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All rights reserved. No part of this work covered by copyright may be reproduced or copied in any form or
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ISBN 978-1-922347-00-8

FOREWORD
This 2020 edition of the Australian Master GST Guide, the 21st in the series, is designed as a practical
and up-to-date explanation of how the GST operates in Australia.
This book aims to:
• help businesses and their advisers to manage and comply with the tax

• equip them to take advantage of some of the opportunities that GST offers, and

• help them to avoid some of the many traps that GST presents.

Plan of this book

Part 1 provides a brief overview of how GST operates and covers the crucial issues in understanding the
tax (Chapters 1 and 2).
The nuts and bolts rules on how GST operates are contained in Part 2. This covers the standard rules on
registration, tax periods, accounting basis, GST liability, claiming credits for GST, adjustments, returns
and payments (Chapters 3 to 8).
Part 3 contains the special rules that apply in areas such as imports and exports, finance, insurance, real
property, transport, food, health, education, charities, gambling, second-hand goods, groups and
branches (Chapters 9 to 17).
Vital planning issues — including pricing and cashflow implications — are covered in Part 4. This part
also contains the transitional rules governing pre-GST contracts, and the anti-avoidance rules.
Administration, audits, compliance, penalties and review are also covered here (Chapters 18 to 21).
Part 5 includes related tax measures — the wine equalisation tax and the luxury car tax. It also explains
how GST is treated for income tax purposes and explains various other GST-related tax rules (Chapters
22 to 24).
Useful checklists covering the GST status of transactions are contained in Part 6. This part also includes
special checklists designed to alert you to GST issues that are relevant to particular industries. A mini-
dictionary of GST terms is also included, as well as a checklist of key GST thresholds (Chapters 25 and
26).
Throughout the text, there are convenient cross-references to commentary in CCH’s flagship Australian
GST Guide (abbreviated as “GSTG”). A comprehensive index and other information locators appear at
the end of the book.
Changes since last edition
This 2020 edition brings the book fully up to date for all developments since the publication of the
previous edition in January 2019. A listing of the main changes introduced since the last edition of the
book is provided at page xi.
Online editions of this book
Reflecting the dynamic GST environment, this book is also available in a continuously updated online
version — the Online Master GST Guide. This version completely updates the commentary at least each
quarter. It also features electronic links so that you can access the text of specific rulings, legislation or
cases referred to in the online commentary. Sophisticated search facilities also enable you to easily
search the online commentary for references to specific paragraphs, rulings, legislation or cases. For
details, visit Wolters Kluwer’s website at www.wolterskluwer.cch.com.au or contact Wolters Kluwer
Customer Support on 1 300 300 224.
Citations
Unless otherwise stated, section references are to sections in the A New Tax System (Goods and
Services Tax) Act 1999. References to other legislation are prefixed as follows:

Administration Act....................................Taxation Administration Act 1953

ITAA 1997....................................Income Tax Assessment Act 1997
ITAA 1936....................................Income Tax Assessment Act 1936
LCT Act....................................A New Tax System (Luxury Car Tax) Act 1999
Reg....................................A New Tax System (Goods and Services Tax) Regulations 1999
CCA....................................Competition and Consumer Act 2010
Transition Act....................................A New Tax System (Goods and Services Tax Transition) Act 1999
WET Act....................................A New Tax System (Wine Equalisation Tax) Act 1999

This edition is up to date for changes notified up to 1 January 2020.

Philip McCouat

Wolters Kluwer Acknowledgments

Wolters Kluwer wishes to thank the following who contributed to and supported this publication:
Director, General Manger, Research & Learning:
Lauren Ma
Associate Director, Regional Head of Content:
Diana Winfield
Author | Editor:
Philip McCouat
Cover Designer:
Anjali Kakkad
Books Coordinator:
Jackie White

ABOUT THE AUTHOR

Philip McCouat MA, LLB (Hons), LLM (Hons), MEnvL, has many years’ experience in business,
publishing and the law. In the area of tax, he is the author of the GST Survival Guide and the Australian
Motor Vehicle Tax Guide. Philip was the Founding Editor for Tax Navigator for Business Activities and
has been a specialist contributor to many other major publications, most recently the Small Business Tax
Concessions Guide, the Australian Master Tax Guide, Australian GST Legislation and the Australian
Federal Income Tax Reporter.

Highlights of GST developments

This sets out significant GST developments — legislative, administrative or judicial — that have occurred
since the preparation of the previous edition. It also provides cross-references to the paragraph in this
book where the development has been incorporated.

GENERALLY
The GST regulations originally issued in 1999 were reissued with minor procedural and numbering
changes (A New Tax System (Goods and Services Tax) Regulations) 2019.
 CHAPTER 3: REGISTRATION
• Retired police officer was not carrying on an enterprise of private investigations or share trading where
there was no business plan or evidence of systematic activities (NKCX v FC of T)....................................
¶3-020
• The government proposes that the ABN system will be strengthened to disrupt black economy
behaviour by making the ABN conditional on holders (1) fulfilling any obligation to lodge income tax
returns (from 1 July 2021); and (2) annually confirming the accuracy of their details on the ABN register
(from 1 July 2022).................................... ¶3-050
• Legislation was passed to require offshore supplies of hotel accommodation in Australia to be included
in GST turnover.................................... ¶3-030; ¶11-320
 CHAPTER 4: LIABILITY FOR TAX / TAXABLE SUPPLIES
• Where a customer purchased sexual services in a brothel, the relevant supply could not be split up into
a supply of the room hire (by the brothel owner) and a separate supply of the sexual services (by the sex
worker), where the owner supplied the customer with the total service, for a single inclusive price (Case
5/20).................................... ¶4-010
• The Tax Office issued a class ruling on the GST treatment of local government activities (Class Ruling
CR 2019/61).................................... ¶4-080
• Van couriers engaged by a labour hire firm were held to be independent contractors, where they had a
significant financial interest in the van (which had special value as a commercial transport vehicle), and
had some influence in the manner in which they performed the work (Qian v FC of T). However, the Tax
Office does not accept that the fact that a worker supplies his or her own vehicle is a decisive or dominant
factor in determining whether the worker is an independent contractor (Decision Impact Statement on
Qian).................................... ¶4-090
• Draft guidelines were released on where grants of rights are taken to have
occurred.................................... ¶4-102
• The Tax Office finalised its guidelines on when supplies of intangibles are treated as being connected
with Australia, attracting GST liability (GST Ruling GSTR 2019/1).................................... ¶4-102
• Guidelines were finalised on the method of converting digital currency to Australian currency for GST
purposes, effective from 13 April 2019.................................... ¶4-200
 CHAPTER 5: CLAIMING INPUT TAX CREDITS / TAX INVOICES
• The Commissioner has the power to direct a liquidator of a company to give GST returns on behalf of
the company within a further specified period. In such a case, the AAT has held that the four-year period
for claiming input tax credits would start to run from that later date (Rosebridge Nominees Pty Ltd (in Liq)
v FCT).................................... ¶5-010
• Where an input tax credit is claimed, the onus is on the claimant to show that an “acquisition” actually
took place (Byron Pty Ltd v FC of T; Stallion (NSW) Pty Ltd v FC of T).................................... ¶5-010
• The ATO withdrew an earlier draft ruling on time limits for claiming input tax credits and is expecting to
finalise its new ruling in 2020.................................... ¶5-010
• A bill proposes that input tax credits should not be available for losses or outgoings incurred by parties
to a Deferred Prosecution Agreement that are not tax-deductible (Crimes Legislation Amendment
(Combatting Corporate Crime Bill) 2019).................................... ¶5-010
• The Commissioner considers that the discretion to waive or modify the tax invoice requirements will be
exercised on a case-by-case basis. The automatic waiver that applied in certain cases where a court or
tribunal had conclusively found that the acquisition was creditable, and that a credit should be allowed, no
longer applies (Notice of Withdrawal of former GST Determination GSTD 2004/1)....................................
¶5-130
 CHAPTER 8: GST RETURNS / BAS/ PAYMENT/ ASSESSMENT /
REFUNDS
• People affected by the 2019 floods in North Queensland, or the November/December bushfires, may be
eligible for concessional extensions of time in lodging returns or paying GST, and accelerated refunds
where they are in necessitous circumstances.................................... ¶8-005
• For 2019/20, the GDP adjustment factor used in calculating GST instalments is
5%.................................... ¶8-037
 CHAPTER 9: IMPORTS AND EXPORTS
• Legislation was passed to remove luxury car tax on cars re-imported into Australia, following a
refurbishment overseas.................................... ¶9-050; ¶23-050
• The Tax Office reported that, in the first year of their operation, the new rules regulating GST on offshore
supplies of low value goods rules yielded over $250m and enjoyed a “very strong overall level of
compliance”.................................... ¶9-130
 CHAPTER 10: FINANCIAL SUPPLIES AND INSURANCE
• The Tax Office issued detailed guidelines for financial suppliers in relation to the GST governance and
record-keeping procedures necessary to mitigate GST risks.................................... ¶10-000
• The Tax Office finalised its guidelines on determining entitlements to input tax credits for acquisitions
made in the business of issuing credit cards (GST Ruling GSTR 2019/2; Practical Compliance Guideline
PCG 2019/8).................................... ¶10-100; ¶10-030
 CHAPTER 11: REAL ESTATE / ACCOMMODATION / SALE OF
BUSINESS
• The Tax Office provisionally considers that certain schemes, affecting the GST treatment of
arrangements between government agencies and private developers affecting land in the Australian
Capital Territory, are not effective (GST Determination GSTD 2019/D1).................................... ¶11-062
• Legislation was passed to require offshore suppliers of commercial accommodation in Australia to
include those supplies in working out their GST turnover.................................... ¶11-320
• The Tax Office considers that in determining whether Crown land is vacant, “improvements” are not
limited to visible structural improvements, and include clearing, draining and any other operation by
humans on the land that enhances its value and/or usefulness.................................... ¶11-400
 CHAPTER 12: TRANSPORT, TRAVEL AND VEHICLES
• The car limit for 2019/20 is $57,581, unchanged from the previous year.................................... ¶12-110
 CHAPTER 16: GAMBLING, SECOND-HAND GOODS AND OTHER
MEASURES
• In a test case, a gold bullion tax scheme of the type which prompted anti-avoidance measures in 2017
has been ruled to be ineffective.................................... ¶16-210
 CHAPTER 18: ADMINISTRATION / AUDIT/ REVIEW
• From the 2019/20 financial year, third-party reporting of GST-affected transactions is extended to the
road freight, IT and security investigation or surveillance businesses.................................... ¶18-110
• The High Court ruled that legal professional privilege is an immunity for the client that enables them to
resist the compulsory disclosure of privileged information. It cannot be used to enforce the return of
privileged documents that are already in the public domain (Glencore International AG v FC of
T.................................... ¶18-140
• The rates of general interest charge were updated.................................... ¶18-300
• Person who purchased, developed and sold 10 properties at considerable profit, claiming that they were
for personal use, and did not lodge GST returns, was found to be carrying on a business of property
dealing and sentenced to 34 months’ jail for avoiding $1.7m in GST.................................... ¶18-300
• Company director was sentenced to four and half years imprisonment for tax fraud, where he
fraudulently reported export sales, resulting in the company receiving substantial GST refunds, and failed
to disclose significant personal taxable income (ATO Media Release).................................... ¶18-300
• Effective from 1 March 2019, the AAT has a separate Small Business Taxation Division to deal with
disputes between small business entities and the Tax Office. Some additional simplified or assistance
measures also apply.................................... ¶18-650
 CHAPTER 20: ANTI-AVOIDANCE RULES
• A bill was introduced to make directors personally liable for their company’s GST liabilities in certain
situations, and to empower the Commissioner to collect estimates of anticipated GST liabilities in the
same way as anticipated income tax collections. Draft guidelines on estimating liabilities were also
released (Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019; Draft Practical
Compliance Guideline PCG 2019/D4).................................... ¶20-000
 CHAPTER 21: PLANNING / PRICING / CASHFLOW
• In 2019/20, as part of its crackdown on black economy activity, the Tax Office expects to visit around
10,000 small businesses in order to check compliance, with particular attention being paid to Northern
Territory, Queensland and Victoria (ATO Media Releases).................................... ¶21-045
 CHAPTER 23: WINE EQUALISATION TAX
• Guidelines for the attribution of WET where a contract for sale includes a retention of title clause, and
the purchaser sells or uses the wine before title passes, are in Practical Compliance Guideline PCG
2019/3.................................... ¶22-300
 CHAPTER 24: LUXURY CAR TAX
• Legislation was passed to remove luxury car tax on cars re-imported into Australia, following a
refurbishment overseas.................................... ¶23-050; ¶9-050
• The general luxury car tax threshold was increased to $67,525 for 2019/20. The ”fuel efficient” threshold
remains at $75,526.................................... ¶23-150
• Exposure draft legislation was released to implement a Federal Budget proposal that would enable
eligible primary producers and tourism operators to apply for a refund of any luxury car tax paid for
vehicles acquired on or after 1 July 2019, up to a maximum of $10,000.................................... ¶23-210
List of Abbreviations
Unless otherwise stated, section references are to sections in the A New Tax System (Goods and
Services Tax) Act 1999. Other references or abbreviations are:

Administration Act: Taxation Administration Act 1953

CCA Competition and Consumer Act 2010
GST Goods and services tax
GSTG The GST Guide (CCH)
GST Regulations A New Tax System (Goods and Services Tax) Regulations 2019
ITAA 1997 Income Tax Assessment Act 1997
ITAA 1936 Income Tax Assessment Act 1936
LCT Act A New Tax System (Luxury Car Tax) Act 1999
LCT Regulations A New Tax System (Luxury Car Tax) Regulations 2019
s section
Transition Act A New Tax System (Goods and Services Tax Transition) Act 1999
WET Wine equalisation tax
WET Act A New Tax System (Wine Equalisation Tax) Act 1999
WET Regulations A New Tax System (Wine Equalisation Tax) Regulations 2019
HIGHLIGHTS OF RECENT GST CHANGES
¶1 Highlights of recent GST changes

A checklist of recent developments included in this update is given below.

CHAPTER 3: REGISTRATION
Legislation was passed to require offshore supplies of hotel accommodation in Australia to be
included in GST turnover. ¶3-030; ¶11-320
CHAPTER 4: LIABILITY FOR GST/TAXABLE SUPPLIES
Draft guidelines were released on where grants of rights are taken to have occurred. ¶4-102
CHAPTER 5: CLAIMING INPUT TAX CREDITS/TAX INVOICES
Where an input tax credit is claimed, the onus is on the claimant to show that an “acquisition” actually
took place (Byron Pty Ltd v FC of T; Stallion (NSW) Pty Ltd v FC of T). ¶5-010
CHAPTER 9: IMPORTS AND EXPORTS
Legislation was passed to remove luxury car tax on cars re-imported into Australia, following a
refurbishment overseas. ¶9-050; ¶23-050
The Tax Office reported that, in the first year of their operation, the new rules regulating GST on
offshore supplies of low value goods rules yielded over $250m and enjoyed a “very strong overall
level of compliance”. ¶9-130
CHAPTER 10: FINANCIAL SUPPLIES AND INSURANCE
The Tax Office issued detailed guidelines for financial suppliers in relation to the GST governance
and record-keeping procedures necessary to mitigate GST risks. ¶10-000
The Tax Office issued draft apportionment guidelines for acquisitions by banks, credit unions or
building societies in relation to the supply of transaction accounts, such as everyday savings,
cheque, deposit, online savings and term deposit accounts. ¶10-030
CHAPTER 11: REAL ESTATE/ACCOMMODATION/SALE OF BUSINESS
Legislation was passed to require offshore suppliers of commercial accommodation in Australia to
include those supplies in working out their GST turnover. ¶11-320
The Tax Office considers that in determining whether Crown land is vacant, “improvements” are not
limited to visible structural improvements, and include clearing, draining and any other operation by
humans on the land that enhances its value and/or usefulness. ¶11-400
CHAPTER 12: TRANSPORT, TRAVEL AND VEHICLES
The car limit for 2019/20 is $57,581, unchanged from the previous year. ¶12-110
CHAPTER 18: ADMINISTRATION/AUDIT/REVIEW
The High Court ruled that legal professional privilege is an immunity for the client that enables them
to resist the compulsory disclosure of privileged information. It cannot be used to enforce the return
of privileged documents that are already in the public domain (Glencore International AG v FC of T).
¶18-140
The rates of general interest charge were updated. ¶18-300
CHAPTER 20: ANTI-AVOIDANCE RULES
A bill was introduced to make directors personally liable for their company’s GST liabilities in certain
situations, and to empower the Commissioner to collect estimates of anticipated GST liabilities in the
same way as anticipated income tax collections. Draft guidelines on estimating liabilities were also
released (Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019; Draft Practical
Compliance Guideline PCG 2019/D4). ¶20-000
CHAPTER 24: LUXURY CAR TAX
Legislation was passed to remove luxury car tax on cars re-imported into Australia, following a
refurbishment overseas. ¶23-050; ¶9-050
The general luxury car tax threshold was increased to $67,525 for 2019/20. The “fuel efficient”
threshold remains at $75,526. ¶23-150
Exposure draft legislation was released to implement a Federal Budget proposal that would enable
eligible primary producers and tourism operators to apply for a refund of any luxury car tax paid for
vehicles acquired on or after 1 July 2019, up to a maximum of $10,000. ¶23-210
OVERVIEW • BASIC CONCEPTS
INTRODUCTION
What is GST? ¶1-000
A 10-point guide to GST ¶1-010
HOW GST OPERATES
GST liability and input tax credits ¶1-100
Registration ¶1-110
Tax periods ¶1-120
Basis of accounting ¶1-130
GST returns, payments and refunds ¶1-140
Tax invoices and adjustments ¶1-150
Non-taxable and GST-free supplies ¶1-160
Input taxed supplies ¶1-170
Special rules and concessions ¶1-180
Transitional rules ¶1-200
SMALL BUSINESS ENTITIES
Overview: small businesses ¶1-250
Carrying on a business ¶1-255
Aggregated turnover test ¶1-260
Calculating aggregated turnover ¶1-265
Affiliates ¶1-275
Connected entities ¶1-280
LEGISLATIVE BACKGROUND
Sources of GST legislation ¶1-300
Complexity of GST ¶1-310
Interpretation of GST legislation ¶1-315
Commissioner’s rulings ¶1-540

Editorial information

Summary
This chapter explains the main concepts involved with GST and briefly describes how the GST
works. It also identifies the main exemptions, special rules and transitional provisions. Although
presented in simplified form, this chapter is fully cross-referenced so you can use it as a starting
point and then go on to further details of the topics you are interested in.
INTRODUCTION
¶1-000 What is GST?

A 10% goods and services tax (GST) started full operation in Australia on 1 July 2000.
The GST is an indirect, broad-based consumption tax.
Indirect means that it is levied on the supply of goods, services or activities, rather than directly on
income. Other indirect taxes include sales tax and stamp duty.
Consumption tax means, in economic terms, that the tax is ultimately borne by consumers, not by
producers or suppliers.
A broad-based tax means that it applies generally to all transactions made by all types of taxpayers, with
only limited exceptions. It can be contrasted with taxes such as sales tax, which was generally limited to
transactions involving sales, and transactions involving certain types of goods.
GST is similar to taxes known in other countries as value-added taxes (VATs). The “value-added” refers
to the feature that the net tax payable at any one stage is based on the increase in the price.
Despite its name, GST is not limited to “goods and services” in the normally understood sense. For
example, it also applies to real estate and the creation of rights. GST is therefore a convenient but not an
entirely accurate shorthand term.
GST replaced sales tax (more formally known as the wholesale sales tax or WST). The introduction of
GST was also accompanied by the introduction of Wine Equalisation Tax (¶22-000) and Luxury Car Tax
(¶23-000), and by a series of other tax measures, collectively forming part of the so-called New Tax
System. In 2017/18, total annual net GST collections were about $63b, representing about 16% of total
taxation revenue for all levels of government (ATO Annual Report 2017/18). An additional $3b in GST
liabilities was raised through the ATO’s direct compliance activities. The main GST collections are from
property and business services, and the wholesale and manufacturing sectors. There are over two million
actively trading businesses registered for GST.
Although the formal commencement date was 1 July 2000, GST could apply to certain contracts entered
into before that date, under special transitional rules (¶19-000).
No increase proposed in GST
As at 31 December 2018, the government has indicated that it does not intend to propose any increase in
the GST to take effect during its current term.
As a matter of information, the Parliamentary Budget Office has released a summary of the revenue
impacts of various options for changing the GST, including increasing the GST rate and/or removing
some or all of the major exemptions (“Goods and Services Tax: Distributional analysis and indicative
reform scenarios”, Report No 5/2015, 9 December 2015).

¶1-010 A 10-point guide to GST

Here is a 10-point simplified snapshot of how GST works. Each of these steps is explained later in this
chapter.
(1) GST liability. Liability for GST arises where a registered entity — typically a business — makes
supplies to its customers. The GST is imposed at the rate of 10%. Typically, it is included in the price
paid by the recipient of the goods or services. The supplier must account for the amount of GST to
the Tax Office (¶1-100).

(2) Getting credits for GST. If the recipient of goods or services is a registered entity, it will normally be
 able to claim a credit for the amount of GST in the price, provided it holds a tax invoice. This credit —
called an input tax credit — is offset against any GST which the business itself is liable to account for
on goods and services it has supplied to its own customers (¶1-100).

(3) Burden on end-consumer. The net effect is that registered entities receive an amount representing
GST but do not keep it, and pay an amount representing GST but get a credit for it. This means that
they act essentially as collecting agents for the tax. The ultimate burden of the tax falls on the private
consumer of the goods and services, as this person gets no credit for the GST component of the
price (¶1-100).

(4) Registration. Most entities will have to register for GST, although there are some exceptions. If an
entity is not registered, GST normally cannot apply to the supply, and the supplier cannot claim
credits for the GST component of its acquisitions (¶1-110).

(5) Accounting basis and tax periods. GST and input tax credits are allocated to particular tax periods
either on a cash basis (based on when amounts are received or paid out) or on an accruals basis
(based on when invoices are sent or received). There are restrictions on who can use the cash basis
(¶1-130). Tax periods may be monthly, quarterly or, in some limited situations, annually. Monthly tax
periods are compulsory in some situations, such as where GST turnover is $20m or more (¶1-120).

(6) Returns. Entities account to the Tax Office for their GST liabilities and credit entitlements by making
a GST return in their Business Activity Statement (¶1-140). A separate GST return is made for each
tax period, though some exemptions apply to quarterly taxpayers on the “instalments” system.

(7) Tax or refund? If the GST allocated to a tax period is more than the credits for that period, the entity
pays the balance to the Tax Office. If the credits exceed the GST, the entity gets a refund (¶1-140).
Adjustments may need to be made later if there is a change of circumstances (¶6-000).

(8) GST exemptions. Some transactions are outside the scope of GST altogether because, for
example, they are gifts, or made by unregistrable entities, or have no connection with Australia.
Others are “GST-free” which means that GST does not apply to the supply, but the supplier can claim
credits for the GST on its own related acquisitions. The main GST-free items are exports, healthcare,
food, education, international travel and certain charitable activities (¶1-160).

(9) Input taxed supplies. A small range of supplies are “input taxed”. This means that GST does not
apply to the supply, and the supplier cannot claim credits for the GST on its own acquisitions. The
main input taxed items are financial services and the supply of residential rental premises (¶1-170).

(10) Special rules apply to a wide range of items including imports, land development, insurance, motor
vehicles, second-hand goods, small businesses, charities and gambling (¶1-180).

HOW GST OPERATES

¶1-100 GST liability and input tax credits

GST applies where you supply goods or services — including real property and rights — in the course of
carrying on an enterprise such as a business. These are called taxable supplies. For there to be a taxable
supply, you must normally be registered, the supply must be made for consideration and it must be
connected to Australia (¶4-000).
The typical example of a “supply” is a sale, but anything else that could be described as supply in the
normal sense of the word is also covered. A supply includes creating or surrendering a right (¶4-010).
The rate of GST is 10%. This is typically included in the price paid to you by your customer. You must
account for the amount of GST to the Tax Office.
If you acquire goods or services as part of your business, you can claim a credit for the GST component
of the price. This is called an input tax credit because it is a credit on your business inputs. For this to
apply, you must normally be registered, the acquisition must be for consideration and the supply must be
connected to Australia (¶5-010).
The combined effect of these rules is that the ultimate burden of the GST will fall on the end user, or
private consumer. The businesses that form part of the chain of supply act as progressive collectors of
the tax, but do not ultimately bear the burden of it.
The following example gives you an idea of how GST is accounted for at the various stages of production.

Example
A customer buys a leather briefcase from a retailer. The retailer had acquired the briefcase from a leathergoods manufacturer that
had acquired the leather to make the briefcase from a tannery. The tannery had bought cowhide from an abattoir to make the
leather. Assume that all parties are registered, except for the customer. The GST rules apply as follows:
(1) The abattoir sells the cowhide to the tannery for $22 (including $2 GST). When the abattoir fills in its GST return, it takes the
GST it collected on its sale to the tannery ($2), subtracts any GST it paid for input (its input tax credit, in this case assume nil)
and sends the net amount ($2) to the Tax Office.

(2) The tannery processes the cowhide into leather and sells it to the leathergoods manufacturer for $44 (including $4 GST).
When the tannery fills in its GST return, it takes the GST it collected on its sale to the manufacturer ($4), subtracts the GST it
paid on its inputs ($2 paid to the abattoir on purchase of the cowhide) and sends the net amount ($2) to the Tax Office. The
Tax Office has therefore collected $4 in total so far.

(3) The leathergoods manufacturer makes the leather into a briefcase that it sells to a retailer for $88 (including $8 GST). When
the manufacturer fills in its GST return, it takes the GST it collected from the retailer ($8), subtracts the GST it paid on its
inputs ($4 paid to the tannery) and sends the net amount ($4) to the Tax Office. The Tax Office has therefore collected $8 in
total so far.

(4) The retailer sells the briefcase to the final consumer for $110 (including $10 GST). When the retailer fills in its GST return, it
takes the GST it collected on the sale to the consumer ($10), subtracts the GST it paid on its inputs ($8 paid to the
manufacturer), and sends the difference ($2) to the Tax Office. The Tax Office has therefore collected $10 in total.

This means that the total GST payable on the briefcase was $10, which was the total amount sent to the Tax Office. It is also clear
that the businesses did not ultimately bear the GST — this was totally borne by the final customer as part of the price paid.

GST is also payable if you import goods. However, in this case you, as importer, account for the GST
instead of the supplier. You also claim an input tax credit for the amount of GST payable (¶9-000).

¶1-110 Registration

To attract GST or claim input tax credits, you must normally be registered (¶3-000). You register with the
Tax Office, which is the body responsible for administering the GST. Registration is compulsory if your
GST turnover is $75,000 or more ($150,000 if you are a non-profit body).
To be registered, you have to show that you are carrying on an enterprise — this is similar to showing that
you are in business, but it is not limited to that (¶3-020).
To be registered you must be an “entity”, for example an individual, company, trust, partnership or
unincorporated association (¶3-015).

¶1-120 Tax periods

Your liability is worked out at the end of each of your tax periods. These periods are normally monthly or
quarterly. Monthly tax periods must be used if:
• your GST turnover is $20m or more, or

• you have a bad tax history.

If you use quarterly tax periods they will normally end on 31 March, 30 June, 30 September and 31
December (¶7-100).
Annual tax periods may apply where GST is being paid by instalments (¶8-037), or where voluntarily-
registered taxpayers so elect (¶8-040).
¶1-130 Basis of accounting

The GST and the input tax credits that belong to each period are worked out according to attribution rules,
which vary according to whether you are on a cash basis or an accruals basis of accounting.
If you are on the cash basis, you work out your GST and input tax credits for each tax period on the basis
of amounts actually received and paid out. You can use the cash basis if:
• you satisfy a small business test

• you account on a cash basis for income tax purposes

• you are a charity, or

• you can convince the Tax Office that it is appropriate (¶7-300).

If you use the accruals basis, you work out your GST and input tax credits for each tax period on the
basis of your entitlement to be paid and your obligation to pay. This will often be when you give or receive
an invoice (¶7-205).

¶1-140 GST returns, payments and refunds

If you are registered or required to be registered, you need to make a GST return in your Business
Activity Statement, and account for the GST. This must be done for each tax period. This may be:
• monthly (¶8-002)

• quarterly (¶8-002), subject to some concessions (¶8-036), or

• annually, in certain situations (¶8-037; ¶8-040).

If your GST turnover is $20m or more, you must normally lodge electronically (¶8-043).
The amount you are liable to pay for each tax period is the GST for that period less the input tax credits
for that period. If the credits exceed the GST, you are eligible for a refund. You pay at the same time you
lodge your return. If your GST turnover is $20m or more, you must pay electronically (¶8-100).

¶1-150 Tax invoices and adjustments

Generally, you must hold a “tax invoice” at the time you lodge your GST return for the period in which the
claim for an input tax credit is made. A tax invoice is a special type of document that contains prescribed
items of information, including the supplier’s Australian Business Number (¶5-100). In certain situations,
the tax invoice may need to be prepared by the recipient, rather than the supplier (¶5-140).
Adjustments to previously declared GST or input tax credits may be needed if supplies are later
cancelled, goods are returned, there is a part-refund, or a change of GST status. These “adjustment
events” are taken into account in the later tax period (¶6-100). If they have the effect of reducing your
liability, you must hold an “adjustment note” at the time of lodging the GST return for the period in which
they are claimed. Adjustment notes contain information similar to tax invoices (¶6-110). Other
adjustments may be required if there is a bad debt, a change in the intended business use, or where a
business is started, transferred or closed down (¶6-000).
Tax invoices are not essential if the supply is for $75 or less, excluding GST (¶5-170). Adjustment notes
are not essential if the amount of the adjustment is $75 or less (¶6-135).

¶1-160 Non-taxable and GST-free supplies

There are three types of exemption from GST. These are:

• supplies outside the GST system
 • GST-free supplies

• input taxed supplies.

Supplies outside the GST system

The GST rules generally did not apply to supplies made before 1 July 2000. Nor, in general, do they apply
to gifts (¶4-030), supplies made by unregistrable entities, supplies made by business entities that are not
registered and are not required to be registered (¶4-090), or transactions that have no connection with
Australia (¶4-100). For example, sales made at a private garage sale are not caught by the GST.
The Commonwealth Government itself is not liable for GST, but has a notional liability for the purpose of
its dealings with others (¶5-010). Appropriations made between government agencies are also not subject
to GST (¶4-040).
GST-free supplies
If a supply is GST-free, this means that no GST is payable on it, but that the supplier is entitled to claim
credits for the GST payable on its business inputs that relate to that supply (s 9-5; 11-15). For this reason,
it is quite different from a supply which is outside the GST system altogether.

Example
A registered greengrocer’s business consists wholly of selling fresh food. The sale of that food is GST-free. GST therefore does not
apply to the sale of the food, but the greengrocer can claim credits for the GST component of the goods and services it acquires in
carrying on its business, for example, rent and equipment.
Note: If the greengrocer used some of those goods for private, non-business purposes, only a proportion of the input tax credit for
GST on those goods would be allowed (¶5-010).

GST-free supplies include:

• exports (¶9-200)

• health and medical care (¶13-300)

• education (¶14-000)

• food (¶13-100)

• child care (¶14-100)

• certain activities of charities and gift-deductible bodies (¶15-000)

• religious services (¶15-050)

• sales of businesses (¶11-500)

• water, sewerage and drainage (¶16-200)

• certain transactions involving precious metals (¶16-210)

• international travel and transportation of goods (¶12-000; ¶12-010)

• international mail (¶12-050)

• supplies through inwards duty-free shops (¶12-020)

• Crown land (¶11-400)

• farm land (¶11-410)

 • subdivisions of farm land for family residential purposes (¶11-420)

• cars for disabled people (¶12-150)

• certain prepaid funerals (¶13-380)

• eligible emissions units (¶16-220).

If a supply is GST-free, the supply of a right to that supply is also GST-free (s 9-30).
Supplies of items such as retail books, public transport or domestic tourism are not GST-free.
The greatest impact of GST-free status will normally be felt where the customer is a private consumer. It
will not matter so much where the customer is a business that can get an input tax credit for GST in any
event, though there may be some cashflow implications (¶21-060).

¶1-170 Input taxed supplies

If a supply is “input taxed”, no GST is payable on it, but the supplier normally cannot claim input tax
credits for the GST payable on its business inputs that relate to that supply (s 9-5; 11-15).

Example
A registered landlord’s business consists wholly of letting private residential premises. These are input taxed supplies. GST
therefore does not apply to the rental, and the landlord cannot claim input tax credits for the GST component of the goods and
services it acquires to run the business.
Note: If the landlord also used some of the goods and services in other business activities that were taxable (or GST-free), it could
claim a proportion of the GST as an input tax credit (¶5-010).

Input taxed supplies are set out in Div 40 (s 9-5). They include:
• financial supplies such as loans, dealings in money and issuing securities (¶10-000) (note that in this
particular case, limited input tax credits may be available)

• the supply of residential rental premises (¶11-300; ¶11-320)

• sales of residential premises (but not new homes or commercial premises) (¶11-010)

• food at school tuckshops (optional) (¶14-010)

• certain transactions involving precious metals (¶16-210)

• certain fundraising activities of charities (¶15-055).

If a supply is input taxed, the supply of a right to that supply is also input taxed (s 9-30).
It is possible that a supply can be categorised as both a GST-free supply and an input taxed supply. In
these cases, the GST-free status prevails (s 9-30(3)).
Of course, this rule does not apply if a taxpayer has specifically chosen to be input taxed, for example,
where a school tuckshop elects to treat its food sales as input taxed.
A supply will also be input taxed if it is a supply of anything that you have used solely in connection with
other input taxed supplies that you make (s 9-30(4)). This does not apply to a supply of new residential
premises (¶11-020), or where the other input taxed supplies are financial supplies.

¶1-180 Special rules and concessions

Some special rules and concessions that have not already been covered are set out below in alphabetical
order.
Agents.
A principal and an agent (or intermediary) can agree that the agent should be treated as a principal for
GST purposes. If a non-resident acts through an agent resident in Australia, the agent is responsible for
the GST consequences (¶17-400).
Associates.
Special rules apply if you supply something to an associate at a price below market value, or as a gift.
The supply will be treated as if it had been for market value, unless the associate would have been
entitled to a full input tax credit. An associate includes a relative, business partner, entities in
trustee/beneficiary relationships, and companies and their controllers (¶17-500).
Avoidance.
The Commissioner has wide powers to cancel GST benefits that arise from contrived schemes and may
also impose substantial penalties (¶20-000).
Branches.
Special rules allow you to register your business branches separately. This procedure is intended to avoid
the administrative and accounting costs of having to amalgamate branch accounts every tax period (¶17-
300).
Charities.
Charities and non-profit bodies are generally subject to GST on their commercial activities, but their non-
commercial activities are GST-free. They are also entitled to concessions on registration and choice of
accounting basis. They may also arrange for their operations to be split into separate independent units
for GST purposes, may claim the benefit of simplified accounting methods, and may choose to have their
fundraising activities input taxed (¶15-000; ¶25-110).
Commercial residential premises.
Special rules apply where commercial residential premises, such as caravan parks, are rented out on a
long-term basis (ie for more than 28 days) (¶11-320).
Deposits
taken as security for performance of an obligation are not subject to GST if the obligation is performed
(¶4-070).
Financial suppliers
who would normally be input taxed may be able to claim partial input tax credits for certain outsourced
services (¶10-040). Input tax credits may also be claimed where the financial supplier does not exceed
the specified threshold or in certain borrowing transactions.
Gambling.
Special rules for calculating GST apply if you provide gambling services. These include selling tickets in
lotteries or raffles, or accepting bets on races, games, sporting events or any other events (¶16-000).
Groups.
Certain groups of companies, trusts, individuals or partnerships can be treated as a single taxpayer for
GST purposes. This means that purely internal transactions within the group do not have any GST
consequences. One member of the group — the representative member — is responsible for lodging
returns (¶17-000).
Importations.
The GST is payable by the importer rather than the overseas supplier (¶9-000).
Insurance.
Detailed rules apply to premiums and payouts. The GST treatment varies according to the type of
insurance involved (¶10-100).
Joint ventures.
Bodies engaged in specified types of joint ventures can have it approved for GST purposes. This will
mean that the operator of the venture is responsible for the GST liabilities and entitlements arising from
the operator’s dealings on behalf of the venture participants (¶17-200).
Pre-establishment costs.
A company may be entitled to input tax credits for acquisitions and importations made before it was
incorporated (¶5-030).
Property dealers and developers.
These can use a “margin scheme” that allows them to calculate their GST liabilities as 1/11th of the
difference between the tax-inclusive sale price and the original purchase price. Special rules apply to real
estate held at 1 July 2000 (¶11-100).
Redeemable vouchers
are subject to GST on redemption rather than on the original acquisition (¶4-060).
Reimbursements.
In certain circumstances, input tax credits can be claimed where employees and others are reimbursed
for expenses they incur in the course of their duties (¶5-040).
Resident agents.
If a non-resident acts through an agent resident in Australia, the agent is responsible for the GST
consequences (¶17-400).
Reverse charge.
Certain services or rights provided from outside Australia may be caught by GST even though they are
not made through an Australian business of the supplier. In these cases, the GST is payable by the
recipient, not by the provider. This “reverse charging” overcomes the fact that the supplier will often not be
within the Australian GST system. Reverse charging can also apply where general taxable supplies are
made by non-residents, if both parties agree (¶9-095).
Second-hand goods.
In certain cases, dealers will be able to claim input tax credits on second-hand goods even though the
person who supplied them with the goods was not registered for GST purposes (¶16-100). A “global”
method of accounting for GST and input tax credits on second-hand goods may be available in certain
circumstances (¶16-120).
Small business entities.
Taxpayers that qualify as small business entities (¶1-250) can claim various concessions such as cash
accounting, annual apportionment of input tax credits and payment of GST by instalments. Small
business entities are those whose income, when aggregated with the income of other related bodies, is
less than $10m.
Tourist refunds.
Departing tourists may be entitled to refunds of GST paid on purchases that they take home with them
(¶12-030).

¶1-200 Transitional rules

The general rule is that GST is payable only on supplies and importations made on or after 1 July 2000,
and that sales tax does not apply to those transactions. Similarly, input tax credits can only be claimed on
acquisitions and importations made on or after 1 July 2000 (¶19-100).
However, there were qualifications to this rule. For example, supplies made on or after 1 July 2000 could
be GST-free in certain situations, where the contract was entered into before the GST officially became
law (8 July 1999).
Other transitional rules affected:
• redeemable vouchers (¶4-060)

• progressive or periodic supplies (¶19-210)

• rights exercisable after 30 June 2000 (¶19-200)

• construction contracts (¶19-230)

• life memberships (¶19-220)

• prepaid funerals (¶13-380)

• luxury vehicles (¶12-110)

• stocks of second-hand goods on hand at 1 July 2000 (¶16-130).

SMALL BUSINESS ENTITIES

¶1-250 Overview: small businesses

An entity’s eligibility to claim the following GST concessions normally depends on it qualifying as a “small
business entity”:
• cash accounting (¶7-300)

• annual apportionment of input tax credits (¶5-020)

• payment of GST by instalments (¶8-037).

To be a small business entity, the entity must satisfy two requirements:

(1) it must be carrying on a business (¶1-255), and

(2) it must satisfy the $10m aggregated turnover test (¶1-260). Broadly, this means that the income of
the entity and associated entities must be less than $10m (ITAA 1997 Subdiv 328-C).

For tax periods starting before 1 July 2007, eligibility for these concessions instead depended on the
entity satisfying various tests based on “annual turnover” (¶3-030). For tax periods starting on or after that
date, those tests — renamed as “GST turnover” tests — still apply in determining the eligibility of the
limited range of entities that are carrying on an enterprise that does not constitute a business, eg some
charities, trustees of superannuation funds and government bodies.
The GST turnover tests also still apply in determining certain GST liabilities, ie for compulsory registration
(¶3-000), compulsory monthly tax periods (¶7-100) and electronic lodgment (¶8-043). They also apply in
determining eligibility for annual payment of GST (¶8-040).
There are substantial differences between GST turnover and the aggregated turnover used for the small
business entity test. For example: (1) the aggregated turnover test applies to the total ordinary income,
whereas GST turnover excludes the value of input taxed and certain other supplies; (2) the aggregated
turnover takes into account the turnovers of affiliates and connected entities, as well as the turnover of the
entity itself; and (3) GST turnover is determined as at the end of each month, whereas an entity’s status
as a small business entity is determined for each income year.
Lower turnover limit pre-2016/17
For an entity to qualify as a small business entity in income years prior to 2016/17, its aggregated
turnover threshold was required to be below $2m, instead of $10m.

¶1-255 Carrying on a business

The first requirement for a small business entity is that it is carrying on a business (ITAA 1997 s 328-110).
A “business” includes any trade or profession, but does not include occupation as an employee. For
details, see ¶3-020.
An entity is also treated as carrying on a business in an income year if it is winding up a business it
formerly carried on, and it was a small business entity in the income year in which it stopped carrying on
that business (ITAA 1997 s 328-110). To determine this, it will need to make a reasonable estimate of
what its annual turnover would have been if the entity had carried on the business for the whole of that
year (¶1-265).

¶1-260 Aggregated turnover test

The second requirement for a small business entity is that it satisfies the “aggregated turnover” test.
The method of calculating the aggregated turnover is explained at ¶1-265. Once this has been
determined, there are three alternative ways of satisfying the test (ITAA 1997 s 328-110). The first
depends on the aggregated turnover of the previous income year, and the second and third tests depend
on the estimated or actual aggregated turnover of the current income year.
First test: An entity satisfies the first test if its aggregated turnover for the previous income year was less
than $10m. This is so irrespective of the entity’s likely or actual aggregated turnover for the current
income year. It is expected that this will be the test most used in practice.

Example
A company that is carrying on a business in 2018/19 had an aggregated turnover for 2017/18 of $9.9m. It qualifies as a small
business entity in 2018/19 even though it expects its aggregated turnover for that year will rise to $10.5m.

Second test: An entity satisfies the second test if its aggregated turnover for the current income year,
worked out as at the first day of that year, is likely to be less than $10m. However, an entity cannot use
this test if its aggregated turnover in each of the previous two income years was $10m or more (this
qualification is designed to prevent abuse and to simplify administration for the Tax Office).
Whether the current year aggregated turnover is likely to be less than $10m is a matter of objective
judgment. It is based on the balance of probabilities as at the start of the income year. Relevant factors
would include:
• the aggregated turnover in previous income years

• the prospect of changes in sales patterns, reductions in staff numbers or operating hours

• plans to cease or wind down the business, and

• the prospect of other factors such as drought, declining industry prices or increased competition.

Example
A company’s aggregated turnover is $9.5m in 2017/18 and $10.1m in 2018/19. A severe industry downturn commences in June
2019. As at 1 July 2019, the company expects to shortly retrench half of its staff. Although it cannot satisfy test 1 in 2019/20
(because of the previous year’s aggregated turnover of $10.1m), it may be able to satisfy test 2, because: (1) it is likely, as at 1 July
2019, that its 2019/20 aggregated turnover will be less than $10m; and (2) at least one of the two previous income years’
aggregated turnovers was less than $10m.
Assume instead that the 2017/18 aggregated turnover had been $10.5m. This would mean that test 2 could not be satisfied in
2019/20, as the aggregated turnover in each of the two previous years exceeded $10m. In such a case, the company will need to
rely on its actual 2019/20 aggregated turnover satisfying test 3 (see below).

An entity that starts carrying on business part-way through an income year will need to satisfy either this
test or the third test, as there will be no previous year’s aggregated turnover. To satisfy the second test,
this entity will need to make a reasonable estimate of its likely aggregated turnover for the whole year,
based on the situation as at the date it started to carry on the business.
Third test: An entity will satisfy the third test if its aggregated turnover for the current year, worked out as
at the end of that year, is actually less than $10m. This is so irrespective of the aggregated turnovers in
previous income years.

Example
A company’s aggregated turnover for 2018/19 was $10.5m (with the result that test 1 cannot be satisfied for 2019/20). As at 1 July
2019, it is likely that there will be a similar turnover in 2019/20 (with the result that test 2 is not satisfied). However, in August 2019 a
severe fire destroys the business premises and severely disrupts business operations, with the result that the actual aggregated
turnover for 2019/20 is $9.3m. The company will satisfy test 3 in 2019/20.

As this test requires eligibility to be worked out at the end of the income year, an entity that satisfies only
this test, and not the others, will not be able to access GST concessions that are used throughout the
year, ie for accounting for GST on a cash basis (¶7-300), making an annual apportionment of input tax
credits (¶5-020) or paying GST by quarterly instalments (¶8-037).
Where entity has more than one business
The aggregated turnover test relates to the business income of the entity, not to each business conducted
by the entity.

Example
A sole trader carries on two separate businesses. The aggregated turnover test will be applied to the turnover of both businesses,
considered together.

Lower turnover ceiling pre-2016/17

For an entity to qualify as a small business entity in income years prior to 2016/17, its aggregated
turnover threshold was required to be below $2m, instead of $10m.

¶1-265 Calculating aggregated turnover

An entity’s aggregated turnover for an income year is the sum of its own “annual turnover” (see below)
and the annual turnovers of other “relevant entities”, ie:
• its affiliated entities (¶1-275), and

• its connected entities (¶1-280).

However, the aggregated turnover does not include income that is:
• derived by the entity from a dealing with a relevant entity, or

• derived by a relevant entity from a dealing with another relevant entity (ITAA 1997 s 328-115).

The reason for this exception is that relevant entities are regarded as a single entity, rather than multiple
entities.

Example
Stefano is an affiliate of Iggie, who is therefore a related entity. Ordinary income from Stefano’s dealings with Iggie is not included in
Stefano’s aggregated turnover.
Assume that Stefano is also connected to X Corp, who is therefore also a relevant entity. Ordinary income from Stefano’s dealings
with Iggie or with X Corp is not included in Stefano’s aggregated turnover. Nor is ordinary income from dealings between Iggie and X
Corp.
An entity’s aggregated turnover includes the annual turnover of an entity that is a relevant entity at any
time during the income year. However, the aggregated turnover does not include ordinary income derived
by that entity during the period while it was not a relevant entity.

Example
From 1 July 2018 to 31 December 2018, Barbara’s controlling shareholding in a company means that the company is a connected
entity (and therefore a relevant entity). On 1 January 2019, Barbara sells her shares. She and the company are no longer
connected. Ordinary income derived by the company from 1 January 2019 onwards is therefore not included in Barbara’s
aggregated turnover for 2018/19.

Annual turnover
An entity’s annual turnover for an income year is the total ordinary income that the entity derives in the
income year in the ordinary course of carrying on a business (ITAA 1997 s 328-120).
Ordinary income simply means income according to ordinary tax concepts. Income is derived in the
ordinary course of carrying on a business if: (1) it is of a kind that is regularly or customarily derived by the
entity in the course of carrying on its business; or (2) it is a direct result of the normal activities of the
business. Wages and salary are not business income and are therefore not included.
The following special rules affect the calculation of annual turnover:
• annual turnover does not include GST on taxable supplies made by the entity or any upwards GST
adjustments

• if the entity carries on a business for only part of the income year, its annual turnover is calculated
using a reasonable estimate of what it would have been if the business had been carried on for the
full year. This applies even if the entity also carried on some other business for the whole of the
income year (Interpretative Decision ID 2009/49).

Examples
(1) If the turnover is $2.2m for the three months of the year that the entity is carrying on business, a reasonable estimate may be that
the full year’s turnover would be $8.8m. This of course may be affected by other factors, such as seasonal demand.
(2) An entity carries on two businesses. During year 1, one business has an annual turnover of $10.8m, and the other has an annual
turnover of $500,000. Halfway through year 2, the entity ceases the larger business, whose turnover for that half-year was $5.4m.
Assuming that all other factors have remained the same, the entity’s annual turnover for year 2 would be reasonably estimated as
$10.8m + $500,000 = $11.3m. This applies even though its actual turnover for that year was $5.4m + $500,000 = $5.9m.

• income derived from the sale of retail fuel is disregarded, as the low profit/volume ratios in this
industry would mean that turnover would not be a reliable indicator of size.

Dealings with associates

If the entity has a non-arm’s length dealing with an associate (¶17-500), the ordinary income is taken to
include the amount that would have resulted if the dealing had been at arm’s length. So, for example, if
the income from the dealing was below market value, the market value would normally be substituted for
the amount actually received. In determining the market value, however, normal discounts (eg for bulk
purchases) may be taken into account. It is important to note that this arm’s length rule does not apply if
the associate is an “affiliate” or a “connected” entity. As explained above, dealings with these entities are
excluded from aggregated turnover altogether.

¶1-275 Affiliates

An affiliate must be a company or individual. Trusts, partnerships and superannuation funds are not
capable of being affiliates.
A company or individual is an affiliate of an entity if it acts, or could reasonably be expected to act, in
accordance with the entity’s directions or wishes, or in concert with the entity, in relation to the affairs of
the individual or the company’s business (ITAA 1997 s 328-130).
Factors that may indicate that parties are acting in concert may include: family or close personal
relationships; financial relationships or dependencies; relationships created through links such as
common partners, directors or shareholders; degree of consultation; and whether there is an obligation to
conduct business with the other. However, none of these is decisive in itself.
The Tax Office considers that generally another business would not be acting in concert with you if they
have different employees, different business premises, separate bank accounts, do not consult you on
business matters and conduct their business affairs independently.
A person’s spouse or child is not automatically an affiliate of the person. For example, if spouses run their
own separate businesses, with no mixing of management, business premises or finances, they would be
unlikely to be treated as affiliates. Similarly, co-directors or partners are not necessarily affiliates. Whether
a franchisee is an affiliate of the franchisor may depend on the nature of the franchise agreement.

¶1-280 Connected entities

Any two entities are connected with each other if one controls the other, or both are controlled by the
same third entity. Control may be direct or indirect (ITAA 1997 s 328-125).
Direct control
There are various tests of direct control.
Direct control of entities (not discretionary trusts)
An entity (X) controls another entity (Y) if it owns interests in that entity that between them carry the right
to receive at least 40% of:
• any distributions of income or capital by entity Y, or

• the net income of Y (if Y is a partnership).

Example
X is a partner in a partnership and is entitled to 40% of the net partnership income. X therefore controls the partnership.

In applying this 40% test, you also take into account any right that X may have to acquire ownership, and
any ownerships or rights of X’s affiliates.

Example
X owns interests in another entity carrying the right to 30% of distributions of entity Y’s capital and income. An affiliate of X has an
interest in entity Y carrying the right to 15%. Although X’s holding alone does not satisfy the 40% test, X will be taken to control entity
Y because the combined interests of X and its affiliate are 45%.

Direct control of company

An entity X also controls a company if it owns equity interests in the company that carry between them the
right to exercise, or control the exercise of, at least 40% of the voting power in the company.

Example
X owns shares in a company that gives him 25% of the voting rights in the company. This alone is not sufficient to make X a
controller.
Assume that X also has an affiliate who owns shares giving her 20% of the voting rights in the company. This will mean that X
controls the company, as his own ownership, added to the ownership of his affiliate, carry rights to a total of 45% of the voting rights.
In determining X’s aggregated turnover, the annual turnover of both the affiliate and the company would therefore need to be taken
into account.
In applying this 40% test, you also take into account any right that X may have to acquire ownership, and
any ownerships or rights of X’s affiliates.
Direct control of discretionary trust
There are two alternative tests for direct control of a discretionary trust.
The first test is that an entity X controls a discretionary trust if a trustee of the trust acts, or could
reasonably be expected to act, in accordance with the directions or wishes of X, or of affiliates of X, or of
X together with affiliates of X.
Factors that would be taken into account in determining this could include:
• the past behaviour of the trustee

• the relationship between the parties

• the amount of any property or services transferred to the trust by the entities

• any arrangement or understanding between the entities and persons who have benefited under the
trust in the past.

The wording of the trust deed will not be conclusive if the facts indicate otherwise.
The second test is that an entity X also controls a discretionary trust for a particular income year if the
following conditions were satisfied for any of the four preceding income years:
• the trustee paid any of the income or capital of the trust to X and/or any of X’s affiliates (or applied it
for their benefit), and

• the amount paid or applied was at least 40% of the total amount paid or applied by the trustee for that
year.

Example
During the income year, X received a distribution from a discretionary trust representing 55% of the total amount of income
distributed by the trust for that year. This will mean that X will be taken to control the trust in each of the succeeding four income
years.
The same would apply if the 50% distribution had been paid to any of X’s affiliates, or to X in combination with its affiliates.

In applying this test, you ignore amounts paid or applied to deductible gift recipients or entities that are
tax-exempt.
Nominee owners
Special provisions apply to enable certain nominee holders to be “looked through” to establish the real
underlying owners. This applies, for example, where there are absolutely entitled beneficiaries, bankrupt
individuals, security providers or companies in liquidation.
Commissioner’s discretion to ignore direct control
Where the 40% test applies, it is possible that there may be multiple controllers of the same entity.
Accordingly, if a taxpayer has an interest that is at least 40% but less than 50%, the Commissioner has
the discretion to determine that it is not a controller, if the Commissioner thinks that another entity is
actually the controller. Depending on the circumstances, this may apply, for example, if one party has
40% and the other 60%. However, the discretion is not limited to situations where the other party has at
least 40%.
Indirect control of all entities
An entity can control another even though one or more other entities are interposed between the two.
This is called indirect control.
This exists where one entity directly controls a second entity, and that second entity controls a third entity,
whether directly or indirectly. In such a case, the first entity is taken to indirectly control the third entity.

Examples
(1) Company A has a 40% direct interest in Company B which in turn has a 40% interest in Company C. Company A is taken to
directly control Company B and to indirectly control Company C.
(2) Company A has a 40% direct interest in Company B which in turn has a 30% interest in Company C. Company A is taken to
directly control Company B. Neither Company A nor Company B control Company C.

Indirect control does not exist where the second entity is:
• a public company, ie one whose shares are listed for quotation in the official list of an approved stock
exchange, unless the shares are of a type that carries the right to a fixed rate of dividend

• a publicly traded unit trust, a mutual insurance company, or a mutual affiliate company, or

• a company which is a 100% subsidiary of any of the above.

LEGISLATIVE BACKGROUND
¶1-300 Sources of GST legislation

The main GST legislation is the A New Tax System (Goods and Services Tax) Act 1999. For obvious
reasons, this is universally shortened to the “GST Act”. In this book, all section references are to this Act,
unless otherwise stated.
The GST Act contains six chapters.
Chapter 1 “Introduction” includes an overview of the Act.
Chapter 2 “The basic rules” covers methods of calculation, supplies and acquisitions, tax periods,
registration and returns.
Chapter 3 “The exemptions” covers GST-free supplies (such as food) and input taxed supplies (such as
financial supplies).
Chapter 4 “The special rules” includes the GST grouping rules and other special provisions ranging from
second-hand goods to insurance. This chapter also includes the anti-avoidance rules (Div 165).
Chapter 5 “Miscellaneous” is just that.
Chapter 6 “Interpreting this Act” contains a dictionary of definitions.
The Schedules include checklists of the GST status of items such as food and medical aids.
Features of the GST Act
The format of the GST Act is similar to that of the redrafted Income Tax Assessment Act 1997. For
example:
(1) gaps have been left in the numbering to allow for future growth

(2) “explanatory sections” appear at the start of Chapters, Divisions and some Subdivisions. These are
intended to provide a quick, simply worded overview of what follows. Although they actually form part
of the Act, they have no operative effect. They can only be used for the following purposes:
(a) to determine the purpose or effect of provisions

(b) to confirm that a provision has its ordinary meaning

(c) to determine a provision’s meaning if it is ambiguous or obscure, or

(d) to determine a provision’s meaning if its ordinary meaning would lead to a manifestly absurd or
 unreasonable result (s 182-10)

(3) footnotes to sections provide useful comments or cross-references. Some sections also have
examples of how they are intended to apply.

Transitional rules
Rules governing the transition to GST are set out in the A New Tax System (Goods and Services Tax
Transition) Act 1999 (hereinafter “Transition Act”). It includes the timing rules for supplies and
acquisitions, special transitional rules for particular types of supply (such as periodical supplies) and the
concessions for pre-GST contracts.
Current transitional rules are explained in Chapter 19, and in various other parts of this book where they
are particularly relevant.
“Locking in” the GST rate
Measures intended to lock in the GST rate at 10% are contained in the A New Tax System
(Commonwealth-State Financial Arrangements) Act 1999. This Act provides that no alteration can be
made to the rate unless each state and territory agrees, as well as both Houses of Federal Parliament. It
would appear, however, that this Act itself has no particular constitutional protection and may be
amended in the same way as any other Commonwealth law. As at 31 December 2018, the government
has indicated that it does not intend to propose any increase to the GST to take effect during its current
term.
Government bodies
The Commonwealth Government is not liable to pay GST, but has a notional liability for the purpose of its
dealings with others (s 177-1; Finance Minister’s (A New Tax System) Directions 2005; A New Tax
System (GST, Luxury Car Tax and Wine Tax) Direction 2015). A Commonwealth body is not liable for
GST penalties or for the general interest charge (Miscellaneous Taxation Ruling MT 2011/1).
State bodies are liable for GST (s 1-4), but their liability is notional to the extent that the tax is a “tax on
property” under s 114 of the Constitution. Penalties and GIC apply to the extent that the liability is not
notional (Miscellaneous Taxation Ruling MT 2011/1; Practice Statement Law Administration PS LA
2011/26). Territory bodies are subject to GST, penalties and GIC (s 1-4).
Distribution of GST revenue
GST revenue is distributed among the states and territories in accordance with a process called
“horizontal equalisation”, which is intended to ensure that all jurisdictions are funded so that they can
provide broadly equivalent basic services. The government periodically reviews the distribution rules.
Price exploitation
Making false or misleading claims in connection with GST may contravene various provisions of the
competition and consumer legislation. For details, see Chapter 21.
Wine equalisation tax and luxury car tax
The wine equalisation tax (WET) and luxury car tax (LCT) are both designed to modify the effect that the
abolition of sales tax would otherwise have had. The operative provisions for these taxes are contained in
the A New Tax System (Wine Equalisation Tax) Act 1999 and the A New Tax System (Luxury Car Tax)
Act 1999. Subsidiary matters are covered in A New Tax System (Wine Equalisation Tax) Regulations
2019 and A New Tax System (Luxury Car Tax) Regulations 2019. The WET and LCT are explained in
Chapters 22 and 23.
Administration
Machinery provisions for the administration of GST are contained in the Taxation Administration Act 1953.
In this book, this is referred to as the “Administration Act”. It covers matters such as assessments, audit,
recovery, penalties and evidence. This is explained in Chapter 18.
GST Regulations
Some important GST rules are contained in the A New Tax System (Goods and Services Tax)
Regulations — for example, the detailed requirements for tax invoices and the definition of input taxed
financial supplies. These regulations, originally issued in 1999, were reissued in amended form, effective
from 1 April 2019. They are generally referred to simply as the “GST Regulations”.
Australian Business Numbers
In general, an entity’s GST registration number will be its Australian Business Number (ABN). Rules
governing the use of ABNs are contained in the A New Tax System (Australian Business Number) Act
1999 (¶3-050).
Imposition of taxes
The main provisions that formally impose GST are contained in the A New Tax System (Goods and
Services Tax Imposition — General) Act 1999, the A New Tax System (Goods and Services Tax
Imposition — Customs) Act 1999 and the A New Tax System (Goods and Services Tax Imposition —
Excise) Act 1999. Correspondingly titled Acts apply to impose wine equalisation tax and luxury car tax.
Constitutional validity
A challenge to the constitutional validity of the GST Act and associated legislation was rejected in Halliday
v The Commonwealth of Australia [2000] FCA 950. The grounds of the challenge included the claims that
the legislation imposed civil conscription, interfered with free trade and commerce and imposed
differential taxation between the states. The Federal Court said that none of the grounds had any
prospect of success.
A further challenge, based on the argument that the GST Act contravened s 55 of the Constitution by
dealing with more than one subject of taxation, was rejected in O’Meara v FC of T 2003 ATC 4406.

¶1-310 Complexity of GST

One of the advantages claimed for GST over other taxes — such as the sales tax it replaced — is that the
GST is much more straightforward, easier to understand and easier to comply with. This is true up to a
point. The general rules are relatively simple, once you become familiar with them. And the standard rate
of 10% simplifies actual calculations and reduces classification problems. However, there are also some
significant complications. These arise in the following ways:
• The concept of the tax is different from the taxes that most Australians and their advisers have
previously been used to.

• There are a number of technical expressions and jargon. While the original intention was to write the
legislation in plain English, this has proven hard to achieve. With drafting expressions such as
“Subdivision 38-P period”, “intended or former application of a thing” and “total Subdivision 66-B
credit amount”, the legislation does not make light reading.

• The legislation is very long — the GST Act itself covers over 800 pages (and is still growing).

• Even before the legislation had come into effect, over 1,000 amendments had been made to the
original text. In some cases, these completely altered the effect of the tax. Since then, hundreds of
further amendments have been made.

• There are various “grey” areas where the detail has been left to Tax Office rulings.

• Complex transitional rules covered the transition from sales tax and the impact of GST on contracts
that spanned 1 July 2000. This complexity was unfortunate as these transitional rules were among
the first things that businesses and advisers had to assimilate.

• There are many exceptions to the general rules. These have proliferated as the government sought to
counter industry objections (as with charities), deal with inadequacies in the original legislation (as
with insurance) or overcome political opposition (as with the exemption for food).

At a more general level, the GST is a complex issue because it has significant effects on business
procedures. Many businesses have had to re-evaluate their business practices. In particular, the impact
of GST on pricing and cashflow has had impacts on many areas of business organisation.

¶1-315 Interpretation of GST legislation

The traditional approach to tax legislation is that it should be interpreted strictly or literally, unless this
leads to an objectively absurd result. This means that the intention to impose tax should be expressed in
clear, unambiguous language. This is often associated with a view that ambiguities should be resolved in
favour of the taxpayer.
An alternative approach, which has gained support in recent years, is that courts should look more at the
“purpose” or intent of the legislation, considered in its overall context (eg Cooper Brookes (Wollongong)
Pty Ltd v FC of T 81 ATC 4292; HP Mercantile Pty Ltd v FC of T 2005 ATC 4571). This approach
supposedly gives more discretion to the courts in deciding how to apply the law.
To some extent, the “purpose” approach has been given some legislative backing. The Acts Interpretation
Act 1901 provides that:
• courts are required to interpret tax legislation in a way that would promote the purpose of the
legislation in preference to a way that would not promote the purpose (s 15AA)

• courts are authorised to refer to “extrinsic” material in confirming that the meaning of a particular
provision is its ordinary meaning, or to determine the meaning of an ambiguous or obscure provision
(s 15AB). Extrinsic material would include explanatory memoranda and second reading speeches.
However, it would not include rulings by the Commissioner — though these may be relied on to some
extent by the taxpayer (¶18-030). “Explanatory sections” in the GST Act are treated in a similar way
to extrinsic materials (¶1-300).

