Edited version of your written advice

Authorisation Number: 1012693156351

Ruling

Subject: GST and activity statement revisions

Question

Can you amend your business activity statements (BAS) to zero where those BAS are outside of the four year rule?

Answer

No.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

• You were voluntarily registered for GST in 2004.

• You received a Private Binding Ruling (PBR) from the Australian Tax Office (Tax Office) in 2013 advising that the sale of sub-divided lots was not subject to GST.

• You applied to the Tax Office on in 2014 for an 'exemption' for the amendment of the BAS for a number of periods:

• You stated in your correspondence that as a result of the PBR and because the client previously thought GST did apply and therefore registered, lodged and remitted from the first quarter of registration onwards, you were now simply amending for this, as GST registration was never needed.

• You received written guidance (email) from the Tax Office in 2014 regarding your request to revise the BAS:

• The advice stated that the Commissioner does not have the discretion to make an exception to the four year limit on GST and that only the two quarterly periods were within time and had been revised.

• Your GST registration has been cancelled.

• You subsequently 'objected' to that advice.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999:

Section 93-5

Section 93-10

Taxation Administration Act 1953 (TAA)

Schedule 1

Section 105-55

Section 105-65

Reasons for decision

Question

Summary

The Commissioner has no discretion to make an exception to the 4 year rule to allow your BAS to be amended and receive a refund of GST.

Detailed reasoning

As you have operated on a GST-registered basis since 2004, you are liable to pay GST on any taxable supplies you make (section 9-5 of the GST Act) and this is so whether or not you charge GST on those supplies.

This means that as consequence of your GST registration, GST is included in the price you charge your customer. There are two components of what you receive from your customers (the price),10/11 of the price is your revenue and 1/11 of the price is the GST that you are required to remit to the Tax Office.

In your case you made supplies (being the sale of the subdivided land) in which GST was included in the price and you claimed GST credits on the GST you paid on supplies acquired in the course of your enterprise.

Section 105-55 of TAA

Subsection 105-55(1) of Schedule 1 to the Taxation Administration Act 1953 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 …

Note: the * asterisk denotes a defined term within the TAA

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.

In your case you did not 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 a tax periods, of your entitlement to a refund. However, the Tax Office accepted your initial query as notification and allowed you a refund for two quarterly tax periods that were within time.

To enable a refund of GST for periods prior to this you would have had to have lodged a notification of your entitlement to a refund prior to that date and in accordance with the 4 year rule requirements of section 105-55 of the TAA which you did not do.

Section 105-65 of TAA

Section 105-65 of the Taxation Administration Act 1953 (TAA) would normally apply where an entity has already paid an amount to the Commissioner. Subsection 105-65 of the TAA, states the following:

(1) The Commissioner need not give you a refund of an amount to which this section applies, or apply (under Division 3 or 3A of Part IIB) an amount to which this section applies, if:

(a) you overpaid the amount, or the amount was not refunded to you, because a *supply was treated as a *taxable supply, or an *arrangement was treated as giving rise to a taxable supply, to any extent; and

(b) the supply is not a taxable supply, or the arrangement does not give rise to a taxable supply, to that extent (for example, because it is *GST-free); and

(c) one of the following applies:

(i) the Commissioner is not satisfied that you have reimbursed a corresponding amount to the recipient of the supply or (in the case of an arrangement treated as giving rise to a taxable supply) to an entity treated as the recipient;

(ii) the recipient of the supply, or (in the case of an arrangement treated as giving rise to a taxable supply) the entity treated as the recipient, is *registered or *required to be registered.

Furthermore, subsection 105-65(2) of the TAA states:

(a) in the case of a *supply:

(i) so much of any *assessed net amount or amount of *GST as you have overpaid (as mentioned in paragraph (1)(a)); or

(ii) so much of any assessed net amount that is payable to you under section 35-5 of the *GST Act as the Commissioner has not refunded to you (as mentioned in paragraph (1)(a)), either by paying it to you or by applying it under Division 3 of Part IIB of this Act;

……..

Accordingly, under subsection 105-65(1) of the TAA the Commissioner need not give you a refund for any overpayments of GST but has a discretion to subject to the time limits of subsection 105-55 of the TAA (as discussed above).

Application of section 105-65 to "no enterprise" cases

As a result of the Naidoo & Anor v FC of T, 2013 ATC 10-323 decision, where a taxpayer is found to have overpaid GST in circumstances where section 105-65 of Schedule 1 to TAA applies, the taxpayer's assessment of the net amount for the relevant tax period will be amended to reflect the correct net amount for the tax period.

For those cases where a taxpayer is found to have not been carrying on an enterprise, the Commissioner will (subject to time limits) amend the assessment of their net amount for each tax period to zero. He will recover any refund of a negative net amount and, where appropriate, impose a shortfall penalty based on the amount of the refund. For those tax periods where the taxpayer returned a positive net amount, section 105-65 may apply to restrict a refund to the extent that the taxpayer has actually overpaid a positive net amount for a tax period.