Other changes relating to indirect taxes
Amendments to the GST Act confirm that the definition of net amount in the GST Act includes LCT and WET in line with current practice and intention. There is now a single net amount definition that allows for the net amount to be worked out using different methods in differing circumstances – for example, for instalments or simplified accounting methods. These changes will have no effect on the way you lodge your activity statement and report amounts payable or refundable.
Generic assessment provisions
The assessment system for indirect tax laws introduces a new generic assessment framework to the TAA. While the general principles of the generic assessment provisions are largely adopted from the income tax self-assessment system, specific provisions have been inserted to reflect the unique nature of the indirect tax laws.
Initially, these generic assessment provisions will not apply to income tax laws. However, the assessment provisions will eventually also apply to other taxes that are already the subject of self-assessment. For this reason, the new assessment provisions in the TAA use generic terminology, structured to apply to other taxes as well.
Backdating GST registration
Our ability to backdate your registration is limited to four years for tax periods commencing on or after 1 July 2012. This means that, in the absence of fraud or evasion, we may no longer backdate your GST registration beyond four years.
GST ceases to be payable for those supplies and GST credits do not arise for those acquisitions made before the date you are required to be registered.
In cases of fraud and evasion, we may still backdate your registration indefinitely.
Example 8: Backdating GST registration
Matthew genuinely believes that the supplies he has made are not taxable supplies. He decides not to register and does not lodge any returns. On 15 June 2019, we determine that although there is no fraud or evasion, Matthew should have been registered from 1 July 2013. However, because four years have passed, we may not backdate Matthew's registration to that day. The earliest we can backdate his registration is to 16 June 2015.
As a result, Matthew is no longer required to be registered and is not required to lodge any returns before 16 June 2015. This also means that Matthew will not have made any taxable supplies or creditable acquisitions before 16 June 2015.
However, we will be able to make an assessment of Matthew's net amount for the part of the tax period from 16 June 2015 to 30 June 2015. Matthew's net amount will include the GST payable on any taxable supplies, and the GST credits for any creditable acquisitions he made from 16 June 2015 to 30 June 2015.
End of example
Payments and refunds
The GST Act sets out your obligations to pay an amount, and our obligation to refund an amount. The Fuel Tax Act similarly provides for the payment and refund of net fuel amounts. For the assessment system, the relevant provisions in these Acts and Schedule 1 to the TAA will reflect that you are only obliged to pay, and we are only obliged to refund, amounts which have been crystallised in an assessment – so, reference is now made to assessed net amounts, assessed net fuel amounts and assessed amounts of indirect tax.
Under the assessment system, we now have unlimited time to recover a debt (subject to you being required to register and lodge a return) and there is no time limit on you being entitled to be paid an assessed amount in your assessment. However, there are still time limits on your entitlement to GST credits and fuel tax credits.
Similar to the existing provisions, which treat any overpayments of the net amount or net fuel amount as an amount that is payable to us at the time of the overpayment, the GST Act and Fuel Tax Act are amended to reflect this. Any amounts which become overpaid to you as a result of an amendment to your assessment, are treated as assessed net amounts or assessed net fuel amounts that become payable at the time the amounts are paid to you.
Under the assessment system, you are still able to correct minor errors in prior tax periods, in the current tax period.
Where the error falls outside the time and correction limits that the Commissioner determines, you need to amend the relevant earlier assessment by requesting an amendment.
Under the assessment system, lodging your activity statement will result in an assessment that will be a reviewable taxation decision under the TAA. You no longer have to ask for an assessment to lodge an objection.
Where you are dissatisfied with:
- an assessment – you can lodge an objection within four years and one day from the issue of the notice of the assessment
- an amended assessment – you can lodge an objection, either within four years of when the notice of the assessment is given to you, or 60 days after the relevant notice of amended assessment is given to you, whichever is later. However, an objection against an amended assessment is limited to the particular or particulars that have been amended.
You may also object to an indirect tax private ruling. However, where an assessment has been made for the same tax period to which the private ruling relates, then an objection can only be lodged against the assessment, not the private indirect tax ruling.
Time limit on entitlement to credits
The four-year time limit to claim GST, LCT, WET or fuel tax credits is in place to encourage you to lodge your return on time.
Your entitlement to a credit ceases if it is not taken into account in an assessment during a four-year period. The four-year time period to claim a GST or fuel tax credit ends four years from the due date of the return for the earliest tax period or fuel tax return period in which you would have been able to claim the credit – setting aside any requirement to hold a tax invoice. You can claim the credit in any tax period but it must be included in an assessment that is made within the four years as set out above. If you are neither registered nor required to be registered for GST, and you have not previously claimed a particular fuel tax credit entitlement, you must claim the fuel tax credit within four years from the day you acquired the fuel.
Your entitlement to a GST credit ceases if the period of review of your supplier's assessment for the tax period to which the GST on the related supply is attributable has ended and, at the time it ended, you did not hold a tax invoice for the acquisition.
