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  • Key messages

    Notional GST – Unimproved land – The ATO received a neutral evaluation on 15 April 2015 which supported the Commissioner’s position in relation to notional GST and unimproved land and the application of section 38-445 of the GST Act. A second neutral evaluation involving notional GST and unimproved land is being progressed and is expected to be heard on 26 April 2017.

    Local Government class action – The ATO is aware of a potential class action by an advisor on behalf of more than 90 local Government bodies. It is understood that the proposed class action seeks to argue that a notional GST cannot be imposed on the state, and therefore local Government, as it is forbidden by section 114 of the Constitution. It is not known if the class action is expected to proceed.

    Penalties under section 2B of the TAA 1953 – The new section 2B of the Taxation Administration Act 1953 does not allow the Commissioner to impose administrative penalties, general interest charges or shortfall interest charges on entities with crown immunity. MT 2011/1 Miscellaneous taxes: application of penalties and interest charges to the Commonwealth, States, Northern Territory and Australian Capital Territory and PS LA 2011/26 Administration of penalties and interest charges in relation to the notional liabilities of the States both have notes added to advise they are under review to consider implications for section 2B.

    Third party reporting – Government grants and payments – ATO provided an update on Taxable payments reporting for Government entities which commences 1 July 2017. Government entities are required to report grants paid to people or organisations with an ABN and payments they make wholly or partly for services. This information will be required to be reported each year on the Taxable payments annual report which is due 28 August 2018, for the year ending 30 June 2018.

    GST and cross border transactions – The ATO provided an overview of the changes for GST and cross-border transactions in the Tax and Superannuation Laws Amendment (2016 Measures No.1) Act 2016. These changes ensure:

    • From 1 July 2017, digital products and other imported services supplied to Australian consumers by foreign entities are subject to goods and services tax (GST) in a similar way to equivalent supplies made by Australian entities
    • From 1 October 2016 to better target the way Australia's goods and services tax (GST) rules apply to cross-border supplies that involve non‑resident entities.

    Agenda items

    Disclaimer

    GST States/Territories Industry Partnership meeting, agendas, minutes and related papers are not binding on the Tax Office or any of the States or Territories referred to in these papers. While every effort is made to accurately record the views expressed, the wording necessarily represents a summary of statements of general position only, and care should be taken in interpreting those statements. These papers reflect the position at the date of release (unless otherwise noted) and readers should note that the position on any issue may subsequently change.

    1. ATO updates

    Unimproved land

    The ATO received a neutral evaluation on 15 April 2015 which supported the Commissioner’s position in relation to notional GST and unimproved land and the application of section 38-445 of the GST Act.

    A second neutral evaluation involving notional GST and unimproved land is being progressed and is expected to be heard on 26 April 2017. The main issue to be considered is the application of item 4 of the table in subsection 75-10(3) in respect of dams, fences and roads on land as at 1 July 2000 where that land has later been subdivided for residential development. The neutral evaluation will also consider the application of section 105-65 of the Taxation Administration Act 1953 in respect of refunds sought on land treated as taxable supplies but purported to be GST-free supplies under section 38-445.

    Local government class action

    The ATO is aware of a potential class action by an advisor on behalf of more than 90 local Government bodies. It is understood that the proposed class action seeks to argue that a notional GST cannot be imposed on the state, and therefore local Government, as it is forbidden by section 114 of the Constitution. It is not known if the class action is expected to proceed.

    Penalties under section 2B of the TAA 1953

    The new section 2B of the Taxation Administration Act 1953 does not allow the Commissioner to impose administrative penalties, general interest charges or shortfall interest charges on entities with crown immunity. MT 2011/1 Miscellaneous taxes: application of penalties and interest charges to the Commonwealth, States, Northern Territory and Australian Capital Territory and PS LA 2011/26 Administration of penalties and interest charges in relation to the notional liabilities of the States both have notes added to advise they are under review to consider implications for section 2B.

    Meeting discussion

    The issue was raised by a member of whether penalties apply to a non-Crown entity which is grouped with a Crown entity and the shortfall of tax is attributable to the non-Crown member? ATO advised that this issue was addressed at the last GST STIP meeting under Action item 05102016/1 to which the ATO responded that penalties apply where the shortfall of tax is attributable to an entity that does not have Crown immunity, regardless of the GST grouping arrangements.

    Decision in MBI Properties case and impact on GSTR 2006/9

    The ATO has issued a discussion paper on the implications of the High Court’s decision in Commissioner of Taxation v. MBI Properties Pty Ltd [2014] HCA 49 in relation to when an entity ‘makes a supply’. The discussion paper sets out the ATO’s preliminary view and interested parties are invited to lodge written submissions on the issues raised in the paper by 28 February 2017.

