ATO ID 2005/227: GST and validity of an arbitrated offer in respect of a long-term non-reviewable contract
Date of decision: 19 July 2005
Business line: Indirect Tax

Issue
Can the entity, a supplier under a long-term non-reviewable contract, make an 'arbitrated offer' in accordance with section 15J of the A New Tax System (Goods and Services Tax Transition) Act 1999 (GST Transition Act) if the assessor's determination of an appropriate price change is not made within 28 days of the end of the initial offer period?

Decision
No, the entity cannot make an arbitrated offer in accordance with section 15J of the GST Transition Act if the assessor's determination of an appropriate price change is not made within 28 days of the end of the initial offer period.

Facts
The entity is a supplier under a long-term non-reviewable contract. The entity wishes to change the price for the supply it makes under the contract to account for the goods and services tax (GST) payable from 1 July 2005. The entity and the recipient of the supply are unable to agree on a price change. The entity decides to use the arbitration process provided by Subdivision C of Division 2 of the GST Transition Act. In accordance with section 15K of the GST Transition Act, the entity makes an initial offer to the recipient to change the price of the supply. The recipient fails to accept the offer. In accordance with section 15L of the GST Transition Act, the entity then applies to an arbitrator for appointment of an assessor to determine an appropriate price change. The assessor does not make the price determination within the prescribed 28 day period as required under paragraph 15L(1)(d) of the GST Transition Act.

Reasons for decision
Summary: Section 15J of the GST Transition Act provides that a final offer to change the consideration for supplies, that are made on or after 1 July 2005 and that are specifically identified by an agreement of a kind referred to in subsection 13(1) of the GST Transition Act, is an arbitrated offer if: The arbitration process in section 15L of the GST Transition Act is a prescribed arbitration process. Paragraph 15L(1)(d) of the GST Transition Act specifically provides that the assessor's determination of an appropriate change to the consideration 'must be made within 28 days of the end of the offer period ...' As the assessor's determination was not made within the prescribed 28 day period, the entity has not met the requirements of section 15L of the GST Transition Act. Therefore the entity cannot make an 'arbitrated offer' in accordance with section 15J of the GST Transition Act.

Legislative references: A New Tax System (Goods and Services Tax Transition) Act 1999 subsection 13(1) Division 2 Subdivision C section 15J section 15K section 15L paragraph 15L(1)(d) section 15M
Related ATO interpretative decisions: ATO ID 2005/228
Other references: GST and long-term non-reviewable contracts (NAT 12997)
Subject references: Goods and services tax GST long term lease GST property & construction GST transitional issues