Private ruling: Election to report your GST using instalments for the relevant financial year.
Published: February 2013
Ruling period: N/A
Date scheme commenced: N/A

Ruling: Q1: Will you be eligible to report GST under section162-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to pay goods and services tax (GST) by instalments for the financial year ending 30 June 2012? | A1: No. You are not eligible to pay GST by instalments for the financial year 2012/13. Your GST reporting method has been amended to full reporting under option 1 from 1 July 2012.

Relevant facts and circumstances: You are a small business and are registered for GST from 26 March 2012. You reported your GST quarterly using the full reporting method under option 1 for the financial year 2011/12. On 28 September 2012 your tax agent accessed your account via the portal and selected option 3 in the September 2012 BAS in error. On 2 September 2012 the ATO dispatched the September Activity statement with a zero instalment amount at label G21 under option 3, the nil instalment amounts were based on your last 12 month lodgement history. You lodged four nil activity statements for the quarter ending March 2012; June 2012; September 2012 and December 2012 (four AS). Your four AS were all lodged on time. Therefore this did not prevent you from being eligible to use option 3. Your turnover is less than $20 million and you do not lodge monthly, therefore this was not a reason for you to become ineligible. During December 2012 you purchased industrial premises, however you received a December 2012 quarterly GST instalment notice which prevented you from claiming the input tax credit relating to the purchase of the property. You realised the September 2012 quarter was incorrectly completed using option 3 instead of option 1. You attempted to correct this error by cancelling your GST registration effective 15 November 2012 with a new GST registration commencing on 10 December 2012. You then attempted to lodge your December quarterly using option 1 with a refund amount reported at label 9. The ATO systems recognised your original election to use option 3 to report your GST and your December 2012 activity statement was recorded as nil. On 7 February 2013, we received your letter and Statutory declaration from your agent asking the Commissioner to correct your Goods and Services Tax (GST) reporting method from instalments under option 3 to full reporting under option 1. On 11 February 2013 we issued you with a Private Binding Ruling (PBR) authorisation 1012419617568. We have reviewed the facts of this PBR and the decision in this ruling will supersede the PBR issued under authorisation 1012419617568.

Relevant legislative provisions: Explanatory Memorandum to the Taxation Laws Amendment Act (No. 3) of 2001 (Cth) Paragraph 2.4. | A New Tax System (Goods and Services Tax) Act 1999 Section 162-5.

Reasons for decision: Summary: The purpose of the GST instalment system is to reduce compliance costs and provide certainty for small businesses about their GST liability for a quarter. Paragraph 2.4 of the Explanatory Memorandum relating to the Taxation Laws Amendment Act (No. 3) 2001 (TLAA EM) states: '2.4 An eligible entity may choose to pay GST by instalments and lodge an annual GST return. This choice involves: paying a quarterly GST instalment worked out by the ATO on a quarterly form; and accounting for any difference between actual GST liability and the total GST instalments for the year on an annual GST return covering the financial year.' Under section 162-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) you are eligible to elect to pay GST by instalments for a financial year if you: · do not exceed the instalment turnover threshold, which is currently $2 million · the current tax period applying to you is not effected by an election or determination · of one month tax periods or a special determination of tax periods under Division 27 of the GST Act · your current GST lodgement record is at least four months old · you have complied with all your obligations to lodge GST returns, and · you are not in a net refund position. In your case, during the 2012/13 financial year you: · have not exceeded the instalment turnover threshold currently $2 million, · have not made any other lodgement cycle election and you have not received a determination from the Commissioner to change your reporting cycle, · are not reporting your GST monthly, · you were registered for GST on 23 December 2002 therefore your lodgement history is more than four months old, · have lodged all activity statements before they were due. However our records indicate your nil lodgements have incorrectly resulted in an offer being made to use option 3 as we consider the instalment amount of zero is not a payment amount. The issue to determine in this case is, how does the ATO determines if you are in a net refund position? The fact sheet called 'GST instalments' NAT 4238 explains how to work out if an entity is in a net refund position. In part it states: You must not: · lodge your activity statement monthly · be in an overall GST net refund position in the previous year (not including the first activity statement you lodged). A GST net refund position means that your total GST credits were more than the total GST payable on your previous activity statements (see, Working out if you are entitled to a refund ). Working out if you are entitled to a refund You are entitled to a refund if your total GST credits were more than the total GST payable on your previous activity statements. We work this out from your previous activity statements for a maximum of 12 months, but do not include your first three months' lodgement. You are not entitled to a refund if, at the start of the year: you have lodged activity statements for at least 13 months your total GST payable is more than your total GST credits for the last 12 months. In your case, you lodged all your activity statements from January to December 2012 as nil. This has resulted in the ATO issuing you with a zero instalment amount at label G21 on your September Activity statement. In accordance with Paragraph 2.4 of the EM you are not 'paying a quarterly GST instalment worked out by the ATO on a quarterly form'. Your total GST payable is neither more nor less than your total GST credits. Furthermore, zero is not an amount payable. Therefore, you were not eligible to elect to pay GST by instalments for the 2012/2013 financial year in accordance with section 162-5 of the GST Act. Your GST reporting method has been returned to option 1 with effect from 1 July 2012. Your September and December 2012 Activity statements have been finalised as nil Business Activity statements.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.