    Further information can be found on our website at MBI Properties case decision – impact on GST treatment of supplies.

    2. Third party reporting – Government grants and payments

    ATO provided an update on Taxable payments reporting for government entities which commences 1 July 2017.

    Government entities are required to report grants paid to people or organisations with an ABN and payments they make wholly or partly for services. This information will be required to be reported each year on the Taxable payments annual report which is due 28 August 2018, for the year ending 30 June 2018.

    Meeting discussion

    Members discussed the new reporting regime with a focus on the following issues:

    Amending an incorrect report 

    The ATO advised government entities will need to provide an amended annual report where any amount fields have been reported incorrectly. There is no threshold for materiality of the error. If an error is identified with any of the amount fields on a lodged annual report an amendment is required to be prepared and lodged.

    A government entity must lodge a corrected report (amendment) no later than 28 days after the entity becomes aware of the error.

    The amended report can be generated through your software. You should contact your software provider for further advice on how to generate an amended report.

    If a significant error (large discrepancies in amounts reported which impacts on a number of payees) is identified contact the ATO directly at tparGov@ato.gov.au.

    Facilitation of expense payment arrangements 

    The law requires a Government entity that has actually made a payment to report it.

    Where another entity eg a shared service merely facilitates a payment on behalf of a government entity then the government entity is required to report that information.

    Payments for services 

    Government entities are required to report payments made wholly or partly for services that they receive. Under the funding of some Government programs, services can be provided by a non-Government entity to an individual. The payment for these services can be made by the Government entity to the individual receiving the service or to the non-Government entity providing the service. If the service is being provided to the individual and not the government entity, the payment does not need to be reported.

    ATO also advised that there is a test facility that is now available where files can be tested to ensure that they meet the specifications. Access is available on the Software developer’s website at softwaredevelopers.ato.gov.au/bulktestExternal Link. You need to register to use this facility – once registered, you will be sent a user id and password as well as instructions on how to access it.

    Information on the Taxable payments reporting for Government entities has been published on the ATO website and can be accessed at www.ato.gov.au/tparGov.

    Action item 27022017/1

    Members sought clarification as to whether compensation payments they make need to be reported?

    Post meeting response

    Government entities may have arrangements under a workers compensation scheme which requires them to pay medical and/or health practitioners for services provided to injured workers, such payments do not need to be reported.

    The service is being supplied by the medical and/or health practitioner to the employee although payment is being made to the service provider by the Government entity under the workers compensation arrangement.

    For further information contact the ATO directly at tparGov@ato.gov.au.

    Action item 27022017/2

    Are Government entities required to report payments for airfares?

    Post meeting response

    ATO advised that payments relating to the transportation of employees, including airfares do not need to be reported.

    3. Division 81 – Payments of taxes, fees and charges

    Issue

    Division 81 and emergency response vehicles

    Background

    An Australian fee or charge means a fee or charge other than an Australian tax, imposed under an Australian law and payable to an Australian Government agency.

    The following two fees are payable to a Government agency and are imposed under an Australian law (for example, the Fire and Emergency Services Regulations)

    GST Regulations

    For the purposes of subsection 81-15 the following kinds of Australian fees or charges will not constitute consideration for a supply:

    • paragraph 81-15.01(d) a fee or charge to compensate an Australian Government agency for costs incurred by the agency in undertaking regulatory activities
    • paragraph 81-15.01(f) a fee or charge for a supply of a regulatory nature made by an Australian Government agency.

    Issue 1 – Fee for the emergency response vessel (boat)

    The Government agency does not charge when the emergency response boat responds to an emergency.

    However the Government is considering charging when the boat is sent out for non-emergency arrangements such as

    • Precaution monitoring, for example, monitoring a berth where fuel is decanted for the whole of the State
    • Attending false alarms. The agency does not know it is false until it is investigated.
    • Safety precaution, for example, oil spills, chemical hazards, other vessels in distress.

    The fee to be charged will be either at cost recovery or less than cost recovery.

    It is noted that the Explanatory Memorandum discusses regulatory activities and provides some examples such as fees for false fire alarms, fees for uninsured fire attendance, fees in relation to hazardous material incidents, emergency response charges. It is noted that attendance for false alarms is specifically mentioned however emergency response as a precaution for safety or monitoring is not.

    Can the ATO confirm our tentative view that GST will not apply as this fee will be imposed to compensate an Australian Government agency for costs in undertaking regulatory activities in accordance with paragraphs 81-15.01(d) and (f) of the GST regulations? 

    Issue 2 – Salvage/fire watch (fee for the emergency response vehicle)

    The Government agency does not charge when the emergency response vehicle responds to an emergency.

