Edited version of your private ruling

Authorisation Number: 1012465425187

Ruling

Subject: GST and input tax credits

Question 1

Are you entitled to input tax credits under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) in relation to tax periods for which the four period has already expired?

Answer

Yes, however the entitlement is subject to the time limits in section 105-55 of Schedule 1 to the Taxation Administration Act 1953 (TAA).

Question 2

Has your entitlement to the refund or credit ceased under section 105-55 of Schedule 1 to the TAA?

Answer

Yes.

Question 3

Do the lodgment and payment demand notices issued to you by the Commissioner for the relevant tax periods satisfy the requirements of paragraph 105-55(1)(b) of Schedule 1 to the TAA?

Answer

No.

Relevant facts and circumstances

You operated a property development enterprise and have been registered for GST on a monthly basis.

A few years ago, you acquired a development site. Following the acquisition of this site, you proposed a major redevelopment of the property into residential and commercial units with car parking bays, all of which were to be sold on a strata titled basis.

To assist in carrying out the re-development, you engaged various entities to carry out different aspects of the development project.

You made creditable acquisitions on your on-going development costs.

You did not lodge activity statements for some of the tax periods for which you were entitled to claim input tax credits.

The ATO issued lodgment and payment demand notices in relation to some of the tax periods.

You notified the Commissioner of your entitlement to a substantial GST refund in relation to the tax periods for which some of the activity statements were overdue.

You did not make taxable supplies of new residential or commercial accommodation.

The partially completed site was sold.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 11-05

A New Tax System (Goods and Services Tax) Act 1999 section 11-20

A New Tax System (Goods and Services Tax) Act 1999 section 93-5

A New Tax System (Goods and Services Tax) Act 1999 section 93-10

Taxation Administration Act 1953 section 105-50 of Schedule 1

Taxation Administration Act 1953 section 105-55 of Schedule 1

Reasons for decision

Question 1

Section 11-20 of the GST Act provides that an entity is entitled to input tax credits for any creditable acquisitions that it makes.

Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if:

· you acquire anything solely or partly for a creditable purpose

· the supply of the thing to you is a taxable supply

· you provide, or are liable to provide, consideration for the supply; and

· you are registered, or required to be registered.

Based on the information provided, you meet all of the above requirements. Therefore, the acquisitions you made for the tax periods for which the four year time limit has expired are creditable acquisitions. This means you are entitled to input tax credits for those acquisitions under section 11-20 of the GST Act.

However, we need to consider whether your entitlement to those input tax credits or any refund has ceased under section 105-55 of Schedule 1 to the TAA for those tax periods.

Question 2

Section 105-55 of Schedule 1 to the TAA

As you intend to claim the input tax credits in the activity statements in relation to tax periods for which the four year time limit has expired, we need to consider the operation of section 105-55 of Schedule 1 to the TAA.

Subsection 105-55(1) of Schedule 1 to the TAA provides a statutory time limit on refunds, other payments or credits from the Commissioner and states:

You are not entitled to a refund, other payment or credit to which this subsection applies in respect of a *tax period or importation unless:

(a) within 4 years after:

(i) the end of the tax period; or

(ii) the importation,

as the case requires, you notify the Commissioner (in a *GST return or otherwise) that you are entitled to the refund, other payment or credit …

Unless you notify the Commissioner of your entitlement for the purposes of paragraph 105-55(1)(a) of Schedule 1 to the TAA within 4 years after the end of the relevant tax periods, you will cease to be entitled to any credit for those tax periods.

Whether your notification is a valid notification

Section 105-55 of Schedule 1 to the TAA requires that a notification is of the refund, other payment or credit and not merely that there is some unspecified entitlement. Accordingly, a notification must bring to the Commissioner's attention the refund, other payment or credit to which the entity claims entitlement. This is in contrast to a general or speculative notification that could give rise to multiple refunds, payments or credits.

Miscellaneous Taxation Ruling MT 2009/1 provides guidance on the notification requirements for an entity under section 105-55 of Schedule 1 to the TAA. It provides at paragraph 32A that a notification that does not either explicitly or implicitly show any basis for the entitlement to a refund, other payment or credit will not be effective. With such a notification, it is not possible to identify whether a subsequent claim is the (or one of the) entitlement covered by the notification.

Your notification only states that substantial GST refunds are due for the relevant tax periods. Unlike the notifications in Central Equity Limited v Commissioner of Taxation [2011] FCA 908, MTAA Superannuation Fund (RG Casey Building) Property Pty Ltd v Commissioner of Taxation [2011] AATA 769 and National Jet Systems Pty Ltd v Commissioner of Taxation [2011] AATA 766, your notification does not refer to the basis of your entitlement and does not provide any description, reason or context in support of your entitlement to the refund, other payment or credit.

While your notification identifies that there is a refund entitlement, it is not notification of any particular refund, other payment or credit. The reference to substantial GST refunds due to you is not a basis for any entitlement. It is the context of transactions giving rise to a refund or credit that is the basis of an entitlement for notification purposes.

We therefore consider that your notification is not a valid notification for the purposes of section105-55 of Schedule 1 to the TAA. It follows that under section 105-55 of Schedule 1 to the TAA, your entitlement to any refund, other payment or credits for the relevant tax periods ceases.

Question 3

Paragraph 105-55(1)(b) of Schedule 1 to the TAA provides an exception to the 4 year time limit in that section where:

within that period the Commissioner notifies you (in a notice of assessment or otherwise) that you are entitled to the refund, other payment or credit; or

The lodgment and payment demand notices

The lodgment and payment demand notices issued to you for the relevant tax periods required you to lodge any overdue activity statements and pay any amounts owing on those activity statements immediately.

The notices do not refer, explicitly or by implication, to any entitlement to a refund, other payment or credit.

It follows that they do not satisfy the requirements of paragraph 105-55(1)(b) of Schedule 1 to the TAA.

Application of section 93-5 of the GST Act

For completeness, the lodgment and payment demand notices also do not attract an exception to section 93-5 of the GST Act.

Section 93-5 applies a time limit on the claiming of input tax credits which have not been taken into account in working out your net amount within 4 years after the day on which you are required to lodge an activity statement for the tax period to which the input tax credits would be attributable under subsections 29-10(1) and (2) of the GST Act.

In your circumstances the four year period for the relevant tax periods had expired under section 93-5 of the GST Act.

Under the exception in subparagraph 93-10(1)(a)(i) of the GST Act you do not cease to be entitled to input tax credits under section 93-5 of the GST Act to the extent that the input tax credits arise out of circumstances that also gave rise to an amount in relation to the notice to which paragraph 105-50(3)(a) of Schedule 1 to the TAA applies.

This exception applies where the Commissioner has required payment of that amount by giving a notice to you within four years after any unpaid net amount or amount of indirect tax became payable by you.

However, the lodgment and payment demand notices issued to you for the relevant tax periods do not attract the exception in subparagraph 93-10(1)(a)(i) of the GST Act. This is because the lodgment and payment demand notices were issued for tax periods for which there are no amounts payable by you.