Helps government organisations meet their goods and services tax (GST) obligations during machinery of government (MOG) changes. It covers some areas of the GST law that may apply during MOG changes and provides links to more detailed information.
This ATO guide helps government organisations meet their goods and services tax (GST) obligations during machinery of government (MOG) changes. It covers some areas of the GST law that may apply during MOG changes and provides links to more detailed information.
This document should be read in conjunction with GST and machinery of government – frequently asked questions.
Terms we use
When we say government organisations, we mean the GST terms government entities or government-related entities.
What is a government entity?
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.
For GST purposes, an entity includes a body corporate, a corporation sole and a body politic.
Examples of a government entity includes a:
- Commonwealth statutory agency
- Australian government department
- state government department
- territory government department.
- MT 2006/1 Miscellaneous tax: The new tax system – the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number
- GSTR 2006/5 Goods and services tax: meaning of ‘Commonwealth, a state or a territory’
What is a government-related entity?
For GST purposes, the definition of a government-related entity builds on the definition of a government entity.
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.
Although all government entities are also considered a government-related entity, not all government-related entities are government entities for GST purposes. For example, a local governing body that is a body corporate is, for GST purposes, a government-related entity but not a government entity.
Government organisations interact with the tax system through GST and fringe benefits tax (FBT), as well as pay as you go (PAYG) and super payments.
To meet their taxation obligations as a taxpayer, government organisations must be confident that they have accounting and control systems and processes that accurately deal with their tax and super obligations.
The Tax and super governance for departments and agencies guide has been developed to help government organisations maintain high standards of compliance with tax and super obligations by implementing and maintaining a good governance approach.
The guide includes high-level governance questions about:
- a governance assessment checklist
- information and worked examples.
The checklist helps government organisations develop a methodical, governance-based approach to:
- assessing the areas of potential risk in meeting their tax and super obligations
- receiving their entitlements.
- Better practice guide for the management of GST administration (BPG) – Government organisations can use this guide with accompanying workbook and checklist to set up practices and procedures to manage their GST obligations more effectively.
- You should read these guides in conjunction with Better practices for the administration of FBT.
Government entities can register for GST even if they are not entities and not carrying on an enterprise.
The Australian Government has a policy that Commonwealth Departments of State, Departments of Parliament and statutory agencies must have an ABN and be registered for GST.
Government entities do not have to cancel their GST registration when they cease to carry on an enterprise, as long as they continue to exist.
Generally, each state (or territory) government has a policy requiring all state (or territory) government entities to be registered for GST.
A government-related entity that is not a government entity must register for GST if it:
- carries on an enterprise
- has a GST turnover of $75,000 or more.
However, GST registration is optional (not compulsory under the GST Act) if the government-related entity’s GST turnover is less than $75,000. A government-related entity that is not a government entity must cancel its GST registration when they cease to carry on an enterprise.
- Registering for GST
- registering Australian government entities for tax purposes, visit the Department of Finance and Deregulation website at finance.gov.auExternal Link
Applying for an ABN and GST registration
Government agencies can apply for an Australian business number (ABN) and other tax registrations by completing an Application for ABN registration for government organisations (NAT 2946).
The form allows government agencies to apply for:
- an ABN
- goods and services tax (GST)
- fuel tax credits
- pay as you go (PAYG) withholding
- a tax file number (TFN).
Once registered, ABN details are stored in the Australian Business Register (ABR). It is important that if ABN details changeExternal Link, the agency notifies the Registrar within 28 days of becoming aware of that change.
Government organisations cannot register online for any of the following:
- an ABN
- other tax obligations.
- Phone us on 13 28 66 to request the form or for more information on registrations including forms, cancellations and changing your details
- When the form is completed it needs to be signed by the authorised contact and posted to the address listed on the form, or faxed to us on 1300 130 905
- Australian business number – government registration processExternal Link
- finance.gov.auExternal Link – Department of Finance and Deregulation, for proof of identification requirements for new Australian government organisations
Cancelling an ABN and GST registration
Government entities that have been abolished should cancel their ABN, GST and other tax registrations by completing the Application to cancel registration (NAT 2955) form.
Completed forms should be signed by the authorised contact person and submitted by mail to the address listed on the form.