It is possible that the particular nature of GST — a largely self-assessed “administrative” tax imposed on
an extremely wide range of business transactions — may mean that courts will tend to concentrate on the
substance of a transaction, rather than simply make an overly technical analysis of its form. The late
Graham Hill J, in a 2003 address, suggested that “unless the legislation otherwise requires, in interpreting
the GST and characterising a transaction entered into for the purposes of the GST, that interpretation or
that characterisation of the transaction will be adopted which produces a practical or common sense
business result that accords with business reality and is not unduly technical”. This approach may require
looking at the entirety and substance of a transaction, without “artificial dissection” (Saga Holidays Limited
v FC of T [2006] FCAFC 191); see also Sterling Guardian Pty Ltd v FC of T 2005 ATC 4796.
This may lead to the GST analysis of a transaction being different to that under income tax law. For
example, the ATO considers that if a trustee of a bare trust transfers legal title to property to a third party
at the direction of the beneficiaries, it is the beneficiaries that make the supply, even though the legal title
was held by the trustee (¶4-010).
On the other hand, there is a limit to how far the courts can go. In a 2005 address, High Court Justice
Michael Kirby said:
“There is a need for the legislature to cure defects from time to time. Yet there seems to be a refusal
on the part of the government to admit there are defects and to make amendments other than
amendments which may be thought necessary to overcome avoidance. In some cases, the courts
may be able to resolve difficulties by applying a purposive construction, but in the Australian
constitutional context where there is a sharp separation of the legislative and judicial powers, there is
a limit to what one can expect of the courts. Ultimately, the courts can not act as legislators.
Parliament cannot stand by and then blame the courts if a decision is one that does not favour the
revenue when the problem lies not in how the legislation is to be interpreted in a common sense way,
but in how it is written.”
Ultimately, it is the text of the law that is important. The High Court has said that, “the statutory text must
be considered in its context. That context includes legislative history and extrinsic materials.
Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text.
Legislative history and extrinsic materials cannot displace the meaning of a statutory text. Nor is their
examination an end in itself” (FC of T v Consolidated Media Holdings [2012] HCA 55).
The ATO says that it takes an approach that strikes a balance between the syntax, the legislative policy
and the context. In developing its interpretations, it considers that, to the extent that the law is able to
properly reflect the underlying policy of the government, it should interpret the law in that way. Where
there are alternative interpretations and one is more practical than the other, the ATO will prefer the more
practical approach or the one that minimises compliance costs, provided that it does not lead to
anomalies or unintended consequences. Where the law is not reasonably capable of reflecting the
underlying government policy, the law must prevail. In instances where the law is ambiguous, the
appropriate avenue for resolution may be to test the interpretation of the law through the courts (Speech
by Bruce Quigley, ATO Deputy Chief Tax Counsel, November 2006).
As the GST law is based partly on overseas legislation, overseas cases may have some value in
interpretation. However, this is limited, particularly where there are significant differences in wording,
context or policy.

¶1-540 Commissioner’s rulings

The Commissioner issues public rulings and determinations setting out the official views on aspects of the
GST law. These rulings and determinations are generally binding on the Commissioner, though not on
courts or tribunals. A separate system of Interpretative Decisions gives non-binding guidance on how
particular issues have been dealt with by Tax Office officers. For details, see ¶18-030.
GETTING STARTED WITH GST
Dealing with GST ¶2-000
A 20-point plan for managing GST ¶2-010
Checklist for management of GST administration ¶2-020
Assistance from ATO and other government departments ¶2-110

Editorial information

Summary
Managing GST is an ongoing project for businesses and their advisers. This chapter provides a
general plan that businesses may follow in meeting this task.

¶2-000 Dealing with GST

Although the GST has been in full operation since 1 July 2000, many businesses will still be facing it for
the first time — either because they are newly established or because recent changes in their turnover
have forced them to register. In addition, some businesses will, even now, still be grappling with the
challenges of managing the tax.
To be in a position to manage GST, businesses will normally have to make a significant investment in
ensuring that they are “GST-ready”. At a minimum, this means that they must:
• understand how the GST applies to them

• ensure that the business is able to handle the necessary changes.

Because of the way GST works, businesses may also need to ensure that their suppliers and customers
are sufficiently informed. GST is different from most other taxes that people are familiar with. Most of
those taxes, such as income tax, are “private” taxes that are not anyone else’s direct business. With GST,
however, many people who deal with you have an interest in knowing whether GST applies to the
transaction and, if so, how much. For the system to work properly, you therefore need to ensure that the
people you buy from and the people you sell to are aware of their GST obligations.
The costs of preparing for GST, and for ongoing compliance, vary widely. However, in practically all
cases, they are significant and, in many cases, they are substantial. In general, the costs are higher for
businesses that have not had experience of dealing with sales tax. You also need to keep in mind that:
• start-up and compliance costs are likely to have a significant effect on cashflow, particularly in the
early stages of implementation (¶21-070)

• in setting prices, businesses are entitled to recoup compliance costs that have been reasonably
incurred as a result of changes in the tax system

• a tax deduction may apply for some start-up costs (¶24-100).

¶2-010 A 20-point plan for managing GST

This is a 20-point plan to help businesses and their advisers to manage GST, together with cross-
references to further explanations and planning considerations. Many of these points will, of course, also
need to be considered where you are reviewing the tax position of a company that you are planning to
purchase.
▸ 1 Have a coordinator
You should have a qualified person (or team) to identify, and ensure compliance with, the GST
requirements that apply to the business.
▸ 2 Be aware of GST impacts
You need to be aware of how GST affects your business. This includes:
• how GST applies to the various types of supply the business makes — taxable, non-taxable, GST-free
or input taxed (¶1-160)

• what types of input tax credits the business will be able to claim on its acquisitions (¶5-000)

• what effect this may have on selling or purchasing decisions (¶21-010)

• how the business may be affected by any exemptions and special rules (¶1-180)

• how customer and supplier relationships may be affected (¶21-010)

• which areas may require professional advice.

▸ 3 Appreciate that GST is not just another tax

GST is not just another tax that can be added onto your existing business practices. As many of the
following points make clear, businesses need to be prepared to make significant changes in business
practices in order to comply with the new tax and take advantage of some of the opportunities it offers.
While compliance will be a burden, it may also act as a spur to updating procedures, improved record-
keeping and better credit control.
▸ 4 Take advantage of assistance
The business should ensure that it is taking advantage of government assistance, including access to
information (¶2-110). Where appropriate, it should also take advantage of any tax concessions available
(¶24-100). Assistance from outside advisers may also be necessary or desirable.
▸ 5 Train management, staff and agents
Management, staff and agents must understand how the GST affects business strategies, business
practices and relationships with customers and suppliers.
Some of the areas requiring particular attention are:
• invoicing (point 13)

• credit control (point 11)

• cashflow requirements (point 11)

• timing of sales and purchases (point 11)

• pricing (point 10)

• marketing (point 10)

• return preparation (point 15)

• contracts and legal matters (point 18)

 • relationships with suppliers (point 17)

• relationships with customers (point 17).

▸ 6 Attend to registration requirements

Most businesses do not have any option about registration as they have turnovers above $75,000. Even
for those who are not obliged to register, there are often good reasons to do so — for example, the ability
to claim input tax credits. For the pros and cons of registration, see ¶3-010.
You also need to consider whether special registration rules — such as grouping or GST branches — are
appropriate for your business.
▸ 7 Choose your tax periods
You need to decide whether your tax period is quarterly, monthly or annual (¶7-100). Normally, tax
periods are quarterly, but monthly tax periods must be used in certain situations and may be adopted in
all cases. There will be some situations where monthly tax periods will be desirable — for example, if you
are an exporter (¶21-070). There are also various options for aligning tax periods with balance dates.
▸ 8 Choose your accounting method
You must identify and, where relevant, choose the accounting method appropriate to your business (¶7-
200). Most businesses use the accruals (or invoice) method, but there are some advantages in choosing
to use the cash basis where this is available. The choice of accounting method can have important
implications for cashflow (¶21-050).
▸ 9 Differentiate stock and services
You need to differentiate stock and services that are taxable from those which are input taxed or GST-
free. This is necessary for pricing and processing.
▸ 10 Examine implications for pricing and marketing
For a full discussion of pricing and marketing issues, see ¶21-010 and following.
▸ 11 Examine implications for cashflow
GST typically has a significant effect — positive or negative — on cashflow. This is affected by factors
such as:
• whether the business’ supplies are taxable, GST-free or input taxed

• the timing of purchases and sales

• whether there are any large capital purchases planned

• the method of accounting for GST

• whether the business has monthly or quarterly tax periods

• whether the business is a net GST payer or is entitled to GST refunds

• whether a business that is input taxed uses outsourced services

• possible changes in customers’ purchasing patterns

• the business’ credit control, bad debt procedures and time-to-pay rules

• whether there are long-term instalment contracts

• whether contracts are drafted to ensure recovery of GST and entitlement to input tax credits

• the impact of GST compliance costs.

These factors are considered in detail at ¶21-050 and following. Particular care also needs to be taken to
ensure that an amount representing the GST collected is still available at the time when it has to be
accounted for to the ATO.
▸ 12 Check labelling and stationery
GST must be incorporated into price tags, price lists and advertising material.
▸ 13 Have procedures for tax invoices
For all supplies the business makes involving GST, you should have a system which ensures that tax
invoices are produced. In practice, most businesses issue tax invoices with all sales, to avoid the effort of
having to discriminate between different types of customer. The system should also ensure that tax
invoices accompany all purchases of inputs and that they are correctly filled out (¶5-100).
For all business acquisitions, it is normally essential to hold a tax invoice in order to claim input tax credits
(¶5-100). It is therefore crucial that you have a system to ensure that all tax invoices for your acquisitions
are collected and retained.
▸ 14 Track adjustments
You need procedures to track changes in the use of items which were purchased for business purposes
so that GST adjustments can be made and, where necessary, adjustment notes issued (¶6-000).
▸ 15 Attend to GST returns
You need to have procedures and record-keeping to ensure that GST returns are prepared and lodged on
time (¶8-005). Timing will depend on whether you have monthly, quarterly or annual tax periods. You
should be prepared to lodge early if you are entitled to a refund.
▸ 16 Accounting systems
Accounting software and systems need to be able to include GST on sales and to capture input tax
credits on purchases.
Smaller businesses can buy off-the-shelf packages which contain GST capabilities. Upgrades will be
more difficult for larger businesses due to their increased size and complexity.
Upgraded systems must be able to:
• identify whether GST is chargeable on the sale of goods and services

• identify whether an input tax credit arises on purchase of an input

• detect any changes to sales and purchases (such as returns and discounts)

• ensure that credit terms with customers and trade terms with suppliers do not jeopardise your
cashflow position

• provide the necessary documentation

• provide information to flow into the GST return for the correct tax period.

Be aware that even very small systemic errors can lead to major discrepancies where they recur in a
large number of transactions over a period.
You should also be aware that your method of accounting for GST may affect your accounting systems,
notably where it differs from the method your system previously used. If you use the cash method for GST
purposes, but your accounting system is set up on the accruals method, you may need to make
adjustments to many transactions. You may find that it is simply easier to adopt the invoice method of
accounting for GST so that it matches your accruals-based accounting system.
Point-of-sale hardware — terminals, cash registers, etc — also needs reviewing.
It is also important to ensure that your systems and processes keep up with changes in your business,
especially in times of rapid growth. Be aware that the adequacy and integrity of your business systems in
accounting for GST may play a vital role in the event that the ATO is considering audit action (¶18-180).
▸ 17 Liaise with customers and suppliers
You should ensure that pricing and invoicing requirements are understood by your customers — and can
be explained by your staff, including call centres. The requirement for complying tax invoices should be
understood by all parties. Your credit control requirements may need tightening (¶21-060) and this should
be explained to customers.
If the business provides or uses contractors, the GST implications must be clearly understood by both
parties (¶4-090).
▸ 18 Check status of contracts
All continuing contracts which commenced before 1 July 2000 should have been reviewed to check
whether, and how, GST may apply. Particular attention should be paid to transactions such as leases and
subscriptions (Chapter 19).
All new supply contracts should take GST into account, where appropriate (¶19-400). You may also need
to check on the cashflow implications of standard provisions allowing time for payment (¶21-060) and
contracts such as instalment sales (¶21-070). This is an area where professional advice should be
sought.
▸ 19 Carry out a business practice review
In the light of GST, you need to analyse the way you conduct your business to determine whether
changes to business practice are desirable. Some typical areas that may be affected are cashflow (¶21-
050), groups (¶17-000) and outsourcing (¶4-090).
Existing company structures may also need to be reviewed if they had been set up with superseded sales
tax considerations in mind; for example, if companies have been interposed to defer the payment of sales
tax at the wholesale level.
Refer to Chapter 21 for general planning considerations.
▸ 20 Prepare for the future
The planning process is continuous. The ramifications of GST for all future key strategic decisions and
transactions should be considered. Procedures to ensure that this is done should be put in place.

¶2-020 Checklist for management of GST administration

The ATO and the Australian National Audit Office have published A Better Practice Guide for the
Management of GST Administration. Although that Guide is intended primarily for government
departments, the ATO says it would be relevant to any large public or private organisation. The Guide
identifies and explains the following “indicators of better practice”:
(1) apply a risk management approach to GST administration

(2) establish an internal control environment that effectively supports GST processing

(3) identify and document all GST-impacted transactions in the organisation’s operations and the
technical positions that related to them

(4) process and report GST transactions in an accurate, complete and timely manner

(5) manage changes that impact on GST administration

(6) monitor and review the effectiveness of GST administration.

¶2-110 Assistance from ATO and other government departments

GST assistance “visits”

The ATO conducts a program of tax assistance (including GST) visits to businesses. These visits are
intended to give practical on-the-spot advice.
The Commissioner has stressed that the visits are not audits and are totally voluntary. It is the taxpayer’s
choice as to whether they want a visit, how long the visit lasts, what level of advice they want, and what
level of information, if any, they are prepared to provide. The visit is not an opportunity for the ATO to
raise issues in relation to compliance or outstanding payments and returns. No information gained during
the visit can be used against the taxpayer.
Information and contacts
The ATO publishes a wide range of industry booklets and fact sheets on the GST, and operates various
“infolines” and an extensive website. Contact details are as follows:
Website: www.ato.gov.au

Tax agents: 13 72 86

GST enquiries: 13 28 66

Email: GSTmail@ato.gov.au

Post: PO Box 9935 in your capital city

The Australian Competition and Consumer Commission (ACCC) provides information on pricing issues.
ACCC: 1300 302 502

ACCC website: www.accc.gov.au

Industry partnerships
The ATO has established “Industry Partnerships” to clarify GST issues relevant to specific industries and
to help keep members of these industries informed. Industry Partnerships have included bookkeepers,
charities and non-profit organisations, education, electronic commerce, financial services, health,
insurance, mining and energy, motor vehicles, primary production, property and construction, racing and
gambling, retail, retirement villages, tax practitioners, telecommunications, tourism and hospitality, and
transport. Minutes of the meetings of the Industry Partnerships are at www.ato.gov.au.
REGISTRATION
Importance of registration ¶3-000
Pros and cons of registration ¶3-010
Only “entities” can be registered ¶3-015
Carrying on an enterprise ¶3-020
The GST turnover test ¶3-030
Procedure for registration ¶3-040
Australian Business Number ¶3-050
Cancellation of registration ¶3-070
Simplified registration for certain non-residents ¶3-075
Special rules about registration ¶3-080

Editorial information

Summary
Registration is the key to the operation of the GST system. Without registration, GST normally will
not apply and input tax credits cannot be claimed. Registration is compulsory for most businesses,
but there are some important exemptions if you have a low turnover. In this chapter, we look at the
requirements for registration, how you go about it and the procedures for cancellation.

¶3-000 Importance of registration

Registration is important for a number of reasons. The main ones are:

• GST is normally only payable on a sale or supply if you are registered, except in the case of imports
(¶4-105)

• input tax credits can only be claimed if you are registered (¶5-010)

• GST returns must be lodged if you are registered (¶8-000).

All of these also apply if you are simply required to be registered.

As far as registration is concerned, there are:
(1) those who cannot be registered

(2) those who can be registered, but are not required to be

(3) those who are required to be registered.

You cannot be registered unless you are carrying on an enterprise (¶3-020), or are intending to do so
from a particular date (s 23-10).
You can be registered if you are carrying on an enterprise, or are intending to do so from a particular date
(s 23-10). Non-residents as well as residents are eligible.
You are required to be registered if you are carrying on an enterprise, and your GST turnover is $75,000
or more (s 23-5). This is called the registration turnover threshold (s 23-15). For non-profit bodies, the
corresponding threshold is generally $150,000 (¶3-030).
If you are required to register, but fail to do so, you become liable for penalties and even prosecution
(¶18-300; ¶18-305).
A taxpayer normally cannot be retrospectively required to register beyond a period of four years (¶3-040).
You can only be registered if you are an “entity” (¶3-015).
Limited registration entities
For simplified rules designed to reduce the impact of the registration rules for certain non-residents, see
¶3-075.
[GSTG ¶5-000]

¶3-010 Pros and cons of registration

Most businesses do not have any choice about whether to register, as they are carrying on an enterprise
and exceed the registration threshold. However, even where it is not compulsory, there are strong
incentives to register. Here are some of the factors you may consider.
• Unless you are registered, you cannot normally claim input tax credits for the GST you pay on your
business inputs, nor pass on entitlement to claim credits to your customers. This may not be so
important for businesses that primarily make input taxed supplies (eg superannuation funds), as their
ability to claim input tax credits is restricted in any event.

• Business suppliers and customers may prefer, or even insist on, dealing only with other registered
businesses.

• Some small businesses may decide to register simply to avoid the administrative chore of continually
checking whether their current or projected turnover is approaching the relevant threshold.

• Small businesses such as contractors may decide to register to avoid the embarrassment of
“advertising” that their turnover is below the threshold.

Although business customers normally will pay GST-inclusive prices, they will typically be able to recover
that GST component by claiming input tax credits. The imposition of GST may therefore not have a
significant net effect, except to the extent that there may be some cashflow disadvantage for the
customer.
However, this will not apply if the customer is an end-user, or is an input taxed business such as a
financial institution. For those customers, the GST will represent an increased cost. A supplier whose
customer base falls into this category may therefore find it advantageous not to register, provided the
supplier:
• is not concerned with claiming input tax credits itself

• has a GST turnover less than the prescribed threshold.

Apart from pricing issues, the main advantage of not registering is that paperwork will be reduced —
records need not be kept of GST or input tax credits, the use of items need not be tracked, returns need
not be lodged and so on. These compliance costs can be significant. Businesses, particularly sole traders
and smaller businesses, also need to be aware that if they register, then all the enterprises they carry on
— not just their main one — are subject to the GST system.
Where a deceased person was registered, registration will also normally be advisable for trustees of the
deceased estate in order to avoid automatic GST adjustments arising on death (¶6-415).
Currently, over two million businesses are registered for GST.
Registration and PAYG
Some people claim to operate as independent contractors, outside the PAYG system, when arguably they
could be classed as employees. This issue may come to a head if those people apply for registration, as
employees are not carrying on enterprises and therefore cannot be registered as such (¶3-020).
Taxpayers that are registered, or that are required to be registered, are not eligible to pay their PAYG
instalments annually.
Registration and ABNs
It is normally necessary to quote an Australian Business Number (ABN) on invoices to business
customers to avoid tax being withheld (¶3-050). However, it is not necessary to register for GST in order
to obtain an ABN. A business may apply for an ABN even though it does not register for GST.
Conversely, a business may register for GST even though it is not entitled to an ABN, for example
because it is not carrying on business in Australia.
[GSTG ¶5-000]

¶3-015 Only “entities” can be registered

To be registered, you must be an “entity” (s 23-5; 23-10). An entity means:

• an individual or natural person

• a “body corporate”. This includes a company, building society, credit union, trade union, statutory
body, strata title body corporate (¶11-200), municipal council, incorporated association, and certain
governing bodies of various religious institutions (Miscellaneous Taxation Ruling MT 2006/1)

• a “corporation sole”. This is a corporation consisting of one person and that person’s successors to a
particular position, for example, a bishopric

• a “body politic”, ie a government. Government departments are technically not entities but can be
separately registered (¶3-080)

• a partnership (see below)

• any other unincorporated association or body, for example, charities, clubs or certain syndicates. To
qualify, something more than a common aim or purpose is necessary. Typical characteristics would
include: members of the association; a contract binding the members among themselves; a
constitutional arrangement for meetings of members and for appointing officers; freedom to join or
leave the association; continuity of existence; and a moment in time when a number of persons
combined to form the association. However, not all these characteristics are essential (Conservative
and Unionist Central Office v Burrell (Inspector of Taxes) [1982] 2 All ER 1; Miscellaneous Taxation
Ruling MT 2006/1)

• a trust, or the trustee of the trust at any given time (see below)

• a superannuation fund, or the trustee of the fund at any given time (¶10-080) (s 184-1).

Non-charitable public ancillary and prescribed private funds (¶15-000) may also register and operate as
enterprises for GST purposes.
Types of partnership
A partnership means an association of persons carrying on business as partners (a “general law”
partnership) and also an association of persons who simply are in receipt of income jointly (a “tax law”
partnership). Both are registrable “entities” for GST purposes. The ATO accepts that, for GST purposes, a
mere change of membership of a general law partnership does not mean that the old partnership is
terminated and a new partnership entity is created, provided there is a continuity clause and no
substantial change in the partnership business (GST Ruling GSTR 2003/13). In contrast, any change in
the membership of a tax law partnership terminates the partnership (GST Ruling GSTR 2004/6; see also
Russell v FC of T 2009 ATC ¶20-143).
The ATO considers that a tax law partnership commences when the persons associate and carry on the
activity from which the income will be received — this means, for example, that it can claim input tax
credits on the acquisition of the property from which income may be derived jointly (GST Ruling GSTR
2004/6).
As to whether an enterprise is being carried on by the partnership or by the partners themselves, see ¶3-
020. For the ATO’s views on supplies by partners and partnerships, see ¶4-010.
A mere joint venture which does not involve a partnership or the creation of a separate entity is not itself
an “entity”. These ventures are called non-entity joint ventures. They typically involve a contractual
arrangement to jointly control an economic activity in order to obtain individual benefits, as distinct from
joint or collective profitability. For ATO views on racing syndicates and groups, see the ATO Fact Sheet
GST for the Racing Industry.
For example, a property development arrangement was held to be carried on by a partnership, not simply
as a non-entity joint venture, where there was:
• a mutual interest in the carrying on of the business for the purpose of profit or gain

• mutual confidence that the parties would engage in the venture for joint advantage only

• sharing of profits and losses from the venture, as distinct from sharing of product (as in some mining
ventures)

• mutual agency in the sense that each party was a principal of the business and may bind the other
(Yacoub v FC of T 2012 ATC ¶20-328).

Trusts
Both the trust and the trustee may be treated as entities (s 184-1(1), (2)). The reason for this is apparently
that a trust is not a legal person in its own right and cannot have legal rights or obligations. The ATO
interprets this as meaning that the relevant entity is the trust, with the trustee standing as that entity when
a legal person is required, eg for transferring property or signing documentation (GST Ruling GSTR
2006/1). Accordingly, it considers that the registration should be in the name of the trustee. A public
company acting as the “responsible entity” of a managed investment scheme was held to be entitled to
register on this basis (Interpretative Decision ID 2007/7).
For the ATO’s views on supplies by trustees, see ¶4-010. For the liability of trustees, see ¶18-270. For the
treatment of Investor Directed Portfolio Services (IDPSs), see ATO GST Industry Issues — Financial
Services: Issues 13.3 and 13.4.
Other aspects
A body that acts in various capacities can be treated as constituting different entities for GST purposes.
This means, for example, that a person acting as a trustee can make a taxable supply to itself acting in an
individual capacity. However, where a new trustee of a trust is appointed to replace the original trustee,
without any change in the underlying trust, the transfer of assets to the new trustee is not treated as a
supply to a new entity (s 184-1(2)).
Entities can also include sub-entities of non-profit bodies (¶15-080).
[GSTG ¶5-045]

¶3-020 Carrying on an enterprise

An entity cannot be registered unless it is carrying on an “enterprise” (s 23-5; 23-10). Enterprise is defined
very widely (s 9-20). The most common example of an enterprise is a business. More specifically, an
enterprise means:
(1) an activity or series of activities done in the form of a business, trade, profession, vocation
or calling. The Commissioner interprets this as including business-like activities that are not carried
out for profit, for example, by bodies corporate of apartment blocks (Body Corporate, Villa Edgewater
Courts 23092 v FC of T 2004 ATC 2056), or non-profit clubs or associations (Miscellaneous Taxation
Ruling MT 2006/1; GST Determination GSTD 2006/6). In determining whether a part of an enterprise
is itself an enterprise, the Commissioner will take into account factors such as the degree of
autonomy, and whether there is a separate management structure, a system of internal user
charging, a separate budget and agreements with internal service providers or external customers
(Miscellaneous Taxation Ruling MT 2006/1; GST Ruling GSTR 2002/5). Trustees who were
appointed and remunerated to carry out the sale of a development site were held to be carrying on
an enterprise where they retained agents, solicitors and valuers, gave instructions for the marketing,
liaised with the parties, prepared the contract, and arranged and implemented the sale (Toyama Pty
Ltd v Landmark Building Developments Pty Ltd 2006 ATC 4160; see also Touram Pty Ltd v FC of T
2008 ATC ¶10-070).
In a case involving rather exceptional facts, a company controlled by an art collector/investor, which
over a period of eight years spent $4.8m on artworks but sold only a very small number of lesser
works, was held to be carrying on an enterprise where: (1) its activities were apparently systematic
and organised on a business-like basis; and (2) there was an intention to sell, where appropriate,
when the circumstances were right (FC of T v Swansea Services Pty Ltd 2009 ATC ¶20-100).
Similarly, in what the tribunal considered was a “finely balanced” case, a luxury car collector/dealer
was held to be carrying on an enterprise even though only one car was sold and that was at a loss
(Davsa Forty-Ninth Pty Ltd v FC of T [2014] AATA 337). However, there was no such enterprise in a
similar “one car” case where there was an absence of records and little independent evidence that
the car had been taken for test drives (Criterion Prestige Pty Ltd v FC of T [2015] AATA 468).
Similarly, a building project manager who spent a few hours a week researching horse breeding
matters and had a minority interest in up to eight horses, but made no profit from these activities, was
not carrying on an enterprise of horse breeding (D’Arcy v FC of T 2008 ATC ¶10-041; see also Trnka
v FC of T 2012 ATC ¶10-262 and Taxpayer v FCT [2015] AATA 737 (equine hospital and medical
supplies)). A company whose “project management” activities consisted of little more than receiving
invoices was held not to be carrying on an enterprise in Dotrac Pty Ltd & Anor v FC of T [2014] AATA
336. Similarly, a retired police officer was not carrying on an enterprise of private investigations or
share trading where there was no business plan or evidence of systematic activities (NKCX v FC of T
2019 ATC ¶10-488).

(2) an activity or series of activities done in the form of one-off ventures in the nature of trade.
This is intended to catch a commercial activity that does not amount to a business. For example, the
ATO considers that acquiring and refurbishing a suburban shop for resale at a profit could amount to
an enterprise (GST Ruling GSTR 2001/7).

Example
A taxpayer’s enterprise consists solely of the acquisition and refurbishment of a suburban shop for resale at a profit. That
activity, though isolated, is treated as an enterprise. In addition, as noted at ¶3-030, the disposal of the shop is not treated as
transfer of a capital asset, with the result that the proceeds of the sale are not excluded from the taxpayer’s projected GST
turnover.

However, the fact that a profit is made does not necessarily mean that the activity is commercial. So,
for example, the sale of the family home, car and other private assets would not normally be caught
(Miscellaneous Taxation Ruling MT 2006/1; GST Determination GSTD 2006/6). Nor would the private
sale by a car dealer of his/her own car. The “mere realisation” of an investment asset is also not, in
itself, an enterprise. For the position where land is subdivided and sold, see ¶11-063.
The ATO considers that if you provide ride-sourcing services to the public (¶12-130), you are likely to
be carrying on an enterprise. This is particularly the case if you operate in a business-like manner
where, for example, invoices are provided to your customers. However, if you operate infrequently or
your activities are otherwise non-commercial, you may not be carrying on an enterprise
 (3) leasing, licensing or granting interests in property, if this is done on a regular or continuous
basis. The Commissioner considers that an activity is “regular” if it is repeated at reasonably
proximate intervals, and “continuous” if there is no significant cessation or interruption to the activity
(Miscellaneous Taxation Ruling MT 2006/1; GST Determination GSTD 2006/6). On this basis, the
occasional letting out of a holiday home for a few weeks a year would not be regarded as regular or
continuous. However, if the holiday home was actively advertised for lease all year round, and was
actually leased for 20 weeks a year, the Commissioner considers that this may constitute leasing on
a regular and continuous basis. Similarly, where there is already an enterprise of leasing a building,
that enterprise continues during the period of temporary vacancy where a new tenant is being
actively sought. However, where the building has not previously been leased to a tenant, but is being
actively marketed, an enterprise of leasing is not operating until the activity of leasing actually
commences, ie when at least one tenant enters into an agreement to lease, or occupies the building
(GST Ruling GSTR 2002/5; see also Cyonara Snowfox Pty Ltd v FC of T 2012 ATC ¶20-362)

Example
The Commissioner considers that an enterprise of leasing would be carried on in a situation where: (1) a commercial building
had been leased for a number of years; (2) various floors were vacant but were being actively marketed; and (3) the remaining
floors were being refurbished (GST Ruling GSTR 2002/5).

• activities of bodies that are eligible recipients of tax-deductible gifts

• activities of a trustee or manager of a complying superannuation fund (¶10-080)

• activities of charities (but these are also entitled to some exemptions: see Chapter 15)

• activities of the Commonwealth, a state or a territory (including government departments and

certain local governments: GST Ruling GSTR 2006/5), or corporations established for public
purposes.

It is not necessary that there be a series of activities. A single activity can be an enterprise.
It may also happen that a single entity carries on more than one enterprise, or carries on some activities
that are an enterprise and some that are not.

Examples
(1) A self-employed doctor also runs a profitable farm. The doctor is carrying on two enterprises. If the doctor registers, that will
cover both enterprises.
(2) A doctor employed by a hospital exercises her rights to private practice. The employment is not an enterprise (see below), but
the private practice activities normally would be an enterprise. If the doctor registers, the registration will only apply to the enterprise
activities.

Commencing or terminating an enterprise

You are treated as carrying on an enterprise if you are doing anything in the course of commencing or
terminating the enterprise (s 195-1). The ATO considers that this would include conducting a feasibility
study involving genuine business activities where there has been serious contemplation of developing an
enterprise. However, this would not apply where, for example, a person merely undertakes a tour of a
wine region to enhance their knowledge of the wine industry with the aim of possibly establishing some
future business activity. Similarly, it has been held that there was no commencement of an enterprise
where a company had simply undertaken preliminary promotional activities before any activities were
actually carried on. These activities were considered to be merely steps taken in preparation for the
commencement (Guru 4 U Pty Ltd v FC of T [2014] AATA 740; Russell v FC of T [2011] FCAFC 10).
Activities undertaken to establish an entity, for example drawing up of a trust deed and the settlement of
trust property, would also not be included (Miscellaneous Taxation Ruling MT 2006/1).
The AAT has said that, “[E]very business has to start somewhere. Where the business progresses from
its foundations to operation within a reasonable time frame, it is easier to see how initial expenditures can
be seen as part of a course of conduct that amounts to carrying on an enterprise. But where there is delay
— where the momentum of the activities is lost — it becomes harder to make a connection between initial
expenditure and the operations which result. That connection is even more difficult to establish where the
business has not, or does not, commence trading in due course” (Clayton v FC of T [2013] AATA 428).
Similarly, acts done in the course of selling the business will be treated as carrying on the enterprise, for
example, finalising accounts, paying creditors, repaying loans, cancelling licences and business
registrations (Miscellaneous Taxation Ruling MT 2006/1); or the realisation of business assets as part of
winding up a partnership (GST Ruling GSTR 2003/13). The ATO’s view is that an enterprise would
normally be taken to have terminated when all assets are disposed of or converted to another purpose,
and all obligations have been satisfied (Miscellaneous Taxation Ruling MT 2006/1). As to the treatment of
pre-establishment acquisitions for agricultural managed investment schemes, see Interpretative Decisions
ID 2010/198; ID 2010/199.

Example
A taxpayer decides to purchase a commercial property with the intention of leasing the property to prospective tenants. It acquires
services and incurs various costs, such as legal and building inspection fees, in relation to the purchase of the property. It is likely
that these acquisitions would be treated as part of the carrying on of the enterprise of leasing by the taxpayer.

The acquisition of a capital asset for the purpose of carrying on a future enterprise may constitute an act
performed in the carrying on of the enterprise. In establishing whether this purpose existed, evidence of
the taxpayer’s intentions may be relevant (Russell v FC of T [2011] FCAFC 10). However, there was no
enterprise being carried on where a taxpayer acquired a property for the purpose of converting it into an
education and accommodation centre, but no educational supplies had been made, only minuscule
income had been derived and the venture lacked commercial character (Educational Pty Ltd v FC of T
[2011] AATA 445). There was also no enterprise of land subdivision being carried on where there was no
objective evidence that the land had ever been acquired (Bryxl Pty Ltd v FC of T [2015] AATA 89).
Other examples of enterprises
Where a head company of a group obtains a valuation as part of the process of forming a “consolidated”
group for tax purposes, this is treated as being an acquisition made in carrying on the company’s
enterprise. The same applies to a valuation obtained by a subsidiary company as part of the process of
joining such a group. This applies even if the consolidation does not go ahead (GST Determination GSTD
2003/3). It would follow that input tax credits could be claimed, provided the other requirements for a
creditable acquisition (¶5-010) have been met.
Where a parent company holds shares in a subsidiary, the parent may be treated as carrying on an
enterprise if it is actively engaged in managing the subsidiary, or provides management services,
equipment or loans to the subsidiary, but not if the holding is merely passive (Miscellaneous Taxation
Ruling MT 2006/1). However, each case will depend on its own facts. The mere fact that the taxpayer is
part of an economic group which overall is carrying on an enterprise does not mean that the taxpayer
itself is carrying on an enterprise (Case 5/2010, 2010 ATC ¶1-024).
A person serving a lengthy prison term would not normally be capable of carrying on an enterprise
(Maksimovic v Registrar of Australian Business Register [2008] AATA 108).
A participant in an agricultural managed investment scheme was considered to be carrying on an
enterprise, where it retained ownership of the produce of the scheme (Interpretative Decision ID
2010/197). Previously, the ATO had taken the provisional view that normally an investor in an agricultural
managed investment scheme is not carrying on an enterprise (former Draft GST Ruling GSTR 2008/D1),
but that was withdrawn following an adverse income tax decision in Hance v FC of T 2008 ATC ¶20-085.
What is not an enterprise
An enterprise does not include the following activities:
• activities carried out as an employee, or other person subject to specified PAYG withholding rules
(company directors, officeholders, labour hire). This means that — subject to the special rule noted
 below — these people are not treated as carrying on an enterprise themselves. However, their
activities are still treated as part of the enterprise of their employer or work provider. For further
details, including the position of independent contractors, see ¶4-090

• private recreational pursuits or hobbies. These are normally characterised by their small scale,
irregularity and lack of profit motive (Taxation Ruling TR 97/11; Miscellaneous Taxation Ruling MT
2006/1)

• activities by an individual, or partnership consisting wholly or mostly of individuals, where there is no

“reasonable expectation” of profit or gain. A reasonable expectation requires more than just a
possibility (Miscellaneous Taxation Ruling MT 2006/1; GST Determination GSTD 2006/6). However,
the fact that no profit was in fact made over a significant period does not necessarily mean that there
was no reasonable expectation that a profit would eventually be made (Case 2/2007, 2007 ATC 103).
This issue often arises, with mixed results, in situations where a taxpayer who is already engaged in
another business buys a yacht for unrelated “demonstration purposes”. One factor that can be taken
into account in considering the likely profitability is the fact that the boat is declining in value (see
discussion in Drysdale v FC of T 2008 ATC ¶10-027). A taxpayer who had been involved in the
childcare industry and property development was unsuccessful in showing that his game fishing
charter activities amounted to an enterprise, where they were conducted in a haphazard and
unbusiness-like way (Rendyl Properties Pty Ltd v FC of T 2009 ATC ¶10-082)

• activities by certain members of local governing bodies, for example, councillors (s 9-20(2), (4)).

In a European case, the activity of installing and generating electricity through a photovoltaic installation
on a private residence constituted an “economic activity” rather than a private activity, even though the
home owner’s end object may have been to reduce his domestic electricity bills. As a result, the taxpayer
was entitled to a VAT deduction for input VAT costs relating to the installation: Finanzamt Freistadt
Rohrbach Urfahr v Unabhängiger Finanzsenat Außenstelle Linz (Case C-219/12). However, it is not clear
that a similar decision would be reached in Australia. For an article discussing this case, see CCH Tax
Week ¶1035 (2013).
Religious practitioners carrying out pastoral and related duties are not treated as carrying on an
enterprise (¶15-053). For the treatment of marriage breakdown settlements, see ¶4-090.
Directors and other officeholders
A special rule applies where a person accepts a position as an officeholder in connection with other
business activities. An example of this is where a partner of a legal or accounting firm becomes a director
of one of the firm’s client companies. Directors are generally treated as employees, so the services they
provide are not normally subject to GST. However, in this particular case, the partner/director will be
treated as an enterprise, not an employee, and the supply of the partner/director’s services to the
company is therefore potentially subject to GST (s 9-20(2)(a)).
A partnership was not carrying on an enterprise where the relevant activities were conducted by a partner
in his capacity as a director and employee of another company (Naidoo & Anor v FC of T 2013 ATC ¶10-
323).
Meaning of “business”
As already noted, the most common form of enterprise is a business. Normally, there is little dispute
about whether a business is being carried on. However, borderline situations arise in areas such as
primary production, writing, sport or gambling. Some of the indicators used by the Commissioner are as
follows. Their importance will vary in any particular situation:
• significant commercial activity

• a purpose of acting in a commercial way

• an intention to make a profit

• a reasonable prospect of profitability

 • repetition or regularity of activity

• reasonable size and scale

• conformity with normal business practice

• existence of a business plan

• keeping of detailed business records

• commercial sales of product

• exercise of knowledge or skill (Taxation Ruling TR 97/11).

Activities may constitute a business even though they are only carried on in a small way. However, it
would normally need to be shown that there was a real expectation of profit emerging. The ATO considers
that where activities are of a very small size and scale, they would normally not be treated as a business
if they are carried on in an ad hoc manner and there is little repetition or regularity. For example, the ATO
would not consider there to be a business where a person occasionally provides translation services on
an ad hoc basis and receives payments totalling only $300 over the year (Miscellaneous Taxation Ruling
MT 2006/1). On the other hand, it considers that if you provide taxi “ride-sourcing” services to the public,
you are likely to be carrying on an enterprise: see ¶12-130. A private tutor was ruled to be carrying on an
enterprise, even though his activities were small-scale and consistently unprofitable, where he could show
that his activities were recurrent and systematic, reliable records were kept, and the intention was to
make a profit (Case 3/2013, 2013 ATC ¶1-052).
Consistent loss-making from horse-breeding activities was held not to be fatal to a claim that a business
was being carried on where the losses were attributable to the capital costs of setting up the business, the
subsequent restructuring of the business and a series of unforeseeable setbacks (Block & Ors v FC of T
2007 ATC 2735). For the position of participants in the racing industry generally, see the ATO Fact Sheet
GST for the Racing Industry and Taxation Ruling TR 2008/2.
Bodies that only supply members
An entity is still treated as carrying on an enterprise even though it only makes supplies to its own
members (s 9-20(3)). This will include, for example, non-profit clubs.
Partnerships
It will normally be the partnership, not the individual partners, that carries on the partnership enterprise.
However, a partner may be carrying on an enterprise if it carries on a separate business on its own
account. The supply of an interest in a partnership is a financial supply (¶10-010) made by the partnership
in the course of its enterprise. For the GST treatment of the transfer of a partnership interest, see ¶11-
500.
The ATO considers that an enterprise can be carried on, not only by a general law partnership, but also
by a tax law partnership (¶3-015). However, the fact that property is held by the owners as tenants in
common, rather than joint tenants, would tend to indicate that the enterprise is being carried on by each
co-owner, rather than the tax law partnership. However, this will not always be the case — in the case of
certain managed property leasing syndicates, the ATO considers that the enterprise is being carried on by
a tax law partnership even though the property is held as tenants in common (GST Ruling GSTR 2004/6).
A partnership was held liable for GST on the sale of assets where the evidence of the partners that the
partnership had transferred the assets to another entity prior to the sale was vague and inconsistent (TG
& A Martinazzo v FC of T 2009 ATC ¶10-074).
Trustees
For the position of trustees carrying on an enterprise, see ¶4-010.
[GSTG ¶5-050]
¶3-030 The GST turnover test

As we have seen, an entity is normally required to register if its “GST turnover” is $75,000 or more (s 23-
15; reg 23-15). This means that it must register if either of the following applies:
• its current GST turnover is $75,000 or more, except if the ATO is satisfied that the projected GST
turnover is below $75,000, or

• its projected GST turnover is $75,000 or more (s 188-10).

Special threshold for non-profit bodies

If you are a non-profit body, the registration threshold is $150,000. “Non-profit” is not defined in the GST
Act, but the ATO considers that a body will qualify if it is prevented by law or its constituent documents
from distributing its profits or assets among its members, either while it is functional, or on winding up,
and acts consistently with those restrictions (GST Ruling GSTR 2012/2; Taxation Ruling TR 97/22). The
ATO also says it will accept that the non-profit test is satisfied if it is clear from the body’s objects,
policies, history, activities and proposed future directions that there will be no distributions to members.
For the position of strata title bodies corporate, see ¶11-200. For other rules relating to not-for-profits, see
¶15-000.
The turnover periods
At any particular time, your current GST turnover is measured over the 12-month period ending at the end
of the current month (s 188-15). Your projected GST turnover is measured over the 12-month period
starting at the beginning of the current month (s 188-20).

Example
If the current month is December 2019, the current GST turnover is measured from the start of January 2019 to the end of
December 2019. The projected GST turnover is measured from the start of December 2019 to the end of November 2020.

This rule means that both your current and projected GST turnover may change every month. It follows
that you may need to monitor them closely to work out if an obligation to register has arisen, or is likely to
arise as a result of projected growth. Regular monitoring of turnover probably makes sense from a
general business point of view in any event.

Example
As at March 2019, your current annual turnover (ie the turnover for the period from 1 April 2018 to 31 March 2019) is $40,000. Your
projected GST turnover (ie the turnover for the period from 1 March 2019 to 29 February 2020) is $80,000. Assuming that you are
not a non-profit body, you are therefore required to register.

Measuring turnover
Current turnover is calculated by adding up the value of all the supplies you have made, or are likely to
make, during the 12-month period ending at the end of the current month. Projected turnover is calculated
by adding up the value of all the supplies you have made, or are likely to make, during the 12-month
period starting at the beginning of the current month.
In determining what supplies are likely to be made, the Commissioner accepts a calculation based on a
bona fide business plan, accounting budget or some other reasonable estimate (GST Ruling GSTR
2001/7).
In each case, the value does not include the GST component of the supplies. In working out the value,
you also exclude the following:
• supplies that are input taxed, for example, financial supplies or supplies of residential accommodation
(¶1-170)
 • supplies where there is no consideration paid, unless they are made to associates (¶17-500)

• supplies that are not made in connection with your enterprise (¶3-020)

• supplies that are not connected with Australia. You also disregard an offshore supply of rights or
options that is deemed to be connected with Australia, unless (from 1 July 2017) it is made to an
“Australian consumer” (¶9-120), the underlying supply is not a supply of goods or real property and
the supply is not GST-free.

• GST-free supplies made by a non-resident that are not made through an enterprise carried on by the
non-resident in Australia. The exclusion applies in working out net amounts for tax periods starting on
or after 1 October 2016.

Example
Lloyd lets out a private house for rent of $110,000 a year. This is an input taxed supply. He makes no other taxable or GST-free
supplies. He is not required to register because he has no turnover for GST purposes.
If 80% of the property was used by the tenant for business, there will be a potentially taxable supply of commercial accommodation
(80% of $110,000 = $88,000) plus an input taxed supply of residential accommodation ($22,000). As the turnover from taxable
supplies exceeds $75,000, Lloyd is required to register. (See generally GST Determination GSTD 2000/9.)

Insurance payouts are also disregarded when working out turnover (s 188-22). If the supply is a loan of
money, the value for turnover purposes is normally the amount of the loan (s 188-35). If you are a
member of a GST group (¶17-000), you also exclude supplies made between members.
In addition, when working out projected turnover, you should not take into account:
• transfers of capital assets, for example business premises, plant or goodwill. Capital assets do not
include trading stock or assets acquired for resale at a profit (GST Ruling GSTR 2001/7: ¶3-020), or

• supplies made solely as a consequence of closing down an enterprise, or substantially and

permanently reducing its size or scale (s 188-25). The Commissioner accepts that a 10% reduction in
size or scale is “substantial” for most enterprises, though a smaller reduction may also qualify.
Changes that could foreseeably affect only one or two years would not be regarded as “permanent”
(GST Ruling GSTR 2001/7).

Supplies made through you as a mere agent are not counted in determining your turnover, as they are not
treated as supplies you have made (¶17-400).
What is measured is the turnover of the entity, rather than the turnover of each enterprise or business. If
the one entity runs two businesses, the turnover of the entity will include both businesses.

Example
Mrs Woolly provides farmstay holidays at her operating farm. The turnovers from the holiday business and the farm business are
taken into account in calculating Mrs Woolly’s turnover. However, if the farm and farmstay businesses are operated by separate
entities, the turnover would be calculated separately for each.

If an overseas body supplies employee services in Australia to its 100% subsidiary, those supplies are
disregarded in working out the non-resident’s turnover for registration purposes (s 188-40). This is subject
to the proviso that the payments the non-resident makes to the employees would have been subject to
Pay As You Go (PAYG) withholding if they had been paid by the Australian subsidiary.
Offshore supplies of hotel accommodation in Australia are now included in turnover: see ¶11-320.
GST turnover relevant for other purposes
Your GST turnover is also relevant in determining:
(1) your obligation to use monthly tax periods (¶7-110) or lodge returns electronically (¶8-043)
 (2) if you do not carry on a business, your eligibility to use the cash basis (¶7-300), make annual
apportionments of input tax credits (¶5-020), or pay GST by instalments (¶8-037)

(3) your eligibility to report and pay annually (¶8-040).

Special rules
Special rules for measuring turnover apply to:
• supplies covered by specified “reverse charge” agreements (¶9-095; ¶16-210)

• agents who agree to act as principals (¶17-420)

• gambling (¶16-030).

[GSTG ¶5-070]

¶3-040 Procedure for registration

You have to apply for registration within 21 days of becoming required to do so (s 25-1). Normally, this
means that you have to apply within 21 days after the time when the enterprise you are carrying on first
meets the relevant turnover threshold test (¶3-030). Remember, you are treated as carrying on an
enterprise if you are doing anything in the course of commencing the enterprise (¶3-020).
If you are entitled to be registered, but not required to do so, you may apply for registration at any time.
Applications may be made online at the Australian Business Register (www.abr.gov.au) or by using the
appropriate ABN registration form (¶3-050). Separate forms apply to sole traders, superannuation funds,
companies and other organisations, and government bodies. The ABN will generally act as your GST
registration number.
Processing of application
The ATO must grant your application if satisfied that you are carrying on an enterprise, or intending to do
so from a specified date. If the ATO is satisfied that you are required to be registered, it must register you
even if you have not applied.
On registration, the ATO will notify you of the date of effect, your GST registration number and the tax
periods that apply to you (s 25-5).
Generally, the registration takes effect from the day specified in the application. This cannot be earlier
than the date on which you commenced to carry on an enterprise. Registration may be backdated beyond
the date specified in the application if the ATO is satisfied that you were required to be registered earlier.
If so, you will be treated as being subject to the GST system from that date (s 25-10; 25-15). However,
the Commissioner cannot backdate the registration beyond four years, unless there has been fraud or
evasion (s 23-20; 25-10).

Example
Due to an honest misunderstanding of its GST obligations, a taxpayer does not register and therefore does not lodge Business
Activity Statements (BASs). Subsequently, on 20 September 2018, the Commissioner determines that the taxpayer should have
been registered from 1 July 2013. However, due to the four-year limit, the requirement to register can only be backdated to 21
September 2014. The taxpayer therefore is liable to lodge BASs for its transactions from that day onwards.

Backdating of the registration means, for example, that you have to account for GST on taxable supplies
you made since that earlier time, even though you may not have allowed for it in your prices. Penalties
and interest may also apply (¶18-300 and following).
The date on which your registration becomes effective will be entered in the Australian Business Register
(s 25-10(2)).
A branch of a registered supplier can be separately registered (¶17-300).
Simplified rules for some non-residents
For simplified registration rules applying to certain non-residents, see ¶9-120.
[GSTG ¶5-080]

¶3-050 Australian Business Number

The Australian Business Number (ABN) is a business identifier which can be used for the GST and
various other tax-related purposes.
For the GST system, your ABN is important because:
• the ABN also acts as your GST registration number (unless you are a GST branch: ¶17-300)

• the supplier’s ABN must normally appear on a tax invoice (¶5-110), otherwise the recipient will not be
able to claim input tax credits.

In the wider context, the ABN is crucial for identification under the PAYG system. Under PAYG, if you do
not quote your ABN on invoices to other businesses, they may be required to withhold tax at the top
marginal rate, plus Medicare levy, from their payment to you. For 2018/19, this normally requires a
deduction of 47%.

Example
Enterprises Ltd hires Fizzer Electricians to do wiring work at its business premises. Fizzer does not have an ABN. It charges
Enterprises Ltd $5,000 for the work. Enterprises should withhold 47% of $5,000 = $2,350 and pay the balance ($2,650) to Fizzer.
Enterprises Ltd should account to the ATO for the $2,350 in its next BAS. Fizzer should claim a credit for that amount in its next tax
return.

This withholding rule does not apply where the supply is wholly input taxed (Administration Act, Sch 1, s
12-190). For example, it will not apply where the supply consists of financial services or residential rent.
Residential tenants will therefore not have to withhold tax from rent payments if the landlord does not
quote an ABN.
You must also have an ABN to apply for endorsement as a deductible-gift recipient or as an income tax
exempt charity. You also need an ABN to apply for registration with the Australian Charities and Not-for-
profits Commission in order to claim specified GST concessions (¶15-000).
A limited registration entity (¶9-120) is not entitled to an ABN.
Applying for an ABN
As the ABN is used for a number of purposes, it is possible to apply for an ABN without applying for GST
registration. This will normally be the advisable option for businesses that decide not to register for GST.
The ABN applies to the individual entity (company, sole trader, trust, partnership, etc), not to the individual
business. If you are carrying on more than one business, you will only have one ABN. Conversely, where
a number of entities contribute to the running of a business, each will have to have a separate ABN.
ABNs and tax avoidance
• The ATO targets “unexpected” registrations as a way of identifying businesses that have previously
been operating outside the tax system.

• In the 2019/20 Federal Budget, the Treasurer said that the ABN system will be strengthened to disrupt
black economy behaviour by making the ABN conditional on holders (1) fulfilling any obligation to
lodge income tax returns (from 1 July 2021) and (2) annually confirming the accuracy of their details
on the ABN register (from 1 July 2022) (2019 Budget Papers No 2, p 13, 2 April 2019).

[GSTG ¶5-300]
¶3-070 Cancellation of registration

If you stop carrying on an enterprise, you are no longer entitled to be registered, and must apply for
cancellation of your registration within 21 days (s 25-50). Remember, you are treated as carrying on a
business or enterprise as long as you are doing anything in the course of terminating it.
Even though you are still carrying on an enterprise, you may apply for cancellation if registration becomes
optional, for example, where the GST turnover drops below $75,000.
In either case, the ATO is obliged to comply with the application for cancellation, provided that you have
been registered for at least 12 months, and provided that the ATO is satisfied that you are not required to
be registered (s 25-55).
These compulsory cancellation rules are also activated if there is a change in the entity carrying on the
enterprise, for example, if an enterprise formerly run by an individual as a sole trader is transferred to a
company, even if the company is controlled by the individual.
For the position of bicycle couriers who mistakenly registered in the belief that they were contractors, not
employees, see ¶4-090.
Cancellation of voluntary registration within 12 months
If you apply for cancellation of voluntary GST registration before the 12 months have expired, the ATO
has a discretion to cancel the registration (s 25-57).
Applications are considered on the basis of:
• how long you have been registered

• whether you have previously been registered

• any other relevant matters (s 25-57). These may include your net GST in previous tax periods and
your likely GST in future tax periods if you remain registered.

It is up to the Commissioner to determine the date of effect of the cancellation. It may be prospective or
retrospective (s 25-60). If you nominate a prospective cancellation date — ie a date after the application is
determined — this date will normally be accepted. If you request a retrospective cancellation date, the
Commissioner will only accept a date that falls at the start of a tax period. In addition, the ATO must be
satisfied that you stopped operating on a GST-registered basis from that date. So, for example, for a
cancellation to be backdated all the way back to 1 July 2000, you would need to show that:
• you have not held yourself out to other businesses as being registered for GST

• you have not issued tax invoices or adjustment notes

• you have not claimed input tax credits, special transitional credits or GST transitional credits (or if
those credits have been claimed, a net GST amount has been paid to the ATO for each tax period
where a Business Activity Statement has been lodged), and

• you have made a signed statement to the ATO that you satisfy all these requirements.

If your registration is cancelled retrospectively to 1 July 2000, the effect is that you will be treated as never
having been in the GST system and can claim back any GST paid to the ATO.
The retrospective cancellation will not affect any claim you may have made in the past for an immediate
deduction for the cost of acquiring or upgrading GST-related plant and software.
Discontinued businesses
The Commissioner must cancel your registration if satisfied that you are not carrying on an enterprise,
and that you are not likely to do so for at least 12 months. This applies whether or not you have applied
for cancellation (s 25-55).
General effects of cancellation
The general effects of cancellation of registration are:
• the current tax period will cease at the end of the day on which the cancellation takes effect (¶7-120).
This will be the business’s final tax period

• future supplies you make are not subject to GST

• you cannot claim input tax credits on future acquisitions that you make

• you will not have to lodge normal GST returns for periods after your final tax period

• if you are on a cash basis, any GST, input tax credits or adjustments that have not been attributed to
any previous tax period will be attributed to the final tax period (s 138-15)

• the business may be liable for an upwards adjustment to its net GST in its final tax period if it retains
assets for which input tax credits have been claimed (¶6-410).

The ATO says that if, after you cease to be registered, you receive a tax invoice for a creditable
acquisition made while you were registered, you cannot claim an input tax credit for that acquisition (GST
Advice GSTA TPP 089).
[GSTG ¶5-200]

¶3-075 Simplified registration for certain non-residents

Simplified GST registration arrangements are available for non-residents who make or intend to make:
• supplies of inbound intangible consumer supplies (¶9-120), or

• for tax periods starting on or after 1 July 2018, offshore supplies of low value goods (this also applies
to redeliverers of these supplies) (¶9-130).

For this to apply, the non-resident must elect to become a “limited registration” entity (Div 146). This
means that the non-resident will only need to provide minimal information when they register and provide
GST returns. Limited registration entities will not be entitled to input tax credits, are not entitled to an ABN
(¶3-050), are not recorded in the Australian Business Register, must have quarterly tax periods, do not
issue tax invoices, and cannot elect to pay GST by instalments (¶8-037) (s 146-5 to 146-25).
These rules were formerly contained in former Subdiv 84-D. Elections made under those provisions
continue in effect.

¶3-080 Special rules about registration

Taxi operators
are required to be registered, regardless of turnover (s 144-5). A taxi operator is someone who carries on
an enterprise that includes transporting fare-paying passengers by taxi or limousine (s 195-1). For further
details, see ¶12-130.
Bankruptcy, receivership, liquidation.
If a person who is registered (or required to be registered) goes into bankruptcy, the trustee in bankruptcy
must be registered as such for GST purposes in relation to any enterprise carried on by that person. A
corresponding rule applies where receivers, liquidators, administrators, controllers or interim managers
are appointed (s 58-20). For these purposes, the representative will have the same tax period as the body
it represents (s 58-35). A representative that ceases to act as a representative must notify the
Commissioner within 21 days (s 58-30). Its registration must be cancelled if the Commissioner is satisfied
that the representative is not required, or no longer required, to be registered (s 58-25; Interpretative
Decision ID 2013/9). For GST adjustments arising after the appointment of the representative, see ¶6-
417. For more on tax periods, see ¶7-100. For the general liability of representatives, see ¶18-250.
Importations.
Even if you are not registered, GST may still apply to taxable importations in the usual way (¶9-000).
Resident agents for non-residents
must be registered if the non-resident is registered or required to be registered (¶17-410).
Charities and non-profit bodies.
The registration turnover threshold for charities and non-profit bodies is $150,000, not $75,000. In
addition, independent sub-units of charities and non-profit bodies can be registered separately from the
parent body (¶15-080).
Non-residents
making taxable supplies may be exempt from registration where the supplies are covered by a reverse
charge agreement (¶9-095). See also ¶17-410.
From 1 July 2017, simplified GST registration arrangements are available for non-resident suppliers of
inbound intangible consumer supplies (¶9-120).
Groups and branches.
Special rules apply to registration of GST groups (¶17-000) and GST branches (¶17-300).
Government departments
can register separately, even if they are technically not “entities” (¶3-015) and even if they are not carrying
on an enterprise or intending to do so (s 149-5). Other government bodies can also register, even though
they are not entities, if they are established to carry on an enterprise or for a public purpose, and can be
separately identified by activity or location. However, government departments and bodies are not
required to register even if they are carrying on an enterprise and exceed the relevant turnover threshold
(s 149-10). Appropriations applied to an agency’s business operations are not treated as GST turnover.
For ATO guidelines on the implications of “machinery of government” changes, such as mergers or
abolitions of departments, see the ATO Fact Sheet GST and machinery of government changes at
www.ato.gov.au.
Partnerships
can register, but individual partners cannot unless they are carrying on a separate enterprise in their own
right (or are intending to do so).
[GSTG ¶5-150]
LIABILITY FOR GST • TAXABLE SUPPLIES
TAXABLE SUPPLIES
What are taxable supplies? ¶4-000
Requirement 1: there must be a “supply” ¶4-010
Multi-party transactions ¶4-015
Requirement 2: supply must be “for consideration” ¶4-020
Gifts, tips, promotions and stolen property ¶4-030
Competitions and prizes ¶4-035
Grants, appropriations, subsidies and sponsorships ¶4-040
Redeemable vouchers ¶4-060
Frequent flyer, shopper and loyalty programs ¶4-062
Cancellation fees ¶4-065
Security deposits ¶4-070
Fines, penalties, taxes and charges ¶4-080
Court orders and out-of-court settlements ¶4-085
Requirement 3: in course of “enterprise” ¶4-090
Requirement 4: connection with Australia ¶4-100
Non-resident’s supplies that are not connected with Australia ¶4-101
Key concepts in connection test ¶4-102
Telecommunication supplies ¶4-103
Supplies partly connected with Australia ¶4-104
Requirement 5: registration ¶4-105
Requirement 6: supplies not GST-free or input taxed ¶4-110
CALCULATING GST ON SUPPLIES
How GST is worked out ¶4-200
Rounding off rules for GST ¶4-205
Buying and selling at auction ¶4-210

Editorial information

Summary
GST is normally payable if you make a taxable supply or importation. This chapter sets out the
requirements for a taxable supply and explains how the GST is calculated.
The main requirements for a taxable supply are that the supplier must be registered and must make
the supply in connection with its business. There are also various special rules dealing with
 particular transactions such as deposits, redeemable vouchers, sponsorships and payments of
taxes and government fees.
Taxable importations are dealt with in Chapter 9.

TAXABLE SUPPLIES
¶4-000 What are taxable supplies?

You are liable to pay GST if you make a “taxable supply” (s 9-40). The rate is generally 10%.
A “taxable supply” is not limited to a sale, and covers a very wide range of transactions. For there to be a
taxable supply, the following requirements must be satisfied (s 9-5):
(1) there must be a supply (¶4-010)

(2) the supply must be for consideration (¶4-020)

(3) the supply must be made in connection with an enterprise carried on by the supplier (¶4-090)

(4) the supply must be connected with Australia (the “indirect tax zone”) (¶4-100)

(5) the supplier must be registered, or be required to be registered (¶4-105)

(6) the supply must not be “GST-free” or “input taxed” (¶4-110).

The ATO considers that the time for determining whether a supply meets these requirements is the time
when the supply is made, or the time of any event that triggers attribution (¶7-200), whichever is earlier
(GST Advice GSTA TPP 070).
GST is also payable where you make a taxable importation (¶9-000).
Simplified rules for non-residents
For special rules designed to reduce and simplify the application of the GST system to non-residents, see
¶4-101.
[GSTG ¶10-000]

¶4-010 Requirement 1: there must be a “supply”

The first requirement for a taxable supply is that a “supply” must be made by the taxpayer. A supply
includes:
• supplying goods (this means any form of tangible personal property)

• supplying services

• providing advice or information

• granting, assigning or surrendering real property

• creating, granting, transferring, assigning or surrendering any right

• making financial supplies (¶10-000)

• entering into an obligation to do anything, refrain from doing something, or tolerate an act or situation
(or releasing someone from such an obligation)
 • any combination of these (s 9-10).

