Date posted: 31/08/2023

Submission on attributing GST input tax credits – exposure draft legislation

Treasury has released draft legislation regarding the attribution of GST input tax credits. CA ANZ recommends that introduction of the proposed provisions to Parliament be delayed

In brief

  • There are three different issues affecting input tax credits attribution which require contemporaneous consideration.
  • The ATO’s interpretation of “taken into account in an assessment” will affect the effectiveness of the draft legislation
  • CA ANZ questions the effectiveness and compliance costs of requiring an election to attribute input tax credits

Treasury has released draft legislation regarding the attribution of input tax credits that is contained in “Treasury Laws Amendment (Measures 4 for Consultation) Bill 2023.”

CA ANZ recommends that introduction of these proposed provisions to Parliament be delayed so that the interaction of these provisions can be considered contemporaneously with other expected changes involving input tax credits to ensure that the interactions work as intended.

CA ANZ raises queries regarding:

  1. how the exposure draft provisions will interact with the Legislative Instrument 2023/D13.  The intent of LI 2023/D13 is to enable taxpayers to rectify GST errors from a prior tax period in a return for a subsequent tax period in certain circumstances, thus removing the need to lodge an amendment request. The legislative instrument affects the net amount of a later period but is silent about attribution.  CA ANZ suggests that it would be useful to have an express provision dealing with attribution of GST and income tax credits under the Determination and making clear that such errors do not then fall under the proposed new subsection 29-10(4) thus needing an election to be made.
  2. The lack of guidance regarding how the ATO will interpret the meaning of “taken into account in an assessment” in section 93-5 GST Act.  MT 2018/D6 which contained the ATO understanding of this phrase was withdrawn in December 2019 due to judicial decisions which contradicted the ATO’s stated position.  The ATO has not issued new guidance on this matter.  This will impact this current consultation as that phrase is also used in the proposed new section 29-10(4)(b).

To trigger the ability to use these attribution provisions the proposed legislation requires an election to be made.  CA ANZ has two concerns about the use of the election.

  1. It allows the wrongly attributed input tax credit to be applied to a subsequent period but not a prior period.  A common situation is where a corporate has acquired a good/service during a tax period and has the tax invoice before the business activity statement (BAS) is lodged, but the accounts payable department process the tax invoice in the next tax period.  Therefore, the input tax credit is claimed in the subsequent BAS.  The proposed election would not cover this scenario.
  2. An election is an extra compliance burden which is not needed when natural business system records can be relied upon.  

Correcting GST errors and legislative determination 2023/D13

CA ANZ has lodged a submission about legislative determination 2023/D3 which outlines the ATO’s views on when a GST error ATO can be corrected.

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