GST minutes, 13 June 2012

^[H1]Meeting details

Venue:	Australian Taxation Office Skybridge Conference Room Gnabra/Kembery Building 21 Genge Street Canberra
Date:	13 June 2012
Start:	10.00am	Finish:	4.00pm
Chair:	Tony Long (Co-chair) Andrew Orme (Co-chair)
Contact and Secretariat:	Tracey Gaffney	Contact phone:	(03) 9215 3104 0403442180

Attendees

Karen Anstis	ATO
Donna Bagnall	Institute of Chartered Accountants in Australia
Joanne Casburn	ATO
Judith Choate	Law Council of Australia
Ken Claughton	CPA Australia
Andrew Compton	Property Council of Australia
Rob Dalla-Costa	Treasury
Michelle de Niese	Corporate Tax Association
Tiffany Douglas	Taxpayers Australia
Michael Evans	Institute of Chartered Accountants in Australia
Natasha Ferguson	Minerals Council of Australia
Tony Greco	Institute of Public Accountants
Tony Long (Co-Chair)	ATO
Peter McDonald	Institute of Public Accountants
Matthew Nicholls	The Tax Institute
James O'Halloran	ATO
Robert Olding	ATO
Andrew Orme (Co-Chair)	ATO
Bill Packwood	Financial Services Council
Chris Plakias	Australian Bankers' Association
Ian Read	ATO
Andrew Sommer	Law Council of Australia
Rod Wilson	National Tax and Accountants Association

Apologies

Bill Benham	Association of Taxation & Management Accountants
Stephanie Caredes	The Tax Institute
Rod Ettridge	ATO
Elizabeth Goli	ATO
Steve Howlin	ATO
Suzanne Kneen	The Tax Institute
Brett Mawby	Minerals Council of Australia
Karl Wood	Property Council of Australia

Agenda items and guests

Chris Barlow (by phone item 7) Assistant Commissioner	ATO	Jenny Lin Policy Analyst	Treasury
Trisha Clarke (item 12) Assistant Commissioner	ATO	Kasey Macfarlane (by phone item 9) Tax Counsel	ATO
Karin Collinson (by phone item 10) Tax Counsel	ATO	Raj Srikhanta (by phone item 8) Tax Counsel	ATO
Rod Dunn ( by phone item 17) Director, Indirect Tax	ATO	Richard Williams (by phone item 3) Director, Registrations Policy	ATO
Steve Fellows (by phone item 5) Assistant Commissioner	ATO	Frank Wilson (item 6) Assistant Commissioner	ATO
Steve Iselin(by phone item 4) Tax Counsel	ATO	Pauline Zdjelar (item 11) Assistant Commissioner	ATO

Professional and industry bodies represented at the NTLG GST Sub-committee

Association of Taxation & Management Accountants	ATMA
Australian Bankers' Association	ABA
Corporate Tax Association	CTA
CPA Australia	CPAA
Financial Services Council	FSC
Institute of Chartered Accountants in Australia	ICAA
Institute of Public Accountants	IPA
Law Council of Australia	LCA
Minerals Council of Australia	MCA
National Tax and Accountants Association	NTAA
Property Council of Australia	PCA
The Tax Institute	TTI
Taxpayers Australia	TA

Acronyms and references

Decision Impact Statement	DIS
General Interest Charge	GIC
National Tax Liaison Group	NTLG
NTLG GST Sub-committee	NTLG GST
Taxation Administration Act 1953	TAA
A New Tax System (Goods and Services Tax) Act 1999	GST Act

Reference to provisions of an unidentified Act are to the A New Tax System (Goods and Services Tax) Act 1999.

^[H2]Agenda items

Disclaimer

National Tax Liaison Forum (NTLG) GST sub-committee agendas, minutes and related papers are not binding on the Australian Taxation Office (ATO) or any of the other bodies referred to in these papers. While every effort is made to accurately record views expressed, the wording necessarily represents a summary of statements of general position only, and care should be taken in interpreting those statements. These papers reflect the position at the date of release (unless otherwise noted) and readers should note that the position on any issue may subsequently change.

1.1 Introductions, apologies, housekeeping matters

Presented by: Tony Long

¦ Chair's opening comments

Apologies

¦ Elizabeth Goli, ATO

¦ Rod Ettridge, ATO

¦ Stephanie Caredes, TTI

¦ Suzanne Kneen, TTI

Substitutions

¦ Tony Long, for Elizabeth Goli, ATO

¦ Karen Anstis, for Rod Ettridge, ATO

Changes to NTLG membership

¦ Andrew Sommer, Partner, Clayton Utz representing the Law Council of Australia

Members stepping down from forum

¦ Paul Stacey, LCA

¦ Jamie Clarke, CPAA

¦ Bill Benham, ATMA

Introduction

¦ Jenny Lin, Policy Analyst, Treasury

Meeting discussion

The Chair announced the apologies, substitutions and new participants to the meeting.

The Chair informed the members that, Paul Stacey, Jamie Clarke and Bill Benham were stepping down from the sub-committee. They were thanked for their contribution.

1.2 Agenda and draft minutes

Presented by: Tony Long

Issue: 17.0

Outline of agenda

¦ Confirmation of the draft minutes for the 21 March 2012 meeting.

¦  

– Post meeting summary issued to members for comment on 29 March 2012.

– Draft minutes forwarded to members for comment on 19 April 2012.

¦ The minutes of the 21 March 2012 meeting need to be corrected as follows:

Agenda item 6, page 23, meeting discussion.

Tom Wheeler confirmed that the ATO attempts to contact taxpayers by phone and/or letter before making a decision on deregistration. In these contacts (not formal notices) the ATO advises taxpayers of the likely consequences of failure to respond and/or supply the requested information. The ATO does not seek to cancel GST registrations where it is not warranted, but in the absence of a response to ATO contact it may be reasonable to conclude on the available evidence assume that the business is not legitimate or entitled to a refund of input tax credits.

Any de-registration or cancellation is made on the basis of the available evidence. Where the ATO believes that fraud or malfeasance has occurred, criminal or administrative prosecution action may be undertaken.

The ATO verifies approximately 55,000 activity statements per year and some registration cancellations result from this verification activity. Where a refund is not paid after verification activities, an amended assessment is issued.

Meeting discussion

The Chair noted that the March meeting summary and minutes had been circulated to the members for comment and feedback.

The above correction to the March minutes was advised:

The minutes for the 21 March 2012 meeting were accepted and ratified.

The Chair informed members that there was a late submission received from the Law Council of Australia that would be discussed at 'General business'.

1.3 ATO acceptance of specialist advisor authorisation to represent taxpayers

Presented by: Richard Williams (by phone)

Issue: 12.30

As submitted by the Institute of Chartered Accountants in Australia.

Subject

ATO acceptance of specialist advisor authorisation to represent taxpayers.

Issue

Specialist tax advisors such as GST advisors continue to be blocked by ATO officers from representing taxpayers who have appointed another firm as their main tax agent.

Background

It is very common for taxpayers to engage more than one firm to represent them to the ATO. The expansion and complexity of tax laws is forcing taxpayers to use the services of many specialists rather than their registered tax agent only eg GST advisors. In the past, the ATO accepted submissions, voluntary disclosures, objections etc issued on the specialist GST advisor's letterhead on behalf of the taxpayer. The ATO usually commenced processing the GST advisor's submission without further proof of identity provided the submission included a statement that the specialist advisor was authorised to represent the taxpayer and attached a signed letter on the taxpayer's letterhead confirming the same.

More recently, some members have found that, despite the attachment of a written taxpayer authorisation, the ATO is refusing to discuss the submission with the specialist GST advisor (even though the specialist advisor lodged it on their own letterhead). In other cases, members have found that the ATO is simply not processing the submission without issuing confirmation to either the specialist advisor or the taxpayer that it has taken that step, frustrating the capacity of taxpayers to comply with their taxation affairs. This is frustrating the capacity of the specialist advisor to provide their professional services and causing unnecessary time wastage at ATO processing and call centres.

The ATO needs to recognise that blocking non-tax agent specialists such as GST advisors from representing taxpayers is a misguided application of the privacy guidelines. There is no possible mischief when a specialist advisor prepares a submission detailing facts and legal arguments and presents it to the ATO on behalf of a taxpayer. Any ATO response to the specialist advisor, provided it does not introduce facts known to the ATO which are not known to the specialist advisor, cannot breach the taxpayers' privacy. That is because the ATO will be merely repeating back to the specialist advisor something that the specialist advisor already knows and has told the ATO.

Industry view/suggested treatment

We recommend the ATO reactivate the process whereby it accepts a written authorisation on the taxpayer's letterhead for a specialist advisor to represent it.

We understand that the ATO's standard procedure when it receives most written submissions is to send a confirmation letter or email back to the issuer. It is suggested that this process can be used to ensure privacy and confirm authorisation. The confirmation letter could require the specialist advisor to ring an ATO call centre with examples of the basic proof of identity documents required for any point of contact, before processing will commence.

Technical references

N/A

Impact on taxpayers

Requiring taxpayers to access the portal and insert authorised representatives as official contacts is an inefficient process, particularly where taxpayers engage multiple specialist advisors on various taxes and many of those are single issue appointments of short duration. Tax agents can register themselves on the ATO portal as tax agent for a taxpayer. It places a specialist advisor such as a GST specialist at a competitive disadvantage if they are not able to avail themselves of the same process to represent the taxpayer. If our suggested solution is adopted, there will be almost a negligible impact on either the ATO or the specialist advisor resources and none on the taxpayer.

Priority of issue where ATO view is required

Medium

Has previous advice been sought from the ATO?

No

Has this issue been discussed at any other ATO consultative forum?

Unknown

ATO response

The areas of ATO responsible for the correspondence that gave rise to this agenda item advise that he procedures outlined by the professional body that raised this agenda item are not part of their formal procedures and are not sanctioned on an 'informal basis'. Given the number of submissions sent to these addresses, it is not possible to identify specific examples for review on the basis of the information available to the ATO at this time. However, the relevant areas of the ATO have agreed to follow up specific cases if specific case details are provided to the NTLG GST Sub-committee.

We can discuss advisor authorisations in more detail at the meeting.

Meeting discussion

The ATO set out the legal context concerning the appointment of advisors to represent taxpayers, particularly specialist GST advisors. Specialist advisors who are not tax agents or BAS agents would have to be appointed by the taxpayer in the approved form.

Members highlighted their experience that ATO systems do not seem to record specialist GST advisors, who are not BAS agents or tax agents for lodgment or RBA purposes, and store them as authorised agents. The experience was, that should another GST query be made to the ATO at a later date, then the specialist GST advisors would have to go through the process of appointment again. Members stated that the issue was of a practical nature rather than a legislative one. The portal also does not allow for a secondary contact to be registered without over riding the current authorised contact and asked the ATO to investigate the issue.