    However the Government is considering charging when a response vehicle is sent out for non-emergency arrangements. These are largely for safety precautions (including the public perception) and/or educational purposes. For example, the agency may be requested to have an emergency response vehicle present at a major sporting event or rock concert; or attend a school to provide safety awareness of fires and what to do in an emergency

    The fee to be charged will be either at cost recovery or less than cost recovery.

    It is noted that the Explanatory Memorandum discusses regulatory activities and provides some examples such as fees for false fire alarms, fees for uninsured fire attendance, fees in relation to hazardous material incidents, emergency response charges. However it is also noted that emergency response vehicle attendance as a precaution for safety and/or education awareness is not.

    Can the ATO confirm our tentative view that GST will not apply as this fee will be imposed to compensate an Australian Government agency for costs in undertaking regulatory activities in accordance with paragraphs 81-15.01(d) and (f) of the GST regulations?

    ATO response

    Question 1

    Are fees charged for a boat being sent out for non-emergency situations, such as, precaution monitoring, attending false alarms and safety precautions, consideration for a taxable supply? 

    No the fees charged are not the provision of consideration and are exempt.

    Question 2

    Are fees charged for a response vehicle being sent out for non emergency arrangements such as for safety precautions and educational purposes, consideration for a taxable supply? 

    No the fees charged are not the provision of consideration and are exempt.

    Reasons

    Under section 81-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), the A New Tax System (Goods and Services Tax) Regulations 2019 (GST regulations) may provide for the payment of a prescribed Australian fee or charge to be not the provision of consideration.

    Paragraph 81-15.01(d) of the GST regulations provides that a fee or charge to compensate an Australian Government agency for costs incurred by the agency in undertaking regulatory activities does not constitute consideration.

    Paragraph 81-15.01(f) of the GST regulations provides that a fee or charge for a supply of a regulatory nature made by an Australian Government agency does not constitute consideration.

    In this situation, Section 26 of the relevant Fire and Emergency Services Act (F&ES Act) provides for the functions and powers that the State Metropolitan Fire Service (SMFS) have.

    These include, to provide services with a view to preventing the outbreak of fires, or reducing the impact of fires, in any fire district (therefore prevention), to develop and maintain plans to cope with the effects of fires or emergencies in any fire district (therefore this could be educational and preventative and for safety precautions). They also have the functions of providing services or support to assist with recovery in the event of a fire or other emergency in a fire district and to perform any other function assigned to SMFS under this or any other act. The Fire and Emergency Services Regulations sets out the fees to be charged for these types of services and can be related back to the provision of those services under the F&ES Act.

    Therefore, it is considered that these fees either compensate the SMFS for the costs they incur in carrying out regulatory activities such as fire monitoring services or for the actual supply of regulatory activities such as monitoring of fire hazards, education etc.

    Therefore, the provision of these fees is not for consideration as a result of 81-15 of the GST Act and is exempt.

    You would need to apply for a private ruling for us to provide more specific advice that you can rely on in relation to these fees.

    Meeting discussion

    It was advised by a member that the above issues for Division 81 arise given budget constraints which require Government organisations to identify ways of increasing their income by charging for services that they have not previously charged for in the past.

    4. GST obligations and novation of a contract for services

    Issue

    GST obligations for Government entities and a novated contract for services

    Issue 1

    Recently, a Government Minister for XYZ, for and on behalf of and so as to bind the Crown in the right of a State (the State), signed a contract with an external communication services company for the supply of various services.

    The Minister does not have an ABN and is not registered for GST. In practice the Department of XYZ which has an ABN and is registered for GST manages the taxation obligations and rights on behalf of its Minister (the State?). In other words, treating the Minister (the State?) as if it were registered for GST, any liability of the Minister (the State?) to pay GST in respect of taxable supplies it makes, and any entitlement of the State to claim input tax credits in respect of creditable acquisitions it makes, is accounted for by Department of XYZ.

    This practice is a practical way and probably the only realistic way of dealing with government taxation obligations and probably affects all jurisdictions.

    Issue 2

    A second issue is that at some time in the future the Department of XYZ may novate the contract to a separate Statutory Authority within the same portfolio of the Minister for XYZ. This authority shares the same Minister as Department XYZ and has an ABN and is registered for GST. When this novation is complete the Statutory Authority will assume all rights and obligations under the contract including all liability of the Minister (the State?) to pay GST in respect of taxable supplies it makes, and any entitlement of the State to claim input tax credits in respect of creditable acquisitions it makes, will be accounted for by this Statutory Authority.

    Is there anything to prevent this if the novation is legally executed?