Parts of the divisions that refer to four-year entitlements under the TAA will only continue to apply to tax periods and fuel tax return periods commencing before 1 July 2012.
Example 9: GST credits not taken into account in assessment within four years
On 5 August 2013, Julien makes a number of acquisitions. Julien lodges her activity statement for the tax period ending 31 August 2013, on 5 November 2013 and forgets to claim the GST credits on those acquisitions. In October 2017 Julien realises her mistake. Even though the period of review for the assessment for August 2013 tax period ends on 6 November 2017, Julien cannot claim the GST credits. Julien's entitlement to the credits ceased on 21 September 2017, four years from the due date for lodgment of her August 2013 activity statement.
Example 10: GST credits taken into account in assessment within four years
On 15 September 2013, Bronlynn makes a number of acquisitions that relate to making a supply that is partly taxable and partly input taxed. Bronlynn chooses an apportionment methodology that treats the supply as 50% taxable and 50% input taxed, and claims half the GST credits for acquisitions related to the supply. Both the supply and the credits are taken into account in her activity statement for the tax period ending 30 September 2013 lodged on 21 October 2013. Bronlynn also makes an unrelated creditable acquisition in the same tax period, but forgets to include the GST credit entitlement on her activity statement for the tax period ending 30 September 2013.
On 23 March 2015, following an audit of Bronlynn's tax affairs, we amend her assessment for the tax period ending 30 September 2013 to reflect that the supply was 60% taxable and 40% input taxed, and increase the amount of GST payable on the supply. As a result of the change in the extent of creditable purpose, Bronlynn's GST credit entitlements for the related acquisitions are also increased.
This gives rise to two amended particulars, each having their own refreshed periods of review that commence on the day we issue Bronlynn with a notice of amended assessment.
On 25 November 2017, Bronlynn provides additional information to us which shows that the supply was actually 40% taxable and 60% input taxed. As the refreshed periods of review for both the GST payable and the GST credits for the related acquisitions are not yet over, we may amend Bronlynn's assessment to reduce both the GST payable and the GST credits claimable. This is because the credits have been taken into account in an assessment where the GST credit is first attributable.
However, Bronlynn may no longer claim the GST credit for the unrelated creditable acquisition because this credit was not taken into account in the assessment where the GST credit is first attributable.
If Bronlynn attributes and therefore takes into account the GST credits in another tax period within the four years, as long as we amend within the period of review or an approved extension, we may amend the GST credits.
End of example
Exceptions to the four-year limit
The introduction of an assessment system also changes the exceptions to the rule that GST credits may not be taken into account after four years. After the four-year period has ended, you may still be entitled to claim a GST credit for the first time if an exception applies.
The first exception applies if, in the absence of fraud or evasion, you did not claim the credit on an acquisition that you believed related to an input-taxed supply and an amendment is made on the basis that the supply is not input taxed.
You are still able to claim the GST credit, provided we are able to amend the assessment for the tax period to which the GST credit would have first been attributable. There is no restriction on which assessment the GST credit may be taken into account. This exception is appropriate in an assessment system where the period of review (running from the date of your assessment) may not align with the four-year GST credit time limit (running from when you are required to lodge your activity statement). For example, this may occur where the period of review (for the tax period to which the input tax credit would have been attributable) is extended.
The second exception allows a GST credit or fuel tax credit outside the four years, where you have requested us to treat a document as a tax invoice within the four years.
For tax periods starting before 1 July 2012, there is an exception to the four-year time limits if you notify us of an entitlement to a refund or if we notify you of an unpaid amount within the relevant four-year period.
For tax periods starting on or after 1 July 2012, you cannot claim a refund outside the period of review by notifying us of an entitlement to a refund within the period of review.
Example 11: Change in the GST treatment of a supply (an exception)
On 11 April 2014, Francesca makes an acquisition that relates to making a supply which she believes will be input taxed. As a result, she does not claim a GST credit in her activity statement for the tax period ending 30 April 2014, or in any other tax periods in the four years after 21 May 2014. Francesca lodges her activity statement for the tax period ending 30 April on 1 May 2014. Francesca makes the supply on 16 September 2014. On 21 October 2014, Francesca lodges her activity statement for the tax period ending 30 September 2014, treating the supply as input taxed.
As we are currently completing an audit of Francesca's assessment for the tax period ending 30 April 2014 (when the acquisition was made), both Francesca and we agree to an extension of the period of review by three months. The period of review will now end 2 August 2018 (rather than 2 May 2018).
On 25 May 2018, we amend Francesca's assessment for the tax period ending 30 September 2014 to treat the supply as taxable. Although Francesca has not claimed the GST credit during the four years from 21 May 2014, she remains entitled to the GST credit because the period of review has been extended. As a result, Francesca may take the credit into account, either by seeking an amendment to the assessment for the tax period ending 30 April 2014, or in another assessment. However, she must do so by 2 August 2018, while we are still able to amend her assessment for the period ending 30 April 2012
Example 12: Asking the Commissioner to treat a document as a tax invoice (an exception)
Tina is an optometrist and is registered for GST. On 15 January 2014, Tina makes a creditable acquisition, but the supplier does not provide Tina with a tax invoice. On 28 April 2014, Tina lodges her activity statement for the tax period ending 31 March 2014. As Tina does not hold a valid tax invoice at the time of lodgment, she does not claim the GST credit on her activity statement.
