ATO Interpretative Decision
ATO ID 2008/94
Goods and Services TaxGST and changes in net amount outside the four year time limit
FOI status: may be released
Status of this decision: Amendments have been made to section 105-55 of Schedule 1 to the Taxation Administration Act 1953 (TAA) which apply with effect from 1 July 2008. From this date, the time limit on refunds in section 105-55 of Schedule 1 to the TAA apply to entitlements to refunds which arise because of reductions in positive net amounts unless a valid notification was made before 1 July 2008 under subitem 16(2) of Schedule 2 to the Tax Laws Amendment (2008 Measures No. 3) Act 2008. This decision is based on the law as it existed prior to the amendments to section 105-55 of Schedule 1 to the TAA.This document has changed over time. View its history.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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.
In determining an entity's net amount, does the four year time limit in section 105-50 of Schedule 1 to the Taxation Administration Act 1953 (TAA) apply to prevent increases in the entity's goods and services tax (GST) payable on certain transactions being taken into account where, in the same tax period:
- the GST payable on other transactions is decreased, and
- the amount of the decrease is greater than the amount of the increase?
No. The four year time limit in section 105-50 of Schedule 1 to the TAA does not apply to prevent increases in GST being taken into account in determining the entity's net amount where, in the same tax period, the GST payable on other transactions is decreased and the amount of the decrease is greater than the amount of the increase.
The entity is registered for GST.
The net amount for the tax period as originally reported on the entity's activity statement was an amount greater than zero.
More than four years after the entity lodged its activity statement and paid the net amount, it discovered mistakes in the calculation of that net amount. The mistakes were not due to fraud or evasion.
The GST payable for the tax period was overstated in relation to some transactions and understated in relation to other transactions.
The net result of the overstated and understated GST payable was an overall decrease in the net amount for the tax period, resulting in a lower net amount which was still greater than zero.
The Commissioner did not give the entity a notice for the purposes of section 105-50 of Schedule 1 to the TAA requiring payment of an unpaid net amount within the four years.
Section 105-55 of Schedule 1 to the TAA (time limit on refunds and credits) does not apply to deny a refund or credit to the entity as the revised net amount is still greater than zero and the mistakes did not relate to an increase in input tax credits that were attributable to the tax period.
Section 105-65 of Schedule 1 to the TAA (restriction on refunds) also does not apply to deny a refund to the entity as the mistakes were not as a result of the entity incorrectly treating supplies as taxable supplies.
Reasons for Decision
Section 105-50 of Schedule 1 to the TAA provides that any unpaid net amount or amount of indirect tax 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 due to fraud or evasion.
'Net amount' 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 the 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 payments of an entity's net amount must be made. GST payable on a transaction involving the making of a taxable supply is not an amount that is separately payable under the GST Act.
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 for particular transactions. In determining the net amount payable, all transactions attributable to a tax period need to be taken into account regardless of whether they will lead to an increase or decrease in the net amount.
Although section 9-40 of the GST Act requires payment of the GST payable, except as provided for in Division 33 of the GST Act in relation to GST payable on some taxable importations, there are no provisions in the GST Act or the TAA that:
- provide for the collection of the GST separately from the net amount, or
- specify when the amount of GST in relation to a specific taxable supply is payable.
As the GST on an individual transaction is not an amount that is payable separately and is not the net amount payable by the entity, it cannot cease to be payable after four years.
For the above reasons, section 105-50 of Schedule 1 to the TAA does not apply to prevent increases in GST payable being taken into account where, in the same tax period, the GST payable on other transactions is decreased and the amount of the decrease is greater than the amount of the increase. There is no overall increase in the net amount and as such there is no 'unpaid net amount'.
Goods and services tax
GST net amounts & adjustments
GST supplies & acquisitions