    ATO response

    Question 1

    Is the Department XYZ liable and entitled to GST in respect to the supplies and/or acquisitions made by the Minister (on behalf of the State)? 

    Section 9 and 11 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that where a GST registered entity makes a ‘taxable supply’ they are liable for the GST payable and where the entity makes a ‘creditable acquisition’ they are entitled to the input tax credit.

    In more complex arrangements involving more than two entities, it may be that a supply is made to one entity but provided to another entity, two or more supplies are made or a supply is made and provided to one entity but consideration is paid by a third party.

    In these circumstances, the entity liable to GST and entitled to input tax credits for GST will ordinarily be determined on a case by case basis, which can usually be determined objectively by the contract and/ or relevant legislation.

    For example, generally if the Minister enters into the contract on behalf of the department in their authorised capacity, and the terms of the contract evidence that the department is the supplier or the recipient, the department is the entity liable for GST and entitled to input tax credits for GST. Similarly, if the department is also a direct or named party to the contract, the department will be the relevant entity for GST purposes. Other examples or scenarios may exist.

    You would need to apply for a private ruling for us to provide more specific advice that you can rely on in relation to a particular transaction as we would require additional information, such as a copy of the contract.

    Question 2

    Is the Statutory Authority liable and entitled to the GST in respect to the taxable supplies and/or creditable acquisitions it is taken to have made under the terms/conditions of a novated contract? 

    Generally, under a novated arrangement, one party (the incoming party, in your example the Statutory Authority) will take over all or part of another party’s (the previous party, in your example Department of XYZ) rights and obligations under the contract. This transfer of rights and obligations is usually agreed to in a deed of novation between the relevant parties.

    Depending on the terms of the deed of novation, the GST liability and entitlement to input tax credits may cease for the previous party who had made a taxable supply and/or creditable acquisition, and transfer to the incoming party who now is taken to make a taxable supply and/or creditable acquisition under the novated contract.

    You would need to apply for a private ruling for us to provide more specific advice that you can rely on in relation to a particular transaction as we would require additional information, such as a copy of the contract.

    5. GST and cross-border transactions

    The ATO provided an overview of the changes for GST and cross-border transactions in the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Act 2016.

    Schedule 1 to this Act amends the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) from 1 July 2017 to ensure that digital products and other imported services supplied to Australian consumers by foreign entities are subject to goods and services tax (GST) in a similar way to equivalent supplies made by Australian entities.

    Schedule 2 to this Act amends the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) from 1 October 2016 to better target the way Australia's goods and services tax (GST) rules apply to cross-border supplies that involve non‑resident entities.

    Meeting Discussion

    The ATO advised of the broad changes to the taxation of goods and services supplied from offshore to Australia which include:

    • GST on services and digital products provided to Australian consumers
    • GST and cross-border transactions between businesses
    • GST on low value imported goods.

    The ATO has published guidance to assist taxpayers with key concepts under these new measures which can be found on Tax on retail sales of goods and services into Australia.

    Recent publications also include:

    • GSTR 2016/D1 Draft GST ruling: making cross-border supplies to Australian consumers is designed to assist an overseas-based supplier determine whether they are making supplies to Australia consumers that are connected with Australia under paragraph 9-25(5)(d).
    • TDP 2016/1 Discussion paper on issues concerning electronic distribution platforms (EDPs). The amendments to the GST Act insert special rules for operators of electronic distribution platforms (EDPs) concerning the GST on the sale to Australian consumers of their digital products and services.
    • LCG 2017/D2 Draft Law Companion Guideline which discusses the amendments proposed by Treasury Laws Amendment (GST Low Value Goods) Bill 2017External Link (the Bill), which was tabled in Parliament on 16 February 2017. The broad purpose of the Bill is to ensure that Australian goods and services tax (GST) is payable on supplies of low value imported goods that are purchased by consumers in Australia.

    6. ATO digital services and Government sector

    ATO provided a presentation on the take up of ATO digital services within the Government sector including discussion on the blockers for Government transitioning to digital and the support available from the ATO to assist with the transition.

    Meeting Discussion

    Members discussed the implications of delivering digital services for their Government organisations with issues raised in relation to staff access and permission for AUSkey and also the introduction of Single Touch Payroll. The ATO advised that from 1 July 2018, employers with 20 or more employees will be required to use Single Touch Payroll enabled software for reporting to the ATO. The ATO has been working with software providers to improve support products including recent testing of software in Sydney and Brisbane.

    Action item 27022017/3

    An electronic copy of the ATO presentation was provided to members on 2 March 2017.

    7. Tax Invoices

    Issue

    Tax invoices lost or destroyed

    Questions

    1. Can an entity claim an input tax credit for an acquisition for which a statutory declaration is submitted by an employee because the tax invoice has been lost or destroyed?

