ATO Interpretative Decision

ATO ID 2014/36

Goods and Services Tax

GST and changes in net amount where an entity has notified the Commissioner of an entitlement to a refund
  • Status of this decision: Sections 105-50 and 105-55 of Schedule 1 to the Taxation Administration Act 1953 (TAA) only apply to payments and refunds that relate to:

    (a)
    tax periods that start before 1 July 2012, or
    (b)
    liabilities or entitlements that arose before 1 July 2012.


    This decision is based on the law as it exists after the amendments to section 105-55 of Schedule 1 to the TAA contained in Schedule 2 of the Tax Laws Amendment (2008 Measures No. 3) Act 2008.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

In working out an entity's entitlement to a refund under section 105-55 of Schedule 1 to the Taxation Administration Act 1953 (TAA), does the four-year time limit in section 105-50 of Schedule 1 to the TAA apply to prevent an amount of unpaid goods and services tax (GST) payable on a taxable supply being taken into account, where, in the same tax period:

·
the entity has an input tax credit entitlement not previously attributed to any tax period
·
the amount of that entitlement is greater than the increase in GST payable on the taxable supply, and
·
the entity has, for that tax period, given the Commissioner a valid notice under section 105-55 of Schedule 1 to the TAA?

Decision

No. The four-year time limit in section 105-50 of Schedule 1 to the TAA does not apply to prevent the unpaid GST payable being taken into account in determining the entity's entitlement to a refund under section 105-55 of Schedule 1 to the TAA in these circumstances.

Facts

The entity is registered for GST.

It lodges and pays the net amount shown on its activity statement for the relevant tax period.

Within 4 years after the end of that tax period, the entity realised that it omitted to claim an input tax credit.

Before the end of that four-year period, the entity gives the Commissioner a notice under section 105-55 of Schedule 1 to the TAA. At the time of preparing its revised activity statement the entity also realised that it failed to report GST payable on a taxable supply that is attributable to the same tax period.

The amount of unpaid GST payable is less than the amount of the unclaimed input tax credit that it now wants to claim in the same tax period, resulting in an overall decrease to the net amount.

The entity lodges the revised activity statement for the relevant tax period, (showing an overall decrease in the net amount) after 4 years from the date upon which that net amount became payable.

The Commissioner did not give the entity a notice under section 105-50 of Schedule 1 to the TAA requiring payment of an unpaid net amount for that tax period.

Reasons for Decision

Subsection 105-50(1) of Schedule 1 to the TAA provides that any unpaid net amount ceases to be payable four years after it became payable unless the Commissioner:

·
has notified the entity of the unpaid amount, and required payment of it, within four years of the date it was payable, or
·
is satisfied that the payment of the amount was avoided by fraud or evasion.

'Net amount' for a tax period is defined in section 17-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) according to the following formula:

GST - input tax credits

GST is the sum of all of the GST for which an entity is liable on the taxable supplies that are attributable to the tax period. Input tax credits is the sum of all of the input tax credits to which an entity is entitled for creditable acquisitions and creditable importations that are attributable to the tax period.

Section 9-40 of the GST Act provides that an entity must pay the GST payable on any taxable supply that it makes.

Division 33 of the GST Act sets out when payment of an entity's net amount must be made. GST payable on a taxable supply is not an amount that is separately payable to the Commissioner under the GST Act.

Although section 9-40 of the GST Act requires payment of the GST payable, there are no provisions in the GST Act or TAA that:

·
provide for the collection of the GST payable on a taxable supply (made by an entity that is registered or required to be registered[1]) separately from the net amount, or
·
specify when such an amount of GST in relation to a specific taxable supply is payable.

Section 105-50 of Schedule 1 to the TAA applies to an 'unpaid net amount'. It does not apply to individual amounts of GST payable on a particular taxable supply. In determining the net amount, all transactions attributable to a tax period need to be taken into account. The result will either give rise to an overall increase or decrease in the net amount.

In this instance, as there is an overall decrease in the net amount for the relevant tax period (which was previously paid), there is no unpaid net amount to which section 105-50 of Schedule 1 to the TAA applies. Accordingly, it does not matter that the Commissioner has not given a notice under section 105-50 of Schedule 1 to the TAA within the four-year period requiring payment of an unpaid net amount for that tax period.

The overall decrease in the net amount - worked out by offsetting the increase in GST payable against the input tax credit claim - results in the entity being entitled to a refund in relation to a net amount under section 105-55 of Schedule 1 to the TAA as they have given the Commissioner a valid notice under that section within four years of the end of the relevant tax period.

However, where there is an overall increase in the net amount for the relevant tax period, the Commissioner's ability to recover the unpaid net amount is limited by section 105-50 of Schedule 1 to the TAA.

Example

An entity originally reports and pays its net amount for the December 2011 tax period. In December 2015, it realises it omitted to claim an input tax credit of $9,000 that would otherwise have been attributable to its December 2011 tax period. Consequently, the entity gives a section 105-55 notice to the Commissioner before 31 December 2015. The Commissioner did not give a section 105-50 notice to the entity for the same tax period.

In March 2016, while preparing the revised activity statement for the December 2011 tax period, the entity also found that it failed to account for GST payable of $2,000 in respect of a taxable supply attributable to the December 2011 tax period.

Even though the Commissioner did not give a section 105-50 notice, the $2,000 in unreported GST can be taken into account in working out the net amount for the December 2011 tax period. The entity's entitlement to a refund in relation to the net amount for that tax period is $7,000 (that is, $9,000 input tax credit less $2,000 GST).

However, if the unreported GST is $12,000 instead of $2,000, there would be an overall increase in the net amount for the December 2011 tax period of $3000 (that is, $12,000 GST less $9,000 input tax credit). As the $3,000 is an unpaid net amount, the Commissioner's ability to recover such amount is limited by section 105-50.

As the amount remains unpaid after four years from the date when it became payable and the Commissioner has not given a section 105-50 notice requiring payment within the relevant four-year period, nor was the payment of the amount avoided due to fraud or evasion, the Commissioner cannot recover the unpaid net amount of $3,000.


Subdivision 78D and Division 105 of the GST Act deal with certain special instances where an entity that is not registered or required to be registered may be required to pay GST on a taxable supply.

Date of decision:  2 December 2014

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-40
   section 17-5
   subsection 29-10(1)
   Division 33
   Subdivision 78D
   Division 105

Taxation Administration Act 1953
   section 105-50
   subsection 105-50(1)
   section 105-55

Related Public Rulings (including Determinations)
MT 2009/1

Keywords
Goods and services tax
GST net amounts & adjustments
net amounts
GST supplies & acquisitions
GST supply
taxable supply
tax administration

Siebel/TDMS Reference Number:  1-5ZB518M

Business Line:  Indirect tax

Date of publication:  5 December 2014

ISSN: 1445-2782