Edited version of your written advice

Authorisation Number: 1012768356772

Ruling

Subject: GST and lost/missing records

Question

How do you complete your outstanding Business Activity Statements (BAS) and account for goods and services tax (GST) for the periods for which you do not have full records of transactions?

Answer

You are expected to reconstruct the lost records to the best of your ability and to keep details of the reconstructed records (for example, any estimate, determination or calculation made, and the method used to arrive to those conclusions) for five years. Refer to Reasons for decision below.

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.

• The company was a joint-venture between yourself (you) and another individual (A) residing overseas.

• The company was registered for GST from 200X and its GST registration was cancelled in 20XX.

• In 20XX, A made a "strategic play" to take over the business and its associated assets and accounts; therefore removing you from a joint-venture relationship.

• Through a lengthy legal process which embarked in early 20XX, A successfully took over complete ownership and control of this entity along with its associated bank accounts, magazine assets (lP) and all corporate files in late 20XX.

• In and around late 20XX, you received written notification from the Tax Office (ATO) that quarterly BAS statements for the 20YY, and 20XX had not been lodged.

• As all accounting functions were conducted out by A overseas, you attempted to contact A without any success.

• Without having access to any bank accounts, files or corporate documentation, you contacted the ATO to inform the ATO of this change, and that the new contact and responsible party was exclusively A.

• The ATO advised that A had not yet updated the company representative; and therefore you were still listed as the company director.

• You requested that the ATO close down the business and backdate its operations in late 20ZZ in order to remove your responsibility on a company that you were no longer legally responsible for since A had not updated this director/owner with the ATO.

• The company was no longer trading in Australia and had moved its operations back overseas.

• On communicating the status of the entity to the ATO, specifically the rightful owner as of the legal proceedings in 20XX, you considered the matter resolved and all further interactions would be conducted between the ATO and A.

• In late 20ZZ, you again received written notification from the ATO that the BAS statements were still considered unresolved,

• You again attempted to contact A unsuccessfully, at which point you contacted the bank in an attempt to collect back-dated bank statements in order to reconstruct your account data to complete and lodge the outstanding BAS statements. However as a result of the legal proceedings you had been removed from all associated bank accounts by A, and therefore, was unable to collect any back bank statements; which left you without any accounting files, bank statements or access to A in order to complete and lodge the outstanding BAS statements.

• You have received verbal advice from the ATO stating that you could lodge nil BAS' for the periods or estimate your supplies and acquisitions for the periods.

Relevant legislative provisions

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

Section 31-5.

Taxation Administration Act 1953

Schedule 1 Chapter 5 Part 5-25 Division 382.

Schedule 1 Section 382-5.

Schedule 1 Subsection 382-5(1).

Schedule 1 Subsection 382-5(4).

Reasons for decision

Issue 1

Question 1

Summary

The entity that is/was registered for GST is required to lodge the outstanding activity statements and account for GST for the outstanding periods. Where you are not the entity you do not have the legal obligation to lodge the outstanding GST returns.

However if you were the legal entity that was/is required to lodge the outstanding activity statements and account for GST and you do not have full records of transactions you are expected to reconstruct the lost records to the best of your ability and to keep details of the reconstructed records (for example, any estimate, determination or calculation made, and the method used to arrive to those conclusions) for five years.

Detailed reasoning

Requirement to lodge

Section 31-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that if you are registered or required to be registered for GST, you must provide to the Commissioner a GST return for each tax period. You must submit a return regardless of whether the net amount for that tax period was zero, or if you are liable for GST on any taxable supplies attributable to the tax period in question. [Emphasis added]

You are required to lodge all BAS for the tax periods in which you are registered, including the periods for which you have limited records of transactions.

Further, you are required to remit GST on any taxable supplies you made in these tax periods. You are also entitled to GST credits for any creditable acquisitions that you made in these tax periods.

In this situation 'You' is a defined term in section 195 of the GST Act and provides that you applies to entities generally, and in this instance when looking at who is required to lodge the BAS etc is taken to mean the entity that is registered for GST. [Emphasis added]

In your circumstances, based on the facts you have provided, the responsibility for the outstanding GST returns rests with you, as at the time they were due to be lodged you were still a company Director and legally responsible for the company and legal statutory obligations.

Lost records

The keeping of records for GST purposes is governed by section 382-5 of Schedule 1 to the Taxation Administration Act 1953 (TAA). The first general record-keeping requirement contained in subsection 382-5(1) of Schedule 1 to the TAA provides that an entity must:

• keep records that record and explain all transactions and other acts the entity engages in that are relevant to a supply, importation, acquisition, dealing, manufacture or entitlement, and

• retain those records for at least five years after the completion of the transactions or acts to which they relate.

The second general requirement in subsection 382-5(4) of Schedule 1 to the TAA, is that a taxpayer must retain records for five years containing particulars of any election, choice, estimate, determination or calculation made under the GST law. Where an estimation, determination or calculation is made the records must also explain the method by which it was made as they may be tested, and consequently accepted or rejected, if you are subsequently audited. [Emphasis added]

Your previously lodged BAS or your integrated client account with the Tax Office may assist you in reconstruction of your records. You can obtain a copy of your integrated client account from the Tax Office by contacting our Business Infoline on 13 28 66.

You may also be able to estimate, recalculate or determine the value of your supplies and acquisitions for the outstanding BAS. The estimates and calculations can be based on income and expenditure report or similar work or periods.

Additionally, you may be able to obtain some information from third parties, i.e. copies of bank statements, credit card statements and/or some supplier statements and invoices.

Once you have obtained copies of your business transactions and/or made calculations or estimates of supplies and acquisitions for the period in question, you can lodge your outstanding BAS.

You will need to keep records for five years of any estimate, determination or calculation made, and the method used to arrive to those conclusions.

You have stated that for the periods in question the business was in the process of winding down, and not running at full-capacity as a result of the legal proceedings and market conditions that were impacting business growth, therefore, if you are using previous months' BAS to reconstruct your records you may use a sliding scale percentage factor to determine your estimations.

Additional Information

You may wish to request a suspension of action for lodgement of the outstanding BAS and also a waiving of any penalties such as late lodgement penalties while you are reconstructing your records by telephoning the Tax Office on 13 28 66. You will need to provide a date by when the outstanding documents would be lodged.

As stated above you have the option of estimating your figures for the outstanding periods or given that you no longer have access to the Company banking facilities and therefore any debt owing to the ATO would be paid out of your own funds you can choose to lodge nil BAS'. This is a personal decision to be made by you and one which the ATO cannot advise you on.