    2. Is a statutory declaration sufficient to comply with the No-ABN withholding requirements?

    Background

    There are situations where an employee makes a purchase, generally with a corporate credit card but could be by cash, where the invoice they receive is lost by them or accidentally destroyed. In these situations the employee provides a statutory declaration to acquit the purchase.

    Purchases mostly relate to cash dockets issued from an EFTPOS outlet. They may be mixed supplies, particularly for food purchases. Suppliers advise they cannot reissue these invoices.

    The information provided on the credit card statement does not satisfy the requirements of a legislative instrument for the waiver of a tax invoice. Credit card statements display the name of the account to which a payment is made but this often is not the trading name of the supplier.

    Question 1

    Section 29-70(1)(a) of the GST Act requires a tax invoice to be issued by the supplier unless it is a recipient created tax invoice. Section 29-70(1A) allows a document to be treated as a tax invoice in certain circumstances but this refers to a document issued by the supplier. Section 29-70(1B) allows the Commissioner to treat as a tax invoice a particular document that would not otherwise be a tax invoice.

    Goods and Services Tax Ruling GSTR 2013/1 provides guidance on tax invoice requirements. It is clear from paragraph 42 of the ruling that, for a recipient to treat a document as a tax invoice, the document must be issued by the supplier which is not the case for a statutory declaration completed by an employee. Neither is a statutory declaration a recipient created tax invoice.

    Section 29-80(1) of the GST Act waives the requirement for a tax invoice for creditable acquisitions that relate to a taxable supply the value of which does not exceed $75. Section 9-75 of the GST Act calculates the value of a taxable supply as the GST-exclusive amount.

    Paragraph 58 of GSTR 2013/1 refers to low value where ‘A supplier is not required to issue a tax invoice and a recipient can claim an input tax credit without a tax invoice if the value of the taxable supply is $75 or less’. This suggests that the acquisition must be a taxable supply by the supplier but this could only be determined from the information provided in the statutory declaration.

    Paragraph 66 of the ruling states the recipient could make a request for the Commissioner to treat the document as a tax invoice under subsection 29-70(1B). However, I assume the document would need to be one issued by the supplier. Law Administration Practice Statement PS LA 2004/11 considers the circumstances under which the Commissioner would exercise their discretion. Paragraph 2 of PS LA 2004/11 refers to situations where the Commissioner’s discretion is not required includes:

    • the value of the taxable supply is $75 or less or the amount of the decreasing adjustment is $75 or less
    • there was a valid tax invoice at the time the ITCs were claimed in the activity statement but it was subsequently lost or destroyed

    It appears from this that an input tax credit could be claimed in respect of a transaction with a value not exceeding $75 if supported by a statutory declaration asserting the purchase is a creditable acquisition. It may even support the situation where the value exceeded $75 and the tax invoice had been lost or destroyed. However, there appears to be the requirement that the tax invoice was held at the time the business activity statement was lodged.

    Paragraph 4 of PS LA states that exercising the discretion to treat a document as if it were a tax invoice should be considered where:

    • it's clear there was a creditable acquisition
    • a tax invoice is required in order to claim input tax credits, but the document doesn't meet the requirements
    • the request is made within four years, and
    • the facts and circumstances indicate it is reasonable to do so.

    Some transaction exceeding $75 would most likely satisfy the decision flow chart attachment of PS LA to exercise the discretion. However, it is understood that a PS LA is for guidance of ATO officers and not a public ruling. Transactions exceeding $75 would need to be referred to the ATO for a decision.

    A problem arises where a transaction consists of mixed supplies such as food purchased from a supermarket for staff amenities. These generally consist of a number of items that could not be accurately apportioned between taxable supplies and GST-free supplies.

    Division 111 of the GST Act allows an employer to claim an input tax credit in respect of a reimbursement to an employee where it would be a creditable acquisition for the employer notwithstanding that the tax invoice is in the name of the employee. It is assumed the same rules would apply if an employee provided a statutory declaration for expenses not exceeding $75 in value.

    Question 2

    The issue here is that payment has been made to the supplier prior to the invoice being lost or destroyed resulting in no withholding being possible.

    Taxation ruling TR 2002/9 concerns the withholding from payments by the recipient of a supply made by a supplier in furtherance of the supplier’s enterprise.

    Where an employee provides a statutory declaration for an invoice that has been lost or destroyed, there is no evidence of an ABN being quoted by the supplier although the original invoice may well have quoted an ABN.