Anything else that could be described as a supply, in the normal sense of the word, is also covered. It
does not matter whether the supply is legal or illegal — GST may be payable either way. Nor does it
make any difference whether the thing being supplied is a revenue asset or a capital asset (though some
exemptions may apply, for example, on the sale of a going concern: ¶11-500).
The concept of a supply is very wide, and can apply whenever one entity provides something of value to
another entity. The “something” can be anything and can be provided by any means. It can be provided
by the supplier refraining from acting, or by the supplier tolerating some act or situation, just as it can be
provided by means of the supplier doing some act (FC of T v MBI Properties Pty Ltd [2014] HCA 49).
Thus, agreeing to refrain from producing goods could still be a supply, even if there is no element of
consumption (GST Ruling GSTR 2001/4).
A transaction which involves a supplier entering into and performing an executory contract (such as a
lease) will in general involve the supplier making at least two supplies: (1) a supply which occurs at the
time of entering into the contract, in the form of both the creation of a contractual right to performance and
the corresponding entering into of a contractual obligation to perform; and (2) a supply which occurs at
the time of contractual performance. This is so even if contractual performance involves nothing more
than the supplier observing a contractual obligation to refrain from taking some action or to tolerate some
situation during a contractually defined period (FC of T v MBI Properties Pty Ltd [2014] HCA 49).
However, it has been previously suggested that there cannot be a supply constituted by a release of an
obligation that occurs independently of the act of the releasor (Shaw v Director of Housing and State of
Tasmania (No 2) 2001 ATC 4054: see ¶4-085).
The ATO considers that a supply is normally something that passes from one entity to another (GST
Rulings GSTR 2001/4; GSTR 2006/9). A company branch is not regarded as a separate entity from the
company, unless it is registered as a GST branch (¶17-300). Therefore, if an unregistered branch carries
out services for the company, there would not be a supply involved.
The ATO considers, on the basis of the Department of Transport case (¶5-010), that even if there is no
binding obligation between a payer and a supplier for services or goods to be provided to a third party,
there may nevertheless be a supply made by the supplier to the payer in certain circumstances (¶4-015).
One transaction can constitute two or more supplies. For example, where a government department
subsidised a taxi company for discounted fares provided for disabled customers, it was held that this
constituted a supply by the company of services to the department and a separate supply to the
customers (FC of T v Department of Transport (Vic), ¶5-010). For the ATO’s views on subsidies, see ¶4-
040.

Examples
(1) In the sale of a business, the ATO accepts that the assumption of an obligation by the purchaser (eg in relation to the
continuation of long service leave entitlements) does not constitute a supply by the purchaser if the liability on the purchaser is
imposed, required and effected by the words of a statute. The same applies if the statutory liability is merely confirmed by way of
contractual agreement between the parties (GST Rulings GSTR 2004/9; GSTR 2006/9).
(2) Where an employee changes jobs from one government employer to another, and the new employer is legally required to
assume liability for the employee’s accrued long service leave entitlements, the new employer does not make a supply when it
simply accepts the statutorily-required payment from the previous employer to cover those entitlements (GST Ruling GSTR 2004/9).
For further discussion of the position where liabilities are assumed by the purchaser on the sale of a business, see ¶11-515.
(3) There was no supply where an entity that did not exercise a right to acquire shares under an entitlement offer later received a
premium as a result of the shares being subsequently sold, at a higher price, to other investors (Interpretative Decision ID 2009/11).
(4) An entity would not make a supply simply because a government licence it held was unilaterally cancelled.

The ATO considers that for an “entry into an obligation” to constitute a supply, the obligation must have
economic value and an independent identity that is separate from the underlying transaction (GST Ruling
GSTR 2001/6). For the possible application of this rule to the purchase of a property subject to an existing
lease, see ¶11-335.
Compulsory acquisitions
On a similar basis, the ATO also considers that the compulsory resumption of land from a taxpayer does
not involve a “surrender” or other supply unless the taxpayer has taken some action to cause its interest
to be transferred or surrendered to the relevant authority. Accordingly, there is no supply by the taxpayer
where its legal interest is divested by operation of the resumption statute, for example, upon gazettal of
the acquisition notice, and the authority initiated the resumption process pursuant to a statutory right
(GST Ruling GSTR 2006/9; see also CSR Ltd v Hornsby Shire Council 2004 ATC 4966). This may apply
even though the owner agreed to the price to be paid for the resumption. However, where the owner,
following a rezoning of land, exercised its right to request a council to acquire the land, the subsequent
transfer of the land to the council constituted a taxable supply by the owner (Hornsby Shire Council v FC
of T 2008 ATC ¶10-061; GST Ruling GSTR 2006/9). This would also have the consequence that the
council may have been entitled to an input tax credit on the acquisition. Similarly, there was held to be a
supply where the taxpayer executed a contract of sale under which it agreed to convey the land to the
State of Queensland at a time when the statutory process of resumption was in prospect but had not
come to fruition (SXGX v FC of T [2011] AATA 110). For the position where co-owned land is partitioned,
see ¶11-064.
Supplies of money
A payment of money for the supply of something else is not a “supply” — otherwise there would be a
doubling up of GST (s 9-10(4)).

Example
(1) Lee buys office equipment from a retailer. The supply in this transaction is the supply of the equipment by the retailer to Lee.
There is not also a supply of money by Lee to the retailer.
(2) A liquidator makes a cash distribution to a shareholder as part of winding up a company. GST would not apply to the payment as
it is not a supply (see also ¶4-020).
(3) A capital contribution of money made by a partner on entering into a general law partnership is not a supply (GST Ruling GSTR
2003/13). For “in kind” contributions, see below.

However, if money is provided as consideration for the supply of other money, that will be treated as a
supply. This may apply, for example, where there is a foreign exchange transaction or a cheque is cashed
for a fee. This is treated as a financial supply (¶10-010).

Example
Company A contributes an amount to company B’s business in return for a right to a share of the net profit from that business. This
contribution is not treated as providing consideration for a supply of money, and therefore is not treated as a supply by A under s 9-
10(4). Nor is it treated as an input taxed supply of an interest in a credit arrangement under s 40-5(1) (¶10-005; Interpretative
Decisions ID 2007/15; ID 2007/17). Note: Entity B would be treated as making a taxable supply of the right to profits under s 9-10(2)
(e). The supply would not be treated as an input taxed supply of an interest in a debt (Interpretative Decisions ID 2007/16; ID
2007/18).

“Money” includes currency, promissory notes, bills of exchange, negotiable instruments intended to be
used as currency, postal notes, money orders and payments by way of credit or debit card, credit or debit
to an account or creation or transfer of a debt (s 195-1). It does not include collectors’ pieces, investment
articles, items of numismatic interest or currency with a market value above its face value.
Bitcoin and digital currency transactions
For supplies or payments made on or after 1 July 2017, the GST treatment of digital currency such as
bitcoin is aligned with that of money (s 9-10(4); 9-85(2)). The effect is that a supply of digital currency is
not treated as a supply unless it is provided as consideration for another supply of money or digital
currency — for example, in debt trading or foreign currency speculation. If there is such a supply, it will be
treated as a financial supply.
This treatment overturns the previous practice of treating digital currency as intangible property. That
practice had the effect that users could effectively have to bear GST twice — once on the purchase of the
currency and again on its use in exchange for other goods and services subject to GST. This was seen as
an obstacle for the financial technology sector to grow in Australia.
“Digital currency” refers to digital units of value that:
• are designed to be “fungible”, or fully interchangeable for the purpose of their use as consideration for
a supply. Digital assets that are valuable because of their specific features, such as photographs, do
not qualify

• are generally available to members of the public, without any substantial restriction on their use as
consideration

• are not denominated in any country’s currency

• do not have a value that depends on the value of anything else, and

• do not give an entitlement to receive or to direct the supply of a particular thing, unless that
entitlement is merely incidental (s 195-1).

For an article on the income tax rules on bitcoin, see CCH Tax Week ¶888 (2017).
Transactions by partners and partnerships
A partnership is treated as an entity in itself for GST purposes (¶3-015). If a partner supplies something in
their capacity as a partner, this is treated as a supply by the partnership, not by the partner (s 184-5).
Factors that may indicate that the supply has been made in the capacity as a partner include:
• the consideration for the supply is paid to a common fund or to all the partners

• the supply is of a kind that is typically made in the type of enterprise carried on by the partnership, and

• the invoice shows the firm or business name, or the names of all the partners, as supplier (GST
Ruling GSTR 2003/13).

A corresponding rule applies to supplies made by members of the committee of management of any other
unincorporated association.
An “in kind” capital contribution made by a partner on entering into a general law partnership (¶3-015) is a
supply by the partner, and may be taxable if made as part of carrying on or closing down a separate
business run by the partner.
The ATO also considers that an in-kind distribution made to the partner during the operation of a general
law partnership, or as a final distribution on its winding up, is a supply by the partnership for
consideration. This consideration is the reduction in the value of the partner’s interest in the partnership
(GST Ruling GSTR 2003/13).
The ATO considers that where a partner takes goods held as trading stock from the partnership for
private or domestic use, this will be a supply by the partnership in the course of its business (GST
Determination GSTD 2009/2). If the partner provides inadequate consideration for the supply, GST may
be based on the market value (¶17-500). The special adjustment applicable under Div 130 (¶6-320) does
not apply in these circumstances.
Transactions by trustees
Although a trust is an entity (¶3-015), it is not a legal person able to have legal obligations or duties. As
the NSW Supreme Court has commented, it is therefore “difficult to conceive how a trust, which has no
legal personality, as distinct from a trustee, or a trustee’s agent, can make a supply” (Toyama Pty Ltd v
Landmark Building Developments Pty Ltd [2006] NSWSC 83). Supplies are therefore made by trustees,
not trusts.
The ATO says that an entity acting in its capacity as trustee does not normally contract as agent for the
beneficiary of the trust (¶17-400), but as principal (GST Ruling GSTR 2008/3).
A taxpayer who was a trustee of a trust and traded under a company name, and who signed a contract as
the director/secretary of the company, could not claim that he was a party to the contract in his capacity
as trustee for the trust (Harland v FC of T 2013 ATC ¶10-348).
In the case of a bare trust, where the trustee has no or minimal active duties, the ATO considers that:
• the trustee does not carry on an enterprise (¶4-090) and therefore cannot make a taxable supply, and
cannot be registered (¶3-000); see also Wynnum Holdings No 1 Pty Ltd v FC of T 2012 ATC ¶10-274

• if the trustee transfers legal title to property to a third party at the direction of the beneficiaries, it is the
beneficiaries that make the supply, even though the legal title was held by the trustee

• a change of bare trustees does not give rise to GST, but a change of beneficiaries may involve a
taxable supply

• relevant tax invoices may be made in the name of the trustee, rather than the beneficiaries (¶5-010).
The Commissioner has also waived the requirement to hold a tax invoice in certain bare trust
situations (WTI 2013/2: see ¶5-130), and

• the trustee may sign an agreement to apply the margin scheme (¶11-100) or an agreement that a
supply be a supply of a going concern (¶11-500) (GST Ruling GSTR 2008/3).

For the liability of trustees, see ¶18-270.

Examples
(1) A taxpayer carrying on business as a developer acquires land from V in the name of a shelf company which agrees to act solely
as a bare trustee in accordance with the developer’s instructions. V calculates the GST on the sale under the margin scheme. The
developer carries out a strata unit development on the land and arranges for the subsequent sale of the units. All moneys relevant to
the original purchase, the development and the ultimate realisation are provided by the developer, and all legal documentation is
signed by the trustee as owner of the land.
The GST implications are:
(a) the creation of the trust does not give rise to GST

(b) the acquisition of the land is an acquisition by the developer, but no input tax credit can be claimed as V calculated
GST under the margin scheme

(c) other acquisitions relating to development and sale of the units are made by the developer, who could claim input tax
credits

(d) the ultimate sale of the units is a taxable supply by the developer, who may make use of the margin scheme in
accordance with the normal rules.

(2) Assume that the developer retains one unit and directs the trustee to transfer title to it. The developer later sells the unit in its
own name. The transfer of the unit to the developer is not a taxable supply because the trustee is not carrying on an enterprise. The
subsequent sale by the developer will be a taxable supply. (Despite the earlier transfer by the trustee, the sale will nevertheless be
treated as a sale of new residential premises: ¶11-020.)
(3) Assume instead that the developer originally acquired the land in its own name and then transferred title to the trustee to hold on
a bare trust. This would not be treated as a taxable supply as there is no consideration. The associate rules (¶17-500) would not
apply, as the market value of the supply is nil. (Based on GST Ruling GSTR 2008/3.)

Motor vehicle holdback and incentive payments

Certain third party rebates or “holdback” payments made by manufacturers, for example in the car
industry, are not treated as consideration for a supply, as there is no supply involved (GST Ruling GSTR
2000/19; GST Determination GSTD 2005/4; see also KAP Motors Pty Ltd & Anor v FC of T 2008 ATC
¶20-007). For the treatment of refunds where a taxpayer has incorrectly overpaid GST in this situation,
see ¶8-110.
This does not apply to specified fleet rebates and run-out model support payments, which have been held
to be consideration for the supply of the vehicles to customers, though target incentives were not (AP
Group Ltd v FC of T [2013] FCAFC 105). As a result of this decision, the ATO has issued guidelines in
GST Ruling GSTR 2014/1. These include:
• where the dealer does something specific for the manufacturer for the incentive payment, there is a
supply by the dealer to the manufacturer for consideration. This does not apply to conduct by the
 dealer that is for its own benefit and something the dealer would be likely to do anyway without an
incentive payment, even if the manufacturer perceives an advantage in encouraging the conduct

• where the supply of particular vehicles to a customer is the reason for the incentive payment, and
there is nothing specific the dealer does for the manufacturer for the payment, there is a supply for
consideration of the vehicle by the dealer to the customer

• where the dealer does not make any supply for consideration, the dealer is not liable for GST and the
manufacturer is not entitled to an input tax credit. However, in these circumstances, an incentive
payment may give rise to a GST adjustment (¶6-100).

Modified rules apply in attributing GST where an incentive payment is received by a dealer (¶7-440). For
modified tax invoice requirements, see ¶5-130.
For the general treatment of multi-party transactions, see ¶4-015.
Small-scale renewable technology rights
Under the small-scale renewable energy scheme, the owner of an installed eligible solar water heater or
small generation unit may acquire assignable rights to create small-scale technology certificates (STCs)
in return for financial benefits. In these circumstances, the ATO’s practice is:
(1) the sale of the heater would be subject to GST in the normal way

(2) the assignment of the right by the customer would only attract GST where the customer was GST-
registered (or required to be)

(3) GST would not apply to the creation of the STC by the assignee, as there is no “supply” involved

(4) sale of the created STC would be a supply which would be subject to GST, unless the vendor is not
registered for GST, or required to be.

The ATO considers that steps (1) and (2) must be accounted for separately, and cannot be “netted” for
GST purposes.

Example
A retailer of a solar water heater sells an eligible system to a customer for a GST-inclusive price of $4,400. The customer, who is not
GST-registered (or required to be), assigns their right to create STCs in relation to the heater to the retailer. In return, the retailer
discounts the price by $600, and the customer pays a net $3,800. The GST consequences are as follows:
• the retailer is liable for GST of $400 on the supply of the water heater to the customer

• the assignment by the customer of the right to create STCs, in return for $600, is not subject to GST. The retailer therefore
cannot claim input tax credits on the assignment.

If instead the customer had been GST-registered (or required to be), the assignment would be a taxable supply. The customer
would therefore be liable to remit GST of 1/11th of $600, and to provide a tax invoice to the retailer so they can claim the relevant
input tax credit (based on ATO Fact Sheet: GST and the small-scale renewable energy scheme).

As to whether the activity of installing and generating electricity through a photovoltaic installation on a
private residence constitutes an “economic activity”, see ¶3-020.
Supplies in a brothel
Where a customer purchases sexual services in a brothel, there can be a question as to whether the
relevant supply can be split up into a supply of the room hire (by the brothel owner) and a separate supply
of the sexual services (by the sex worker). It appears that the ATO may accept that there are separate
supplies if the facts demonstrate that the fees for these are properly segregated physically and by proper
accounting (Harrison v FC of T [2010] AATA 155). In such a case, the owner would be liable to GST only
on the room hire. However, this would not apply if the facts were that the owner supplied the customer
with the total service, for a single inclusive price, and used the sex worker as a sub-contractor for the
sexual component (Case 5/2018 ATC ¶1-097).
ATO’s summary of “supply” rules
The ATO considers that the following propositions generally apply in identifying and characterising typical
two-party supplies:
(1) for every supply there is a supplier
(2) generally, for every supply there is a recipient and an acquisition
(3) a supply may be mixed, composite or neither
(4) a transaction may involve two or more supplies
(5) to “make a supply”, an entity must do something (though refraining from an act, or tolerating some act
or situation, may also be sufficient: MBI Properties, above)
(6) “supply” usually, but not necessarily, requires something to be passed from one entity to another
(7) an entity cannot make a supply to itself
(8) a supply cannot be made by more than one entity
(9) creation of expectations alone does not establish a supply
(10) it is necessary to analyse the transaction that occurs, not a transaction that might have occurred
(GST Ruling GSTR 2006/9).
[GSTG ¶10-070]

¶4-015 Multi-party transactions

Transactions may of course involve more than two parties. According to the circumstances, these
transactions may comprise:
• a supply made to one entity but provided to another entity

• the making of two or more supplies, or

• a supply made and provided to one entity and consideration paid by a third party.

The ATO uses the following propositions when analysing these arrangements (the numbering follows on
from the 10 propositions used in analysing two-party arrangements (¶4-010)):
(11) the agreement is the logical starting point when working out the entity making the supply and the
recipient of that supply (see Example 1)
(12) transactions that are neither based in an agreement that binds the parties in some way, nor involve a
supply of goods, services or some other thing, do not establish a supply (see Example 3)
(13) when A has an agreement with B for B to provide a supply to C, there is a supply made by B to A
(contractual flow) that B provides to C (actual flow) (Examples 1 and 2)
(14) a third party may pay for a supply but not be the recipient of the supply (see for example the TT-Line
case: ¶4-020)
(15) one set of activities may constitute the making of two or more supplies (see for example the
Department of Transport case: ¶5-010)
(16) the total fact situation will determine the nature of a transaction, the entity that makes a supply and
the recipient of the supply (GST Ruling GSTR 2006/9).

Examples
The following examples of the ATO’s approach are adapted from GST Ruling GSTR 2006/9:
(1) A enters into a contract with B, a florist, for B to provide flowers to C. There is no contractual relationship between A and C.
Also, there is no contractual relationship between B and C, as B simply provides flowers to C on A’s behalf. The only
contractual relationship is between A and B. Under this contract, B makes a supply of flowers to A and consideration is paid by
A to B. The flowers are provided (not supplied) by B to C.
 (2) An airline had an arrangement where third party food outlets provided food to passengers on delayed flights. When there was
a flight delay, vouchers of a specified amount were made available for passengers’ use at the outlets. The ATO would treat
this in the same way as the supply of flowers in Example (1), ie the food outlets make a supply of the meals to the airline, but
provide the meals to the passengers. Note that in comparable circumstances in the UK, the supply has been treated not as a
supply of meals but the supply of a right to have the passengers fed (British Airways plc [2000] BVC 2207; following Customs
and Excise Commissioners v Redrow Group plc [1999] BVC 96).

(3) M, a manufacturer, supplies goods to authorised dealers who on-supply those goods to end-users. M makes a standing offer
to end users that if their purchases from an authorised dealer reach a certain level, M will pay the end user a “loyalty
payment”. Under this arrangement, M supplies goods to a dealer (D), and D supplies goods to an end-user (E). E receives a
loyalty payment from M. However, there is no supply from E to M in relation to the loyalty payment. (However, M may be
entitled to a decreasing adjustment of 1/11th of the third party payment: ¶6-100.)

The ATO considers, on the basis of the Department of Transport case (¶5-010), that even if there is not a
binding obligation between a payer and a supplier for services or goods to be provided to a third party,
there may nevertheless be a supply made by the supplier to the payer. This may occur in certain cases
where it is in accordance with a pre-existing framework which contemplates that the services or goods will
be provided in that way (2011 Addenda to GST Rulings GSTR 2006/9; GSTR 2006/10).

¶4-020 Requirement 2: supply must be “for consideration”

The second requirement for a taxable supply is that the supply is made “for consideration”.
Consideration means, in effect, just about anything of value (s 9-15). In the straightforward example of a
sale of goods for money, the consideration is simply the payment.
As well as payment, consideration also covers situations where someone does something or refrains from
doing something. Any of these things are treated as consideration for a supply if they are:
• “in connection with” the supply (this is interpreted widely)

• made in response to the supply, or

• made to induce the supply.

It is not necessary that the consideration is provided by the recipient of the goods or services — it may be
provided by a third party. Nor is it necessary that there was any legal obligation to make the payment, or
that it was made to the supplier (TT-Line Company Pty Ltd v FC of T 2009 ATC ¶20-157; GST Ruling
GSTR 2006/9). However, in such cases, it would be necessary to establish that there is a sufficient
connection between the supply and the third party payment.

Examples
(1) Kool Kars sells a car that was financed under a hire-purchase agreement. It directs the purchaser to pay the purchase price
directly to the financiers to cover the amount still owing to them by Kool Kars. This payment will be treated as consideration for the
supply of the car by Kool Kars.
(2) A service trust associated with a law firm provided tax minimisation schemes to clients. A fee was payable by the clients, but this
was not paid to the trust — instead it benefited other individuals or entities associated with the trust. The AAT ruled that this was a
taxable supply for consideration. (Based on Keenhilt Pty Ltd v FC of T [2007] AATA 2095.)
(3) The government reimbursed a transport company for discounts the company allowed to its passengers. The reimbursement
precisely matched the amount of fare reduction offered to passengers. The court considered that the reimbursement formed part of
the consideration received by the company for providing transport services. (Based on TT-Line case.)
Note: (1) the reimbursement was not covered by the exemption for government appropriations (¶4-040); (2) for the separate issue of
whether an input tax credit can be claimed, see the Department of Transport case at ¶5-010. For the general position on subsidies,
see ¶4-040.

It is not necessary that the consideration be adequate or at a commercial rate.

The requirement that the consideration be “for” the supply means that there must be a connection or
relationship — not necessarily a contractual one — between the supply and the consideration (FC of T v
Qantas Airways Ltd [2012] HCA 41).
Payments by members
Payments made by members to their associations can be consideration.

Example
The registered body corporate of a block of home units imposes a levy on each owner. This is treated as consideration for the
services that the body corporate provides. As the body corporate is regarded as carrying on an enterprise (¶11-200), GST will be
payable if it meets the relevant turnover threshold (Body Corporate, Villa Edgewater Courts 23092 v FC of T 2004 ATC 2056).
However, the body corporate can claim input tax credits for the GST it pays outside contractors for providing those services.

Similarly, club membership subscriptions are treated as consideration for the supply of membership
services.

Example
To obtain membership of a club, Hector must pay a membership fee and also provide an interest-free loan to the club. This will be
treated as a supply of membership services for a consideration equal to the membership fee plus the benefit to the club of having
the interest-free use of the loan moneys for the period of the loan. (Based on Interpretative Decision ID 2003/4; see also Exeter Golf
and Country Club Ltd v Customs and Excise Commissioners (1981) 1 BVC 385.)

For the treatment of fines imposed on members, see ¶4-080.

Non-monetary consideration and bartering
The consideration for a supply may be monetary or non-monetary, or a combination of both.
If there is a barter transaction, where property or services are traded for other property or services, this is
treated as a supply for consideration by each party. For example, where web pages are designed in
exchange for web server space, this is treated as a supply of design services for consideration and a
separate supply of server space for consideration.
The GST is based on the GST-inclusive market value of the property or services bartered (s 9-75). Tax
invoices will need to be issued to enable input tax credits to be claimed by either party.

Example
Enterprises sells an item of equipment to Business in return for specified services. The GST-inclusive market value of the equipment
and the services is assumed to be the same, ie $11,000. Enterprises is liable for GST of $1,000 on the sale of the equipment and
can claim a $1,000 input tax credit on the acquisition of the services. Business is liable for GST of $1,000 on the supply of the
services and can claim a $1,000 input tax credit on the acquisition of the equipment.

The market value is the price that would be negotiated between a knowledgeable and willing (but not
anxious) buyer and a knowledgeable and willing (but not anxious) seller, acting at arm’s length in an
appropriate market. This will often be determined on the basis of the value of identical or closely similar
items, but in some cases a professional appraisal may be needed. In the case of new or unique items, a
cost plus profit margin method may be appropriate. Where the market value is difficult to determine, for
example where intangibles are involved, the market value may be assumed to be equal to the
consideration provided. The Commissioner does not accept “historical cost” or “residual value” methods
(GST Ruling GSTR 2001/6). For further guidelines on market valuations, see the ATO’s Market Valuation
for Tax Purposes (www.ato.gov.au/General/Capital-gains-tax/In-detail/Market-valuations/Market-
valuation-for-tax-purposes).
The Commissioner considers that the market value should be determined at a time that is reasonable in
the circumstances. This may be when the agreement is entered into, when economic risk is transferred,
or when the recipient assumes effective control (GST Ruling GSTR 2001/6).
If a supplier is on a cash basis and receives consideration in the form of services over more than one tax
period, the services will need to be apportioned. This may be done on the basis described in GST
Determination GSTD 2000/3 (¶19-100). In determining when services begin to be provided, purely
preliminary activities may be disregarded in appropriate circumstances (GST Ruling GSTR 2001/6).
For the treatment of bitcoin transactions, see ¶4-010. For the Commissioner’s guidelines on barter
transactions carried out under a formalised system involving points or credits, see ¶7-435.
Simplified compliance rules
From 18 November 2016, simplified compliance rules apply to barter (or “countertrade”) transactions in
the following situation:
• countertrade transactions do not exceed approximately 10% of the taxpayer’s total number of supplies

• both parties to the transaction are GST-registered and are acting at arm’s length

• both supplies are fully taxable/creditable

• no monetary consideration is involved, and

• appropriate records of the transaction are kept (Practical Compliance Guideline PCG 2016/18).

The general effect is that the two parties do not need to agree on the value of the transaction, or
exchange tax invoices, where the transaction is GST-neutral. Instead, each party can report the supply
and the corresponding acquisition at the amount that they consider the goods or services they have
supplied to be worth.
Mining “farm out” arrangements
For the ATO’s views on the application of the GST rules to farm-out arrangements that are commonly
used in the mining and petroleum industries, see Miscellaneous Taxation Ruling MT 2012/1 (immediate
transfers) and Miscellaneous Ruling MT 2012/2; A New Tax System (Goods and Services Tax) (Particular
Attribution Rules Where Supply or Acquisition Made Under a Contract Subject to Preconditions)
Determination 2012 (deferred transfers).
Adjustments and set-offs on sale of business
For the calculation of consideration where the sale price of a business is affected by adjustments and set-
offs, see ¶11-515.
Trade-ins
For the GST treatment of motor vehicle trade-ins, see ¶12-125.
Government charges
Government “fee for service” charges, such as park entry charges or visa fees, are treated as
consideration for the services to which they relate, and GST may therefore apply. However, there are
various exceptions to this (¶4-080). Appropriations made between government bodies are not subject to
GST, even if they are separately registered (¶4-040).
Rights and options
If someone is granted a right or option to acquire something, that is a supply. If the option is later
exercised, that is a further supply. The amount paid, if any, for each supply is treated separately. This
would apply even if the contract states that the purchase price is inclusive of the option fee (The Trustee
for the Whitby Trust v FC of T 2017 ATC ¶10-450). One effect of this rule is that the second supply is not
subject to GST unless there is an extra amount payable on the exercise of the option (s 9-17).
Separate rules apply to certain redeemable vouchers (¶4-060).

Example
In February 2019, Enterprises, a registered business with quarterly tax periods, grants an option to Trader to buy land for business
purposes for $220,000. Trader pays Enterprises $22,000 on the grant of the option. Enterprises must account for 1/11 × $22,000 =
$2,000 in its GST return for the March 2019 quarter.
In July 2019, Trader exercises the option and pays Enterprises the balance of $198,000. Enterprises must account for GST of 1/11 ×
$198,000 = $18,000 in its GST return for the September 2019 quarter.
 If Trader is also registered with quarterly tax periods, it can claim input tax credits for $2,000 in the March 2019 quarter and $18,000
in the September 2019 quarter.

GST will also potentially apply where an option is assigned or renewed for consideration, but apparently
not where the option simply expires. For transitional provisions relating to options granted before 1 July
2000, see ¶19-200.
Note that if a supply is GST-free, the supply of a right to that supply is itself GST-free. Similarly, if a
supply is input taxed, the supply of a right to that supply is itself input taxed (s 9-30).
Early termination of lease of goods
The Commissioner’s views on the GST treatment of payments received on early termination of a lease of
goods are as follows (GST Ruling GSTR 2003/11):
• where the lessee exercises a contractual right to terminate early, the termination payment is treated
as altering the consideration for the original supply of the leased goods, giving rise to a GST
adjustment. The same applies if the lessee terminates early pursuant to a right under consumer
credit legislation

• where there is an early termination by mutual agreement, outside the terms of the original lease, the
termination payment is treated as consideration for a separate supply by the lessor. The same
applies where the lease allows for early termination at the lessor’s discretion

• if the early termination payment arises automatically from the lessee’s default, and it is made to
genuinely compensate the lessor for any damage suffered, it will not be treated as consideration for a
supply, so GST will not apply. The same would normally apply to early termination payments that
become due because of some external event, such as where the leased goods are stolen, destroyed
or compulsorily acquired.

However, specific components of the termination payment may be treated separately. For example, if part
of the payment is made in satisfaction of arrears of lease instalments, that part is always treated as
consideration for the earlier supply of the leased goods. If part of the payment is made for transferring title
to the goods to the lessee, the ATO considers that this should be treated as consideration for a separate
supply (the supply of title).
For the GST treatment of lease incentives and payouts in relation to commercial leases of real estate, see
¶11-330.
Early termination of hire-purchase agreement
Where the supplier terminates a hire-purchase agreement (¶7-438) due to the hirer’s default, the
termination amount payable to the supplier is treated as damages and therefore does not form part of the
consideration for the supply, except for any component representing a payment of pre-termination arrears
(Interpretative Decision ID 2013/52). For GST adjustments that may apply, see ¶6-100 (Interpretative
Decision ID 2013/51).
Termination of water access rights
For the treatment of termination fees paid by irrigators to water infrastructure operators, see ¶16-200.
Distributions by liquidators, trustees
It appears that a cash distribution by a liquidator on the extinguishment of shares is not a supply (¶4-010).
Nor, it seems, is it consideration for a supply by the shareholders. There are accordingly no GST
consequences of such a distribution.
An “in specie” distribution of the company’s assets is also not normally made for consideration. However,
it may nevertheless be subject to GST in certain situations where it is made to an associate (¶17-500):
see ATO GST Industry Issues — Representative of Incapacitated Entities: Issue 5.1.
There may be consideration where a trustee transfers an asset to a beneficiary who has an indefeasible
interest in the trust property. However, a distribution of an asset by a trustee to a beneficiary under a
discretionary trust would not be for consideration, as the beneficiary has no rights to surrender (see also
¶17-500).
Dividends paid to parent company
Where a parent company provides management services to a subsidiary, the mere receipt of dividends
from the subsidiary would probably not be treated as consideration for those services (Floridienne SA &
Berginvest SA v Belgian State [2001] BVC 76).
Pro bono services
A business may provide free goods or services to deserving clients, for example the poor, charities and
local non-profit groups. These “pro bono” supplies are not subject to GST as there is no consideration. If
they are provided at a discount, GST will only be payable on the discounted price. In either case, the
supplier could presumably claim input tax credits for its costs, provided that pro bono work can be
regarded as being done in the normal course of a business.
Supplies to associates
In certain cases, if something is supplied free or at a discount to an associate, GST may be payable as if
the associate had paid market value (¶17-500).
[GSTG ¶11-000]

¶4-030 Gifts, tips, promotions and stolen property

Most gifts do not attract GST as no consideration is involved and, in any event, they will usually be made
in non-business situations.
A gift is something that is transferred voluntarily for no material advantage (FC of T v McPhail (1968) 17
CLR 111; Taxation Ruling TR 2005/13). On this basis, the ATO considers that membership fees paid to a
charity organisation are not gifts because they confer membership rights, even though these may not be
tangible. However, a school scholarship is evidently regarded as a gift (¶14-004).
A restaurant proprietor is liable for GST on service charges and pre-set extras, but not on genuine tips
made personally to restaurant staff. If a tip is paid with a credit card, GST will not apply if the amount of
the tip is actually given to the person for whom it was intended. This must be recorded by the business
(ATO GST Industry Issues — Tourism and Hospitality: Issue 26). The Commissioner considers that tips
paid to registered taxi operators are subject to GST. No GST applies to free services such as shuttle bus
services for club patrons.
The fact that goods or services are provided as a gift does not prevent the donor from claiming an input
tax credit for the cost if the gift is made in the course of carrying on the donor’s enterprise.
Gifts made to associates can be subject to GST in certain situations (¶17-500).
Fundraising dinners, auctions and functions
At a typical $1,000-a-plate fundraising dinner, none of the $1,000 can be treated as a gift, even though
the actual value of the dinner may only be $100. This applies even if the admission price is notionally split
into $100 for the dinner and $900 as a “gift”, unless the gift component is truly optional.
Similarly, if a person at a charity auction pays $100 for an item worth $40, no part of the $100 is treated
as a gift. Accordingly GST, if applicable, will be calculated on the full amount.
On the other hand, GST will not apply on separate genuinely voluntary payments. For example, if a
person pays $22 to attend a fundraising trivia night, and later makes a voluntary contribution of $10, the
GST will be limited to 1/11 × $22 = $2.
In certain circumstances, charities and non-profit bodies may elect to treat fundraising activities as input
taxed (¶15-055).
“Crowdfunding” arrangements
Crowdfunding involves using the internet and social media to raise funds for specific projects or particular
business ventures. Typically, the promoter of the project or venture engages an intermediary to operate
an online platform that allows the promoter to connect to potential funders. The ATO’s views on the GST
impacts are as follows:
(1) if the funder makes a payment without receiving anything significant in return, apart from public
acknowledgement, there is no supply by the promoter, so GST would not apply to that transaction.
However, GST may apply to the supply of services by the intermediary to the promoter, who may claim an
input tax credit for those
(2) if the funder receives something significant in return, such as free or concessional goods or services,
the promoter will be liable for GST on those supplies, provided that it satisfies the usual GST
requirements (registration, carrying on an enterprise, connection with Australia, etc: ¶4-000). The funder
would be entitled to an input tax credit if it satisfies the general requirements for creditable acquisitions
(¶5-010). The intermediary makes a taxable supply of services to the promoter, who is entitled to an input
tax credit for those
(3) if the funder makes a payment in return for an interest in the equity of the promoter (such as shares in
the company), the supply of the shares is input taxed (¶10-000), and no input tax credit is available to the
funder. The intermediary makes a taxable supply of services to the promoter, who is not entitled to an
input tax credit for those unless it satisfies a concessional rule such as the financial acquisitions threshold
test (¶10-032)
(4) if the funder’s payment is to be repaid with interest, both the funder and the promoter have made input
taxed financial supplies. The intermediary/promoter’s position is the same as in (3) above.
Clients’ meals
Under the income tax rules, a taxpayer wishing to claim a tax deduction for meals provided to its clients at
an in-house dining facility must include a specified amount in assessable income. This is not treated as a
supply for consideration (Interpretative Decision ID 2005/121).
Collect-a-Cap and similar programs
Under promotional programs such as Collect-a-Cap, a manufacturer makes a payment to a participating
organisation for every specially marked bottle cap from the manufacturer’s product collected by the
organisation. The ATO considers that if the organisation is registered, the provision of the caps may be a
taxable supply by the organisation for a consideration equal to the payment made by the manufacturer.
GST of 1/11th of that payment would therefore be payable. However, if the organisation is a charity, gift-
deductible entity or government school (¶15-000), the supply will be GST-free because it is the sale of
donated second-hand goods (¶15-030). If the organisation is a specified non-profit body, it has the option
to treat its Collect-a-Cap activities as a non-profit sub-entity (¶15-080), which will not have to register and
pay GST unless the turnover is $150,000 or more. In that case, however, the organisation could not claim
input tax credits on its purchases made in carrying out those activities.
Marketing incentives
Payments received by a retailer as an incentive to sell a particular manufacturer’s or wholesaler’s
products are treated as consideration for a supply by the retailer.

Example
Under an incentive agreement between a greeting card wholesaler and a GST-registered newsagency, the agency receives $1,000
plus a month’s supply of free stock in return for agreeing to sell the wholesaler’s cards for 12 months. This is treated as a taxable
supply by the agency, which must account for GST based on a consideration equal to $1,000 plus the market value of the free stock.

“Free” software
If “free” software is downloaded over the internet, there would normally be no consideration, so GST
would not apply. However, it is possible that there will be consideration if the software is accompanied by
a “cookie” that provides benefits to the supplier. It would, however, be difficult to value the consideration
involved.
Acknowledgments
The Commissioner considers that if something is supplied voluntarily, it may still be a gift even though the
supplier receives an in-kind “payment” purely in recognition of the supplier’s benevolence (GST Ruling
GSTR 2001/6).

Example
A company supplies equipment to a school free of charge to use on its annual speech night. The fact that the school acknowledges
the company in its program does not prevent the supply from being a gift. However, if the school provided advertising or naming
rights to the company, that would be treated as a paid sponsorship and GST may apply (¶4-040).

Tokens of appreciation
If a conference organiser presents a speaker with a mere token of appreciation, this will generally not be
treated as consideration for the speaker’s services (GST Determination GSTD 2002/5). The
Commissioner says that a typical token of appreciation could include a book, a bottle of wine or a bunch
of flowers. It will not be a token of appreciation if the speaker has requested it, or expects or is entitled to
it.

Example
A speaker who is registered for GST charges $550 for her speaking services. In addition, she is presented with a bottle of wine as
an unsolicited token of appreciation. Only the $550 is treated as consideration. The GST is therefore 1/11 × $550 = $50. If the
speaker had not charged any fee, and received only the bottle of wine, there would be no consideration for the speaking services
and no GST liability.

As an exception to this general rule, a token of appreciation may be treated as consideration where there
are special circumstances. Factors that may point to the token being consideration include:
• the fact that it is significantly different from gifts given to other speakers

• the fact that it complements another non-monetary fee provided to the speaker, for example, where
the non-monetary fee is a laptop computer and the token is complementary software, the token may
be considered as additional consideration

• the motive of the organiser

• whether the value of the token exceeds what is reasonable, taking into account the fee paid to the
speaker or comparable speakers for this type of engagement. For example, where a speaker waives
a significant fee and instead receives a comparably-valued item of equipment related to the
speaker’s business, the token may be treated as consideration (GST Determination GSTD 2002/5).

The Commissioner considers that accommodation, transport and meals are not consideration if they are
provided merely to enable the speaker to supply the speaking services. However, they would be
consideration to the extent that they go beyond that, for example, where they cover a period outside the
conference, or the speaker’s family members (GST Determination GSTD 2002/5).
A “gift” of free product presented by a direct marketer to the host of a product party held at the host’s
home was a taxable supply, as it was conditional on the services provided by the host (Interpretative
Decision ID 2004/673).
An honorarium given to persons for voluntary services (eg by a football club to a strapper) may constitute
consideration if there is sufficient connection between the services and the payment (GST Advice GSTA
TPP 015).
Promotions
“Happy hour” alcohol promotions are subject to GST on the discounted price.
A free drink which is given away as part of a promotion would normally not be subject to GST as there is
no amount paid. The same applies if a restaurant offers an additional main course (or bottle of wine) for
diners who pay for a meal, or similar “buy one, get one free” type offers. In this case, GST applies to the
amount charged. There is no GST on the notional value of the additional main course or wine.
For the situation where promotional items are supplied “free” with GST-free food, see ¶13-200.
Stolen property
Where property is stolen from a business, that is not a taxable supply as no consideration has been
provided. No adjustment is made to any input tax credit that the business may have claimed when it
originally acquired the property (¶6-100). If the thief is later forced to make some payment for the goods,
there would be a taxable supply to that extent.
If a business is robbed of its takings, representing the proceeds of earlier taxable supplies, that does not
alter the fact that GST is payable on those supplies. If the business is reimbursed under an insurance
policy, the settlement will not be subject to GST (¶10-120).
No GST applies if a taxi passenger “does a runner” and does not pay the fare. The supply of the taxi
service to the passenger is not a taxable supply as there is no consideration.
[GSTG ¶11-730]

¶4-035 Competitions and prizes

There are three different sets of rules that may apply to competitions:
• charitable raffles and bingo may be GST-free (¶15-020)

• commercial gambling — including lotteries, raffles, and betting on games, races or sporting events —
is covered by special rules (¶16-000)

• other competitions are covered by the general GST rules, as discussed below.

In a competition covered by the general rules, there are various types of supply that may be subject to
GST, if the supplier is registered and makes the supply as part of an enterprise:
• the supply by the organiser to entrants of rights to participate

• the supply by the entrants of their participation

• the supply by the organiser of (non-monetary) prizes.

(1) Organiser’s supply of right to participate

If an entry fee or some other consideration is paid by the entrant, and the organiser is registered, the
organiser’s supply of the right to participate is subject to GST (GST Ruling GSTR 2002/3). So, for
example, if the entry fee is $110, the GST will be $10. The entrant can claim an input tax credit for this
amount if the entrant is registered and entered the competition as part of an enterprise.
(2) Entrant’s supply of participation
The entrant’s supply of participation will be taxable if the entrant receives consideration (eg a prize), is
registered and entered the competition as part of its enterprise (GST Ruling GSTR 2002/3). If there is a
non-monetary prize, this may be treated as part of the consideration. For valuation procedures, see ¶4-
020.

Example 1
A registered racehorse owner enters a horse in a race. The horse wins $11,000 and a trophy with a GST-inclusive market value of
$5,500. The owner is liable for GST of 1/11 × $16,500 = $1,500. The organiser can claim this amount as an input tax credit.

If the prizewinner is not registered (or required to be), or does not enter the competition as part of its
enterprise, the supply of its participation cannot be taxable, so there is no GST on it.
The Commissioner says that if the prize is a symbolic medal, ribbon or trophy awarded as a recognition of
achievement, with only personal or sentimental value, it is treated as having a market value of nil. It will
therefore not attract GST. The same applies to perpetual trophies awarded on a custodial basis.
However, this does not apply if the medal, etc, has intrinsic value because of its craftsmanship or
precious metal content. Nor does it apply if the prize has a practical use, for example, a crystal decanter.
Such prizes have a market value and will be treated as consideration for the winner’s supply of
participation (GST Ruling GSTR 2002/3; ATO Fact Sheet GST for the Racing Industry).
Winners of medals won in the Olympics or Commonwealth Games are not subject to GST. Exhibitors at
agricultural shows and fetes are not subject to GST on the medals, ribbons or trophies typically awarded
at these types of events (ATO Media Release Nat 02/87).
(3) Organiser’s supply of non-monetary prizes
The organiser’s supply of a (non-monetary) prize may be a taxable supply for a consideration consisting
of the winner’s winning effort (GST Ruling GSTR 2002/3). This does not apply to money prizes, as money
cannot normally be treated as a supply (¶4-010).

Example 2
The supply of the trophy to the racehorse owner in the previous example is a taxable supply. The consideration is the GST-inclusive
market value of the horse’s winning participation attributable to the trophy, which is valued by reference to its market value, ie
$5,500 (see further below). The organiser accounts for $500 GST on the supply and the owner claims an input tax credit of the same
amount. If the owner was not registered, it could not claim the input tax credit.

This applies even if the winner has not formally entered the competition, for example, a sportsperson’s
best player award. However, it does not apply:
• if the winner does not have to provide anything more than participation, for example, lotteries or raffles
where success is governed purely by chance

• to product promotion competitions, for example, where winning symbols are found on product
packaging, or

• if the prize is awarded as a gesture of thanks, for example, where it is given in recognition of volunteer
community involvement (GST Ruling GSTR 2002/3).

If the winner is registered, and competed in the course of an enterprise, the winner’s participation is
normally valued as the value of the prize (GST Ruling GSTR 2001/6: ¶4-020). However, this may not
apply where the winner is not registered, or not competing in the course of an enterprise, and the
participation is trivial, for example:
• entering a free prize draw

• being a nominated caller to a radio program and answering a trivial question

• participating in “social” competitions, for example, as the person who can hop on the spot the longest,
or

• being among the first to arrive at a promotional vehicle parked at an advertised location (GST Ruling
GSTR 2002/3).

In these cases, the winner’s participation is treated as having no additional market value, so no GST
applies. The same would apply, for example, to participation in children’s underage sporting events or
school quiz events for students. However, an unregistered winner’s participation may have market value
in certain cases, depending on the commerciality of the event and the media profile of the event and the
winner. This would apply, for example, where:
• a contestant wins prizes in a national television quiz show
 • an amateur sportsperson wins a prize in a major professional tournament, or

• a winner is required to endorse the organiser’s products (GST Ruling GSTR 2002/3).

In these cases, the winner is taken to have provided valuable consideration for the prize, so GST may
apply.
Grossing up of prizes
It is understood that racing clubs are able to advertise prize money exclusive of GST. If the winning owner
is registered, GST will be added. (This is called “grossing up” the prize money.) This will require that the
owner’s registration status be notified to the club.

Examples
(1) A horse race carries prize money of $10,000 (plus $1,000 allowance for GST) and a trophy worth $1,320. As the winning owner
is registered, the supply of the horse by the owner is a taxable supply. The consideration for this supply is $12,320 (ie $10,000 +
$1,000 + $1,320). The owner accounts for GST of $1,120 (ie 1/11 × $12,320) and the racing body claims an input tax credit of
$1,120.
The trophy also constitutes a taxable supply by the racing body to the horse owner for a consideration equal to its value (ie $1,320).
The racing body accounts for GST of $120 and the owner claims an input tax credit of $120.
The overall result is that the owner receives $11,000 plus the trophy, accounts for $1,120 as GST and claims an input tax credit of
$120. Its net gain is therefore $10,000 plus the trophy.
The racing body pays $11,000 plus the trophy, claims a $1,120 input tax credit and accounts for $120 as GST. Its net outlay is
therefore $10,000 plus the trophy.
(2) Assume instead that the owner is not registered. The supply of the horse by the owner is therefore not a taxable supply and has
no GST implications. The owner therefore receives prize money of $10,000 plus the trophy. However, the supply of the trophy is a
taxable supply by the racing body. The body accounts for GST of $120. The owner is not entitled to any input tax credit for this.

A racing syndicate may take the form of a company, a partnership, or an incorporated association or body
of persons. If it fits none of these descriptions, it may be the individual members who are supplying the
horse to race — in other words, each of those members will be a supplier. If only some of these are
registered, the consideration should be apportioned according to the proportion of those registered. The
racing body should gross up the prize money according to this percentage.
Attribution of GST and credits
For the purpose of attributing GST and input tax credits to tax periods (¶7-200), consideration that
consists of participation is first given when the participation commences and continues to be given until
participation stops. Consideration that consists of a prize is given and received in the tax period in which
the prize is awarded (GST Ruling GSTR 2002/3).
Tax invoices
In certain circumstances, an event or competition holder may issue a recipient created tax invoice (RCTI),
showing the prize as consideration for the supply of participation by the entrant (¶5-140). An RCTI can
also include supplies by the recipient, so it could also show the supply of any non-monetary prize to the
entrant.
Supplies by sponsors
Where prizes are provided by sponsors, the supply by the sponsor to the organiser is treated separately
from the supply by the organiser to the winner (¶4-040).
Data matching program for horse racing industry
The ATO has set up a data matching program (¶18-175) to check GST compliance by racehorse owners
and lessors, trainers, jockeys and farriers, with particular emphasis on correct treatment of GST
registration, income and prizes.
[GSTG ¶10-110]

¶4-040 Grants, appropriations, subsidies and sponsorships

Normally, a payment of money is not itself a “supply” (¶4-010). However, if there is a supply by the
payee/recipient in return for the payment, the money may be treated as consideration for that supply. If
so:
• the payee will be liable for GST on that supply if it is registered and carrying on an enterprise

• in accordance with the usual rules, the GST will be 1/11th of the payment, and

• the payer may be entitled to an input tax credit.

This issue commonly arises with payments such as grants, subsidies, sponsorships, financial assistance,
co-payments and rebates. In general, for these to be treated as payments for a supply by the payee,
there must be a sufficient nexus or connection between the payment and the supply. This is an objective
test, to be determined on the basis of the true character of the arrangement between the parties. Not
every connection will be sufficient.
In the ATO’s view, set out in GST Ruling GSTR 2012/2, there may be a sufficient nexus where, in return
for the payment:
• the payer is provided with the right to commercially exploit the results of the payee’s work

• the payer is provided with advice or information in return for the payment, eg where a government
funds medical research in return for the right to use the results of that research in developing its
health policy. However, this would not apply where the information is required merely to substantiate
how the funds were spent

• the payee enters into an obligation with the payer to do something or refrain from doing something, as
desired by the payer, eg where an arts group accepts a grant conditionally on the group having to
present performances in remote areas

• the payee promotes the payer’s business through promotional material, programs or uniforms, or
advertises the business at events and in the media. However, this would not apply where the payee
merely acknowledges the source of the assistance, eg on a plaque (see further “Sponsorships”
below).

The fact that the payee has to repay the assistance if it fails to comply with the payer’s requirements does
not necessarily mean that the payment is made for a supply. However, this factor will form part of the
overall circumstances that should be taken into account. For example, the ATO would consider that there
was a payment for a supply where, as part of a governmental industry restructuring scheme, a company
receives a government payment as an incentive for exiting the industry, but must return the money if it
resumes that business within a certain period. However, this apparently would not apply where a scout
group that received a council grant to help in the purchase of gymnasium equipment simply had to repay
it if it elected not to proceed with the purchase.
The financial assistance cannot be treated as consideration for a supply where nothing is to be supplied
by the payee in return for the payer or in relation to it. For example, this would apply where a government
settles a charitable trust for the relief of the needy. The trust provides nothing to the government/payer, so
there is no relevant supply and GST does not arise. The same applies if:
• there is simply an expectation that the payee may make a supply, as distinct from an obligation, and
nothing else passes from the payee to the payer or a third party, or

• a business simply receives a government rebate for buying energy efficient equipment.

Grants made to employees will not attract GST because employees are not carrying on an enterprise.
Similarly, the payment of unemployment benefits is not subject to GST, even though it is subject to
conditions to look for work.
GST does not apply where payments are made to creators and publishers under the Public Lending Right
scheme or the Educational Lending Right scheme. Nor did it apply to payments to cane growers under
the Sugar Industry Assistance Package. According to the ATO Fact Sheet GST and the Great Barrier
Reef Marine Park Structural Adjustment Package 2004, GST may apply to “licence buy out” assistance
and social or community assistance provided under that package, but not to the full fishery-related
business exit assistance, business restructuring, employee or business advice assistance components.
For the general treatment of multi-party transactions, see ¶4-015. For the treatment of subsidised supplies
of travel, see Example (3) at ¶4-020.
Gifts to non-profit bodies
Gifts to non-profit bodies cannot be treated as consideration in any circumstances (s 9-17; former s 9-
15(3)(b)). This means that GST cannot apply unless the grantor gets some “material advantage” in
connection with the grant (¶4-030). For the meaning of “non-profit”, see ¶3-030.

Examples
The ATO interprets this rule as follows.
(1) A grant is made to a non-profit body which looks after the needy. The grantor states a non-binding preference that the funds be
spent on food rather than shelter. The ability to make such a preference is not regarded as a material advantage to the grantor, so
the grant is a gift and GST does not apply.
(2) A philanthropist makes a grant to a non-profit hospital to build a new wing, which the hospital decides to name after the grantor.
This is not treated as a material advantage and will be accepted as a gift, so GST does not apply. (Based on GST Ruling GSTR
2012/2.)

For the treatment of subsidies received by a charity for supplying low-cost accommodation, see ¶15-010.
Sponsorships
As noted above, sponsorships would normally be subject to GST, as they are provided in return for
advertising services. This means that if the beneficiary is registered, it will have to account for GST on the
amount received as it has made a supply of services for consideration. Correspondingly, the sponsor can
claim an input tax credit if it is registered.

Example
A sporting group that is registered for GST receives $5,500 in sponsorship from a leagues club, and in return shows the sponsor’s
name on its uniforms. The sporting group will account to the ATO for GST calculated as 1/11th of $5,500, ie $500. The sponsor will
be entitled to an input tax credit of $500.

If the sponsor provides goods or services instead of cash (contra sponsorship), both parties will be
making supplies to each other and, if registered, must pay GST on that supply.

Example
Assume instead in the previous example that the leagues club directly provided the group with uniforms worth $5,500 (including
$500 GST) in return for advertising worth the same amount. The club is liable to account for $500 GST on its supply of uniforms, and
the group is liable to account for $500 GST on its supply of advertising. Both the club and the group can claim input tax credits of
$500. The net amount of GST paid is therefore nil.

GST may not apply where the “sponsorship” involves a mere acknowledgment (¶4-030).
Government appropriations
In accordance with the normal rules noted above, a payment between government bodies is not treated
as consideration for a supply if it is made without strings or conditions. GST will therefore not apply to the
transaction.
A payment between government bodies is also not treated as consideration if it qualifies under the rule
governing appropriations made under Commonwealth, state or territory law, or specified agreements.
The purpose of this rule is to exclude funding payments, which are non-commercial in nature, from the
operation of GST, while not excluding payments that represent fees for goods, services and similar
things.
The relevant government bodies are Commonwealth, state and territory departments, agencies, statutory
bodies and local governing bodies. This would include government schools.
Once the appropriation is used to acquire goods or services, or is provided as a grant to a non-
government organisation, that transaction will be subject to the GST rules in the normal way.

Example
A local council receives an appropriation from a state government to purchase earthmoving equipment. The appropriation itself is
not subject to GST. However, GST may apply to the purchase, as the expenditure will be treated as consideration.

For the appropriations rule to apply, there must be a connection between the payment and the
appropriation. Provided that the payment is made for a non-commercial supply, it is sufficient that it simply
be “covered” by an appropriation, as distinct from being specifically covered (s 9-17). For the supply to be
non-commercial, the payment and any associated benefits must not exceed the supplier’s anticipated or
actual costs of making the relevant supplies. On this basis, for example, GST will not apply where the
payment is made in return for a hospital committing to achieve certain health outcomes (non-commercial),
but would apply where the supply was the provision of legal services on a fee-for-service basis
(commercial).
The exemption for appropriations may apply where a government agency receives payment for the
secondment of its employee to another government entity, in accordance with reciprocal arrangements
(Interpretative Decision ID 2013/54).
It is specifically provided that payments covered by the appropriations rules are not affected by the rules
applying to associates (¶17-500).
Appropriations applied to an agency’s business operations do not form part of its GST turnover for
registration purposes (¶3-030).
Services provided outside Australia
GST will not apply if the grant is made to a body outside Australia, and the services to be supplied by the
grantee in return for the grant are also to be performed outside Australia (s 9-25(5)).

Example
Help Foundation makes a grant of humanitarian aid to an overseas aid organisation to assist refugees in a civil war. The grant is not
subject to GST.

Position of grantor
If the grantor is registered, it will normally be able to claim an input tax credit for any GST component of
the grant, as it will be paid as part of its business. The grantor will of course need to obtain a tax invoice
from the grantee. It may be that the parties can apply for approval for the tax invoice to be created by the
grantor (a recipient created tax invoice) (¶5-140).
Grossing up payments to allow for GST
Where pre-GST grants or sponsorships are renewed, allowance should be made for the GST’s impact.
For example, to maintain the level of support, the grant or sponsorship may need to be increased by
1/10th to cover the GST. This amount can be claimed back as an input tax credit by a registered grantor
or sponsor, so the result is revenue neutral. Grantors in this situation would normally need to be assured
that the grantee is registered and that it will provide a tax invoice.

Example
Assume it is proposed to make a grant of a net $10,000 to a registered charity for specified purposes. If the grant is grossed up to
 $11,000, the position is as follows:
• the registered grantor pays $11,000 including GST and recovers $1,000 as an input tax credit. The net cost is $10,000

• the registered charity receives $11,000. As $1,000 of it has to be accounted for as GST, the net receipt is $10,000.

“Grants” that are financial supplies

If a “grant” is actually a financial supply, such as a loan involving repayment with interest, it will be input
taxed (¶10-010).
[GSTG ¶11-730]

¶4-060 Redeemable vouchers

Special rules apply to vouchers, tokens, stamps, coupons or similar articles that can be redeemed for
other supplies up to a monetary value stated on the voucher (s 100-5; 100-25). These are commonly
called “face value” vouchers. A typical example is a retail store voucher that entitles the holder to any
goods from that store up to a stated value. These vouchers may be distinguished from vouchers that
entitle the holder to a specific item, for example, goods to replace stolen goods.
Under these special rules, the initial supply of the voucher is not a taxable supply, so no GST applies and
no input tax credit can be claimed (s 100-5(1)). However, GST potentially applies if and when the voucher
is redeemed and the relevant goods or services are supplied (s 100-10; see also ¶7-325). This GST
liability on the supplier will vary according to the GST status of those particular goods or services, in the
normal way.
These special rules apply because, at the time of issue, it is possible that the voucher may be redeemed
for different types of supplies that have a different GST status that will not be known until redemption.
GST on redemption
On redemption of the voucher for taxable goods or services, the GST will normally be based on a
consideration equal to the face value of the voucher, plus any additional consideration provided for the
supply on redemption. If the voucher is partly redeemed for goods and services and partly for a cash
refund, the GST on redemption will be based on the face value less the amount refunded (s 100-12; GST
Ruling GSTR 2003/5).
If the voucher is not redeemed, the supplier will become liable for an upwards GST adjustment at the time
that it writes back its reserve for the redemption into current income (s 100-15). This may also apply to the
extent that the voucher is only partly redeemed. In such a case, the adjustment is based on the amount
unredeemed. The adjustment applies even though it is possible that the voucher could have been
redeemed for GST-free goods (Interpretative Decision ID 2013/24).
Inclusions and exclusions
The special rules do not apply to postage stamps (s 100-25). Nor are they intended to apply to tickets or
entitlements for specified goods or services, such as ordinary bus tickets, movie tickets or airline tickets.
On this basis, for example, a music voucher entitling the recipient to buy CDs or DVDs of his/her choice
up to a value of $50 is covered by the special rules, but not a movie pass specifically entitling the recipient
to 10 visits to the cinema over a 12-month period, or a monthly bus pass. The movie or bus pass would
be subject to GST on sale in the normal way and no GST would apply on redemption unless an additional
amount was payable at that time (s 9-17; former s 9-15(3)). For the treatment of bitcoin transactions, see
¶4-010.
The special rules also do not apply where the supply would not have been taxable in any event, for
example, supplies of traveller’s cheques that are treated as input taxed financial supplies (¶10-010).
The ATO considers that an article does not become a voucher until it is issued by the entity that has
commissioned its production. For example, if a business places an order with a printing company to
produce 1,000 vouchers, these are not treated as vouchers for GST purposes until the business supplies
them to a retailer (GST Ruling GSTR 2003/5).
The special rules apply to a wide range of prepaid phone cards or facilities. To qualify, the card or facility
must be issued for the primary purpose of using telephone or similar services or making acquisitions
facilitated by those services. The similar services include mobile phone or multimedia messaging
services, text, graphics, images, sound, video, information, software content and data transmission
services — including email — and internet access services. If the voucher is supplied as part of a bundled
kit (for example, a mobile handset, a SIM card and an entitlement to telephone services that are facilitated
by the voucher), this will be a mixed supply that must be apportioned between its taxable and non-taxable
components. Phone cards that have a credit facility are input taxed financial supplies and are not
vouchers. Nor are stored value cards linked to bank accounts, or mobile phone accounts where the user
pays a monthly access fee or rental fee in advance and call costs under a plan.

Examples
(1) A department store issues a $100 gift certificate entitling the holder to purchase goods to the value of $100 (GST-inclusive). No
GST applies on the issue of the certificate. The recipient later redeems the certificate by buying clothes for $55 and food for $45. As
the food is GST-free, the store must account for the GST of 1/11th of $55, ie $5 which has been paid by the certificate holder on the
clothes. If the holder had purchased $100 worth of clothes, the GST on redemption would have been 1/11th of $100, ie $9.09.
(2) For their first wedding anniversary, Charles buys a gift certificate for Morticia which entitles her to $110 worth (GST-inclusive) of
beauty products of her choice from Miracle Cures. This certificate is covered by the special voucher rules. The purchase by Charles
would therefore not be subject to GST. However, when Morticia redeems the voucher, this will be treated as a purchase of those
goods for the value stated. Assuming that all the beauty goods are taxable, Miracle Cures will then have to account for GST of 1/11th
of $110, ie $10.
(3) Assume instead in Example 2 that Morticia is outraged by what she sees as the deeply offensive and sexist nature of the gift
from Charles. She disposes of the certificate into a nearby receptacle and never redeems it. Miracle Cures has, however, made a
reserve in its accounts for the unredeemed certificate. When it ultimately writes back that reserve to current income, there will be a
GST adjustment of 1/11th of the amount written back.
(4) For their second anniversary, Charles buys Morticia a gift certificate which entitles her to a three-hour total foot massage at
Pleasure Spot. The certificate costs $110. As the service is specified, the special rules do not apply. This is treated as a normal
purchase, and Pleasure Spot must account for GST of 1/11th of $110, ie $10 in the normal way. What Morticia actually does with the
certificate is irrelevant for GST purposes. There is no further GST on redemption.
(5) A book voucher with a face value of $100 is redeemed for taxable books worth $90 and change of $10. GST on the redemption
is 1/11th of $90, ie $8.18. If no change had been given, GST on the redemption would have been 1/11th of $100, ie $9.09.

Supply chains
The ATO considers that the amount received on the supply of the voucher is not relevant in determining
the consideration on its redemption (GST Ruling GSTR 2003/5). It considers that contrary views
expressed in the European case (Argos Distributors Ltd v Commissioners of Customs and Excise [1997]
BVC 64) are based on differently structured legislative provisions.

Example
A wholesaler distributes its vouchers through a retailer. The vouchers have a face value of $33, but are sold for $22 to the retailer,
who in turn sells them to customers at face value. On redemption, the wholesaler supplies goods with a face value of $33 to the
customer. The ATO takes the view that the wholesaler is liable for GST on the face value of the voucher ($33), even though the
consideration actually received by the wholesaler was only $22.

Voucher suppliers and their distributors may voluntarily enter into arrangements to simplify their GST
accounting procedures (s 100-18). Under these arrangements, the supply of commission or similar
services is not treated as a taxable supply. This means that it will not be necessary for the distributor or
retailer in a distribution chain to remit GST on the commission services, and the supplier of the voucher
will not claim the corresponding input tax credit. So, in the example above, if the $11 difference
represents commission, the retailer would not be required to remit GST on the commission services, and
the wholesaler would not be able to claim an input tax credit on the amount paid for them. For an
associated rule allowing the Commissioner to apply special attribution rules to supply chain transactions,
see ¶7-440.
Purchase price more than face value
If the purchase price of a voucher is more than its face value, GST will apply to the additional
consideration at the time of purchase, then to the balance on redemption (s 100-5(2)).

Example
Nick buys a collector’s limited edition phone card with a face value of $50 for $110. GST will apply to the additional consideration of
$60, so the GST payable on the sale will be 1/11th of $60, ie $5.45. Nick later loses interest in collecting, and redeems the phone
card by making phone calls to his Swiss investment adviser. On this redemption, GST will apply to the face value consideration of
$50, so the GST payable will be 1/11th of $50, ie $4.55. The total GST which has been paid is $5.45 + $4.55 = $10, ie 1/11th of the
original consideration of $110.

