ATO ID 2004/449: GST and exercise of discretion to allow late election to pay GST by instalments: instalment paid but activity statement unintentionally not lodged
Date of decision: 6 April 2004
Business line: Indirect Tax

Issue
Will the Commissioner exercise his discretion under subsection 162-25(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to allow the entity, a business operator, to make a late election to pay goods and services tax (GST) by instalments when:

Decision
Yes, the Commissioner will exercise his discretion under subsection 162-25(3) of the GST Act to allow the entity to make a late election to pay GST by instalments since the entity is eligible to elect to pay GST by instalments and, having regard to the entity's good compliance history, exceptional circumstances led to the entity not making its election by the due date.

Facts
The entity is a business operator that is registered for GST. The entity paid GST by instalments in previous financial years, making its elections by the due date. The entity meets the requirements in section 162-5 of the GST Act to elect to pay GST by instalments and made this election on its September quarter AS. The entity paid its September instalment at the Post Office by the due date. The entity thought it had also sent its September AS at this time. When the December AS was to be lodged the entity discovered that it could not pay its GST by instalments as it has not lodged is September AS and therefore, had not elected to pay GST by instalments. The entity has requested, in the approved form, the Commissioner exercise his discretion to allow the entity to make a late GST instalment election. The entity has a good compliance history including lodging their ASs by the due date and paying GST instalments on time.

Reasons for decision
Summary: An entity that wants to and is eligible to pay GST by instalments must make an election: However, pursuant to subsection 162-25(3) of the GST Act, the Commissioner may, in accordance with a request from an entity in the approved form, allow the entity to make its election on a specified day occurring after the day provided for under subsection 162-25(1) or 162-25(2) of the GST Act. This discretion is exercised on a case by case basis after considering the individual circumstances of the entity. The discretion in subsection 162-25(3) of the GST Act only gives the Commissioner a discretion in relation to the date of an entity's election. It does not give the Commissioner a discretion in relation to an entity's eligibility to elect to pay GST by instalments. Therefore, an entity must still meet the eligibility requirements in subsection 162-5(1) of the GST Act before the Commissioner is able to allow an entity to elect to pay GST by instalments after the legislated due date of the election. That is, the Commissioner is unable to allow an entity to elect to pay GST by instalments late where the entity is not eligible to pay GST by instalments. Factors the Commissioner will consider when determining whether he will allow an entity to make a late election include: The entity is eligible to elect to pay GST by instalments and has applied in the approved form for the Commissioner to exercise his discretion. The entity paid its September instalment on time and believed that it has also posted its AS to the Tax Office. The entity was unaware that it had not lodged its September AS, and therefore had not made its election to pay GST by instalments, until it was time to lodge is December AS. This circumstance, of itself, is not an exceptional circumstance such that it warrants the Commissioner exercising his discretion. However, the entity has a good compliance history, including complying with its obligations to give GST returns to the Commissioner and paying GST instalments on time. In addition, the entity's previous elections to pay GST by instalments were made by the due date. Therefore, the entity's failure to elect to pay GST by instalments by the due date is an exceptional circumstance having regard to their history. Its late election is a one off occurrence. Therefore, the Commissioner will exercise his discretion under subsection 162-25(3) of the GST Act to allow the entity to make a late election to pay GST by instalments.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 162-5 subsection 162-25(1) subsection 162-25(2) subsection 162-25(3)
Related ATO interpretative decisions: ATO ID 2004/447 | ATO ID 2004/448
Subject references: Goods and services tax GST payments GST returns, payments & refunds