ATO ID 2008/75: GST and a retrospective application of a changed apportionment method under Division 11
Date of decision: 8 May 2008
Business line: Indirect Tax

Issue
Can the entity, a financial supply provider, change its apportionment method which is fair and reasonable and revise an earlier net amount, by applying a new apportionment method which is also fair and reasonable?

Decision
Yes, the entity can change its apportionment method, and revise an earlier net amount, by applying a new apportionment method which is also fair and reasonable.

Facts
The entity is a financial supply provider which is registered for goods and services tax (GST). The entity carries on an enterprise and makes financial supplies and taxable supplies in Australia. The entity makes acquisitions for the purpose of making financial supplies and taxable supplies. The entity accounts on a non-cash basis. The entity exceeds the financial acquisitions threshold and is not entitled to claim input tax credits to the extent that the acquisitions relate to making financial supplies but may be entitled to claim reduced input tax credits on reduced credit acquisitions. The entity in making an input tax credit claim in a GST return for the relevant tax period estimated the planned use of its acquisitions by applying a fair and reasonable apportionment method as set out in Goods and Services Tax Ruling GSTR 2006/3 (the first apportionment method). The entity held the relevant tax invoices in this tax period. Then, at a later time, the entity determined that by applying another apportionment method, which is also fair and reasonable and in accordance with GSTR 2006/3 (the second apportionment method), its entitlement to an input tax credit in the GST return for the earlier period could increase. The entity revised its GST return for that period to make this claim.

Reasons for decision
Summary: The entity lodged a GST return under Division 31 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). In this return, the entity provided the net amount for the original tax period. The net amount, as required under subsection 17-5(1) of the GST Act, is the GST less any input tax credits. The input tax credits for the purposes of section 17-5 of the GST Act is the sum of all of the input tax credits to which an entity is entitled for the creditable acquisitions and creditable importations that are attributable to the tax period. An entity makes a creditable acquisition , under section 11-5 of the GST Act, when that entity: The entity made creditable acquisitions which were only partly for a creditable purpose, as defined in subsections 11-15(1) and (2) of the GST Act. These subsections provide that: The entity made an input tax credit claim in the original tax period, to the extent that the acquisitions are partly creditable by applying the formula in subsection 11-30(3) of the GST Act, which is: Full input tax credit * Extent of creditable purpose * Extent of consideration In order to calculate the extent of creditable purpose, the entity applied a fair and reasonable apportionment method, as prescribed in GSTR 2006/3, to the acquisitions made (the first apportionment method). Then, at a later point in time, the entity determined that another apportionment method (the second apportionment method) could be applied, which is also fair and reasonable and in accordance with GSTR 2006/3, to increase the input tax credit entitlement lodged in the GST return for the original tax period. The entity is entitled to revise the original net amount lodged in the GST return for the original tax period by amending its input tax credit claim. The revised net amount reflects a correct input tax credit entitlement when the new method (the second apportionment method) is also fair and reasonable and in accordance with GSTR 2006/3 given the facts and circumstances which existed at that time.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 11-5 subsection 11-15(1) subsection 11-15(2) subsection 11-30(3) section 17-5 subsection 17-5(1) Division 31 section 93-5
Related public rulings and determinations: Goods and Services Tax Ruling GSTR 2006/3
Subject references: Creditable acquisition Goods and services tax GST input tax credits & creditable acquisitions GST net amounts & adjustments GST returns GST returns, payments & refunds GST supplies & acquisitions GST supply Net amounts Taxable supply