The ATO sought examples of situations where issues have arisen so that further investigation could be undertaken to identify the reasons where the authorised contact was found not to have been recorded in the ATO systems. The ATO stated that it is general practice to contact the advisors or the taxpayers and inform them when the advisors are not listed as an authorised contact and seek the authorisation rather than disregard the submissions made, be it for a private ruling or otherwise.

Members sought further clarification on the types of approved forms and asked the ATO to provide the relevant links to where the forms can be accessed and the steps that need to be undertaken to be recorded on the ATO systems as an authorised contact.

Action item	2012.06.01
Description	Approved forms to appoint specialist advisors for GST purposes. The ATO to provide members with the links to 'approved forms' that can or must be completed when appointing a specialist advisor for GST purposes.
Responsibility	ATO
Due date	12 September 2012
Action item	2012.06.02
Description	Recognition of specialist advisors as authorised contacts. Members to provide the ATO with examples where they have faced difficulties with specialist advisors being recognised as an authorised contact and/or were required to go through an appointment process again. The ATO to investigate these cases and provide members with the reasons for the occurrence(s).
Responsibility	ATO
Due date	12 September 2012
Action item	2012.06.03
Description	Becoming an authorised contact. The ATO to inform members of the steps that a specialist GST advisor needs to take, the form that is required to be completed and where it needs to be mailed in order to be recorded on ATO systems as an authorised contact for GST purposes.
Responsibility	ATO
Due date	12 September 2012
Action item	2012.06.04
Description	Recording secondary contacts on ATO systems. The ATO to inform members if it is possible for a secondary contact to be registered on the ATO systems through the portal without over riding the already existing Tax agent or BAS agent.
Responsibility	ATO
Due date	12 September 2012

1.4 Withdrawal of ATO ID 2004/694

Presented by: Steve Iselin (by phone)

Issue: 11.22

As submitted by the Institute of Chartered Accountants in Australia

Subject

Withdrawal of ATOID 2004/694

Issue

The ATO has withdrawn ATOID 2004/694, an interpretative decision titled 'GST and sale of land by Body Corporate in NSW'.

Issues include:

¦ why the ATOID was withdrawn

¦ whether the issues covered in that ATOID are covered in any other ATO product, and if so which one(s), and

¦ why the ATO would not wish to direct taxpayers and practitioners to those continuing ATO products.

Background

Following the ATO's withdrawal of ATOID 2004/694 on 20 April 2012, members of the Institute were unable to understand the reasons for the withdrawal of the ATOID, and given the withdrawal, where the ATO's view on the GST implications of the sale of land by a body corporate in NSW could be found.

While the withdrawn ATOID contains a note stating that the issue misinterpreted the Strata Schemes Management Act 1996 (NSW), there is no cross-reference on the withdrawn ATOID to any other existing / continuing ATO product covering the issue.

During the pre-NTLG GST meeting teleconference held on 10 May 2012, the ATO informed the Institute (and other participants on the call) that the issue in the withdrawn ATOID is covered in two later ATOIDs, namely ATOID 2008/81 and ATOID 2008/82.

The Institute's members have now had an opportunity to examine the above two ATOIDs and we confirm that we agree with the ATO's view that the latter two ATOIDs override the earlier ATOID (2004/694) which has been withdrawn.

In such a case, where the ATO view on the issue is overridden or superseded by a later view on the issue, we would expect that the Commissioner would at a minimum cross-reference the withdrawn ATO product to the ongoing or succeeding ATO products that are considered to apply and continue to cover the issue.

A similar 'cross-referencing' issue has recently arisen and been discussed at the NTLG GST forum (March 2012 meeting) in the context of the Decision Impact Statement (DIS) for International All Sports, where the Institute expressed concern about the DIS making changes to an existing ruling (MT 2010/1) without the ruling having a statement on it cross-referencing the DIS to let taxpayers and practitioners know that the ruling was varied to the extent of the view expressed in the DIS.

There is a need to cross-reference so as to provide appropriate sign posts to practitioners and taxpayers who have a duty to navigate the rules of the tax system and be aware of the 'direction' in which they should be travelling at all times.

Industry view/suggested treatment

We request that the ATO take the following steps when withdrawing existing written views such as ATOIDs:

¦ Insert a note on the withdrawn ATO product stating the reason for withdrawing it, eg the same issue is covered in a later or other existing ATO product; and

¦ Cross-reference the relevant ATO product(s) in the withdrawn ATO product, eg a GSTR, GSTD, or ATOID.

In the present case, withdrawn ATOID 2004/694 should contain a statement that the issue is considered to be covered by ATOID 2008/81 and ATOID 2008/82, or should at least cross-reference them under the heading 'Related ATO Interpretative Decisions'.

In this respect, we note that the later 2008 ATOIDs do contain such a cross-reference back to ATOID 2004/694, as well as a reference to the other 2008 ATOID respectively.

Technical references

ATOID 2004/694; ATOID 2008/81; ATOID 2008/82; Decision Impact Statement for International All Sports.

Impact on taxpayers

To fail to provide these administrative sign posts is the equivalent of the Road and Traffic Authority closing an existing road, without detouring motorists and providing new sign posts to guide them as to where to go next. It is a recipe for uncertainty and people getting lost or worse still heading down a road in the wrong direction.

Priority of issue where ATO view is required

High

This issue is an ongoing theme whereby ATO views and guidance is removed without practitioners and business knowing what happened to the ATO view and why, which creates confusion and uncertainty in the tax administration system.

Has previous advice been sought from the ATO?

Not specifically. Only as noted above.

Has this issue been discussed at any other ATO consultative forum?

No, only as noted above

ATO response

ICAA submission to the NTLG (GST Sub-committee) dated 16 May 2012 - the withdrawal of ATO ID 2004/694

The ATO aims to provide advice that makes compliance with the tax laws easier. Where it is appropriate to add things like a cross reference to a published product, including a withdrawal note, it would normally be done.

The use of a cross reference to the withdrawal note for ATO ID 2004/694 was inadvertently missed.

The withdrawal note to ATO ID 2004/694 now reads:

The issue in ATO ID 2004/694 has misinterpreted the Strata Schemes Management Act 1996 (NSW). This issue is covered in ATO ID 2008/81 and ATO ID 2008/82

We appreciate this matter being bought to our attention and welcome collaborative participation as to how we can make it easier for the community to comply at a minimal cost, whether that be in respect of individual products or more systematic issues.

Meeting discussion

The ATO acknowledged the error made by not cross referencing the products.

There was further discussion and a suggestion made in relation to the cross referencing of products.

The ATO stated that the 'Withdrawal notice' provides a brief reason for the withdrawal of the product.

1.5 GST registrations of non-residents

Presented by: Steve Fellows

Issue: 4.5

As submitted by The Tax Institute

Subject

GST registrations of non-residents

Issue

It is understood that the ATO might be disbanding the existing non-resident GST registration unit that operates at Newcastle.

Can the ATO confirm that the unit is being disbanded?

Can the ATO advise what alternative arrangements will be put in place if the unit is disbanded?

Can the ATO confirm that the existing service standard will be maintained under the alternative arrangements?

Background

An application for registration of a non-resident entity for GST purposes (either with or without an application for an ABN) is a unique process that is significantly more complicated than an application for registration of a resident entity.

In particular, the proof of identity requirements are demanding, as are the requirements for the certification of copies of original documents. The need to obtain documents from other revenue and non-revenue authorities in foreign jurisdictions presents unique challenges and consultation is often required with members of the non-resident GST registration unit to ensure that the relevant documents obtained are acceptable.

The non-resident registration unit at Newcastle has gained considerable expertise in dealing with the registration requirements for non-residents and can clearly explain the need for the respective forms of documentation and how the documentation requirements can be satisfied.

There is a concern that if this unit is disbanded and if the registration of non-residents becomes part of the general registration workload of the ATO, that the expertise will be lost, the registration application process will become more difficult for taxpayers and tax agents and the ATO will not be able to finalise the registration of non-residents within the 28 days service standard.

Industry view/suggested treatment

Non-resident taxpayers and tax agents would benefit greatly from a continuing centralised point of contact at the ATO in relation to registration applications for non-resident entities and the associated documentary requirements.

Technical references

N/A

Impact on taxpayers

Non-resident entities seeking to become GST registered

Priority of issue where ATO view is required

Medium

While the number of applications might not be large, there is often an urgency in obtaining the relevant registration.

Has previous advice been sought from the ATO?

No

Has this issue been discussed at any other ATO consultative forum?

No

ATO response

Can the ATO confirm that the unit is being disbanded?

The non-resident registration unit referred to is part of Client Account Services. The ATO is currently transitioning the Client Account Services function out of the Newcastle site.

Can the ATO advise what alternative arrangements will be put in place if the unit is disbanded?

There is currently a transition plan to skill staff who have extensive ABR experience to conduct the non-resident work and build up capability. This will not affect the support that the ATO has provided and services standards will be maintained.

Can the ATO confirm that the existing service standard will be maintained under the alternative arrangements?

The existing Service Standard will be maintained under the new arrangements.

Meeting discussion

In response to the submission in relation to the disbanding of the Newcastle non-resident registration team, the ATO assured members that staff at other sites were being trained to deal with the non-resident registration issues and that the support that is currently being provided and the services standards will be maintained.

Members sought from the ATO if it could provide a name and contact details of the officer who would be a central point of contact should members experience any processing difficulties they may experience and solve the issue, rather than raise the issue 3 months later at the next NTLG GST sub-committee meeting.

Action item	2012.06.05
Description	ATO contact for non-resident registration matters ATO to provide contact details of a senior officer to be a point of reference with whom members could raise issues about non-resident registrations if and when they arise.
Responsibility	ATO
Due date	12 September 2012

1.6 Tax invoices

Presented by: Frank Wilson

Issue: 7.2

As submitted by the Institute of Chartered Accountants in Australia

Subject

Tax invoices - status of ATO position

Issue

Could the ATO please provide clarification of the present position on tax invoices as follows:

1. What is the time frame for the issue of a ruling upon which suppliers can rely to issue valid tax invoices?

2. Is the 'this is a tax invoice when paid' approach - approved under GSTR 2000/17 - still acceptable?

3. Are tax invoices issued by agents for undisclosed principals no longer valid if they don't contain the supplier's name and ABN?

4. Is a supplier able (and should be advised) to seek a private ruling that its tax invoices are treated as valid 'tax invoices'?

Background

We note that a number of 2012-13 renewal notices contain the note 'this document will be a tax invoice for GST purposes upon payment'.

