Private ruling: GST and amendments and refunds
Published: December 2013

Ruling: Q1: Has the GST group over declared its net amount on account of amounts overpaid as goods and services tax (GST) in respect of the discount. applied to Category 1 and Category 2 supplies, in accordance with Division 17 and Division 19 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes. | Q2: If the answer to question 1 is yes, will the Commissioner amend the GST group's assessed net amounts for the amounts overpaid as GST in respect of the post-self assessment period in accordance with Division 155 of Schedule 1 to the Taxation Administration Act 1953 (TAA)? | A2: There is no impediment in the legislation to stop the Commissioner from amending your net amounts in accordance with Division 155 of Schedule 1 to the TAA in the current circumstances | Q3: Assuming the answer to question 2 is yes; will section 105-65 of Schedule 1 to the TAA operate to limit to any extent the GST group's entitlement to a refund for the amounts overpaid as GST, as a result of the discount applied to Category 1 and Category 2 supplies? | A3: No, section 105-65 of Schedule 1 to the TAA does not apply. | Q4: If the answer to question 3 is yes, will the Commissioner exercise his discretion under section 105-65 of Schedule 1 to the Taxation Administration Act 1953 (TAA) to allow you a refund of the goods and services tax (GST) when you incorrectly included GST in the price of a non-taxable supply? | A4: As section 105-65 of Schedule 1 to the TAA does not apply there is no requirement to respond to this question. Note The following different legislative provisions may apply depending on the particular tax period being amended: · for tax periods starting before 1 July 2012 (self-actuating system), Division 105 of Schedule 1 to the Taxation Administration Act 1953 (TAA) applies. · for tax periods starting on or after 1 July 2012 (self-assessment system), new Division 155 of Schedule 1 to the TAA applies. (This Division contains rules relating to assessments. The rules in this Division deal with the following: (a) how assessments are made or amended and their effect; and (b) review of assessments.) 155-35(1) The Commissioner may amend an assessment of an *assessable amount within the *period of review for the assessment. SECTION 155-15 SELF-ASSESSMENT 155-15(1) The Commissioner is treated as having made an assessment under section 155-5 of an *assessable amount mentioned in an item of the following table, if the document mentioned in the item is given to the recipient mentioned in the item: Self-assessed amounts Item Column 1 Assessable amount Column 2 Recipient Column 3 Document 1 your *net amount for a *tax period the Commissioner your *GST return for the tax period EM Self assessment 1.23 The assessment system allows a majority of taxpayers to self assess their tax-related liabilities and tax-related entitlements through the lodgment of the relevant return for a tax period. On lodgment, the Commissioner is treated as having made an assessment for the reported tax period and the return is deemed to be the notice of assessment for that tax period. The assessment is worked out in accordance with the information set out in the return. Assessment by the Commissioner 1.25 A limited number of taxpayers, such as non-business taxpayers claiming fuel credits, are not be able to self assess. Instead, the Commissioner is required to make an assessment from the information given to him or her by the taxpayer, and is required to issue the taxpayer with a notice of assessment. Period of review 1.26 As part of establishing an assessment system, Schedule X1 introduces a four year period of review during which the assessment may be amended. The period of review commences when the taxpayer is issued with a notice of the assessment (in most cases, this will be the same day the taxpayer lodges his or her return). The period of review may be extended in certain circumstances.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. · You are the representative member of a GST group, which includes amongst its members Company A and are registered for GST. · The GST group accounts for GST using monthly tax periods and on an accruals basis. · Company A makes supplies to Australian customers. In all cases, this supply has been treated as subject to GST at 10%. · During the relevant tax periods, aside from a small scale trial involving a small amount of commercial customers, Company A's customer base was exclusively domestic users, which for the purposes of this application are assumed to have acquired their supplies exclusively for a private or domestic consumption. · The supplies to commercial customers should be disregarded for the purposes of this ruling. · In making the supplies to customers, during the relevant period Company A offered a discount on the account. The discount was granted automatically by Company A's billing system in circumstances where the terms of the customer contract provided for a discount, and the customers paid their account on or before the nominated due date of the invoice. · The amount of the discount varied between the individual products involved and the package signed up for by the customer. The discount has typically been between 5% and 20% of the pre-discount charges (including GST). That is, the discount has been calculated to be inclusive of GST. · Due to a systems oversight, the GST group has calculated the GST on the supplies in the relevant period without regard to the discount. That is to say, its GST liability of such taxable supplies was determined based on the full consideration invoiced, before any allowance was made on account of the customer's discount entitlement (if any). · No adjustment or reduction has been recorded in any GST returns to reflect the effective reduction to the consideration arising from the discount applying in the relevant period. · This has resulted in the GST group having over-disclosed and over-paid its net amount