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Ruling

Subject: GST and date of effect of GST registration

Question 1:

Are you required to backdate your GST registration to the date when your GST turnover exceeded the registration turnover threshold?

Answer:

Yes, you must backdate your GST registration as you were required to be registered at the time when your GST turnover exceeded the registration turnover threshold.

Question 2:

If you are required to backdate your GST registration on an earlier date, are you required to remit GST in respect of all the supplies you made from the date of registration?

Answer:

Yes, you are required to remit GST in respect of all the taxable supplies you made from the date of registration.

Relevant facts and circumstances

You are a sole trader. You operate in the construction building industry. Your customers are residential home owners.

You have an Australian business number (ABN). You are not registered for GST.

Your accountant recently prepared your tax returns for the last three financial years and discovered that your turnover exceeded the GST registration threshold of $75,000 on an earlier date.

Your current and projected GST turnover is more than $75,000

Based on the figures provided, you were required to register for GST on an earlier date.

As you were not aware that you were required to be registered for GST on an earlier date, you did not include any GST in the price of your supplies made from date you required to register for GST to date.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

A New Tax System (Goods and Services Tax) Act 1999 section 25-10

A New Tax System (Goods and Services Tax) Act 1999 section 25-15

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-5

A New Tax System (Goods and Services Tax) Act 1999 section 188-10

Reasons for decision

1. Requirement to register for GST

Section 23-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that an entity is required to be registered under that Act if:

· it is carrying on an enterprise; and

· its GST turnover meets the registration turnover threshold.

Currently, the registration turnover threshold is $75,000 ($150,000 for non-profit bodies) as specified in the A New Tax System (Goods and Services Tax) Regulations 1999.

You advised us that you are carrying on an enterprise and your annual turnover had exceeded the registration turnover threshold on an earlier date. Therefore, you were required to be registered for GST from that date.

Section 25-1 of the GST Act provides that, if you are not registered for GST and you are required to be registered, you must apply to be registered within 21 days after becoming required to be registered.

The Commissioner of Taxation (the Commissioner) must decide the date from which an entity's registration takes effect, or took effect. This means that although an entity can nominate a date of effect in its registration application, it is the Commissioner who will decide the date of effect having regard to whether the entity is required to be registered.

The Commissioner can backdate an entity's GST registration. However, paragraphs 25-10(1)(a) and 25-10(1)(b) of the GST Act state:

· if you did not apply for registration and the Commissioner is satisfied that you are *required to be registered - the date of effect must not be a day before the day on which you became required to be registered; or

if you applied for registration - the date of effect must not be a day before:

(i) the day specified in the entity's application; or

(ii) if the Commissioner is satisfied that the entity became required to be registered on an earlier day - the day that the Commissioner is satisfied is that earlier day;

Based on the information that you provided, the Commissioner is satisfied that you were required to be registered for GST on an earlier date. As such, the Commissioner will backdate your registration to the earlier date but not a day before.

2. Effect of backdating GST registration

Section 25-15 of the GST Act deals with the effect of backdating your GST registration.

Paragraphs 25-15(a) and (b) of the GST Act provide that when the Commissioner backdates your registration, you are taken to have been registered from and including your backdated registration day for purposes of determining whether a supply you made on or after your registration day was a taxable supply and whether an acquisition you made on or after that day was a creditable acquisition.

Taxable supply

GST is payable on a taxable supply.

Under section 9-5 of the GST Act you make a taxable supply if:

· you make the supply for consideration;

· the supply is made in the course or furtherance of an enterprise that you carry on;

· the supply is connected with Australia; and

· you are registered or required to be registered.

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

GST is payable on the supplies that you made from the date of registration if all the requirements in section 9-5 of the GST Act are satisfied.

Based on the information that you provided, the supplies that you made from the date of registration satisfied paragraphs 9-5(a) to 9-5(d) of the GST Act as follows:

· you supplied your services for consideration by way of payments;

· the supplies were made in the course of an enterprise (business) that you carry on;

· the supplies were connected with Australia as you are carrying on your enterprise (business) in Australia; and

· you were required to be registered for GST as advised in issue 1. Furthermore, you will be taken to be registered for GST from your backdated registration day (in accordance with section 25-15 of the GST Act) even if you apply for registration at a later date.

 Your supply of goods and services to customers in Australia is not input taxed or GST-free under any provisions of the GST Act or any other legislation.

Therefore, the supplies that you made from the backdated registration day were taxable supplies. Accordingly, GST is payable on those supplies.

Note that the GST Act provides that the supplier, not the recipient, of a taxable supply is liable for the GST payable on the supply. Therefore, you are liable to remit 1/11^th of the consideration that you received for the taxable supplies that you made from your backdated registration day. It does not matter if you did not charge GST to recover the cost of your GST liability.

Additional information

Input tax credits

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

Section 11-5 of the GST Act states that 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 for GST.

 You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. However, you do not acquire the thing for a creditable purpose to the extent that the acquisition relates to making supplies that are input taxed or are private or domestic in nature.

 As you were required to be registered for GST on the earlier date, you would be entitled to claim input tax credits for the GST paid on acquisitions that you made from that date if paragraphs 11-5 (a) to 11-5 (c) of the GST Act were also satisfied. You should note that you must hold tax invoices for those acquisitions, at the time of lodgement of your activity statements.

 GST registration

 As you were required to be registered for GST, you must complete an application form to register for GST with the date of effect of your registration from when your GST turnover exceeded the registration turnover threshold.

Once you are registered for GST, the Tax Office will send you activity statements for the periods that you were required to be registered for GST.