The ruling that authorised this approach (GSTR 2000/17) was withdrawn on 25 May 2011 (as a consequence of the amendment to section 29-70 with effect from 1 July 2010) and the draft ruling 2011/D1 was issued. On the face of it, the draft requires a reapplication for approval of the 'this becomes a tax invoice' approach - see paras from 101 and Appendix 3.

In the December 2011 NTLG GST subcommittee, the ATO provided a document that foreshadowed a change to the draft ruling - see attached.

At para 5 attached, it seems that the ATO proposes that the approval for the 'renewal notice' cannot be given in advance - unless the application is made by the recipient.

From the public rulings program document, GSTR 2011/D1 is 'On hold pending the outcome of discussions with the NTLG GST subcommittee' but I note that the topic is not listed for discussion on the scheduled 13 June 2012 NTLG GST meeting.

Industry view/suggested treatment

Please provide a response to the four questions above regarding the ATO's approach to tax invoices.

Technical references

Section 29-70 of the GST Act 1999; GSTR 2000/17; Draft GSTR 2011/D1

Impact on taxpayers

Uncertainty around compliance with the GST law. Suppliers may be issuing invalid tax invoices to recipients who are in turn relying on them to claim input tax credits.

Priority of issue where ATO view is required

High

Has previous advice been sought from the ATO?

Not specifically. Only as noted above - discussions on the issue have been held at the NTLG GST forum.

Has this issue been discussed at any other ATO consultative forum?

No, only as noted above.

ATO response

5. A decision has been made to consult with the community again on the issue of tax invoices, especially in relation to our proposed waiver of tax invoice legislative instrument approach to provide certainty to taxpayers and, in effect, continue the same administrative treatment for circumstances in which the Commissioner had previously treated documents as a tax invoice. It is expected that the tax invoices ruling will therefore be re-issued as a further draft for consultation in mid July. It has also been decided that until this new draft ruling becomes a final ruling the treatment of documents as tax invoices afforded under GSTR 2000/17 should continue until the proposed legislative instruments take effect. Further, other public rulings in which documents had been treated as tax invoices and which will be covered by the proposed legislative instruments will also be updated. In the interim, the treatment of documents as tax invoices afforded in those public rulings should continue until the proposed legislative instruments take effect.

6. The 'this is a tax invoice when paid' approach for offer documents and insurance renewal notices will continue in the same manner as set out in GSTR 2000/17 until the proposed legislative instruments take effect. After that date the treatment will follow the proposed legislative instrument approach. This proposed approach waives the requirement for a recipient to hold a tax invoice when they hold an offer document or insurance renewal notice that meets certain conditions. Part of the conditions before the recipient may attribute an input tax credit to a tax period in which it holds such a document is that the recipient has accepted the offer or renewal and has paid and completed according to the terms of the offer or renewal.

7. Under the legislative instrument approach it is proposed to waive the requirement for a recipient to hold a tax invoice before attributing an input tax credit to a tax period when they hold a document issued by an agent for an undisclosed principal where it contains the agent's identity and ABN than rather the supplier's identity and ABN. Until this proposed legislative instrument takes effect, such documents will continue to be treated as tax invoices in the same manner as GSTR 2000/17.

8. Where a document does not meet the requirements for a tax invoice, an option available to taxpayers is to request the Commissioner to treat a document as a tax invoice. This discretion is an administrative discretion which means that the Commissioner must consider the exercise of the discretion for each individual document on a case by case basis taking into account all the facts and circumstances. However, as stated above the treatment of documents as tax invoices afforded under GSTR 2000/17 in certain circumstances will continue in the interim. It would therefore be unnecessary for suppliers to seek the exercise of the discretion in such circumstances. Further, under the legislative instrument approach it is proposed to waive the requirement for a recipient to hold a tax invoice in circumstances in which the Commissioner had previously treated documents as a tax invoice.

Meeting discussion

Frank Wilson, Assistant Commissioner, provided members with a background in relation to tax invoices, the section of the Act and the ATO's interpretation in the withdrawn ruling GSTR 2000/17. The ATO initially considered an addendum to GSTR 2000/17; however given the issues that had arisen and gathered over the 10 years of GST practice the preferred option was to publish a draft ruling.

There was discussion in relation to the Commissioners discretion to treat a document that has not otherwise complied with the requirements as per s29-70(1) as a tax invoice. The ATO had requested members for comments to the ATO's interpretation in the draft ruling, considered the responses received, made changes to the ruling and added further information. Members were informed that the ruling has been through the rulings panel, the business lines and is expected to receive sign off for publication of a further draft by mid July.

In response to the other questions in the submission it was stated that the ATO had previously indicated in GSTR 2000/17 and other rulings that certain classes of documents or types of documents would be treated as tax invoices. In terms of the technical interpretation, and in order to provide the maximum level of comfort in relation to the statements that had been made, it was decided to resolve the issue through the legislative instrument approach under s29-10.

Members were assured that till such time the ruling is finalised and the legislative instruments take affect the approach approved under GSTR 2000/17 would be acceptable. The ATO in accordance with the Practice Statement, on where there is a change in view and reversing of policy (PS LA 2011/27) will be accepting and will not be challenging or disputing any tax invoice that has been created under the old GSTR 2000/17 approach.

Member were assured that in the date of effect clause of the new draft ruling a statement would be included to state that the documents issued as tax invoices which would be treated as such under the previously withdrawn ruling would continue to be treated as tax invoices until the legislative instruments have affect. Members requested that the statement be mirrored in the withdrawal notice of the withdrawn ruling.

There was discussion in relation to undisclosed agents and the issues surrounding the issuing of documents purporting to be tax invoices that aren't and the concerns that those 'tax invoices' could be considered false and misleading as they do not include all the elements of s29-70(1).

Frank Wilson informed members that the ATO will write to Treasury to identify particular areas of concern which had arisen in discussions on the draft ruling.

1.7 ERROR: numbering value not found! Administration practice in relation to the verification of GST refunds

Presented by: Chris Barlow (by phone)

Issue: 13.19

This agenda item is to advise members of the changes in the ATO's approach to processing refunds following legislative changes.

Meeting discussion

Chris Barlow provided members with an update on how the ATO has responded to changes as a result of the Multiflex decision. Members were informed that legislation was on foot and when it receives Royal Assent it will impact on the ATO's business model. Members were given an indication of the size of the Refund Integrity risk and that the ATO to date had achieved 90% of its plan.

The outcome of the Multiflex decision was that the Commissioner could consider the veracity of the refund in the period which he had to process the refund and pay it out. The ATO trialled a rapid response approach in refund integrity, a process to identify and verify high risk refunds by reviewing those cases which entailed making contact with the taxpayers shortly after the activity statement was lodged.

The trial provided the ATO with the opportunity to refine its processes whilst holding refunds and minimise the impact that this may have on the taxpayers. The significant change has been in the post issue environment where refunds had to be released and therefore the ATO had to undertake some audit work in those circumstances. The ATO is monitoring the progress of its current work practices which will be taken into consideration to shape future strategies to deal with the risk.

The ATO is also considering the trial of an informal review process as well as using the formal powers of the Commissioners through the issuing of formal notices. In the latter circumstance the ATO will proceed with prosecution action if taxpayers do not provide the relevant documents.

Chris thanked the tax professionals for co-operating with the ATO and responding favourably to the strategies implemented as a result of the Multiflex decision.

1.8 Self assessment regime

Presented by: Joanne Casburn & Raj Srikhanta (by phone)

Issue: 12.31

This agenda item is to provide members with an overview of the self assessment regime commencing 1 July 2012.

Meeting discussion

Members were informed that the ATO have had systems in place and are ready to deal with the self assessment regime that comes into effect on 1 July 2012. The self assessment will apply to the BAS lodged on the 21 August 2012.

On 2 July 2012 the ATO will publish a fact sheet on its website which will set out and provide a background on the self assessment regime. A learning and development package which is being used for ATO staff will also be made available on the website.

After 1 July 2012, the BAS lodged will be treated as a Notice of Assessment on the day the BAS is lodged. No notice of amended assessment will need to issue for a taxpayer amendment application via a RBAS if it is accepted by the Commissioner in full.

The Correcting GST Mistakes guide has been updated for self assessment. Members queried if there was going to be an increase in the thresholds and time allowed for correcting GST mistakes. The ATO has taken the suggestion as feedback.

The ATO will be issuing information in relation to approved forms. Members were informed that there was a list of approved forms on the website and will be linked to the information. The legislative instruments being drafted will set out the parameters of what the Commissioner will accept as being in the approved form. In the context of approved forms, members raised an example where an objection was sent in by a taxpayer's representative via a letter and they were asked to complete the ATO's objection form instead. The ATO will confirm whether the Commissioner would accept a letter with all the same necessary information as being a taxation objection in the approved form.

Members queried whether the Commissioner will 'make' an amendment where a taxpayer 'self amends' as there is no power for a self amendment to be deemed to be an amendment. It was stated that there is a risk of dispute whether the Commissioner made an amended assessment.

Action item	2012.06.06
Description	Objections - approved form ATO to confirm whether the Commissioner will accept a letter that provides the same necessary information as the objection form on the ATO website as being a taxation objection made in the approved form.
Responsibility	ATO
Due date	12 September 2012
Action item	2012.06.07
Description	Self revision of BAS and deemed amended assessment. The ATO to clarify whether of the Commissioner makes an amendment where the taxpayer lodges a revised BAS.
Responsibility	ATO
Due date	12 September 2012

1.9 Treatment of construction works imposed obligations on recipient of supply

Presented by: Kasey Macfarlane (by phone)

Issue: 1.65

As submitted by the Institute of Chartered Accountants in Australia Subject.

Subject

Treatment of construction works imposed obligations on recipient of supply. (withdrawn GSTR 2008/2)

Issue

Can the Commissioner issue fresh ruling (or an addenda to GSTR 2001/6) to clarify:

¦ When the carrying out of an obligation to construct improvements on property in circumstances similar to those in (withdrawn) GSTR 2008/1 is itself a supply or consideration for the grant of the development rights; and

¦ When the carrying out of an obligation to construct improvements on property in circumstances similar to those in GSTR 2008/1 is consideration for the grant of the development rights or subsequent supply of interests in the improvements.

The views taken in this respect in GSTR 2008/2 and GSTR 2001/6 are inconsistent with the example in the EM to the No 9 Bill and to the treatment of conditions imposed for the construction of infrastructure projects.

Background

In GSTR 2008/2, the Commissioner ruled that the carrying out of an obligation imposed by a government agency on a lessee should not be regarded as a supply by the lessee to the government lessor.

