Edited version of private ruling

Authorisation Number: 1011740083360

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: GST and registration

Question

Were you required to be registered for GST on a specified date (the specified date)?

Answer

Yes.

Relevant facts and circumstances

You are an independent contractor and carry on a specified enterprise.

You registered for GST a number of years ago.

On the specified date, you cancelled your GST registration based on the advice that you received.

You stated that you believed that your projected turnover for the financial year ended 30 June 20XX was under $75,000.

On preparation of your income tax return for the financial year ended 30 June 20XX, your turnover was found to be over the GST registration threshold. You provided details of the supplies made during each month of the financial year ended 30 June 20XX.

You did not provide details of the supplies made after 30 June 20XX.

You stated that the consideration for the above supplies were all received within one week of invoicing.

During the financial year ended 30 June 20XX, you provided your services to a few specified recipients.

All the agreements made with the recipients are verbal and on a project by project basis. The scope of the services is discussed before each project and varies between projects. The duration and period of engagement generally varies between one week and three weeks per project.

You informed the recipients that you were no longer registered for GST from the specified date. You charged the recipients GST exclusive rates. You did not include GST in the invoices you issued to the recipients on or after the specified date.

We have looked at our records in respect of the supplies that you made in each quarterly tax period since you were registered for GST until the specified date.

You have been given contradicting verbal advice by the ATO. One opinion is that you should not have deregistered on the specified date. The other opinion is that you were entitled to deregister at the start of the year and only need to reregister prior to the date your turnover exceeds $75,000.

Our records show that you have reregistered for GST and have backdated the date of effect of your registration to the specified date.

Reasons for Decision

Summary

You were required to be registered for GST on the specified date as your GST turnover met the registration threshold of $75,000.

Detailed reasoning

An entity is required to be registered for GST if it satisfies the requirements of section 23-5 of the GST Act. This section states:

You are required to be registered under this Act if:

(a) you are *carrying on an *enterprise; and

(b) your *GST turnover meets the *registration turnover threshold.

(* denotes a term defined in section 195-1 of the GST Act)

Whether you were carrying on an enterprise on the specified date

The term enterprise is defined in subsection 9-20(1) of the GST Act to include, amongst other things, an activity, or series of activities, done in the form of a business.

You are an independent contractor and carry on a specified business/enterprise. You have been carrying on your enterprise for a number of years including on and from the specified date until present. Therefore you satisfy the requirements of paragraph 23-5(a) of the GST Act.

Whether your GST turnover met the registration turnover threshold on the specified date

Under subsection 188-10(1) of the GST Act:

You have a GST turnover that meets a particular *turnover threshold if:

(a) your *current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your *projected GST turnover is below the turnover threshold; or

(b) your projected GST turnover is at or above the turnover threshold.

The registration turnover threshold was increased from $50,000 to $75,000 from 1 July 2007 (from $100,000 to $150,000 for non-profit bodies).

Subsection 188-15(1) of the GST Act provides that your current GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during the 12 months ending at the end of that month.

Subsection 188-20(1) of the GST Act provides that your projected GST turnover at a time during a particular month is the sum of the values of all the supplies that you have made, or are likely to make, during that month and the next 11 months.

There are some supplies that are excluded from the calculation of both current and projected GST turnovers however these exclusions do not apply to the services that you supply.

Therefore what needs to be determined is whether on the specified date your GST turnover met the registration turnover threshold as outlined in subsection 188-10(1) of the GST Act.

Goods and Services Tax Ruling GSTR 2001/7 Goods and services tax: meaning of GST turnover, including the effect of section 188-25 on projected GST turnover states at paragraph 16 and 17:

Whether your GST turnover meets, or does not exceed, a turnover threshold

16. Whether you have a GST turnover that meets or does not exceed a particular turnover threshold depends on an objective assessment of your projected GST turnover and current GST turnover. An 'objective assessment' is one that a reasonable person could be expected to arrive at having regard to the facts and circumstances which apply to your enterprise at the relevant time. The Commissioner will accept your assessment of these turnovers unless he has reason to believe that your assessment was not reasonable.

17. Under sub-section 188-10(1), you meet a particular threshold if your projected GST turnover is at or above the threshold. You also meet a turnover threshold if your current GST turnover is at or above the turnover threshold and it is not possible to conclude that your projected GST turnover is below the threshold. This will occur if your projected GST turnover is also above the relevant threshold, or if your circumstances are such that it is not possible to calculate a projected GST turnover. In either of these situations, the Commissioner can not be satisfied that your projected GST turnover is below the turnover threshold.

In your case, on the specified date your current GST turnover was above $75,000.

You stated that you cancelled your GST registration as you believed that your projected GST turnover was less than $75,000.

However, looking at the pattern of your supplies made during each quarterly tax period and particularly the supplies that your made in the tax period that you cancelled your GST registration, we consider that on the specified date, your circumstances were such that it was not possible for you to conclude that your projected GST turnover was below the registration turnover threshold.

Therefore, as explained in paragraph 17 of GSTR 2001/7, the Commissioner is not satisfied that on the specified date your GST turnover was below the registration turnover threshold. Accordingly on the specified date you had a GST turnover that met the registration turnover threshold under paragraph 188-10(1)(a) of the GST Act.

As you had a GST turnover that met the registration turnover threshold on the specified date, you also met the requirements of paragraph 23-5(b) of the GST Act. Therefore, you were required to be registered for GST on the specified date.

It is important to note that your GST turnover is not calculated with reference to a fixed time period such as a financial year. As the definitions of the current and projected GST turnovers in subsections 188-15(1) and 188-20(1) indicate, the GST turnover is calculated on a cumulative basis.

Taxable supplies

Section 9-40 of the GST Act provides that you must pay the GST payable on any taxable supply that you make.

Section 9-5 of the GST Act states:

You make a taxable supply if:

a) you make the supply for *consideration; and

b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and

c) the supply is *connected with Australia; and

d) you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

In your case, the supplies that you have made since the specified date are taxable supplies. This is because you were required to be registered for GST and you meet all the other the requirements of section 9-5 of the GST Act.

Accordingly, you are liable to pay an amount equal to 1/11 of the consideration that you received for your supplies since the specified date as GST, even if you did not include GST in the price of your services.

Input tax credits

Section 11-20 of the GST Act provides that you are entitled to the input tax credit for any creditable acquisition that you make.

Section 11-5 of the of the GST Act states:

You make a creditable acquisition if:

(a) you acquire anything solely or partly for a *creditable purpose; and

(b) the supply of the thing to you is a *taxable supply; and

(c) you provide, or are liable to provide, *consideration for the supply; and

(d) you are *registered, or *required to be registered.

Subsection 11-15(1) and subsection 11-15(2) of the GST Act state:

(1) You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise.

(2) However, you do not acquire the thing for a creditable purpose to the extent that:

(a) the acquisition relates to making supplies that would be *input taxed; or

(b) the acquisition is of a private or domestic nature.

You are entitled to input tax credits for any creditable acquisition that you have made since the specified date. You can claim the input tax credits provided you hold a tax invoice when you lodge the relevant activity statement.

GST returns

Subsection 31-5(1) of the GST Act states 'If you are *registered or *required to be registered, you must give to the Commissioner a *GST return for each tax period'.

As you were required to be registered for GST, you must lodge GST returns/activity statements for the tax periods since cancelling your GST registration.

Failure to comply with your registration obligation can result in you being liable to a penalty under the Taxation Administrative Act 1953.