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  • GST and machinery of government

    This document contains information about GST and machinery-of-government changes (MOG), including information on GST registration, GST groups, recipient created tax invoices (RCTIs) and tax invoices.

    This ATO guidance document should be read in conjunction with GST and machinery of government changes.

    Terms we use

    When we refer to government organisations, generally, we mean the GST terms government entities or government-related entities.

    Government entities

    The term ‘government entity’ refers to:

    • Australian government departments
    • departments of an Australian state or territory
    • executive and statutory agencies
    • some bodies established by the Commonwealth or a state or territory to carry on activities for a public purpose.

    Government entities are not ‘entities’ in their own right. They are part of an entity that is the larger body politic of the Commonwealth, state or territory.

    Government-related entities

    A government-related entity is any of the following:

    • a government entity
    • an entity that would be a government entity if it were not an entity in its own right
    • a local governing body established by or under a state or territory law.

    Examples of government-related entities include:

    • a Commonwealth authority – for example, an Australian government business enterprise that is a body corporate
    • a statutory body corporate
    • an independent statutory authority or body corporate established under a territory Act
    • a local governing body.

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    GST Registration

    GST branching and the machinery of government

    GST branching requires a branch of an entity (the parent entity) to have both an independent system of accounting and to be identified separately by either:

    • the nature of its activities
    • its location.

    A GST branch is responsible for lodging its own activity statements. However, although the branch may provide payment when it lodges its activity statement, the parent entity is liable for amounts owed by the branch to us.

    GST branching can be used by an existing or newly formed government organisation which takes over the functions of another government organisation as a result of machinery of government (MOG) changes.

    By treating the transferred functions to be undertaken by one of its branches, the existing or newly formed government organisation can register the branch as a GST branch.

    Branch registration number

    When registering a GST branch, we notify the parent entity of the GST branch registration number. This number includes the same Australian business number (ABN) of the parent entity with a unique identifying extension.

    A GST branch must show its GST branch registration number on tax invoices, including recipient created tax invoices (RCTIs) for taxable supplies that it makes.

    Note: A parent entity and its GST branches will need to consider impacts to their business systems and their obligations in relation to giving tax invoices.

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    Machinery of government change time frames

    An 'Administrative Arrangements Order' (AAO) specifies the date on which a MOG change takes effect.

    If the AAO specifies the date on which a government organisation (the losing agency) is abolished, the losing agency will:

    • not exist on or after that date
    • have its functions transferred to another government organisation (the gaining agency).

    The losing agency

    All transactions undertaken by the losing agency before the date of the MOG change need to be reported in its concluding activity statement.

    The abolished agency will need to lodge a concluding activity statement but consideration should be given to the other tax obligations such as pay as you go withholding (PAYGW), fringe benefits tax (FBT) and fuel tax credits, which are also reported on activity statements.

    The abolished agency should then cancel its ABN, GST registration and other tax registrations by completing the Application to cancel registration (NAT 2955) form.

    Cancelling a GST registration

    If a government organisation is abolished as a result of a MOG change then it will cease to exist on and after a certain date. The abolished government organisation must cancel its GST registration after it has lodged its concluding activity statement.

    The gaining agency

    All transactions undertaken by the gaining agency from the date of the MOG change in administering the functions transferred from the losing agency must be reported by the gaining agency.

    We understand that the implementation and changeover of transaction processing systems to accommodate a MOG change can take some time. However, a date should be arranged as soon as possible after the date of the MOG change for the gaining agency to undertake the administrative responsibilities in relation to the transferred functions (such as reporting in activity statements and issuing tax invoices).

    The gaining agency must work out the extent to which it should report sales, purchases and any GST obligations relating to the transferred functions in its activity statement, by working out what the abolished agency has already reported before the date of the MOG change.

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    When a member of a GST group or joint venture is subject to MOG changes

    MOG changes usually take immediate effect which can make it difficult for government organisations to meet their GST obligations.

    From the first tax period after 1 July 2010, certain government organisations are able to form, change or dissolve a GST group or GST joint venture on any day during a tax period.

    Consideration must be given to these structures following MOG changes. The representative member of a GST group or the operator of a GST joint venture is responsible for notifying us of any changes to the GST group or joint venture as soon as possible.

    For GST purposes, the GST group representative member lodges a single activity statement and is liable for the GST payable on all taxable supplies. Despite this special rule, a GST group member is the entity making the taxable supply and must issue a tax invoice for a taxable supply when requested by the recipient. You may however authorise the representative member to issue tax invoices on your behalf. The tax invoice must include your details and not the details of the representative member of your group.

    Note: GST group members and GST joint venture participants will need to consider impacts to their business systems and their obligations in relation to tax invoices.

    Government-related entities can become:

    • members of GST groups under Divisions 48 and 149 of the GST Act
    • participants in GST joint ventures under Division 49 of the GST Act.

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    Sales and purchases

    Supply when staff and assets are transferred to the gaining agency following a MOG change

    There are generally no GST consequences if staff and assets are compulsorily transferred to the gaining agency as a result of MOG changes. The transfers can be given effect by:

    • gazettal of a notice
    • specific legislation abolishing a losing agency
    • proclamation such as in the case of local authorities.

    However, in situations where the staff and assets are transferred as a result of MOG changes and the losing agency has taken action to cause those assets to be transferred to the gaining agency, then there may be GST consequences.

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    GST consequences

    Generally there are no GST consequences for either the losing agency or the gaining agency if assets or liabilities are transferred as a result of MOG changes, provided that the gaining agency assumes those liabilities.