At paragraph 41, the (now withdrawn) ruling stated:

41. While the undertaking of the development works by the developer is an obligation that needs to be fulfilled for the developer to become entitled to the freehold or leasehold title to the land, it does not have a separate identity or an independent value to the government agency. It is merely a condition of the primary transaction between the parties, being the sale or long-term lease of land by the government agency to the developer.

This view is an application of the principle established in GSTR 2001/6.

The Gloxinia litigation concerned whether the transmission of the long term lease following development was a supply to the erstwhile lessee. It did not concern:

¦ The treatment of the works that were under taken as a condition of the lease; nor

¦ The value of the supply of the long term lease by the government agency.

However, the EM to the No 9 Bill that made the Gloxinia amendments, include examples that are inconsistent with the views taken in GSTR 2008/1 and GSTR 2001/6 concerning the satisfaction of conditions imposed on recipients of supplies.

There are many PPPs that involve the grant of leases and conditions imposed upon recipients to construct infrastructure to be used by the recipient of the lease to provide other services to the government lessor - eg, BOOT contracts for toll roads, sewerage plants, schools, prisons etc.

The withdrawal of GSTR 2008/2 and the example in the EM create uncertainty of the operation of the GST law in these cases.

Further, Dowsett J made (at least) two further observations in Gloxinia that were not contradicted by the majority that seem to be contrary to the example in the EM to the No 9 Bill:

¦ The building works were described a 'premium' for the long term lease. In this case, if the works are consideration for a supply, it seems (consistent with the income tax law) the works would be for the agreement to grant the long term lease and not the grant of the long term lease itself. This has consequences for the use of the margin scheme.

¦ The erstwhile lessee had equitable rights over (at least) the buildings, making the value of the title minimal. This contradicts the example in the EM.

Industry view/suggested treatment

The position adopted in GSTR 2008/1 concerning the undertaking of conditions should be restored in a public ruling.

Technical references

N/A

Impact on taxpayers

The complexity, cash flow and risk arising to taxpayers and government as a result of very large 'barter' transactions arising from 'phantom supplies'.

The withdrawal of GSTR 2008/1 and the inconsistent example in the EM creates uncertainty as to the correct compliance approach.

Priority of issue where ATO view is required

High

Has previous advice been sought from the ATO?

Informal discussions

Has this issue been discussed at any other ATO consultative forum?

The issue was raised at the HoR Economics Committee review of the No 9 Bill.

ATO response

The ATO withdrew its GST ruling about development leases (GSTR 2008/2) as a result of the Full Federal Court's decision in Commissioner of Taxation v. Gloxinia Investments Ltd atf Gloxinia Unit Trust [2010] FCAFC 46; 2010 ATC 20-182; 75 ATR 806 ('Gloxinia').  

GSTR 2008/2 was withdrawn because, as stated in the ATO's Decision Impact Statement issued on 21 April 2011, in response to the Gloxinia decision, the Full Federal Court's decision in that case meant that the substantive view, and the essential reasoning supporting the substantive view in GSTR 2008/2 was incorrect.   

Contrary to the Commissioner's submissions and the views in GSTR 2008/2, in Gloxinia the majority of the Full Federal Court held that the grant of 99 year strata-lot leases,

¦ by a local council with respect to strata-titled home units

¦ pursuant to a development lease arrangement, and

¦ conditional upon the developer constructing the home units on its own account on the council's land that was occupied by the developer under a lease

¦ constituted a supply of each of the individual home units to the developer. That is, the council made a supply of the home units comprising the underlying land and completed development works to the developer; as opposed to making a supply of the underlying land only. Therefore, it follows that in undertaking the development of the home units, the developer supplied the development works, ie the construction of the home units to the council. Otherwise, it would be inconsistent with the decision of the majority of the Full Federal Court, that the Council supplied the completed home units together with the underlying land to the developer when the Council subsequently granted the strata lot leases.

Following the above analysis, and applying the general principles of the GST Act which recognises that consideration can be non-monetary, and the broad definition of consideration in section 9-15 to include 'any payment, or any act or forbearance, in connection with a supply of anything', the development works supplied by the developer is an act in connection with the grant of the strata lot leases by the Council. Similarly the grant of the strata lot leases is an act in connection with the supply of the development works by the developer, and is therefore consideration for the developer's supply of those development works. 

The majority of the Full Court's in Gloxinia considered that, under the terms of the specific arrangement in question, the arrangement resulted in the Council being in a position to supply not only the underlying land to Gloxinia but also the completed development works on that land. It follows from the majority's decision and their characterisation of the arrangement in question, that the undertaking of the development works by Gloxinia was something more than a condition of the supply of the underlying land. The majority rejected the Commissioner's view that the Council supplied the underlying land only to Gloxinia.

The above analysis is consistent with the Commissioner's response to the Gloxinia decision, as set out in his decision impact statement that was issued on 21 April 2011.

Meeting discussion

Members discussed and outlined the obligations imposed on Gloxinia under the arrangement that it had entered into with the Council. In particular, under the terms of the contractual arrangements between Gloxinia and the Council, Gloxinia was required to construct residential units upon land which it held by way of a lease granted by the Council. Furthermore, the terms of the arrangement between Gloxinia and the Council provided that upon completion of the construction of the residential units and upon registration of the applicable strata plan, Gloxinia would surrender its existing lease of the land and the Council would grant new strata-lot leases in respect of each of the individual residential units.

The Explanatory Memorandum to Tax Laws Amendment (2011 Measures No. 9) Act 2011 ('the EM to TLAB No. 9') includes an example which suggests that a developer undertaking of construction works, under a development lease arrangement similar to the arrangement between Gloxinia, makes supply of those construction works to the land owner. Furthermore, the example also suggests that the undertaking of the construction works by the developer also constitutes consideration for the ultimate freehold or long term leasehold supply of the completed premises to the developer.

Some members expressed concern that the outcomes suggested in the abovementioned example in the EM TLAB No. 9 are contrary to those that applied under the Commissioner's former public ruling 'GSTR 2008/2 - Goods and services tax: development lease arrangements with government agencies'. Former GSTR 2008/2 expressed the view that the undertaking of development works, by a developer, pursuant to the terms of a development lease did not constitute a supply or consideration as it was merely a condition of the lease granted to the developer.

Some members requested that the ATO make an amendment to GSTR 2006/9 and GSTR 2001/6 to explain the circumstances when the satisfaction of obligations imposed on a lessee under the terms of a long-term lease of premises constitute a supply by the lessee to the lessor and /or also constitute consideration for a supply by the lessor to the lessee at full GST inclusive market value. There is also a question of how to determine the market value of the relevant consideration.

The ATO stated that it has published its view in the Gloxinia Decision Impact Statement and withdrew the ruling GSTR 2008/2 which was found to be incorrect, based on the decision of the Full Federal Court in Gloxinia.

Some members disagreed with the ATO's view that the Full Federal Court's decision in Gloxinia meant that the reasoning for the substantive views in former GSTR 2008/2, including the view that the developer did not make supply of the development works to the government agency under the terms of a development lease arrangement, were not correct.

The ATO stated that the Commissioners view expressed in GSTR 2001/6 is still current, that is where one enters the obligation under a contract that has no economic value or independent identity, the obligation is not consideration in its own right.

1.10 Division 81 - ATO ID 2012/21 and 22

Presented by: Karin Collinson (by phone)

Issue: 9.26

As submitted by the Institute of Chartered Accountant in Australia.

Subject

Division 81 - ATO ID 2012/21 and 22

Issue

¦ What is the meaning of the word 'imposed' in the application provision for the amendment to Division 81? Does it mean becoming payable or is it the regulation that establishes the lawful charge?

¦ How does the application provision work for fees and charges established before 1 July 2012 but becoming payable after 1 July 2012 for fees listed in the last Div 81 determination.

¦ What is the ATO view as to when the carrying out of a public function (such as the hearing of disputes as in the case of the ATO IDs that one expects is not able to be carried out by the private sector) is an activity 'in the form of a business'?

¦ In the case of the activities in question in the ATO IDs, what is the 'supply for consideration' in question? It would seem that the function was not regarded as 'commercial' in the past because it was listed in the Div 81.

¦ How does the decision, in the ATO IDs, that there is a supply for consideration under the normal rules relate to the new provisions concerning appropriations that require the payer to conclude whether the appropriations and other consideration for the public service function will not exceed the costs of providing it. Is this relevant in determining when a government fee or charge is 'commercial' under Div 81?

Background

The original Division 81 of the Australian GST law deemed the payment of an Australian tax fee or charge imposed under an Australian law to be consideration for a (taxable) supply made by the government agency to which it was paid or payable.

But the Division empowered the Treasurer to specify by way of legislative instrument that the payment is not to be so deemed.

At the time of its drafting it seemed clear that the original Division was designed to overcome doubts that:

¦ Government charges may not be for a supply made by the Government (even where it might generally be referred to as being made under the 'user pays' principle)

¦ A compulsory statutory exaction, particularly one imposed under a taxation power, could be consideration at all.

The Explanatory memorandum to the 2011 amendments to Division 81 confirmed this, at least in part:

¦ 4.6 When the GST was introduced, the Commonwealth, states and territories agreed that the GST would apply to the commercial activities of government at all levels and that the non-commercial activities of government would be outside the scope of the GST.

¦ 4.20 Taxes are imposed as part of the general revenue raising activities of government and should not be subject to GST. Generally, taxes are not considered to be associated with a supply and are not subject to GST under the GST basic rules. However, given the expansive definition of 'supply' and 'consideration' contained within the GST Act, these amendments ensure all payments of taxes imposed under an Australian law will not be subject to GST at first instance.

The new Division 81 was explained in the Explanatory Memorandum to work as follows:

¦ A tax cannot be consideration for a supply unless it is specified to be so by way of regulations

¦ A fee or charge may be consideration for a taxable supply if:

¦  

– It is consideration for a supply under the general rules and is not specifically excluded under subsections (4) and (5) of the new section 81-10; or

– It is deemed to be consideration for a supply under the regulations.

¦ A fee or charge may be excluded from being consideration for a supply by way of regulations.

These new provisions took effect for taxes, fees or charges imposed on or after 1 July 2011.

But the amendments do not apply to taxes fees or charges imposed before 1 July 2012 that are covered by a Treasurer's determination under the old law - these remain free of GST. The amending Act specifies that 'a Division 81 determination continues to have effect, after the commencement of this item and before 1 July 2012.'

The Explanatory Memorandum explained the transitional provision as follows:

Those Australian taxes, fees and charges currently not subject to GST under the A New Tax System (Goods and Services Tax) (Exempt taxes, fees and charges) Determination 2011 (No. 1) will remain not subject to GST until 1 July 2012 and thereafter will be assessed under the changes made in this Schedule.