Sale to non-resident
If the voucher is sold to a non-resident who is overseas, but the voucher is to be redeemed in Australia,
the normal GST rules apply and GST would apply on the sale (s 100-20).
Complimentary or promotional vouchers
If a supplier gives away a redeemable voucher (eg as part of a sales promotion), GST will not apply in
any event as any supply will be a gift (¶4-030). However, if the voucher is a separately identifiable
component of a supply of something else, the consideration should be apportioned even if the voucher
was described as being “free” (GST Ruling GSTR 2003/5).
“Two-for-one” offers would not normally be treated as vouchers, but simply as a discount (¶4-030).
Vouchers as consideration
If you receive a redeemable voucher in return for supplying services, the voucher may be treated as
consideration for those services (Interpretative Decision ID 2003/957).
[GSTG ¶11-870]

¶4-062 Frequent flyer, shopper and loyalty programs

Under “frequent shopper” programs, a customer typically receives points for purchases made at a shop.
When these points reach a certain amount they can be redeemed for other goods or services from the
shop. The Commissioner considers that GST does not apply to the award of these points, or to the supply
of the goods or services obtained on the redemption of the points, as there is no consideration. However,
GST will apply to any additional amount the customer is required to pay to obtain those goods or services
(sometimes known as “points plus pay”) (GST Ruling GSTR 2012/1). GST will also apply to any fees paid
for membership of the program.
Similar rules would apply to frequent flyer programs (¶12-020) or equivalent consumer loyalty programs.
Additional factors apply where a “points fee” is charged by a loyalty program operator to partners in the
program. The Commissioner considers that this fee would be consideration for the supply of the points by
the operator to the partner. The GST consequences depend on the GST status of the supply made when
the points are redeemed. For example, if the points are redeemed for supplies of goods that are taxable,
the supply of the points by the operator will also be taxable. On the other hand, if the points are redeemed
for GST-free international travel, the supply of points by the operator would also be GST-free (GST Ruling
GSTR 2012/1). If the points are redeemed for vouchers, this would be a taxable supply to the extent that
the vouchers would, in turn, be redeemed for taxable supplies; this is so even though the supply of the
voucher itself may be non-taxable under the rules in ¶4-060 (Interpretative Decision ID 2013/1).

¶4-065 Cancellation fees

A fee imposed where a customer cancels an intended supply, or fails to take advantage of an intended
supply, will commonly be treated as consideration, and may therefore attract GST. The reason, according
to the ATO, is that even if the intended supply is not made, there will normally be other supplies for which
the cancellation fee can be treated as consideration. On this view, which is based on an interpretation of
Reliance Carpet (¶4-070), these other supplies may, for example, include actions taken by the supplier in
preparing to make the supply (“facilitation supplies”), in processing the cancellation, or in performing work
in progress at the time of the cancellation.
If the cancellation fee is consideration for any of these other supplies, the question then arises whether
those supplies are exempted from GST on other grounds. For example, facilitation supplies may be GST-
free in various situations, for example, where the booking gives the customer a right to receive a GST-
free service, or involves the supply of certain administrative services relating to GST-free education
courses (¶14-004) or certain travel agent services in relation to overseas travel (¶12-020).
The ATO’s guidelines on the GST treatment of various types of cancellation are set out in GST Ruling
GSTR 2009/3 and are summarised below.
Appointments
If a cancellation fee is charged where a customer fails to turn up for an appointment or reservation, or
turns up late, the fee will normally be treated as consideration for a supply. That supply consists of the
actions taken by the supplier in making the booking, committing to carry out the service, setting aside the
time for the customer to the exclusion of others, and allocating personnel or resources. This facilitation
supply is distinct from the actual supply of the service itself.

Example
A customer has to pay a $25 cancellation fee for failing to show up for a beauty treatment in accordance with an appointment. This
will be treated as payment for a taxable supply, and GST will apply.

However, if the terms of the appointment give the customer a contractual right to receive a GST-free
supply (eg to receive medical services), GST will not apply on the cancellation, as the supply of a right to
receive a GST-free supply is itself a GST-free supply (s 9-30).
Hotel reservations, ticketing and no-shows
If a customer cancels or fails to show up for a hotel reservation, the cancellation fee is treated as
consideration for the supply of a right in relation to land (¶11-000), and GST would therefore apply.
If a customer buys a non-refundable ticket for a concert, but fails to show, GST will still apply as the
original supply has gone ahead. If the ticket was partly refundable on a customer no-show, GST applies
to the extent that the ticket was not refundable — this may therefore give rise to a decreasing GST
adjustment for the supplier (¶6-100). If the supplier cancels the concert, and refunds the price in full, the
supplier will be entitled to a decreasing adjustment for the full amount of GST.
For the GST effects of cancelled travel arrangements or passenger no-shows, see ¶12-020.
Early termination fees
For the GST treatment of early termination fees on leases or hire-purchase agreements, see ¶4-020.

¶4-070 Security deposits

Special rules apply to deposits made as security for the performance of an obligation (Div 99). These are
called security deposits. Typical transactions to which these rules will apply are: (1) a contract for the hire
of goods, where the supplier holds a security deposit to secure the return of the goods; or (2) a contract
for the purchase of real property, goods or services, where the purchaser pays a deposit to secure the
obligation to complete the purchase.
If the security deposit is refunded on performance of the obligation, no GST is payable because the
deposit is not treated as consideration for a supply (s 99-5).

Example
Heidi, a home handyperson, hires a piece of equipment. She pays $110 for the hire and a separate $132 security deposit. She
returns the equipment the next day and gets the deposit back. The GST component of the hire cost was $10 but no GST applies to
the deposit.
In most types of transactions, however, if the transaction proceeds to completion, the deposit simply
becomes incorporated into the consideration for the supply. For example, if land is sold for $100,000, and
a deposit of $10,000 was paid on exchange of contracts, the sale will be completed by the vendor
transferring the land, retaining the deposit and receiving the balance of $90,000 from the purchaser. If the
supply of the land was taxable, the GST will be based on a total consideration of $100,000, including the
deposit.
Forfeited deposits
The situation is different if a taxable supply does not proceed to completion because the supplier has
rescinded the contract on the grounds of the purchaser’s default, and the purchaser has accordingly
become liable to forfeit the deposit to the supplier. In such a case, the forfeited deposit is treated as the
consideration for a separate taxable supply (s 99-5). The effect is that the supplier becomes liable for
GST on the forfeited amount in the tax period in which the forfeiture took place, and that the purchaser
may claim an input tax credit if the transaction meets the usual requirements (¶5-010) (s 99-10) (FC of T v
Reliance Carpet Co Pty Ltd 2008 ATC ¶20-028; [2008] HCA 22; GST Rulings GSTR 2000/28; GSTR
2006/2).
The rules on forfeited deposits, as stated above, apply only where the original contemplated supply would
have been taxable. The ATO has indicated that where the original contemplated supply would have been
GST-free or input taxed, the separate supply on forfeiture will also be GST-free or input taxed, as the
case may be (ATO Decision Impact Statement on Reliance Carpet; s 9-30): This represents a change
from the earlier ATO view, so taxpayers who incorrectly paid GST on forfeited security deposits on the
basis of that earlier ATO view may seek a refund, subject to the usual restrictions (¶8-110).

Examples
(1) Assume in the previous example that Heidi failed to return the equipment and forfeits the deposit. Additional GST of $12 (= 1/11th
of $132) would become payable.
(2) Ron, a business owner, orders business equipment for $10,000, payable on delivery. The supplier requires a $990 deposit
before filling the order. That deposit will be refunded to Ron if the supplier is unable to fulfil the order, and Ron will forfeit it if he
cancels the order. Four months later, Ron cancels the order and forfeits the deposit. The supplier accounts for GST of $90 for the
tax period in which the cancellation was made. As Ron is registered, he can claim an input tax credit of $90.
(3) A registered purchaser pays a $55,000 deposit on signing a contract to buy commercial real estate. The purchaser later defaults
on the contract and forfeits the deposit to the registered vendor. On forfeiture, the vendor should account for $5,000 as GST, and the
purchaser should claim an input tax credit for the same amount. (For further details of GST on land sales, see ¶11-065.)

Where the forfeiture of a security deposit may attract GST, the supplier should ensure that the deposit is
calculated on a GST-inclusive basis. If the party forfeiting the deposit is eligible for an input tax credit, it
should obtain a tax invoice from the supplier.
These rules do not apply in any event where the deposit was never forfeitable or “at risk” and was always
treated as simply a part-payment. In this case, the contract is the same as an instalment contract (¶21-
070).

Example
An established customer is allowed to pay 20% on delivery and the balance in four monthly instalments. The first payment is clearly
understood by both parties to be the first instalment of the purchase price, and not to be a forfeitable deposit. This is treated as an
instalment contract, and is subject to the normal attribution rules (¶21-070). The rules for security deposits do not apply.

The ATO considers that pre-contract deposits, paid simply to indicate the purchaser’s keen interest, are
not normally deposits at all, and that Div 99 would therefore normally not apply to them. The ATO
considers that these payments are simply consideration for a separate transaction (GST Ruling GSTR
2006/2).
Deposits vs penalties
The ATO considers that an amount is not a “deposit” if it is so unreasonably high as to constitute an
unenforceable penalty. In standard commercial sale contracts, the ATO would consider that amounts
higher than 10% should normally be treated as penalties, unless there is a higher-than-normal risk of
significant losses in the event of default. Relevant factors in determining this would include:
• unusual designs or sizes that make a completed product very difficult to sell in the event of default

• the use of special materials that could not be used on other jobs

• the purchase of highly specialised equipment which could only be used in the performance of the
contract at risk

• the length of time of the contract and the risk of loss or devaluation of the asset by neglect, illegal act,
mismanagement or adverse conditions during that period

• vulnerability of the goods to loss in value

• industry practices or norms, or

• other extraordinary conditions of the contract (GST Ruling GSTR 2006/2).

In the case of a hiring contract, the ATO considers that a higher deposit may be reasonable, as the
supplier is taking a calculated risk that the goods may not be returned, or may be returned damaged. The
deposit could then be considerably higher than the actual hire fee (GST Ruling GSTR 2006/2).
If the payment is unreasonable, it is not a security deposit and is subject to the normal attribution rules for
part payments. If it is refunded, a GST adjustment may be appropriate (GST Ruling GSTR 2006/2).
Core deposits for reconditioned vehicle parts
The ATO says a “core deposit” paid as part of the supply of reconditioned motor vehicle parts cannot be
treated as a security deposit, and is simply part of the consideration for the part (ATO Fact Sheet GST
and the Sale of Reconditioned Parts; GST Ruling GSTR 2006/2). GST should therefore be calculated on
the full price including the core deposit. If the deposit is returned to the customer, in return for the
customer providing a worn part to the supplier, this is treated as a separate sale of the worn part by the
customer. If the customer is registered, it will be liable for GST on that sale and the parts supplier can
claim an input tax credit. Recipient created tax invoices (¶5-140) may be issued in such cases (A New
Tax System (Goods and Services Tax) Recipient Created Tax Invoice Determination RCTI 2005/1). If the
customer is not registered, the parts supplier may claim an input tax credit in accordance with the second-
hand goods rules (¶16-110).
[GSTG ¶11-910]

¶4-080 Fines, penalties, taxes and charges

Fines and penalties imposed for punishment or deterrence are normally not treated as consideration for
any supply, and therefore do not attract GST (Case S65 (1996) 17 NZTC 7408). The ATO considers that
this would apply, for example, to fines or penalties imposed by a club on a member for breach of its rules
(GST Determination GSTD 2005/6). However, the position may be different where the penalty is imposed
under a commercial contract (eg a late fee for video hire), or the defaulter obtains extra rights in return for
paying the penalty.
Exempt taxes and charges
Although GST potentially applies to goods and services supplied by governmental bodies, government
taxes, regulatory charges and information-related fees are not treated as consideration for the supplies to
which they relate, and those supplies therefore do not attract GST (s 81-5; 81-10). In more detail, this
exemption applies to:
(1) Australian taxes, eg income tax, stamp duty, fringe benefits tax, payroll tax, Medicare levy, local
government general rates (Interpretative Decision ID 2012/87) and various industry levies. Certain
local government special rates were also considered to be exempt in Class Ruling CR 2013/1.
 (2) Australian fees and charges payable to Australian government agencies that relate to:
• providing, retaining or amending a permission, exemption, authority or licence. For example, this
would apply to items such as occupational practising certificates; pilots’ licences; heavy vehicle
drivers’ licences; compulsory testing or inspection fees for regulatory purposes; permits for
restaurants to occupy the footpath; or a licence for an event to close roads

• recording, copying, modifying, accessing, receiving, processing or searching for information. For
example, this would apply to Freedom of Information requests; searches and extracts from
government registers; copies of official documents; or registration and lodgement fees for
property transfers deeds, plans and instruments. However, exemption would not apply to
commercial sales of information by government agencies, eg bookshops.

The following fees or charges are also not treated as consideration:

• for kerbside collection of waste. In Class Ruling CR 2013/19, the Commissioner said that this may not
apply to certain fees levied by NSW Councils for garbage tips or refuse transfer stations, or for waste
management services provided in a competitive market

• as royalties charged in relation to natural resources

• imposed on an industry to finance regulatory or other government activities connected with the
industry

• to compensate an Australian government agency for costs incurred by the agency in undertaking
regulatory activities

• imposed in relation to a court, tribunal, commission of inquiry or Sheriff’s office, including hearing fees

• for a supply of a regulatory nature made by an Australian government agency (eg an annual charge
for emergency services levied by a local council: Class Ruling CR 2013/1)

• for entry to a national park (GST Regulations, Div 81).

Most fees and charges imposed by councils in relation to property development and building applications,
and other related approvals and permissions, would be exempt: for detailed guidelines, see Class Ruling
CR 2013/32. Water, sewerage and drainage supplies are normally GST-free (¶16-200) and associated
services would normally be exempt: see table in Class Ruling CR 2013/39. For the treatment of council
enforcement activities, essential services, provision of information, professional time, staff time and
works, see Class Ruling CR 2013/41.
Certain community services such as Meals on Wheels are GST-free under separate rules (¶13-340).
Where GST may apply
GST may apply to:
• parking fees, road tolls, car ferry fees

• fees for hiring, using or entering a facility (but not national park entry fees)

• fees imposed by a waste disposal facility. Governmental environmental levies paid by the facility are
exempt but, if passed on in the fee charged to customers, the fees will form part of the taxable
consideration (Interpretative Decision ID 2013/38)

• non-compulsory pre-lodgment advice relating to applications relating to providing, retaining or

amending a permission, exemption, authority or licence. For example, this would include fees for the
pre-examination of a community plan, deposited plan or strata plan (Interpretative Decision ID
2012/55)

• fees for the sale of maps and related products

 • database access subscription fees (GST Regulations, Div 81).

The various exemptions were formerly set out in detail in the Treasurer’s A New Tax System (Goods and
Services Tax) (Exempt Taxes, Fees and Charges) Determination,
www.comlaw.gov.au/Details/F2010L03352. The ATO has said that government agencies that self-
assessed the GST treatment of their supplies as exempt in accordance with the Treasurer’s determination
will be protected from any retrospective amendment of that treatment (Practice Statement PS LA 2013/2
(GA)).
Inclusion of charge in price
If a business which has incurred a non-taxable charge (such as stamp duty) passes that amount on as
part of the price charged to a purchaser, the amount normally forms part of the consideration — it does
not retain its exempt status (GST Ruling GSTR 2000/37; Interpretative Decision ID 2001/133). The
position is different if the business does not pay the amount on their own account, but purely as an agent
for their customer, as may sometimes happen in the case of a solicitor (¶17-425). In such a case, the
payment by the purchaser is effectively a reimbursement, so no GST would apply on that component of
the price.

Example
A new motor vehicle is modified by Racy Wheels before delivery to the purchaser. On behalf of the purchaser, Racy Wheels also
arranges and pays for the issue of a vehicle modification permit from the relevant authority. This permit is a non-taxable charge.
Racy Wheels should include a GST component in charging the purchaser for the cost of the repairs and for arranging the issue of
the permit. However, GST should not be applied to the permit fee itself, as the purchaser is merely reimbursing Racy Wheels for that
(non-taxable) amount. (Based on Interpretative Decision ID 2002/877.)

The Environmental Management Charge on Great Barrier Reef tours is levied directly on customers, and
tour operators are responsible only for collecting it on behalf of the Great Barrier Reef Marine Park
Authority. This means that GST does not apply to the Management Charge component of the tour price.
Previously, the charge was imposed on the operators, and therefore formed part of the taxable
consideration for the tour where it was passed on to the customers (ATO Fact Sheet NAT 11230; Great
Barrier Reef Marine Park Act 1975, Sch 1).

Example
An operator charges $59.50 for a barrier reef tour, including a $4.50 environmental management charge. The operator accounts for
GST calculated as 1/11th of the price excluding the charge, ie $55, so the GST is $5. Note also that no input credit is allowed for the
charge.

Where a farmer is liable for Commonwealth grain levy, this is paid direct by the purchaser to the levying
agency, but is included in the price on which GST is imposed.

Example
The price of grain is $110, including $10 GST. The levy is $1. The purchaser pays $109 to the grower and $1 to the levying agency,
and claims an input tax credit of $10. The grower accounts for $10 GST to the ATO. (Based on Primary Production Issues Register
2.3.1.)

Land developer contributions

As part of a planning approval granted to a developer by a local authority, the developer may legally be
required to provide additional capital works or services, either to the authority or to third parties. These
are often called “in kind” developer contributions. The supply of the contribution and the supply of the
approval are not treated as consideration for each other (s 82-5; 82-10). Therefore, neither supply is
taxable on that ground.
This also applies if the developer contribution takes the form of a tax, fee or charge. For the treatment of
certain developer contributions to NSW councils, see Class Ruling CR 2013/13. For the GST treatment of
development leases, see ¶11-062.
Other surcharges and levies
• Credit card surcharge. A surcharge imposed by a supplier on a purchaser who uses a credit card to
pay is treated as part of the consideration for the underlying transaction (GST Ruling GSTR 2014/2).
If a credit card is used to pay a GST-exempt fee or charge (such as a council residential parking
permit), the surcharge is similarly exempt (Waverley Council v FC of T [2009] AATA 442). Similar
rules apply to debit cards

• Dishonour fees. A fee imposed by a financial institution on a supplier for presentation of a

dishonoured cheque or dishonoured direct debit is treated as part of the consideration for a financial
supply (¶10-010, item 1; GST Ruling GSTR 2002/2). If the supplier on-charges its customer with a
failed payment fee, under a contractual arrangement, this will not normally be treated as
consideration for a supply (GST Determination GSTD 2013/1). This may be contrasted with credit
card surcharges or late payment fees (see above), which are a contingent part of the agreed price
and are therefore part of the consideration

• Industry levy. Dairy Adjustment Levy paid on sales of flavoured milk was not part of the consideration
for the sale (former Interpretative Decision ID 2005/25).

[GSTG ¶11-930]

¶4-085 Court orders and out-of-court settlements

An out-of-court settlement or court-ordered compensation may be treated as consideration for a supply (s

9-15(2A)). In accordance with the normal rules, that supply may therefore be taxable if:
• the plaintiff is registered (or required to be registered)

• the supply is made in the course of carrying on the plaintiff’s enterprise

• the supply is connected with Australia, and

• the supply is not GST-free or input taxed (s 9-5).

To work out the GST consequences in any particular case, you must therefore identify:
• the relevant supply, if any

• whether that supply is taxable.

Where the payment is consideration for a taxable supply, the payee is liable for GST and the payer is
entitled to an input tax credit provided that it satisfies the usual conditions (¶5-010).
Damages awards
It seems that an award of damages in itself does not constitute a taxable supply by the court (Interchase
Corporation Ltd v ACN 010 087 573 Pty Ltd & Ors 2000 ATC 4552; Gagner Pty Ltd v Canturi Corporation
Pty Ltd [2009] NSWCA 413; Taxation Ruling TR 2001/4). It follows that GST would not apply to it.
However, as explained below, the ATO considers that certain settlements may involve consideration for
supplies by the parties and therefore potentially attract GST.
According to the ATO’s view, as set out in GST Ruling GSTR 2001/4, the relevant supply between the
parties may include:
• a supply made as part of the transaction from which the dispute arose (this is called an “earlier”
supply), and/or

• a supply made as part of the settlement itself, for example, where the settlement requires one party to
provide the other with something of substance (this is called a “current” supply).
 Examples
(1) Under an out-of-court settlement, Dodger agrees to pay an amount for supplies previously made to it by Retailer. The settlement
amount is treated as consideration for that “earlier” supply. If the other requirements for a taxable supply are met, GST will apply.
(2) As a result of a dispute over the use of a trade name, Magnum agrees to allow Minim the right to use the name in the future. This
would be a “current” supply. If the other requirements for a taxable supply are met, GST will apply.

However, the ATO accepts that there is no supply where the order or settlement is wholly concerned with
finalising a claim for damages or compensation for previous property damage, negligence causing loss of
profits, breach of copyright, personal injury, termination or breach of contract. In such cases, there is
therefore no GST liability. This would also apply to a settlement for wrongful use of a trade name, though
if the payment is made for the right to use a trade name in the future, that may amount to a “current”
supply to which GST may apply.

Examples
(1) Damages for negligent misstatement were held not to be subject to GST in Shaw v Director of Housing and State of Tasmania
(No 2) 2001 ATC 4054. The Tasmanian Supreme Court ruled that for there to be a supply, there had to be some voluntary action by
the plaintiff. Here, although a “supply” includes a release of obligations, and although the award of damages was technically a
“release” of the defendants’ liability, that release occurred without any voluntary act by the plaintiff. GST therefore did not apply.
(2) Similarly, GST was held not to apply where a court ordered payment of a judgment debt arising out of a dispute over a
construction contract (Walter Construction Group Ltd v Walker Corporation Ltd & Ors [2001] NSWSC 283). The NSW Supreme
Court said that there was neither a “supply” by the plaintiff as a result of the court order, nor consideration paid by the defendant.
(3) The taxpayer successfully sued another party for conversion of its assets. Under the judgment, payment of the damages
extinguished the taxpayer’s ownership of the assets, which then vested in the other party. The court rejected the Commissioner’s
argument that this constituted a taxable supply of the assets by the taxpayer (Reglon Pty Ltd v FC of T 2011 ATC ¶20-267; [2011]
FCA 805).
(4) A company sued a former employee for damages for losses arising from the breach of a contractual obligation restraining the
person from competing for the services of the company’s clients. The person made a payment in settlement of the claim but was not
entitled to claim an input tax credit for it as the payment did not qualify as consideration for a taxable supply by the company
(Lighthouse Financial Advisers (Townsville) Pty Ltd [2014] AATA 301).

A practical problem can arise in determining whether the amount of damages should reflect the fact that
the plaintiff is likely to be liable for GST on that amount.

Example
A person received damages for non-payment for work done. It argued that as it was likely that the damages would be subject to
GST, the court should “gross up” the damages by 10%, or that alternatively the defendant should indemnify the plaintiff for the
amount of any GST the plaintiff would have to pay. The court ruled that the “fairest and most efficient” approach would be as follows:
(1) the plaintiff would provide a tax invoice to the defendant on request, thus enabling the defendant to obtain an input tax credit; (2)
the defendant would pay the plaintiff 10% of the damages amount; and (3) the plaintiff would remit the GST to the ATO and provide
the defendant with written proof of the payment (Peet Ltd v Richmond [2009] VSC 585).

Where the award is compensation for outgoings for which the plaintiff would be eligible to claim input tax
credits, the compensation should reflect that fact.

Examples
(1) A plaintiff received compensation for damage caused by flooding from a neighbour’s property. The plaintiff would have been
entitled to input tax credits for the costs of rectifying that damage. The amount of the compensation should therefore be reduced to
reflect that fact. (Based on Gagner Pty Ltd v Canturi Corporation Pty Ltd [2009] NSWCA 413.)
(2) The owner of a business vehicle claimed compensation for the cost of damage caused to the vehicle in an accident. The owner
would have been entitled to claim input tax credits for the cost of the repairs. The court ruled that the owner was under a duty to
mitigate its damage, and that the compensation should therefore be reduced to the extent that the owner had not acted reasonably
in claiming the input tax credits to which it was entitled (Millington v Waste Wise Environment Pty Ltd [2015] VSC 167).

Other ATO guidelines

The ATO’s views on other specific aspects of court orders and settlement awards are as follows.
Awards of legal costs.
There is no supply where legal costs are awarded to one party by the court, or are payable under a
negotiated “out of court” settlement (Practice Statement PS LA 2009/9). However, although the award of
costs itself does not give rise to GST liability, there is a separate question as to whether the amount
recovered as costs should be reduced to reflect the fact that the party would have been entitled to claim
the GST component of those costs as an input tax credit. This will be affected by the relevant court rules
in each jurisdiction, to which reference must be made in each case. For example, in assessing costs on a
party/party basis, most jurisdictions provide a fixed scale of professional fees that cannot be adjusted to
reflect input tax entitlements. Adjustment of these costs may, however, be appropriate in the State Courts
of New South Wales (for most purposes) and in the Supreme and District Court of South Australia.
Adjustment may also be appropriate in all jurisdictions for the following:
• the assessment of professional fees on a “solicitor and client” or indemnity basis, and

• disbursements (except where these are fixed).

For worked examples, and jurisdictional details, see Practice Statement PS LA 2009/9, Annexure I. For
additional discussion on the situation in NSW, see the useful articles by Mark Brabazon SC in the NSW
Law Society Journal, December 2009 at p 66, and March 2010 at p 54.
Discontinuance undertakings.
Most settlements involve a formal, incidental undertaking by the plaintiff to discontinue the claim. Although
this is technically a supply (a “discontinuance” supply), the settlement will not normally be treated as
consideration for this supply, unless the undertaking gives rise to additional payment in its own right, for
example (see Lighthouse Financial Advisers). This could occur where payment is made for settlement of
a claim which is obviously lacking in substance.
For GST indemnities in relation to offers of compromise, see ¶19-400.
Judgment interest.
The ATO considers that the award of pre- or post-judgment interest is not consideration for any relevant
supply and that, to this extent, GST would not apply (GST Determination GSTD 2003/1). This does not
apply to judgment interest awarded in insurance claims covered by s 78-110 (¶10-150).
GST adjustments.
Where the relevant supply is an “earlier” supply, GST and input tax credits on that supply may have
already been attributed to an earlier tax period. In such a case, the subsequent settlement of the dispute
may be an adjustment event (¶6-100).

Example
Enterprises invoices business goods to Trader for $22,000. Both parties are on the accruals basis. Enterprises accounts for GST of
$2,000 and Trader claims an input tax credit for the same amount. Trader subsequently defaults on payment, alleging that the goods
were defective. The dispute is ultimately settled by Trader agreeing to pay $16,500, instead of $22,000. The reduction in the
consideration resulting from the settlement is an adjustment event. Enterprises is entitled to a decreasing adjustment of 1/11th of
($22,000 − $16,500) = $500 and Trader is liable for an increasing adjustment of the same amount.

Where there is more than one supply.

A settlement may involve consideration for more than one supply. If those supplies have different GST
consequences — for example, one is taxable and the other is not — there will need to be an
apportionment. If the court itself apportions the settlement amount, that will be accepted by the ATO. In
the case of an out-of-court settlement, an apportionment made by the parties will be accepted if it is made
on a “reasonable” basis.

Example
Colossus sues Minor, claiming $50,000 damages for breach of contract plus an undisclosed amount for unauthorised use of
copyright material. The matter is settled for $200,000 before it reaches the court. The ATO considers that it would be reasonable to
 apportion the payment on the basis that $50,000 relates to the (non-taxable) damages claim and $150,000 to the (taxable) copyright
usage claim. Alternatively, industry standards may be used to calculate the copyright usage fees.

For the separate rules applying to insurance payouts, see ¶10-120.

[GSTG ¶10-105]

¶4-090 Requirement 3: in course of “enterprise”

The third requirement for a taxable supply (¶4-000) is that the supply is made “in the course or
furtherance of an enterprise” that the supplier is carrying on (s 9-5).
According to the ATO, this covers any supplies that are made in connection with the enterprise. The ATO
considers that the necessary relationship is established if the asset is applied, or intended to be applied,
in the enterprise. This is so even if the application or intended application is minor or secondary. It is
irrelevant what the recipient intends to use the asset for. It is also irrelevant, for example, whether the
asset is sold or whether it is distributed “in specie” (eg where a discretionary trust makes a distribution to
a beneficiary by directly transferring an asset to them). However, it would not cover the supply of private
commodities, such as when a car dealer privately sells his/her own car that is not used to any extent in
the business (GST Determination GSTD 2009/1). For an article discussing the width of the ATO’s views,
see CCH Tax Week ¶670 (2008).
The meaning of “enterprise” is explained at ¶3-020. As is noted there, the most common example of an
enterprise is a business, but it is not limited to that.
Employees vs independent contractors
GST does not apply to services provided by an employee to his/her employer (¶3-020). Therefore, wages
and salaries paid to employees and superannuation contributions paid on behalf of employees are not
subject to GST. However, GST does apply to services provided by a registered independent contractor.
The reason for this distinction is that GST is only payable if services are provided by a registered person,
and only enterprises can be registered. The activities of an employee are not classed as an enterprise,
but the activities of an independent contractor are.
This has important implications in situations where businesses have “outsourced” any part of their
workforce. From the independent contractors’ point of view, they will normally become liable to account
for GST to the ATO, just like any other business, provided that they are registered. Registration is
compulsory if GST turnover is $75,000 or more, so many contractors will be caught.
From the businesses’ point of view, GST will not apply to the services provided by their employees, but
normally will apply to the services provided to them by contractors. Normally, this will not ultimately affect
the business’ bottom line because it will be able to claim back the GST component of the prices it pays by
getting an input tax credit. However, if the business cannot claim input tax credits, this will increase the
effective cost of the services provided by the contractor. This could apply, for example, where the
services are provided to a private individual who is not in business, or a business that is not registered, or
to an input taxed business such as a bank. For provisions that are designed to reduce this bias towards
in-house services for financial service providers, see ¶10-040.
In some cases, the borderline between employee and independent contractor is difficult to draw. In
general, the greater the control and direction which is exercised over the way in which the person’s work
is done, the more likely it is that the person is an employee. Factors pointing towards the person being
more likely to be an independent contractor include (1) they have independence in the conduct of their
work, and work on their own account (2) the substance of the contract is to achieve a specific result and
requires special skills (3) they have power to delegate or subcontract the work (4) they bear the risk of
remedying defects in the work, and (5) they provide their own clothing, tools and equipment and incur
business expenses. However, the application of these factors in particular cases, and the relative weight
to be given to them, leads to some fine distinctions. See also the ATO guidelines in Taxation Ruling TR
2005/16.
The consideration for the contractor’s services (on which GST is calculated) includes reimbursements of
travel and incidental costs (¶17-425), but not statutory superannuation support contributions made on
behalf of contractors who are engaged principally for their labour (Interpretative Decision ID 2002/22).
Where on-charged expenses form part of the consideration, the amount on-charged should be reduced to
reflect any input tax credit entitlement of the contractor.
Labour hire arrangements
As noted at ¶3-020, GST typically does not apply to payments made by a labour hire firm to workers
whose services it provides to other businesses. The reason for this is that the workers are either
employees of the firm or subject to PAYG withholding. Their activities therefore do not constitute an
enterprise, so there is no taxable supply (s 9-20(2)). However, the labour hire firm itself will be carrying on
an enterprise, so the fees it charges to the contracting business will be subject to GST.
Where the labour hire firm only provides a placement service, it charges a fee for introducing the worker
to the contracting business, and that business then contracts directly with the worker for their services. In
this situation, the labour hire firm charges GST on the placement fee to the business. If the worker is
engaged as an employee by the business, the salary paid by the business to the employee will be subject
to PAYG withholding, and will not be subject to GST. If the worker is engaged as an independent
contractor by the business, fees charged by the independent contractor will be subject to GST, assuming
that the contractor is registered or required to be registered.

Examples
These examples are based on the ATO’s views in GST Determination GSTD 2000/12. It is assumed that all entities other than
employees are registered.
(1) Handypersons, a labour hire firm, contracts to provide the services of an accountant to a business. Handypersons pays the
accountant and charges the business a fee. The payments to the accountant by Handypersons are subject to PAYG withholding (not
GST) and the fee charged by Handypersons to the business is subject to GST.
(2) Assume that Handypersons only provides a placement service. In this case, the accountant is employed by the business. The
payments to the accountant by the business are subject to PAYG withholding (not GST) and the placement fee charged to the
business by Handypersons is subject to GST. If the business instead engages the accountant as an independent contractor, fees
charged by the accountant will be subject to GST (not PAYG).

People such as certain bicycle couriers engaged by labour hire firms may have registered for GST on the
basis that they were independent contractors, but have subsequently been ruled to employees (see Hollis
v Vabu Pty Ltd 2001 ATC 4508). Couriers in that position would need to apply for cancellation of their
registration (¶3-070) (ATO Fact Sheet, 9 May 2002). However, van couriers engaged by a labour hire firm
were held to be independent contractors, where they had a significant financial interest in the van (which
had special value as a commercial transport vehicle), and had some influence in the manner in which
they performed the work (Qian v FC of T 2019 ATC ¶10-487). However, the Tax Office does not accept
that this decision establishes that the fact that a worker supplies his or her own vehicle is a decisive or
dominant factor (Decision Impact Statement on Qian, 12 April 2019).
Where there is a voluntary withholding agreement
Under the PAYG system, businesses and contract workers can enter into voluntary agreements for tax to
be withheld from payments for work or services, even though the workers are not employees and would
not normally be covered by the PAYG rules. In this situation, the provision of that work or services is not
treated as a taxable supply, so no GST is applicable. However, there is an exception to this rule if the
business uses the work or services in making input taxed supplies (eg financial supplies). In this case, the
provision of the work or services will be a taxable supply and GST will apply (s 113-5). This is intended to
prevent voluntary agreements being used to avoid GST in input taxed industries.

Example
A computer contractor contracts with a bank to provide various services associated with the bank’s loans business. The contractor
and the bank enter into a voluntary agreement that the bank will withhold tax from the payments for those services. If the contractor
is registered for GST, the provision of those services will be a taxable supply and GST should be included in the price the contractor
charges.
Group training schemes and secondments
Where a Group Training Company charges a host employer for the supply of services of apprentices or
trainees, that supply will be subject to GST. However, in accordance with the normal rules, the wages
paid to the apprentice or trainee by the Group Training Company will not be subject to GST (GST
Determination GSTD 2000/7).
Similarly, GST may apply if a taxpayer charges another for supplying the services of employees under a
secondment arrangement.
Disposal of capital assets
A common error made by registered enterprises — one which the ATO takes a particular interest in under
its compliance program — is the failure to recognise that disposal of capital business assets (ie assets
that are not trading stock) will often be a taxable supply. The disposal of capital assets such as motor
vehicles, manufacturing machinery, office equipment or land and buildings are considered to be a supply
in the course or furtherance of the enterprise. Disposals cover sales, trade-ins and the transfer of
ownerships, and include the sale of obsolete assets as scrap.
The sale of a capital asset that was acquired by a business and then sold before it was used in the
business will still be regarded as a taxable supply, as the sale is still connected with the entity’s enterprise
and so regarded as being made in the course or furtherance of the entity’s enterprise (Interpretative
Decision ID 2003/701).
The disposal of capital assets will not be a taxable supply if the asset is not a business asset (eg a family
car), or if sold as part of a business sold as a going concern (¶11-500), or if it is residential premises (¶11-
000) or if the asset is farm land in some cases (¶11-410).
The ATO has set up a data matching project (¶18-175) directed at identifying incorrect treatment of
business asset disposals. This will involve collection of data from sources such as motor vehicle
registries, finance companies and land titles offices.
Transfers on marriage breakdown
Normally, no question of GST arises with transfers of non-business assets (eg the family home) on
marriage breakdown, as the transferor will normally not be registered and there will be no “enterprise”. In
the case of business assets or interests (eg a commercial rental property or partnership interest), the ATO
considers that GST would not normally apply, as a disposal as a result of marriage breakdown is not “in
the course or furtherance” of carrying on the enterprise, and in any case there is no consideration for the
transfer (GST Ruling GSTR 2003/6). However, the disposal may give rise to a GST adjustment in cases
where input tax credits were claimed on the original acquisition of the asset; for an example, see ¶6-300.
Fringe benefits for employees
For the GST effects where fringe benefits are provided to employees, see ¶24-200.
[GSTG ¶12-510]

¶4-100 Requirement 4: connection with Australia

The fourth requirement for a taxable supply is that the supply is connected with Australia (the “indirect tax
zone”) (s 9-25). This test varies according to whether the supply is of goods, real property or other things
such as services. Special rules also apply to telecommunications (¶4-103), and there are important
exemptions for certain supplies by non-residents (¶4-101).
(1) Goods
A supply of goods has the relevant connection with Australia in the following circumstances:
(a) in the case of goods supplied wholly within Australia, the supply has the relevant connection if the
goods are delivered or made available in Australia. The ATO considers that this means physically
delivered or made available (GST Ruling GSTR 2018/2)

(b) in the case of goods supplied from Australia, the supply has the relevant connection if the goods are
 removed from Australia (but for the exemption for exports, see ¶9-200), or

(c) in the case of goods supplied to Australia, the supply has the relevant connection if either:
• the supplier imports the goods into Australia. The ATO considers that, in this context, “import”
includes completing the customs formalities, for example, by entering the goods for home
consumption, warehousing or transhipment (GST Ruling GSTR 2003/15). For the special rules
applying to imports, see ¶9-000, or

• the supply is an offshore supply of low value goods to a consumer, and the supplier does not
reasonably believe that the supply will be a taxable importation (¶9-130). This particular measure
applies for tax periods starting on or after 1 July 2018.

“Goods” include any form of tangible personal property (s 195-1). Goods therefore include trading stock,
plant, equipment, food, vehicles and raw materials. Goods do not include real property, interests in real
property, or intangible property such as contractual rights, goodwill, copyright or trademarks. A human
body awaiting burial is not goods, but a preserved body and cremated ashes are goods (Doodeward v
Spence (1908) 6 CLR 406; Interpretative Decision ID 2008/124), as is a dead animal. A ticket for an event
is not goods, where it is merely evidence of prepayment (Interpretative Decision ID 2004/153).
A supply of money, whether Australian or foreign currency, is not normally a supply of goods (Travelex
Ltd v FC of T [2010] HCA 33). An acquisition of currency at face value was not considered to be an
acquisition of goods even though the acquisition had been made with a view to possible resale of the
currency as collectibles (Interpretative Decision ID 2006/202). However, goods include banknotes or
coins acquired or sold as collectibles.
Software, in itself, is not goods. However, where computer software is sold packaged with hardware, it will
normally be treated as goods (GST Ruling GSTR 2003/8; see also Toby Constructions Products Pty Ltd v
Computa Bar (Sales) Pty Ltd [1983] 2 NSWLR 48). The Commissioner also considers that if “off the shelf”
software is supplied on a tangible medium — such as a CD-ROM — this should be treated as a supply of
goods, even though specified rights to use are inherent in the product (Taxation Ruling TR 93/12; GST
Ruling GSTR 2003/8). However, software that is downloaded or transmitted by email is not goods (ASX
Operations Pty Ltd v Pont Data Australia Pty Ltd (1990) 97 ALR 513; GST Ruling GSTR 2003/8). The
Commissioner also considers that it will not constitute the supply of rights simply on the ground that it is
accompanied by a licence to use (GST Ruling GSTR 2003/8).
The Commissioner considers that a one-off software solution that is developed for a client will be a supply
of services, not goods, if copyright in the program vests on its creation in the client — this is so whether it
is delivered on-line or on a disk. However, where a programmer contracts to develop a solution and make
it available for the client, so that copyright in the program, once developed and accepted by the client, will
be assigned to the client, the supply will be a mixed supply — it will comprise the development and a
supply of the program and assignment of copyright in the program. Assignment of the copyright is the
supply of a right, but supply of the program is not. The supply of the program is not a supply of goods
even if it is delivered in tangible form on a disk (GST Ruling GSTR 2003/8).
If goods are supplied by way of a lease, the ATO treats this as a supply of the goods, rather than the
supply of the right to use the goods.
(2) Real property
A supply of real property has the relevant connection if the real property is situated in Australia, or if the
land to which the real property relates is in Australia. “Real property” includes rights, interests, options
and licences over land (¶11-000). So, for example, if you have a licence to occupy land situated in
Australia, that licence is treated as real property which is connected with Australia. This would also apply
to the grant of contractual rights to occupy or stay at accommodation in Australia, and would include a
stay at a hotel or motel on presentation of a voucher or travel document (GST Ruling GSTR 2018/1; ¶12-
020).
(3) Other things such as services and intangibles
A supply of anything else (eg services, digital products, rights, advice or obligations) has the relevant
connection if:
(a) it is done in Australia, or

(b) the supplier makes the supply through an enterprise that the supplier carries on in Australia (¶4-
102), or

(c) there is a supply of a right or option to acquire some other thing, and the supply of that thing would
be connected with Australia. This particular measure is primarily intended to ensure that GST can
apply to non-resident tour operators who acquire Australian package holidays from resident tour
wholesalers and then on-sell them to tourists. However, it is not specifically restricted to that
situation. It appears that the accommodation component of such packages would in any event be
caught under the pre-existing rules (¶12-020). The Commissioner considers that, in general, the rule
in (c) may be satisfied irrespective of whether the supply of that other thing is actually made.
However, in the case of a surrender of a right or option to acquire something, the Commissioner
considers that the rule in (c) will not apply. This would mean that the surrender would only be
connected with Australia if (a) or (b) is satisfied (GST Ruling GSTR 2003/8), or

(d) for tax periods starting on or after 1 July 2017, where the recipient of the supply is an “Australian
consumer”. An Australian consumer means a resident of Australia that either: (1) is not registered, or
(2) is registered, but does not acquire the supply solely or partly for the purpose of an enterprise that
it is carrying on. For full details of this measure, see ¶9-120.

Exceptions
• Some services or rights supplied from overseas to Australian businesses are subject to special rules
that affect whether they are treated as having a connection with Australia (¶4-101; ¶9-100).

• If the consideration for a supply is an Australian tax, fee or charge, the supply may be treated as
taxable even though it is not connected with Australia (s 81-10).

¶4-101 Non-resident’s supplies that are not connected with Australia

For tax periods starting on or after 1 October 2016, the following types of supply are not connected with
Australia if they are made by a non-resident and the supply is not made through an enterprise carried on
in Australia:
(1) supply of an intangible (anything other than goods or real property) made to an “Australian-based
business recipient”, where the thing is done in Australia. An entity is an Australian-based business
recipient of a supply if it is registered and carries on an enterprise in Australia, and its acquisition of
the supply is not solely private or domestic

(2) supply of an intangible to another non-resident that acquires it solely for the purpose of carrying on
its enterprise outside Australia, and the thing is done in Australia

(3) transfer of ownership of leased goods to another non-resident that does not acquire them solely or
partly for an enterprise that it carries on in Australia. The lessee must have made a taxable
importation of the goods before the supply was made and must continue to lease them on
substantially similar terms and conditions, or

(4) supply of the lease if the recipient in (3) is the lessee (s 9-26).

These exclusions override the special rules applying to telecommunication supplies (¶4-103). For ATO
guidelines, see GST Ruling GSTR 2018/2.
Although these supplies are not connected with Australia, the supply may be “reverse charged”, so that
GST is instead paid by the recipient (¶9-100), if the acquisition would not have not been fully creditable to
the recipient (¶5-010).
 Examples
(1) Non-resident makes supply from overseas of digital service to Australian-based business recipient that uses it wholly for
creditable business purposes. This supply is not connected with Australia (s 9-26), no GST is payable by supplier or recipient,
and no input tax credit is claimable by the recipient.

(2) Assume the same facts, except that recipient uses the digital service only partly for creditable business purposes. The supply
is connected to Australia and is taxable, but the reverse charge rules apply. The recipient is liable for the GST, and can claim
an input tax credit to the extent of the creditable purpose.

(3) Non-resident leases equipment to an Australian company that imports and uses it in Australia. The non-resident later sells
the equipment to another non-resident, subject to the lease. That sale is not connected with Australia.

For transitional rules, see ¶19-250.

¶4-102 Key concepts in connection test

Some of the key concepts in determining whether there is a connection with Australia are explained
further below.
“Done” in Australia.
The ATO considers that if the supply consists of the creation, grant, transfer, assignment or surrender of a
right, the supply is “done” where that creation, etc, occurs. For example, if a right is granted under an
agreement to use intellectual property, the grant is done where the agreement is made — not where the
right is exercised (Draft GST Ruling GSTR 2019/D2; former GST Ruling GSTR 2000/31). The agreement
will be made where the last act necessary to create a binding contract is performed (WA Dewhurst and
Co Pty Ltd v Cawrse [1960] VR 278).
Services are normally “done” in the place where they are performed, even if they are performed by a non-
resident or for the benefit of a recipient who is somewhere else. For example, the ATO considers that if,
an architect prepares a plan, or a lawyer prepares a legal opinion, in Australia, and then provides it to an
offshore recipient, the service is done in Australia, even though the delivery of the end product may be
offshore (Draft GST Ruling GSTR 2019/D2; former GST Ruling GSTR 2000/31). However, even though
that service is therefore connected with Australia, it could be specifically made GST-free under s 38-190
(¶9-240).
Where a non-resident contracted to supply an installation service for goods in Australia, and
subcontracted that obligation, that would normally be considered to be a service done by the non-resident
in Australia (GST Ruling GSTR 2005/6).
Many digital supplies are governed by specific rules which affect whether they have a connection with
Australia, depending on whether they are made to Australian consumers (¶9-120) or Australian
businesses (¶4-101; ¶9-100). To the limited extent that it is necessary to determine whether they are
done in Australia, it is the subject of the supply or its component parts which must be characterised,
rather than the activities, actions, means, processes or systems involved (Draft GST Ruling GSTR
2019/D2). A computer program, which is normally treated as a service, not goods (see ¶4-100) is “done”
where the work is done to develop it (ATO Fact Sheet Trading Over the Internet).
The reservation or registration of an internet domain name is a supply of a service, not goods or real
property. It is therefore not connected with Australia if the service is done in a place overseas where the
supplier carries on its enterprise (Interpretative Decision ID 2005/354). However, if the Australian resident
customer is registered for GST and the acquisition of the services is not solely for a creditable purpose,
Div 84 (¶9-100) may apply to reverse-charge the customer for GST on the supply.
“Enterprise carried on in Australia”
For tax periods starting on or after 1 October 2016, an enterprise is carried on in Australia if it is carried
on by one or more individuals who are in Australia, and either:
• the enterprise is carried on through a “fixed place” in Australia, or

• it has been carried on through one or more places in Australia — not necessarily fixed places — for
 more than 183 days in a 12-month period, or

• the entity intends to carry on the enterprise through one or more places in Australia for more than 183
days in a 12-month period (s 9-27).

The individual(s) concerned may be either the entity itself, or an employee or officer of the entity, or an
agent (or agent’s employee) that habitually exercise its authority to conclude contracts on the entity’s
behalf. This does not extend to brokers, general commission agents or other independent agents.
In accordance with accepted international practice, a “fixed place” means that there is a stable or
continual connection between the enterprise and the place. It need not be everlasting or forever, but must
be more than a merely temporary or transitory connection.
In determining whether an enterprise is carried on through a particular place (fixed or not), the place does
not need to be exclusively used by the entity for carrying on its enterprise. Nor does the entity need to
own, lease or have any other claim or interest in the place.
The 183 days need not be continuous.
This test, which replaces the “permanent establishment” test (see below), applies for tax periods starting
on or after 1 October 2016. The ATO has provided useful guidelines on how it will apply (Law Companion
Ruling LCR 2016/1). According to the ATO, the types of supply that are affected by the change will
generally be things other than goods or real property, for example, legal or accounting services, or
supplies of digital products. It is intended to have two main outcomes:
• where the non-resident entity has the relevant connection, the entity will be treated in the same way
as a domestic entity, and

• where the non-resident entity does not have the relevant connection, the non-resident will generally
only be subject to GST on supplies to unregistered entities in Australia.

Former “permanent establishment” test

For tax periods starting before 1 October 2016, the test was instead dependent on whether the enterprise
was being carried on through a “permanent establishment” in Australia.
A permanent establishment means “a place at or through which a person carries on any business” and
includes a factory, office, farm, mine or market. It also includes:
• a place where the supplier is carrying on business through an agent

• a place where the supplier has or is using or installing substantial equipment or machinery (see
generally Taxation Ruling TR 2007/11). For the application of this to reverse charging on cross-
border leases, see ¶9-095

• a place where the supplier is engaged in a construction project, or

• where goods sold by the supplier are manufactured, assembled, processed, packed or distributed by
a related party.

For there to be “a place at or through which a person carries on any business”, the Commissioner
considers that there must be a degree of permanence in both place and time. As a rule of thumb, the
Commissioner considers that this test is satisfied where the business operates at or through a particular
place continuously for six months or more, though shorter periods of less than six months may suffice if
the connection with Australia is very strong (Taxation Ruling TR 2002/5). This may apply, for example,
where the business returns to a particular location in Australia on an ongoing and regular basis but for
short periods each time; or where the intention is to set up a permanent business in Australia but the
owner unexpectedly dies or the business fails.
Due to its intangible and mobile nature, a website is normally not a permanent establishment. However, if
the business operates a server, that could constitute a permanent establishment (Taxation Determination
TD 2005/2).
Whether a supply is made “through” the permanent establishment will depend on the facts. The
Commissioner considers that if the supplier carries on an enterprise through a permanent establishment
in Australia, any supply made in the course of that enterprise will be a supply made through the
permanent establishment, even if the supply can also be said to be connected with a place of business in
another country. The requirement would presumably be satisfied if the permanent establishment signs the
contract or accepts purchase orders for the supply, provides the service or has authority to make
important decisions in relation to the supply (GST Ruling GSTR 2000/31). Where software is sold and
transmitted directly from an overseas supplier to an Australian customer, the ATO considers that there is
a sufficient connection if the sale was negotiated and promoted by an employee of the permanent
establishment in Australia (Interpretative Decision ID 2001/577).
“Australia”,
for GST purposes, does not include external territories, for example Christmas Island, Cocos (Keeling)
Islands or Norfolk Island (s 195-1). Norfolk Island previously had its own 12% GST, but this was abolished
as part of changes to end its self-governing status, with effect from 1 July 2016. The Australian GST will
not be introduced to replace it.
“Australia” may include offshore oil rigs, but not oil rigs in the Australia/East Timor Joint Petroleum
Development Area (Interpretative Decision ID 2007/169). It also includes coastal seas for up to 12
nautical miles (Acts Interpretation Act 1901, s 15B).
Note that with effect for tax periods starting on or after 1 July 2015, the term “Australia” is replaced by the
expression “the indirect tax zone” (ITZ), without significant alteration in meaning. This is considered
necessary to differentiate the territorial scope of GST from the uniform definition of Australia that applies
generally for other tax purposes from that date (s 195-1 definition).

¶4-103 Telecommunication supplies

Telecommunication supplies are connected with Australia if the recipient will “effectively use or enjoy”
them in Australia (s 85-5). This potentially applies to telephone calls, call back services, email and internet
access, satellite transmissions, the provision of leased lines, circuits and global networks, and the
transmission element of international data exchange (s 85-10). However, it is not intended to apply to
licences to use intellectual property such as computer software, or consultancy services provided via the
internet.

Example
A New Zealand telecommunication provider supplies internet access to a customer in Australia. This supply will be treated as
connected to Australia under s 85-5, so GST may apply. If the supply was made through an Australian business, it could be treated
as being connected with Australia under the general rules in s 9-25.

This rule applies whether the supplier is in Australia or offshore. However, the Commissioner has a
discretion not to apply it if the supply is made through an offshore enterprise and enforcement would not
be administratively feasible (s 85-5(2)). Collection of GST is not administratively feasible where the
recipient is not registered, or where the recipient itself makes telecommunication supplies to the public for
a fee (A New Tax System (Good and Services Tax) Act 1999 Telecommunication Supplies Determination
(No 38) 2015).
For tax periods starting on or after 1 October 2016, this rule is subject to the exclusions in ¶4-101.

¶4-104 Supplies partly connected with Australia

As different rules apply to goods, real property, services and telecommunication supplies, a supply that
involves a mixture of these may be partly connected with Australia and partly not connected. In this
situation, the supply is split up into separate supplies. The GST and input tax credits are calculated only
on the part of the supply that is connected with Australia (s 96-5).
 Example
Under a contract, goods are delivered in Australia to an overseas resident and services are provided to that person overseas
through an overseas enterprise. Although the supply of the goods is associated with Australia, the supply of the services is not. Only
the supply of the goods is a taxable supply. The value of this supply is calculated as a proportionate part of the whole supply, based
on value (s 96-10). If the supply of the goods was only partly subject to GST (because part was input taxed or GST-free), the taxable
value is reduced further.

However, if one of the supplies is incidental to the other, and its value does not exceed $50,000, it will be
treated as part of that other supply (s 96-5(4)).

Example
Assume in the previous example that the value of the services was $25,000 and that they were incidental to the provision of the
goods. The supply of the services will be treated as part of the supply of the goods. The whole supply may therefore be a taxable
supply.

In this context, hotel accommodation provided as part of a tour package would not normally be regarded
as “incidental” to the transportation and sightseeing components of the package (Saga Holidays Limited v
FC of T [2006] FCAFC 191).
[GSTG ¶13-200]

¶4-105 Requirement 5: registration

The fifth requirement for a taxable supply is that the supplier is either registered or required to be
registered (s 9-5). This means that a supplier who is required to register — for example, because its GST
turnover is $75,000 or more (¶3-000) — cannot avoid GST obligations simply by not registering.

Examples
(1) A business supplier with a GST turnover of $20,000 elects not to register, in accordance with the rules at ¶3-000. GST does not
apply to the supplies it makes. GST can only apply if it elects to register.
(2) A business supplier with a GST turnover of $100,000 fails to register. The supplies it makes will nevertheless be subject to GST
in the normal way, because it was required to register (¶3-000). This is so even though the supplier did not formally include GST in
its prices. The supplier will still have to account for GST equal to 1/11th of the price. In addition, the supplier may be liable to a
penalty for failing to register when required.

[GSTG ¶5-000]

¶4-110 Requirement 6: supplies not GST-free or input taxed

Taxable supplies do not include supplies that are GST-free or input taxed (s 9-5; 9-30). If a supply is
GST-free, this means that no GST is payable on it and that the supplier is entitled to claim credits for the
GST payable on its related business inputs. If a supply is input taxed, no GST is payable on the supply,
but the supplier generally cannot claim input tax credits on its related business inputs. For lists of GST-
free and input taxed supplies, see ¶25-000.
A supply of a right to receive a supply that would be input taxed is itself input taxed, and the supply of a
right to receive a supply that would be GST-free is itself GST-free.
[GSTG ¶13-530]

CALCULATING GST ON SUPPLIES

¶4-200 How GST is worked out
To calculate the GST, you must know the “value” of the taxable supply. GST is calculated as 10% of that
value (s 9-70).
The “value” of the supply is 10/11th of the price, ie the consideration for the supply (s 9-75(1)). This
means, in effect, that the GST is calculated as 1/11th of that price. The supplier must account for that
amount to the ATO. This is so, irrespective of whether the supplier actually included any GST component
in the price.

Example
Enrico buys a car from a registered dealer for $33,000, including GST. The amount of GST is 1/11th of $33,000, ie $3,000.

If the payment for the supply includes something other than money, the price will include the market value
of that thing, including GST (ie the GST-inclusive market value) (¶4-020). For this purpose, notes or coins
which are collector’s pieces or have a value above face value are not treated as money and will be valued
at their GST-inclusive market value.
If the supply is made to an associate below market value, or as a gift, the GST may be worked out as if
market value had been paid (¶17-500).
Luxury cars
Luxury car tax is not taken into account in calculating the value of a taxable supply of a luxury car (s 9-
75(2)).
Mixed and composite supplies
If the supply is partly taxable and partly GST-free, the value of the taxable supply is worked out on a
proportional value basis (s 9-80). The same applies if the supply is partly taxable and partly input taxed,
for example, where the lease of a building includes both residential premises (input taxed) and distinct
commercial premises, such as a doctor’s surgery (taxable). For convenience, all these types of supplies
are called “mixed” supplies.
The actual apportionment formula in s 9-80 has elements of circularity, and accordingly apportionment
should instead be carried out in a practical, commonsense manner (FC of T v Luxottica Retail Australia
Pty Ltd 2011 ATC ¶20-243; [2011] FCAFC 20; GST Ruling GSTR 2001/8).

Example
A business makes a supply for $210. The taxable proportion is 50% of the total value. The value of the total supply for GST
purposes is:
(10 × $210) / (10 + 0.5) = $200
The value of the taxable supply is therefore 50% of $200 = $100. The GST is 10% of $100 = $10.

However, in some cases, the parts of the supply may not be separately identifiable in this way. For
example, there may be a supply which is essentially of one thing, but which contains other parts which
are simply “integral, ancillary or incidental” to that supply. This would be treated as a “composite” supply,
rather than as a mixed supply, and apportionment would not be appropriate.
Whether a supply is a mixed supply or a composite supply will often be a matter of fact and degree, and
should be determined in a practical, realistic way (Luxottica), after having regard to any specific provisions
of the GST Act. Identifying the essential character of what is supplied may help to determine whether a
particular transaction is covered by such a provision.
For example, an air ticket may include the supply of an in-flight meal, but that meal would normally be
treated as merely incidental to the supply of the transport (British Airways plc v Customs and Excise
Commrs [1990] 5 BVC 97). Such a supply is therefore a composite supply and it is not necessary to
apportion it into its taxable and non-taxable components. This may be contrasted with a situation where a
rail company offers special gourmet excursions at premium prices, where the provision of the food is
heavily promoted as a vital part of what is being supplied. In such a case, there may be a mixed supply of
food and transport, which requires apportionment (Sea Containers Ltd v Customs and Excise Commrs
[2000] BVC 60).
It has also been held in the UK that all the rights conferred under a credit card protection plan, including
registration of cards and emergency cash advances, were incidental to the main objective of the plan,
which was insurance (Card Protection Plan Ltd v Commrs of Customs and Excise [2001] UKHL 4).
The Commissioner considers that a component will be integral, ancillary or incidental if it is insignificant in
value or function, or merely complements the dominant part of the supply. For example, as a rule of
thumb, this will apply if the consideration that would otherwise be apportioned to the component does not
exceed the lesser of $3 or 20% of the total consideration. However, this test is not exhaustive (GST
Ruling GSTR 2001/8).
Examples of incidental parts of a composite supply that the Commissioner considers would normally not
require apportionment include:
• a cleaning brush supplied as part of a hearing aid

• periodic journals provided as part of the GST-free supply of membership of a professional

organisation to a non-resident (GST Ruling GSTR 2003/8)

• the fitted tyres supplied as part of a motor vehicle

• newspapers provided without additional charge to hospital patients

• cleaning and porterage services provided with room accommodation, and

• stickers provided with a packet of cereal.

Examples of separately identifiable parts of a mixed supply that the Commissioner considers would
require apportionment include:
• food supplied to a full boarder at university college

• a coffee plunger (taxable) and a jar of coffee (GST-free) that are sold together at a discount price.
Non-food promotional items, such as clocks, cricket balls and cups, which were supplied “free” with
GST-free food were considered to be separate taxable supplies in the Food Supplier case: see
further ¶13-200

• membership of gym provided with purchase of premium health cover.

The delivery of sold goods is normally treated as a separately-identifiable part of a mixed supply. For
example, if goods are ordered from a department store, and the customer opts to have them delivered for
a fee, the delivery service will be taxable irrespective of the GST treatment of the goods themselves. The
position is different where delivery is an incidental part of a composite supply. For example, the
Commissioner accepts that if goods are ordered from an internet, mail order or other supplier, and the
supplier provides no premises where they can be picked up, delivery is an essential part of the supply.
The GST treatment of the delivery service will therefore be determined by the GST treatment of the
goods. If those goods are GST-free, so will be the delivery; if the goods are partly taxable and partly GST-
free, so will be the delivery (GST Determination GSTD 2002/3; Customs & Excise Commissioners v
British Telecommunications plc [1999] 3 All ER 961). Similar rules would apply to packing.

Example
Tamsyn orders fresh fruit ($44, GST-free) and flowers ($22, including $2 GST) from an internet grocer. There are no facilities for
pick-up. The delivery fee is $11. The GST component of the delivery fee is 1/11 × $11 × 22/66 = $0.33. The grocer’s total GST
liability is therefore $2.33.
If delivery had been optional, the delivery would have been fully taxable, and the GST component would have been 1/11 × $11 = $1.
The grocer’s total GST liability would therefore be $3.
A part of a supply cannot be treated as incidental where there is specific legislation to the contrary. For
example, where food is provided on an educational field trip, its GST status must be determined
separately (¶14-004). Separate rules also apply to incidental financial supplies (¶10-010).
For the application of these rules to an international online sale of goods to Australia, see Interpretative
Decision ID 2013/20 at ¶12-010. For composite services supplied by inbound tour operators, see ¶12-
020.
Methods of apportionment
The Commissioner considers that you may use any reasonable method to apportion the consideration for
the separate parts of a mixed supply (GST Ruling GSTR 2001/8). Apportionment may be done on a direct
basis, for example the relative value of goods or property, relative time spent in providing services, or
relative floor value basis in a supply of property. There are also indirect methods, for example, cost plus
usual profit margin. However, the Commissioner does not accept “historical cost” or “residual value”
methods unless they reflect an appropriate apportionment. An apportionment based on relative cost was
considered reasonable in Case 6/2007 (¶13-200).
The fact that an item is advertised as a “free” component of a package of goods does not necessarily
mean that it must be given a nil value in an apportionment. All the relevant circumstances, including the
terms of the offer, must be considered (Food Supplier case, ¶13-200; Luxottica).
Records supporting the apportionment should be kept (¶18-040).
Discounted mixed supplies
It may happen that a supplier allows a discount on one component of a mixed supply, but not on the
other. For example, a discount may apply to the taxable component of the supply, but not the GST-free
component. Provided that this pricing is commercially justifiable and is not a contrived arrangement, it
seems that the GST on the taxable component should be based on the fully discounted price of that
component. It is not appropriate to spread the discount over the whole of the supply.

