ATO Interpretative Decision

ATO ID 2004/117

Goods and Services Tax

GST and retrospective application of a GST reverse charge agreement
FOI status: may be released

With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act.

Status of this decision: Decision Current

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Can the entity, a non-resident supplier making taxable supplies to a resident, enter into a reverse charge agreement under subsection 83-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) that applies retrospectively to supplies that were attributable to an earlier tax period?

Decision

No. The entity cannot enter into a reverse charge agreement under subsection 83-5(1) of the GST Act that applies retrospectively to supplies that were attributable to an earlier tax period.

Facts

The entity is a non-resident supplier. Since 1 July 2000, the entity has been making taxable supplies under section 9-5 of the GST Act, to a resident entity (recipient).

At the time the supplies were made, the entity and the recipient did not have an agreement that the GST on the supplies was payable by the recipient ('reverse charged').

Both the entity and the recipient agree to have a reverse charge on future supplies and to have this agreement applied retrospective to supplies that were attributable to earlier tax periods.

The entity does not carry on an enterprise in Australia nor does the entity provide the supply through a resident agent in Australia.

The entity is not registered for goods and services tax (GST). The recipient of the entity's supply is registered for GST.

Reasons for Decision

Under subsection 83-5(1) of the GST Act, the GST on a taxable supply made by a non-resident supplier can be reverse charged to the recipient of the supply if:

•: the supplier is a non-resident
•: the supplier does not make the supply through an enterprise that the supplier carries on in Australia
•: the recipient is registered or required to be registered, and
•: the supplier and the recipient agree that the GST on the supply be payable by the recipient.

The entity is a non-resident supplier making taxable supplies. The entity does not carry on an enterprise in Australia nor does it provide the supply through a resident agent in Australia. The recipient of the supply is registered for GST. Therefore, the first three requirements of subsection 83-5(1) of the GST Act are satisfied.

The entity and the recipient agree that the GST on future supplies will be payable by the recipient (that is, they will be 'reverse charged'). However, the entity and the recipient want to have this agreement applied retrospectively to cover taxable supplies that were attributable to earlier tax periods.

Except where a special rule applies, Division 29 of the GST Act contains the rules for attribution. The attribution rules establish the tax period in which the GST payable on a taxable supply must be paid to the Commissioner. It follows that the entity liable to pay the GST must be known at this time.

As an agreement under Division 83 changes the liability for GST from the supplier to the recipient, this agreement must be in place for the tax period in which the GST is attributable. Therefore, an agreement cannot be made retrospectively to cover supplies that were attributable to earlier tax periods.

Accordingly, the entity cannot enter into a reverse charge agreement under subsection 83-5(1) of the GST Act that applies retrospectively in respect of supplies that were attributable to earlier tax periods.

Date of decision: 2 May 2003

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   Division 29
   Division 83
   subsection 83-5(1)

Keywords
Goods and services tax
GST international services
Connected with Australia
Reverse charge on supplies made by non-residents
GST supplies & acquisitions
Creditable acquisition
Creditable purpose
GST enterprise
GST supply
Taxable supply
GST tax periods
Attribution rules

Siebel/TDMS Reference Number: 3477390

Business Line: Indirect Tax

Date of publication: 6 February 2004

ISSN: 1445-2782

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