The 'grandfathering' provides that 'the amendments do not apply in relation to a payment, or a discharge of a liability to make a payment, relating to an Australian tax, or an Australian fee or charge, imposed before 1 July 2012', if the tax etc. is covered by a Treasurer's determination. But, the determination continues to have effect, only before 1 July 2012.

The two ATO IDs that were issued deal with 'daily hearing fees' charged by a State Tribunal for disputes between builders and householders in relation to a newly constructed domestic residence.

ATO ID 2012/21 covers the situation for a fee imposed before 1 July 2012 but covered by a Treasurer's determination.

In this case is the position that:

¦ Division 81 has no application to fees, imposed before 1 July 2011, but payable after 1 July 2012?

¦ If so, our question is whether the fee is consideration for a supply made by the Tribunal under section 9-5.

ATO ID 2012/22 covers the same fee but one that is imposed on or after 1 July 2012.

¦ The ID reasons that the fee is subject to GST - as follows:

¦ The new Division 81 applies because the fee is imposed on or after 1 July 2011

¦ It is not a 'tax' - but it is an Australian fee or charge

¦ The grandfathering provision in the amending Act does not apply because the fee is imposed on or after 1 July 2012

¦ The fee is 'Australian fee or charge'

¦ The payment is not covered either by subsection 81-10(4) of the GST Act, which is about permissions, exemptions, authorities or licences; or by subsection 81-10(5) of the GST Act which is about the provision of information

¦ The payment of the fee or charge is not covered by a regulation made under section 81-15 of the GST Act

¦ The fee or charge is not prescribed in a regulation made under subsection 81-10(2) of the GST Act which is about treating a payment as the provision of consideration.

¦ The fee is, under section 9-5, consideration for a taxable supply made by the Tribunal that is registered for GST

¦  

– There is a supply of services of hearing and resolving the dispute is a thing done in Australia

– The fee has a nexus with the supply of services and is 'consideration'

– The Tribunal carries out its activities 'in the form of a business'

– The supply is not GST-free or input taxed.

Note 2 to the ID explains the surprising reference in the ID to term 'in the form of a business' as follows:

For the purpose of applying the enterprise requirement in paragraph 9-5(b) of the GST Act, this ATO ID refers to the Australian government agency carrying on its activities 'in the form of a business'. Miscellaneous Tax Ruling MT 2006/1 The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number explains the meaning of 'form of a business'. An alternative provision that may apply is paragraph 9-20(1)(g) of the GST Act, which is about the activities of the Commonwealth, a State, or a Territory, or by a body corporate, or corporation sole established for a public purpose under a law of the Commonwealth, a State or a Territory. This provision also is explained in MT 2006/1.

Paragraph 9-20(1)(g) was designed to deal with the question of whether the activities of government agencies were within GST. There is, however, a fundamental point about whether government charges are consideration for a supply - this is the reason for Division 81 in the first place.

It seems reasonably clear that the fee charged for access to a State government tribunal to determine a dispute:

¦ is not consideration for the supply of a service under the normal rules

¦ the activities of the Tribunal are not of a commercial nature and so, are not within the policy of inclusion with the GST net - this is evidenced by the fact that the Treasurer listed them in the original determination.

Industry view/suggested treatment

The amendments to Div 81 and section 9-20 concerning appropriations - both of which confirm the policy intent that non-commercial activities of government are not to be subject to GST - means that the exiting ruling on supplies and consideration are not sufficiently well developed to deal with the provision of public services and the imposition of a statutory exaction.

The proposed revision of GSTR 2000/11 does not deal with these issues in a way that allows taxpayers to proceed with certainty.

While it seems clear that this difficult area is the reason that Div 81 was framed in the way it was, its amendment now gives rise to the need for a better examination of the difficult areas than is given by the two IDs.

Technical references

See above

Impact on taxpayers

See above

Priority of issue where ATO view is required

High

Has previous advice been sought from the ATO?

No

Has this issue been discussed at any other ATO consultative forum?

Consultation on amendments to Div 81 and 9-20(c).

ATO response

What is the meaning of the word 'imposed' in the application provision for the amendment to Division 81? Does it mean becoming payable or is it the regulation that establishes the lawful charge?

The amended Division 81 of A New Tax system (Goods and Services Tax) 1999 (GST Act) generally applies in relation to '…an Australian fee or charge imposed on or after 1 July 2012.' The Commissioner takes the view that the phrase 'imposed on or after' in the application provision refers to the transaction or circumstances of the payer that triggers the imposition of the liability on the payer, that is, it refers to the timing as to when the payer's liability for a particular fee arises.

ATO Interpretative Decisions 2012/21 and 2012/22 deal with the payment to an Australian government agency of a fee imposed before and after 1 July 2012 under Division 81 of the GST Act.

ATOID 2012/21 provides that where an Australian fee or charge is imposed after 30 June 2011 but before 1 July 2012 and is listed in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No.1) (Determination) then the fee will be excluded from being the provision of consideration for GST purposes.

On the other hand, where an Australian fee or charge is imposed after 1 July 2012, the Determination no longer applies so the fee is subject to the new Division 81 of the GST Act. Where this Division does not apply then the GST implications on that fee is assessed in accordance with the basic GST provisions.

This view is consistent with the statement in the relevant Explanatory Memorandum (at paragraph 4.12) that:

'Those Australian taxes, fees and charges currently not subject to GST under the A New Tax System (Goods and Services Tax) (Exempt taxes, fees and charges) Determination 2011 (No.1) will remain not subject to GST until 1 July 2012 and thereafter will be assessed under the changes made in this Schedule.'

How does the application provision work for fees and charges established before 1 July 2012 but becoming payable after 1 July 2012 for fees listed in the last Division 81 Determination?

2.1 Following on from the above explanation, it is relevant to determine when the payer becomes liable for the fee or charge. If this occurs on or after 1 July 2012, then the Determination does not apply so the fee or charge is subject to the new Division 81 of the GST Act.

What is the ATO view as to when the carrying out of a public function (such as the hearing of disputes as in the case of the ATOIDs that one expects is not able to be carried out by the private sector) is an activity 'in the form of a business'?

The phrase 'in the form of a business' under section 9-20 of the GST Act is discussed in Miscellaneous Taxation Ruling MT 2006/1 at paragraphs 170 and following. Amongst other things, the ruling observes that 'The definition clearly includes a business and the use of the phrase 'in the form of' indicates a wider meaning than the word 'business' on its own.' For instance, the Commissioner considers that a non-profit body may carry on its activities in the form of a business even if not all of the main features of a business are present. This is explained in paragraph 170 of MT 2006/1.

The recent ATOID 2012/22 concerns a Tribunal established under a State Act of Parliament. The focus of this ATOID is whether a payment of the daily hearing fee, to an Australian government agency, imposed after 30 June 2012 is consideration for a taxable supply. The Tribunal is registered for GST and carries on its activities in the 'form of a business'. The use of the phrase 'form of a business' in this context is under the heading of 'facts' and was simply included in the context of confirming that the Tribunal is an entity carrying on an enterprise for GST purposes and is registered for GST.

The Commissioner is not seeking in the ATO ID to provide an ATO view on the issue of whether a Tribunal carried on its activities in the form of a business. We note that where paragraph 9-20(1)(g) of the definition of enterprise applies, it is unnecessary to determine whether the activity is in the form of a business and we have no ATO view specifically on when the carrying out of a public function is in the form of a business.

To avoid any misunderstanding that the ATOID is seeking to give a view about what is in the form of a business, we will be amending the relevant facts to state that the activities done by the Tribunal satisfy the requirements of an enterprise under the provisions of paragraph 9-20(1)(g) of the GST Act.

In the case of the activities in question in the ATOIDs, what is the 'supply for consideration' in question? It would seem that the function was not regarded as 'commercial' in the past because it was listed in the Division 81 Determination.

Both ATOIDs 2012/21 and 2012/22 concern a payment of a daily hearing fee for a dispute to be heard and resolved by an Australian government agency, the Tribunal. The fee is calculated based on the number of days the matter is heard by the Tribunal. It is a 'user pays' fee and is intended to recoup the costs that the Tribunal incurs in hearing and resolving a dispute.

In hearing and resolving a dispute, the Tribunal is providing a service to the applicant. The Tribunal therefore makes a supply of service to the applicant. As such the daily hearing fee payable by the applicant is consideration for the supply of service provided by the Tribunal in accordance with section 9-15 of the GST Act, which defines consideration to include any payment, or any act or forbearance, in connection with a supply of anything.

ATOID 2012/21 then provides that as the fee is imposed before 1 July 2012 and is listed on the Determination, it is not subject to GST.

The explanatory statement to the Determination states that an Australian tax, fee or charge may be listed on the Determination based on the following principles:

¦ taxes that are in the nature of a compulsory impost for general purposes and compulsory charges by the way of fines or penalties will be exempt from GST;

¦ regulatory charges that do not relate to particular goods or services will be exempt from GST including:

¦  

– fees and charges levied on specific industries and used to finance particular regulatory or other activities in the government sector; and

– licences, permits and certifications that are required by government prior to undertaking a general activity.

A fee or charge that is listed on the Determination is exempted from GST.

As from 1 July 2012 the Determination no longer applies and any Australian fee or charge will be assessed in accordance with the new Division 81 of the GST Act.

Under the new Division 81 of the GST Act a payment, or the discharging of a liability to make a payment, is not the provision of consideration to the extent the payment is an Australian fee or charge that:

¦ relates to or relates to an application for the provision, retention or amendment of a permission, exemption, authority or licence as outlined in subsection 81-10(4) of the GST Act

¦ relates to information and record keeping as specified in subsection 81-10(5).

Furthermore, the regulations may provide that the payment of a prescribed Australian fee or charge, or the discharging of a liability to make such a payment, is not the provision of consideration (section 81-15). Currently there are no regulations under section 81-15 of the GST Act for the payment, or the discharging of a liability to make a payment, of any such fees or charges. This means for the daily hearing fee to be exempt from GST, it must fall within the scope of subsections 81-10(4) and 81-10(5) of the GST Act.

In applying subsections 81-10(4) and 81-10(5) of the GST Act to the daily hearing fee, ATOID 2012/22 explains that such fee is not a fee or charge that relates to or relates to an application for the provision, retention or amendment of a permission, exemption, authority or licence. Similarly, the hearing fee does not relate to the provision of information listed in subsection 81-10(5) of the GST Act. In addition, there is currently no regulation that provides that the daily hearing fee payable to the Tribunal for the hearing and resolving of a dispute is not 'consideration'. As a result, the daily hearing fee does not fall within the scope of the new Division 81 of the GST Act. This means the GST implications of such a fee are determined by reference to the general GST provisions concerning supply and consideration.