Example
A spectacle retailer sold (taxable) frames at a discount on the condition that the customer also purchased (GST-free) prescription
lenses at the normal price. The ATO argued that in calculating GST on the supply, the discount should be apportioned, so that only
part of it should be attributed to the cost of the taxable frame. However, the court ruled that the discount should be wholly offset
against the cost of the frame, even though that discount would not have applied if the frame had been sold separately without the
lenses. (Based on Luxottica, above.)
Note: for the availability of refunds to suppliers as result of this decision, see ¶8-110.

Foreign currency conversion

If the price is expressed in foreign currency, it has to be converted to Australian currency in the manner
determined by the Commissioner (s 9-85). Guidelines for conversion are given in GST Ruling GSTR
2001/2; Goods and Services Tax: Foreign Currency Conversion Determination 2018. In general, the
Commissioner says that the conversion rate you use may come from:
• the Reserve Bank of Australia

• a commercial bank or other foreign exchange organisation, or

• the agreement between the parties.

The Commissioner says that whichever rate is chosen, it should be used consistently, although rates may
be changed if there are “sound commercial reasons” for doing so. If you alternate between exchange
rates with a view to reducing your GST liability, the Commissioner considers that the anti-avoidance
provisions may apply (¶20-000). A separate rule applies for low-value imports to consumers (¶9-130).
The “functional currency” conversion rules that apply for income tax purposes do not apply to GST
(Taxation Determination TD 2006/5).
Digital currency conversion
Prices expressed in digital currency, such as bitcoin, must be converted to Australian currency.
Guidelines are in GST Digital Currency Conversion Determination 2019 (DCC 2019/1), effective from 13
April 2019. These state that the exchange rate should be obtained from a digital currency exchange or
website, or be agreed between the parties. If that rate is only quoted in a foreign currency, it will also need
to be converted to Australian currency according to the normal guidelines. These guidelines replace
similar provisional guidelines that had effect from 1 July 2017.
[GSTG ¶13-800]

¶4-205 Rounding off rules for GST

Special “rounding off” rules apply where the amount of GST involves a fraction of a cent (s 9-90).
Single unitemised supply
If there is only one taxable supply on an invoice, and this supply is not broken down into a number of
items, the GST is rounded to the nearest cent, with half cents being rounded upwards.

Example
Enterprises invoices a purchaser $10.84 (GST-inclusive) for a single supply. The unrounded amount of GST is 1/11 × $10.84 =
$0.9854545. This is rounded to 99 cents.

Multiple supplies or items

If there is more than one taxable supply on an invoice, or a single supply is broken down into separate
items, the ATO says that you have a choice of approaches. Under the “total invoice approach”, if the GST
for each supply or item is 1/11th of the price, you may simply divide the total price by 11 to arrive at the
total GST. Where necessary, the total should be rounded to the nearest cent, with half cents being
rounded upwards.
Alternatively, you can adopt a “line item approach”. This requires you to add up the separate unrounded
amounts of GST and round the total to the nearest cent, with half cents being rounded upwards.

Example
Enterprises charges a purchaser GST-inclusive amounts of $10.84 and $14.08 for two separate supplies on the one invoice. The
unrounded amounts of GST are $0.9854545 + $1.28 = $2.2654545. This is rounded to $2.27.

It may happen that the unrounded amount of GST for an individual supply or item has more decimal
places than your accounting system can record. In this case, you can round the amount to the maximum
number of places that you can record. If the last number in the unrounded GST is five or more, you round
up, otherwise you round down. You then add up the amounts, rounded as necessary, to reach a total.
This total is in turn rounded to the nearest cent, with half cents being rounded upwards.

Example
Assume in the previous example that Enterprise’s accounting system only records to four decimal places. The GST on the $10.84
item will be rounded to $0.9855. The total will therefore be $2.2655, which is rounded to $2.27.

It is a matter for the supplier to choose the rounding rule for working out its GST liability, and for the
recipient to choose the rounding rule for working out its input tax credit entitlement. It is not necessary that
they use the same rule.
These rules also apply where the document on which the GST is recorded is not an invoice, for example
where it is a receipt, a cash register total, a recipient’s record of small expenses, or electronic data.
[GSTG ¶13-930]
¶4-210 Buying and selling at auction

The ATO considers that where taxable goods are being sold at auction, it should be made clear whether
the items are being sold on a GST-inclusive or GST-exclusive basis, and whether the seller is registered.
Auctioneers and vendors who fail to ensure disclosure may attract the attention of the Australian
Competition and Consumer Commission (ACCC) and incur legislative penalties (¶21-010).

Example
A real estate agent auctioned three allotments of residential land. The land was promoted in newspapers without showing whether
the prices were inclusive or exclusive of the GST. There was also no clear disclosure to potential bidders before the auctions
whether GST applied to the land sales. In one auction, the auctioneer made a representation that he did not believe GST was
applicable when in fact there was GST liability on the hammer price. Following intervention, the agent gave court-enforceable
undertakings to the ACCC, and the successful bidders became entitled to refunds totalling $48,350 of the GST paid. (Based on
ACCC Media Release 177/05, 13 July 2005.)

A number of cases have arisen in which there is a dispute over what exactly was said by the auctioneer
or agent. Simply saying that the sale is subject to GST leaves the question open as to whether any GST
that is payable is included in the price or should be added to it. The following examples illustrate the
difficulties that may arise.

Examples
(1) A contract for the sale of vacant business premises stated that the price was GST-inclusive. After the sale was made, the
vendors sought to have the contract rectified on the basis that both parties had clearly understood that GST was to be added to the
price. Disputed evidence was led as to what the auctioneer had said at the auction, and what the vendors and purchasers
respectively understood was the position. The court ruled that the vendors had failed to establish that there had been a mistake
common to both parties or that the contract should be rectified (based on Tam v Mannall & Anor [2010] NSWC 250).
(2) A different result was reached in another case, again involving a dispute over what was said at an auction. In this case, the court
found, on the balance of probabilities, that both parties understood that the sale price of $1,060,000 was GST-exclusive, even
though the contract said it was GST-inclusive. The vendors were therefore entitled to have the contract rectified to say that the price
was “$1,060,000 + GST”. However, as there was a further dispute over whether the sale was subject to GST in any event, the court
ruled that the vendor should apply to the Commissioner for a private ruling as to whether the sale was taxable and if so, to what
extent, so that the amount of GST (if any) could be determined (based on Ashton v Monteleone [2010] NSWC 258).
(3) Although a contract for sale specified that the price was inclusive of GST, the vendor claimed that it was clearly understood
between the parties that it was GST-exclusive. This was supported by evidence given by the auctioneer as what was said at the
auction, and by the existence of contemporaneous written evidence that the price did not include GST. The court ordered that, given
the weight of evidence, the contract should be rectified (based on SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd
[2016] NSWSC 362).

If the sale is GST-inclusive, GST will be included in the final auction price and a registered purchaser may
claim an input tax credit of 1/11th of that price. If the sale is GST-exclusive, 10% GST will have to be
added in order to calculate the input tax credit claimable by the purchaser.

Example
Under the conditions of sale at an auction, the sale is GST-exclusive. The vendor, the auctioneer and the purchaser are all
registered. The knockdown price is $4,000. GST of $400 is added, so that the purchaser pays the seller $4,400. The seller accounts
for $400 of that as GST. The seller can also claim an input tax credit of $10 for the $110 auctioneer’s fee, so the net GST for the
seller is $390. The purchaser can claim an input tax credit of $400 for the GST on its purchase.

If the vendor is not registered, the sale must necessarily be on a GST-exclusive basis. GST will not apply
on the sale, so no input tax credit can be claimed by the purchaser. Nor can the vendor claim an input tax
credit on the auctioneer’s fee.
The same principles apply to computer aided livestock marketing (CALM) sales. The assessor’s fee and
CALM levies would be subject to GST, but a registered vendor could claim input tax credits for these.
If the goods are GST-free, no GST applies in any event. For example, livestock sold at auction are
taxable, but slaughtered and processed stock that are for human consumption are GST-free food (¶13-
110).
CLAIMING INPUT TAX CREDITS • TAX INVOICES
INPUT TAX CREDITS
What is an input tax credit? ¶5-000
Creditable acquisitions ¶5-010
Calculation of input tax credit ¶5-020
If company is not yet set up ¶5-030
Reimbursement of employees, agents, officers or partners ¶5-040
TAX INVOICES
Role of tax invoices ¶5-100
Contents of tax invoices ¶5-110
Sample tax invoices ¶5-120
Postponing credit claim to later BAS ¶5-125
Modifications to tax invoice requirements ¶5-130
Recipient created tax invoices ¶5-140
Contents of recipient created tax invoices ¶5-150
Low-value acquisitions ¶5-170
Acting through an agent or broker ¶5-190

Editorial information

Summary
Although you are liable for GST on goods or services that you supply through your business, you
can also claim credits for the GST on your business inputs or acquisitions. These “input tax credits”
are designed to ensure that the ultimate burden of GST falls on the end consumer, not the
businesses that form the chain of supply. In this chapter, we explain how you identify the business
acquisitions that qualify for input tax credits and how the credits are calculated. We also explain the
requirement to hold a “tax invoice” to support your credit claim.

INPUT TAX CREDITS

¶5-000 What is an input tax credit?

The general scheme of the GST legislation is that you account for GST on the supplies you make, but get
a credit for the GST component of supplies made by others to you. This credit is called an input tax credit,
because it is a credit for tax paid on your business inputs.
Input tax credits are designed to ensure that the ultimate burden of the GST will fall on the end user, or
private consumer. The businesses that form part of the chain of supply act as progressive collectors of
the tax, but do not ultimately bear the burden of it. For an example of how this operates, see ¶1-100.
[GSTG ¶15-000]

¶5-010 Creditable acquisitions

You are entitled to an input tax credit equal to the GST component of your “creditable acquisitions” (s 11-
5; 11-20). A creditable acquisition is simply the purchase or acquisition of something to be used in
carrying on your enterprise. More specifically, you make a creditable acquisition if all the following
conditions are satisfied:
(1) you must “acquire” something

(2) you must acquire the thing for a “creditable purpose”

(3) the supply of the thing to you must be a “taxable supply”, ie it must be subject to GST (¶4-000)

(4) you must provide consideration, or be liable to do so. Consideration is explained at ¶4-020, and

(5) you must be registered or required to be registered (¶3-000). For the position where registration is
cancelled, see ¶3-070.

You will normally also need to hold a tax invoice for the transaction at the time you lodge your GST return
for the tax period in which the input tax credit on the transaction is claimed (s 29-10). For details of tax
invoices, see ¶5-100.
The question of whether a taxpayer has made a creditable acquisition is determined from the point of
view of the taxpayer, not of the supplier.

Example
A government department subsidised a taxi company for discounted fares provided for disabled customers. The department was
held to have made a creditable acquisition of transport services. This was so, notwithstanding that from the company’s point of view
it was simply making a supply of travel to the customer (FC of T v Department of Transport (Vic) 2010 ATC ¶20-196: see ¶4-040).
Similarly, where an employer provides a Cabcharge facility for its employees who work late, it seems that it could claim an input tax
credit for the GST component of the taxi fare.

“Acquisition”
An acquisition is a mirror image of a supply (¶4-010). It includes:
• acquiring goods

• acquiring services

• receiving advice or information

• accepting the grant, assignment or surrender of real property

• accepting the grant, transfer, assignment or surrender of any right

• receiving financial supplies (¶10-000)

• acquiring the right to require someone to do something, refrain from doing something, or tolerate
something, and

• any combination of these (s 11-10).

Anything else that could be described as an acquisition, in the normal sense of the word, is also covered.
However, receiving a payment of money for the supply of something else is not treated as an acquisition
— otherwise, there would be a doubling up of input tax credits.
It does not matter whether the acquisition is legal or illegal — input tax credits may be claimed either way.
The onus is always on the taxpayer to show that the acquisition actually took place. For recent examples
involving unsuccessful claims for credits for the claimed acquisition of motor vehicles, see Byron Pty Ltd v
FC of T [2019] AATA 2042; Stallion (NSW) Pty Ltd v FC of T 2019 ATC ¶20-707; [2019] FCA 1306.
“Creditable purpose”
To acquire something for a “creditable purpose” (s 11-15) means that:
(a) you must have acquired it in carrying on your “enterprise” (¶3-020). This requires that the particular
nature of the enterprise be identified. The ATO considers that this is determined on the basis of
matters such as the business’ income-earning activities, its formation documents, contracts, business
records, business plans and minutes. The ATO also considers, on the basis of analogous income tax
cases, that whether a thing is acquired in carrying on your enterprise depends on the purpose for
which you acquired the thing (GST Ruling GSTR 2008/1). This is determined objectively (AXA Asia
Pacific Holdings Ltd v FC of T 2008 ATC ¶20-074), though your subjective purpose might also have
some limited relevance (Macquarie Finance Ltd v FC of T 2005 ATC 4829; GST Ruling GSTR
2008/1)

According to the ATO, some of the factors that would suggest that an acquisition is made in carrying
on an enterprise are that:
• it is incidental or relevant to the commencement, continuance or termination of the enterprise

• the thing acquired is used by the enterprise in making supplies

• the acquisition secures a real benefit or advantage

• it is one which an ordinary business person would be likely to make

• it does not meet the personal needs of individuals such as partners or directors

• it helps to protect or preserve the enterprise entity, structure or organisation, and

• it is made by the entity in accordance with statutory requirements (GST Ruling GSTR 2008/1)

(b) the acquisition must not be of a private or domestic nature. The ATO considers, on the basis of
analogous income tax cases, that this would normally cover matters such as living expenses,
childminding expenses and most home/work travel (GST Ruling GSTR 2008/1), and

(c) the acquisition must not relate to making supplies that would be input taxed, unless specified
exceptions apply (¶5-020). Typical input taxed supplies include financial supplies (¶10-000) and
residential accommodation (¶11-310). The relationship must be real and substantial, not just trivial.
However, it is not necessary that there be a direct link between the acquisition and an actual supply
that is input taxed (HP Mercantile Pty Limited v FC of T 2005 ATC 4571; [2005] FCAFC 126; GST
Ruling GSTR 2008/1). Nor is the relationship subject to some overriding “purpose” test. For example,
where a mining company acquired residential accommodation to lease to its employees in remote
areas, it was denied input tax credits on associated acquisitions, as they related to the (input taxed)
supply of the premises. This was so notwithstanding that this supply was not a commercial objective
of the company in itself, but was made as a purely incidental part of running its (taxable) mining
operations (Rio Tinto Services Ltd v FC of T 2015 ATC ¶20-525).

Examples
(1) Bank acquires a computer that it uses in making its input taxed financial supplies. The acquisition is not creditable.
(2) Retailer that also offers loan finance to customers acquires special loans software to be used exclusively by its loans staff. The
acquisition is not creditable.
It is apparently irrelevant whether the acquisition precedes or follows the input taxed supply (HP
Mercantile Pty Limited v FC of T 2005 ATC 4571; [2005] FCAFC 126).
Apportionment is appropriate where the acquisition is partly private or domestic, or partly related to
making input taxed supplies (¶5-020).

Examples
(1) Where a bookshop owner buys stock to sell in the business, this will be a creditable acquisition for which input tax credits can be
claimed. So will a new broom that the shopowner buys to sweep the shop. But the bus ticket that the shopowner buys to travel to the
shop each day is not a creditable acquisition for which input tax credits can be claimed because it is a private or domestic expense.
The same applies to other expenses such as food, clothing, shelter and child care that are treated as private or domestic under the
income tax law (based on GST Ruling GSTR 2006/4).
(2) Keith, an employee, is dismissed and goes into business carrying on an enterprise as a sole trader. Keith brings unfair dismissal
proceedings against his former employer. Although Keith is now operating as a sole trader, he cannot claim an input tax credit for
the legal expenses, because they were incurred as a result of his employment, not his enterprise.
(3) A public company that is subject to a takeover offer obtains an independent report on the merits of the takeover, and obtains
legal advice on the preparation of a formal shareholder statement required by law. The ATO would accept these as being acquired
in carrying on the company’s enterprise (GST Ruling GSTR 2008/1).
(4) A businessperson was disallowed claims for input tax credits on life insurance premiums, home contents insurance, home
electricity and gas charges, airfares for guests, cable TV subscriptions and dental and grooming costs. A proportion of his claims
was allowed for items such as newspaper costs and travel expenses; and a full claim was allowed for certain airfares, and for legal
and accounting fees (Ryan v FC of T [2014] AATA 818).

In determining whether goods or services have been acquired for business or private purposes, you look
at it from the business’s point of view.

Example
Lavish Pty Ltd provides cars to its sales representatives as part of their salary packages. The cars can be used for personal
purposes when not being used on company business. However, from the company’s point of view, it acquired the cars purely
because of the requirements of its business. They are therefore treated as being acquired wholly for business purposes. (Based on
GST Ruling GSTR 2006/4.)

It follows that items such as food, clothing, shelter and child care will be treated as private if they are
acquired for the benefit of the business owner, but not if they are required to be provided to others as part
of that business.

Examples
(1) A religious order provides food and accommodation to monks who live and work at its monastery. Although the food and
accommodation are private to the monks, it is treated as being acquired by the order wholly for business purposes (based on GST
Ruling GSTR 2006/4.)
(2) A taxpayer had a swimming pool constructed as part of the intended establishment of a naturist retreat. This was considered to
be an acquisition made in the course of carrying on the taxpayer’s enterprise. This applied even though the pool would also have
been capable of private or domestic use (Russell v FC of T [2011] FCAFC 10).

Some of the expenses for which a business could not claim input tax credits for one reason or another
would be employees’ wages (not taxable: ¶4-090), life insurance premiums (no GST is payable: ¶10-100),
interest on loans (no GST is payable: ¶10-000), most entertainment, or water or sewerage supplies (GST-
free: ¶16-200).
Where no tax deduction available
Generally, it is not necessary that you are able to claim an income tax deduction for the cost of something
you have acquired before you can claim an input tax credit for it. For example, the purchase of a capital
item will not normally be tax deductible, but there is no reason why it cannot qualify as a creditable
acquisition for the purpose of claiming input tax credits. This applies equally to acquisitions of a capital
nature which are made to provide an enduring benefit to the enterprise, or to restrict competition (GST
Ruling GSTR 2008/1). Similarly, where goods or services are acquired in order to carry out a feasibility
study, that acquisition may qualify for input tax credits irrespective of whether the cost would be tax
deductible (¶3-020). However, acquisitions will not qualify as creditable acquisitions to the extent that they
involve certain expenses that are specifically made non-deductible under the income tax law (s 69-5).
These include expenses that are not deductible under the following provisions:
• recreational club expenses (ITAA 1997 s 26-45)

• leisure facility expenses (ITAA 1997 s 26-50)

• non-compulsory uniforms (ITAA 1997 Div 34)

• family maintenance (ITAA 1997 s 26-40)

• relatives’ travel (ITAA 1997 s 26-30)

• entertainment (ITAA 1997 Div 32; ITAA 1936 s 51AEA; 51AEB; 51AEC). However, input tax credits
may apply for acquisitions in the limited situations where the entertainment is deductible, for
example, where morning and afternoon teas or light lunches are provided to employees during the
working day (Taxation Ruling IT 2675); food, accommodation and travel is provided as part of a
qualifying seminar (Taxation Determination TD 93/195); entertainment is provided to employees as a
taxable fringe benefit; or food and drink is provided at a non-social occasion at an in-house dining
facility to employees or, subject to conditions, to clients (Interpretative Decision ID 2005/122). For
fringe benefits tax (FBT) rules, see ¶24-210

• penalties (ITAA 1997 s 26-5)

• car parking for certain self-employed persons, partnerships and trusts (ITAA 1936 Div 4A of Pt III)

• certain non-cash business benefits used for private purposes (ITAA 1936 s 51AK).

Currently, there is no prohibition on the maker of an unlawful supply claiming input tax credits for
creditable acquisitions related to that supply. Note, however, that the government has changed the
income tax law to deny deductions for outgoings that are related to activities for which the taxpayer has
been convicted of an indictable offence.

Example
Colossus Enterprises buys $110,000 worth of sporting and theatre tickets which it distributes free to its major clients. These would
be classed as entertainment expenses. Colossus Enterprises cannot claim an input tax credit for the $10,000 GST on the tickets.

Conversely, of course, the fact that an expense is tax deductible does not necessarily mean that the
acquisition will qualify for input tax credits. For example, a bank may claim a tax deduction for outgoings
even though, as a financial supplier, it cannot claim input tax credits.
These restrictions apply equally to bodies that are exempt from tax, such as charities.
Purchasing from the government
The Commonwealth Government is not liable to pay GST, but has a notional liability for the purposes of
its dealings with others (¶1-300). If you purchase goods or services for your business from the
government, you can claim input tax credits as if this notional GST had applied. Similarly, you can claim
input tax credits if you make a business purchase from a state government, and a notional GST liability is
included in the payment (s 177-3).
Corresponding rules apply to untaxable Commonwealth entities.
For GST exemptions that apply to certain government services, see ¶4-080.
Acquisitions by partners and partnerships
If a partner acquires something in their capacity as a partner, this is treated as an acquisition by the
partnership, not the partner (s 184-5). Factors that may indicate that the acquisition has been made in the
capacity as a partner include:
• the acquisition is used in the partnership enterprise

• it is made with the consent of all the partners

• it is paid for out of the partnership profits or from a partnership account

• the invoice shows the firm or business name, or the names of all the partners, as recipient (GST
Ruling GSTR 2003/13).

The Commissioner has waived the requirement to hold a tax invoice in certain situations where a
taxpayer holds a document that contains a partner’s identity and certain other requirements (WTI 2013/6:
see ¶5-130).
Corresponding rules apply to acquisitions made by members of the committee of management of any
other unincorporated association.
A general law partnership can claim an input tax credit on the acquisition of an “in kind” contribution by a
partner on formation of the partnership. However, the partner cannot claim an input tax credit on the
acquisition of an interest in the partnership, as its supply to the partner is not a taxable supply (¶10-010;
GST Ruling GSTR 2003/13).
If a partner resigns and later incurs legal expenses in recovering its equity in the partnership, the partner
cannot claim an input tax credit for those expenses, as they are not incurred in carrying on an enterprise
(Interpretative Decision ID 2002/11). For the definition of partnership, see ¶3-015.
When input tax credit can be claimed
The tax period for which the input tax credit can be claimed will depend on whether you are on the cash
basis or the accruals basis of accounting. For details, see ¶7-200 and ¶7-320.
In certain situations, it is open to a taxpayer to defer a claim for an input tax credit from the tax period for
which it would normally be attributable, to a later tax period (¶5-125). However, any deferment is subject
to a time limit, as follows:
• if the period to which the input tax credit would normally be attributable commences on or after 1 July
2012, a taxpayer will generally lose the entitlement to the credit unless it has been taken into account
in an assessment within four years after the taxpayer was required to lodge a return for that tax
period (s 93-5; Draft Miscellaneous Taxation Ruling MT 2018/D1)

• if the period to which the credit would normally be attributable commenced before 1 July 2012, the
taxpayer generally lost the entitlement to the credit unless it claimed it in a return lodged within four
years after the taxpayer was required to lodge a return for that tax period (Administration Act, Sch 1,
former s 105-55; Trustee for SBM Trust v FC of T 2015 ATC ¶10-389; ATO Decision Impact
Statement, 25 August 2015).

Example
A taxpayer on a cash basis made a creditable acquisition in August 2015 but neglected to take it into account in its September 2015
quarterly return, which was required to be lodged by 28 October 2015. The taxpayer has until 28 October 2019 to claim the input tax
credit in a return, thereby giving rise to an assessment (¶8-080).

Exceptions to this limit apply in the following situations:

(1) where the supply to which the acquisition relates is incorrectly assessed as input taxed, and is
subsequently assessed as taxable or GST-free, or

(2) where the taxpayer has requested the Commissioner to treat a document as a tax invoice before the
end of the four-year period, and the Commissioner agrees after the four-year period has passed (s
93-10).
The Commissioner has the power to direct a liquidator of a company to give GST returns on behalf of the
company within a further specified period (s 58-50; ¶8-050). In such a case, the AAT has held that the
four-year period would start to run from that later date (Rosebridge Nominees Pty Ltd (in liq) v FC of T
[2019] AATA 426).
Artificial claims
The ATO considers that certain arrangements where an entity uses an associate to secure input tax
credits on the construction of residential premises for lease, and to defer the corresponding GST liability,
are not tax-effective (GST Ruling GSTR 2010/1 (¶20-000); Taxpayer Alerts TA 2009/4; TA 2009/5). It has
also raised questions about the effectiveness of certain arrangements where an entity claims an input tax
credit on a purported acquisition of an intangible right (on non-commercial terms), with the provision of
vendor finance under which payments are contingent on a future event (Taxpayer Alert TA 2012/5).
[GSTG ¶15-050]

¶5-020 Calculation of input tax credit

Normally, the input tax credit is simply the amount of GST payable on the supply to you (s 11-25).

Example
You buy equipment that you use wholly in carrying on your business. The GST-inclusive cost is $22,000. You can claim an input tax
credit of $2,000.

However, some transactions involve acquisitions that are only partly eligible for credit (s 11-30). Typically,
these involve acquisitions that relate partly to making private or input taxed supplies. In these cases, it is
necessary to work out the creditable amount by a process of apportionment. The general rule is that the
method for doing this must be fair and reasonable, must reflect the intended use of the acquisition, and
must be appropriately documented.
Apportionment guidelines have been issued by the Commissioner (GST Ruling GSTR 2006/4) and are
explained below.
Part business, part private
The first category of partial credits is where the acquisition is made partly in carrying on your business
and partly for private or non-business purposes. In this situation, you are only entitled to a credit for the
part related to business use.
There are various methods for working out the extent to which you acquired something for a business
use. These vary according to the nature of the item acquired and the nature of the business.
The ATO prefers that you use “direct” methods for determining intended or actual use. These methods
are based on factors such as:
• distance, for example, kilometres travelled by a motor vehicle as evidenced by a logbook

• time, for example, computer processing time spent on various input taxed and other activities, as
evidenced by a time sheet

• volume, for example, numbers of transactions of particular types

• space, for example, floor area where the space is used for different activities, and

• staff numbers, for example, where the use of particular acquisitions is directly related to the number of
staff.

These factors may be measured on the basis of:

• records you already have available from a previous period
 • records kept since you made the acquisition, but before you lodge your BAS for the tax period in
which you made the acquisition, including your actual use of it

• records kept for some other purpose, for example, income tax (see below), management accounting,
profitability analysis, intra-entity transfer charging or cost accounting

• your previous experience concerning the usage of similar acquisitions

• your business plan, or

• any other fair and reasonable basis.

If you have already established the business use of an acquisition for income tax purposes in a particular
tax year, this may be used as a reasonable estimate for GST purposes for tax periods ending during the
next tax year. However, this will not apply if you are aware of significant changes to the extent of business
use (GST Ruling GSTR 2006/4).
You may also need to make adjustments to reflect the differences between the income tax and GST rules
(¶5-010).
The ATO accepts that it is not always necessary to consider each individual acquisition separately. In the
case of acquisitions of a particular class, or made by a business area of the enterprise which undertakes
a single type of supply or activity, it may be sufficient simply to determine the intended use of acquisitions
of that class or business area.
Specific types of expenses
In the case of car expenses, you can adapt the four methods used for tax purposes, ie cents per
kilometre, percentage of original value, one-third of actual expenses or log book method. For details and
useful examples, see GST Bulletin GSTB 2006/1.
In other cases, the ATO accepts the following methods:
• computer and internet expenses — a reasonable estimate may be based on a diary or log of
computer use over one representative month

• home offices — for insurance and other occupancy expenses, a reasonable estimate may be based
on a floor area basis. If the insurance relates to contents, a valuation basis may also be used. For
electricity and other running expenses, a reasonable estimate may be based on a diary or log of
home office use over one representative month

• telephone — a reasonable estimate may be based on a diary or log for one representative month,
covering incoming and outgoing calls (GST Ruling GSTR 2006/4).

Examples
(1) Ronald, a builder, acquires a load of bricks for $11,000, including $1,000 GST. He uses 70% of the bricks in his business and
30% for building extensions to his home. Ronald will be entitled to an input tax credit of 70% of $1,000, ie $700.
(2) Megan lives in a flat above the shop where she runs a business. She incurs the following expenses:
Electricity: If only one electricity bill covers the entire premises, this could be apportioned according to the business usage
established by diary records for a typical month.
Telephone: If there is only one telephone line for the entire premises, the bill could be apportioned on the percentage of business
calls. This could be based on a log of incoming and outgoing calls over a representative month.
Building insurance: This could be apportioned on a floor area basis. For example, if the shop comprises 60% of the total floor area,
and the bill is $1,100, then the insurance relating to the shop is $660. The amount for which an input tax credit could be claimed is
therefore 1/11th of $660, ie $60.
(3) Kerry buys a replacement car for her business. The business use of the replaced car, as established by log books, was 60%. If
the pattern of usage is expected to be the same, Kerry can use the same percentage in calculating business usage for the new car.
However, the ATO would expect her to keep a log book for a representative period to substantiate actual business use.
(4) Robyn leases a farm for $60,000 pa, including GST. The lease includes a private house where Robyn lives. The rental value of
the house is $10,000. The Tax Off would probably accept an apportionment so that Robyn can claim an input tax credit of 1/11th ×
5/6 × $60,000, ie $4,545 and the lessor accounts for GST of the same amount.
In Interpretative Decision ID 2002/296, it was suggested that if you construct a house as your home, you
cannot claim any input tax credit on the construction costs, even though you intend to use part of the
home for business purposes, unless that part is clearly differentiated as commercial premises (eg a
doctor’s surgery). That Decision has now been withdrawn as it does not accurately reflect the ATO view.
Optional annual apportionments for small business
Certain types of small businesses can elect to make their apportionments of input tax credits annually (s
131-5). This applies to entities that qualify as small business entities (¶1-250) for the income year in which
the election is made, and to non-business entities with a GST turnover that does not exceed $2m. For
calculation of GST turnover, see ¶3-030. This option does not apply to taxpayers who are on the
instalments system (¶8-037) or who have elected for annual tax periods (¶8-040).
The election takes effect from the start of the first tax period for which a GST return (BAS) is not yet due
at the time of the election (s 131-10). For example, if a quarterly taxpayer makes an election on 20 April
— before the 28 April deadline for lodging a return for the March quarter — the election takes effect from
the beginning of that March quarter. Extensions may be approved by the Commissioner. The election
ceases to have effect if:
• the taxpayer revokes it, or

• the taxpayer ceases to be a small business entity, or

• the taxpayer is a non-business entity that exceeds the turnover threshold as at 31 July in the financial
year.

The Commissioner may also disallow the election on the ground of a bad compliance history (s 131-20).
A record should be kept of the election, for example in a file note, but it does not need to be notified to the
ATO.
The general effect of the election is that where an acquisition was made during a tax period, a full input
tax credit can be claimed in the BAS for that tax period, even though the acquisition was not fully
creditable (s 131-40). Any necessary apportionment is instead made by way of an increasing adjustment
for the tax period in which the next annual income tax return is due to be lodged with the ATO (s 131-55;
131-60). The increasing adjustment is calculated by subtracting the input tax credit based on the actual
creditable use from the input tax credit originally claimed. Any other adjustments that would normally
apply are also taken into account.
If no income tax return is required to be lodged, the adjustment is made in the BAS for the tax period
ending 31 December after the end of the financial year in which the tax period occurred. Taxpayers can in
any case elect to attribute the adjustment to an earlier tax period if they wish.
The election cannot apply to acquisitions that are not creditable at all, eg where they are applied or
intended to be applied solely for a private purpose. Nor can it apply to reduced credit acquisitions. The
input tax credit will also be reduced pro rata where the acquisition relates partly to making supplies that
would be input taxed, or where the taxpayer has provided only part of the consideration (s 131-40). The
input tax credit allowed on the acquisition of a “luxury” car generally cannot exceed the limit normally
allowed (¶12-110; s 131-50).
Corresponding rules apply to importations (s 131-45; 131-50; 131-55). In the case of GST groups, an
election can only be made if each group member satisfies the eligibility criteria (s 131-15).

Example
In March 2019, Gary, a quarterly GST payer, pays $550 for telephone services, including $50 GST. He uses the services partly for
his business and partly for private purposes. He has made a valid election to make an annual apportionment, so he claims the full
$50 as an input tax credit in his BAS for the March 2019 quarter.
It later turns out that Gary has applied the telephone services 80% for business purposes during 2018/19. Gary is therefore liable for
an increasing adjustment of $10, calculated as follows:

Input tax credit originally claimed.................................... $50

Less: credit allowable on basis of actual business use (80% ×
 $50).................................... $40

Increasing adjustment .................................... $10

Assuming that Gary’s income tax return is due by 31 October 2019, the adjustment must be made in the BAS for the tax period
ending 31 December 2019, which itself is required to be lodged by 28 February 2020.

Business involving input taxed supplies

The second category of partial credits arises where the acquisition is made partly for making input taxed
supplies. To that extent, you will generally not be entitled to an input tax credit (¶10-000). This does not
apply where the input taxed supply is made through an enterprise, or part of an enterprise, that you carry
on outside Australia. In such a case, input tax credits may still be available.
Typical supplies that would be input taxed are renting out residential premises (¶11-310) and financial
supplies (¶10-000). Guidelines on apportionment of credits to the extent that they relate to financial
supplies are given at ¶10-030. In the case of financial supplies, there are also some exceptions to the
general rule. The first exception is that certain outsourced services may entitle you to a reduced 75%
input tax credit (¶10-040). The second is the “de minimis” exception, which applies to businesses that
provide financial services as only an incidental part of their operations (s 11-15). The general effect of this
exception is that you will not be prevented from claiming input tax credits relating to financial supplies if
those credits do not exceed $50,000 and are also less than 10% of the total input tax credits of the
business (¶10-032). The third exception is that if an entity borrows money and uses it in making taxable or
GST-free supplies, it will be entitled to input tax credits for its borrowing-related expenses (¶10-035).
Indirect apportionment
All the examples discussed above involve fairly straightforward situations where business (or taxable)
usage can be calculated directly. Sometimes, however, the usage has to be calculated indirectly. This
may be appropriate, for example, where a direct method is not practicable or where the cost of measuring
directly is disproportionate to the cost of the acquisition itself. For example, the ATO accepts that an
indirect method may be appropriate where there are overhead expenses or a large number of small
acquisitions and it is not cost effective to treat each one separately (GST Ruling GSTR 2006/4).
There are two types of indirect methods — input based and output based. The ATO prefers the input-
based method, where possible. Under this method, the way in which some inputs are used is applied to
measure the way other inputs are used. It can only be used if the use of the first set of inputs can be
worked out directly.

Example
Amir owns a building. He rents out the ground floor to a business (a taxable supply) and the first floor to a private residential tenant
(an input taxed supply). Some of his costs are overheads that cannot be directly allocated to either the taxable or the input taxed
supplies. However, various other costs can be allocated directly on the basis of 60%/40%. Using the input-based method would
enable Amir to allocate the overheads on the same basis.

Output- based methods use outputs to measure the business use of inputs.

Example
Shane makes both taxable and input taxed supplies as part of her business. Some of her costs are overheads that cannot be
directly allocated to either the taxable or the input taxed supplies. However, the outputs from taxable supplies are 60% of total
outputs. Using the output-based method, Shane can allocate the overheads on the same basis.

The ATO can approve other ways of apportioning input tax credits in particular cases. For an example
involving the disposal of goods on a marriage breakdown, see ¶6-300. The apportionment of general
management expenses incurred by a financial supplier was considered in AXA Asia Pacific Holdings Ltd v
FC of T [2008] FCA 1834.
Feasibility studies
A business may conduct a feasibility study into whether to embark on a particular course of action. If the
study is directed wholly at the feasibility of making supplies that would be input taxed, no input tax credit
would normally be available (HP Mercantile Pty Limited v FC of T 2005 ATC 4571; [2005] FCAFC 126).
However, if the study relates to two options — one involving supplies that would be taxable and the other
involving supplies that would be input taxed — the ATO suggests that an input tax credit may be available
for services rendered up to the time the business forms the intention to proceed with the input taxed
option: see Example 41 in GST Ruling GSTR 2002/2.
Correcting mistakes in credit claims
There are procedures for correcting mistakes in claims for input tax credits: see ¶8-045. However, a four-
year limit applies to claims (¶5-010).
No input tax credit can be claimed where GST was mistakenly not included by the supplier and the GST
has since ceased to be payable because the four-year collection limit (¶8-100) has expired (Interpretative
Decision ID 2008/16).
Use of industry benchmarks
The ATO may use its industry benchmarks (¶18-175) to identify claims which are above the norm and
which may require further investigation or substantiation: see, for example, Baini (¶12-130) and Carter v
FC of T [2013] AATA 141, where a florist claimed a “cost of goods sold” equalling 83% of total business
income, whereas the benchmark rate was in the range of 44%–54%.
Taxpayers with claims significantly above benchmark levels need to be prepared to provide satisfactory
records as substantiation. For example, an eBay trader was unsuccessful in challenging a benchmark-
based GST assessment where they had carried on their enterprise without proper consideration of GST
requirements and lacked any adequate records (Cronan v FC of T [2014] AATA 745). However, the AAT
has commented that benchmarks may not be appropriate in certain cases, such as where a taxpayer who
is operating a low turnover business has suffered prolonged serious illness (Mold v FC of T [2011] AATA
823).
Payment partly by third party
Input tax credits also need to be apportioned where you only pay part of the purchase price and someone
else pays the balance. You will only be entitled to an input tax credit in accordance with the proportion of
the amount you paid (s 11-30).

Examples
(1) As part of her business, Alana gives a talk at a business motivation seminar. The cost of her interstate travel and accommodation
associated with the seminar is $2,200, including $200 GST. Alana pays half this amount and the company organising the seminar
pays the other half. Alana is entitled to half the input tax credit ($100) and the company is entitled to the other half ($100).
(2) Assume the same facts, except that $550 of the costs (including $50 GST) relate to accommodation for a private holiday
stopover after the seminar. Alana would be entitled to an input tax credit of:

($2,200 − $550)
× 1/2 × 1/11 × $2,200 = $75
$2,200

Adjustment on subsequent supply

A GST adjustment may be available where you dispose of something that you originally acquired wholly
or partly to make financial supplies or for private or domestic purposes (¶6-310).
Special rules
• The input tax credit may be limited if you acquire a car for more than the car limit (¶12-110).

• Details of how the ATO calculates the input tax credit where a representative of an incapacitated
entity (¶18-250) on a cash basis pays creditors a dividend of less than 100 cents in the dollar are
contained in Practice Statement PS LA 2012/1 (GA).
 [GSTG ¶15-500]

¶5-030 If company is not yet set up

It may happen that you incur business costs relating to a company that has not been formally established.
If you are not registered, you cannot claim an input tax credit. Even if you are registered, the credit is not
available unless setting up the company is part of your own business. To cover these situations, a special
rule enables the credit to be claimed by the company after it has been set up (s 60-5).
For this “pre-establishment” rule to apply, all these conditions must be satisfied:
• you must have made an acquisition before the company exists

• you must use the acquisition for the purpose of bringing the company into existence, or for the
purpose of the company carrying on an enterprise

• the company must come into existence and be registered within six months after the purchase

• you become a member, officer or employee of the company

• the company fully reimburses you for the amount you paid for the purchase (s 60-15).

Where all these conditions are satisfied, the input tax credit is claimable by the company, not by you. The
input tax credit is attributed to the tax period in which you are fully reimbursed for the costs you incurred
on the acquisition (s 60-25). At the time that the company lodges its GST return for that period, it should
hold a copy of the tax invoice that you hold for the purchase (¶5-100). If it does not, the input tax credit will
be deferred until the copy of the tax invoice is held.
Where pre-establishment rule does not apply
The pre-establishment rule does not apply if you yourself are entitled to an input tax credit on the acquired
goods or services, for example, if you use the purchased goods or services as part of your own business.
Nor does it apply if the company takes over the ownership of the goods or services and can claim an
input tax credit in the normal way (s 60-15).

Examples
(1) An accountant who sells shelf companies as a business would be entitled to input tax credits for the incorporation costs, so the
pre-establishment rule does not apply. The credit is simply claimed by the accountant, not the companies.
(2) An equipment wholesaler purchases stock to be used by a future retail company. After the company is set up, it buys the stock.
This purchase entitles the company to an input tax credit for the GST component of the purchase price. The original purchase by the
wholesaler is therefore not treated under the pre-establishment rule.

The pre-establishment rule also does not apply if the purchase is of a private or domestic nature, or if it
relates to the company providing financial services or other input taxed supplies (s 60-20).
The pre-establishment rule applies only to companies. Other business entities cannot claim input tax
credits for acquisitions made in these circumstances. However, they may be able to claim adjustments for
stock held at the time they register (¶6-400).
The supply of services through your overseas branch is not treated as an input taxed supply, so the pre-
establishment rule may apply (¶10-050).
Taxable importations
Corresponding rules apply if you make importations before the company has been set up.
[GSTG ¶15-720]

¶5-040 Reimbursement of employees, agents, officers or partners

An employer that is making taxable supplies can claim input tax credits where it purchases uniforms, tools
and equipment needed by its employees to do their job.
If the employee makes the purchase on his/her own account, the employee cannot claim input tax credits
for the GST on the purchase because they are not themselves carrying on an enterprise. Nor could the
employer, unless the employee was acting purely as its agent in making the purchase (¶17-400).
However, in certain circumstances, you can claim input tax credits if you reimburse employees or agents
for expenses they incur that are directly related to the performance of their duties (s 111-5). For the
purpose of this rule, employees include people subject to withholding under the PAYG rules relating to
company directors, officeholders, labour hire arrangements or voluntary agreements (s 111-20). A
corresponding rule applies when a partnership reimburses a partner, or a company reimburses a
company officer.
In addition, where there is no direct relationship to work duties, input tax credits can nevertheless be
claimed if: (1) you reimburse an employee, or an associate of the employee, for expenses incurred by the
employee or the associate; and (2) the reimbursement is a fringe benefit (or an exempt fringe benefit)
under the FBT legislation. In this case, it is not necessary for you to be the employer of the employee.
Your entitlement to the credit will be determined as if you had incurred the expense yourself. However,
you cannot claim the credit if the employees, etc, are themselves entitled to claim one. Nor can you claim
if you are a partnership that is already entitled to an input tax credit for the expense in any case under s
184-5 (¶5-010). The credit will also be reduced to the extent that the reimbursement is for an acquisition
that relates to the making of input taxed supplies, eg financial supplies (Interpretative Decision ID
2013/13).
The amount of the input tax credit is 1/11th of the amount of the reimbursement (s 111-10).

Example
An employee incurs $110 for petrol that she uses entirely in work-related travel. If the employer fully reimburses the employee, the
employer can claim an input tax credit of $10.

Input tax credits for reimbursements of expenses incurred by agents, officers and partners will be
proportionately reduced if the expenses were only partly directly related to the performance of the
person’s duties (s 111-10). This does not apply to reimbursements of an employee’s expenses because,
as noted above, these qualify for input tax credits in additional situations where there is no direct
relationship to work duties.
To enable you to claim the credit, the employee, etc, will need to obtain and provide you with a tax invoice
for the acquisition that they made (s 111-15). However, in accordance with the normal rules, this will not
be necessary if the acquisition was for $75 or less, excluding GST (¶5-170). The tax invoice will be
effective even if the employee, not the employer, is shown as the recipient (GST Ruling GSTR 2013/1). A
corresponding rule applies to adjustment notes for later adjustments (¶6-140). For the situation where the
purchase is made on a corporate credit or charge card, see ¶5-130.
Reimbursement of non-deductible expenses
You cannot claim input tax credits for a reimbursement of “non-deductible” expenses (¶5-010) such as
client entertainment or penalties.

Example
Kindly Ltd reimburses an employee for fines and penalties that she incurs. No input tax credit can be claimed for fines and penalties,
so no input tax credit can be claimed for their reimbursement.

Direct payment of employee’s expenses

These rules also apply where an employer directly pays the work-related expenses of an employee (s
111-25). This is treated in the same way as a reimbursement.
 Example
Trusty Enterprises pays the professional association fees of its senior staff. Trusty can claim an input tax credit in relation to these
payments.

This also applies where anyone — not necessarily the employer — pays on behalf of an employee, or an
associate of the employee, for expenses incurred by the employee or the associate. In this case, the
payment must be a fringe benefit (or an exempt fringe benefit) under the FBT legislation.
Former or future employees
Input tax credits can also be claimed for reimbursements of, and direct payments to, former and future
employees or their associates. In this case, the payment must be a fringe benefit (or an exempt fringe
benefit) under the FBT legislation (s 111-30).
Allowances
The reimbursement rules do not apply where an employee is paid an allowance, for example, where:
• the employee is paid for an estimated expense and does not have to repay any amount not spent, or

• the employee is paid on a notional basis, such as a cents-per-kilometre payment for work-related use
of a private car, or a “per diem” travel allowance.

In such cases, the Commissioner considers that the employer cannot claim an input tax credit.
Charitable volunteers’ expenses
Volunteers for endorsed charities are treated in the same way as employees for the purposes of these
rules. This means, for example, that charities will be able to claim input tax credits if they reimburse
volunteers for expenses that are directly related to their activities as volunteers (s 111-18).
This also applies to volunteers for gift-deductible organisations or for government schools (¶15-000).
However, it does not apply to other non-profit organisations.
[GSTG ¶15-740]

TAX INVOICES
¶5-100 Role of tax invoices

A tax invoice is a special type of invoice which contains specified items of information needed for the
effective operation of the GST system.
Tax invoices are important because they record creditable acquisitions for which an input tax credit can
be claimed. You will normally have to hold a tax invoice for the acquisition at the time you lodge your GST
return for the tax period in which the credit is claimed (s 29-10(3)). For exceptions to this rule, see ¶5-130.
Tax invoices are only relevant for taxable supplies. For the position where a supplier has both taxable and
non-taxable supplies, see ¶5-110.
The mere existence of a document purporting to be a tax invoice is not, by itself, sufficient to establish
that a taxable supply or creditable acquisition has occurred (GH1 Pty Ltd (in liquidation) v FC of T 2017
ATC ¶10-461).
Issue of tax invoice
The tax invoice for a taxable supply must be issued by the supplier, except in the case of “recipient
created” tax invoices (¶5-140). If the recipient requests a tax invoice, the supplier must issue it within 28
days after the request (s 29-70). If the supplier refuses to issue a tax invoice in accordance with the
recipient’s request, the recipient may apply to the ATO to investigate the matter, giving full details of the
transaction. The recipient may also apply for a determination either: (1) that a tax invoice is not required in
the circumstances (s 29-10); or (2) that such documentation as the recipient holds can be treated as a tax
invoice (s 29-70) (¶5-130).
Penalties apply for failing to issue a tax invoice (¶18-300). It has been held that a tax invoice is not
“issued” until some act is done to convey it to the intended recipient, though it is not clear whether it is
necessary to show actual receipt (Tavco Group Pty Ltd v FC of T 2008 ATC ¶10-049). Tax invoices may
also be issued in electronic form (¶5-110). For ATO guidelines on when an “invoice” is issued, see ¶7-
205.
For penalty remission guidelines, see ¶18-305. Failure to hold a tax invoice at the time of making a claim
for an input tax credit may also constitute a penalisable false or misleading statement (¶18-300).
In cases of dispute, the recipient may also apply to the court for a declaration that a tax invoice should be
supplied. However, in a situation where the supplier’s refusal to issue the tax invoice was backed by a
private ruling from the Commissioner, the court may refuse to determine the matter unless the
Commissioner is also joined as a party to the proceedings (CSR Ltd v Hornsby Shire Council 2004 ATC
4966).
The obligation on a supplier to issue a tax invoice, or on a recipient to obtain one, does not apply where
the value of the supply (excluding GST) does not exceed $75 (¶5-170). The tax invoice rules also do not
apply to importations (¶9-010). For other modifications to the tax invoice rules, see ¶5-130.
Tax invoice is different from ordinary invoice
An ordinary invoice is simply a notice of an obligation to pay (¶7-205). It does not have to contain the
information that a tax invoice must. However, if it does not, it cannot normally be used to support the
recipient’s claim for input tax credits (for exceptions, see ¶5-130). On the other hand, the issue of an
ordinary invoice by a non-cash basis supplier is sufficient to ensure that all the GST on that supply should
be attributed to the tax period in which the invoice is issued (s 29-5).
Purchasers will need to be alert that invoices purporting to be tax invoices in fact comply with all the
requirements. If a purchaser claims an input tax credit on the basis of an incorrect belief that the invoice
complies, and no exemption applies, the purchaser might even be exposed to penalties as well as not
getting the credit.
Suppliers can choose to issue a tax invoice as well as their ordinary invoices, though most simply adapt
their ordinary invoices to serve both purposes.
[GSTG ¶16-000]

¶5-110 Contents of tax invoices

The required contents for a tax invoice are as follows:

(1) it must be issued by the supplier (for recipient created tax invoices, see ¶5-140)

(2) it must be in the approved form

(3) it must contain enough information to enable the following to be “clearly ascertained”:
• the supplier’s identity (eg its legal name, business name or trading name) and ABN. A builder’s
registration or licence number would not normally be sufficient (GST Ruling GSTR 2013/1)

• if the total price of the supply/ies is $1,000 or higher, the recipient’s identity or ABN

• what is supplied, including quantity and price

• the extent to which each supply to which the document relates is taxable. This requirement is
satisfied if the document includes the amount of GST payable for each taxable supply, or a
statement of the extent to which the supply is taxable, or each taxable supply is asterisked with a
corresponding statement of the extent to which the supply is taxable (GST Ruling GSTR 2013/1)

• date of issue
 • the amount of GST payable in relation to each supply to which the document relates

• such other matters as may be specified in the regulations, and

(4) it must be clearly ascertainable from the document itself that it was intended to be a tax invoice. The
most obvious way would be to include the words “Tax Invoice”, though alternatives such as “GST
Invoice” may suffice in appropriate circumstances (s 29-70).

The tax invoice may cover more than one supply, provided that it meets the requirements for each of
those supplies. If it meets the requirements for some but not all of the supplies, it qualifies as a tax invoice
in relation to the former supplies, but not the latter. So far as price is concerned, GST Ruling GSTR
2013/1 says that it is not necessary to specify the actual price of each item, provided that the price can be
determined from the invoice.
The $1,000 threshold for requiring the recipient’s identity or ABN is designed to accommodate smaller
business transactions, such as from a cash register, where that information may not be readily available.
Of course, a supplier retains the option of including this information if it wishes, even if the transaction is
for less than $1,000.
“Clearly ascertainable” information
It appears that the required information must be ascertainable from the document itself. It is not sufficient
that it could be ascertained from some other external source.

Example
A document purporting to be a tax invoice contains all the required information except for the supplier’s ABN. The fact that the ABN
may be ascertainable from the Australian Business Register is not sufficient, because it cannot be said that the ABN is ascertainable
from the document. The document therefore does not qualify as a tax invoice. (However, it may qualify if the ABN can be
ascertained from some other document provided by the supplier: see further below.)

One piece of information may often be sufficient to satisfy more than one condition. For example, the
description of the supply may also make clear the identity of the supplier, such as in certain cases where
a new membership in a club is issued (GST Ruling GSTR 2013/1).
In satisfying requirement (4), evidence as to the subjective intention of the supplier is not relevant. The
intention must be clearly ascertainable from the document itself. The most obvious way of satisfying this
is simply to include the words “Tax invoice” or “GST invoice” on the document. It may also be sufficient to
specifically state in the document that it provides all the information needed for the recipient to claim an
input tax credit. However, merely providing that information without such a statement would not be
sufficient.
Information in two or more documents
Two or more documents can be considered together when a recipient is determining whether all of the
required information has been provided (s 29-70(1A)). For this to apply, all the required information must
be clearly ascertainable from the documents, and those documents must have been given by the supplier
to the recipient. It is not sufficient that the information can be ascertained from some other outside source.

Examples
(1) A document purporting to be a tax invoice contains all the required information except for the supplier’s ABN. However, the ABN
can be ascertained from an earlier invoice or business card provided by the supplier. The recipient can treat the documents,
considered together, as comprising a valid tax invoice.
(2) The same applies if the purported tax invoice shows an incorrect ABN, but the correct ABN can be determined from the other
document (GST Ruling GSTR 2013/1).

Although the document(s) may be treated as a tax invoice for the purposes of the recipient, this does not
mean that the supplier has satisfied its own obligation to supply a tax invoice. The recipient may still
require the supplier to provide a formally valid tax invoice, and this must be provided within 28 days (¶5-
100).
Tax invoices and GST groups
A special rule applies where the recipient of the supply is a member of a GST group, and the group’s
representative member is entitled to an input tax credit for that member’s acquisition (¶17-020). In
practice, the supplier may not always know which member of the group has actually made the acquisition.
To avoid practical difficulties arising, there is a relaxation of the normal requirement that a tax invoice
must enable the recipient’s identity or ABN to be clearly established. In such a case, it is sufficient if the
document contains enough information to enable the clear ascertainment of the identity of:
• the group itself

• the group’s representative member, or

• another member of that group, provided that the representative member would have been able to
claim the input tax credit if that member had actually been the recipient (s 48-57).

This concession can operate in conjunction with the concession allowing more than one document to be
taken into account in determining whether the document can be treated as a tax invoice.
The actual recipient retains the right (s 29-70) to require the supplier to provide a tax invoice which
identifies the recipient rather than just the relevant group, representative member or other group member
(s 48-57). This may be appropriate, for example, in some situations where it is necessary to account for
GST adjustments arising after the actual recipient has left the group.
This particular concession does not apply to recipient created tax invoices.
Overlooking non-compliance
Even if the document does not qualify under the above rules, the Commissioner still has the discretion to
treat it as a tax invoice (¶5-130; s 29-70(1B)). Alternatively, the recipient may request the Commissioner
to exercise the discretion to allow an input tax credit to be claimed despite the absence of a tax invoice
(¶5-130).
These are additional to the other options open to a recipient on receiving a document that does not
formally comply with the tax invoice requirements, namely:
• if the defect can be rectified by reference to another document provided by the supplier, to treat the
documents together as a tax invoice

• to require the supplier to issue a formally compliant tax invoice.

Other aspects
Tax invoices issued by trusts. In GST Ruling GSTR 2013/1, the Commissioner says that information
sufficient to identify the trust includes the registered business name, or the trustee’s name, and the ABN
of the trust.
Property contracts. The Commissioner considers that a property settlement statement or a contract for
the sale of real property would not normally qualify as a tax invoice (¶19-400).
Tax invoice issued under arrangement. In certain circumstances, another entity can issue a tax invoice on
behalf of a supplier where there is an agreement between them (Interpretative Decision ID 2010/146).
Joint recipients. A single tax invoice may be issued to cover a single supply to joint recipients, eg where
an item is supplied jointly to two family members who operate separate businesses. However, the
identities or ABNs of both recipients must appear (Interpretative Decision ID 2010/144).
Foreign currency. Although the consideration may be expressed in a foreign currency, the amount of GST
payable must be expressed in Australian currency, or there must be sufficient information to enable the
recipient to work it out (GST Ruling GSTR 2001/2: ¶4-200). For the requirements for recipient created tax
invoices, see ¶5-140.
Rounding. For the “rounding” rules that apply where the amount of GST involves a fraction of a cent, see
¶4-205.
Electronic tax invoices. A tax invoice may be in electronic form, provided that it contains the required
information. For record-keeping requirements, see ¶18-040. For the application of this to mobile phone
invoices, see Class Ruling CR 2014/15.
Identification of supply. The items supplied may be identified by a code or part number if both the supplier
and the recipient hold another document that describes the item covered by that number.
Lost invoices. If the original tax invoice is lost, the Commissioner suggests that any replacement issued to
the recipient should be marked “copy” or “duplicate”.
Amount of GST. The ATO considers that a document that shows only the “WEG” amount (ie the
combined amount of GST plus wine equalisation tax) does not meet the requirements, as it does not
show the amount of GST.
[GSTG ¶16-050]

¶5-120 Sample tax invoices

The following are sample tax invoices that comply with these rules. For further guidance, see the ATO’s
How to set out tax invoices and invoices at www.ato.gov.au.
Fully taxable supply for less than $1,000

TAX INVOICE No 2019/67

Pete’s Office Supplies Pty Ltd 15 Byron Road

ABN: 32 123 456 789 Shelley NSW

Date: 1 August 2019

Description of supply Total

Filing cabinets $750

GST $75

TOTAL $825
The total price includes GST for this supply

Fully taxable supply for $1,000 or more

TAX INVOICE

Dinkum Auto Parts Pty Ltd 302 Keats Street

ABN: 32 123 456 787 Coleridge QLD
Date: 15 August 2019

To: Auto Assemblers Ltd

99 Elliott Drive
Lehmann QLD
 Qty Description of supply Unit Total
price

500 Carb flanges $15.00 $7,500

GST $1.50 $750

TOTAL including GST $8,250

Mixed supply

TAX INVOICE

Owl Student Resources 75A Donne Street

ABN: 32 123 455 271 Milton SA
Date: 12 August 2019

To: St Brian’s Secondary School

116 Larkin Parade
Ginsberg SA
Qty Description of supply Unit Total
price

30 Tax Studies Primer $24.00 $720

GST $2.40 $72

75 Bottled water $1.00 $75

TOTAL including GST $867

[GSTG ¶16-100]

¶5-125 Postponing credit claim to later BAS

A business may sometimes fail to claim an input tax credit because, for example, it is not aware that it
holds a tax invoice for a particular acquisition until after it has lodged its GST return for the relevant tax
period. This may particularly apply to larger businesses that have a number of departments. In such
situations, the input tax credit for the acquisition will be postponed to any subsequent tax period in which
it is claimed (s 29-10(4)). This removes the need to lodge an amended GST return for the earlier tax
period, though it does not prevent the taxpayer from adopting that option (Interpretative Decision ID
2011/76). Note, however, that an overall four-year limit generally applies to input tax credit claims (¶5-
010).

Example
During a tax period, a business orders and buys a piece of equipment. Although it has received a tax invoice, no claim for an input
tax credit is claimed in the GST return for that tax period. The credit may instead be claimed in any subsequent GST return and will
be attributable to the tax period covered by that return.
Where this occurs, the normal five-year period for keeping records starts from the time you make the
claim, rather than from when the acquisition was made (Administration Act, Sch 1, s 382-5). For general
rules on correction of BAS mistakes, see ¶8-045.
[GSTG ¶16-350]

¶5-130 Modifications to tax invoice requirements

The Commissioner can waive or modify the requirement that a tax invoice must be held before an input
tax credit can be claimed (s 29-10). For example, this has been done, subject to various conditions, in
relation to:
• corporate credit or charge card statements (see below)

• importations of services under the “reverse charge” rules (¶9-100)

• direct entry services (WTI 2015/30)

• reimbursement by government law enforcement agencies of work expenses incurred by undercover

officers under assumed names (WTI 2006/1)

• acquisitions under an agency relationship (¶5-190)

• acquisitions from or by a beneficiary of a bare trust (¶4-010; WTI 2013/2)

• acquisitions through electronic purchasing systems (WTI 2013/3)

• acquisitions where total consideration not known (¶7-440)

• offer documents and renewal notices (WTI 2013/5)

• acquisitions from or by a partnership (¶5-010; WTI 2013/6)

• acquisitions from property managers (WTI 2013/7)

• taxi travel (WTI 2013/8)

• creditable acquisitions by a lessee or sub-lessee following a sale of a reversion in commercial

premises (¶11-335; WTI 2013/9)

• acquisition of a motor vehicle under a novated lease (WTI 2013/10; see ¶7-420)

• acquisition of a motor vehicle from a dealer who is entitled to a motor vehicle incentive payment (WTI
2014/1; see ¶4-010).

For further details, see Appendix 2 to GST Ruling GSTR 2013/1.

The Commissioner has previously said that this discretion may be exercised where there are special
circumstances, such as a natural disaster or where the supplier is uncontactable or uncooperative (former
GST Ruling GSTR 2000/17).
The Commissioner considers that the discretion to waive or modify the requirements will be exercised on
a case-by-case basis. The automatic waiver that applied in certain cases where a court or tribunal had
conclusively found that the acquisition was creditable and that a credit should be allowed, no longer
applies (Notice of Withdrawal of former GST Determination GSTD 2004/1; ATO Decision Impact
Statement on Davsa case (¶3-020)).
Corporate credit or charge card statements
Many businesses allow employees to use corporate credit or charge cards, with purchases being
recorded on periodical statements. In GST Ruling GSTR 2000/26, the Commissioner sets out the
circumstances in which businesses can claim input tax credits on the basis of these statements, even
though no formal tax invoice has been issued. This ruling has been supplemented by various Legislative
Determinations which may be accessed via the Legal Database on the ATO website (¶2-110).
The exemption applies, subject to varying conditions, to certain statements issued by providers such as
VISA, American Express, Diners Club, MasterCard, Motorcharge, Fleet Systems, Cabcharge, Custom
Service Leasing, Qantas and Wex Australia.
Documents that do not strictly comply
The Commissioner also has a discretion to treat a document as a tax invoice even though it does not
strictly comply (s 29-70(1B)). The ATO says that this discretion is exercised in a practical way. According
to Practice Statement PS LA 2004/11, the preconditions are:
• if the taxpayer has not yet claimed the credit, it must have made a genuine and reasonable attempt —
preferably in writing — to obtain a valid tax invoice from the supplier, although it is not necessary that
they go to extraordinary lengths or great expense

• if the claim for a credit has already been made in a BAS, the taxpayer must show that it has made a
genuine attempt to meet the invoice requirements, bearing in mind the practical and commercial
realities of record-keeping. The ATO will take into account factors such as: (1) whether the error is
minor in legal or money terms; (2) whether any missing information is provided in other
documentation; (3) the taxpayer’s compliance record; (4) the adequacy of their record-keeping
systems; and (5) their GST “experience” level.

