Private ruling: GST and adjustment events
Date of advice: 7 December 2017
Published: April 2018

Ruling: Q1: Did you have an adjustment event for a supply pursuant to section 19-40 when you agreed to repay $xxx to the Liquidator? | A1: Yes | Q2: To which tax period do you attribute any adjustment? | A2: The mmyy tax period, subject to you holding a valid adjustment note.

Relevant facts and circumstances: You are registered for GST. You report monthly on a non-cash basis. You are a service provider, who supplied services to the liquidated company. When the company was placed in receivership and ultimately liquidation, they owed $xxx. The Liquidator, commenced a review and took certain actions against creditors of the former company, including you. After protracted negotiations regarding alleged preference payments made by the company to you for services supplied, you reached a settlement. The settlement was set out in a Deed of Settlement and Release (Deed) executed in mmyy. Pursuant to the Deed, it was agreed that you would repay $xxx to the Liquidator.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 19-10 | A New Tax System (Goods and Services Tax) Act 1999 section 19-45 | A New Tax System (Goods and Services Tax) Act 1999 section 29-20

Reasons for decision: Summary: Under paragraph 19-10 (b), an adjustment event is any event which has the effect of changing the consideration for a supply or acquisition. When you agreed to repay the $xxx, for supplies made to the company prior to the appointment of the Liquidator this constituted an event which had the effect of changing the consideration for your earlier supply of services to the former company. Under section 19-45, you will have a decreasing adjustment in respect of the GST payable on the earlier supplies as a result of this adjustment event. This is on the basis that the corrected GST on those supplies will be less than the GST previously attributed on those supplies. Subsection 29-20(1) provides that such adjustments are attributable to the tax period in which you became aware of the adjustment. As you became aware of the adjustment in the mmyy period, your decreasing adjustment will be attributable to that same tax period. You are required to hold a valid adjustment note.