As the daily hearing fee is a payment for the Tribunal's service in hearing and resolving the dispute, it is consideration for a supply of service in accordance with section 9-15 of the GST Act.

How does the decision, in the ATOIDs, that there is a supply for consideration under the normal rules relate to the new provisions concerning appropriations that require the payer to conclude whether the appropriations and other consideration for the public service function will not exceed the costs of providing it. Is this relevant in determining when a government fee or charge is 'commercial' under Division 81?

5.1 In relation to the GST treatment of payments made under an appropriation, there have been proposed changes which, if enacted, would mean that non-commercial activities of government related entities (GREs) will not be subject to GST.

5.2 The proposed amendment provides that a payment will not be the provision of consideration if:

¦ the payments is made by a GRE to another GRE; and

¦ the payment is covered by an appropriation under an Australian law, or is made pursuant to the National Health Reform Agreement or an agreement to implement the National Health Reform Agreement; and

¦ the payment satisfies a non-commercial test.

The proposed non-commercial test will only be relevant to determining whether a payment is not consideration under proposed section 9-17. The proposed test, if passed, will not be relevant to the circumstances dealt with in the ATO IDs. The new Division 81 does not contain a similar 'non-commercial' test.

In ATOIDs 2012/21 and 2012/22, the payment of a daily hearing fee is for the Tribunal's supply of service in hearing and resolving the matter. The facts state that the fee is calculated based on the number of days the matter is heard and that it is a 'user pays' fee intended to recoup the costs that the Tribunal incurs in hearing and resolving a dispute. However, in stating that the fee is 'intended to recoup the cost', the Commissioner does not imply a 'non-commercial' test to assess whether the fee being charged is more than the cost incurred by the Tribunal in making the supply.

In applying the new Division 81, the Commissioner must consider whether the hearing fee falls within the scope of subsections 81-10(4) and (5) and whether there are any regulations that exempt the fee from being consideration for a supply.

As subsections 81-10(4) and (5) do not apply to the payment for the hearing fee and currently there are no regulations that exempt the fee from being consideration, the GST implication on such fee is assessed in accordance with the general GST provisions of taxable supply and consideration.

Meeting discussion

In the response provided, the Commissioner says that imposition refers to the transactional circumstances of the payer which trigger the imposition of the liability. Members stated that if that was the intention, the law would have been phrased differently, further stating that the provisions refer to fees and charges imposed in the sense of under an Act or Regulation and the Commissioner ought to adhere to that meaning.

There was discussion about the way in which the Commissioner is interpreting the term imposed in this application provision and members advised that they consider the Commissioner's interpretation constitutes a risk, given the other meaning which is available.

Following on, members queried the premise of a tax that is imposed being payable, as taxes are imposed under an Act, however said that the view could be different for fees and charges. There was discussion whether there was a difference between when a thing that triggers the tax arises and when it is payable.

Members suggested that the response provided to Issue 1 of the submission be incorporated into a ruling.

In relation to the question regarding the activity of the Tribunal being in the form of a business, members requested for the Commissioner to explain in published form the meaning of 'anything done in the form of a business.'

The ATO re-iterated that this is discussed in Miscellaneous Taxation Ruling MT 2006/1 and, as stated in the response there was no intention to provide a view on the issue of whether a Tribunal carried on its activities 'in the form of a business' in these ATO IDs

Further in relation to these ATOIDs, members commented on the response provided which stated that the Tribunal is providing a service of hearing the case and referred to the current Treasury exposure draft that specifically provides that a statutory charge for access to the justice system is not subject to GST. There was further discussion about consideration for a supply and that courts have always identified the legal rights and obligations obtained in relation to the provision of the consideration. Members stated that the ATO IDs should be withdrawn or revised as they were confusing and suggested that the Commissioner clarify the Division 81 taxes, fees and charges that are subject to GST and those that are not in line with the explanatory statements that exclude non-commercial activities of Government.

In relation to these issues generally, members were advised that the ATO was looking at what further guidance is required in the market and at a minimum will be amending the 2nd ATO ID irrespective of the outcome of the consideration of the draft regulations. If the draft additional regulations are registered the ATO will be issuing guidance regarding these. In relation to providing guidance products, members requested the ATO to look at what other governments have done in the context of what government related payments are subject to tax.

Members were of the opinion that there were some particular things that government does and the ATO should be able to publish a view on nexus, connection and whether it constitute a supply in the government context. It was stated that either the technical issues needed to be bedded down which would take the pressure of the regulations or there should be a reversion to the determination approach.

In relation to the ATO IDs, the ATO had decided at the time that it would provide guidance only on specific scenarios as it anticipated new regulations may be introduced. However, consideration is being given to the need for further guidance products and what form they might take eg by putting specific types of fees and charges in fact sheets thus providing as much certainty as possible.

Post meeting update

On 28 June 2012, new regulations were made for the purposes of Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The regulations, in conjunction with the provisions of Division 81 of the GST Act, provide a mechanism for entities to determine the GST treatment of Australian taxes, fees and charges. In addition, the regulation extends the operation of the A New Tax System (Goods and Services Tax) (Exempt taxes, fees and charges) Determination 2011 (No. 1) until 30 June 2013.

The new regulations are available from Comlaw.gov.au .

Regulation that will result in payments of certain fees and charges being consideration for a supply:

Paragraph 81-10.01(f), in relation to information has been replaced and two new additional paragraphs inserted.

(f) a fee or charge for the provision of information by an Australian government agency if the provision of the information is of a non-regulatory nature

(g) a fee or charge for a supply of a non-regulatory nature

(h) a fee or charge for a supply by an Australian government agency, where the supply may also be made by a supplier that is not an Australian government agency.

Sub-regulation 81-10.01(2) provides that where a payment of a fee or charge in sub-regulation 81-10.01(1) is also covered by subsection 9-17(3) or (4) of the GST Act (which is about appropriations), the payment will not be consideration for a supply.

Regulation that will result in payments of certain fees and charges not being consideration for a supply:

Sub-regulation 81-15.01(1) has been inserted in respect of payments of fees and charges that will not be consideration (for ease of reference, these payments are referred to as being 'exempt from GST'):

(a) a fee or charge for:

(i) the kerbside collection of waste; or

(ii) the supply, exchange or removal of bins or crates used in connection with kerbside collection of waste

(b) royalties charged in relation to natural resources

(c) a fee or charge imposed on an industry to finance regulatory or other government activities connected with the industry

(d) a fee or charge to compensate an Australian government agency for costs incurred by the agency in undertaking regulatory activities

(e) a fee or charge imposed in relation to a court, tribunal, commission of inquiry or Sheriff's office

(f) a fee or charge for a supply of a regulatory nature made by an Australian government agency

(g) a fee or charge for entry to a national park

(h) any other fee or charge imposed before 1 July 2013 and specified in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2011 (No. 1) (last determination) as in force immediately before the commencement of Schedule 4 to the Tax Laws Amendment (2011 Measures No. 2) Act 2011.

Tiebreaker rules

Some payments of fees and charges may be covered by both regulation 81-10.01 and 81-15.01. Where both these regulations apply, regulation 81-15.02 provides the following tiebreaker rules:

If the payment of the fee or charge is covered by the Treasurer's determination for Division 81 - the payment will continue to be exempt from GST where it is imposed before 1 July 2013.

If the payment of the fee or charge is covered by both sub-regulation 81-10.01(1) (other than paragraph 81-10.01(1)(g)) and sub-regulation 81-15.01(1) - this will be consideration for a supply.

If the payment of the fee or charge is covered by both sub-regulation 81-15.01(1) and paragraph 81-10.01(1)(g) - this will be exempt from GST.

Treatment of taxes, fees and charges under amended Division 81 and regulations.

Under the extended grandfathering provisions, taxes, fees and charges currently listed on the Treasurer's Determination will continue to be exempt until 30 June 2013.

Taxes, fees and charges must be self assessed under the amended Division 81 with reference to the regulations that are applicable to the relevant period, as outlined below:

For payments of new taxes, fees and charges not listed in the Treasurer's determination:

¦ which were imposed in the period 1 July 2011 to 30 June 2012 - in accordance with Division 81 and the regulations that commenced on 1 July 2011

¦ which were imposed from 1 July 2012 - in accordance with Division 81 and the consolidated regulations that apply from 1 July 2012.

¦ For payments of taxes, fees and charges listed in the Treasurer's determination:

¦  

– these will be exempt from GST until 30 June 2013.

¦ From 1 July 2013 government agencies must self assess the GST status of all taxes, fees and charges - in accordance with Division 81 and the consolidated regulations that apply from 1 July 2012.

Entities should review their systems, processes and documentation to ensure that the payment of taxes, fees and charges is treated correctly in accordance with Division 81 and the regulations.

[Note: Taxes, fees and charges imposed by Australian government agencies before 1 July 2011 were exempt only if they were listed in the Treasurer's Determination.]

Changes are being made to www.ato.gov.au/division81 to provide further information and reflect the new regulations.

1.11 Clean energy measures - GST implications

Presented by: Pauline Zdjelar

Issue: 12.32

This agenda item is to provide members with an overview of the Clean energy measures - GST implications subject.

Meeting discussion

The ATO presented the GST implications of the Clean energy measures.

Members asked if the ATO would be publishing a matrix that shows the main types of units and the GST treatment. It was stated that there would be a number of different types of units that will be registered on the register that will be taxable and fall outside the GST-free. Eligible units will be GST-free.

Members raised concerns with the application to derivatives and futures which are going to be input taxed. There was discussion around input taxed treatment under items 7 and 8 and the possible outcomes for GST purposes.

Action item	2012.06.08
Description	Eligible units and their tax treatment ICAA to provide the ATO with a matrix of the various eligible units and their tax treatment for consideration and publication.
Responsibility	ICAA
Due date	12 September 2012
Action item	2012.06.09
Description	Links to clean energy overview material. The ATO to provide links to the website for the overview material for Income Tax and GST.
Responsibility	ATO
Due date	12 September 2012

1.12 Action items

Presented by: Tony Long

Issue: 17.1

NTLG GST Sub-committee - responses to action items coming out of the 21 March 2012 meeting.

Action item	Details of item
2011.12.03	Publishing draft indirect tax sharing agreement guidelines. The ATO to consider whether it is appropriate to publish the draft guidelines on the website to make them more accessible. Carried forward from December 2011; agenda item 5.

Response

We have received some comments on the guidelines on 15 May 2012. We have considered those comments and the guidelines are currently being cleared for publication. It is expected the guidelines will be published towards the end of June 2012.

