Bills Digest no. 134 2009–10
Tax Laws Amendment (2010 GST Administration Measures No.
1) Bill 2010
Note: This Digest is an historical Digest, published
after the Bill was read a third time in the Senate on 11 March
2010. The Bill was passed by both Houses unamended, and received
Royal Assent on 24 March 2010.
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Glossary
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Abbreviation
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Definition
|
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ABN
|
Australian Business Number
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BAS
|
business activity statement
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Commissioner
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Commissioner of Taxation
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GST
|
goods
and services tax
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GST
Act
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A New Tax System (Goods and Services Tax) Act
1999
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TAA
1953
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Taxation Administration Act 1953
|
Source: Parliamentary Library and Explanatory Memorandum, Tax
Laws Amendment (2010 GST Administration Measures No. 1) Bill 2010,
p. 1.
Tax Laws Amendment (2010 GST Administration Measures No.
1) Bill 2010
Date introduced: 10
February 2010
House: House of
Representatives
Portfolio: Treasury
Commencement: This
Bill commences on the day of Royal Assent. However, items 3, 10,
and 11 of Schedule 1 and item 2 of Schedule 2 only commence after
the commencement of Schedule 1 of the Tax Laws Amendment (2009
GST Administration Measures) Act 2010.[1]
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
This Bill implements improvements to GST
laws in line with recommendations from the Board of
Taxation’s review of GST administration. In particular, this
Bill deals with the recommendations involving adjustments for third
party payments and attribution of input tax credits.
The report of the Board of Taxation’s Review of the
Legal Framework for the Administration of the Goods and Services
Tax was released on 12 May 2009 by the then Assistant
Treasurer.[2] At that
time, the Assistant Treasurer agreed to implement 41 of the
Board’s 46 recommendations.
Recommendation 6 involved amending the GST law to ensure that
adjustments for manufacturers’ rebates which effectively
change the price of a transaction also result in adjustments for
the taxpayer and the third party.[3]
Recommendation 20 involved the clarification of input tax
credits to confirm that a taxpayer can defer input tax credit
claims even if he or she held a tax invoice at the end of the
period to which the credit would otherwise be attributable.[4]
The Government’s initial response to the report indicated
that adjustments for manufacturers’ rebates would apply from
1 July 2010, and clarification of input tax credits would apply
from 12 May 2009.[5]
However, following the four-year restriction on claiming input tax
credits contained in Schedule 1 of the Tax Laws Amendment (2009 GST
Administration Measures) Bill 2009, further clarification of the
input tax attribution rules was required.
On 12 May 2009, the Treasury released a discussion paper
outlining the government response to the Board of Taxation’s
review.[6] This
discussion paper received thirteen submissions.[7]
A number of comments on the proposed amendments present in this
Bill were raised in submissions to the Treasury’s Discussion
Paper.
For example, while the Corporate Tax Association of Australia
appreciated the practical value of allowing taxpayers to claim
input tax credits in a later income year, it raised concerns about
the situation where a BAS is later amended (voluntarily or as a
result of an audit) and a higher amount of GST becomes payable. In
particular, it said:
In this scenario, the ATO’s view is that
the GST payable must be attributed to the prior period and that the
increase in input tax credits must be attributed to the next BAS to
be lodged, as directed under subsection 29-10(4). This means that
[General Interest Charge] and penalties may arise on a GST payable
amount despite the existence of valid offsetting input tax credits.
To avoid such unfair exposures to GIC and penalties, taxpayers
should be allowed the option of amending BASs for increases in
input tax credits claimed.[8]
CPA Australia supported the changes to tax invoice requirements
and attribution provisions put forward by the Discussion Paper but
made the following qualification:
From a policy perspective we believed that
reliance on the exercise of the Commissioner’s discretion
should be avoided wherever practicable in order to provide both the
ATO and taxpayers with sufficient clarity on the operation of the
law.