on the supplies in the relevant period. · The GST group's attribution of GST payable on the supplies for the purposes of the GST law has generally been triggered by Company A issuing a periodic invoice to its customers'. · As a practical matter, Company A's invoices are issued progressively throughout the month (i.e. some customers may be issued invoices at the beginning of the month, whilst other customers may receive invoices toward the middle or end of the month). · As noted above, a customer's eligibility for the discount automatically arises when an invoice is paid on or before its due date. The payment due date for each invoice is normally between 14 and 20 days following the invoice issue date (although this varies between individual Australian states and territories owing to differences between the regulatory environments). · The GST overpayments in relation to the discount are designated into two broad categories: o Category 1 supplies - those cases where attribution of the GST payable on the supply occurred in one tax period, and the customer became eligible for the discount) in the same tax period. o Category 2 supplies - those cases where attribution of the GST payable on the supply occurred in one tax period, and the customer only became eligible for the discount in a later tax period. · Company A's analysis of historical data indicates that around X% to Y% of customers typically become eligible for the discount. However, Company A does not have sufficiently detailed data to determine the likelihood of discount eligibility on a customer-by-customer basis, and consequently Company A has not been able to conclude that the discount is "almost certain" to be applied in relation to any given customer or in respect of any given invoice. · The Commissioner is requested to assume that, for the purposes of this ruling application, the GST overpayments for each customer invoice relating to the discount are less than $75, and therefore fall within the de minimis limits established in section 29-80 of the GST Act, as modified by regulation 29-80.02 of the GST Regulations. The initial modelling undertaken by Company A indicates those cases where the GST overpayment is above $75 per customer per invoice are immaterial. · The GST overpayment was identified, as a consequence of an accountant previously employed by the GST Group investigating a customer invoice on an unrelated issue. · After seeking GST advice from an accounting firm on the matter, a notification of entitlement to GST refund pursuant to section 105-55 of Schedule Ito the TAA was lodged on xx/xx/ 2012. This notification covers the period from xx/xx/2008 to xx/xx/2012 (inclusive). · The GST group does not anticipate reimbursing a corresponding amount of the GST overpayment to its customers. This is on the basis that the discount applied to the customer's account already reflects the customer's full entitlement to the PPD, which has been calculated as inclusive of GST (i.e. the benefit of a refund of the GST overpayment has already been passed back to the customer). · In the interests of simplicity, the Commissioner is requested to assume that no amount of any refund granted would be re-applied in any other manner (e.g. against another tax debt pursuant to Division 3 or 3A of Part 11B of the TAA).

Relevant legislative provisions: Taxation Administration Act 1953 , Section 105-65 Schedule 1 | A New Tax System (Goods and Services Tax) Act 1999 Subsection 19-10(1). | Section 19-40. | Section 19-55. | Section 21-5. | Section 195-1.

Reasons for decision: Summary: The GST group has over declared its net amount on account of amounts overpaid as GST in respect of the discount applied to Category 1 and Category 2 supplies. The payment of the discount provided by Company A to customers, applied to Category 1 supplies is a discount, and in relation to the Category 2 supplies is an adjustment event. | Detailed Reasoning - Detailed reasoning: Overpayment Miscellaneous Taxation Ruling MT 2010/1 provides the Tax Office's view on restrictions on GST refunds under section 105-65 of Schedule 1 to the TAA but the provisions and reasoning within would apply equally to the provisions of Division 155 of the TAA. Paragraph 20 and paragraphs 54 to 58 provide further context and meaning to the word overpaid and state: 20. In the context of section 105-65, 'overpaid' means the amount that has been remitted must be in excess of what was legally payable on the particular supply in the relevant tax period prior to taking into account or applying section 105-65. 54. For section 105-65 to apply there has to be an overpayment of GST, that is, the amount remitted as GST for a supply in a relevant tax period must exceed the amount which was required to be remitted. 55. The word 'overpaid' as used in paragraph 105-65(1)(a) is not a defined term so it takes its normal meaning. The Macquarie Dictionary relevantly defines 'overpay' as: '1. to pay more than (an amount due).' 56. In Chippendale Printing Co Pty Ltd v. FC of T & Anor 96 ATC 4175; (1996) 32 ATR 128 ( Chippendale ), the Full Federal Court made some observations on the meaning of 'overpaid' in the context of the sales tax regime. Lehane J considered that the concept of overpayment includes both a payment exceeding an amount of tax actually due and a payment, as tax, where no amount of tax was actually due. 57. Tamberlin J compared the previous sales tax legislation with the then relevant current sales tax legislation. Neither legislation defined the term 'overpaid' but a schedule to the new legislation referred to 'overpaid' as an amount paid as sales tax that was not legally payable. Tamberlin J thought this expression would also cover the concept of 'overpaid' in the previous legislation and, furthermore, held that this meaning accords with 'the ordinary meaning of the expression which is '...a sum of money paid in excess of what is due.' 58. Applying the reasoning in Chippendale in the context of section 105-65, the amount