Over the next four years Tina asks the supplier numerous times for the tax invoice. On 15 March 2018, Tina writes to us requesting that we treat a number of documents containing proof of her purchase as a tax invoice so that she may claim the GST credit. After investigating the documents that Tina provides, we agree to treat the documents as a tax invoice on 30 April 2018.
Even though the four years mentioned in section 93-5 have passed, Tina may still take the GST credit into account when assessing her net amount.
Example 13: Restriction where GST stops being payable by supplier
Jane and Alex are both registered for GST. Jane has monthly tax periods and accounts for the GST on an accruals basis. Alex has quarterly tax periods and accounts on a cash basis.
In July 2013, Jane supplies Alex with real property that they treat as an input-taxed supply. On 21 August 2013, Jane lodges her activity statement for the monthly tax period ending on 31 July 2013, and does not include GST payable on the supply she made to Alex.
On 28 February 2014, Alex lodges his activity statement for the quarterly tax period ending 30 September 2013 (the tax period he acquired the property in) and does not claim a GST credit for the acquisition from Jane because the acquisition is not a creditable acquisition.
On 31 August 2017, we commence an examination of Alex's activity statement for the tax period ending 30 September 2013. We determine that the supply from Jane to Alex is taxable.
Alex's entitlement to the GST credit ceases because Jane's period of review for the assessment for the tax period ending 31 July 2013 ends on 22 August 2017, and her assessment for that tax period does not include the GST on the supply of the property. This means that the GST on the supply ceases to be payable by Jane on 22 August 2017. Alex does not hold a tax invoice for the acquisition until 30 August 2017.
Although Alex's entitlement to the GST credit will not usually cease until 28 October 2017, he can no longer claim the GST credit after 22 August 2017.
Example 14: Notifications about your entitlement to a GST credit
Merryl commenced her business in April 2012 and has been lodging quarterly activity statements claiming GST credits on her creditable acquisitions.
Merryl engages an accountant to review her business records and finds that she had failed to claim GST credits on some acquisitions.
On 13 June 2016, she notifies the Commissioner about the errors and her entitlement to GST credits for the tax period ending 30 June 2012. She explained that, her accountant may take some time to work out her correct GST credit entitlement. This notice preserves her entitlement to the GST credits for the quarterly tax period ending 30 June 2012. She may claim the credits and will be entitled to a refund even if she makes the claim after 30 June 2016.
However, in relation to the tax periods starting on or after 1 July 2012, she cannot lodge a notification to preserve her entitlement to the GST credits. For these tax periods, she must claim the GST credits in an assessment within four years from the due date for lodgment of the relevant activity statement that the GST credits were first attributable – setting aside any requirement to hold a tax invoice.
End of example
You use an activity statement to report your business tax entitlements and obligations, including GST, WET, LCT, fuel tax credits (as applicable), pay as you go (PAYG) instalments, PAYG withholding and fringe benefit tax instalments. From 1 July 2012, we will be taken to have made an assessment of an assessable amount worked out in accordance with information stated in your activity statement. Your activity statement is taken to be your notice of assessment, given to you on the date your activity statement is given to us.
A net amount, net fuel amount, other indirect tax amount or a credit under an indirect tax law is an assessable amount.
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Fuel tax credits
You can claim a credit for taxable fuel that you acquire or manufacture in, or import into, Australia to the extent that you do so for use in carrying on your enterprise.
You can also claim fuel tax credits if you are a householder using fuel to generate domestic electricity or non-profit organisation that is not required to be registered for GST, operating emergency vehicles or vessels. You will claim these credits on a claim form.
Fuel tax return period
If you are not registered for GST, nor required to be registered for GST, your fuel tax return period is the period specified in the claim form.
You can claim a credit for the GST included in the price of goods or services you purchase for your business, unless you use the purchase to make input-taxed sales.
If you use the purchase partly for private purposes, you will not be able to claim a credit for the full amount of GST, only for the amount that relates to business use.
Net fuel amount
The net fuel amount is the amount of fuel tax credit entitlements, taking into account any adjustments, for a tax period or fuel tax return period.
A particular is a constituent element that affects an increase or decrease in the assessable amount. In the context of GST, a particular can be a single supply or a single acquisition, provided it individually results in a change to the net amount or net fuel amount.
A tax period may be monthly, quarterly or annually, and refers to how frequently you lodge your activity statement.
A guide to the self-assessment changes for indirect tax laws as a result of recommendations 19, 21 and 42 from the Board of Taxation review of the goods and services tax (GST) administration.