    GST treatment of an appropriation when a government organisation is abolished

    When a MOG change occurs, a redirection authority within an Appropriations Act would normally be invoked to redirect the funds to a new government organisation.

    For GST purposes, the payment of the redirected funds, if on similar terms, will have the same GST consequences as the payment would have had when paid to the previous agency.

    The transfer of unspent funds held by the original government related entity to the government related entity that now has responsibility for the function, is a transfer of money and not itself a supply for GST purposes.

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    Role of the Treasurer's determination

    The payment of any Australian tax, fee or charge that is specified in a written determination of the Treasurer is not subject to GST under Division 81 of the GST Act. This applies where such a tax, fee or charge is paid to a gaining agency which remains a government organisation after a MOG change.

    The Treasurer's determination no longer applies from 1 July 2013. The amended Division 81 and the relevant Regulations of the A New Tax System (Goods and Services Tax) Act 1999 applies from 1 July 2013.

    See also:

    • PS LA 2013/2 (GA) GST treatment of Australian fees or charges under Division 81 of the A New Tax System (Goods and Services Tax) Act 1999.

    Tax invoices

    Commissioner's discretion to treat a document that is not a tax invoice as a tax invoice

    The Commissioner has the discretion to treat a document as a tax invoice even when it does not meet all requirements of a tax invoice.

    When a MOG change occurs, an affected government organisation can ask us to exercise a tax invoice discretion. In exercising the discretion, we generally specify in the notice of decision a three month period during which certain documents will be treated as tax invoices.

    These documents include:

    • tax invoices issued to the losing agency for supplies received by the gaining agency
    • tax invoices issued in the identity of the losing agency for supplies made by the gaining agency
    • RCTIs issued in the identity of the losing agency for supplies received by the gaining agency.

    These documents must comply with the other GST requirements for tax invoices.

    These discretions are not automatically exercised following a MOG change unless the jurisdiction that the gaining agency belongs to has already obtained from us a notice of decision to exercise the discretion. Otherwise, the gaining agency should follow the procedures within their jurisdiction in relation to the requirement to request the Commissioner to exercise the discretion. You may need to lodge a private ruling request or an objection for us to consider whether a document is tax invoice or an adjustment note. For more information, please go to ato.gov.au.

    Circumstances allowing affected government organisations more time to treat certain documents as tax invoices

    The three month period specified in the notice of decision about treating certain documents as tax invoices usually commences on the date specified in the AAO or proclamation for the MOG changes to take place. Extensions of this time are considered on a case by case basis. Government organisations should contact us as soon as possible if they believe it may take longer than three months for them to have their tax invoices compliant.

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    RCTI agreements with an abolished government organisation

    A MOG change usually takes immediate effect which can make it difficult for either the supplier or recipient to an RCTI agreement to meet the requirements for issuing an RCTI.

    In these circumstances, an abolished government organisation will no longer be the supplier or recipient of a supply referred to in an existing RCTI agreement. New RCTI agreements must be entered into by the gaining agency and other suppliers or recipients as soon as possible.

    If an abolished government organisation was the recipient in an RCTI agreement, the new government organisation will need to request that the Commissioner exercise his discretion to treat a document issued under the existing RCTI agreement as an RCTI. This will enable the new government organisation to claim GST credits on the supply it receives.

    See also:

    When suppliers or recipients to RCTI agreements need to enter new agreements following MOG changes

    Suppliers or recipients to RCTI agreements may need to enter into new agreements following MOG changes.

    We have the discretion to treat a document as a tax invoice even if the document does not meet all the requirements of a tax invoice.

    When a MOG change occurs, an affected government organisation can ask us to exercise the discretion. In exercising the discretion, we generally specify in the notice of decision a three month period during which certain documents will be treated as tax invoices.

    The notice of decision in relation to treating certain documents as tax invoices will also apply to RCTIs issued in the identity of a losing agency for supplies received by a gaining agency.

    A gaining agency will only be required to make one request to us to exercise the discretion to treat specified documents as tax invoices.

    Notice of decision, issued to one jurisdiction under a MOG change

    A notice of decision issued to one jurisdiction about treating a document (that is not a tax invoice) as a tax invoice under a MOG change specifies the relevant legislation governing the MOG change.

    The notice cannot treat documents that are generated in relation to MOG changes in another jurisdiction under different legislations and which are not tax invoices, as tax invoices.

    Private rulings

    Role of private rulings issued to a losing agency for a gaining agency

    Private rulings issued to a losing agency cannot be relied upon by a gaining agency. GST private rulings can only apply to the entity the ruling was given to.

    If a gaining agency (who is not the ruling recipient) relies on a private ruling that was issued to the losing agency and as a result underpays a net amount, the gaining agency will be liable for this amount unpaid.

    It is expected that government organisations risk assess to determine whether it is necessary to reapply for a private ruling depending on the changes. This risk assessment process is inherent to the nature of the self-assessment taxation regime and, in particular, when relying on our publications or rulings (public or private) due to the individual circumstances and any changes to those circumstances.

    Pay as you go withholding

    Obligations for government organisations undergoing a restructure, merge or change of name at short notice

    This information only applies to government organisations.

    When a government organisation undergoes a restructure, merge or change of name at short notice, it is often difficult to change systems to quickly reflect this new structure, for example, payroll.

    In these circumstances where staff have moved between entities and continue to perform essentially the same role, the guidelines outlined in Restructure of government organisations will apply.

    See also:

      Last modified: 17 Oct 2017QC 25055