Further details are given in the Practice Statement and in GST Ruling GSTR 2013/1. The AAT has
commented that these situations should not necessarily be limited to special circumstances, but that it
would normally be necessary for the taxpayer to show that it had acted with reasonable care and in good
faith (Queensland Harvesters Pty Ltd v FC of T 2009 ATC ¶10-088). Note also that taxpayers may
disregard minor errors and treat other documents as tax invoices in certain situations (¶5-110).
Where the discretion is not exercised in the taxpayer’s favour, the input tax credit will of course be
disallowed. However, it is possible that additional penalties and general interest charge may be waived if
the acquisition was otherwise creditable. The taxpayer may seek a review of the decision under the
Administrative Decisions (Judicial Review) Act 1977. They may also object against an assessment that
excludes an input tax credit as a result of the decision not to exercise the discretion (¶18-600).
Whether the discretion is exercised or not, the supplier remains liable to issue the tax invoice within 28
days of the recipient’s request (Practice Statement PS LA 2007/3). For penalties, see ¶18-300.
A single tax invoice may be issued for a series of supplies under a progressive or periodic contract, such
as a lease. For further details, including the position of novated leases, see ¶7-420.
Other modified requirements
Various other modifications to the normal tax invoice rules apply in the following situations:
• in certain situations, invoices may be issued by the recipient, not the supplier (¶5-140)

• an employer can claim an input tax credit for a reimbursement made to an employee even if the tax
invoice shows the employee as the recipient (¶5-040)

• casinos and other gambling operators do not need to issue tax invoices (¶16-000)

• tax invoices are not required to be issued for supplies of real property under the margin scheme (¶11-
100)

• tax invoices are not required for supplies made by non-residents that are covered by reverse charge
rules (¶9-095)

• tax invoices are not required where liability for GST under a long-term contract has passed to the
recipient under special transitional rules
 • the tax invoice rules apply to sales made to satisfy a debt, whether or not you are required to be
registered (¶10-070)

• special rules apply where supplies are made by members of a GST group (¶17-020) or GST branch
(¶17-300)

• tax invoices may be held by either you or your agent (¶5-190)

• modified requirements apply where supplies are made before the total consideration is known or
where there is a retention clause (¶7-440)

• a formal tax invoice is not required where a second-hand dealer buys goods from an unregistered
seller (¶16-110).

[GSTG ¶16-300]

¶5-140 Recipient created tax invoices

A tax invoice is normally issued by the supplier. However, sometimes this will not be practicable, for
example, where the recipient determines the value of the goods or services, rather than the supplier. In
these cases, it may be more appropriate for the tax invoice to be issued by the recipient. The situations in
which these “recipient created tax invoices” (RCTIs) can be issued are determined by the Commissioner
(s 29-70(3)).
The Commissioner has authorised the use of recipient created tax invoices for some general situations
and for a variety of more specific industry transactions. The general situations are specified in GST Ruling
GSTR 2000/10. They are as follows:
(1) Supplies of agricultural products made to registered recipients who determine the value of the
products after a qualitative or quantitative analysis. This applies to products derived from viticulture,
horticulture, pasturage, apiculture (bees), poultry farming and dairy farming, and other operations
connected with cultivation, crop gathering or livestock rearing.

Example
A tax invoice could be issued by a sugar mill that tests crushed sugar cane it receives to establish the sugar content or by an
abattoir that weighs, slaughters, grades and prices the animals that are supplied to it.

(2) Supplies made to registered government entities such as a department, branch or other approved
body.
(3) Supplies made to registered recipients that have a turnover of at least $20m. If the recipient is a
member of a group that meets the requirements for a GST group (¶17-010) — even though the group is
not actually registered as such — it will be sufficient that one of the members of the group has GST
turnover of at least $20m. If the recipient is the operator of a GST joint venture (¶17-200), it will be
sufficient that one of the participants has turnover of at least $20m, or is a member of a qualifying group
as described above. The turnover is measured in the same way as explained at ¶3-030, including the
value of input taxed supplies.

Examples
(1) Company X has turnover of $25m. It satisfies the turnover test even if $10m of that turnover is for financial supplies that are input
taxed.
(2) Company Y has turnover of $5m. It is 100% owned by Company Z that has a turnover of $21m. As Company Z’s turnover
exceeds $20m, and Companies Y and Z can be treated as a group, Company Y satisfies the turnover test. Company Z satisfies the
turnover test in any event by virtue of its own turnover.

For a recipient created tax invoice to be effective in any of these situations, various additional conditions
must be satisfied, for example, there must be a written agreement (which may alternatively be embedded
in the invoice) and both parties must be registered.
RCTIs for specific industry transactions
The Commissioner has also determined that recipient created tax invoices may be used in specific
industry situations.
These determinations, which are subject to various qualifications, are contained in a series of Recipient
Created Tax Invoice (RCTI) Determinations. They may be accessed under “Legislative Determinations” at
www.ato.gov.au.
Registered recipients or industry associations whose members are registered recipients can request the
Commissioner to make a determination approving other classes of recipient created tax invoices. The
request should include the following:
• name of the recipient or industry association

• type of industry

• details of the supply and related transactions, including current invoicing and payment practices

• a statement acknowledging that the recipient(s) will enter into written agreements (or have such an
agreement embedded in the invoice)

• an explanation of why the determination is requested (GST Ruling GSTR 2000/10).

Applications will be decided on the basis of the particular circumstances of the industry.
The ATO considers that a document that shows only the “WEG” amount (the combined amount of GST
plus WET) does not meet the requirements, as it does not show the total amount of GST.
Dual purpose invoices
A tax invoice issued by the recipient can also cover any supplies which the recipient makes back to the
supplier. However, the Commissioner considers that the two supplies must be accounted for separately in
the GST return of each party (GST Ruling GSTR 2013/1).

Example
A cane grower supplies cane to a sugar mill, which in turn supplies testing services to the grower. Although the supplies are related
they must still be treated as separate supplies, which must be accounted for separately in the parties’ GST returns. The recipient
created tax invoice issued by the mill can, however, act as a tax invoice covering both supplies provided it treats them as separate.

The ATO considers that a recipient created tax invoice can qualify as an “invoice”, for the purpose of
determining when liability arises under the accruals basis (¶7-205; GST Determination GSTD 2005/1).
Foreign currency conversions
If the consideration for the supply is expressed in foreign currency, the recipient issuing the invoice should
hold a written advice from the supplier stating the supplier’s particular exchange rate and the conversion
day. However, if the recipient’s computer system is set up in a way that does not enable the recipient to
use the supplier’s conversion information, the recipient can make a reasonable estimation (GST Ruling
GSTR 2002/4; ¶4-200).
[GSTG ¶16-400]

¶5-150 Contents of recipient created tax invoices

For determining net amounts for tax periods, the requirements for a recipient created tax invoice are as
follows:
(1) it must be issued by the recipient
 (2) it must be in the approved form

(3) it must contain enough information to enable the following to be clearly ascertained:
• the supplier’s identity and ABN

• the recipient’s identity or ABN

• what is supplied, including quantity and price

• the extent to which each supply to which the document relates is taxable

• date of issue

• the amount of GST payable in relation to each supply to which it relates

• that any GST payable is payable by the supplier

• such other matters as may be specified in the regulations, and

(4) it must be clearly ascertainable from the document that it was intended to be a recipient created tax
invoice (s 29-70).

Reflecting the special status of recipient created tax invoices, these requirements differ from ordinary tax
invoices (¶5-110) by requiring that the recipient’s identity or ABN must be ascertainable, even if the total
price of the supplies is less than $1,000. Further differences are that it must be ascertainable from the
document that the GST is payable by the supplier and that the document is intended to be a recipient
created tax invoice.
The ATO has prepared a template that may be followed in preparing an RCTI: see “recipient created tax
invoice form” at www.ato.gov.au.
[GSTG ¶16-450]

¶5-170 Low-value acquisitions

There is no obligation to issue or hold a tax invoice if the value of the supply (excluding GST) is $75 or
less (s 29-80; A New Tax System (Goods and Services Tax) Regulations 2019 s 29-80.01). In the typical
case, where the GST is 10% of the GST-exclusive price, this means that there is no obligation to issue or
hold a tax invoice if the GST-inclusive value of the supply is $82.50 or less.

Example
A registered supplier sells an item for $77, including $7 GST. The GST-exclusive value is $70. The supplier is therefore not obliged
to issue a tax invoice. Correspondingly, there is no requirement for the recipient to hold a tax invoice in order to support its claim for
an input tax credit.

The Commissioner applies this threshold on the basis of the value of the whole of the taxable supply. For
example, if the sale comprises two items, each with a GST-exclusive value of $45, you will still need a tax
invoice because the total GST-exclusive value of the supply exceeds $75 (GST Ruling GSTR 2013/1).
Where a tax invoice is not issued for a low-value transaction, the recipient will need to support a claim for
an input tax credit in other ways. This would normally require that the recipient be able to produce
sufficient records to substantiate what was purchased, the supplier, the time of purchase and the
consideration.
Even where the supplier is not obliged to issue a tax invoice, the supplier may of course choose to do so.
[GSTG ¶16-550]
¶5-190 Acting through an agent or broker

If you are acting through an agent, the general agency rules apply (¶17-400). However, some specific
rules apply to tax invoices and adjustment notes for transactions made through an agent. The effect is as
follows:
• you can claim an input tax credit on an acquisition made through an agent if either you or the agent
holds a tax invoice at the time the return is lodged (s 153-5)

• if you have made a supply or acquisition through an agent, you can claim an adjustment reducing your
tax if either you or the agent holds an adjustment note at the time the return is lodged (s 153-10)

• either you or the agent may issue a tax invoice for a supply made through the agent, but not both (s
153-15). Corresponding rules apply to adjustment notes relating to supplies or acquisitions made
through an agent (s 153-20; GST Ruling GSTR 2013/1)

• in the case of insurance premiums, it is sufficient if the tax invoice or adjustment note is held by an
insurance broker on your behalf. Brokers can also issue tax invoices or adjustment notes on behalf of
insurance companies (s 153-25). The Commissioner says that these may show the name and ABN
of the insurance broker instead of the insurer (GST Ruling GSTR 2000/37).

In certain cases, an agent/intermediary and a principal may agree that the agent/intermediary will act as if
it were a principal (¶17-420). In these cases, the tax invoice and any relevant adjustment note for a supply
to third parties will be issued by the agent/intermediary, not the principal (s 153-50).
The Commissioner has waived the requirement for a tax invoice to be held in certain agency situations
(WTI 2013/1: see ¶5-130).
[GSTG ¶16-375]
GST ADJUSTMENTS
Types of GST adjustment ¶6-000
ADJUSTMENT EVENTS
What are adjustment events? ¶6-100
Adjustment notes ¶6-110
Contents of adjustment notes ¶6-115
Modifications to adjustment note requirements ¶6-130
Adjustment note exemption for minor adjustments ¶6-135
Special rules about adjustment notes ¶6-140
ADJUSTMENTS FOR BAD DEBTS
Bad or overdue debts ¶6-200
Attributing bad debt adjustments to tax periods ¶6-205
What is a bad debt? ¶6-210
Other rules affecting bad debts ¶6-220
“PLANNED USE” AND ASSOCIATED ADJUSTMENTS
Changes to planned use ¶6-300
Adjustment periods ¶6-304
Interaction with other adjustment rules ¶6-306
Sales of things acquired without full credits ¶6-310
Goods applied solely to private or domestic use ¶6-320
STARTING, TRANSFERRING OR CEASING BUSINESS
Adjustments for newly-registered businesses ¶6-400
Adjustments on cessation of registration ¶6-410
Where business owner dies ¶6-415
Adjustments after bankruptcy, liquidation, etc ¶6-417
Adjustments on acquisition of business ¶6-420
OTHER ADJUSTMENT RULES
Other rules about adjustments ¶6-510

Editorial information

Summary
Adjustments to previously declared GST or input tax credits may be needed if supplies are later
cancelled, goods are returned, there is a part-refund, or there is a change in the GST status of a
supply. These “adjustment events” are taken into account in the later tax period, provided that an
 adjustment note is held at the time of lodging the GST return for that period. Other adjustments
may be required if there is a bad or overdue debt, a change in the intended business use, a
business is started up, transferred or closed down, or a business owner dies.

¶6-000 Types of GST adjustment

Sometimes subsequent changes to transactions or business operations may make it necessary to adjust
the amount of GST that has been imposed, or the amount of input tax credit that has been claimed.
These changes fall into the following categories:
• changes in price or GST status. These are called adjustment events (¶6-100)

• debts becoming bad or overdue (¶6-200)

• changes in intended use (¶6-300)

• changes associated with starting, transferring or ceasing business, or altering your registration status
(¶6-400)

• other miscellaneous adjustments (¶6-510).

Increasing and decreasing adjustments

An adjustment may either increase or decrease your net GST.
It is called an increasing adjustment (IA) if the adjustment has the effect of increasing the net GST, ie by
increasing the GST on your supplies or reducing the input tax credit on your acquisitions (s 19-50; 19-75;
19-80).
It is called a decreasing adjustment (DA) if the adjustment has the effect of reducing the net GST, ie
reducing the GST on your supplies or increasing the input tax credit on your acquisitions (s 19-55; 19-75;
19-85).
Attribution to tax periods
Adjustments are generally attributed to the tax period in which you become aware of them (s 29-20).
Apparently, this means when you become aware of the relevant facts that give rise to the liability, whether
you realise the GST implications or not (Interpretative Decision ID 2007/72). For examples of how this
rule operates in the case of bad or overdue debts, see ¶6-200.
Special attribution rules apply for adjustment events (¶6-100) and on cessation of registration (¶6-410).
[GSTG ¶17-000]

ADJUSTMENT EVENTS
¶6-100 What are adjustment events?

“Adjustment events” occur where:

(1) a supply of goods or services is cancelled, for example, where an order is returned. However,
simply returning something for repair or maintenance is not an adjustment event (for travel
reservations, see ¶12-020)

(2) the consideration is changed, or

(3) a supply changes its GST status, for example, where goods supplied for export are not exported
within 60 days, and thereby become subject to GST instead of being GST-free (s 19-10).
If this happens, a compensating adjustment generally must be made by both parties to reflect the true
GST position (s 19-40; 19-70). In determining that true GST position, you may also need to take into
account any other adjustments that have already been made.
If a supplier does not fully reimburse a customer, or only reimburses part of the GST paid for a cancelled
supply, any adjustment as a result of the cancelled supply is correspondingly reduced (¶8-115; GST
Ruling GSTR 2009/3). This ensures that the supplier does not get a windfall gain.
The adjustments are attributed to the tax period(s) in which you become aware of them. However, if you
account on a cash basis and the adjustment event results in your paying consideration, the adjustment is
attributable to the period(s) in which the consideration is paid (s 29-20). In the case of decreasing
adjustments, you must also hold an adjustment note (¶6-110).
For the treatment of cancellation fees, see ¶4-065.
Product recalls
Where there is a product recall, and the goods returned for refund cannot be reused or resold, the
supplier is entitled to a decreasing adjustment for the GST component of the original sale. The purchaser
will have to make an increasing adjustment if they have already claimed an input tax credit on the
purchase. If substitute goods are supplied, instead of allowing a refund, this is treated as a new supply
coupled with a cancellation of the original supply.
Change of consideration
Examples of where there is an adjustment resulting from change in the consideration (see (2) above) are:
• where there is a discount, for example, for early repayment or volume purchases. However, this does
not apply to a discount made to induce the purchase in the first place, because that type of discount
would be reflected in the actual consideration charged. The ATO also considers that if the purchaser
is paid interest for early payment, this is not an adjustment event — instead, it is a separate input
taxed financial supply by the purchaser (GST Ruling GSTR 2000/19)

• where the supplier under a hire-purchase agreement exercises its right to terminate the agreement
due to default, and the future outstanding instalments are no longer payable (GST Ruling GSTR
2000/29; Interpretative Decision ID 2013/51). The same applies where the supplier equitably assigns
the payment stream relating to the hire-purchase agreement to a special purpose trust under a
securitisation arrangement, and later terminates the agreement due to a default by the purchaser
(Interpretative Decision ID 2010/6). For other aspects of termination, see ¶4-020

• where the invoice is incorrect and is later changed

• where the quantity of goods supplied for a particular price varies from that originally agreed and the
parties agree to accept that change

• where there is a change in the extent to which the purchaser is liable to pay the consideration, for
example, where a purchaser originally obliged to contribute 50% has to pay 60% (GST Ruling GSTR
2000/19)

• in certain cases where the vendor of premises is required under a rental guarantee agreement to pay
the purchaser an amount to make up for a shortfall in rent received from the premises (GST
Determination GSTD 2014/3), or

• where a payment is made under a court order or out-of-court settlement relating to an earlier disputed
supply (¶4-085), or a company in liquidation receives a payment in settlement of a voidable
preference claim (¶6-417).

The ATO considers that there is not a change in consideration — and therefore not an adjustment event
— where:
• additional charges are made for an extension of a hire period
 • late payment charges are imposed. These charges, whether in the form of interest or as “account-
keeping fees”, are treated as consideration for a separate input taxed financial supply by the seller
(Addendum to GST Ruling GSTR 2000/19)

• a promotional, cooperative or advertising allowance is paid by a supplier to a retailer in return for

promotional and marketing activities to boost sales of the supplier’s products. These allowances are
treated as consideration for the separate supply of those activities by the retailer, rather than
changes to the original price (see “Marketing incentives” at ¶4-030). The same applies where a
retailer receives a commission in the form of a rebate for recommending a supplier’s product to
customers (Interpretative Decision ID 2004/232)

• a foreign currency gain or loss is made on a set price contract

• there is a credit card “chargeback” (reversal of credit) by a financial institution against a merchant,
unless the chargeback is due to fraudulent use of the card (GST Advice GSTA TPP 017)

• a payment cheque is dishonoured. However, in such a case, a bad debt adjustment may become
appropriate if the debt actually becomes bad (¶6-210). For the treatment of dishonour fees, see ¶4-
080, or

• you correct an error in an earlier Business Activity Statement.

Examples
(1) Dodgy Deals provides spare parts to Ernest Enterprise for $11,000, including $1,000 GST. Six months later, Ernest Enterprise
discovers that 25% of the spare parts are defective and receives a refund of $2,750, including $250 GST. Dodgy Deals is eligible for
a decreasing adjustment that reduces its net amount of GST for the later period by $250. Correspondingly, Ernest Enterprise is
liable for an increasing adjustment that reduces its input tax credit for the later period by $250.
(2) A manufacturer buys raw materials from a supplier worth $110,000 during a tax period. The supplier accounts for $10,000 GST
and the manufacturer claims an input tax credit of $10,000. In a later tax period, the manufacturer’s level of purchases from the
supplier entitles it to a retrospective volume discount of $2,200 (including $200 GST) for its original purchase. The supplier is eligible
for a decreasing adjustment that reduces its net GST by $200 and the manufacturer is liable for an increasing adjustment that
reduces its input tax credit for that later tax period by $200.

The nature of a rebate does not change even though it is bundled into another type of rebate. For
example, if a 3% volume rebate and a 2% promotional rebate are bundled up into a 5% rebate, they
retain their own characters, no matter what that composite rebate is called. Only the original 3% would be
treated as changing the consideration.
If the adjustment event occurs in the same tax period as the earlier transaction, there is no “adjustment”
— the change is simply reflected in the relevant amount for that period (GST Ruling GSTR 2000/19).

Example
On 1 April goods are supplied for $115, with a $5 discount if payment is made within 14 days. Within that time, the purchaser pays
the discounted amount of $110. As the supply and the change of consideration occur in the same tax period, both parties will simply
account for GST on the basis that the price was $110.

For the position where business property is stolen, see ¶4-030.

Adjustments for third party payments
A special rule applies where there is a rebate to a third party. The effect is that GST adjustments will be
made in all situations in which consideration is paid by an entity in the supply chain to a payee where that
payment effectively alters the consideration paid (Div 134). This could have particular application, for
example, to manufacturers’ rebates.
The effect is:
• the payer of the amount becomes entitled to a decreasing adjustment (s 134-5). Unless this
 adjustment is below the threshold amount (¶6-135), it cannot be claimed until the payer creates and
holds a “third party adjustment note” (s 134-15)

• the payee, if it acquires the goods as part of its business, becomes liable for an increasing adjustment
(s 134-10).

The third party adjustment note must be in an approved form, which requires it to contain enough
information to enable the following to be clearly ascertained:
• payer’s identity and ABN

• payee’s identity or ABN

• description and quantity of what is being supplied

• amount of the third party payment

• amount of payer’s decreasing adjustment, and

• date of issue (A New Tax System (Goods And Services Tax) Third Party Adjustment Note Information
Requirements Determination (No 1) 2010).

The payer must give a copy of it to the payee within 28 days after becoming aware of the adjustment, or
within 28 days of receiving a request, if this is earlier (s 134-20).

Example
A manufacturer sells goods to a retailer for $660. The retailer sells the goods to a business customer for $880. Under the
manufacturer’s cash back scheme, the customer obtains a cash back payment of $110 from the manufacturer. The GST
consequences of this payment are:
The manufacturer is entitled to a decreasing adjustment calculated as:
(1/11 × $660) − (1/11 × $550) = $10
Its net GST liability is therefore ($60 − $10) = $50
The retailer’s position is not affected. Its net liability is calculated in the normal way, ie GST of (1/11 × $880) less input tax credit of
(1/11 × $660) = $20.
The business customer has an increasing adjustment calculated as:
(1/11 × $880) − (1/11 × $770) = $10
Its net entitlement is therefore an input tax credit of ($80 − $10) = $70.
Note: (1) As the manufacturer’s adjustment is less than the relevant threshold (¶6-135), it need not issue a third party adjustment
note; (2) if the customer was not a business customer, no question of an increasing adjustment for that customer arises, as they
would not have been entitled to an input tax credit in any event.

These adjustment rules apply even though the relevant supplies may not have been taxable for the
reason that the parties in the supply chain were members of the same GST group, GST religious group or
GST joint venture. There are also provisions to ensure that:
(1) there is no decreasing adjustment for the payer of a third party rebate if the supply to the payee of
the rebate is GST-free (eg exports or pharmaceuticals), not connected with Australia (eg sales by
overseas retailers to overseas customers), or is subject to a refund of GST under the Tourist Refund
Scheme, provided that the payer knows or has reasonable grounds to suspect that this is the case,
and

(2) the payee of a third party payment is not required to make an increasing adjustment if the supply by
the payer was not a taxable supply.

Detailed guidelines on the application of these rules to incentive payments made under typical motor
vehicle “floorplan” arrangements are in GST Ruling GSTR 2014/1.
For the general treatment of motor vehicle fleet sales support payments, margin support payments and
related incentives, see ¶4-010.
[GSTG ¶17-040]

¶6-110 Adjustment notes

If an adjustment event results in a decreasing adjustment — ie a reduction of GST or an increase in input

tax credits — you will need to hold an adjustment note at the time you lodge your return for the tax period
in which the adjustment is claimed (s 29-20). There is an exception for minor adjustments (¶6-135).
An adjustment note must be issued by the supplier within 28 days after the recipient requests. Even if a
request is not made, the supplier must issue an adjustment note within 28 days of becoming aware of the
adjustment, provided that a tax invoice was issued (or requested) in relation to the original supply (s 29-
75). Penalties for failing to issue an adjustment note are explained at ¶18-300 and penalty remission
guidelines at ¶18-305.
The Commissioner has a discretion to vary the 28-day rule in those cases where a request has not been
made. This may be appropriate, for example, in the case of a utilities supplier that issues bills on the basis
of three-monthly meter checks (see Goods and Services Tax Extension of Time to Issue an Adjustment
Note Determinations (Nos 35, 36 and 37) 2015). However, if the recipient makes a request for an
adjustment note, it must be issued within the normal 28-day period.
[GSTG ¶17-080]

¶6-115 Contents of adjustment notes

The required contents for an adjustment note which is issued by a supplier are as follows:
(1) it must be in the approved form. No particular format has been prescribed, as long as it complies
with (2) and (3)

(2) it must set out the ABN of the supplier

(3) it must contain enough information to enable the following to be “clearly ascertained”:
• that it is intended as an adjustment note, and the effect of the adjustment, eg whether it is for an
increasing or decreasing adjustment

• the identity and ABN of the supplier or supplier’s agent

• the identity or ABN of the recipient or the recipient’s agent. This, however, is only essential where
the note relates to a tax invoice showing the total price for the supply was at least $1,000; or
relates to a supply that was not taxable but becomes taxable and its price is at least $1,000

• the issue date

• a brief explanation of the reason for the adjustment

• the amount of the adjustment to the GST payable. Where the amount of GST is 1/11th of the price
(as is usual), it will be sufficient to make it clear that the difference in the price of the supply
includes GST

• the difference (if any) between the price of the supply before the adjustment event and the price
after the adjustment event. If the supply is not wholly taxable, the price is apportioned
accordingly (s 29-75; A New Tax System (Goods and Services Tax) Adjustment Note
Information Requirements Determination 2012, 2013; GST Ruling GSTR 2013/2).

Guidelines on corresponding requirements for tax invoices, including the meaning of “clearly ascertained”,
are set out at ¶5-110.
Recipient created adjustment notes
Recipient created adjustment notes — ie those issued by the recipient of the supply (¶5-140) — must
contain the same information as those issued by suppliers, except that they must make it clear that they
are intended to be recipient created adjustment notes, and must in all cases show the recipient’s identity
and ABN.
ATO guidelines for special situations
The following additional guidelines were given in GST Ruling GSTR 2013/2:
Combined adjustment note and tax invoice.
In situations such as where there is a prompt payment discount, it may be convenient to combine the
adjustment note with the original tax invoice. This is permissible, provided that the content requirements
of both are satisfied.
Adjustments may also be shown on a later tax invoice. For example, a monthly statement may be issued
at the end of the month that shows the supplies made during the month, as well as any adjustments such
as returns or discounts made during that month. A separate amount should be shown for each type of
adjustment (discounts, refunds, etc). In these situations, however, care must be taken to comply with the
rule that the adjustment note is issued within the required period of 28 days.
Adjustment note in two documents.
Two or more documents may be considered together in determining whether the required information has
been provided, provided that they have been given by the issuer to the other party. For example, it may
happen that a supplier cancels the original tax invoice with a credit note and then issues a new tax invoice
showing the new price. The credit note and the new tax invoice may together be accepted as an
adjustment note, provided that the required information is clearly ascertainable.
Electronic notes.
An adjustment note may be issued in electronic form, for example, by Electronic Data Interchange (EDI),
provided it is readily accessible and convertible to English.
Foreign currency.
Although the consideration may be expressed in a foreign currency, it should also contain enough
information to enable the recipient to work out the change in GST payable in Australian currency.
[GSTG ¶17-080]

¶6-130 Modifications to adjustment note requirements

The Commissioner has the discretion to modify the adjustment note requirements in various ways.
(1) Removal of requirement for adjustment note
You do not need to have an adjustment note to claim an adjustment if the Commissioner has given a
written determination that it is not required (s 29-20). This will apply, for example, where you import
services and are liable for GST under the “reverse charge” rules (¶9-100) or in particular cases where a
court or tribunal has conclusively found that there is an entitlement to a decreasing adjustment (GST
Determination GSTD 2004/1). Other specific exemptions have been granted by Legislative Determination;
these are summarised in Appendix 2 to GST Ruling GSTR 2013/2 and may be accessed via the Legal
Database on the ATO website at www.ato.gov.au.
(2) Documents that do not strictly comply
The Commissioner may also treat a document as an adjustment note even though it does not strictly
comply (s 29-75). This discretion is exercised on a case-by-case basis, as explained in Practice
Statement PS LA 2004/11 (discussed in the context of tax invoices at ¶5-130).
It was not appropriate to treat non-complying documents as adjustment notes where they did not relate to
the original invoices by description or identification, and did not show the actual adjustment in relation to
the original invoiced amount (Vadasz v FC of T [2006] AATA 682).
[GSTG ¶17-080]
¶6-135 Adjustment note exemption for minor adjustments

There is no requirement to issue an adjustment note if the amount of the adjustment is $75 or less (s 29-
80; GST Regulations s 29-80.02).
It is irrelevant what the value of the original supply may have been.

Example
The value of a taxable supply is $1,000. As a result of an adjustment event, there is a decreasing adjustment of $60. As this does
not exceed the applicable $75 threshold, no adjustment note is required.

[GSTG ¶17-100]

¶6-140 Special rules about adjustment notes

▸ Groups.
The representative member of a GST group is responsible for adjustments relating to a group member
(¶17-020), but that group member must issue the relevant adjustment note.
▸ Branches.
If you make a taxable supply through a GST branch, you must show the branch registration number on
any related adjustment note (s 54-50).
▸ Agents and insurance brokers.
For the special rules that apply, see ¶5-190.

ADJUSTMENTS FOR BAD DEBTS

¶6-200 Bad or overdue debts

If you pay GST on an accruals basis (¶7-200), you may be required to account for GST on goods or
services you have supplied before you actually receive the payment for them. If the payment is in fact not
paid, or not paid in full, you will have overpaid the GST on the transaction. In such a case, you are entitled
to a decreasing adjustment that reduces the GST for the period in which the debt is written off as a bad
debt. The amount of the reduction will be 1/11th of the amount written off (s 21-5).
This also applies if any part of the debt has been overdue for 12 months or more, whether or not you have
actually written it off. In this case, the reduction will be 1/11th of the amount unpaid. “Overdue” means that
the debtor has breached its obligation to discharge the debt (s 195-1). For the rules for determining
whether or when consideration has been received, see ¶7-325.
If some or all of the debt is later recovered, there will have to be an appropriate increasing adjustment to
the GST for that later period. Again, the amount of the increase will be 1/11th of the amount recovered (s
21-10). However, the Commissioner accepts that where an entity receives a payment under an insurance
policy that covers the non-payment of customer debts, an increasing adjustment under s 21-10 is not
required. This is because the payment from the insurer is not paid on behalf of the non-paying customer
as a payment of that debt, but in accordance with the insurance policy, the supply of which is a separate
supply. The insurance payment does not cancel the customer’s debt (Interpretative Decision ID
2003/698). This interpretation is possibly inconsistent with remarks in Apple Computer Australia Pty Ltd v
Mekrizis & Ors [2003] NSWSC 126. Note too that the sale of bad debts to a debt factor is treated as a
separate transaction (normally an input taxed financial supply: ¶10-010) and does not give rise to an
increasing adjustment (Interpretative Decision ID 2005/201).
Corresponding rules apply to the other party to the transaction. If they account for GST on an accruals
basis, they may have claimed an input tax credit before they have actually paid for the goods or services.
If they fail to pay within 12 months after the due date, or the supplier writes the debt off as a bad debt,
they are liable for an increasing adjustment that increases their GST for the period in which they become
aware of that. If they later pay some or all of the consideration, there will be a corresponding reduction in
the GST (s 21-15; 21-20). Details of how the ATO calculates these adjustments where a representative of
an incapacitated entity (¶18-250) pays creditors a dividend of less than 100 cents in the dollar are
contained in Practice Statement PS LA 2012/1 (GA).
The Commissioner considers that “debt” is not limited to monetary debts and includes non-monetary
consideration that has not been received (GST Ruling GSTR 2001/6).
Partial adjustments
If the supply giving rise to the adjustment was only partly taxable, the adjustment will be reduced
accordingly (s 136-5). A similar rule applies where an acquisition giving rise to an adjustment is only partly
creditable (s 136-10). Of course, there can be no adjustment for the supplier if the supply was never
taxable at all, and no adjustment to the recipient if there was never any entitlement to an input tax credit.
It may also happen that, technically, a supply is fully taxable, or an acquisition is fully creditable, but not to
the normal extent of 1/11th of the price. For example, this may apply where cars are sold for a price above
the car limit (¶12-110), or the GST on the supply of long-term commercial accommodation is calculated at
a concessional rate (¶11-320). In these situations, special rules apply for working out bad debt
adjustments (Subdiv 136-B). The general effect is as follows:
• the supplier’s decreasing adjustment for the bad debt is calculated as the difference between the GST
on the original transaction and the GST that would have been payable if the price had been reduced
by the amount of the bad debt (s 136-30)

• the supplier’s increasing adjustment on recovery of a bad debt is calculated as the difference between
the GST adjusted for the bad debt and the GST that would have been payable if the original price
had been reduced by the amount still owing (s 136-35)

• corresponding rules apply in calculating the adjustments for the recipient (s 136-40; 136-45).

Adjustment notes
Adjustment notes are not required to substantiate bad or overdue debt adjustments. There is also no
obligation on a supplier to tell the customer that the debt has been written off.
[GSTG ¶17-200; ¶17-220; ¶17-240]

¶6-205 Attributing bad debt adjustments to tax periods

The normal rule is that an adjustment is attributed to the tax period in which you became aware of it (¶6-
000). The Commissioner interprets this as meaning that:
• an adjustment for a bad debt is attributed to the tax period of the supplier in which it is written off, and
to the tax period of the recipient in which the recipient becomes aware that the debt has been written
off

• an adjustment for an overdue debt that has not been written off is attributed to the tax period of the
supplier in which the supplier becomes aware that the debt has been overdue for 12 months, and to
the tax period of the recipient in which the recipient becomes so aware (GST Ruling GSTR 2000/2;
Addendum GSTR 2000/2A).

Examples
(1) Bad debt. In January 2019, Enterprises supplies goods to a business customer for $110. Both parties are on an accruals basis
and have quarterly tax periods. Enterprises accounts for GST of $10 in its return for the tax period ending 31 March 2019 and the
customer claims an input tax credit of the same amount in its return for the same period. The customer goes into liquidation without
paying any of the debt, and Enterprises writes the debt off as bad in May 2019. Enterprises will be entitled to an adjustment reducing
its GST by $10 in its return for the tax period ending 30 June 2019. Conversely, if the customer is aware that the debt has been
written off, there will be an adjustment for the customer increasing its GST by $10 in its corresponding tax period.
 If the customer had in fact paid $44 of the debt, only $66 would be bad, so Enterprises’ decreasing adjustment and the customer’s
increasing adjustment would both be $6.
(2) 12-month overdue debt. In January 2019, Enterprises supplies goods to a business customer for $110. Both parties are on an
accruals basis and have quarterly tax periods. Enterprises accounts for GST of $10 in its return for the tax period ending 31 March
2019 and the customer claims an input tax credit of the same amount in its return for the same period. Although the debt is due to be
paid by 15 March 2019, the customer defaults and refuses to pay. The debt becomes 12 months overdue on 15 March 2020.
Enterprises will be entitled to an adjustment decreasing its GST by $10 in its return for the tax period ending 31 March 2020.
Conversely, there will be an adjustment to the customer increasing its GST by $10 in its tax return for the same period.
(3) Supply only partly taxable. Assume in Example 2 that half the value of the supply was for GST-free goods. Enterprises’ GST and
subsequent decreasing adjustment will be $5. The customer’s input tax credit and subsequent increasing adjustment will also be $5.
(4) Partial credit. Assume in Example 2 that the supply was fully taxable, but that the customer only plans to use the goods 50% for
business purposes and is therefore only entitled to a 50% input tax credit. Enterprises’ GST position is the same as in Example 2.
The customer’s input tax credit and subsequent increasing adjustment will both be reduced to $5.

It may happen that a debt arises and is written off as bad in the same tax period. Where this occurs, the
Commissioner considers that you must separately account in your return for the GST on the supply and
for the amount of the adjustment. You cannot ignore them on the basis that they cancel each other out
(GST Ruling GSTR 2000/2).
[GSTG ¶17-260]

¶6-210 What is a bad debt?

Whether a debt is bad is a question of fact. The Commissioner accepts that if you make a bona fide
commercial decision that a debt is unlikely to be recovered, the debt can be treated as bad (GST Ruling
GSTR 2000/2). However, a debt normally cannot be considered as a bad debt simply because it is
overdue or if there is still a genuine dispute over it (Case 45/93, 93 ATC 486).
In the Commissioner’s view, a debt can be considered bad in any of these situations:
(1) the debtor has died, leaving insufficient assets to pay the debt

(2) the debtor or the debtor’s assets cannot be traced

(3) the debt has become statute barred and it is reasonable to expect the debtor will rely on this
defence

(4) the debtor company is in liquidation or receivership with insufficient funds to pay the debt

(5) an objective examination of all the facts indicates that there is little or no likelihood of recovering the
debt. This will normally require that appropriate steps have been taken to attempt to recover the debt.
These steps vary according to the size of the debt and the resources available to pursue it.
Depending on the circumstances, the steps could include:
• issuing reminder notices and attempting telephone/mail contact

• allowing a reasonable time for payment

• serving a formal notice of demand

• issuing and serving a summons

• entering judgment

• execution proceedings to enforce judgment

• ceasing the calculation of interest and closing the account

• valuing any security held against the debt

• selling any seized or repossessed assets (Taxation Ruling TR 92/18; GST Ruling GSTR 2000/2).
The fact that a cheque is dishonoured (¶6-100) does not, by itself, mean that the debt has become bad,
though it will be a relevant circumstance.
Writing off the debt
A bad debt is normally written off by a journal entry in the books of account, though less formal written
records may also suffice. A bad debt cannot be written off if it has already ceased to exist, for example,
where it has been released, settled or compromised (Point v FC of T 70 ATC 4021; GE Crane Sales Pty
Ltd v FC of T 71 ATC 4268). However, where this involves a change in the price payable, there may be
an adjustment under the “adjustment event” rules (¶6-100).
The Commissioner also considers that a bad debt adjustment cannot be claimed if a debt has been
factored or assigned to someone else, because the adjustment can only be claimed by the original
supplier (GST Ruling GSTR 2000/2).
[GSTG ¶17-220]

¶6-220 Other rules affecting bad debts

▸ For the treatment of bad debts arising from gambling, see ¶16-010.

▸ If real estate is sold under the margin scheme, the amount of any GST bad debt adjustment for the
supplier is limited to 1/11th of the margin (¶11-130).

▸ Special rules apply to bad debt adjustments where there is a change of accounting basis (¶7-400).

“PLANNED USE” AND ASSOCIATED ADJUSTMENTS

¶6-300 Changes to planned use

You can only claim an input tax credit for something you acquire in carrying on your enterprise, and you
cannot normally get a credit if the purchase relates to the sale of input taxed goods and services or for
private or domestic purposes (¶5-010). However, it might be that your actual use turns out to be different
from the use you intended. This may mean that your input tax credit entitlement will need to be adjusted
(s 129-5).
This type of adjustment is made annually, subject to important limitations (¶6-304). In determining the
amount of each subsequent adjustment, you take into account the actual total use since purchase, not
just the actual use since the last adjustment (s 129-40).
If you buy something and later donate it to a charity, that is not treated as a change of use, so no question
of an adjustment arises (s 129-45): see further ¶15-040. However, this does not apply if the “donation” is
in fact payment for something else.
Adjustment thresholds
You should ignore any change of use where the thing you acquired was used in making financial supplies
(¶10-010) unless you exceed the financial acquisitions threshold (¶10-032).
You also do not make GST adjustments where the original acquisition related solely or partly to providing
financial supplies and its GST-exclusive value was $10,000 or less. In any other case, the rule is that no
adjustment is required if the GST-exclusive value of the acquisition was $1,000 or less (s 129-10). The
GST-exclusive value is simply the price of the thing less GST — looking at it another way, it is 10/11th of
the GST-inclusive price.
The ATO considers that where several things are acquired together, they should nevertheless be
considered separately in working out whether the threshold has been exceeded (GST Ruling GSTR
2000/24). Similarly, each component of a progressive or periodic acquisition is treated separately — for
example, if you lease a building, each progressive component of the lease is a separate acquisition.
 Example
An engineering business buys a computer for $4,400 and a desk for $660. The GST-exclusive value of the computer is $4,000 and
of the desk is $600. Although they were bought on the same invoice and delivered together, they are treated separately. The
computer is over the $1,000 threshold, but the desk is under it. Accordingly, an adjustment can only arise in relation to the computer,
not the desk.

Planned and actual use

The amount of the adjustment depends on the difference between the planned and the actual use of the
thing for a “creditable purpose” (¶5-010). The legislation uses the terms “intended application” and “actual
application” to describe these (s 129-40). An increasing GST adjustment can arise where the intended
application exceeds the actual application. A decreasing GST adjustment can arise where the actual
application exceeds the intended application. The “intended application” is the extent to which you
acquired the thing for a creditable purpose, ie for carrying on your business, other than for making
supplies that are input taxed or are of a private or domestic nature (s 129-50). The “actual application” is
the extent to which the thing has been applied for those purposes since its acquisition. You “apply”
something if you supply, consume, dispose of or destroy it, or allow another entity to do those things (s
129-55).
The ATO says that, where possible, you should use a “direct” method for working out the extent to which
the item is used for a creditable purpose. For example, for a car, you could use the proportion of business
kilometres. Where a direct method is not practicable, you can use an indirect method, for example, an
input- or output-based method (GST Ruling GSTR 2000/24). For an explanation of both direct and indirect
methods, see ¶5-020.
It may happen that the item is idle or not in use for part of a period. In these cases, the ATO says that you
can apportion the non-use period according to the actual usage pattern, or simply disregard it (GST
Ruling GSTR 2000/24).

Example
A sole trader uses a vehicle 80% for business and 20% for private purposes. The vehicle breaks down and is out of action for a
month. The business use can still be treated as 80%.

In certain situations, the ATO will accept that a business can “pool” individual assets in order to compare
their actual and intended applications (GST Ruling GSTR 2000/24). This may possibly be appropriate, for
example, where there is a large number of assets which can be pooled on the basis of location, type of
acquisition, business unit or profit/cost centre.
The ATO considers that if a taxpayer acquires advice about the feasibility of a proposed input taxed
transaction (such as a takeover), but does not proceed with that transaction, there is no adjustment event,
and the acquisition of the advice remains wholly non-creditable. However, if the same advice is also later
re-used for a different purpose in connection with a different transaction which is not input taxed, there
may be a change of creditable purpose and an adjustment event may therefore arise (GST Determination
GSTD 2012/3).
Disposals on marriage breakdown
As explained at ¶4-090, a disposal of business assets as a result of a marriage breakdown is not normally
a taxable supply. However, it may give rise to a GST adjustment if input tax credits were claimable on the
original acquisition of the asset. The reason is that the disposal is treated as an application for private
use. As there is no ongoing use of the asset by the transferor after the disposal, an indirect method of
calculating the extent of creditable use must be adopted. In GST Ruling GSTR 2003/6, the Commissioner
suggests the use of an “effective life” method for depreciating assets and a “rental value” method for non-
wasting assets, such as land.

Example
Back on 1 July 2016, two spouses in a business partnership bought a second-hand car for $55,000. They intended to use it 80% for
 business (which they in fact did), and therefore claimed an input tax credit of 80% × 1/11 × $55,000 = $4,000.
On 31 December 2018, as a result of their marriage breakdown, the car is transferred to one of the spouses. On the basis that the
effective life of the car was eight years, the actual application may be calculated as:

Period of time held

× extent of creditable purpose pre-disposal
Effective life
= 2.5/8 × 80% = 25%
The increasing GST adjustment is calculated as:
Full input tax credit × % difference between actual and intended application = $5,000 × (80% − 25%) = $2,750.
In effect, therefore, the partnership has received a net input tax credit of ($4,000 − $2,750 = $1,250). (Based on GST Ruling GSTR
2003/6.)

There would be no adjustment if the asset had originally been acquired GST-free, as in this case no input
tax credit would have been claimable. This could happen, for example, where the asset had been part of
GST-free acquisition of a going concern (GST Advice GSTA TPP 067).
Residential property developments
It may happen that a taxpayer carries out a property development with the sole intention of selling the
individual units, but due to a depressed market is forced to rent them out pending sale to assist with
meeting the holding costs. In this situation, there is a difference between the extent to which premises
were intended to be used for a creditable purpose and the extent to which they are actually used. The
reason is that although the original intended application was entirely for a creditable purpose (ie sale), the
actual application is for the mixed purpose of renting out (input taxed and therefore not creditable) and
marketing for sale (creditable). There would therefore have to be an increasing GST adjustment.
In GST Ruling GSTR 2009/4, the ATO suggests that if the premises are sold before the end of the
relevant adjustment period, one acceptable method of calculating the extent of creditable purpose in the
actual application could be as follows:

Consideration for the taxable supply of the new residential premises

Consideration for the taxable supply of the new residential premises plus consideration for the input
taxed supplies of residential premises by way of lease

Where the sale does not occur before the end of the adjustment period, but the premises are held for the
purpose of sale for the whole of the period, the estimated consideration for the sale may be substituted for
the actual consideration in this formula. However, if the premises were held for sale for only part of the
time before sale, an additional reduction based on time would need to be made. Relevant factors in
showing that the premises are being held for sale would include the fact that they are being actively
marketed for sale, and that an ultimate sale is consistent with the taxpayer’s business plan and past
activities. Special considerations apply where the premises are partially completed, or are being
undertaken in multiple stages.
It has been held that the relevant intention did not exist where there were no overt acts demonstrating that
the apartments were available for sale and the intention was not to sell in the short term (Case 8/2009,
2009 ATC ¶1-012).
It appears that an apportionment based on an assumed effective life of the premises is not appropriate
(GST Ruling GSTR 2009/4, para 128–129; Taxpayer v FC of T [2011] AATA 160).
Instead of revising the BAS (¶8-045) to reflect the increasing adjustment, the taxpayer may send a
Voluntary Disclosure Statement — Property (NAT 72625) to the ATO at PO Box 1127, Albury, NSW,
2640. If there is a voluntary disclosure, and the mistake was honest, no shortfall penalties will be imposed
and the general interest charge (¶18-300) will be reduced by seven percentage points. This concession
will not apply if the ATO has already advised you that they are conducting an audit (ATO Fact Sheet
Reporting mistakes on GST and property transactions).
Financial suppliers’ reduced credits
If a financial supplier is entitled to a reduced (75%) input tax credit (¶10-040), any adjustment for a
change of use is calculated on the basis that the item was acquired 75% for a creditable purpose (s 129-
40(3)).

Example
A credit union acquires eligible services for $22,000, including $2,000 GST, which it intends to use entirely for making financial
supplies. This entitles it to a reduced (75%) input tax credit of $1,500. The “intended application” is therefore 75%.
At the end of the adjustment period, the services have in fact been used 60% for making financial supplies and 40% for taxable
supplies. The “actual application”, ie the extent to which the services have been used for creditable purposes, is therefore 40% +
(75% × 60%) = 85%.
The credit union is therefore entitled to a decreasing GST adjustment calculated as:
Full input tax credit × % difference between actual and intended application = $2,000 × (85% − 75%) = $200
In effect, therefore, the credit union has received a net input tax credit of ($1,500 + $200) = $1,700.

[GSTG ¶17-280]

¶6-304 Adjustment periods

An adjustment for changes in planned use is made annually, usually in the tax period that ends on 30
June or the closest to 30 June — this is designed to fit in as closely as possible with the income tax year
(s 129-20). This period is called the adjustment period. The first adjustment period must start at least 12
months after the end of the tax period in which the acquisition was made — this is designed to provide an
adequate time for you to assess the use.

Example
(1) A business bought equipment on 1 December 2016, and was allowed an input tax credit for its quarterly tax period ending 31
December 2016. The first adjustment period for the equipment is the tax period from 1 April 2018 to 30 June 2018.
(2) Assume instead that the business bought the equipment in January 2018. The first adjustment period is the tax period from 1
April 2019 to 30 June 2019.

The obligation to make these annual adjustments does not continue forever. There are limits, ranging
from one to 10 adjustments, according to the type of acquisition and its GST-exclusive value.
If the acquisition related solely or partly to making financial supplies, and was not in any way of a private
or domestic nature, the limits are as follows:
• if the GST-exclusive value is $10,000 or less, there is no requirement to make an adjustment in any
event

• if the GST-exclusive value is more than $10,000 but less than $50,000, you only have to make one
adjustment for a change of use. This adjustment is made in the first adjustment period that occurs at
least 12 months after the tax period in which you make the acquisition. You do not make any
subsequent adjustments

• if the GST-exclusive value is more than $50,000 but less than $500,000, you may have to make
adjustments for changes of use in any of the first five adjustment periods after acquisition

• if the GST-exclusive value is $500,000 or more, you may have to make adjustments for changes of
use in any of the first 10 adjustment periods after acquisition.

In other more typical cases — for example, where the acquisition does not relate to making financial
supplies — the limits are as follows:
• if the GST-exclusive value is $1,000 or less, there is no requirement to make an adjustment in any
event
 • if the GST-exclusive value is more than $1,000 but less than $5,000, you may have to make
adjustments for changes of use in any of the first two adjustment periods after acquisition

• if the GST-exclusive value is more than $5,000 but less than $500,000, you may have to make
adjustments for changes of use in any of the first five adjustment periods after acquisition

• if the GST-exclusive value is $500,000 or more, you may have to make adjustments for changes of
use in any of the first 10 adjustment periods after acquisition.

Example
In December 2018, Alexander buys a commercial van to use in his courier business, with the intention that 25% of the van’s use will
be private. The van costs $88,000, including $8,000 GST. Alexander is therefore entitled to an input tax credit of 75% × $8,000, ie
$6,000.
At the end of the first annual adjustment period (30 June 2020), Alexander has in fact used the van 40% privately since purchase.
The input tax credit therefore should have been 60% × $8,000, ie $4,800 instead of $6,000. Alexander is liable for an increasing
GST adjustment of $1,200.
At the end of the second annual adjustment period (30 June 2021), Alexander has in fact used the van 30% privately since
acquisition. The input tax credit therefore should have been 70% × $8,000, ie $5,600 instead of $4,800. Alexander is entitled to a
decreasing GST adjustment of $800.
As the GST-exclusive value of the van ($80,000) is between $5,000 and $500,000, adjustments may continue, if appropriate, for the
next three adjustment periods.

It might happen that the thing you acquire is disposed of, lost, destroyed or stolen, or expires before the
end of its last adjustment period. If so, the last adjustment period for that acquisition will be the next tax
period ending on 30 June or closest to it (s 129-25). However, this does not apply if the disposal is
covered by the rules at ¶6-310. For special rules applying where a business owner dies, see ¶6-415.
A taxpayer cannot claim an adjustment in relation to events occurring after its registration is cancelled
(GOL-HUT Pty Ltd v FC of T 2013 ATC ¶10-306).
[GSTG ¶17-380]

¶6-306 Interaction with other adjustment rules

If there has already been an adjustment — for example, because of a change in consideration or a bad
debt — this must be taken into account in working out any subsequent planned use adjustment (s 129-
80).

Example
A business purchases items for $22,000 wholly for business purposes and becomes entitled to an input tax credit of $2,000. At the
end of the first adjustment period, the actual application for business purposes is only 60%, so the business becomes liable for an
increasing adjustment to reflect the change in planned use. In the meantime, there have been other adjustments resulting from a
$1,100 quantity discount (¶6-100) and from a $3,300 bad debt write-off by the supplier (¶6-200).
The planned use adjustment is calculated as:

% difference between actual and intended

Full input tax credit ×
application
= (1/11 × ($22,000 − $1,100 − $3,300)) × (100% − 60%)
= $640

[GSTG ¶17-460]

¶6-310 Sales of things acquired without full credits

GST will be adjusted downwards in certain situations where you sell something that you originally
acquired wholly or partly to make financial supplies or for private or domestic purposes (Div 132).
(1) Financial suppliers
If you acquire (or import) something for the purpose of providing financial supplies, or subsequently use it
for those purposes, you will either not be entitled to an input tax credit or be entitled to a reduced credit. If
you subsequently sell that thing as part of a taxable supply, or as part of a GST-free disposal of a going
concern, your GST will be adjusted downwards (s 132-5). This decreasing adjustment compensates for
your not being allowed the input tax credit on the acquisition. Pro rata rules apply if you were only entitled
to a partial input tax credit on the acquisition because you only intended to use it partly for providing
financial services. The adjustment is attributed to the same tax period as the sale (s 132-10).
These rules apply only where the thing is “sold”. Other types of supply, such as leases or gifts, are not
covered. However, the ATO considers that a sale includes a transfer by way of barter or exchange (GST
Ruling GSTR 2004/8).
The adjustment is calculated as:

However, it cannot exceed the difference between the potential input tax credit on the acquisition and the
input tax credit (if any) to which the financial supplier was actually entitled.

Examples
(1) A bank acquires a building to use in its banking activities for $110m. As these activities are input taxed, the bank cannot claim
any of the potential $10m input tax credit. It later sells the building for $165m. It is entitled to a decreasing adjustment of $10m,
calculated as the lesser of:
• the difference between the potential input tax credit and the actual input tax credit, ie $10m

• 1/11th × $165m × (1 − zero/$10m) = $15m.

(2) A finance company acquires a building for $110m to use 60% in its loan activities and 40% in taxable business activities. The
finance company can claim an input tax credit of 1/11th × 40% × $110m = $4m. It later sells the building for $99m. It is entitled to a
decreasing adjustment of $5.4m, calculated as the lesser of:
• the difference between the potential input tax credit and the actual input tax credit, ie $6m, and

• 1/11th × $99m × (1 − $4m/$10m) = $5.4m.

In calculating the actual input tax credit, any adjustments are taken into account. In these circumstances,
the last adjustment period will be the last period ending before the sale (s 129-25).
In calculating the potential input tax credit, the ATO considers that you normally ignore credits on
associated goods or services such as conveyancing or valuations. Similarly, you ignore credits on work
made after the acquisition, unless it represents clearly identifiable differences between the thing sold and
the thing originally acquired. For example, in the case of a building, you would take into account input tax
credits on work relating to a new wing, but not work relating to repairs of the original building (GST Ruling
GSTR 2004/8).
(2) Private or domestic use
A similar GST adjustment applies where you sell something that you originally acquired or later used
wholly or partly for private or domestic purposes.

Example
Priya, a registered sole trader, buys a computer for $4,400 (including $400 GST) which she uses 75% for business and 25% for
private purposes. She claims an input tax credit of $300 (ie 75% of $400). Some years later she sells the computer for $660
(including $60 GST). Priya can claim an adjustment reducing her GST by $15. This is calculated as the lesser of:
• the difference between the potential input tax credit and the actual input tax credit, ie $100
 • 1/11 × $660 × (1 − 300/400) = $15.

If the thing was being used wholly for private or domestic purposes at the time of the sale, there will be no
decreasing adjustment under Div 132. The reason is that the sale would presumably not be made in the
course of an enterprise, and would therefore not be a taxable supply.
[GSTG ¶17-600]

¶6-320 Goods applied solely to private or domestic use

We have already seen that if you acquire something for business purposes and later decide to use it
partly for private or domestic purposes, there will be an increasing adjustment, in accordance with the
planned use rules (¶6-300). A separate rule applies to goods that were acquired solely for business
purposes, but are applied solely to private or domestic use. In this situation, the benefit of the input tax
credit is effectively withdrawn by an increasing adjustment (s 130-5). The $1,000 threshold applicable
under the planned use rules does not apply.
The ATO considers that:
• this rule is not limited to trading stock, and extends to plant, building materials and office equipment

• this rule may apply even though the goods were applied for business use before they were applied
solely to private or domestic use

• when trading stock is set aside and removed for private consumption, this is an application solely to
private and domestic use (GST Ruling GSTR 2003/6).

Example
In November, a shopowner purchases 20 × $55 items as business stock for a GST-inclusive total of $1,100 and puts them on the
shelf for sale. In his November monthly return, the owner claims an input tax credit of 1/11th of $1,100, ie $100. In the next February,
the owner takes one of the items off the shelf to keep solely for personal use at home. In his February return, the owner’s net GST
will be increased by an adjustment of 1/11th of $55, ie $5.

If there is an adjustment under this rule, there cannot later be an adjustment under the planned use rules.
Conversely, if there has already been an adjustment under the planned use rules, there cannot be an
adjustment under this rule (s 129-15; 130-5(3)).
The Commissioner considers that the Div 130 adjustment only applies where the entity that acquired the
goods is the same as the entity that applies them for private or domestic purposes (GST Determination
GSTD 2009/2). It therefore does not apply where a partner takes goods held as partnership trading stock
for the private or domestic use of the partner in his/her individual capacity.
[GSTG ¶17-580]

STARTING, TRANSFERRING OR CEASING BUSINESS

¶6-400 Adjustments for newly-registered businesses

It may happen that at the time a business registers for GST, it has already paid GST on stock for resale or
for use as raw materials. However, it would not have been able to claim input tax credits for this GST,
because it was not registered at the time. On the other hand, if it sells or uses the stock after registration,
GST will apply. To cover this situation, a special GST adjustment is allowed. This has the effect of
reducing your net GST by the amount of input tax credit you could have claimed if you had been
registered (s 137-5).
This adjustment applies if:
 • at the time you become registered, or required to be registered, you hold stock for the purpose of sale
or exchange, or for use as raw materials, in the course of your business

• you acquired the stock solely or partly for a creditable purpose (¶5-010)

• you were not entitled to an input tax credit on the acquisition.

The adjustment applies only to stock, not plant or equipment.

Example
Roberta runs a business with a GST turnover of $40,000 (ie below the compulsory registration threshold). She chooses not to
register for GST. In August, she acquires some trading stock for $1,100 including $100 GST. Roberta cannot claim an input tax
credit for this $100 because she is not registered or required to be registered. In the following month, she registers and starts
becoming liable for GST on her supplies. At this time the stock is still on hand. Roberta is entitled to an adjustment reducing her net
GST by $100 in her first GST return.

The adjustment would not apply if Roberta had purchased a computer because it would not be stock. Nor
would it apply if the stock had been sold before Roberta was registered.
Re-registrations
It may happen that a business is registered after previously having its registration cancelled. The
adjustment on registration will not apply unless the business has had its GST increased to cover input tax
credits claimed on stock held at the time of cancellation, under the rules described at ¶6-410.
[GSTG ¶17-640]

¶6-410 Adjustments on cessation of registration

When a business’ registration is cancelled, it may still hold assets on which it has claimed input tax
credits. In this situation, the business’ net GST will be adjusted upwards, to the extent that the asset still
has value (s 138-5). The amount of this adjustment is calculated as:
1/11th × actual application × applicable value
The “actual application” means the extent to which the asset was applied for purposes of the business,
other than for making supplies that are input taxed, private or domestic (s 129-40). The “applicable value”
is the GST-inclusive market value of the asset (¶4-020) immediately before the cancellation. If you
acquired or imported it for less than that amount (eg where the asset has appreciated over time), the
applicable value is the amount you paid (s 138-5(2)).
The adjustment is made in the business’ concluding tax period (¶7-120) (s 138-10).

Example
Norbert winds up his business and cancels his registration. The only business asset remaining is a truck which Norbert acquired for
$55,000 (including $5,000 GST). Norbert used the truck exclusively in the business and claimed an input tax credit of $5,000. At the
time of the cancellation of the registration, the GST-inclusive value of the truck has dropped to $22,000. The amount of the
adjustment is:
1/11th × 100% (actual business use) × $22,000 = $2,000
This is added to Norbert’s net GST for his concluding tax period. The net effect is that Norbert’s original input tax credit of $5,000 is
reduced to $3,000.

These rules normally apply irrespective of the reason for the cancellation of registration, for example,
where the business is wound up, or sold as a going concern, or the business opts to cancel because its
turnover falls below $75,000. However, special rules apply where the taxpayer had an annual tax period
(¶8-040). For the position where a business continues to be carried on after the death of the owner, see
¶6-415.
It may have happened that adjustments have already been made because of a change in the planned use
of the asset (¶6-300). If the relevant adjustment period(s) have ended before the cancellation of
registration takes effect, there will be no further adjustment on cessation of registration (s 138-5(3)).
The adjustment could apply where the item for which input tax credits were claimed is an identifiable part
of another asset, for example, where there are improvements made or spare parts installed (GST Advice
GSTA TPP 094). However, no adjustment is necessary where the item for which input tax credits were
claimed does not exist as a discrete asset in its own right (for example, repairs or painting), or where the
asset has zero value (for example, scrapped machinery) (GST Advice GSTA TPP 095).
Other unattributed adjustments
If you were on the cash basis, any adjustments which have not yet been attributed to a tax period are
attributed to the tax period in which your registration is cancelled (s 138-15).
[GSTG ¶17-660]

¶6-415 Where business owner dies

When a GST registered individual dies, his/her registration must be cancelled. This potentially gives rise
to an increasing adjustment under the rules described at ¶6-410. However, those rules will not apply if the
deceased’s business continues to be carried on by a GST registered estate trustee (s 138-17). Nor will
they apply when a GST registered estate beneficiary takes over the running of the business from the
trustee.
In these situations, however, there may be a need for an adjustment under the “planned use” rules (¶6-
300). In working out how these apply, you treat the business as if it were still being carried on by the
individual who died.

Example
In December 2018, Harley buys a computer for $4,000. In his GST return for the December 2018 quarter, he claims an input tax
credit on the basis that the computer is used 75% for business and 25% for private purposes. Harley dies in January 2019. David,
the estate executor, uses the computer in continuing to carry on the business. David increases the business usage of the computer
and at the end of the adjustment period the business use is 90%. David, as executor, is entitled to a decreasing adjustment based
on the change of business use from 75% to 90%.

A separate adjustment applies in the different situation where the estate trustee distributes a deceased’s
business assets to a beneficiary who does not intend to continue carrying on the business (Div 139). In
such a case, the trustee becomes liable for an increasing adjustment, to reflect the fact that the asset is
no longer used for purposes of the business. This adjustment is calculated in a similar way to adjustments
on cessation of registration (¶6-410).

Example
Assume the same facts as in the previous Example. David, the executor, also distributes another asset of Harley’s business to
Rebecca who intends to use it for private purposes. Harley had purchased this asset for $5,500 and claimed an input tax credit for
this asset on the basis that it was used 100% for business purposes. When the asset is distributed to Rebecca, its GST-inclusive
value is $3,300. The increasing adjustment is calculated as:
1/11 × 100% (Harley’s actual business use) × $3,300 = $300

Special rules apply where a taxpayer with an annual tax period dies (¶8-040).
[GSTG ¶17-680]

¶6-417 Adjustments after bankruptcy, liquidation, etc

It may happen that an adjustment that arises after a trustee in bankruptcy has been appointed may relate
to a transaction that occurred before the appointment. The same may apply where other representatives
— receivers, liquidators or interim managers — are appointed.
In this situation, the adjustment will be attributable to the business entity, not the representative (¶18-250).

¶6-420 Adjustments on acquisition of business

An increasing adjustment will apply if you acquire a business GST-free as a going concern but intend to
use it wholly or partly in making private or input taxed supplies (eg providing credit facilities). This type of
adjustment is explained at ¶11-520.
[GSTG ¶17-620]

OTHER ADJUSTMENT RULES

¶6-510 Other rules about adjustments

▸ Adjustments relating to members of a GST group are attributed to the representative member (¶17-
020 and following).

▸ Adjustments relating to participants in a GST joint venture are attributed to the venture operator (¶17-
220 and following).

▸ There may be an adjustment where property is amalgamated (¶11-140).

▸ Special rules about adjustment notes apply where you make a supply through an agent (¶5-190).

▸ Insurance companies may be entitled to decreasing adjustments when they settle a claim with an
insured who was not entitled to full input tax credits for the premiums it paid. They may also be liable
for increasing adjustments where they make acquisitions directly for the purpose of settling the claim
(¶10-120).

▸ Adjustments may need to be made where there is a change in the method of determining the
proportion of creditable entertainment expenses (¶24-210).

▸ An increasing adjustment may apply where a taxpayer elects to make annual apportionments of input
tax credits (¶5-020).