Accordingly, any changes to, or relaxation of,
the tax invoice requirements should be made via amendments to the
GST legislation (including the regulations) rather than by
increasing reliance on the exercise of the Commissioner’s
discretion.[9]
The Investment and Financial Services Association (IFSA) raised
concerns in regards to supply and third party payments
arrangements:
An area of uncertainty in the current GST
framework is in tri-partite rebate arrangements. In the insurance
and investment industry, fund manager rebates to investors are
common; however, rebates on services are not addressed by the
Discussion Paper (only rebates in relation to goods in a
distribution chain). This is complicated further by the broad scope
of supply in the GST Act.
…
IFSA recommends consideration is given to the
expansion of rebates (i.e. the manufacturers rebate scenario) to
include a services context.[10]
The Property Council of Australia submission supported both the
third party payments arrangements and the attribution of input
credits.[11]
The Explanatory Memorandum for the Bill states that the
financial impact of Schedule 1 (dealing with adjustments for third
party payments) will be nil in 2009–10 and low in the
following four financial years. The financial impact of Schedule 2
(dealing with the attribution of input tax credits) will be
negligible as it ‘clarifies the interpretation of the law in
a manner consistent with current administration’.[12]
Schedule 1 to the Bill primarily amends the
A New Tax System (Goods and Services Tax) Act 1999 (the
GST Act) to insert proposed Division 134—Third party
payments.
Item 13 of Schedule 1 to the
Bill inserts proposed Division 134 to allow for
decreasing adjustments for payments made to third parties
(proposed section 134-5), and increasing
adjustments for payments received by third parties
(proposed section 134-10).
The Treasury Discussion Paper on these changes uses the
following example:
- A manufacturer supplies a computer printer to a wholesaler for
$440. The manufacturer accounts for $40 GST, giving net revenue
collected to this point in the supply chain of $40.
- The wholesaler then supplies the printer to a retailer for
$660. The wholesaler accounts for $40 input tax credit and accounts
for GST of $60, giving net GST of $20.
- The retailer then supplies the printer to a customer for $880.
The retailer accounts for $60 input tax credit and accounts for GST
of $80, giving net GST of $20.
- The customer pays $880 inclusive of $80 GST being 1/11th of the
total GST inclusive price the customer has paid. This is the
correct amount of revenue $40 + $20 + $20 = $80 (which is equal to
10 per cent of the $800 value added through the supply chain).
- The customer then receives a $110 rebate from the manufacturer
(and makes no separate supply to the manufacturer). The customer
has now effectively paid $770 for the printer. The value added
through the supply chain is $700. GST on the value added of $700 at
10 per cent is $70. However, total GST revenue collected is
$80.[13]
Source: Treasury
Discussion Paper, p. 12.
Proposed Division 134 provides for an
adjustment so that in this instance the GST owed would only be $70
on the final cost of the product, rather than the $80 which has
been paid.
A ‘decreasing adjustment’ occurs if:
- the taxpayer makes a payment to an entity (the payee) who has
acquired a thing that the taxpayer supplied to another entity
(proposed paragraph 134-5(1)(a))
- the taxpayer’s supply of the thing to the other entity
was a ‘taxable supply’ (proposed paragraph
134-5(1)(b))
- the payment is in the form of a payment of money; an offset of
an amount of money the payee owes to the taxpayer; or a crediting
of an amount of money to an account held by the payee
(proposed subsection 134-5(1)(c))
- the payment is made in connection with (or as a response to or
inducement for) the payee’s acquisition of the thing
(proposed paragraph 134–5(1)(d)), and
- the payment is not ‘consideration’ for a supply to
the taxpayer (proposed paragraph
134-5(1)(e)).
The amount of the ‘decreasing adjustment’
is the difference between the GST paid on the original supply and
the GST payable on the supply if the price is reduced by the amount
paid to the payee (proposed subsection
134-5(2)).