When cancelling an ABN and GST registration, Australian government entities must follow procedures developed by the Department of Finance and Deregulation. However, State and territory government entities should follow procedures developed by their relevant Department of Treasury (DOT). Some states and territories require cancellations to be submitted via their relevant DOT.
If a government-related entity, such as a local governing body which is a body corporate, is abolished under relevant legislation the entity must cancel its ABN.
This guide only relates to GST. Cancelling GST registration can impact on other tax obligations such as pay as you go withholding (PAYGW), fringe benefits tax (FBT) and your eligibility to claim fuel tax credits.
- If your business changes or ceases
- finance.gov.auExternal Link - Department of Finance and Deregulation, for procedures for cancelling ABNs, GST and other tax registrations of Australian government entities
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's 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.
- 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.
From time to time, it may be necessary for a government organisation to make changes that increase or decrease its net GST liability for a reporting period. These changes are called ‘adjustments’ and are to be made on the activity statements.
If a government organisation has made an error on a previous activity statement, the correction of that error is not classified as an adjustment.
If the abolished losing agency made an error in an activity statement lodged before the MOG change, the gaining agency may be able to correct the error on its next activity statement after the MOG change.
The error can be corrected on the next activity statement as long as the error is within time limits and satisfies the conditions set out in the Correcting GST errors guide.
A tax invoice is a document that is issued by the supplier and satisfies certain requirements, unless it is a recipient created tax invoice (an RCTI is issued by the recipient).
It is important that agencies ensure they hold tax invoices for purchases made during and after MOG changes so they can claim GST credits (if entitled). Tax invoices from suppliers must correctly record, amongst other things, the agency's identity and/or ABN.
A tax invoice or RCTI must include information to establish the identity of the supplier, and the recipient where applicable.
A tax invoice or RCTI that shows a legal name or a registered business name will satisfy the requirement to provide sufficient information to clearly ascertain the identity of the Government organisation.
Prior to 28 May 2012, government organisations and businesses could record 'trading names' on the Australian Business Register (ABR). A trading name is an unregistered business name. That is, a trading name is a 'business' name that is used by a government organisation (or an entity) in carrying on an enterprise and is not registered under the national business names registration system – administered by the Australian Securities and Investments Commission (ASIC).
Trading names that were displayed in the ABN Lookup before 28 May 2012 will continue to be displayed up to 31 October 2023, but can no longer be updated and new trading names cannot be added.
A Government organisation that has a trading name which is displayed in the ABN Lookup prior to 12 May 2012 can use the trading name in a tax invoice or RCTI as information to establish its identity up to 31 October 2023.
Agency A is affected by a MOG change and becomes a losing agency, they have outstanding orders placed with Suppliers Ltd that relate to the operation of the transferred functions. Suppliers Ltd makes sales under those orders to Agency B, the gaining agency. Agency B then uses the goods purchased in operating the transferred functions and is liable to make payments to Suppliers Ltd. Agency B is entitled to the GST credits for the goods purchased. Supplier Ltd issues Agency B with a document that satisfies all the requirements of a tax invoice but it only contains sufficient information to work out the identity and ABN of Agency A, the losing agency.
This document is therefore not a tax invoice and Agency B cannot use it to claim the GST credits.
Example 2: Invoices issued by the losing agency for sales made by the gaining agency
After MOG change comes into effect, Agency C (the losing agency) will continue to process all sales relating to the transferred functions made by Agency D (the gaining agency) for a number of months.
Comp Ltd, a GST registered recipient of the sales, can claim GST credits on their purchases. Agency C issues Comp Ltd with a document that satisfies all the requirements of a tax invoice but does not contain sufficient information to work out the identity and ABN of Agency D. The document contains the identity and ABN of Agency C. The document is therefore not a tax invoice and Comp Ltd cannot use it to claim the GST credits.End of example
Treating a document as a tax invoice
A supplier issues a document to a recipient. The document does not contain all the information required of a tax invoice. The recipient may treat the document as a tax invoice if:
- it would be a tax invoice but for the missing information; and
- the missing information can be found in other documents given to the recipient by the supplier.
However, if the recipient finds the missing information from a source which is not another document given to it by the supplier, the recipient cannot rely on this information for the purposes of treating the (first mentioned) document as a tax invoice.