Action item	Details of item
2011.12.08	Circulation of draft practice statement on 'Preserving the status quo'. Secretariat to circulate the draft practice statement to members when Commissioner sign-off is received. Carried forward from December 2011; agenda item 11.

Response

A link to PS LA 3521 (draft) - Treatment of input tax credits claimed by a recipient where the Commissioner does not give a refund to the supplier due to the operation of section 105-65 of Schedule 1 to the Taxation Administration Act 1953 - was emailed to the members of the NTLG GST Sub-committee on 12 April 2012.

Any comments on the draft will be considered as part of the preparation of the final version of the LAPS which, being a LAPS (GA) will be sent to the Commissioner for approval.

Action item	Details of item
2012.03.01	MT 2010/1 and section 105-65 of the TAA. Members to provide comments on the draft of changes proposed by way of addendum to MT 2010/1 to John Gleeson at john.gleeson@ato.gov.au by 4 April 2012. Refer to agenda item 3. Secretariat's note: Please note that the deadline for comments has been extended to Friday, 4 May 2012.

Response

Member comments on the draft changes to MT 2010/1 were received on 11 May 2012. We are currently considering those comments. We will publish final changes as an addendum to MT 2010/1.

Action item	Details of item
2012.03.02	Cancellation of GST registration Members to contact Tom Wheeler if they have details of particular cases where they think the correct processes have not been followed. Refer to agenda item 6.

Response

One case example was received and subsequently reviewed. As only one response was received it is not possible to draw any conclusions about any systemic issues that may be emerging in this work.

Action item	Details of item
2012.03.03	Maintenance of the ABR The Assistant Registrar of the ABR to provide advice on how often synchronisation occurs between the ABR and ASIC records. Refer to agenda item 7.

Response

The ABR and ASIC synchronise each time a client registers for an ABN and is also an ASIC registered company. The ABR validates the Australian Company Number and Name of the company as part of the evidence of identity checks for ABN. This occurs on line and in real time.

Following the Business Name release on 28th May 2012, there will an increased synchronisation. ASIC will synchronize with the ABR to validate the ABN or the ABN reference number prior to a client submitting a Business name application. ASIC will automatically update the ABR when a Business Name is registered. This will include all entity types who hold or are applying for an ABN. This service will also be on line and in real time.

Action item	Details of item
2012.03.04	Maintenance of the ABR The Assistant Registrar of the ABR to provide advice on how often the status of incapacitated entities is updated in the ABR. Refer to agenda item 7.

Response

Cancellation of an ABN for a De-registered company can happen in two ways:

¦ either the client advises the ABR to cancel the ABN or

¦ the Registrar acts on information received from ASIC

The total number of Companies that have been cancelled in the last two years follows.

¦ 2010/11 - 75,119

¦ 2011/12 - 24,953 (YTD@29/4/12)

There is currently no automatic on line process to cancel an ABN once ASIC has deregistered the company. There are a number of reasons for this and these include our ability to separate deregistrations for administrative purposes (eg fees not paid or late), which may be temporary, from other deregistrations which are more likely to be permanent.

There is also activity that occurs in relation to tax obligations and wind up action while the client and the ATO finalise the accounts. It is a requirement the ABN remains active for this period in order to finalise BAS and other obligations.

Data in relation to other updates to registrations is not available.

Action item	Details of item
2012.03.05	Managed funds Ian Read & Steve Howlin to contact Bill Packwood to discuss issues around managed funds. Refer to agenda item 8.

Response

The relevant discussion has taken place. The issue concerns refund check enquiries in relation to managed funds. The ATO is looking into the matter, and if it has broader application will revert to the NTLG.

Action item	Details of item
2012.03.06	GST-free going concerns - draft ATO ID. Kasey Macfarlane to take the feedback into account and circulate a revised version of the ATO ID to members for comment prior to publication. Refer to agenda item 10.

Response

The revised ATO ID about GST-free going concerns was circulated to members on 9 May 2012. The ATO has considered Member responses and is in the course of publishing a final version.

Action item	Details of item
2012.03.07	The Leighton case Andrew Orme to check whether the Leighton case has any implications for GST. Refer to agenda item 15.

Response

Members asked whether the Full Federal Court decision in Leighton v FCT [2011] FCAFC 96 case has any relevance for GST purposes.

In that case, the Court concluded that income was not subject to Division 6 of Part III of the Income Tax Assessment Act 1936, because as a matter of fact it was derived by two companies beneficially. The income already derived was then held on trust. Therefore, it was concluded that the income was properly income of the two companies, and not income of the trust estate.

We have considered whether the decision may impact on any ATO views in respect of GST matters. We have considered generally the views in MT 2006/1 concerning entity and enterprise, and those in GSTR 2008/3 concerning dealings in real property by bare trusts, but consider that the decision has no impact on these rulings.

Action item	Details of item
2012.03.08	Refunds post Multiflex James O'Halloran to provide information out of session around our audit/compliance activities regarding refunds post Multiflex. Refer to agenda item 16.

Response

In response to members query whether there was an increase in audit activity since Multiflex at the March 2012 NTLG GST Sub-committee meeting.

Overall, the total number of refund cases performed in 2011/12 is less than previous years.

More specifically:

¦ the number of refund audits for the December 2011 to March 2012 period are less than the same period in previous years

¦ for December 2011, audit numbers are high for the month. This was due to the clearing of backlogs.

The months of February and March 2012 in particular show significant declines in audit numbers when compared to previous years.

1.13 Finalised issues and removal of matters

Presented by: Tony Long

Issue: 17.6

It is proposed that the issues listed below be removed from the issues list, for the reasons stated.

No	Issue	Removal Reason
1.42	GST- free going concern	The revised ATO ID about GST-free going concerns was circulated to members on 09 May 2012. The ATO has considered member responses and is in the course of publishing a final version.
1.64	Section 105-65 and margin scheme refunds	The ATO has circulated to NTLG members for comment a draft of proposed changes to MT 2010/1 to take account of the decision in International All Sports
4.7	Cancellation of GST registration	One case example was received and subsequently reviewed. As only one response was received it is not possible to draw any conclusions about any systemic issues that may be emerging in this work
11.20	Preserving the status quo policy - PLSA 2002/12 and MT 2009/D1	The new practice statement has been published in draft. Any comments that are received will be considered as part of the preparation of the final version of the LAPS which, being a LAPS (GA) will be sent to the Commissioner for approval.
12.28	Escalating an audit/review issue prior to assessment	The relevant discussion has taken place. The issue concerns refund check enquiries in relation to managed funds. The ATO is looking into the matter, and if it has broader application will revert to the NTLG.
12.29	Quality assurance (QA) in ATO Audit / BAS Review / Refund Integrity in SME sector	Discussion has taken place at the meeting on 21 March 2012. No action items arose from the meeting discussion.
13.42	International All Sports v Commissioner of Taxation [2011] FCA 824 - various issues including refunds	A submission received from ICAA in January 2012 that related specifically to the need to re-write MT 2010/1 and more generally to whether the DIS or the public ruling is to be followed pending amendments to the public ruling. No action items arose from the meeting discussion. Draft changes to MT 2010/1 have been circulated to members.
13.46	The application of the four year rule in section 105-50 of Schedule 1 of the TAA to Commonwealth Government Departments	A submission was received from the TTI on 9 February 2012 and included as an agenda item for discussion at the meeting on 21 March 2012. No action items arose from the meeting discussion

Meeting discussion

These issues were dealt with by exception.

No issues or other matters were raised by the members.

1.14 Tax Issue Entry System (TIES)

Presented by: Tony Long

Issue: 17.7

This is a standing agenda item to allow discussion about issues that may be appropriate for including on TIES.

Meeting discussion

The ICAA suggested a TIES item to change 29-70(1)(b) to allow the ATO discretion for classes of documents.

The ATO would consult with the officers dealing with the tax invoice issue and would inform members of the outcome.

1.15 Top 3 significant issues

Presented by: Tony Long

Issue: 17.8

This is a standing agenda item to include discussion about the top 3 significant issues coming out of the meeting. These significant issues will be reported to the NTLG.

After discussing the top 3 significant issues at the 21 March 2012 sub-committee meeting, members noted the following items of significance for reporting to the NTLG:

¦ The proposed changes in the ATO's approach to the ruling on tax invoices

¦ Finalisation of the indirect tax sharing agreement guidelines

¦ Refund administration following the Multiflex decision.

Meeting discussion

The members nominated the following top 3 significant issues for the June meeting:

¦ Tax invoices

¦ Trustee Services

¦ Division 81.

1.16 New ruling topics

Presented by: Tony Long

Issue: 17.9

This is a standing agenda item to include discussion about new potential ruling topics with a view to referring any topics identified to the NTLG Public Rulings Steering Committee.

Meeting discussion

¦ Members suggested that there may need to be a ruling on when undertaking obligations gives rise to a taxable supply. Members suggested that this could be impacted by the High Court Qantas decision, and further consideration given to this topic when the decision is handed down.

¦ Members noted that the appropriations ruling needs to be updated.

¦ Members suggested that consideration should be given to whether there should be a ruling in relation to the GST implications of carbon pricing and emissions units.

1.17 General business

Presented by: Tony Long

Issue: 17.2

This is a standing agenda item to allow members to raise matters regarding updates provided with the meeting papers or other matters of concern or general interest to members.

As noted during the meeting discussion at agenda item 2, the following late submission was lodged by the Law Council of Australia.

Subject

Implementation of Trustee Services Amendments to the GST Regulations.

Issue

¦ The GST Regulations were amended on 24 May with effect from 1 July 2012 changing the eligibility of certain acquisitions for RITCs and the rate of those RITCs

¦ There are 2 sets of issues for the ATO in relation to the implementation of these amendments:

¦  

– administrative concessions during the period of implementation; and

– administrative guidance in relation to implementation

¦ Affected industries are likely to require a substantial period of time to ensure that their systems are compliant with the new rules

¦ Compliance with the new rules is made more difficult because of the inherent ambiguity associated with the terms of the new rules.

¦ It is expected that because of the short period allowed for implementation there will be widespread non-compliance with the new regulations.

Background

The A New Tax System (Goods and Services Tax) Amendment Regulation 2012 (No.1) (Amendment Regulations) contain a number of measures relating to the operation of the RITC regime. In particular, the amendments proposed by Items [7] - [9] of the Amendment Regulations implement changes to counter the perceived benefits of 'bundling' a variety of different services within a single supply of 'trustee services' in order to expand an entitlement to RITCs (Trustee Services Amendments).

The changes effected by the Amendment Regulations apply from 1 July 2012. However, Item 32 (introduced by the Amendment Regulations) will only apply to the extent that 'supplies are acquired on or after 1 July 2012'.