▸ A decreasing adjustment may be available where a claim for an input tax credit for an additional
payment required under a “gross-up” clause falls outside the four-year limit (¶19-400).
ACCOUNTING BASIS • TAX PERIODS
Offsetting credits against GST ¶7-000
TAX PERIODS
Determining the tax period ¶7-100
Non-standard tax periods ¶7-105
The $20m turnover test ¶7-110
Concluding tax periods ¶7-120
ACCRUALS AND CASH BASIS
Working out the GST and credits attributable to a tax period ¶7-200
Accruals basis ¶7-205
Cash basis ¶7-300
How the cash basis operates ¶7-320
When consideration is received or provided ¶7-325
Where GST or credits are adjusted ¶7-330
SPECIAL ATTRIBUTION RULES
Changing your accounting basis ¶7-400
Progressive or periodic supplies ¶7-420
Lay-by sales ¶7-430
Barter transactions and trade exchanges ¶7-435
Hire-purchase transactions ¶7-438
Tax Office guidelines on particular attribution situations ¶7-440
Other special attribution rules ¶7-450

Editorial information

Summary
Your GST liability is worked out at the end of each of your tax periods. These may be monthly or
quarterly (or annually in certain cases), but monthly tax periods are normally compulsory if your
GST turnover is $20m or more. To work out your GST liability, you offset the input tax credits for
the tax period against the GST on your supplies for the period, and make allowance for any GST
adjustments. The way you attribute credits and GST to each period depends on whether you
operate on a cash basis or — more commonly — an accruals (invoice) basis. Special rules also
apply, for example, where there are lay-bys or periodic supplies. The Commissioner also has power
to override the normal rules where they would produce an inappropriate result.
¶7-000 Offsetting credits against GST

Your GST liabilities are worked out at the end of each tax period. As explained at ¶7-100, this period may
be either monthly, quarterly or annual.
For each tax period, you work out the amount of input tax credits you can claim and offset it against the
amount of GST that applies to supplies you have made. The balance, after allowing for any adjustments,
is called the “net amount” (s 7-5). If the GST exceeds the input tax credits, you must pay the balance to
the ATO with your GST return for the period. If the credits exceed the GST, you are entitled to a refund (s
7-15). The Tax Office may, however, offset that refund against any other tax debts you might have (¶8-
110).
It is not necessary to work out the GST and input tax credits separately for each transaction attributable to
the period. Assuming that the standard 10% GST and input tax credit rates apply, you can calculate the
net amount from your total taxable supplies and creditable acquisitions for each period.

Example
The total creditable acquisitions attributed to a particular tax period are $110,000, entitling you to input tax credits of $10,000. The
total taxable supplies attributed to that period are $121,000 including $11,000 GST. The net amount is ($11,000 − $10,000) =
$1,000. This is the net amount of GST payable to the Tax Office for that period.
If instead the total taxable supplies were $44,000 including $4,000 GST, the net amount would be $6,000 and this could be claimed
as a refund.
If instead the total taxable supplies were $110,000 (ie the same as the creditable acquisitions), the net amount would be zero. There
would be no amount on account of GST payable to the Tax Office, and equally no amount payable by the Tax Office to you.

This then raises two questions:

• How do you work out your tax periods? This is explained at ¶7-100.

• How do you know which transactions are attributable to which period? This is explained at ¶7-200.

Simplified accounting methods for some industries

Simplified accounting methods apply to food retailers (¶13-215) and for certain sales by charities (¶15-
060). The Commissioner also has the power to specify simplified accounting methods for small enterprise
entities that make both taxable and GST-free supplies, or that make acquisitions from such supplies. A
“small enterprise entity” is:
• a small business entity (¶1-250), or

• an entity that does not carry on a business but has a GST turnover (¶3-030) that does not exceed
$2m (s 123-5; 123-7).

[GSTG ¶20-000]

TAX PERIODS
¶7-100 Determining the tax period

Tax periods are either one month or quarterly, depending on the circumstances. In certain situations,
annual tax periods may also apply. All these options are discussed below.
Quarterly tax periods
The general rule is that tax periods are quarterly, ie for three months. These periods end on 31 March, 30
June, 30 September and 31 December (s 27-5).
However, as explained below, monthly tax periods will be compulsory in certain situations. In other cases,
optional monthly tax periods may be adopted.
Compulsory monthly tax periods
You must use monthly tax periods if any of the following apply:
• your GST turnover is $20m or more

• you will be carrying on your enterprise in Australia for less than three months

• you have a history of failing to comply with your tax obligations (s 27-15).

If these circumstances change — say, your GST turnover falls below $20m — you can elect to change to
quarterly tax periods, provided that you have been using one-month periods for at least 12 months (s 27-
25). Unlike the position with optional monthly tax periods — see below — the Tax Office does not have a
discretion to reduce this 12-month period.
If you are a resident agent for a non-resident, monthly tax periods will apply if the non-resident’s GST
turnover is $20m or more (s 57-35).
Optional monthly tax periods
Even if monthly tax periods are not compulsory, you may elect to use them (s 27-10). This election can
take effect from 1 January, 1 April, 1 July or 1 October.
Once you have been using optional monthly tax periods for at least 12 months, you can change to
quarterly tax periods, provided that your GST turnover is less than $20m (s 27-20). This simply requires
the relevant notification to the Tax Office.
The Tax Office has a discretion to reduce this 12-month period if you make a request in the approved
form (s 27-22). In exercising this discretion, the Tax Office may take all relevant matters into account,
including how long you have been using monthly tax periods and whether monthly tax periods applied to
you under an earlier registration.
Annual tax periods for small business
For small business entities (¶1-250) that elect to pay GST by instalments, the tax period will normally be
the same as the financial year (¶8-037).
Taxpayers that are voluntarily registered also have the option of reporting and paying GST on an annual
basis (¶8-040).
Planning considerations
If you legitimately elect to have monthly tax periods so as to bring forward your entitlement to input tax
credits, it seems that this would not be caught by the anti-avoidance rules (¶20-000).
Having monthly returns will increase your paperwork because you will have to lodge returns more
frequently. However, in some cases there can be cashflow benefits. Some of the cashflow implications of
monthly and quarterly returns are discussed at ¶21-050 and following.
Liquidators, receivers and trustees
Liquidators, receivers, interim managers, controllers and trustees in bankruptcy have the same tax period
as the entity they represent (s 58-35). The entity’s tax period at the time that it becomes incapacitated is
taken to have ended on the day prior to that time. The next tax period starts on the day after the tax
period ends, and ends when the first tax period would have ended (s 27-39). For the effect on entities that
are group members, see ¶17-030.
[GSTG ¶20-500]

¶7-105 Non-standard tax periods

There may be modifications to normal tax periods to fit individual circumstances.

(1) “Non-calendar” monthly tax periods
The compulsory monthly tax periods may be modified for businesses that do not use calendar months as
the basis of their commercial accounting. Entities that are in this position, and that have GST turnovers of
$20m or more, can apply to the Tax Office to have tax periods that reflect their normal accounting practice
(s 27-37). For example, this may be appropriate if the entity uses 13 four-weekly accounting periods, or
12 accounting periods, with some of four weeks and others of five weeks. Approval will be withdrawn if
the entity subsequently fails to satisfy any of these preconditions (s 27-38).
(2) Seven-day leeway for aligning tax periods
You can also change the day in each year on which a tax period would normally end, so as to be
consistent with your normal accounting practice. However, the changed period must end no more than
seven days before or after the end of the original period. You do not need to get the Tax Office’s consent
for this (s 27-35).
If the day is changed in this way, the next period commences on the day after the changed period ends.

Example
A supermarket owner normally balances her accounts on Fridays. She uses quarterly GST tax periods. Assume the first period in
the year (ending 31 March) ends on a Tuesday. She opts to end her tax period on Friday, 27 March, so that she does not have to
make a special balance on the Tuesday. Her next three-month tax period starts on Saturday, 28 March, instead of 1 April. She must
account for the tax period ending on 27 March by 28 April.

(3) Transitional tax periods

If you have changed tax periods, the Tax Office can nominate a particular period as a tax period to ensure
a continuous transition. The nominated period cannot be less than three months, and cannot overlap with
any other tax period for which a GST return has already been lodged (s 27-30). This also applies at the
time you register.

Example
In August, a business on three-month periods realises that its GST turnover will for the first time exceed $20m. It must therefore
change to one-month periods from 1 September. Its previous tax period ended on 30 June. It may therefore be appropriate for the
Tax Office to nominate a two-month interim tax period from 1 July to 31 August.

[GSTG ¶20-550]

¶7-110 The $20m turnover test

As already explained, you are required to use monthly tax periods if your GST turnover is $20m or more
(s 27-15). This means that you must use monthly periods if either of the following applies:
• your current GST turnover is $20m or more, except if the Tax Office is satisfied that the projected GST
turnover is below $20m, or

• your projected GST turnover is $20m or more (s 188-10).

Example
As at March 2019, your current GST turnover (ie the turnover for the period from 1 April 2018 to 31 March 2019) is $18.6m. Your
projected GST turnover (ie the turnover for the period from 1 March 2019 to 29 February 2020) is $21.3m. You will therefore be
required to adopt monthly tax periods.

The way you work out your current and projected GST turnover is explained at ¶3-030. For special rules
relating to clubs and hotels, see ¶16-030.
[GSTG ¶20-500]

¶7-120 Concluding tax periods

Your final (or “concluding”) tax period ends at the following time:
• at the end of the day before you die, or the entity ceases to exist

• at the end of the day on which you cease to carry on any enterprise

• at the end of the day on which your cancellation of registration takes effect (s 27-40).

If you are on a cash basis and your registration is cancelled (¶3-070), any GST, input tax credits or
adjustments that have not been attributed to any previous tax period will be attributed to your concluding
tax period (s 138-15). For GST adjustments that may apply where registration is cancelled, see ¶6-410.
For special rules that apply where the taxpayer is paying GST by instalments, see ¶8-037. For taxpayers
with annual tax periods, see ¶8-040. For the separate rules that apply to bankruptcy, liquidation and
receivership, see ¶7-100.
[GSTG ¶20-600]

ACCRUALS AND CASH BASIS

¶7-200 Working out the GST and credits attributable to a tax period

You need to work out the GST and input tax credits attributable to each tax period because you have to
lodge a GST return for every period. There are two alternative ways of doing this:
• the accruals (or invoice) basis

• the cash basis.

These two attribution methods are explained below. Note that they do not apply to attributing GST on
taxable importations, which are covered by separate rules (¶9-005).

¶7-205 Accruals basis

Unless you qualify to operate on a cash basis (¶7-300), you must use the accruals basis. Under the
accruals basis, the GST payable on a supply that you make is attributed to the tax period in which:
• you received any consideration for the supply (¶7-325), or

• an invoice for the supply is issued,

whichever comes first (s 29-5).

The input tax credit which you are eligible to claim on an acquisition that you make is attributed to the tax
period in which:
• you provided any consideration for the goods or services, or

• an invoice for the acquisition is issued,

whichever comes first (s 29-10).

However, you normally cannot claim an input tax credit unless you also have a tax invoice for the
purchase at the time of lodging the return (¶5-100). You may also be able to defer an input tax credit to a
tax period after the period in which you first held the tax invoice. This, however, is subject to the general
four-year limit on making input tax credit claims (¶5-010).
Some of these terms need more explanation:
Invoice.
An invoice is a document notifying an obligation to make a payment (s 195-1). It may be in written or
electronic form.
The ATO considers that the obligation must be a legal obligation (GST Ruling GSTR 2000/34). However,
it seems that a document may be an invoice even though it does not specify a time for payment (Shell NZ
Holding Company Ltd v CIR (1994) 16 NZTC 11,163 at p 11,168).
An invoice may include a delivery docket, but not a mere job quote or an insurance or membership
renewal notice. The Tax Office also considers that a notification of a conditional obligation is not an
invoice. On this basis, a standard contract for the sale of land would normally not be an invoice because
the sale is conditional on both parties completing their side of the agreement (GST Ruling GSTR
2000/28). Similarly, a document issued by an exporter would not be an invoice where it related to a debt
that would only become payable at a later stage, once the goods were loaded onto a ship (Interpretative
Decision ID 2002/531).
Suppliers may need to take care that documents such as reports on work in progress do not
unintentionally amount to invoices. Where it is not intended that the document create an obligation to pay,
it may be advisable to make this explicit in the document.
It has been held that a tax invoice is not “issued” until some act is done to convey it to the intended
recipient, though it is not clear whether it is necessary to show actual receipt (Tavco Group Pty Ltd v FC
of T 2008 ATC ¶10-049). The Tax Office considers that an invoice is issued when it is electronically
transmitted, posted, couriered, hand delivered or similar. The recipient is entitled to rely on the date of
issue noted in the invoice in the absence of any evidence to the contrary (GST Ruling GSTR 2000/34).
The Tax Office also considers that an invoice posted on a website is “issued”, provided: (1) it is posted in
an area that is readily accessible; (2) it can be downloaded or printed in a readable format; and (3) the
receiver has been informed that the invoice has been placed on the website (eg by email), or is aware by
prior arrangement that invoices will be placed on the website (GST Determination GSTD 2005/2).
Invoices would normally be issued by the supplier, but the Tax Office considers that a recipient created
tax invoice (¶5-140) would also qualify (GST Determination GSTD 2005/1).
Tax invoice.
This is a special type of document which must include certain details about the supplier, the supply and
the GST. It is not necessarily the same as an ordinary invoice, though they will commonly be the same
document (¶5-100).
Consideration.
This is normally the payment for the supply, but also covers almost anything of value (¶4-020). For the
rules on when various forms of consideration are treated as being received by the supplier, or provided by
the recipient, see ¶7-325.

Examples
(1) Assume that the seller and the buyer operate on an accruals basis and that both have the same tax periods. The seller sells
goods and issues an invoice in the first tax period of the year. The invoice does not comply with the requirements for a tax invoice.
The buyer pays for the goods in the second tax period of the year.
The seller becomes entitled to be paid when it issues the invoice and should therefore attribute all the GST on the sale to the first tax
period.
The buyer becomes liable to pay when it receives the invoice in the second tax period, but cannot attribute the input tax credit to that
period because it does not have a tax invoice. Until it receives this, it cannot claim the credit.
(2) Assume that the seller and the buyer operate on an accruals basis and that both have the same tax periods. The buyer makes a
deposit on goods in the first tax period, receives the goods in the second period (together with a tax invoice) and pays the balance
owing in the third period.
As the seller receives some of the consideration (ie the deposit) in the first tax period, all the GST on the sale should be attributed to
that period.
As the buyer does not receive a tax invoice until the second tax period, all the input tax credit for the purchase should be attributed
to that period.
(3) Assume that the seller and the buyer operate on an accruals basis and that both have the same tax periods. The seller requires
payment in advance in the first tax period, and delivers the goods in the second tax period, together with a tax invoice.
The seller should attribute all of the GST on the sale to the first period.
As the buyer does not receive a tax invoice until the second tax period, all the input tax credit for the purchase should be attributed
 to that period.

For cashflow implications of using the accruals basis, see ¶21-050 and following.
[GSTG ¶21-050]

¶7-300 Cash basis

Under the cash basis, GST is attributed to the tax periods in which consideration is received (¶7-325), and
input tax credits are attributed to the tax periods in which you provide consideration (¶7-320).
The cash basis is never compulsory, but you may choose to adopt it in any of the following situations:
(1) where you satisfy the relevant turnover test. The test is that:
(a) you are a “small business entity” for the income year in which you make your choice. Broadly,
this requires that your income, aggregated with that of affiliates and connected bodies, is less
than $10m (¶1-250), or

(b) you are not carrying on a business, and your GST turnover (¶3-030) is less than $2m. The
requirement that there not be a “business” — as distinct from an enterprise (¶3-020) — means
that this category would normally be restricted to taxpayers such as certain charities, trustees of
superannuation funds or government bodies.

(2) where you are an endorsed charity, a gift-deductible entity or a government school (¶15-000; s 157-
5).

(3) where you account for your income tax on a receipts basis (eg this method is commonly used by
individual professional practitioners: see Taxation Ruling TR 98/1).

(4) where each of the enterprises that you carry on is of a type that has been approved by the
Commissioner as being able to adopt a cash basis (s 29-40). Under such an approval, liquidators,
receivers, interim managers and trustees in bankruptcy may adopt a cash basis for the enterprises
that they carry on as representatives (Goods and Services Tax Choosing to Account on a Cash Basis
Determination (No 39) 2015). Approvals under this head may be appropriate for industry groups or
bodies representing their members, such as industrial trade unions (Goods and Services Tax:
Accounting on a cash basis Determination 2017 — Industrial Trade Unions). In considering these
applications, the Commissioner is likely to take into account the same considerations as when
considering applications for permission by individual entities (see below).

In each of these situations, the choice to adopt the cash basis will take effect from the first day of the tax
period that you choose.
Approval of cash basis in individual cases
Even if you do not qualify on any of these grounds, you can still adopt the cash basis where you can
satisfy the Commissioner that it is appropriate in your particular case. The Commissioner will take into
account:
• the nature and size of your enterprise

• the nature of your accounting system (s 29-45).

To get this permission, you have to apply. The Commissioner has provided the following guidelines (GST
Ruling GSTR 2000/13).
Whether supplies are on cash or credit basis.
Where the vast majority of sales are made for cash, then the cash basis may apply, for example a men’s
hairdresser, convenience store or hot bread shop.
Value and volume of supplies.
Generally, a cash basis business will have high volume supplies of low value, for example, ice-cream
vendors, milk or paper runs.
Circulating capital and consumables.
The cash basis will be more appropriate where the business does not rely on its circulating capital or
consumables to produce supplies. For example, it may not be appropriate for a motor vehicle spare parts
and repairs business.
Capital items.
The greater the reliance on the use of capital items, the greater the likelihood that it would not be
appropriate to use the cash basis. Cash basis is more appropriate where labour is the major component
of the business. For example, the accruals basis may be more appropriate for a car rental company, but
the cash basis may be more appropriate for a driving school where the use of the vehicles is only for the
purpose of providing lessons.
Credit policy and debt recovery.
If the business has formal procedures for extending credit and collecting debts, the cash basis is less
likely to be appropriate.
Size.
The cash basis is less likely to be appropriate where the business has a large number of employees,
large overheads, a large amount of trading stock or a complex business structure.
Nature of the accounting system.
This requires consideration of the books of account and the way they are kept for day-to-day business
operations; the appropriateness of the accounting method used; its ability to readily provide lists of
creditors and debtors; ordinary accounting principles and commercial practice; and Accounting Standard
AAS 6, which requires companies to use the accruals basis. For example, a cash basis would not be
appropriate for a business that is totally operated on invoice sales and has an accounting system with the
capacity to readily obtain invoice information.
Timing advantages.
The cash basis will not be warranted on the sole basis that it avoids timing disadvantages that may apply
under the accruals basis.
If permission is granted, the cash basis will take effect from the date notified by the ATO.
Ceasing to account on the cash basis
You may, at your own option, notify the Tax Office that you are ceasing to use the cash basis for future
tax periods. If you cease to satisfy the eligibility requirements, you must stop using the cash basis for
future tax periods, unless you have the Tax Office’s permission (s 29-50; 157-10).
[GSTG ¶21-100]

¶7-320 How the cash basis operates

If you are using the cash basis of accounting for GST, you attribute the GST to the tax period in which you
received payment (consideration) for supplies you make. If you only received part of the payment for
supplies during the tax period, you attribute a corresponding part of the GST to that period. The GST
which is attributed to the tax period is the amount that is included in your return for the period (s 29-5).
The time of invoicing or supply is irrelevant.
If you are making acquisitions and are using the cash basis, you attribute the input tax credit for the
purchase to the tax period in which you provided the payment. If you only provided part of the payment
during the tax period, you attribute a corresponding part of the credit to that period. The credit which is
attributed to the period is the amount that is claimed in the return for the period. However, you normally
cannot claim any credit unless you also held a tax invoice (¶5-100) for the acquisition at the time of
lodging the return (s 29-10).
You may also be able to defer an input tax credit to a tax period after the period in which you first held the
tax invoice. This, however, is subject to the general four-year limit on making input tax credit claims (¶5-
010).

Examples
(1) Assume that a seller and buyer both operate on a cash basis and both have the same tax periods. The seller sells goods and
issues a tax invoice in the first tax period of the year. The buyer pays for the goods in the second tax period of the year.
The seller should attribute the GST on the sale to the second tax period because that is when payment is received. The buyer
should attribute the input tax credit to the second period because it paid for the goods in that period and had a tax invoice.
(2) Assume that a seller and buyer both operate on a cash basis and both have the same tax periods. The buyer makes a part-
payment for goods in the first tax period, receives the goods in the second period, together with a tax invoice, and pays the balance
owing in the third period.
The seller should attribute the GST on the part-payment to the first tax period, and the GST on the balance to the third tax period.
As the buyer does not receive a tax invoice until the second tax period, the input tax credit for the part-payment should be attributed
to that period. The input tax credit for the balance should be attributed to the third period.

Cashflow and instalment transactions

Where there is a sale by instalments to a cash basis taxpayer, the parties cannot accelerate the claiming
of input tax credits by agreeing that an amount representing the GST component of the whole
consideration is payable at the time of the first instalment. The input tax credits for each tax period must
be based on the instalments paid in that period (Lancut (Aust) Pty Ltd v FC of T 2003 ATC 2204).
For other cashflow implications of using the cash basis, see ¶21-050 and following.
[GSTG ¶21-200]

¶7-325 When consideration is received or provided

For the purposes of the attribution rules, the ATO has given its views on when consideration is received
by the supplier, or provided by the recipient, under various types of transactions (GST Ruling GSTR
2003/12). These are as follows.
Cash.
Consideration is normally both provided and received when cash is tendered.
Cheque.
Consideration is provided when the cheque is either handed or posted to the supplier. Consideration is
received when the cheque is actually received, not when it is banked or cleared. If the cheque is post-
dated, consideration is normally both provided and received on the date stated. However, if the cheque is
received later to that date, the consideration is received when the cheque is received.
If a cheque you receive is dishonoured in a later tax period, and you are on the cash basis, the Tax Office
considers that you should lodge a revised BAS to reflect the reduced GST (GST Ruling GSTR 2000/19).
If you are on the accruals basis, the Tax Office says that this will not be an “adjustment event” (¶6-100),
but that a bad debt adjustment (¶6-200) may be appropriate if it is established that the debt has actually
become bad.
Traveller’s cheque.
Consideration is both provided and received when the cheque is countersigned.
Credit card.
If payment is made in person, consideration is both provided and received when the cardholder signs the
docket to authorise the transaction. If payment is made by telephone or through the internet, the
consideration is provided and received when the cardholder gives the card number and other required
details.
Debit card (EFTPOS).
Consideration is both provided and received when the transaction is accepted by the system.
Direct credit (eg BPAY).
Consideration is provided when the payment is authorised by the recipient, and is received when credited
to the supplier’s account. Consideration is not received under a conditional letter of credit until it can be
drawn on (Interpretative Decision ID 2002/530).
Direct debit.
Consideration is both provided and received at the time of transfer.
Interbank transfer.
Consideration is provided on a date authorised by the recipient and is received when the payment is
credited to the supplier.
Digital cash.
Consideration is both provided and received when the cash transfer is made.
Vouchers.
If payment is made using a voucher that entitles the holder to receive supplies up to a stated monetary
value (¶4-060), consideration is both paid and received on redemption of the voucher. To the extent that
other consideration is paid in connection with vouchers, the manner of payment (eg cash, cheque)
determines when the consideration is provided and received.
Stored value card.
If the card is supplied with no credit on it, and is not linked to a bank or similar account, the manner of
payment determines when the consideration is provided and received. Loading value onto the card may
not be treated as consideration. When the card, loaded with value, is used to purchase goods or services,
consideration is both provided and received at the time the card is used in payment.
If the card is supplied with credit already stored, and the card gives an entitlement to certain specific
goods or services (eg a transit card), the issue of the card is treated as the supply of a right (s 9-17;
former s 9-15(3)). The manner of payment for it will determine when the consideration is provided and
received.
If the card is able to be recharged by the supplier for further consideration provided by you, the recharging
of the card will be a further supply of rights to you, and will be treated in the same way as the initial
purchase of the card. The supply of goods or services for which the card is used will not be a supply for
consideration unless consideration in addition to the value on the card is provided. In that case, the
payment instrument used will determine when consideration is provided and received.
If the card is linked to a bank or similar account, its issue will be an input taxed financial supply (¶10-000).
The transfer of funds to the card from its linked account is not treated as consideration. The consideration
for a supply of goods or services obtained by the use of the card will be the full amount of the
consideration given, including the amount by which the value of the card is depleted. The consideration is
both provided and received at the time the transaction takes place.
Line of credit/overdraft.
If the supplier provides an interest bearing line of credit or overdraft, and payment is reflected by an
increase in the amount owing in relation to the debt facility, consideration is both provided and received at
the time that increase is recorded in the supplier’s accounts.
Book entries.
The Tax Office considers that, in the absence of actual payment, book entries can amount to the
provision or receipt of consideration for a taxable supply where there is a discharge of mutual liabilities by
way of set-off. The consideration is provided or received on the date that the set-off legally occurs. This is
typically when the set-off is recorded in the books of the parties (GST Determination GSTD 2004/4).
However, it needs to be established that there is a real transaction between the parties, and that
something real was acquired and supplied (Sunlea Enterprises Pty Ltd as trustee for Drummond Cove
Unit Trust v FC of T; 2018 ATC ¶10-480).
Sale on credit.
Where a supply is made on credit (eg 30 days to pay), consideration is provided and received when
actual payment is made in accordance with the manner of payment used. This would also apply where
the agreement is for the purchaser to pay by instalments, with interest accruing on the outstanding
balance (Interpretative Decision ID 2008/49).
Where a cash property sale was settled partly with a secured loan from the vendor, the AAT considered
that the taxable consideration received on settlement included the full amount of the loan, even though it
was ultimately not fully repaid. This was not affected by the fact that the vendor was on the cash basis
(Rod Mathiesen Truck Hire Pty Ltd v FC of T [2013] AATA 496).
Bill of exchange.
Where a bill of exchange with a future maturity date was honoured on maturity, the ATO considered that
consideration was given and received on the maturity date. If it is not honoured, there is no receipt of
consideration and, if the holder is on an accruals basis, a bad debt adjustment (¶6-200) may be available
(Interpretative Decisions ID 2010/10; ID 2010/11).
Barter transactions.
See ¶7-435.
Money held on trust pending disbursement
Where a retirement village operator held moneys deposited by residents in a maintenance reserve fund
on trust, the moneys were not “received” by the operator until they were withdrawn from the fund for the
purpose of providing the maintenance services. Accordingly, for a cash basis operator, the GST on the
supply of the maintenance services would be attributable to the tax period in which the withdrawal took
place, not the period in which the amounts were originally deposited by residents (Interpretative Decision
ID 2003/422). The same applies to an accruals-based operator that does not issue an invoice for the
services (Interpretative Decision ID 2003/423).
[GSTG ¶11-100]

¶7-330 Where GST or credits are adjusted

There may need to be an adjustment to the GST or input tax credits because of a change in
circumstances, for example, a transaction is cancelled, goods are returned, the price is changed, a debt
becomes bad or overdue, or there is a change in planned use. For the attribution rules for adjustments,
see ¶6-000.

SPECIAL ATTRIBUTION RULES

¶7-400 Changing your accounting basis

If you change your basis of accounting, there have to be some transitional rules that prevent some of your
transactions being taxed twice or falling through the net altogether.
For example, if you change from the cash basis to the accruals basis, GST and input tax credits may not
arise at all on transactions that were invoiced before the change but not paid until after. Conversely, GST
and input tax credits may arise twice if the change was from the accruals basis to the cash basis.
To overcome these anomalies, the following transitional rules apply.
Change from cash to accruals basis
If the GST on a supply was not attributable to a tax period before the change, but would have been if the
change had been made earlier than it was, the GST is attributed to the first tax period in which the change
applies (s 159-5).
If the GST on a supply was partly attributable to a tax period before the change, but would have been fully
attributable if the change had been made earlier than it was, the balance of the GST is attributed to the
first tax period in which the change applies (s 159-10).
Corresponding rules apply to input tax credits and adjustments.

Examples
(1) Assume you operate on a cash basis. In tax period 1, you issue an invoice for a supply. For tax period 3, you stop accounting on
a cash basis. In tax period 4, you receive payment for the supply.
The GST on the supply is not attributable to tax period 1, because at that time you are on a cash basis and have not received
payment. However, it would have been attributable to that period if you had been on an accruals basis, because you had issued an
invoice. It is therefore attributed to the first tax period in which you are on an accruals basis, ie tax period 3.
(2) Assume you operate on a cash basis. In tax period 1, you issue an invoice for a supply and receive 25% of the payment. For tax
period 3, you stop accounting on a cash basis. In tax period 4, you receive the balance of the payment for the supply.
The GST on the supply is 25% attributable to tax period 1, because at that time you are on a cash basis and have received 25%
payment. However, it would have been fully attributable to that period if you had been on an accruals basis, because you had issued
an invoice. It is therefore attributed 25% to tax period 1, and 75% to the first tax period in which you are on an accruals basis, ie tax
period 3.

Where GST or credits are attributed under these rules, but the relevant debt was written off as bad before
the change, there will be a GST adjustment in the same way as if you were always on the accruals basis,
except that it is attributed to the first period in which you are actually on the accruals basis (s 159-15).

Example
A company operates on the cash basis. In tax period 1, it issues an invoice for a supply. In tax period 2, it writes off the whole of the
debt because the customer has gone out of business. In tax period 3, it changes to the accruals basis. Under the normal transitional
rule on a change of accounting basis, the GST on the supply will be attributed to tax period 3. However, because the debt is bad,
there will also be a decreasing GST adjustment (¶6-200) in that same period, which will have the effect of reducing the net GST on
the supply to nil.

Change from accruals to cash basis

If the GST was attributable to a tax period before the change, it remains attributable to that period and no
other (s 159-20). Corresponding rules apply to input tax credits and adjustments.

Example
Assume you operate on an accruals basis. In tax period 1, you issue an invoice for a supply. In tax period 3, you start accounting on
a cash basis. In tax period 4, you receive payment for the supply.
The GST on the supply is attributable to tax period 1, because at that time you are on an accruals basis and had issued an invoice.
In the absence of the transitional rule, it would also have been attributable to tax period 4, because you were on a cash basis and
had received payment. The effect of the transitional rule is that the GST remains wholly attributable to tax period 1, and not to tax
period 4.

If you change from an accruals to a cash basis, and a debt is written off as bad after the change, there will
be a GST adjustment in the same way as if you were still on the accruals basis (s 159-25).

Example
A company operates on the accruals basis. In tax period 1 it issues an invoice for a supply. In tax period 2 it changes to the cash
basis. In tax period 3 it writes off the whole of the debt because the customer has gone out of business. Under the normal
transitional rule on a change of accounting basis, the GST on the supply remains attributable to tax period 1. However, because the
debt is bad, there will be a decreasing GST adjustment (¶6-200) as if the company were still on the accruals basis. This will apply in
tax period 3 and will have the effect of reducing the net GST on the supply to nil.

[GSTG ¶22-000]
¶7-420 Progressive or periodic supplies

If you are not operating on a cash basis, a special rule applies to agreements where a single supply or
acquisition is made for a period or on a progressive basis, and the payment is made on a progressive or
periodic basis (Div 156). This specifically applies to leases and hiring arrangements (s 156-22), but other
examples would include annual subscriptions paid on a monthly basis, building and construction
contracts, real estate property management contracts, pay-by-the-month insurance cover or an office
equipment maintenance contract payable monthly.
In this situation, the contract is treated as a series of contracts for supplies that are paid for separately (s
156-5; 156-10; 156-17; 156-20). From the supplier’s point of view, this means that each progressive or
periodic component of the supply is treated as a separate supply, so that the GST is attributed to the tax
period in which the payment for that component is made or earlier invoiced. Correspondingly, from the
recipient’s point of view, it means that the input tax credit for each progressive or periodic payment is
attributed to the tax period in which the payment is made or earlier invoiced. Without this special rule, you
would have been required to attribute all the GST and input tax credits to the tax period in which the first
payment was made or earlier invoiced.
It may happen that the progressive or periodic components are not readily identifiable. In this case, the
components will correspond to the separate amounts of consideration (s 156-5; 156-10).

Examples
(1) Under a 12-month lease, payments are made monthly. In this case, the components are readily identifiable as being monthly.
The lessee’s input tax credit for each lease payment will be attributed to the earlier of the invoice or payment for the month.
(2) Under a 12-month lease to a farmer, the payments are to be staggered according to when crops are harvested. In this case, the
components may not be readily identifiable. If the payments are actually made in April ($10,000), May ($5,000) and June ($5,000),
the lease will be treated as comprising three separate supplies of $10,000, $5,000 and $5,000 occurring in those months. The
farmer’s input tax credits will be calculated accordingly.

Although Div 156 applies to rent payments, it does not apply to lease premiums or lease incentives (GST
Ruling GSTR 2000/35). Hire-purchase transactions entered into from 1 July 2012 onwards are specifically
excluded (s 156-23); this confirms the Commissioner’s previous practice (GST Ruling GSTR 2000/29).
For the separate rules applying to these transactions, see ¶7-438.
Where a deposit is paid, this is not treated as a part payment unless the deposit is forfeited (¶4-070) or
unless it was never forfeitable in any event.
It is not necessary that both the supplier and the recipient account on the accruals basis. If only one party
is operating on the accruals basis, the rule will apply only to that party.

Example
A consultant agrees to provide consultancy services to a company for a period of six months, with payments made monthly. The
consultant is on the cash basis and the company is on the accruals basis. The special rule in Div 156 will therefore apply to the
company but not the consultant. In accordance with the normal cash basis rules, the consultant must attribute the GST on each
payment to the tax period in which it is received. In accordance with Div 156, the company must attribute the input tax credit for each
payment to the tax period in which the payment is made or earlier invoiced.

Part not connected with Australia

A further adjustment must be made if any part of these supplies is not connected with Australia, for
example, if services under the contract are provided outside Australia through an overseas branch (¶4-
100). In this situation, the part that is not connected with Australia is itself treated as a separate supply
that is not subject to GST (s 156-15). This particular rule applies whether you are on a cash basis or an
accruals basis (s 156-25).
Tax invoice requirements
Although the various components are treated as separate supplies, it is not necessary to issue a separate
tax invoice (¶5-100) for each of those supplies. The Commissioner accepts that a single tax invoice can
be issued covering all the supplies, provided that it identifies the price of each of them, either within the
document or in an attached schedule. For example, a lease agreement that showed the rent as $1,000 a
month would be treated as a tax invoice covering all the monthly supplies, provided that it otherwise
complied with the tax invoice rules (GST Ruling GSTR 2013/1).
The Commissioner has waived the requirement for an employer making an acquisition of a motor vehicle
by way of a lease through a full or split full novation arrangement to hold a tax invoice for an input tax
credit to be attributable to a tax period (s 29-10; ¶5-130). The employer must hold documents other than a
tax invoice that meet certain requirements (WTI 2013/10). Formerly, it was the practice for the novated
lease agreement to be treated as a tax invoice provided that it otherwise satisfied the information
requirements (former GST Advice GSTA TPP 056).
Contract spanning 1 July 2000
A special transitional rule applied where goods or services were provided progressively under a contract
that spanned 1 July 2000 (¶19-210).
[GSTG ¶22-050]

¶7-430 Lay-by sales

Lay-by sales made in the course of business would normally be subject to GST.
If the retailer is on the cash basis (¶7-300), it will account for GST on each instalment as it is received.
Correspondingly, if the customer is a cash basis business customer it will claim input tax credits as the
instalments are made. Of course, if the customer is a private consumer, no question of claiming input tax
credits will arise.
If the retailer is on the accruals basis, the normal attribution rules would mean that it should account for
the whole of the GST in the tax period in which the first instalment is made, or tax invoice is issued (¶7-
205). This result can be seen as inappropriate, as a lay-by customer is not under any obligation to
complete the sale. Accordingly, under the powers noted at ¶7-440, the Tax Office has varied the normal
rules by determining that retailers in this position can instead account for the GST in the tax period in
which the final instalment is made (GST Ruling GSTR 2000/12; Goods and Services Tax: Particular
Attribution Rules for Lay-By Sales Determination 2017). Correspondingly, a business customer on the
accruals basis cannot claim an input tax credit for any of its payments until the tax period in which the
final instalment is made.
A business customer should ensure that it receives a complying tax invoice to support its claim for input
tax credits. This may be comprised in the lay-by agreement.

Example
A registered retailer operates on a cash basis, with quarterly tax periods. Under a lay-by sale, the total price is $1,650. The
purchaser makes payments of $550 in October 2018, December 2018 and February 2019. The retailer should account for 1/11th of
$1,100, ie $100 in its return for the December 2018 quarter and 1/11th of $550, ie $50 in its return for the March 2019 quarter.
Note: If the retailer had been on an accruals basis, it should account for GST of 1/11th of $1,650, ie $150 in its return for the March
2019 tax period.
Assume that the purchaser is registered, enters into the transaction as part of its business and operates on a cash basis with
quarterly tax periods. It will be entitled to input tax credits of $100 in its return for the December 2018 tax period and $50 in its return
for the March 2019 quarter.
If instead the registered purchaser was on the accruals basis, it would be entitled to an input tax credit of $150 in its return for the
March 2019 quarter.

Cancellation of lay-by
If a lay-by is cancelled, and payments are refunded, the supplier will be entitled to a GST adjustment to
the extent that it has already accounted for GST on those payments (s 19-40). The adjustment is allowed
in the tax period in which the supplier finds out about the cancellation (s 29-20). This adjustment will,
however, apply only to cash basis suppliers. Accruals basis suppliers would not have accounted for any
GST in any event because of the special attribution rules noted above.
If any payments are retained by the supplier, they will be treated as consideration for the supply of the
lay-by service (s 102-5). This also applies to any additional payments recovered from the customer as a
result of the cancellation (but not uncollected moneys required to be forwarded to the government under
unclaimed moneys legislation (Interpretative Decision ID 2005/306)). The GST is attributed to the tax
period in which the amount is retained or recovered (s 102-10). This applies whether the supplier is on the
cash or the accruals basis.
Correspondingly, if the purchaser took out the lay-by for business purposes and later cancels, the
purchaser will have an adjustment increasing its GST to the extent that it has already claimed input tax
credits. This will only apply to cash basis purchasers. Accruals basis purchasers would not have claimed
any input tax credits because of the special attribution rules noted above.
The business purchaser can, however, claim an input tax credit for the GST component of the amount
retained by the supplier. This credit is attributed to the tax period in which the payment was retained or
recovered. This applies whether the purchaser is on the cash or the accruals basis.

Example
A registered retailer operates on a cash basis, with quarterly tax periods. Under a lay-by sale, the total price is $1,650. The cash
basis purchaser makes payments of $550 in October 2018 and December 2018. It then cancels and makes no further payment.
The retailer refunds the payments made but retains $55 as a service fee. The retailer is entitled to a GST adjustment reducing its
previously declared GST by $100, and is liable for GST of 1/11th of $55, ie $5. The adjustment is allowed in the return for the period
in which the retailer finds out about the cancellation (March 2019 quarter). The GST is attributed to the tax period in which the $55 is
retained (March 2019 quarter).
Note: If the retailer had been on an accruals basis, it would not be entitled to any adjustment because it would not yet have
accounted for any of the payments. However, it will be liable for GST of $5 in its return for the March 2019 quarter.
The purchaser will be subject to a GST adjustment increasing its GST by $100 in its return for the March 2019 tax period. It will also
be entitled to an input tax credit for 1/11th of $55, ie $5 in the same return.
Note: If the purchaser had been on an accruals basis, it would not be liable for any adjustment because it would not yet have
claimed input tax credits for any of the payments. However, it will be entitled to an input tax credit for 1/11th of $55, ie $5 in its return
for the March 2019 quarter.

[GSTG ¶22-100]

¶7-435 Barter transactions and trade exchanges

Barter transactions may be formal or informal. The application of the GST rules to informal barter
transactions is discussed at ¶4-020.
Formalised barter transactions are typically carried out under a system involving points or credits with
standard values (eg “trade exchanges”). In these cases, the consideration normally consists of the
amount of credit to the supplier’s account (GST Ruling GSTR 2003/14).

Example
Under a formalised barter system, Chris provides secretarial services to Tim, and is credited with 110 credits. Each credit is worth
$1. The price of the supply is therefore $110. If Chris is registered and made the supply as part of his business, he is liable to
account for GST of $10.

The ATO considers that, for purposes of attribution of GST and input tax credits, the consideration is both
received and provided when the recipient of the supply signs the docket or transaction slip to authorise
the exchange to credit the supplier’s account and debit the recipient’s account. When a payment is made
remotely (eg by telephone or through the internet) using a membership card, consideration is provided
and received when the member cardholder gives the card number and other required details (GST Ruling
GSTR 2003/12; Taxology Pty Ltd v FC of T [2016] AATA 565).
 Example
Under a formalised barter system, Merryn provides business services to other participants and is credited with barter points. She
uses those barter points to purchase business equipment from Angus, another participant.
Merryn is treated as having paid when she signs the docket authorising the scheme organiser to credit Angus’ account and debit her
account.

Direct barter
Where there is a direct barter of goods or services, but there is a time lapse between the two
transactions, the Tax Office will treat the first transaction as a prepayment for the second (GST Ruling
GSTR 2003/12).

Example
A painter and a plumber agree that the painter will provide specified painting services to the plumber and in return the plumber will
later provide specified plumbing services for the painter. The provision of the painting services will be treated as a prepayment for
the provision of the plumbing services. The painter therefore claims an input tax credit, and the plumber accounts for GST, based on
a consideration equal to the GST-inclusive market value of the painting. When the plumbing is done, this is consideration for the
painting. The plumber claims an input tax credit, and the painter accounts for GST, based on a consideration equal to the GST-
inclusive market value of the plumbing.
Note: This example assumes that invoices triggering GST liabilities are not issued before the supplies are made.

The Tax Office considers that: (1) where a current exchange member sells any of its credit for a sum of
money, this may be a taxable supply, not an input taxed financial supply; and (2) the tax invoice for a
trade exchange transaction should show the GST-inclusive price or GST payable in Australian currency
(GST Ruling GSTR 2003/14; Interpretative Decision ID 2007/31).
For further Tax Office guidelines, see Bartering and barter exchanges (NAT 9748) and the ATO Fact
Sheet Record keeping for barter transactions.
The supply of an interest in a barter trade exchange is taxable in accordance with the normal rules (GST
Regulations s 40-5.09; GST Determination GSTD 2005/5). This means that GST is required to be
remitted on the supply of the interest, and input tax credits are available for the acquisition of the interest.
Further, barter scheme suppliers will be entitled to claim input tax credits for acquisitions that relate to
making the supply of the interest in the scheme.
The Tax Office has set up a data matching project (¶18-175) using data collected from barter exchanges
to identify incorrect treatment of barter transactions by participants. It also considers that certain artificial
barter exchange agreements involving grossly inflated payments are not effective for GST purposes (GST
Determination GSTD 2006/5; Taxpayer Alert TA 2005/4).
Simplified compliance rules
From 18 November 2016, simplified compliance rules apply to barter (or “countertrade”) transactions in
certain situations where the transaction is GST-neutral (Practical Compliance Guideline PCG 2016/18;
¶4-020).
[GSTG ¶11-770]

¶7-438 Hire-purchase transactions

A hire-purchase agreement is normally treated in the same way as a purchase of goods by instalments. In
accordance with the usual rules (¶7-205), taxpayers on an accruals basis account for their GST liabilities
upfront in the tax period when the first payment is received or an invoice is issued, whichever is the
earlier. Correspondingly, they claim input tax credits in the tax period when they make the first payment,
or an invoice is issued, whichever is the earlier.
In contrast, cash basis taxpayers would normally attribute their GST liabilities and input tax credits
progressively, in the tax periods in which they make or receive each instalment. To overcome the
distortion that this rule creates between hire-purchase and other forms of financing, a special rule now
enables these cash basis taxpayers to instead account for hire-purchase transactions as if they were
accruals basis taxpayers. This special treatment only applies to agreements entered into on or after 1 July
2012 (s 158-5): ¶12-110.

Examples
(1) A taxpayer who accounts on a cash basis entered into a hire-purchase agreement in July 2018. The purchase price was $5,500.
The taxpayer paid the first of 10 instalments of $550. Although the taxpayer is on a cash basis, it can claim the full input tax credit of
$500 (ie 1/11 × $5,500) in the tax period in which the invoice was originally issued, in the same way as if it had been on an accruals
basis.

For the position where a hire-purchase agreement is terminated early, see ¶4-020.

¶7-440 Tax Office guidelines on particular attribution situations

The Commissioner has the power to determine that special attribution rules for GST, input tax credits and
adjustments should apply in situations where the normal attribution rules would have an inappropriate
effect (s 29-25). This power can only be exercised in situations such as:
• a deferral of the passing of title

• a deferral of the use or enjoyment

• a cooling-off period

• a conditional contract

• a situation where aspects of the contract are not known by the parties at the relevant time.

The power can also be exercised in the situation where the GST treatment of a supply or acquisition will
not be known until a later supply is made, for example, where the supply is made through a distribution
chain.
The special attribution rule must relate to all instances of the specified kind of supply, acquisition,
importation or adjustment. It cannot be limited, for example, to supplies of a specified kind made by a
particular entity. Once a determination is made, it is mandatory.
The Commissioner has determined that special attribution rules will apply in the following situations.
Contracts subject to cooling off
Certain contracts are subject to statutory cooling-off periods that enable a purchaser to cancel the
contract, for example, in the case of used cars and door-to-door sales. In these situations, the GST on the
sale and the input tax credit on the purchase will be deferred until the tax period in which the cooling-off
period expires. This will apply irrespective of the accounting basis (GST Ruling GSTR 2000/29; Goods
and Services Tax: (Particular Attribution Rules for Cooling off Periods) Determination 2017).
Coin- or note-operated machines
Where transactions are carried out through a coin- or note-operated vending or games machine, you may
not know what sales you have made until you empty the machine. Under the normal attribution rules, you
would therefore have to empty the machine at the end of every tax period. To overcome this compliance
cost, the GST on the sales will be attributed to the tax period in which the machine is emptied, whenever
that may be. This applies irrespective of your accounting basis (GST Ruling GSTR 2000/29; Goods and
Services Tax: Particular Attribution Rules for Banknote and Coin-operated Machines and Similar Devices
Determination 2017).
This will typically apply to machines used for food and drink vending, games and amusements, access to
parking or toll-ways, photocopying, internet kiosks, car washes, laundry services and automatic photo
booths.
Where GST applies, the purchaser’s entitlement to input tax credits will be determined in the usual way.
Typically, the entitlement, if any, will arise when payment is made.
Transactions conducted through agents
If you make supplies or acquisitions through your agent (¶17-400), information about those transactions
may not become available to you until after the end of the tax period in which they occurred. Where this
occurs as part of your normal business practice, the following rules will apply:
• if you are a supplier on an accruals basis, you attribute the GST to the tax period in which you
become aware that any consideration has been received or that an invoice has been issued,
whichever is the earlier

• if you are a supplier on a cash basis, you attribute the GST to the tax period in which you become
aware that consideration has been received

• if you are an accruals based purchaser, you attribute the input tax credit to the tax period in which you
become aware that any consideration has been provided or that an invoice has been issued,
whichever is the earlier

• if you are a cash-based purchaser, you attribute the input tax credit to the tax period in which you
become aware that consideration has been provided (GST Ruling GSTR 2000/29; Goods and
Services Tax Particular Attribution Rules for Supplies and Acquisitions Relating to the Operation of a
Collecting Society under the Copyright Act Determination (No 34) 2015; Goods and Services Tax:
(Particular Attribution Rules for Supplies and Acquisitions made through Agents) Determination
2017).

This, however, does not affect the requirements for issuing tax invoices and adjustment notes (¶5-190).
Nor does it apply to transactions conducted by a non-resident through a resident agent (¶17-410), or
situations where there is an agreement for the agent to act as a principal (¶17-420).
Where there is retention of payment
Under some contracts, such as building and construction contracts, a part of the payment may be
retained until the end of the defects liability period, or pending final completion. In this situation, the GST
on the retained amount may be deferred until the tax period in which it is actually received or an earlier
invoice relating to it is issued. Similarly, the input tax credit on the retained amount is deferred until the tax
period in which the amount is actually paid or an invoice issued (GST Ruling GSTR 2000/29; Goods and
Services Tax: (Particular Attribution Rules for Retention Payments) Determination 2017). In these
situations, the Commissioner suggests that the initial tax invoice should set out the total price, less the
retention amount, with a net amount payable (GST Ruling GSTR 2013/1). This special rule only needs to
apply if you account on an accruals basis.
Estimated or contingent payments
Under arrangements such as agricultural pooling contracts, payments may be received before the final
amount is known. That final amount will typically be calculated after the goods are measured or graded,
and may be affected by current market conditions. In this situation, the GST and input tax credit are
attributed to a tax period to the extent that consideration has been received/paid or an invoice issued. The
balance will be attributed to the tax period in which the final amount becomes known (GST Ruling GSTR
2000/29; Goods and Services Tax: Particular Attribution Rules Where Total Consideration Not Known
Determination 2017). The Commissioner has waived the requirement to hold a tax invoice in certain such
situations (WTI 2013/4: see ¶5-130). This special rule will not apply if you account on a cash basis.
A similar rule applies where a dealer receives a third party motor vehicle incentive payment (¶4-010) or
issues an invoice for the payment before receiving the payment. In this case, the GST and luxury car tax
payable will be attributable to the tax period in which the total consideration for the supply of the vehicle is
known. This is normally the tax period in which the dealer and customer enter into a contract for the sale
of the vehicle (A New Tax System (Goods and Services Tax) (Particular Attribution Rules for Certain
Motor Vehicle Incentive Payments Made to Motor Vehicle Dealers) Legislative Instrument 2015).
Electricity and gas supplies
Some public utility providers have special payment plans allowing customers to spread their payments,
which may involve part payment before the meter is read and an invoice issued. If the provider is on the
accruals basis, the Commissioner considers that the GST payable on those supplies should be attributed
to the tax period in which the invoice is issued or would normally have been issued (GST Ruling GSTR
2000/32; Goods and Services Tax: (Particular Attribution Rule for Supplies of Gas or Electricity made by
Public Utility Providers) Determination 2017).
Lay-bys
For the special attribution rules that apply to accruals basis retailers and customers under a lay-by
transaction, see ¶7-430.
Transactions falling under more than one rule
It may happen that a single transaction is covered by more than one of these special attribution rules. In
this case, the Commissioner considers that the rule which results in later attribution should apply (GST
Ruling GSTR 2000/29; Goods and Services Tax: Application of Particular Attribution Rules
Determinations (Determination) 2017).
Situations where normal rules will apply
The Commissioner does not intend to vary the normal attribution rules in the case of goods sold “on
approval” or on a “sale or return” basis, or floor plan arrangements (GST Ruling GSTR 2000/29). The
effect is as follows:
Goods sold on “approval” or on a “sale or return” basis: the seller is not normally charged or required to
make payment until the ownership of the goods changes. If this is the case, GST or input tax credits will,
under the normal rules, not be attributed before title to the goods passes (¶17-422). The Commissioner
regards this as appropriate.
Floor plan arrangements: these typically apply to motor vehicles, caravans, power boats, pianos and
jewellery. Under the normal attribution rules, the manufacturer, distributor or financier attributes GST to
the tax period in which it issues an invoice or receives any part of the consideration from the dealer. This
will usually be when the dealer has secured a customer and acquired title to the goods (¶17-422).
Similarly, the dealer attributes its input tax credit to the same tax period. (This assumes neither party is on
the cash basis.) The Commissioner regards this as appropriate.
[GSTG ¶22-250]

¶7-450 Other special attribution rules

Other special attribution rules apply to:

• importations (¶9-005; ¶9-010)

• agents and insurance brokers (¶5-190)

• company amalgamations (¶17-100)

• associates (¶17-500)

• security deposits (¶4-070)

• pre-establishment costs (¶5-030)

• representatives of incapacitated entities (¶18-250)

• second-hand goods (¶16-110)

• cessation of registration (¶6-410)

• supplies of real estate (¶11-065)

• supplies of things acquired without full credits (¶6-310).
GST RETURNS • THE BAS • PAYMENT •
ASSESSMENT • REFUNDS
INTRODUCTION
Various options for lodgment of GST returns ¶8-000
STANDARD METHOD
GST return for each tax period ¶8-002
Standard method: time for lodgment ¶8-005
Standard method: completion of GST return ¶8-010
OTHER REPORTING OPTIONS
Option to use streamlined quarterly remittance form ¶8-036
Small business option to pay GST instalments ¶8-037
Option to report and pay annually ¶8-040
OTHER PROCEDURAL ISSUES
Authorised BAS preparers ¶8-042
How a GST return is lodged ¶8-043
Correcting and revising an earlier BAS ¶8-045
Other special rules for GST returns ¶8-050
ASSESSMENT, PAYMENT AND REFUNDS
GST assessments ¶8-080
Amending an assessment ¶8-090
Payment of net GST ¶8-100
Payment of GST refunds ¶8-110
Restriction where refund would give rise to windfall ¶8-115
Review and other rules about refunds ¶8-120

Editorial information

Summary
If you are registered or required to be registered, you need to make a GST return in your Business
Activity Statement, and account for the GST. Normally, for monthly taxpayers, this must be done for
each tax period. However, streamlined requirements for lodgment of returns apply to quarterly
taxpayers. Returns may be made electronically — in fact, this is normally a requirement if your GST
turnover is $20m or more. This chapter also explains the procedures for refunds, and directs you to
various special rules that might apply.
INTRODUCTION
¶8-000 Various options for lodgment of GST returns

All taxpayers who are registered — or are required to be registered — must provide a GST return to the
ATO (s 31-5). The GST return must be in the approved form, ie in a Business Activity Statement (BAS)
(¶8-010); however, the precise requirements for lodging returns vary according to the circumstances.
The standard method requires a return to be lodged for each tax period (¶8-002). This may be used by
either monthly or quarterly taxpayers.
Two additional options apply specifically to quarterly taxpayers. These are:
• the “quarterly remittance” method, which enables a substantially abbreviated form to be lodged each
quarter, with a full information report lodged annually (¶8-036)

• the “instalments” method, which is available only to small taxpayers. This requires quarterly
instalments to be paid and an annual return to be lodged (¶8-037).

Simplified BAS for newly registered businesses . . .

From 19 January 2017, newly registered small businesses have the option of completing a simpler BAS.
Under this option:
• if a quarterly GST reporting cycle was selected when registering for GST, select “Option 2: Calculate
GST quarterly and report annually” on the first BAS. The ATO will not seek the additional GST
information or lodgment of the Annual GST Information Report

• if a monthly GST reporting cycle was selected at registration, insert “0” at G2, G3, G10 and G11 on
your BAS

• if an annual GST reporting cycle was selected at registration, the business can leave G2, G3, G10
and G11 blank on its Annual GST Return.

. . . and for small businesses

From 1 July 2017, small businesses with GST turnover of less than $10m have simpler requirements for
their annual BAS. The effect is that the annual BAS will only need the following information:
• G1 Total sales

• 1A GST on sales

• 1B GST on purchases

• 1H GST instalments.

Information will no longer be required on labels (G2) export sales, (G3) GST-free sales, (G10) capital
purchases and (G11) non-capital purchases. Quarterly GST instalments reporting will remain unchanged.
Voluntary registrees
For taxpayers that are voluntarily registered, there is an option to report on an annual basis (¶8-040). This
may be used by either monthly or quarterly taxpayers.
[GSTG ¶25-000]

STANDARD METHOD
¶8-002 GST return for each tax period
The “standard” method applies to:
• taxpayers with monthly tax periods, and

• quarterly taxpayers who choose to use it.

Under the standard method, you must provide a GST return in your Business Activity Statement (BAS) for
each tax period (s 31-5).
The return must be made even if the net amount (¶8-100) is zero, and even if you are not liable for any
GST on supplies made during the period (s 31-5).
[GSTG ¶25-040]

¶8-005 Standard method: time for lodgment

Under the standard method (¶8-002), if you have monthly tax periods, the return must normally be made
on or before the 21st day of the month following the end of the tax period (s 31-10). For example, the
monthly return for March 2018 is due by 21 April 2018.
If you are a quarterly taxpayer using the standard method, the lodgment deadlines are:

Quarter ending Deadline

30 September 28 October
31 December 28 February
31 March 28 April
30 June 28 July

Extensions
The Commissioner has the power to extend the time for lodgment. Two-week extensions of the 28
October, 28 April and 28 July deadlines may be allowed for businesses lodging and paying their quarterly
returns online via the ATO’s Business Portal (¶8-043). Extensions are also allowed where returns are
prepared by tax agents. In individual cases, an extension may be appropriate where there are the usual
delays in the settlement of affairs following a taxpayer’s death. Applications for such individual extensions
should be made before the due date to avoid the possibility of penalty. For the position where the
deadline date falls on a weekend or public holiday, see ¶25-055.
People affected by major natural disasters may be eligible for concessional extensions of time in lodging
returns or paying GST, and accelerated refunds where they are in necessitous circumstances, eg the
2019 floods in North Queensland. For details, see www.ato.gov.au/individuals/dealing-with-disasters/.
Adjusted monthly tax periods
A special rule applies if your monthly tax period ends during the first seven days of a month. This can
happen where the period has been adjusted to fit in with your normal balancing date (¶7-105). In this
situation, the time for lodgment is calculated at the beginning of that month, not the following month.

Example
Assume that as a result of the alignment of your GST and commercial accounting periods, your monthly GST tax period ends on 2
October 2019, not 30 September 2019. You must lodge your return for that tax period by 21 October 2019.

BAS and FBT returns

The Commissioner suggests that if your BAS includes fringe benefits tax (FBT) instalments, you should
lodge your BAS for the period ending on 31 March before you lodge your FBT return for the FBT year
ending on that date. This should ensure that your FBT details are up to date and may therefore avoid
delays in processing the FBT return.
Penalties
For details of penalties for late lodgment or incorrect returns, see ¶18-300.
[GSTG ¶25-040]

¶8-010 Standard method: completion of GST return

Under the standard method (¶8-002), the GST return is incorporated in a two-page form called the
Business Activity Statement, or BAS. The BAS is also used as a return for income tax withholding and
instalments, deferred company tax instalments, FBT instalments, luxury car tax (¶23-000) and wine
equalisation tax (¶22-000).
Normally, the ATO will send you a personalised BAS before lodgment time. It will indicate when it needs
to be lodged and the tax period it covers.
Although the BAS itself is relatively short, considerable preparation may be needed in order to complete
it. Businesses should not underestimate the time needed, particularly, in the case of their first few returns.
In calculating the GST, taxpayers may use the “GST Calculation Worksheet” which is supplied by the
ATO but which is not actually lodged with the BAS. Alternatively, they can use the more streamlined
“derived from accounts” method, which enables them to identify their GST payable and input tax credits
directly from their accounting records. This method may be used if you separately record your GST
amounts for supplies and acquisitions. This requirement may be satisfied by the relatively simple
procedure of having a GST column in your cash book or spreadsheet.
Net GST or refund
In general terms, you are liable to pay GST for a tax period if the GST payable on supplies is more than
the input tax credits claimable on your acquisitions. You are entitled to a refund from the ATO for a tax
period if the GST payable on your supplies is less than the input tax credits claimable on your acquisitions
(¶8-100).
The GST return therefore requires you to:
• identify the GST payable on your supplies

• identify the input tax credits you can claim

• offset them against each other.

Guidance on completing the return is given in the ATO’s Goods and Services Tax — How to Complete
Your Activity Statement (NAT 7392).
ATO tips on preparing a BAS
The ATO has given the following tips and warnings:
• if you have lost your BAS form, contact the ATO to get a new one sent

• the actual BAS form must be posted in after payment is made at the Post Office or electronically

• use numerics rather than symbols such as $ + − /

• use only whole dollars

• generally, leave boxes blank if they do not apply to your business. However, you should write a zero
(0) at G1 and 1A if you are using GST Option 1 or 2 and have nothing to report due to a suspension
of trading. If you are varying your GST instalment down to zero, you should write a zero at 1A
 • use black pen only. If a mistake is made, use white-out (for corrections to earlier returns, see ¶8-045)

• if you have not provided your correct bank account details, it may take longer to receive a refund —
telephone 13 28 66 to update your details

• do not add attachments or explanatory comments.

Common errors in preparing BAS

For common errors made in complying with GST requirements, see ¶18-170. For corrections to earlier
returns, see ¶8-045.
[GSTG ¶25-060]

OTHER REPORTING OPTIONS

¶8-036 Option to use streamlined quarterly remittance form

Quarterly taxpayers have the option — referred to as Option 2 — of making their GST payments on the
basis of a “simple remittance form” and lodging a more detailed annual information report.
The quarterly remittance form only requires reports of sales, GST collected on sales, and GST paid on
purchases. The annual information report requires details of exports, other GST sales, capital and other
purchases for compliance reasons. This report must be lodged by the date the income tax return is due
(or 28 February following the end of the financial year if no income tax return is due).
This method is optional. Quarterly taxpayers that fully comply with the standard system (¶8-002) are not
under any obligation to change from their previous arrangements.
[GSTG ¶25-040]

¶8-037 Small business option to pay GST instalments

A further option — referred to as Option 3 — applies to certain small businesses that are entitled to lodge
quarterly. Under this “instalments” option, GST returns are lodged annually and instalments of estimated
GST are paid quarterly, with an annual reconciliation being made. The instalments are generally based on
the previous year’s GST. The amount of the instalments may be varied by the taxpayer, but penalties may
apply if the varied instalments turn out to be too low.
Who is eligible
You may elect to use the instalments system if you satisfy all the following requirements:
• you are a “small business entity” (¶1-250) in the income year in which you make your election, or you
are a non-business taxpayer with a “GST turnover” (¶3-030) that does not exceed $2m

• you are not required to lodge on a monthly basis and have not elected to do so (¶7-100)

• you have a “current lodgment record” of at least four months

• you have lodged all previous GST returns as required

• you are not in a “net refund position” (s 162-5).

Even if you are eligible, your election can still be disallowed if the Commissioner is satisfied that you have
a history of failing to comply with your taxation obligations (s 162-15). Limited registration entities (¶9-120)
are not eligible for the instalments system.
GST turnover of non-business taxpayers
A non-business taxpayer’s “GST turnover” is measured in the same way as for registration purposes (¶3-
030). This means that it will satisfy the turnover requirement if:
 • its current GST turnover does not exceed $2m, and the Commissioner is not satisfied that its
projected GST turnover will exceed $2m, or

• its projected GST turnover does not exceed $2m (s 188-10).