    Paragraph 51 of TR 2002/9 sets out the withholding exceptions including:

    • the supplier quotes their ABN on an invoice or some other document relating to the supply
    • if the payment does not exceed $75 (disregarding so much of it as relates to GST payable on the supply)

    It is clear that a withholding is not required in respect of a supply not exceeding $75 whether or not an invoice is held by the recipient of the supply. However, where a supplier has issued a tax invoice to the recipient for a supply exceeding $75, and that tax invoice has been lost or destroyed, it would be unreasonable to withhold any of the consideration. Furthermore, it would not be possible to withhold from payments made by credit card.

    Paragraph 56 of TR 2002/9 advises an ABN may be quoted in the following manner:

    • in writing;
    • in an electronic document;
    • orally or over the telephone; or
    • on an internet site.

    An invoice that has been lost or accidentally destroyed would have been issued by the supplier in writing. The invoice would most likely have quoted an ABN. Where a supplier is used consistently and regularly by the recipient, the supplier’s ABN could be substantiated from previous invoices issued by the supplier. This would be similar to the situation at paragraph 63 where the recipient holds records of approved suppliers and their ABN.

    Industry view/suggested treatment

    It is suggested that input tax credits should be available for transactions not exceeding $75 in value only where a statutory declaration clearly distinguishes a creditable acquisition. Where the statutory declaration identifies a transaction consisting of mixed supplies, an input tax credit should not be available unless a reasonable apportionment of the supplies can made.

    Transactions with regular suppliers should not be subject to the No-ABN withholding provisions where the supplier’s ABN is recorded on previous invoices and the statutory declaration confirms an invoice had been received.

    Reference to other States and Territory

    Similar situations most likely arise nationally

    Technical references

    GSTR 2013/1 Goods and services tax: tax invoices

    PS LA 2004/11 Treating a document as a tax invoice or adjustment note

    TR 2002/9 Income tax: withholding from payments where recipient does not quote ABN

    ATO response

    Summary of facts 

    1. An employee makes an acquisition using a corporate credit card and/or cash.
    2. The invoice received by the employee is a cash docket which has been issued from an EFTPOS outlet.
    3. Prior to the entity claiming an input tax credit for this acquisition the invoice is either lost or accidently destroyed by the employee.
    4. The supplier advises the invoice cannot be reissued.
    5. The employee provides a statutory declaration in support of the acquisition made.
    6. The acquisition made is a mixed supply of food items with some items being taxable and other items being GST-free.

    Question 1

    Can an entity claim an input tax credit for an acquisition where a statutory declaration has been provided by an employee because the tax invoice has been lost or accidently destroyed?

    Section 29-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you must hold a tax invoice before you can claim the input tax credit on a creditable acquisition costing more than $82.50 (GST-inclusive).

    Specifically, subsection 29-10(3) of the GST Act provides that you must hold a tax invoice for the acquisition at the time you lodge your activity statement before an input tax credit can be attributed to a tax period.

    An entity may be entitled to an input tax credit where an employee makes an acquisition on their behalf and the conditions set out in Division 111 of the GST Act are satisfied.

    Under Division 111 of the GST Act, an entity can potentially claim an input tax credit for an expense incurred by an employee where:

    • the entity reimburses the employee for the expense, or
    • the entity pays the third party supplier on the employee’s behalf.

    In circumstances where an entity reimburses an employee for an expense he or she incurs that is directly related to his or her activities as the entity’s employee, the entity is treated as having made an acquisition from the employee and the reimbursement is treated as consideration for the acquisition. Under such circumstances, the thing supplied by the third party supplier to the employee must have been subject to goods and services tax (GST).

    The entity is treated as having a valid tax invoice for the deemed acquisition made from the employee if the entity holds the tax invoice that was issued by the third party to the employee, even though the invoice contains the employee’s name rather than the entity’s name.

    In this case, the employee has lost or accidently destroyed the tax invoice he or she received from the supplier for the acquisition of food items, some of which were taxable and some of which were GST-free.

    However, the employee has provided a statutory declaration to the entity in support of the acquisition made.

    Is the statutory declaration provided by the employee sufficient to allow the entity to claim an input tax credit in respect of the acquisition? 

    Subsection 29-70(1) of the GST Act states:

    A tax invoice is a document that complies with the following requirements:

    1. it is issued by the supplier of the supply or supplies to which the document relates, unless it is a recipient created tax invoice (in which case it is issued by the recipient);
    2. it is in the approved form;
    3. it contains enough information to enable the following to be clearly ascertained:
      1. the supplier's identity and the supplier's ABN;
      2. if the total price of the supply or supplies is at least $1,000 or such higher amount as the regulations specify, or if the document was issued by the recipient – the recipient's identity or the recipient's ABN;
      3. what is supplied, including the quantity (if applicable) and the price of what is supplied;
      4. the extent to which each supply to which the document relates is a taxable supply;
      5. the date the document is issued;
      6. the amount of GST (if any) payable in relation to each supply to which the document relates;
      7. if the document was issued by the recipient and GST is payable in relation to any supply – that the GST is payable by the supplier;
      8. such other matters as the regulations specify;
       
    4. it can be clearly ascertained from the document that the document was intended to be a tax invoice or, if it was issued by the recipient, a recipient created tax invoice.

