Edited version of private ruling

Authorisation Number: 1011881509774

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Ruling

Subject: Entitlement to input tax credits and the four year rule

Question 1

Is entity A entitled to claim input tax credits after the four year period has expired?

Answer

No

Question 2

If the answer to question 1 is "no", can Entity A claim the input tax credits in an activity statement for a later tax period?

Answer

No

Relevant facts

Entity A is a foreign based company whose business involves the transport by sea of liquefied Natural Gas (LNG) from Australia to overseas.

Entity A commenced transporting the LNG from Australia several years ago.

The LNG is produced in Australia by an associated overseas company

Entity A does not have an office in Australia.

Entity A does not make taxable supplies in Australia.

As part of its transport operations, entity A engages the services of tug providers to provide towage services into and out of Australian ports (the towage services).

Supplies to entity A of the towage services are taxable supplies and entity A receives tax invoices from the supplier.

Entity A recently became aware that it is entitled to obtain goods and services tax (GST) registration and claim an input tax credit (ITC) on the GST they paid on the acquisition of the towage services.

Entity A recently became registered for GST, with a view to both retrospectively and prospectively claiming ITC relating to acquisitions of the towage services.

Entity A accounts on an accruals basis and has recently lodged all activity statements (AS) for all tax periods.

Reasons for decision

Question 1

Section 11-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that you are entitled to input tax credits for your creditable acquisitions.

Section 11-5 of the GST Act states the following in relation to creditable acquisitions:

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.

As entity A meets all of the tests in section 11-5 of the GST Act, they are considered to make creditable acquisitions for the purposes of that section.

The Tax Laws Amendment (2009 GST Administration Measures) Bill 2009 amended the GST Act, the Fuel Tax Act 2006 (Fuel Tax Act) and the Taxation Administration Act 1953 (TAA) to provide that a taxpayer will cease to be entitled to an ITC (including a reduced input tax credit) or fuel tax credit if the credit has not been claimed within four years. The four year period starts from the date to which the credit would be attributable under the basic attribution rules in subsections 29-10(1) and (2) of the GST Act for input tax credits and subsections 65-5(1) to (3) of the Fuel Tax Act for fuel tax credits.

Section 93-1 of the GST Act states the following:

Your entitlements to input tax credits for creditable acquisitions cease unless you include them in your net amounts within 4 years.

However, this time limit might not apply to any such entitlements relating to amounts that the Commissioner has notified to you, that arise as a result of fraud or evasion, or that you have notified to the Commissioner.

Section 93-5 of the GST Act states the following:

93-5 Time limit on entitlements to input tax credits

(1) You cease to be entitled to an input tax credit for a *creditable

acquisition to the extent that you have not taken it into account in working out your *net amount for:

(a) the tax period to which the input tax credit would beattributable under subsection 29- 10(1) or (2); or

(b) any other tax period for which you give to the Commissioner a *GST return
during the period of 4 years after the day on which you were required to give to the Commissioner a GST return for the tax period referred to in paragraph (a).

(2) This section has effect despite section 11-20 (which is about who is entitled to input tax credits for creditable acquisitions).

While subparagraph 93-5(1)(a) of the GST Act is silent as to the actual time limit in which ITC must be claimed, section 93-1 of the GST Act states:

Your entitlements to input tax credits for creditable acquisitions cease unless you include them in your net amounts within 4 years."

Notwithstanding the four year time limit for making ITC claims in section 93-5 of the GST Act, section 93-10 of the GST Act sets out the limited circumstances in which entitlement to ITC does not cease under section 93-5.

Section 93-10 of the GST Act states the following:

93-10 Exceptions to time limit on entitlements to input tax credits

Commissioner has notified you of excess or refund etc.

(1) You do not cease under section 93-5 to be entitled to an input tax

credit to the extent that:

(a) the input tax credit arises out of circumstances that also gave rise to the whole or a part of:

(i) an amount, or an amount of an excess, in relation towhich paragraph 105-50(3)(a) in Schedule 1 to theTaxation Administration Act 1953 applies; or

(ii) a refund, other payment or credit in relation to which paragraph 105-55(1)(b) in Schedule 1 to that Act applies; and

(b) the Commissioner gave to you the notice referred to in that

paragraph not later than 4 years after the end of the tax period

to which the credit would be attributable under subsection

29-10(1) or (2) of this Act.

Excess relates to amount avoided by fraud or evaded

(2) You do not cease under section 93-5 to be entitled to an input tax credit to the extent that the input tax credit arises out of circumstances that also gave rise to:

(a) the whole or a part of an amount in relation to which

paragraph 105-50(3)(b) in Schedule 1 to the Taxation

Administration Act 1953 applies; or

(b) an amount of an excess, in relation to which that paragraph

applies.

You have notified the Commissioner of refund etc.

(3) You do not cease under section 93-5 to be entitled to an input tax

credit to the extent that:

(a) the input tax credit arises out of circumstances that also

gave rise to the whole or a part of a refund, other payment or

credit in relation to which paragraph 105-55(1)(a) in Schedule

1 to the Taxation Administration Act 1953 applies; and

(b) you gave to the Commissioner the notice referred to in that

paragraph not later than 4 years after the end of the tax period

to which the credit would be attributable under subsection

29-10(1) or (2) of this Act.

Subsection 93-10(1) of the GST Act does not apply to entity A's circumstances, as the Commissioner has not required payment of an amount of excess indirect tax by issuing a notice to Entity A under paragraph 105-50(3)(a) in Schedule 1 to the TAA.

Moreover, subsection 93-10(1) of the GST Act does not apply to entity A's circumstances, as the Commissioner has not provided notification to entity A of an entitlement to a refund, other payment or credit under paragraph 105-55(1)(b) in Schedule 1 to the TAA.

Subsection 93-10(2) of the GST Act does not apply to entity A's circumstances, as the Commissioner has not established that an amount of excess was avoided by fraud or evaded for the purposes of paragraph 105-50(3)(b) in Schedule 1 to the TAA.

Subsection 93-10(3) of the GST Act does not apply to entity A's circumstances, as entity A has not notified the Commissioner, within the four year time limit in paragraph 105-55(1)(a) in Schedule 1 to the TAA, of an entitlement to a refund, other payment or credit for acquisitions of towing services that are attributable to the tax periods for which the four year time period has expired.

Question 2

Section 93-5 of the GST Act states:

93-5 Time limit on entitlements to input tax credits

(1) You cease to be entitled to an input tax credit for a *creditable acquisition to the extent that you have not taken it into account in working out your *net amount for:

(a) the tax period to which the input tax credit would be attributable under subsection 29-10(1) or (2); or

(b) any other tax period for which you give to the Commissioner a *GST return during the period of 4 years after the day on which you were required to give to the Commissioner a GST return for the tax period referred to in paragraph (a).

(2) This section has effect despite section 11-20 (which is about who is entitled to input tax credits for creditable acquisitions).

Of particular note is subparagraph 93-5(1)(b) of the GST Act, which broadly provides that an entity cannot attribute an ITC to an AS for a tax period, if that AS is lodged on a date which is more than four years after the day that the AS that the ITC would originally have been attributable to was required to be lodged.

As more than four years have passed since the due date for lodgement of the AS for the tax periods outside four years, entity A cannot attribute to any later tax period any of the ITC that were originally attributable to the tax periods for which the four year period has expired.