of GST that has been remitted as part of the net amount must be in excess of what was legally payable on the particular supply in the relevant tax period prior to section 105-65 being applied. The view that overpaid means 'in excess of what is legally payable' is further supported by the reasoning in Luxottica Retail Australia v. FC of T 2010 ATC 10-119 ( Luxottica ) at paragraph 55. In discussing what was meant by 'overpaid', it was stated: The words must be taken to encompass any payment in excess of the true net amount. In this case you have advised that due to a systems oversight, the GST group calculated the GST on the supplies in the relevant period without regard to the discount. That is to say, its GST liability of such taxable supplies was determined based on the full consideration invoiced, before any allowance was made on account of the customer's discount entitlement. If the discount amount is deducted from the contracted amount payable by the customers to Company A for taxable supplies on the initial tax invoice issued to the customer by Company A, the GST is payable by Company A for taxable supplies made by it calculated on the discounted price (that is, after the discount has been deducted from the contracted amount payable by the customer to Company A). You have overpaid GST of $X and have over declared your net amount on account of amounts overpaid as GST in respect of the discount) applied to Category 1 and Category 2 supplies. | Summary: The period of review starts on the day on which we first give notice of the assessment (in most cases, this will be the same day you lodge your activity statement) and ends four years from the day after the notice of assessment is given. An assessment can be amended by us either on your application or at our discretion. There is no impediment in the legislation to stop the Commissioner from amending your net amounts in accordance with Division 155 of Schedule 1 to the TAA in the current circumstances | Detailed Reasoning - Detailed reasoning: Period of review For tax periods and fuel tax return periods commencing on or after 1 July 2012, a four year period of review applies where we may amend an assessment (that is, GST, LCT, WET or fuel tax credit amounts on the activity statement or claim form for a fuel tax return period). The period of review starts on the day on which we first give notice of the assessment (in most cases, this will be the same day you lodge your activity statement) and ends four years from the day after the notice of assessment is given. After the period of review ends, an amendment will only be made by us in limited circumstances, to give effect to an application already received, where an assessment has been disputed or where there is fraud or evasion. The period of review to amend an assessment will replace the four year time limits for the recovery of unpaid amounts and the entitlement to unclaimed refunds that apply to tax periods and fuel tax return periods commencing before 1 July 2012. Example 5: Applying for an amendment during the period of review Esmeralda runs a jewellery store and is registered for GST. She lodges an activity statement for the tax period ending 30 September 2012 on 28 October 2012. Her four year period of review starts on 28 October 2012 and ends on 29 October 2016. Esmeralda applies for an amendment on 14 May 2013 which is within the period of review. Amendments There is only ever one assessment for a particular tax period, whether initiated by us or you. Any change to an assessment results in an amendment. An assessment can be amended by us either on your application or at our discretion (for example as a result of an audit). An amendment application made by you includes one applied for by you on advice from us, for example a voluntary disclosure to access penalty concessions. Amendment applications made by you must be made within the four year period of review. Where an assessment is amended and as a result of the amendment, an additional amount is payable, this amount becomes payable on the original due date for payment. Amounts not paid by the original due date accrue the general interest charge. For example, if your net amount payable of $10,000 due on 28 October 2012 is later amended to be $15,000 then the extra $5,000 is also due on 28 October 2012. The general interest charge accrues from that date. If you lodge an activity statement late and we have already raised an assessment, your activity statement will be treated as an application for an amendment. The way in which you apply for an amendment, the decision we make on that application and the timing of the amendment will determine the way we notify you of the result of that request. You may apply for an amendment using a revised activity statement or by making a request in writing. Amendments outside of the period of review We may still make an amendment after the period of review has ended if you apply for a private ruling, or request an amendment within the period of review. This means that where we have not processed your amendment or private ruling application before the end of the period of review, we are still able to make the amendment or give effect to the ruling after the period ends. Where we advise you to seek an amendment, and you choose not to apply for one, the usual time limits apply. If you choose to apply for an amendment, this does not extend the period of review. We may also make an amendment at any time to give effect to anti-avoidance declarations and to give effect to a decision relating to objections, reviews or appeals or where there is fraud or evasion. Applying for an amendment using a revised activity statement Where you apply for an amendment using a revised activity statement (paper RBAS), or lodge electronically via electronic lodgement service (ELS), electronic commerce interface (ECI), Standard Business Reporting (SBR) or portal, a notice of amended assessment will not issue when: · we amend the assessment in