Tax invoices and discretion
We have the discretion under the GST law to treat some documents as tax invoices even though they do not meet all the requirements of a tax invoice.
When MOG changes occur, gaining agencies can request that we exercise the discretion to treat documents satisfying all the requirements of a tax invoice except that they contain the losing agency’s identity and ABN as tax invoices. This applies to documents that are issued or to be issued by:
- suppliers to a losing agency for sales made to the gaining agency
- the losing agency for sales made by the gaining agency.
The gaining agency should follow the procedures within their jurisdiction in relation to requesting the exercise of our discretion to treat certain documents as valid tax invoices.
In the situations described in Example 1, the losing and gaining agencies should also ask the suppliers to take steps to use the identity and ABN of the gaining agency in future tax invoices.
Losing and gaining agencies should inform recipients to sales they make relating to the transferred functions that:
- the documents are not tax invoices and cannot be used to claim GST credits
- the gaining agency is the party to the sales
- the gaining agency already has or will request that we exercise the discretion to treat the documents as valid tax invoices.
When the decision to exercise the discretion is received, the affected documents issued during the period specified in the decision will be treated as valid tax invoices.
You may need to lodge a private ruling request or an objection for the ATO to consider whether a document is tax invoice or an adjustment note.
- When you need a tax invoice
- GSTR 2013/1 Goods and services tax: tax invoices
- PS LA 2004/11 The Commissioner's discretions to treat a particular document as a tax invoice (As at 1 July 2000).
- Treating a document as a tax invoice or adjustment note- supporting information
RCTIs and discretion
When MOG changes occur, the losing agency and various suppliers may have entered into recipient created tax invoice (RCTI) agreements that specify certain sales to be made by the suppliers to the losing agency for use in operating the transferred functions.
After the MOG change comes into effect, those suppliers then make sales to the gaining agency. The gaining agency is liable to make payments to the suppliers and can claim GST credits. In these circumstances the losing agency may continue to issue documents with its ABN or identity for sales made to the gaining agency under the RCTI agreements (entered into by the losing agency and the suppliers). Those RCTI agreements will no longer be valid as the losing agency is no longer the recipient of the supply. Therefore, the documents are not RCTIs and the gaining agency cannot use them to claim GST credits even if they contain the identity or ABN of the gaining agency.
The gaining agency can request we exercise the discretion to treat the documents as valid RCTIs. In making the request, the gaining agency should follow the procedures within their jurisdiction in relation to the exercise of our discretion to treat certain documents as valid tax invoices.
The losing and gaining agencies should inform those suppliers that the documents are not RCTIs and that the gaining agency:
- is the recipient of the sales
- has already or will request that the ATO exercises the discretion to treat the documents as RCTIs.
When the decision to exercise the discretion is received, the affected documents issued during the period specified in the decision will be treated as valid RCTIs. The gaining agencies should also take steps to enter into new RCTI agreements with the suppliers as soon as practicable.
- Recipient created tax invoices
- GSTR 2000/10 Goods and services tax: recipient-created tax invoices
- Recipient created tax invoice – Embedded Agreement Amending Legislative Instrument 2009.
Change of name
If a MOG change changes the name of a government organisation, that organisation should contact us to advise of its new legal name.
The organisation should also consider visiting the ASIC website to find out whether it can register its former 'legal' name as a business name. Registered business names will be displayed in the ABN Lookup. The government organisation needs to notify its suppliers of its new legal name as well as any new registered business names.
Abolition of the losing agency and transfer of its functions
If a MOG change also abolishes the losing agency, the gaining agency should consider visiting the ASIC website to find out whether it can register the 'legal' name of the abolished agency as a business name. Registered business names will be displayed in the ABN Lookup. The gaining agency needs to notify its suppliers of its legal name as well as any registered business names.
- Government organisations can phone us on 1300 720 092 to request a copy of the form Change of registration details (NAT 2943).
To find out more information:
- email us at LMGTechnicalIssues@ato.gov.au for ABN technical issues and all registration issues, including forms, cancellations and changes to details recorded on the ABR
- phone us on 13 28 66 for all government registration matters
- visit How we can help.