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Subject: GST and treating a document as a valid tax invoice.

Question

Will the Commissioner of Taxation exercise his discretion to allow the input tax credits claimed in your business activity statements without providing valid documents to substantiate the claim?

Answer

No, the Commissioner of Taxation will not exercise his discretion to allow the input tax credits claimed in your business activity statements without providing valid documents to substantiate the claim

Relevant facts and circumstances

You are registered for Goods and Services Tax (GST).

You were allowed to backdate your GST registration and you have lodged your business activity statements.

You did not have tax invoices to substantiate the input tax credits claimed in your business activity statements.

You were not able to obtain copies of the tax invoices from your suppliers or from the relevant parties.

You completed your business activity statements from the available accounting statements and other records.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 29-70 and

A New Tax System (Goods and Services Tax) Act 1999 Subsection 29-70(1A).

Detailed reasoning

Section 29-70 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that a tax invoice is a document that complies with several requirements. Paragraph 29-70(1)(c)(i) states that the document that purports to be a tax invoice must be on an approved form which contains enough information to clearly ascertain the supplier's identity and the supplier's ABN.

A number of points need to be considered before the Commissioner will exercise his discretion to treat a document as a valid tax invoice, where they do not otherwise satisfy the requirements of section 29-70 of the GST Act. These points are explained in Practice Statement Law Administration (PSLA) 2004/11.

Paragraphs 18 and 19 of PSLA 2004/11 state:

18. Officers may use the discretions in a number of situations, the majority of which involve recipients' claims for input tax credits or decreasing adjustments. The process for making these decisions will depend on whether or not the recipient has already claimed the input tax credit or decreasing adjustment.

19. In either case, an important step in deciding whether to exercise the discretions is being satisfied that there is sufficient evidence of the recipient making a creditable acquisition (under Division 11 of the GST Act) or having a decreasing adjustment (under Division 19 of the GST Act). To substantiate the correct input tax credit entitlement, officers should verify the price of the relevant goods or services, the amount of GST included in the price, and the names, addresses and Australian business numbers (ABNs) of each party to the transaction.

The information provided by you in relation to claiming input tax credits is insufficient to determine whether the expenses reported in your activity statements were creditable acquisition to you as per Division 11 of the GST Act. There are no supportive documents to verify the price of each acquisition, the amount of GST included in the price, names and addresses and ABNs of each party to the transaction.

Subsection 29-70(1A) of the GST Act states that a document issued by an entity to another entity may be treated by the other entity as a tax invoice for the purpose of the GST Act if:

· it would comply with the requirements for a tax invoice but for the fact that it does not contain certain information, and

· all of that information can be clearly ascertained from other documents given by the entity to the other entity.

You have not provided other documents where the above information could be ascertained. Please note that in the absence of any other relevant documents issued to you by your suppliers, the Commissioner will not be able to exercise his discretion to treat your letter and the information provided in the letter as a valid tax invoice to enable you to claim input tax credits.

Therefore, you are not entitled to claim input tax credits claimed in your activity statements, as this claim has not been substantiated with satisfactory documentation.

We have enclosed the following fact sheets for your information:

1 Valid tax invoices and GST credits (NAT 12358-08.2011)

2 GST for small business (NAT 3014-12.2008)

These two documents provide more information on tax invoices and claiming input tax credits.