full as a result of the application (that is, we fully accept your amounts), and · the amendment is made during the period of review. The application for amendment will be taken to be the notice of amended assessment issuing on the day we adjust your running balance account. Treating your application as a notice of amended assessment reduces compliance costs and the volume of paperwork you receive. Example 4(a): Applying for an amendment by revising an activity statement Jik runs a bicycle shop and is registered for GST. On 28 October 2012 Jik lodges an activity statement for the tax period ending 30 September 2012. On 14 May 2013 Jik lodges a revised activity statement which increases her entitlement to GST credits by $100. We make the amendment and on 22 May 2013, a credit of $100 is posted on Jik's running balance account. Because the amendment made was the exact amendment applied for, the revised activity statement lodged by Jik is treated as her notice of amended assessment dated 22 May 2013. Applying for an amendment in writing Where you write to us during the period of review and this amendment application is accepted, this application will not be treated as a notice of amended assessment. We will issue a notice of amended assessment. Conclusion As you are still within the period of review for the tax periods between 1 July 2012 and 31 May 2013 you may amend your BAS' to reflect the correct amounts. Correcting GST errors Please note the following relevant information: The guide Correcting GST errors explains how to correct GST errors you made on an earlier activity statement. In particular, it explains when you can correct GST errors on a later activity statement, in accordance with Goods and Services Tax: Correcting GST Errors Determination 2013 which took effect from 10 May 2013 (also accessible at www.ato.gov.au) In this case you may claim a refund of the overpaid GST in accordance with the procedures outlined in the ATO publication ' Correcting GST errors '. | Summary: Section 105-65 of Schedule 1 to the TAA does not apply to limit the refund of the GST overpayment. | Detailed Reasoning - Detailed reasoning: Under the general rules the Commissioner is required to give a refund or apply that amount in accordance with the running balance account provisions in Divisions 3 and 3A of Part IIB of the TAA. However, the requirement to give a refund of overpaid GST is subject to section 105-65 of Schedule 1 to the TAA which modifies the general rules so that the Commissioner need not give a refund or apply that amount if an entity overpaid its net amount or an amount of GST where the requirements of the section are satisfied. Subsection 105-65(1) of Schedule 1 to the TAA states: (1) The Commissioner need not give you a refund of an amount to which this section applies, or apply (under Division 3 or 3A of Part IIB) an amount to which this section applies, if: (a) you overpaid the amount, or the amount was not refunded to you, because a *supply was treated as a *taxable supply, or an *arrangement was treated as giving rise to a taxable supply to any extent; and (b) the supply is not a taxable supply, or the arrangement was treated as giving rise to a taxable supply, to that extent (for example, because it is *GST free); and (c) one of the following applies: (i) the Commissioner is not satisfied that you have reimbursed a corresponding amount to the recipient of the supply or (in the case of an arrangement treated as giving rise to a taxable supply) to an entity treated as the recipient; (ii) the recipient of the supply, or (in the case of an arrangement treated as giving rise to a taxable supply) the entity treated as the recipient, is *registered or *required to be registered. Note: * asterisk denotes a defined term in the Act Whether subsection 105-65(1) of Schedule 1 to the TAA applies to your circumstances The restriction on refunds of overpaid GST under section 105-65 of Schedule 1 to the TAA will apply if all three of the following conditions are satisfied: · there was an overpayment of GST, · a supply was treated as a taxable supply when it was not a taxable supply or was taxable to a lesser extent, and · either the recipient has not been reimbursed a corresponding amount of the overpaid GST and/or the recipient of the supply is registered or required to be registered for GST. Miscellaneous Tax Ruling MT 2010/1 provides the view of the Commissioner on section 105-65 of Schedule 1 to the TAA. Paragraph 20 of MT 2010/1 explains the meaning of "overpaid". In the context of section 105-65 of Schedule 1 to the TAA, "overpaid" means the amount that has been remitted must be in excess of what was legally payable on the particular supply in the relevant tax period prior to taking into account or applying section 105-65. Discount In this case there has been an overpayment of GST. The overpayment occurred because consideration for the supply decreased as a consequence of the application of the discount. Secondly, the supplies made by Company A are and at all times have been taxable supplies and have been treated as taxable supplies. Lastly, the customers' discount entitlement for both Category I and Category 2 supplies was calculated by reference to the pre-discount usage charges on a GST-inclusive basis. The customers have already received the benefit of the GST component which was over-declared and overpaid by the GST group to the Commissioner. Consequently, as the GST group has not accounted for the discount in calculating its net amount, the GST overpayment has been borne by the GST group, and not the customer. Accordingly, as the three conditions are not satisfied and in accordance with our view in MT 2010/1, section 105-65 will not apply to restrict the amount of refund payable to you in these circumstances. You are therefore entitled to a refund of the overpaid GST. | Detailed Reasoning - Detailed reasoning: As section 105-65 of Schedule 1 of the TAA does not apply there is no need to consider this question.