    Paragraphs 42 to 50 of Goods and Services Tax Ruling – Goods and services tax: tax invoices (GSTR 2013/1) explain when a recipient can treat a document as a tax invoice. However, these paragraphs are all prefaced on the existence of an original document issued by the supplier and therefore we consider a statutory declaration provided by the employee is not sufficient for the entity to claim an input tax credit for the acquisition made.

    Where the acquisition made is further evidenced by a corporate card statement would this be sufficient for the entity to claim an input tax credit? 

    Goods and Services Tax Ruling – Goods and services tax: corporate card statements – entitlement to an input tax credit without a tax invoice (GSTR 2000/26) explains two determinations that the Commissioner has made under subsection 29-10(3) of the GST Act and sets out the circumstances in which a registered entity that holds a corporate card statement (issued by certain organisations) can claim an input tax credit for a creditable acquisition without holding a tax invoice for that acquisition.

    However, paragraph 29 of GSTR 2000/26 provides that an entity must obtain a tax invoice for the acquisition before claiming an input tax credit if the supply is a mixed supply.

    We do not consider that the corporate card statement and the statutory declaration together are sufficient to support the entity claiming input tax credits in respect of a mixed supply.

    Is this a circumstance in which the Commissioner may exercise the discretion and treat the statutory declaration as a tax invoice? 

    Paragraph 51 of GSTR 2013/1 states that the Commissioner has the discretion to treat a document that does not satisfy the tax invoice requirements as a tax invoice and that this discretion can also be used to treat a document that does not meet the requirements for a recipient created tax invoice as a tax invoice.

    Law Administration Practice Statement (PS LA 2004/11) Treating a document as a tax invoice or adjustment note provides guidance about exercising the discretion under subsection 29-70(1B) of the GST Act to allow a document to be treated as a tax invoice even if it does not meet the specific requirements under the law.

    Paragraph 2 of PS LA 2004/11 provides a list of circumstances in which an exercise of the discretion is not required and an input tax credit can be claimed without a valid tax invoice. This case is not one of the circumstances outlined at paragraph 2.

    Paragraph 5 of PS LA 2004/11 provides a number of factors to be considered in making the decision in regard to the exercise of the discretion. Examples of some of these factors are:

    • whether the recipient made a reasonable and genuine attempt to obtain a valid tax invoice from the supplier
    • whether the recipient has evidence that demonstrates an entitlement to claim input tax credits despite not having a valid tax invoice
    • does the recipient have a good compliance history, and
    • does the recipient have adequate record keeping systems.

    We consider the decision as to whether or not the Commissioner would exercise the discretion would be largely dependent on the particular facts of each case and the level of detail/evidence provided by the employee in the statutory declaration.

    Acquisition cost is $82.50 or less 

    The statutory declaration should contain a record of the purchase including the name and Australian business number (ABN) of the supplier, the date the acquisition was made, a description of the items acquired and the amount paid.

    Question 2

    Is a statutory declaration sufficient to comply with the No-ABN withholding requirements?

    Subsection 12-190(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA) outlines when an entity making a payment in respect of a supply is required to withhold an amount.

    This section imposes an obligation on the paying entity to withhold an amount from the relevant payment where the payment is for a supply made or proposed to be made in the course or furtherance of an enterprise carried on by the supplier in Australia and none of the exceptions listed in this section apply.

    Regular suppliers can provide a periodic quotation of their ABN that covers all the supplies they make to a particular business for a specified period, such as a financial year. The recipient of the regular supplies should check at least once a year that the ABN quotation is correct and up to date. Therefore, if this acquisition was made from one of the entity’s regular suppliers and a yearly check of the ABN had already been carried out then this would be sufficient.

    Are documents quoting an ABN, other than invoices, acceptable? 

    Documents quoting an ABN and relating to the supply are acceptable. Some examples are:

    • a quotation notice that formed the basis of the supply being accepted
    • an invoice you created because the supplier did not give you one
    • renewal notices such as for insurance, motor vehicle registration and
    • magazine subscriptions
    • an order form
    • contracts or lease documents
    • catalogues, magazines or other promotional material.

