or general explanation needed to be developed if a payee enquired about the need to include their data. It was pointed out that this reporting is a legislative requirement.

    A question was raised about whether corrections had to be provided on a case by case basis or broadly. The ATO is of the understanding that the software providers included an amendment function without limit to the quantity of changes.

    It was pointed out that there is some difficulty for an individual in amending individual items in the file due to the specifics of the format, especially considering that the government entities have to lodge electronically. The ATO is not able to comment on specifics for each software package so if the software is inadequate perhaps the software provider should be the point of contact.

    For more information

    Business enquiries number: 13 28 66

    Government entity TPAR mailbox: TPARgov@ato.gov.au

    Single Touch Payroll

    Presented by Scott Payne, ATO

    Single Touch Payroll has been live for employers with 20 or more employees since 1 July 2018. ATO provided an update on these first few months. There are 42.5 thousand employers reporting including 15.5 thousand which are not yet legislatively required to.

    Some issues experienced include requests for help to register and set up, how to use, confirming data was received, and error messages. Between the federal agencies currently registered and lodging, including the ATO, already 40 thousand employees are covered.

    When an entity is first required to lodge their single touch payroll information they are granted a six month no failure-to-lodge penalty, in order to ensure a smooth transition.

    The top 100 employers are getting ready to start reporting, with some going through the final testing.

    GST Technical Update

    Meeting Discussion

    ATO has updated the GST Digest and has distributed to members. The GST Digest update details information in relation to the previous 12 months for:

    • Legislative changes including in respect of:
      • Digital currency.
      • GST at settlement
    • Current bills in respect of :
      • Feminine hygiene products.
    • New legislation information pages including in relation to:
      • GST for cross-border transactions
      • GST on low value imported goods
    • New and updated public advice and guidance products
    • GST Court and AAT decisions

    5. General business

    Removing irritants and better support

    Presented by Brendan Sheen, ATO

    The ATO is very keen to continue to work with the States and Territories to identify irritants for government agencies and receive suggestions on how the ATO can better support the government sector.

    Next GST STIP Meeting

    Presented by Brendan Sheen, ATO

    The members decided that the next meeting location and date are to be confirmed.

    Meeting wrap up and close. Meeting was closed at 12:00pm

    Attendees

    Organisation

    Members

    QLD Government

    Liza Gordon

    ACT Government

    Robert Enright

    Commonwealth Department

    Alice Walker

    Commonwealth Department

    Christine Havas

    NT Government

    Michael Kwong

    NT Government

    Joanne Staples

    SA Government

    Justyna Carlier

    NSW Government

    Joan Cram

    ATO

    Anne-Maree Tattersall

    ATO

    Cheryl Manley

    ATO

    Martyn Lyons

    ATO

    Scott Payne

    ATO

    Brendan Sheen (Secretariat)

    ATO

    Donna Crowley

    ATO

    James Francis

    ATO

    Christopher Schaffer (Minutes)

    Apologies

    Organisation

    Members

    QLD Government

    Giles Wilmer

    TAS Government

    Rachel Johnston

    NT Government

    Harold Glenwright

    SA Government

    Tracey Scott

    VIC Government

    Peter Stibbard

      Last modified: 24 Jan 2019QC 57795