• Machinery of government changes

    A MOG change at a Commonwealth, state, territory and local government level may occur at any time.

    Examples of MOG changes undertaken by the Commonwealth, a state or territory in relation to government entities include:

    • abolishing a government department by transferring its functions to other government departments
    • creating a government department
    • merging two or more government departments
    • moving functions in to or out of government departments
    • changing a government department name.

    Similar changes can apply to local governing bodies under a state or territory law.

    For GST purposes, MOG changes apply to both government entities and government-related entities.

    How GST applies when MOG changes occur

    An example of a common MOG change is when functions from one government organisation (the losing agency) are transferred to another government organisation (the gaining agency).

    In these circumstances, both agencies are registered for GST. The losing agency may continue to exist or be abolished. The gaining agency may be an existing government organisation or a newly created one.

    The transfer of the functions under the MOG change may be effected by:

    • an administrative arrangements order (AAO) made for government entities
    • a proclamation declared for government related entities such as local governing bodies
    • an Australian law establishing a government related entity that is a body corporate.

    Specific Commonwealth, state or territory law authorises the making of an AAO or declaration of a proclamation.

    At the time the MOG change takes effect, the AAO, proclamation or Australian law would operate (in relation to the transferred functions) to, among other things:

    • transfer any property, assets, rights, debts, liabilities and obligations held by the losing agency to the gaining agency
    • treat a reference to the losing agency in any document or arrangement as a reference to the gaining agency.

    Where the losing agency has not taken any action to cause the assets and liabilities to be transferred to the gaining agency, there are no GST consequences if those assets or liabilities are transferred as a result of MOG changes.

    Find out more

    • GSTR 2006/9 Goods and services tax: supplies, especially paragraphs 71 to 91.

    GST on sales

    GST on sales made by the losing agency before the MOG change

    The gaining agency must determine the extent to which it should report sales and any related GST payable in its activity statements by working out the extent to which the losing agency has reported those sales and the related GST payable in its activity statements.

    If the losing agency is not abolished and continues to exist, any sales income which it has generated from operating transferred functions before the MOG change is its revenue. The losing agency should report those sales and related GST payable in its activity statements.

    GST on sales made by the gaining agency after the MOG change

    Whether the losing agency is abolished or continues to exist, the sales income from operations undertaken by the gaining agency after the MOG change is revenue of the gaining agency. The gaining agency should report those sales and related GST payable in its activity statements.

    If the losing agency continues to exist and receives income and transfers it to the gaining agency, there are no GST consequences for either of them in relation to the transfer. It is the gaining agency that should report those sales and related GST payable in its activity statements.

    GST on purchases

    GST on purchases made by the losing agency before the MOG change

    If the losing agency is abolished and the gaining agency receives and pays for (in part or total) purchases ordered by the losing agency, those purchases are taken to be made by the gaining agency.

    The gaining agency needs to determine the extent to which it should report those purchases and claim any related GST credits in its activity statements by determining the extent the losing agency has reported those purchases and claimed any related GST credits in its activity statements.

    To claim any GST credits, the gaining agency needs to have valid tax invoices.

    If the losing agency continues to exist, it should report in its activity statements any purchases it used in operating the transferred functions before the MOG change and claim any related GST credits if it has valid tax invoices.

    GST on purchases made by the gaining agency after the MOG change

    If the losing agency continues to exist and pays for a purchase made by the gaining agency after the MOG change, the gaining agency should report the purchase and claim the related GST credit in its activity statements if it has a valid tax invoice.

    If the gaining agency reimburses the losing agency for paying for the purchase, there are no GST consequences for either of them in relation to the reimbursement. It is the gaining agency that should report the purchase and claim the related GST credit in its activity statements if it has a valid tax invoice.

      Last modified: 22 May 2014QC 22915