The effect of the Trustee Services Amendments, in broad terms, is that:

¦ the recognised trust scheme will be entitled to RITCs at the rate of 55% instead of 75% for acquisitions of trustee services from 1 July 2012.

¦ the recognised trust scheme will continue to be entitled to RITCs at the rate of 75% for acquisitions that are excluded from Item 32.

This will require the administrators of recognised trust schemes:

¦ to correctly identify the extent to which acquisitions will be made after 1 July 2012 under ongoing arrangements spanning that date without the benefit of any specific time of supply (acquisition) rules under the GST law.

¦ to correctly identify those acquisitions that will give rise to a 55% RITC and those that will give rise to a 75% RITC and to correct allocate an undivided consideration between those 2 classes of acquisitions.

¦ ensure that the correct net cost of acquisitions is passed on to investors in the recognised trust schemes.

¦ ensure that all disclosure material to investors is complied with in relation to the passing on of the net cost (GST inclusive cost less RITCs) of acquisitions. In some cases, there will be a shortfall between the net cost which can be passed on to investors and the actual net cost of the acquisition as a result of the Trustee Services Amendments. This will give rise to the need for an additional contribution to be made to the recognised trust scheme in a manner that is not immediately apparent.

Industry suggested treatment

Assistance for the financial services industry is sought from the ATO in relation to:

¦ the provision of guidance which allows for grandfathering of existing arrangements to counter the problems associated with determining the extent to which acquisitions are made after 1 July 2012. This is considered necessary because the approach taken in the regulations (determination of the date an acquisition is made) has no mechanism in the GST law to provide guidance and certainty to taxpayers.

¦ the provision of safe-harbours on apportionment which recognise that the bulk of acquisitions made in the context of managed investment schemes, superannuation schemes and the like involve the management of investment assets and therefore would continue to give rise to RITCs at the rate of 75%.

Specific questions on which the ATO's views are sought include:

¦ Has the ATO formed a view on transitional arrangements for the commencement of these regulations? When will the ATO's views on transitional arrangements be communicated?

¦ What is the ATO's reasonable expectation as when binding advice is able to be issued on the operation of these regulations? Would such advice take effect from date of issue?

¦ Will the ATO be able to issue private binding rulings on the operation of these regulations within the standard timeframes? Given that one legal person may be responsible for accounting for the GST consequences of a large number of GST entities, does the ATO have a view on a simpler and more efficient means by which private binding rulings can be issued to ensure the legal person acting as trustee can discharge its fiduciary duties in respect of those various trusts without having to seek a separate ruling in respect of each trust?

¦ In the period prior to binding advice being available to be relied on by taxpayers (and during which period taxpayers will be required to lodge returns applying these regulations) what forms of assurance/advice/guidance will the ATO accept as being reasonable for taxpayers to rely upon?

¦ references

¦ regulations

¦ on clients

¦ described above

¦ of the issue if an ATO view is sought

Given the timeline for implementation of the amendments, guidance is sought from the ATO on an urgent basis.

Has previous advice been sought from the ATO?

The ATO has been involved in industry consultation during the period leading up to the final amendments being released.

Has this issue been discussed at any other ATO consultative forum?

It is understood that the Financial Services Council has raised these issues with the ATO during industry consultation.

Meeting discussion

Members stated that the regulations were signed on 24 May, released on 29 May and commenced from 1 July. The concern in relation to those amending regulations is the impact they have on heavily regulated industry that will be claiming the RITC's. The issue is being able to comply by 1 July which is a very short timeframe. Apart from tax compliance there are Corporations Act compliance issues, such as the obligations that trustees have to their investors. For example trustees need to disclose fees net of any reduced input tax credit claims, and reflect this in the prices of units. Another issue is the implementation of system changes to get the right allocation between 55% and 75% credits by 1 July.

Members stated that the operation of the regulations rely on the concept of the time at which an acquisition is made and needed transitional guidance in relation to when an acquisition would have been acquired pre and post 1 July 2012. Members also requested that safe harbours on apportionment be provided. Members sought timely guidance from the ATO to meet their obligations of not only getting the BAS correct but more broadly breaches of duties to investors and breaches of the Corporations Act given the short time for implementation.

The ATO in response stated that they were fully aware of the circumstances that the industry faced to ensure compliance with the provisions from 1 July and to mitigate the tax risk and the unit pricing risk. The ATO has commenced consultation around implementation and have engaged with the Financial Services Council where some further detail has been provided in relation to the transitional issues. The ATO is proposing to gather sufficient information on what has been considered the most important and essential questions that require a view from the Commissioner. The ATO stated that it will publish its preliminary view, which will not be binding, in a question and answer format and circulate it to members and attach the same as an appendix to the meeting minutes. The ATO will build on the issues with the aim to issue a public ruling. It was also stated that affected taxpayers who follow the advice will not be subject to compliance activity and any change in view would be applied prospectively.

Members were invited to put forward the issues the industry requires advice on and to get the Commissioner's preliminary view. The ATO provided a list of issues that had already been identified eg the time of acquisition, including in respect of trailing commissions, apportionment of single fee services into 55% and 75% RITCs, financial adviser services in relation to IDPS and wrap platforms and sub trusts and GST grouping. There was further discussion on the issue of trailing commissions and the ATO stated that it was looking for documentation that would enable it to form a conclusion.

Action item	2012.06.10
Description	Trustee services issues requiring provision of guidance by the Commissioner. The ATO to provide the list of issues that have been identified that require the provision of guidance by the Commissioner. Members to provide feedback on the list circulated and raise any additional issues that need to be addressed.
Responsibility	ATO
Due date	12 September 2012
Action item	2012.06.11
Description	Changes to GST Regulations impacting on 'trustee services'. The ATO to publish a preliminary view in the form of a questions and answers document, circulate it to the members and incorporate it as an appendix to the minutes of the meeting.
Responsibility	ATO
Due date	12 September 2012

^[H20]Future meeting dates

Presented by: Tony Long

Meeting schedule for 2012

¦ Wednesday, 12 September 2012
Australian Taxation Office
Large Conference Room, 6th Floor
6 Gladstone Street, Moonee Ponds

¦ Wednesday, 5 December 2012
To be hosted by the ICAA in Sydney

^[H21]Attachments

Attachment 1

Action item	Details of item
2012.06.10	Trustee services issues requiring provision of guidance by the Commissioner. The ATO to provide the list of issues that have been identified that require the provision of guidance by the Commissioner. Members to provide feedback on the list circulated and raise any additional issues that need to be addressed.

The following update was circulated to members on 15 June 2012.

Dear Members

Following on the request at the NTLG GST Sub-Committee meeting of 13 June 2012, in the context of the abovementioned, we have identified the following issues that require the provision of guidance by the Commissioner: 

¦ Guidance on the principles to apply in determining whether an arrangement, spanning 1 July 2012, consists of a supply acquired on or after 1 July 2012

¦  

– industry consultation has identified that the main issue in this context surrounds the characterisation of the supply made in relation to the payment of trailing commissions (as to when such a supply is acquired where the payment of commissions span 1 July 2012)

¦ Guidance on the principles to apply in determining when it is necessary to 'unbundle' an acquisition into its constituent parts in order to determine the correct amount of reduced input tax credit (RITC) entitlement under item 32

¦  

– the principal example involves the treatment of trustee / responsible entity (RE) services that are currently viewed as a single supply. Such arrangements may incorporate separate and distinct components that qualify as carve-outs from the operation of item 32. In this regard, industry participants have sought confirmation that marketing / advertising / promotion / capital raising / commission costs (incurred by the trustee / responsible entity in their personal capacity) should not be 'unbundled' as they are considered to represent inputs into the trustee / RE service (rather than separate and distinct components of such a service)

– more generally the 'unbundling' issue will arise in terms of every acquisition made from a third party supplier.

¦ Guidance on the apportionment principles to apply in circumstances where a single fee is charged for a trustee / RE service that is capable of being 'unbundled' into separate and distinct components that give rise to RITC entitlements at the 55% and 75% rates.  Essentially, industry participants are seeking confirmation on what the Commissioner considers to be a fair and reasonable method to apportion the single fee against the 55% and 75% rate components (assuming that such arrangements don't involve separate and distinct acquisitions covered by item 32(b)(i)). Presently, industry consultation has identified the following apportionment options

¦  

– the use of an 'inputs' method (this option is heavily dependent on the call made in relation to treatment of various inputs - as discussed above)

– the use of a 'benchmarking' method to identify the arms-length value of investment portfolio management / administration / trustee components

¦ Guidance on the treatment financial adviser services supplied in the context of investor directed portfolio service (IDPS) / wrap platform arrangements, as to who makes the acquisition, and where the acquisition is made by a recognised trust scheme, whether the acquisition qualifies as a carve-out from the operation of item 32

¦ Guidance on whether controlled or partly owned sub-trusts of a head trust (that is itself an managed investment scheme (MIS) is 'part' of an MIS for the purposes of the operation of item 32

¦ Guidance on the impact or otherwise of the Grouping rules on the operation of item 32.

Members are requested to provide feedback whether the above covers the matters that need to be addressed through the provision of a preliminary view by the Commissioner. If not, details of the additional issues that need to be addressed (together with relevant documentation that would assist the Commissioner to express a preliminary view on the issue).

Please forward your comments to:

Due date: 21 June 2012
Contact officer: Rodney Dunn
email address: Rodney.Dunn@ato.gov.au  
Telephone: (03) 9275 9796

Attachment 2

Action item	Details of item
2012.06.11	Changes to GST Regulations impacting on 'trustee services'. The ATO to publish a preliminary view in the form of a questions and answers document, circulate it to the members and incorporate it as an appendix to the minutes of the meeting.

The following update was circulated to members on 2 July 2012.

Dear Members

The update below is for your information and distribution to your members.

Following the request at the NTLG GST Sub-Committee meeting of 13 June 2012, in the context of the Implementation of Trustee Services amendments to the GST Regulations and in recognition of the short timeframes taxpayers have to implement changes arising from the commencement of item 32 from 1 July 2012, the ATO has prepared guidance on issues raised by industry in the form of questions and answers.

The document attached below is not a public ruling under Division 358 of Schedule 1 to the Taxation Administration Act 1953.

Please note: The document embedded in the email circulated to members on 2 July 2012 is reproduced below for your convenience.

If you have any queries about the Questions and Answers, please contact Andrew Ditchfield by:

email: Andrew.Ditchfield@ato.gov.au

Phone: (03) 9215 3546

Fax: (03) 9215 3440

Note - if a copy of the document referred above to is required, please contact the Secretariat at NTLGGSTSubcom@ato.gov.au.