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Ruling

Subject: GST and registration and refund issues

Question 1

Can your goods and services tax (GST) registration be cancelled from the start date of your registration?

Answer

No

Question 2

Can you revise your activities statements for the tax periods the start date of your registration to nil thus enabling a refund of GST?

Answer

No

Relevant facts

You operate a very small enterprise.

You are registered for goods and services tax (GST).

You were incorrectly advised by a family member that you needed to be registered for GST.

Your turnover is well under the $75,000 threshold for GST.

You believe that you have not charged GST to your clients.

You lodged your Business Activity Statements (BAS) and remitted GST on your sales, when in fact you believe that you did not collect GST.

You have previously contacted the Tax Office (ATO) and had your GST registration cancelled with the date of effect being in the past.

Relevant legislative provisions

All references are to the A New Tax System (Goods and Services Tax) Act 1999:

Section 7-1

Section 9-5

Section 23-5

Subsection 25-55(1)

Subsection 25-60(1).

Reasons for decision

Issue 1

Question 1

Summary

Your GST registration cancellation date cannot be backdated because you held yourself out to other businesses as being registered for GST and you lodged your BAS for the relevant periods.

Detailed reasoning

Although you were not required to be registered for GST because you did not meet the registration turnover threshold under paragraph 23-5(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), you chose to do so.

Under subsection 25-55(1) of the GST Act, the Commissioner must cancel an entity's registration if:

· the entity applies for cancellation of registration in the approved form; and

· at the time the entity applied for cancellation of its registration, it had been registered for at least 12 months; and

· the Commissioner is satisfied that the entity is not required to be registered.

Further to this, subsection 25-60(1) of the GST Act provides that the Commissioner must decide the date on which the cancellation of your GST registration under subsection 25-55(1) of the GST Act takes effect.

In your case, you applied for cancellation of your GST registration in the approved form and at the time you applied you had been registered for GST for at least 12 months. You GST registration was cancelled to a date in the past.

Backdating the date of cancellation of GST registration

Practice Statement Law Administration PS LA 2011/8: which applies to the GST registration of entities provides at paragraphs 68 to 81 general information about cancelling GST registration. In addition, paragraphs 89 to 95 provide more specific information about the date of effect of cancellation of GST registration.

92. If an entity is registered but is not required to be registered (a voluntary registration), and it has operated on a GST-registered basis, the date of cancellation will not be retrospective. The Commissioner will negotiate a prospective date if the application does not state one.

94. If an entity is voluntarily registered and has stopped operating on a GST-registered basis from a certain date, the Commissioner may accept its application to cancel its GST registration from the start of the tax period on or after the date it stopped operating on a GST-registered basis.

The Commissioner may cancel an entity's GST registration where the entity has never operated on a GST-registered basis.

In your case, based on the information you provided and our records, you have operated on a GST-registered basis and have lodged all the relevant BAS accordingly.

Therefore, the Commissioner can only cancel your GST registration from the start of the tax period on or after the date it stopped operating on a GST-registered basis. The cancellation of your GST registration cannot be backdated to a date earlier than this.

Further issues for you to consider

Input tax credits (ITC)

As you have not claimed any GST credits in any of the tax periods since you first became registered for GST there may be an opportunity for you to claim tax credits where you hold valid tax invoices for creditable acquisitions that you may have made in these periods.

Reinstatement and Cancellation of GST registration

You will need to contact the ATO to have your GST registration re-instated from the start date of your business to enable you to claim the ITC that you have not claimed. Once these adjustments have been made to the BAS you may then re-apply to the ATO for the cancellation of your GST registration.

To cancel your GST registration, you need to apply for cancellation of registration in the approved form. Alternatively you can call 132866.

Upon cancellation of your GST registration, an adjustment may be required under Division 138 of the GST Act in respect of assets that you still held at the time of cancellation of your registration and for which you might have been entitled to an input tax credit. Any adjustment under Division 138 of the GST Act will be made in your concluding tax period.

As you are continuing to carry an on enterprise, you will need to monitor your GST turnover to ensure you do not become required to be registered for GST. You are entitled to retain your Australian business number (ABN) for as long as you continue carrying on an enterprise after your GST registration is cancelled.

Question 2

Summary

You cannot revise your activity statements to reduce them to nil. You may revise BAS but only to correct errors in calculation, not to reduce them to nil.

Detailed reasoning

Tax periods within four years

Miscellaneous taxation Ruling MT 2009/1 deals with the notification requirements for an entity under section 105-55 of Schedule 1 to the Tax Administration Act 1953 (TAA).

Your request to the ATO has been treated as a notification of entitlement to GST refund or credit under section 105-55 of Schedule 1 to the TAA for the relevant tax periods as it was lodged within four years for those periods. The request satisfies the requirements of that provision (please refer to paragraph 12 of MT 2009/1).

Liability for GST

As you have operated on a GST-registered basis since registration you are liable to pay GST on any taxable supplies you make (section 9-5 of the GST Act) and this is so whether or not you charge GST on those supplies. This means that as consequence of your GST registration, GST is included in the price you charge your customer. There are two components of what you receive from your customers (the price),10/11 of the price is your revenue and 1/11 of the price is the GST that you are required to remit to the Tax Office. How you set your price to recover the GST included in the price is your business decision that the Tax Office cannot comment.

There are many situations where GST may not consciously be factored into a price by the supplier, but such a failure to consider the GST is not normally sufficient to show that GST has not been passed on. Not explicitly considering the GST at the time of the price setting does not mean that the supplier has not passed on the GST.

By lodging the BASs and remitting the GST embed in the price to the Tax Office indicates that you understand the above principle of GST

Although you might not have charged GST in your tax invoices for the taxable supplies you have made, you must still remit the GST on those supplies to the ATO even if you did not recover the GST from the recipients of those supplies.

Therefore, you cannot revise the BAS for the tax periods to reduce the amount at label 1A (GST payable amount) to nil. You can only revise those BAS if the supplies you made were GST-free supplies or input taxed supplies or you made errors in the calculation of the GST payable.

Based on the information supplied, the supplies you have made where neither GST-free nor input taxed. Unless you made mistakes in the calculation of the GST payable, the amounts of GST you have remitted to the ATO since registration would be correct.

Entitlement to input tax credits (ITC)

As you have operated on a GST-registered basis, you are entitled to ITC in relation to creditable acquisitions if the requirements of section 11-5 of the GST Act are met. The BAS you have lodged that you have not claimed any ITC.

Therefore, you will be able to revise the BAS for these tax periods to claim the ITC.

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