Edited version of private ruling

Authorisation Number: 1011857035690

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: Cancellation of GST registration

Question 1

Can entity A's GST registration be cancelled from 1 July 2000?

Advice/Answers

No, Entity A's GST registration cannot be cancelled from 1 July 2000. It can only be cancelled from the date the Commissioner is satisfied entity A stopped operating on a registered basis.

Question 2

Can entity A revise its activities statements for the tax periods from1 July 2000 to nil?

Advice/Answers

No.

Entity A may revise AS for the tax periods within four years but only to correct an error in the calculation of the GST payable or the input tax credits claimed, but it cannot revise those AS to nil.

Relevant facts

Entity A provides sub contractor services to entity B. The works include general in house manufacturing.

Entity A was advised by its tax agent at the time that it was required to be registered for GST from 1 July 2000 but did not explain the registration turnover threshold.

Entity A has not met the registration turnover threshold since 1 July 2000.

Without the proper knowledge of how to write a tax invoice, entity A did not include the GST amount of 10% in its tax invoices, resulting in entity A having to pay GST out of its own pocket.

Entity A reported GST payable and claimed input tax credits in all activity statements lodged since 1 July 2000.

Reasons for decision

Question 1

Although entity A was not required to be registered for GST because it did not meet the registration turnover threshold under paragraph 23-5(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), it chose to do so from 1 July 2000.

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

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

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

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

The Commissioner will decide the date on which cancellation of an entity's GST registration takes effect. This date may be on a day occurring before, on, or after the day on which the Commissioner makes the decision to cancel the entity's GST registration (subsection 25-60(1) of the GST Act).

As entity A has been registered for GST for at least 12 months and is not currently required to be registered for GST, the Commissioner will, where an entity applies for cancellation of your GST registration in the approved form, cancel their GST registration from a date as determined by the Commissioner.

Backdating the date of cancellation of GST registration

Practice Statement Law Administration PS LA 2011/8: -The Registration of entities- (PSLA 2011/8) provides at paragraphs 68 to 81 general information about cancelling GST registration. Paragraphs 89 to 95 provide more specific information about the cancelation date of effect.

The Commissioner may cancel an entity's GST registration from 1 July 2000 where the entity has never operated on a GST-registered basis. The Commissioner will be satisfied that an entity never operated on a GST-registered basis (or stopped operating on a registered basis) where:

· the entity has never held itself out to other entities as being registered for GST

· the entity has not issued any tax invoices or adjustment notes

· the entity has not claimed any GST credits, special transitional credits or indirect tax transitional credits, and

· the entity has made a signed declaration to the Commissioner that it satisfies all the above points.

(Paragraph 95 of PS LA 2011/8)

The information provided by entity A shows that it has operated on a GST-registered basis from

1 July 2000 because it has:

· held itself out to other entities as being registered for GST

· issued tax invoices or adjustment notes

· claimed GST credits in the AS lodged since it registered for GST on 1 July 2000

· made a declaration to the ATO that it has done any of the above.

Therefore, the Commissioner can only cancel entity A's GST registration from the date the Commissioner is satisfied entity A stopped operating on a registered basis. The cancellation of entity A's GST registration cannot be backdated to 1 July 2000. Paragraph 92 of PS LA 2011/8 states:

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

Entity A reported GST and claimed input tax credits in its AS until a few months ago. Thus, the effective date of the cancellation of entity A's GST registration cannot be earlier than the last AS in which entity A reported GST and claimed GST credits.

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

As entity A is continuing to carry an on an enterprise, it will need to monitor its GST turnover to ensure it does not become required to be registered for GST. Entity A is entitled to retain its Australian Business Number (ABN) for as long as it continues carrying on an enterprise after its GST registration is cancelled.

Question 2

1) Tax periods within four years

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

Entity A's request for a private ruling has been treated as a notification of entitlement to GST refund or credit under section 105-55 of Schedule 1 to the TAA for the tax periods within four years. The ruling request satisfies the requirements of that provision (paragraph 12 of MT 2009/1).

Liability for GST

As entity A has operated on a GST-registered basis since 1 July 2000, it is liable to pay GST on any taxable supplies it has made (section 9-5 of the GST Act) and this is so whether or not entity A has charged GST on those supplies.

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

Therefore, entity A cannot revise the AS for the tax periods within four years to reduce the amount at label 1A (GST payable amount) to nil. It can only revise those AS if the supplies it has made were GST-free supplies or input taxed supplies or it made errors in the calculation of the GST payable.

The supplies entity A has made where neither GST-free nor input taxed. Unless entity A made mistakes in the calculation of the GST payable, the amounts of GST it has remitted to the ATO since 1 July 2000 would be correct.

Entitlement to input tax credits (ITC)

As entity A has operated on a GST-registered basis since 1 July 2000, it is entitled to ITC in relation to creditable acquisitions if the requirements of section 11-5 of the GST Act are met. The AS entity A has lodged since 1 July 2000 show that it has claimed ITC, for which entity A would have had tax invoices.

Therefore, entity A cannot revise the AS lodged for tax periods within four years to reduce the amount of ITC to nil, it can only revise them if it has made an error in the calculation of the amounts of ITC claimed.

2) Tax periods outside four years

Entitlements to GST refunds or credits expire four years after the end of the tax period to which they relate, unless the Commissioner is notified before that time. Entity A's request for a private ruling was received out of time for tax periods outside four years.

Therefore, entity A is not entitled to a GST refund or credit for the tax periods outside four years and cannot amend the AS for those periods.