Edited version of private ruling

Authorisation Number: 1011634064886

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Subject: GST and reinstate instalment option

Question 1

Are you eligible to make an election to pay GST by instalments for the current financial year under section 162-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No

Relevant facts and circumstances

You are carrying on a business of selling goods.

You have been registered for goods and services tax (GST) after 1 July 2000.

You were using the instalment option.

You advised the following:

· You were not allowed to choose the instalment option for the current financial year.

· Your aggregated turnovers for the previous two financial years were over $2 million.

· You anticipate your estimated aggregated turnover for the current financial year will be over $2 million.

· You were not aware that the instalment option was not made available to you for the last financial year. You inserted the amount of $X at label G21 for all the quarterly tax periods.

· You did not complete any other labels in your activity statements.

· You were under the impression that the Australian Taxation Office (ATO) had allowed you to use the instalment option as you did not hear from anyone that you were unable to do so.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 162-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 162-5(1)

Reasons for decision

Summary

You are not eligible to make an election to pay GST by instalments for the current financial year as you are not a small business entity.

Detailed reasoning

Eligibility to elect to pay GST by instalments

To pay GST by instalments you must be eligible under section 162-5 of the GST Act. Under subsection 162-5(1) of the GST Act, you are eligible to elect to pay GST by instalments if:

a) either:

· you are a small business entity, or

· you do not carry on a business and your GST turnover does not exceed the instalment turnover threshold, and

(b) the current tax period applying to you is not affected by:

· election of one month tax periods, or

· determination of one month tax periods, or

· special determination of tax periods on request, and

(c) your current GST lodgement record is at least 4 months, and

(d) you have complied with all your obligation to give GST returns to the commissioner, and

(e) you are not in a net refund position.

Of relevance to you is whether you are a small business entity.

The meaning of small business entity

You are a small business entity for an income year if you carry on a business in an income year and satisfy one of three tests.

These tests are:

· for the previous income year, you carried on a business with an 'aggregated turnover' is less than $2 million - referred to as the 'look back' test

· the 'aggregated turnover' for the current income year is likely to be less than $2 million (this test cannot be used if you carried on business for the previous two income years and your 'aggregated turnover' for each of those years was more than $2 million) - referred to as 'look forward' test, and

· the 'aggregated turnover' for the current income year (calculated at the end of the year) is less than $2 million - referred to as the 'actual turnover' test.

The term 'aggregated turnover' is defined as the sum of the following amounts:

· the taxpayer's annual turnover for the income year

· the annual turnover of any entity that is connected with the taxpayer at any time during the income year, and

· the annual turnover for the income of any entity that is an affiliate of the taxpayer at any time during the income year.

In your case, from the information that you have provided and by applying the above tests, we have concluded that you are not a small business entity for the current financial year.

This means that you do not satisfy all of the conditions of section 162-5 of the GST Act.

Hence you are not eligible to make an election to pay GST by instalments for the current financial year.

The previous financial year

For the previous financial year, you were not allowed to make an election to pay GST by instalments for the same reasons mentioned above, that is you were not a small business entity. However, you included an amount calculated by you at label G21 for all the quarters for that financial year.

Therefore, you must correct your activity statements for all the quarters for that financial year by including the actual amounts of your sales at label G1 and the GST amount at label 1A. You can revise all the activity statements by ringing Activity Statement Exception Business line of the ATO on 1300 130 926

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