    Meeting discussion

    It was discussed whether a corporate credit card statement itself is sufficient in these circumstances where the tax invoice has been lost. The ATO advised that their response explains that GSTR 2000/26 sets out the circumstances in which a registered entity that holds a corporate card statement (issued by certain organisations) can claim an input tax credit for a creditable acquisition without holding a tax invoice for that acquisition. Paragraph 29 of GSTR 2000/26 provides that an entity must obtain a tax invoice for the acquisition before claiming an input tax credit if the supply is a mixed supply. The ATO does not consider that the corporate card statement together with the statutory declaration are sufficient to support the entity claiming input tax credits in respect of a mixed supply. However the Commissioner can exercise his discretion to treat a statutory declaration as a tax invoice under PS LA 2004/11 but any decision to exercise this discretion would depend on the facts of each case and the level of detail provided in the statutory declaration. Clarification was sought by members in circumstances where the acquisition is a mixed supply for a cost of $82.50 or less.

    There was further discussion in relation to whether the employer has an obligation to withhold, and potentially liable to a penalty for no ABN withholding, in situations where the employee has incurred an employment related expense exceeding $75 and the employer reimburses the employee under Division 111 of the GST Act.

    Action item 27022017/4

    Does the statutory declaration need to identify the GST free amount in situations where the tax invoice for a mixed supply is lost and the acquisition cost is $82.50 or less?

    Post meeting response

    The ATO considers that it would be appropriate for the statutory declaration to also identify the amount of GST paid on the supply by the employee. This can be based on a reasonable apportionment taking into consideration the amount of taxable and non-taxable supplies included in the acquisition.

    Action item 27022017/5

    Does subsection 12-190(1) of Schedule 1 to the TAA apply in situations where the employee has incurred an employment related expense exceeding $75 but has since lost the tax invoice and provides a statutory declaration for the employer to reimburse the employee under Division 111 of the GST Act?

    Post meeting response

    The ATO considers that the withholding requirements under subsection 12-190(1) of Schedule 1 to the TAA do not apply in this situation as neither the employee nor the employer has an obligation to withhold.

    The supply is from the supplier to the employee and the employee (the payer) is not required to withhold in accordance with paragraph 12-190(4)(a) of Schedule 1 to the TAA as the payment was not made in the furtherance of an enterprise carried on in Australia by the payer. The payer in this situation is making the acquisition in its capacity as an employee and therefore is not required to withhold under section 12-190 of Schedule 1 to the TAA.

    Division 111 of the GST Act gives entitlement to the employer to an input tax credit included in the supply to the employee when the employer reimburses the employee for the acquisition. However it does not impose a withholding obligation on the employer in respect of the reimbursement.

    8. GST technical update

    Discussion of recent legislative changes, judicial decisions and published ATO rulings and guidance with GST impacts for government entities.

    Meeting Discussion

    There was discussion on the interaction of PCG 2016/18 GST and countertrade transactions and GSTR 2001/6 Goods and services tax: non-monetary consideration. ATO advised that the principles of non-monetary consideration in GSTR 2001/6 are still relevant. Both the supply and the acquisition are still reported on the BAS however the amount of GST payable and GST credit are equal in the same tax period and therefore GST neutral.

    9. General business

    9.1 Removing irritants and better support

    We would like 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.

    9.2 Future GST impacts for States and Territories

    We would like the States and Territories to consider the following questions for discussion at the meeting.

    • What issues from a GST perspective do the States and Territories anticipate in the future?
    • How will the States and Territories be equipped to respond to these impacts?
    • What challenges to sustainability of compliance do the States and Territories face over the next few years?
    • How effective (easier, contemporary, cost effective, more tailored) is the design of existing ATO systems for the administration of GST?
    • How can any deficiencies be shaped to become more effective?

    Meeting discussion

    Members raised concern at the decreasing ATO support to the Government sector. Each jurisdiction no longer has the support from the ATO Relationship Managers which was designed to service the Government sector at a jurisdictional level. ATO advised that availability of this service has ceased as within the ATO the management of Government sector clients from a GST compliance perspective has moved from ITX Public Groups Engagement to ITX Business Assurance. However, support will continue to be provided at a jurisdictional level by Martyn Lyons and Margaret Lake.

    ATO also advised there was work being progressed towards improving the client service experience for the Government and NFP sectors. The focus of this work is to identify irritants and transform the experience for the Government and NFP sectors through new or improved products or services.

    9.3 GST STIP minutes

    The minutes from the last GST STIP meeting held on 5 October 2016 have been published on the ATO website and can be accessed via this link – GST States and Territories Industry Partnership minutes – 5 October 2016.

    9.4 Next meeting

    The meeting date for the next GST STIP was scheduled for Tuesday 19 September 2017 to be held in Tasmania.

      Last modified: 01 Apr 2019QC 52560