Conversely, an ‘increasing adjustment’
occurs if:
- the taxpayer receives a payment from an entity (the payer) who
has supplied a thing the taxpayer acquired from another entity
(whether or not the entity acquired the thing from the payer)
(proposed paragraph 134-10(1)(a))
- the taxpayer’s acquisition of the thing from the other
entity was a ‘creditable acquisition’ (proposed
paragraph 134-10(1)(b))
- the payment is in the form of a payment of money; an offset of
an amount of money the payee owes to the taxpayer; or a crediting
of an amount of money to an account held by the taxpayer
(proposed subsection 134-10(1)(c))
- the payment is made in connection with (or as a response to or
inducement for) the taxpayer’s acquisition of the thing
(proposed paragraph 134–10(1)(d)), and
- the payment is not ‘consideration’ for a supply
from the taxpayer (proposed paragraph
134-10(1)(e)).
The amount of the ‘increasing adjustment’
is equal to the difference between the amount of input tax credit
the taxpayer was entitled for the original acquisition from the
other entity and the amount of input tax credit the taxpayer would
have been entitled for that acquisition if consideration for the
acquisition had been reduced by the amount paid by the payer to the
taxpayer (proposed section 134-10).
Decreasing adjustments above the adjustment note
threshold[14]
cannot be attributed until the tax period in which the taxpayer
holds a third party adjustment note (proposed section
134-15). Proposed section 134-20 sets out
the requirements for a ‘third party adjustment
note’. A ‘third party adjustment’ note for a
decreasing adjustment is a document that must be created by the
taxpayer in the approved form and must include the payer’s
ABN and any other information the Commissioner determines in
writing (proposed subsection 134-20(1)). The
taxpayer must supply a copy of the third party adjustment note to
the entity that received the payment that gave rise to the
adjustment within 28 days of the entity requesting a copy, or
within 28 days of the taxpayer becoming aware of the adjustment
(proposed subsection 134-20(2)). The Commissioner
may make a determination in regards to the alternative number of
days a taxpayer has to supply a copy of the third party adjustment
note (proposed subsections 134-20(2)(b) to
(7)).
A payment that leads to a third party adjustment under
proposed Division 134 cannot give rise to an
‘adjustment event’ (proposed section
134-25).[15]
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Schedule 1 (items 1 to
13 and items 14 to
23) makes a number of consequential amendments to
include third party adjustments into the tax law. This includes
inserting references to proposed Division 134 into
the following provisions of the GST Act:
- paragraph 19-40(c) (where adjustments for supply arise)
- paragraph 19-45(c) (decreasing adjustments for supplies)
- paragraph 19-70(2)(a) (working out corrected input tax credit
amounts for adjusted acquisitions)
- paragraph 19-75(b) (previously attributed input tax credit
amounts)
- section 19-99 (special rules relating to adjustment
events)
- section 29-39 (special rules relating to attribution
rules)
- section 37-1 (checklist of special rules)
- subsections 54-50(1) and (2) (tax invoices and adjustment
notes)
- section 129-80 (effect of adjustment)
- subsections 131-55(3) and (4) (increasing adjustments relating
to annually apportioned acquisitions and importations)
- Subdivision 153-A (attributing input tax credits, tax invoices
and adjustment notes in the context of agents and insurance
brokers), and
- section 195-1 (dictionary).
Schedule 1 (items 24 to
28) also amends the Taxation Administration
Act 1953 to include:
- third party adjustment notes in the list of statements made in
relation to a tax law that are made to a person other than a
taxation officer (subsection 8J(1)),
- an administrative penalty of 20 penalty units for failing to
issue a third party adjustment note (section 288-45 in
Schedule 1),[16] and
- an offence where principal and agent both issue separate third
party adjustment notes (section 288-50 in Schedule
1).
Schedule 1 applies to payments made on or after
1 July 2010 (item 29).
Schedule 2 to this Bill amends
subsection 29-10(4) of the GST Act by removing any
reference to other provisions in the Act. This will have the same
effect as the previous law, but aims to remove ambiguity in the
interpretation, about which some taxpayers have expressed
concerns.
Schedule 2 applies to net amounts for tax
periods commencing on or after 1 July 2010. It is subject to the
four-year restriction on claiming input tax credits which are
contained in Schedule 1 to the Tax Laws Amendment (2009 GST
Administration Measures) Bill 2009.[17]
Paige Darby and Bernard Pulle
30 March 2010
Bills Digest Service
Parliamentary Library
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2469.
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