Current lodgment record

To satisfy the current lodgment record requirement, you must have lodged GST returns covering at least
a four-month period before the current tax period (s 162-10). This would be satisfied by: (1) four monthly
returns; (2) two quarterly returns; or (3) one monthly and one quarterly return. This requirement provides
the ATO with a payment history so that it can make reasonable instalment calculations. For this reason, if
you are a member of a GST group, the period starts again whenever there is a change in membership.
Similarly, if you were previously the representative member of a GST group, returns lodged for periods
while you had that status are not taken into account in determining your lodgment record.
Net refund position
Whether you are in a net refund position is measured over a period that varies according to how long you
have previously been lodging returns (s 162-5). If you have lodged returns for less than seven months,
you work out whether you are in a net refund position by looking at the results for the three months
preceding the current tax period. If you have lodged returns for eight or nine months, you look at the six
months preceding the current tax period. If you have lodged returns for 10, 11 or 12 months, you look at
the nine months preceding the current tax period. If you have lodged returns for at least 13 months, you
look at the 12 months preceding the current tax period.

Example
A newly established quarterly payer has net GST of $16,000 for its first GST return (up to 30 September 2017) and a refund of
$12,000 for its second GST return (up to 31 December 2017). It wishes to elect to adopt the instalment system with effect from its
third quarter. As it has lodged returns for tax periods totalling six months (ie less than seven months), it must take into account the
three months preceding the third quarter. On this basis, it is in a net refund position (ie for the $12,000), so it cannot elect to adopt
the instalment system at this time.
Assume that the payer subsequently has net GST of $15,000 for its third GST return (up to 31 March 2018). It wishes to elect to
adopt the instalment system with effect from its fourth quarter. As it has now lodged returns for tax periods totalling nine months, it
must take into account the six months preceding the fourth quarter (ie the second and third tax periods). The total tax amount over
this period is $15,000 − $12,000 = $3,000. It is therefore not in a net refund position, and can elect to adopt the instalment system
provided that all other requirements are fulfilled.

Making the election to pay instalments

To make the election, you must notify the Commissioner in the approved form (s 162-15). In practice, you
will be taken to have exercised the option if you complete the relevant box on the BAS.
The election must normally be made by 28 October of the relevant financial year (s 162-25). However, in
certain situations you can make part-year elections. This applies if you first become eligible to use the
instalments system after 28 October, and your current lodgment record does not exceed six months —
typically, this means that you have lodged no more than two quarterly GST returns. In these
circumstances, your election must be made by the date you would otherwise have had to lodge a GST
return for the tax period in which you became eligible. The election will then be valid for that tax period
until the end of the year.
An election continues in force indefinitely, unless you revoke it or lose your eligibility, or the Commissioner
disallows it on the grounds of your bad compliance history (s 162-30). As an exception to this, an entity
that is already paying GST by instalments can continue to do so, even if it has moved into a net refund
position. In such a case, the instalment amount will be zero. The rules as to loss of eligibility are similar to
those applying to annual input tax credit apportionments (¶5-020).
The Commissioner also has power to extend the time for making an election in individual cases.
Application for the extension must be made on the approved form. The Commissioner will take into
account the taxpayer’s previous compliance history, whether the taxpayer has a valid reason for the late
election, whether the failure to elect was isolated and any exceptional circumstances such as serious
illness (Interpretative Decisions ID 2004/447 to ID 2004/449).
The representative member of a GST group cannot make an election unless each member of the group is
eligible (s 162-20).
Effect of making instalments election
Making the election means that:
• you are called a “GST instalment payer” (s 162-50)

• you have an “instalment tax period” that corresponds to the period for which the election applies (s
162-55). For example, if your election applies to the whole financial year, that financial year will be
your instalment tax period

• you must pay the GST for that instalment tax period by quarterly instalments (see below)

• you must lodge a BAS for that instalment tax period (see below). Taxpayers can opt not to lodge the
BAS for an instalment period if they: (1) only report GST and Pay As You Go (PAYG); and (2) accept
the instalment amount calculated by the Commissioner.

Amount and timing of instalments

The amount of each instalment will normally be notified to you by the Commissioner (s 162-135). This will
typically be calculated as 25% of the previous year’s GST, adjusted by a factor that reflects changes in
GDP (Gross Domestic Product) (Administration Act, Sch 1, Subdiv 45-L). This adjustment factor is:
• 6% for the 2018/19 income year

• 4% for the 2017/18 income year

• 2% for the 2016/17 income year.

Instalments are payable by 28 April, 28 July, 28 October and 28 February (s 162-70), ie the same dates
as for lodgment of quarterly returns under the normal rules (¶8-005).
If any instalments are paid late, the general interest charge (GIC) will be imposed (s 162-100).
You can also elect to vary your notified instalments (see below).
Annual return and reconciliation
In the typical case, where your instalment tax period is the financial year, the ATO will normally send you
an annual GST return sometime after 30 June. This return must be completed and lodged by the time
your income tax return is due (s 162-60). However, if you are not liable to lodge an income tax return, the
GST return must be lodged by the following 28 February.
The Commissioner can extend the time for lodging GST returns (Administration Act, Sch 1, s 388-55).
The annual GST amount is worked out on the annual return. Any shortfall (or “wash up” payment)
between this and the amounts already paid must be paid by the time for lodgment of that return (s 162-
105; 162-110). If there has been an overpayment, the Commissioner must give a refund (s 35-5).
If the taxpayer has died, ceased to carry on an enterprise or has its registration cancelled during the
instalment tax period, there is still an obligation to lodge an annual return for that period as described
above (s 162-85). However, there is no requirement to pay instalments for any quarter that starts after the
death, etc.

Example
Jan is on the instalments system. She dies on 15 January 2019. An annual return must be lodged by the time her income tax return
for 2018/19 is due. Her last quarterly instalment will be for the quarter ending 31 March 2019.

If the taxpayer becomes incapacitated (eg goes bankrupt, goes into liquidation or receivership) or goes
out of existence, the instalment tax period ends on the day before that happens, and the return must be
lodged by the 21st day of the following month (s 162-90). Any outstanding GST must also be paid by that
date.

Example
Assume the same facts except that Jan goes bankrupt instead of dying. An annual return must be lodged by 21 February 2019.

If the membership of a GST group changes, the instalment tax period ends at that time (s 162-95). The
representative member must lodge the annual return by the 21st day of the following month, together with
any outstanding GST.

Example
A, B and C are members of a GST group and commence paying by instalments from the start of 2018/19. In December 2018, C
leaves the group. The GST group must lodge the annual return by 21 January 2019. All parties will revert to ordinary quarterly tax
periods and, in accordance with the normal rules, cannot resume paying by instalments until they have current lodgment records of
at least four months.

Variation of instalments
Instead of accepting the instalments notified by the Commissioner, you have the option of varying the
instalments by using your own estimates (s 162-140). The variation is made by notifying the
Commissioner on or before the due date for the instalment.
Variation may be appropriate in a variety of circumstances. The BAS form requires that you provide a
numerical “reason code” for the variation. These codes are: current business structure not continuing
(21); significant change in trading conditions (23); internal business restructure (24); change in legislation
(25); financial market changes (26); entering the Simplified Tax System (28); or leaving that system (29).

Example
Enterprises is paying its GST by instalments. For the September 2019 quarter, the Commissioner notifies Enterprises that its GST
instalment is $50,000 (consistent with an annual GST of $200,000). Due to a major downturn in business, Enterprises estimates that
its annual GST will only be $160,000 and decides to vary its instalment to (1/4 × $160,000) = $40,000.
For the (second) December 2019 quarter, Enterprises revises its annual GST estimate to $164,000. The varied second instalment
will be (1/2 × $164,000) − $40,000 = $42,000.
For the (third) March 2020 quarter, Enterprises does not change its estimate. The third instalment will be (3/4 × $164,000) − $82,000
= $41,000.
For the (final) June 2020 quarter, Enterprises again revises its estimate, to $168,000. The revised fourth instalment will be $168,000
− $123,000 = $45,000.
Enterprises’ actual GST liability for the year turns out to be $170,000. Enterprises will be required to pay the balance of $2,000 (ie
$170,000 − $168,000) by the time it lodges its annual return.

However, there are a series of penalties that apply if your varied estimates turn out to be too low. These
penalties apply if:
• the sum of your instalments is less than 85% of your actual annual GST liability (s 162-175)

• your estimated annual GST amount relating to any quarter is less than 85% of your actual annual
GST liability (s 162-180), or

• each varied instalment is not a correct proportion of your estimated annual GST amount (s 162-185).
This is designed to ensure, for example, that an entity that correctly estimates its annual GST amount
cannot vary its instalments to zero for the first three quarters and then pay 100% of the estimated
annual liability in the final quarter.

If the first of these penalties applies, the other two will not apply. The second can only apply if the first
does not apply. The third can only apply if the other two do not apply.
In each case, the amount of penalty is imposed at the rate of the GIC (¶18-300), calculated up to the date
when the net amount is due. If you make up an earlier underestimate by a top-up payment for a later
quarter, the penalty is only calculated up to the date of the top-up (s 162-190; 162-200). These penalties
are tax deductible (ITAA 1997 s 25-5).
No penalties apply where an underestimate results simply from the adoption of the Commissioner’s
notified instalments. This applies even if the taxpayer is aware that the notified instalments are not
representative of its current position. This can provide some cashflow benefits (¶21-070).
Primary producers and averaging professionals
A special concession applies to primary producers and others who are entitled to average their income for
tax purposes. The concession recognises that these bodies are susceptible to wide fluctuations in
income. It means that they will only have to pay two instalments for any financial year. These are due on
28 April and 28 July (s 162-80).
The concession applies if:
• you carry on a primary production business in the year in which you elect to use the instalments
system, and you had at least $1 of net primary production income in your last tax assessment

• you are a “special professional” entitled to average your income (eg an author, inventor, performing
artist or sportsperson), and you had at least $1 of net professional income in your last tax
assessment.

In effect, this means that the first two instalments are deferred until the net annual GST amount is paid.
This may incidentally provide some cashflow benefits (¶21-070).
[GSTG ¶25-230]

¶8-040 Option to report and pay annually

A taxpayer that is voluntarily registered for GST may elect to adopt an annual tax period, so that it reports
and pays GST on an annual basis, instead of monthly or quarterly (s 151-5). This applies to ordinary
enterprises with a GST turnover of less than $75,000 and non-profit organisations with a GST turnover of
less than $150,000 (¶3-030).
The election is not available to taxpayers if the only reason that they are not required to be registered is
because offshore supplies of rights or options have been disregarded in calculating their turnover (¶3-
030). Nor does it apply to taxi operators (¶12-130) or to taxpayers on the instalments system (¶8-037).
Making the election
The election is called an “annual tax period election”. Normally, it must be made on or before 28 October
in the financial year to which it relates (for quarterly taxpayers) or on or before 21 August in that financial
year (for monthly taxpayers). The election applies from the start of the financial year (s 151-10; 151-20).
However, a special rule applies where a taxpayer first becomes eligible to make an election after 28
October in any financial year, and their current GST lodgment record is no more than six months. This
taxpayer may make the election on or before the date their next GST return becomes due. The election
takes effect from the start of the tax period to which that return relates.
The Commissioner has the power to grant extensions of these deadlines.
Effect of election
Making a valid election means that the taxpayer has an annual tax period (s 151-40). This takes the place
of the monthly or quarterly tax periods that would otherwise apply (¶7-100). If the election takes effect
part-way through the year, the balance of that year is still called an annual tax period.
An annual GST election also applies to WET (¶22-000) and LCT (¶23-000). However, it does not affect
PAYG obligations.
Lodgment of return
The taxpayer must lodge an annual GST return and pay its GST for the annual tax period. This must be
done on or before the date the taxpayer is required to lodge its annual income tax return for that year (s
151-45; 151-50). The ATO has the power to extend this deadline.
If the taxpayer is not required to lodge an income tax return, it must lodge its annual GST return and pay
its GST by 28 February following the end of the financial year.
Duration of election
Once made, an election continues in force indefinitely unless:
• the taxpayer revokes it. A revocation is effective for the whole of the financial year if made on or
before 28 October in that year; otherwise, it does not apply until the start of the next financial year

• the taxpayer’s circumstances (eg turnover) are such that it is required to be registered as at 31 July in
the financial year. In this case, the election ceases to have effect from that start of that year. In effect,
this means that a taxpayer must review its eligibility each 31 July, or

• the Commissioner disallows the election on the ground of a bad compliance record. If the
disallowance occurs during the financial year in which the election first took effect, the election will
have no effect. For later financial years, a disallowance is effective for the whole of the financial year
if made on or before 28 October in that year; otherwise, it applies from the start of the next financial
year (s 151-25).

If an individual taxpayer who has made an election dies during a financial year, the annual tax period
continues until the end of that financial year (s 151-25; 151-55). The same applies if a taxpayer ceases to
carry on its enterprise, or has its registration cancelled. However, a different rule applies if the taxpayer
becomes incapacitated (eg goes bankrupt, goes into liquidation or receivership), or ceases to exist. In this
case, the annual tax period ends at the end of the day before the bankruptcy, etc, occurs. Unless the
Commissioner grants an extension, the GST return will become due and GST will become payable for
that period on or before the 21st of the following month (s 151-25; 151-60).
GST groups
The representative member of a GST group (¶17-010) can only make an election if all members of the
group are eligible (s 151-15).
Alignment with PAYG instalments
Voluntarily-registered taxpayers who choose to remit GST annually may also, in certain circumstances,
be eligible to make their PAYG tax instalments annually (Administration Act, Sch 1, Div 45).
[GSTG ¶25-045]

OTHER PROCEDURAL ISSUES

¶8-042 Authorised BAS preparers

A national registration and regulation system governs those who are in the business of providing “BAS
services” for a fee or other reward. Under the Tax Agent Services Act 2009 (TASA), these providers have
to be registered with the Tax Practitioners Board (TPB) as tax agents, or as BAS agents. BAS agents
have to meet minimum educational and experience tests, though at a lower level than that required of tax
agents. There are penalties for failing to comply.
From 2016, registered tax and BAS agents have to complete an annual declaration with the TPB,
showing that they meet their registration requirements: see “Annual declaration” at www.tpb.gov.au.
What are BAS services?
BAS services which registered BAS agents or tax agents may provide include:
 • preparing or lodging a return or other approved form about a taxpayer’s liabilities, obligations or
entitlements under a “BAS provision” (this includes the GST, WET and LCT laws)

• giving a taxpayer advice about a BAS provision that the taxpayer can reasonably be expected to rely
on to satisfy their taxation obligations

• dealing with the Commissioner on behalf of a taxpayer in relation to a BAS provision.

They do not include:

• installing computer accounting software without determining default codes tailored to the client

• coding tax invoices and transferring data onto a computer program for clients under the instruction
and supervision of a registered BAS agent, or

• general training in relation to the use of computerised accounting software, preparing bank
reconciliations or entering data.

Under its power to declare that certain services are BAS services, the Tax Practitioners Board has
indicated that it will not require BAS agents to register as tax agents for work such as:
• superannuation guarantee and superannuation guarantee charge services

• superannuation contribution payment and reporting services, and taxable payments reporting. This
practice has now been formalised, effective from 2 June 2016 (Tax Agent Services (Specified BAS
Services) Instrument 2016).

Further details of what constitutes BAS services are at the TPB website: www.tpb.gov.au.
Requirements for registration
The requirements for registration as a BAS agent are as follows:
(1) Individuals must be aged 18 years or more, be a fit and proper person and satisfy the following
tests:
• the individual must have been awarded at least a Certificate IV Financial Services (Accounting) or
a Certificate IV Financial Services (Bookkeeping) from a registered training organisation or an
equivalent institution. They must also have successfully completed a course in basic GST/BAS
taxation principles, and

• if the individual is a voting member of a recognised tax agent or BAS agent association, they
must have undertaken at least 1,000 hours of relevant experience in the preceding three years.
Otherwise they must have undertaken at least 1,400 hours of relevant experience in the
preceding three years (TASA, s 20-5; Tax Agent Services Regulations 2009, reg 7, Sch 2).

(2) For partnerships and companies, the partners and directors will need to pass fit and proper person
requirements, the entity must not be under external administration, and there must not be any
disqualifying taxation offences. In addition, the partnership or company will need to have a sufficient
number of individuals who are registered tax agents or BAS agents, to provide BAS services to a
competent standard, and to carry out supervisory arrangements (TASA, s 20-5).

Licensed customs brokers may provide BAS services that relate to imports or exports affected by GST,
WET or LCT without being registered. Employees of BAS agents are not necessarily required to be
registered. The same applies to legal practitioners providing BAS services in the course of acting for a
trust or deceased estate.
The AAT does not have the jurisdiction to review a decision by the Board to grant registration for a period
shorter than the standard three-year period (Kuan v Tax Practitioners Board [2013] AATA 254).
Code of practice and “safe harbours”
BAS agents are also governed by a Code of Professional Conduct (TASA, s 30-10). The Code contains
14 principles dealing with honesty and integrity, independence, confidentiality, competence and other
responsibilities. Sanctions for breach of the Code include cautions, compulsory re-education, imposition
of restrictions (such as working under supervision or providing only limited services), suspension or
termination of registration (TASA, s 30-15 to 30-30). For an Information Sheet on the Code, see the Tax
Practitioners Board website (www.tpb.gov.au).
Under “safe harbour” rules, a taxpayer who uses a registered agent may, in certain circumstances, not be
liable for administrative penalties for making false or misleading statements, or failing to lodge
documents, where the statement or failure to lodge is attributable to the agent. Details are at ¶18-300.
ATO’s BAS Agent Portal
The ATO has a portal especially for bookkeepers and other non-tax agents that provide BAS services for
a fee. The BAS Agent Portal enables them to:
• prepare, lodge, view and print activity statements

• receive confirmation of lodgments

• view and update client registration details

• view client account information

• view payment options and print payment slips, and

• communicate with the ATO using secure portal mail.

See “ BAS agents portal” at www.ato.gov.au.

¶8-043 How a GST return is lodged

If your GST turnover is $20m or more (¶3-030), you must lodge your GST return electronically in a format
approved by the ATO, unless the ATO approves some other method (s 31-25). In other cases, you can
choose whether to lodge your return physically (by mail) or electronically.
To lodge electronically, go to the ATO’s Business Portal (www.bp.ato.gov.au), which operates 24 hours,
seven days a week. At this Portal, businesses can also view previously lodged BASs, view and update
registration details and carry out certain other transactions. To use the portal, businesses must have a
valid Australian Business Number (ABN), an ATO digital certificate (available from the ATO) and, of
course, internet access. Businesses lodging quarterly returns via the Business Portal may be entitled to
automatic extensions of time (¶8-005).
If there is nothing to report for the tax period (nil amounts at all labels), the ATO may allow you to lodge
by telephone (s 31-15). This may apply, for example, where your business is seasonal, intermittent or has
no staff or turnover activity in the period. You will need to have your BAS on hand and be able to quote
your ABN or tax file number, and the BAS document identification number.
GST turnover test for electronic returns
As already noted, you must normally lodge electronically if your GST turnover is $20m or more (s 31-25).
This means that you must lodge electronically if either of the following applies:
• your current GST turnover is $20m or more, except if the ATO is satisfied that the projected GST
turnover is below $20m, or

• your projected GST turnover is $20m or more (s 188-10).

Example
As at March 2019, your current GST turnover (ie the turnover for the period from 1 April 2018 to 31 March 2019) is $18.5m. Your
projected GST turnover (ie the turnover for the period from 1 March 2019 to 29 February 2020) is $21.3m. You will therefore be
required to lodge electronically.
The way you work out your current and projected GST turnover is explained at ¶3-030.
[GSTG ¶25-080]

¶8-045 Correcting and revising an earlier BAS

If you have made an error in your Activity Statement, you may lodge a revised Statement. You can ring
the ATO on 13 28 66 and request a revised form to complete.
In certain situations, however, the Commissioner can allow you to simply make the appropriate change in
a subsequent BAS, rather than making a revision of the earlier form (s 17-20). This is beneficial for
taxpayers, as it may enable them to avoid liability for general interest charge or administrative penalties
(¶18-300). Note that in certain cases the ATO may allow penalty relief for inadvertent errors in Activity
Statements made by small businesses (¶18-305).
The ability to make a correction is not limited to errors in the immediately preceding BAS. For corrections
of wine equalisation tax, see ¶22-300.
Guidelines on corrections
The Commissioner has issued the following guidelines on how this concession may be administered
(Goods and Services Tax: Correcting GST Errors Determination 2013):
• the concession applies to quantified overstatements (credit errors) or understatements (debit errors)
of the net GST payable for an earlier tax period. These may arise, for example, from clerical or
typographical errors, double counting, omissions or other mistakes. Although it would include
overstating or understating an input tax credit, it would not include the situation where the taxpayer
simply delays attributing the whole of an input tax credit and takes it into account in a later tax period,
in accordance with the rules at ¶5-125. Nor does it include normal GST adjustments to reflect
changed circumstances (¶6-000)

• an error cannot be corrected in a return if at the time of lodging the return the taxpayer is subject to a
GST audit or other compliance activity (¶18-160)

• in the particular case of a debit error, the error must be corrected in the first return after it is identified.
It must not have resulted from recklessness or intentional disregard for the GST law (¶18-300), and
must comply with the limits set out in the following table:

Current GST turnover
Less than $20m
$20m to less than $100m
$100m to less than $500m
$500m to less than $1b
Debit error value limit
Less than $10,000
Less than $20,000
Less than $40,000
Less than $80,000
Debit error time limit
The error must be corrected on an
activity statement that is lodged within
18 months of the due date of the
incorrect activity statement.
The error must be corrected on an
activity statement that is lodged within
12 months of the due date of the
incorrect activity statement.
The error must be corrected on an
activity statement that is lodged within
12 months of the due date of the
incorrect activity statement.
The error must be corrected on an
activity statement that is lodged within
12 months of the due date of the
incorrect activity statement.
 $1b and over Less than $450,000 The error must be corrected on an
activity statement that is lodged within
12 months of the due date of the
incorrect activity statement.

A taxpayer cannot correct an error from an earlier tax period by requesting an amendment of a GST
return of a later tax period. Credit errors from an earlier tax period can only be corrected in a later tax
period if the GST return for the later tax period is lodged within the period of review for the earlier
assessment in which the error was made (Correcting GST Errors Amendment Determination 2017 (No 1):
GSTE 2017/1).
Property owners
For special rules applying to corrections on certain supplies to non-resident property owners, see the ATO
Fact Sheet GST Paid on Services to Non-resident Property Owners. For the procedure where a GST
adjustment arises from a change in intended business use of a development property, see ¶6-300.

¶8-050 Other special rules for GST returns

Here are some special rules about returns.

▸ The ATO has the power to require you to provide a GST return, or to make additional or more detailed
GST returns (s 31-20). For example, this power may be exercised where you fail to furnish a return at
all, or are acting as the agent or trustee of someone else. The information required in these returns
may be modified so as to avoid unnecessary duplication of material that has already been provided.

▸ The Commissioner can treat a GST return as having been duly signed by a taxpayer, or with the
taxpayer’s authority, unless the taxpayer is able to prove otherwise (Administration Act, Sch 1 s 350-
10; former s 31-30). This rule is intended to allow the Commissioner to be able to process
assessments without needing to be involved in disputes about who was authorised to lodge a return
on the taxpayer’s behalf.

▸ The GST return requirements also apply if you are required to be registered, even if you are not
actually registered (s 31-5).

▸ GST returns must be made for all of an entity’s GST branches (¶17-300).

▸ Only the representative member is required to lodge a return for a GST group (¶17-020).

▸ A representative that is appointed to two or more incapacitated entities (¶18-250) that are members of
a GST group may lodge one return for a tax period for all the entities (s 58-45). The Commissioner
can direct a representative to provide a return for an incapacitated entity that has failed to do so (s
58-50). Incapacitated entities need not provide returns for tax periods for which there is no GST
liability (s 58-55). The representative must notify the Commissioner of any undisclosed liabilities of
the incapacitated entity of which the representative could reasonably be expected to have become
aware (s 58-60).

▸ The joint venture operator must lodge a return for a GST joint venture (¶17-220).

▸ Special rules apply to non-residents and their resident agents (¶17-400).

▸ A special GST return may be required by an insured business that has ceased to be registered at the
time an insurance settlement is made (¶10-120).

▸ GST returns are required for supplies made by creditors in satisfaction of debts in certain
circumstances (¶10-070).

ASSESSMENT, PAYMENT AND REFUNDS

¶8-080 GST assessments

GST is a “self-assessment” system (Administration Act, Sch 1, Div 155). This means that:
• a taxpayer’s GST liability is determined by an assessment (Sch 1 s 155-5)

• this assessment may be made at any time, but is normally deemed to have been made when the
taxpayer lodges their return

• the assessed liability is normally the amount stated in the taxpayer’s return (Sch 1 s 155-15), and

• notice of the assessment must be given to the taxpayer as soon as practicable (Sch 1 s 155-10).
However, the return itself is normally deemed to be an assessment notice which is notionally given to
the taxpayer on the date of lodgment of the return (Sch 1 s 155-15).

In limited cases, a taxpayer’s return will not contain sufficient information to allow a deemed assessment
to occur. An actual assessment must therefore be made. If the taxpayer does not receive notice of the
assessment within six months after the return was lodged, the taxpayer can request the Commissioner to
issue the notice. If the Commissioner fails to do so within 30 days, the taxpayer can object under the
normal objection and appeal provisions (Sch 1 s 155-30): see ¶18-600.
If the taxpayer simply fails to lodge a return, the Commissioner can issue a default assessment at any
time (Sch 1 s 155-5). In making an assessment, the Commissioner can treat part of a tax period as the
whole tax period (Sch 1 s 155-25). A taxpayer may object to an assessment under the normal objection
and appeal provisions (Sch 1 s 155-90): see ¶18-600.
[GSTG ¶25-600]

¶8-090 Amending an assessment

If a taxpayer lodges a return, then later lodges an amended return for the same tax period, the first return
gives rise to a deemed assessment, and the second return is treated as an application for amendment of
that assessment. Similarly, if the Commissioner makes a default assessment due to the taxpayer’s failure
to lodge a return, and the taxpayer later lodges a return for that period, that return will be treated as an
application to amend the default assessment.
An assessment can be amended either on the Commissioner’s own initiative or at the request of the
taxpayer. If the request is made in the approved form (such as where the taxpayer lodges a revised
return), and the Commissioner makes the amendment in accordance with the revised return, that return is
itself deemed to be a notice of the amended assessment. This is treated as being given to the taxpayer
on the day when the Commissioner makes the appropriate change to the taxpayer’s running balance
account (RBA) (Sch 1 s 155-40; 155-80).
If the Commissioner makes an amendment that is not fully in accordance with the taxpayer’s request, or
the request was not in the approved form (eg it was in a simple letter), an actual notice of amended
assessment must be issued.
Period of review
Under the self-assessment system, once there has been an assessment of the taxpayer’s GST liabilities
and entitlements, they remain payable without time limit. This means that they are able to be enforced at
any time.
However, there is generally a four-year period in which the assessment can be amended, either in favour
of the Commissioner or the taxpayer (Sch 1 s 155-35). This “period of review” is measured from the date
on which notice of the assessment is given (or deemed to be given) to the taxpayer.
The four-year period can be extended if there is a partly completed examination of the taxpayer’s affairs
— eg an audit, investigation or review — that is pending when the period expires. For this to apply, the
Commissioner must obtain either the consent of the taxpayer or a Federal Court order. The request for
consent, or the application to the court, must be made before the period expires. In deciding whether to
grant an extension order, the court must be satisfied that the Commissioner’s failure to complete the
examination was attributable to actions taken by the taxpayer, or to the taxpayer’s failure to take
reasonable steps (Sch 1 s 155-35). This could apply, for example, where the taxpayer has been
unreasonably obstructive or non-cooperative. An extended period of review may itself be extended.
As exceptions to the general rule, the Commissioner can amend an assessment at any time where:
(1) it is made in response to a request for amendment in the approved form made by the taxpayer
within the period of review (Sch 1 s 155-45)

(2) the amendment is necessary to give effect to a decision on review or appeal (Sch 1 s 155-60)

(3) it is made to give effect to a private ruling requested by the taxpayer during the period of review
(Sch 1 s 155-50)

(4) the Commissioner considers that there has been fraud or evasion (Sch 1 s 155-60)

(5) the Commissioner has made a declaration under the anti-avoidance rules (¶20-070) (Sch 1 s 155-
55).

In each of these cases, except for (1), the Commissioner must issue an actual notice of amendment to
the taxpayer.
Where an assessment is amended within the normal four-year review period, there is another four-year
period in which that amendment may itself be reviewed (Sch 1 s 155-65; 155-70). This “refreshed” period
runs from that date on which notice of the amended assessment was given to the taxpayer. This period
cannot itself be extended.

Example
A taxpayer lodges a BAS for the September 2019 quarter on 28 October 2019. The Commissioner’s notice of assessment is
deemed to be given on the same day, so the period of review is until 27 October 2023. On 1 December 2022, within the period of
review, the taxpayer applies for an amendment. The Commissioner allows the amendment on 15 December 2022, so the refreshed
four-year period of review for that amendment starts from that date.

If amendments were made in relation to different particulars at different times during the normal four-year
period, a separate refreshed review period will apply to each.
These rules about refreshed periods do not apply to those cases noted above where an amendment can
be made at any time.
An amended assessment is itself an assessment and the taxpayer can object to it under the normal
objection and appeal provisions (Sch 1 s 155-80; 155-90): see ¶18-600.
[GSTG ¶25-615]

¶8-100 Payment of net GST

The standard rule is that you are liable to pay GST for a tax period if the GST payable on supplies you
make is more than the input tax credits claimable on your acquisitions. Typically, this will be where the net
amount shown in your GST return is more than zero (s 33-5).
The net amount for a tax period is the amount of GST attributable to the period, less the input tax credits
attributable to that period (s 17-5). The net amount may be increased or decreased if there are any GST
adjustments for the period (s 17-10). It may also be increased by any amounts of wine tax or luxury car
tax, or decreased by any wine tax credits or luxury car tax credits (¶22-300; ¶23-260).
Your liability depends on an assessment being made. In the normal case, this is deemed to occur when
you lodge your return (¶8-080).

Example
 According to your return, the GST on sales that you made which is attributable to a particular tax period is $50,000. The input tax
credits on acquisitions which are attributed to that period are $35,000. There are no other relevant liabilities or credits. You must
account for the net amount of $15,000 to the ATO.

The deadlines for paying GST are generally the same as the deadlines for lodging returns (¶8-005). For
example, for taxpayers with monthly tax periods the net GST must normally be paid on or before the 21st
day of the month following the end of the tax period (s 33-5). For quarterly taxpayers, the net GST must
normally be paid on or before 28 July, 28 October, 28 February and 28 April (s 33-3). Extensions of time
apply in certain situations (¶8-005). Special rules apply to taxpayers paying by instalments (¶8-037) and
taxpayers with annual tax periods (¶8-040). For the position where the deadline falls on a weekend or
public holiday, see ¶25-055.

Examples
(1) For the quarterly tax period ending on 31 December 2018, your due date for payment is 28 February 2019.
(2) For the monthly tax period ending on 31 January 2019, your due date for payment is 21 February 2019.

If the return is late, interest will be payable (¶18-300). The ATO has the power to extend the time for
payment in special circumstances, or to allow the amount to be paid by instalments (¶8-005): see “Help
for small businesses experiencing short-term financial difficulties” and “Difficulty in paying your tax debt”
at www.ato.gov.au.
On the other hand, the ATO can bring forward the time for payment if there is reason to believe that you
may be leaving Australia. The ATO can also issue a Departure Prohibition Order in certain circumstances
(Administration Act, s 14U; Sch 1 s 255-20). For the requirement to lodge a security deposit, see below.
If your GST turnover is $20m or more, you must pay electronically (s 33-10). This mirrors the requirement
to lodge your return electronically (¶8-043). In other cases, you can choose whether or not to pay
electronically — this applies whether or not you lodge your return electronically.
The ATO says it will accept electronic payment through direct credit, direct debit or BPAY. If you do not
pay electronically, payment may be made in cash or by cheque at any post office, or by mail. For special
advance payment facilities available to the taxi industry, see ¶12-130.
In making an assessment, the ATO may take into account third party information, audit results, statistical
comparisons or extrapolations from previous years. The production of a notice of assessment is
conclusive evidence that the assessment was properly made and — except on normal review or appeal
proceedings (¶18-600) — that the amount of the assessment is correct (Administration Act, Sch 1, s 350-
10; former s 105-100). However, this may not apply if the assessment was tentative or not bona fide (DFC
of T v Richard Walter Pty Ltd 95 ATC 4067; Platypus Leasing Inc & Ors v FC of T [2005] NSWCA 399).
For ATO practice on issuing multiple assessments in relation to the same transaction, see Practice
Statement PS LA 2006/7.
BAS amounts and the RBA
In practice, in determining the taxpayer’s net BAS tax or credit, the net GST/LCT/WET liability is
aggregated with any liabilities or credits for other types of tax covered by the BAS, such as PAYG
instalments, FBT instalments or deferred company tax instalments. These are collectively called “BAS
amounts”. The net amount owing at any particular time is recorded in the taxpayer’s RBA (Administration
Act, s 8AAZA to 8AAZLH).
However, it is not mandatory for the Commissioner to offset a payment, credit or RBA surplus against a
BAS tax debt until that debt is due and payable. This could have particular application to joint ventures, eg
a credit in the RBA for a joint venture account will not automatically be offset against a debt on the
operator’s own BAS account where that debt is due but not yet payable.
GST on importations
Payments of GST on importations are made by the importer, at the same time and in the same way as
customs duty (s 33-15). However, the payment may be deferred in certain situations. For further details,
see ¶9-000.
Time limit on recovery of GST
Separate rules on recovery of unpaid GST apply according to the tax period to which the GST liability
relates.
Under the self-assessment system, there is no time limit on the Commissioner’s power to recover unpaid
GST relating to tax periods commencing on or after 1 July 2012, once the taxpayer’s liability entitlement
has been crystallised in an assessment (¶8-080). However, any amendment to an assessment can only
be made during a refreshable four-year period, normally four years (¶8-090).
An unpaid net amount of GST relating to a tax period commencing before 1 July 2012 ceased to be
payable four years after it originally became payable by the taxpayer, unless the Commissioner had given
notice to the taxpayer within those four years, or the payment was evaded, or avoided by fraud
(Administration Act, Sch 1, former s 105-50; Practice Statement PS LA 2009/3; Interpretative Decision ID
2014/36). Effective from 1 July 2008, this restriction also applied where the liability resulted from a
reduction in a taxpayer’s entitlement to a refund. The “notice” may take the form of a notice of
assessment, even if the Commissioner subsequently concedes that the amount stated as owing in that
notice was wrong (Cyonara Snowfox Pty Ltd v FC of T 2012 ATC ¶20-362). The four-year limit did not
apply where the Commissioner was seeking to recover input tax credits incorrectly allowed to the
taxpayer (Wynnum Holdings (No 1) Pty Ltd v FC of T [2011] AATA 296; Russell v FC of T 2009 ATC ¶20-
143).
Security deposits
The Commissioner may require a taxpayer to provide security for the payment of existing or future tax
liabilities, including GST (Administration Act, Sch 1, s 255-100). This applies where the Commissioner
has reason to believe that:
• the taxpayer is establishing or carrying on an enterprise, and intends to carry on that enterprise for
only a limited time, or

• it is appropriate in the circumstances.

Security may be required to be given in various situations, including where:

• the enterprise is likely to be short-term

• there is a history of non-compliance by the taxpayer or its directors

• the Commissioner has granted the taxpayer the benefit of a payment arrangement, or

• phoenix activity (¶20-000) is involved.

The security may take various forms, including a bank guarantee, mortgage or an electronic funds
transfer.
The Commissioner has validly used this power to require a security deposit to be given by way of a
mortgage over land owned by the taxpayer, where GST liabilities were expected to arise from the
taxpayer’s proposed sale and subdivision of the land and the Commissioner believed that there was a
significant risk that this liability would not be paid. This was so even though the taxpayer had not actually
commenced carrying out the relevant enterprise: Keris Pty Ltd v FC of T [2017] FCAFC 164.
Special rules about payments
Special rules about payment apply to GST branches (¶17-300), joint ventures (¶17-220), insurance
settlements (¶10-120), importations (¶9-000) and supplies in satisfaction of debts (¶10-070).
Schemes designed to decrease payments or alter their timing may be caught by special anti-avoidance
rules (¶20-030).
Penalties
For details of penalties for late payment, see ¶18-300.
 [GSTG ¶25-220]

¶8-110 Payment of GST refunds

You are entitled to a refund from the ATO for a tax period if the net amount shown in your GST return (¶8-
100) is less than zero (s 35-5). In a simple situation, this could occur, for example, if the GST payable on
supplies you make is less than the input tax credits claimable on your acquisitions.
The entitlement to a refund arises when the Commissioner issues an assessment of the relevant amount
(s 35-10). Where a refund is involved, there is an incentive to lodge the return as soon as possible.

Example
According to your return, the GST on sales that you made which is attributable to a particular tax period is $50,000. The input tax
credits on acquisitions which are attributable to that period are $80,000. There are no other relevant liabilities or credits. You are
entitled to a refund of $30,000.

Refunds may also become due where there is an amendment of a taxpayer’s GST liability as a result of
an amendment of an assessment (Administration Act, Sch 1, s 155-75).
Time limit for paying refunds
There is no set time limit within which the ATO must actually credit the refund, but it appears that it must
generally be done within a “reasonable” period. However, the ATO has specific power to retain the refund
in the following situations:
(1) during any time that it is awaiting a return or information which may affect the amount of that refund
and which the taxpayer is under a statutory obligation to provide (Administration Act, s 8AAZLG), or

(2) pending verification of information that the taxpayer has provided (Administration Act, s 8AAZLGA;
Practice Statement PS LA 2012/6).

The power to retain pending verification ((2) above) applies only where it would be reasonable to require
verification, or the taxpayer has requested that the power be exercised. In deciding whether to retain the
refund, the Commissioner must take into account factors such as the likely accuracy of the information
provided, the likelihood that it was affected by fraud, evasion or recklessness, the financial impact on the
taxpayer, the impact on the revenue and the complexity of the verification process. The Commissioner
can only retain the refund until:
• it is no longer reasonable to require verification, or

• there is a change to the amount of the refund as a result of an assessment or amended assessment.

The taxpayer must be notified of the retention within 14 days, otherwise the refund becomes payable
immediately. The taxpayer can object to a decision by the Commissioner to retain the refund, under the
usual objection and appeal provisions (Administration Act, s 14ZW), but this does not apply once the
retention period has expired by the subsequent issue of an assessment or amended assessment
(Sanctuary Australasia Pty Ltd v FC of T [2013] AATA 371).

Examples
The following examples of the Commissioner’s practice are based on Practice Statement PS LA 2012/6:
(1) Likely level of accuracy: A taxpayer registered as a commercial land developer lodges a BAS claiming an input tax credit on
the acquisition of a block of land. A property search is conducted based on information given by the taxpayer and the search
results indicate that the land may not have been purchased by the taxpayer. This would be a factor in favour of it being
reasonable to retain the refund for verification.

(2) Financial impact: A company lodges an income tax return that is identified for review. The company is expecting a large
refund and claims that the refund is required to fund business reconstruction following a recent natural disaster. Bank
statements and other documents show that the viability of the business will be compromised if the refund is retained. This
would be a factor against it being reasonable to continue to retain the refund.
If the ATO does not pay the refund within 14 days of a complete return being lodged, “delayed refund”
interest becomes payable (Taxation (Interest on Overpayments and Early Payments) Act 1983, s 12AA;
12AF). The interest is payable with effect from 14 days after the date on which the entitlement for the
refund arose, irrespective of when the ATO becomes aware of the refund amount. There is no statutory
requirement for the taxpayer to notify the ATO of the entitlement, though this would be advisable as a
practical matter (Travelex Limited v FC of T [2018] FCA 1051; 2018 ATC ¶20-661; appeal pending).
The interest rate is, in effect, seven percentage points less than the rate of GIC (¶18-300). For example,
for the October–December 2019 quarter, when the GIC rate was 7.98%, the delayed refund interest rate
was 0.98%.
Offsetting of refunds
Any GST refund will be offset against any liabilities for other types of tax covered by the BAS, ie “BAS
amounts” (¶8-100). The ATO may also offset any refund against outstanding tax liabilities under other
taxation legislation administered by the ATO, for example, income tax (Administration Act, s 8AAZL to
8AAZLB).
The ATO has a discretion not to offset GST refunds against outstanding tax debts if those debts are “due”
but not yet actually payable (Administration Act, s 8AAZL). However, this does not apply to outstanding
tax debts covered by the BAS. This means that GST refunds may continue to be offset against these
amounts provided that they are due, even if they are not yet payable.
The ATO also has a discretion not to offset GST credits against another tax debt where:
• the taxpayer is complying with an arrangement to pay that debt by instalments, or

• the ATO has agreed to defer recovery of the debt (Administration Act, s 8AAZL).

Example
Lauren has a GST credit. She also has been assessed for an amount of income tax which she disputes. The ATO has agreed to
defer recovery of the debt until the matter is determined by a tribunal. In these circumstances, the ATO may pay the GST credit as a
refund, notwithstanding that the tax debt is still technically outstanding.

Manner of payment
After any offsetting as described above, refunds will normally be made electronically to a bank, building
society, credit union or other financial institution nominated by the taxpayer (Administration Act, s
8AAZLH). This account must be in the name of the taxpayer, or their tax agent, or of a legal practitioner
acting as trustee or executor. The ATO also has a discretion to make payments in other ways, for
example, by cheque. It may also pay the refund by crediting the accounts of certain nominated third
parties who have “significant legal relationships” to the taxpayer, for example, a parent company, strata
title manager, liquidator or receiver, provided this is in accordance with a legal obligation or common
commercial practice (ATO Practice Statement PS LA 2004/7). Other methods may be approved in special
cases, for example, where there are religious objections.
Unless these requirements are fulfilled in one way or the other, the ATO is not obliged to make the refund.
In such cases, however, it may offset the entitlement against liabilities arising in subsequent BASs.
[GSTG ¶25-400]

¶8-115 Restriction where refund would give rise to windfall

In general, excess GST is not refunded if this would give the taxpayer a windfall gain (Div 142).
For the purposes of this rule, “excess GST” is the additional GST liability that can arise where:
• a transaction has been wrongly categorised as a taxable supply, whereas in fact it is an input taxed or
GST-free supply, or is not a “supply” at all
 • there is a miscalculation of the GST payable (this can typically occur under the real estate margin
scheme (¶11-100) or the gambling supply rules (¶16-000)), or

• there is a mistake in the way that an amount of GST is reported in the taxpayer’s BAS.

Excess GST does not arise where an amount has simply been attributed to an incorrect tax period; or
where the correct amount was reported but is reduced in a later period due to an adjustment event, such
as the cancellation of a supply or a change in consideration for the supply (s 142-5). However, the ATO
considers that if a subsequent adjustment increasing the GST is incorrectly taken into account, this can
give rise to excess GST, and is therefore covered by the restriction (GST Determination GSTD 2016/1).
This could occur, for example, where the price paid for an earlier supply is adjusted upwards, but the
supply later turns out to be have been GST-free.
The taxpayer is entitled to a refund of excess GST provided that the excess has not already been “passed
on” to another (for example, to a customer), or if it has been passed on but reimbursed (s 142-10). In the
case of an amount that has not been passed on, the refund is made under the normal refund provisions
(Administration Act, Sch 1, s 155-75). This also applies if there is a reimbursement following an incorrect
characterisation of a transaction as a “supply” (s 142-15). In other cases of reimbursement, the refund
normally takes the form of a decreasing adjustment for the taxpayer, and a corresponding increasing
adjustment for the customer (¶6-000).
As a practical business matter, it would normally be assumed that if GST has been paid, it will be passed
on to recipients in some way. Whether it has been passed on would generally be clear from the tax
invoice or other documentation, though this is not necessarily conclusive. However, the supplier may still
remain entitled to the refund if they can show that the recipient has not yet paid the invoiced amount (s
142-25), or possibly, depending on the supplier’s pricing structure, where it makes a drastic reduction in
the sale price of an item in order to sell it. In a sales tax context, the High Court has held that if the price
charged for an item was calculated by reference to costs including sales tax, this means that the sales tax
component had been passed on, and that a refund would therefore not be allowable (Avon Products Pty
Limited v FC of T [2006] HCA 29).
The Commissioner considers that the matters relevant to whether GST has been passed on include:
• the manner in which the excess GST arose

• the supplier’s pricing policy and practice

• the documentary evidence surrounding the transaction, and

• any other relevant circumstances (GST Ruling GSTR 2015/1).

If only part of the GST was passed on, the refund entitlement applies to the part that is not passed on.
Where the whole amount has been passed on, but the recipient was only partly reimbursed for it, the
refund entitlement is reduced accordingly (s 142-10; GST Ruling GSTR 2015/1). The taxpayer’s refund
entitlement applies whether the excess is discovered before or after the taxpayer has actually paid it to
the Commissioner.
The fact that a refund of excess GST is later made to the supplier does not affect the recipient’s original
input tax credit, but a decreasing adjustment would arise to the recipient when the supplier reimburses the
excess GST to it. As an anti-collusion measure, refunds would not be made where the recipient knows, or
could reasonably be expected to know, that the supplier has not actually paid excess GST (s 142-15).
Commissioner’s discretion to allow refund
In certain limited circumstances, the Commissioner has a discretion to allow a refund of excess GST,
even though it has been passed on and not reimbursed. This discretion may only be applied where the
taxpayer specifically requests it and the Commissioner is satisfied that the refund would not result in a
windfall gain for the taxpayer (s 142-15). This may apply, for example, where the windfall gain is technical
rather than real. However, it seems that it would not apply simply because for practical reasons it would
not be cost-effective to make a reimbursement, or that the benefit from the excess has been counteracted
by the effect of market forces.
 Example
A supermarket mistakenly sells a product to a mass market as subject to GST. As its competitors are correctly selling the same
product as GST-free they are selling at a lower price and thereby gaining market share. After discovering the error, and ceasing to
include GST in the price, the supermarket applies to the Commissioner to exercise the discretion to allow a refund for the excess
GST that it has previously incurred on the product and passed on to customers. It argues that it is not cost effective to try to locate
customers to provide a reimbursement, and that its mistake has caused it to lose sales and profitability. The Commissioner would
not exercise the discretion in this case.

Where the cancellation of a taxable supply results in a decreasing GST adjustment for the supplier (¶6-
000), the amount of that adjustment is reduced to the extent that GST has been passed on but not
reimbursed. Correspondingly, there would be a reduction in the recipient’s increasing adjustment (s 142-
20).
Former windfall rules
Under the rules that applied in working out refunds for excess GST for tax periods commencing before 31
May 2014, a larger degree of discretion was given to the Commissioner to refuse payment of refunds
(Administration Act, Sch 1, s 105-65). For details, see pre-2018 editions of the Australian Master GST
Guide.

¶8-120 Review and other rules about refunds

Taxpayers have the normal rights of objection and review in challenging assessments that include excess
GST. A separate review right also applies where the Commissioner refuses to exercise the discretion
under s 142-15 to allow a refund of excess GST that has been passed and not reimbursed (¶18-600).
In contrast, under the refund rules applying to tax periods commencing before 31 May 2014, it was held
that a taxpayer could not object to the AAT under the normal review provisions against the
Commissioner’s decision on whether to allow a refund (Naidoo & Anor v FC of T 2013 ATC ¶10-323).
That restriction has now been statutorily removed (Administration Act, Sch 1, s 105-65).
The objection must be made within 60 days after the taxpayer is notified of the decision, or four years
after the end of the tax period to which the decision relates (Administration Act, s 14ZW). As associated
transitional measures, objections raised by taxpayers before the Naidoo decision (28 June 2013) have
been validated, and taxpayers that decided not to object because of the finding in Naidoo have been
given 60 days from 30 May 2014 in which to object. For most purposes, these provisions will terminate
from 1 July 2018 (Tax Laws Amendment (2014 Measures No 1) Act 2014, s 17 to 24). Apart from the
normal rights of objection, “judicial review” of the Commissioner’s decision by the Federal Court (¶18-600)
may be available, though was refused in PFTF Stock Pty Ltd v FC of T [2010] FCA 557.
The ATO accepts that a taxpayer can object to a private ruling that the Commissioner makes on the
availability of a refund, provided that an assessment has not already been made (GST Determination
GSTD 2014/1).
Overpaid refunds
It may turn out that a previously paid refund has been overpaid. For example, this may arise where the
Commissioner makes or amends an assessment, or a taxpayer revises their BAS. With effect from the
first quarterly tax period starting on or after 24 March 2010, the overpaid amount is liable for GIC from the
date when the taxpayer received the benefit of the overpayment. The Commissioner has a discretion to
remit the GIC in appropriate circumstances.
It seems that the Commissioner cannot issue an assessment withdrawing a refund which has been paid
in accordance with a binding private ruling (Swanbat Pty Ltd v FC of T 2013 ATC ¶10-344). The
Commissioner accepts that where he seeks to recover a refund mistakenly paid outside the former four-
year limitation period (¶8-110), he should proceed under the normal rules for recovering administrative
overpayments.
Where registration was cancelled retrospectively
A refund of any GST paid to the ATO can be claimed if your voluntary registration was cancelled
retrospectively to 1 July 2000 (¶3-070).
Refunds under double taxation treaties
Under various double taxation treaties and international agreements, certain bodies — such as the
Australian–American Educational Foundation — are entitled to refunds of Australian indirect taxes paid on
their acquisitions. Applications for refunds of GST, accompanied by the relevant tax invoices, must be
made to the ATO (Taxation Administration Regulations 2017, reg 58 to 61; former Taxation Administration
Regulations 1976, reg 21A to 21E).
Refunds of GST will also apply for certain acquisitions by Papua New Guinea visiting forces, US visiting
forces, US commissaries and the US Government in relation to defence facilities at Pine Gap and the
North West Cape (Taxation Administration (Defence Related International Obligations — Indirect Tax
Refunds) Determination 2000).
Other special rules
Special rules about refunds apply to GST branches (¶17-300), joint ventures (¶17-220) and tourists (¶12-
030).
Schemes designed to increase refunds or alter their timing may be caught by special anti-avoidance rules
(¶20-030).
For general procedures on correcting mistakes in earlier BASs, see ¶8-045. For the practice relating to
charities, see ¶15-010.
IMPORTS AND EXPORTS
GOODS IMPORTED INTO AUSTRALIA
Taxable importations of goods ¶9-000
GST is payable by importer ¶9-005
Input tax credits on imports ¶9-010
Installation or assembly of goods brought to Australia ¶9-020
Non-taxable importations of goods ¶9-030
Where importation is partly taxable ¶9-040
Where goods have previously been exported for repair ¶9-050
Re-importation of breeding livestock ¶9-055
Excisable goods held “in bond” ¶9-060
Imported second-hand goods ¶9-070
Importations through an agent ¶9-080
SPECIAL RULES RELATING TO OFFSHORE SUPPLIES
Non-resident business supplies: optional reverse charge ¶9-095
Offshore business supplies of services and rights ¶9-100
Offshore supplies of digital products and other intangibles to consumers ¶9-120
Offshore supplies of “low-value” goods to consumers ¶9-130
EXPORTS
Treatment of exports ¶9-200
Exports of goods ¶9-210
Export of aircraft or ship ¶9-215
Other GST-free exports of goods ¶9-220
Lease of goods used overseas ¶9-230
Tooling used by non-residents ¶9-235
Exports of services and other things ¶9-240
Repair or treatment of goods under warranty ¶9-250

Editorial information

Summary
Imports of goods into Australia are generally subject to GST, which is payable by the importer
rather than the supplier. Some services and rights supplied from overseas are also subject to GST
under the “reverse charging” rules. Special rules apply to imports of digital products and low-value
goods to consumers. Exports are generally GST-free.
GOODS IMPORTED INTO AUSTRALIA
¶9-000 Taxable importations of goods

With only limited exceptions, GST will be payable where goods are imported into Australia (s 7-1).
In technical terms, you make a taxable importation of goods if:
• the goods are imported, ie brought to Australia with the intention of unloading them here

• you enter the goods for home consumption under customs law (s 13-5).

For the meaning of “goods” and “Australia”, see ¶4-100. Comprehensive details of the Commissioner’s
views on taxable importations are given in GST Ruling GSTR 2003/15.
Taxable importations do not include offshore supplies of things other than goods, for use in Australia.
These may attract GST under other rules (¶9-100).
Entry for home consumption
Entry for home consumption generally means that the goods have passed out of customs control.
However, some goods may be treated as effectively imported even though they have not been entered in
this way (s 114-5). Examples of this include:
• personal and household goods of passengers or crew

• certain low-value consignments

• certain goods that are delivered into home consumption under authorisation

• goods delivered after having been seized

• goods purchased at an inwards duty-free airport shop

• goods that should have been entered for home consumption but were not.

Unless goods are exported after being imported, they cannot be taken to be imported twice (s 114-10).
Warehoused goods imported by others
If you purchase goods in bond from an importer, you will also be treated as an importer and can therefore
claim an input tax credit for the amount of GST paid when the goods are taken out of bond (s 114-25).
[GSTG ¶40-220; ¶40-240]

¶9-005 GST is payable by importer

The GST is payable by the importer (s 13-15). This applies whether or not the importer is registered, and
whether or not it was carrying on an enterprise. However, if the importer is registered, it may be able to
claim input tax credits for the GST it has paid (¶9-010).
The GST is calculated as 10% of the value of the taxable importation (“VOTI”). This is worked out by
adding up:
(1) the “customs value” of the goods. This is normally the value of the goods at the time they were
exported, as determined by Australian Customs. It excludes GST and transport and insurance costs
from the place of export

(2) the amount paid or payable for the international transport of the goods (¶12-010) to their “place of
 consignment” in Australia (see further below)

(3) the amount paid or payable to insure the goods for that international transport

(4) the amount paid or payable for loading or handling the goods, or for facilitation services (such as
fumigation), during the course of GST-free international transport. This does not include taxes, fees
and charges exempted under s 81-5 (¶4-080)

(5) any “customs duty” payable in respect of the importation of the goods, and

(6) any wine equalisation tax payable in respect of the local entry of the goods (s 13-20(2)).

The VOTI does not include the value of any assembly or installation services (¶9-020).
To avoid duplication, it is provided that each of the inclusions in items (2)–(4) applies only to the extent
that they are not already covered by any earlier inclusion, such as the customs value.

Examples
(1) If the goods cost $20,000 to buy overseas, the freight, insurance and other relevant costs were $5,000 and customs duty was
$2,000, the GST would be 10% of $27,000, ie $2,700. However, if the importer is registered, an input tax credit may be claimed (see
Example 2).
(2) A registered importer imports equipment for $5,000, including duty, freight, insurance and other relevant costs. It pays GST of
$500 to Customs on the importation. The importer then sells the equipment to a wholesaler for $7,700, including $700 GST. The
importer must account for this $700 GST in its GST return, but can claim an input tax credit for the $500. The net amount due to the
ATO is therefore $200.

If the costs of transport and insurance are expressed in foreign currency, they should be converted at the
ruling rate of exchange on the day the goods were exported.
A special rule for calculation applies if the imported goods had previously been exported for repair or
renovation (¶9-050).
Where the overseas supplier is also the importer, it is liable for the GST on the importation and, if
registered, may be entitled to an input tax credit for that GST, as outlined above. If registered, it will also
be liable for GST on the actual supply to the customer (Clothing Importer v FC of T [2011] AATA 281).
For taxable importations made on or after 1 October 2016, the importer may use a shortcut method of
calculating the transport, insurance, loading and handling fees in items (2)–(4) above. This will simply be
determined as 10% of the customs value. So, for example, if the customs value is $150,000, those fees
may be treated as being $15,000. This option may be particularly useful where invoices for those costs
have not yet been received. The percentage may be varied by regulation. This shortcut does not apply to
taxable importations of luxury cars, or where the local entry is a taxable dealing in relation to wine.
Place of consignment in Australia
The “place of consignment” in Australia is defined in s 195-1 as:
(1) for postal goods — the place in Australia to which the goods are addressed. Goods weighing less
than 31.5 kg that are transported to Australia and delivered “door to door” by an international express
courier service are treated as goods posted to Australia (GST Ruling GSTR 2003/15)

(2) if the supplier of the goods is to deliver them in Australia — the place in Australia for delivery under
the contract for the supply of the goods. This will typically be the case, for example, where the supply
is on trading terms such as “delivered duty paid” (DDP), “delivered duty unpaid” (DDU) or “cost,
insurance and freight” (CIF)

(3) if the goods are not posted, the supplier is not to deliver the goods in Australia, and they are to be
transported to Australia by a transport contractor for the importer — the place in Australia to which
the goods are to be delivered under that transport contract. This will typically be the case, for
example, where the supply is on “free on board” (FOB) trading terms
 (4) in any other case — the port or airport of final destination of the goods in Australia as indicated in
the relevant transportation document, eg consignment note, house bill of lading or master air waybill.
The “port or airport of final destination” is the port or airport where the goods can be removed from
Customs control after being dealt with in accordance with the Customs Act. If the goods are removed
from Customs control at a place other than a port or airport, the last port or airport that the goods
were located prior to being taken to that other place is the “port or airport of final destination” (GST
Ruling GSTR 2003/15).

Example 1
An overseas supplier agrees to sell and deliver goods to a purchaser in Windsor, NSW. The supplier subcontracts with Global to
transport the goods. Global itself undertakes the transport to Sydney and subcontracts with Minnow for the transport from there to
Windsor.
Under item (2) above, the place of consignment is Windsor. The value of the importation will include the total cost of transport to
there, not just to Sydney.

Example 2
Assume instead that the contract between the supplier and the purchaser did not include delivery. Instead, the goods are supplied
on a FOB basis, and the supplier’s obligations cease once the goods are delivered on board a ship at the overseas port. The
purchaser contracts separately for shipment of the goods to Sydney, and also engages a freight forwarder to transport the goods to
Windsor.
Under item (3) above, the place of consignment is Sydney, not Windsor. The value of the importation will include the total cost of
transport to Sydney, but not from there to Windsor.

Time and manner of payment

The rules for attributing GST to tax periods do not apply to importations. Instead, the following rules apply:
• the GST should be paid to Customs, in the same way and at the same time as customs duty

• the time for payment is when the goods are entered for home consumption or otherwise dealt with
under the Customs Act

• a Customs officer can refuse to deliver the goods if customs duty or GST has not been paid (s 33-15).

Under the self-assessment system (¶8-080), an assessment of the GST is deemed to have been made
when an import declaration or self-assessed clearance declaration has been communicated to Customs,
and Customs issues an import declaration advice or a self-assessed clearance declaration advice
(Administration Act, Sch 1, s 155-20). The assessable amount is worked out according to the declaration
and the advice.
In practice, a special Deferred GST Scheme enables approved importers to defer the GST until the first
Business Activity Statement is submitted after the goods are entered for home consumption. In most
cases, this deferral means that the GST is cancelled out, as a corresponding input tax credit will be
claimed in the same return.
To be eligible for the deferral, an importer must:
• have an Australian Business Number (ABN) and be registered for GST

• lodge its return monthly and electronically

• pay its liability electronically

• enter goods for home consumption electronically (although making a refund application manually
would be permissible: Interpretative Decision ID 2013/55)

• have a satisfactory compliance record

 • have written approval from the Tax Office (GST Regulations, Div 33).

Approved importers should quote their ABN to Customs when entering goods for home consumption.
Customs will release the goods after payment of customs duty, but record the deferred GST of each
shipment as it is cleared. This liability will appear on the Business Activity Statement issued to the
importer by the Tax Office.

Example
An importing company successfully applies for approval under the deferral scheme. On 15 August, it imports goods from overseas
and enters them for home consumption. The VOTI is $100,000, with a GST liability of $10,000. The company can defer payment of
this $10,000 until 21 September, when its Business Activity Statement for the month of August is due. In that Business Activity
Statement, it can also claim a corresponding input tax credit.

The deferral scheme is intended to overcome the cashflow disadvantage for importers of having to pay
GST “up front”. The government estimates that it covers more than 95% in value of total business
importations.
According to the Tax Office, common GST errors with imported goods include:
• importers failing to account for GST on their on-sale of the imported goods

• taxpayers who assemble or install imported goods but fail to account for GST on those services (¶9-
020).

“Free into store” transactions

Under certain trading arrangements, the overseas supplier of goods undertakes to import them into
Australia and deliver them to the premises of the Australian purchaser. In the case of a “free into store”
(FIS) transaction where the overseas supplier is responsible for entering the goods for home consumption
and paying duties and taxes, Customs treats the supplier as the importer (Australian Customs Notice
ACN 2000/30). It follows that the supplier is liable for the GST and will need to register if it wishes to claim
input tax credits. In the case of a “landed into store” (LIS) transaction where either party can enter the
goods for home consumption, whichever party takes this responsibility will be treated as the importer for
GST purposes.
Other rules relating to payment
If there is an importation without entry for home consumption, and security for payment of customs duty
on goods is forfeited, the assessed GST payable on the importation is payable at that time (s 114-15). If
information had to be provided as a condition of obtaining authorisation for the delivery of goods into
home consumption, the assessed GST payable on the importation is payable when the information is
provided (s 114-20).
In the case of temporary importations, the importer may be required to give a security or undertaking to
pay any customs duty, GST or luxury car tax relating to the importation. If the goods are subsequently
exported within the required time and other relevant conditions are complied with, GST will not be payable
(s 171-5).

Example
Horst, an overseas executive, is seconded to Australia for six months. He brings with him his Mercedes car, provides Customs with
an undertaking to export the car on his return overseas and lodges a security to cover the customs duty, GST and luxury car tax that
would have been payable if the car had been imported permanently. No duty or taxes will be imposed unless Horst fails to export the
car within six months or otherwise breaches the terms of his agreement with Customs.

The Tax Office considers that in the racing industry, animals imported for racing may qualify under the
temporary import provisions, but animals imported for breeding purposes generally will not (ATO Fact
Sheet GST for the Racing Industry).
Similar rules apply in situations such as where the goods are accidentally destroyed before they can be
exported.
If goods are imported under bond directly into a licensed customs warehouse, duty and taxes only
become payable when they are removed from the warehouse.
Customs broker’s fees
GST would apply to the fees charged by a customs broker for processing and clearing importations. The
business can claim this GST as an input tax credit in accordance with the rules set out at ¶9-010.
[GSTG ¶40-300; ¶40-360]

¶9-010 Input tax credits on imports

If you import goods, you can claim an input tax credit if you are registered (or required to be registered)
and the taxable importation was for a “creditable purpose”. This requires that the importation be made in
carrying on your enterprise, that it is not of a private or domestic nature, and that it does not relate to
making input taxed supplies (s 15-5; 15-10). The amount of the credit will be equal to the amount of the
GST payable on the importation (s 15-20).
This corresponds to the normal rules for claiming input tax credits, described at ¶5-010. The differences
are that:
• there is no requirement that payment has been made. The reason for this is that the GST on
importations is based on market value, not price

• unlike the normal situation, the person claiming the credit is the same person who was liable for the
GST (s 15-15)

• you do not need to hold a tax invoice to claim the credit. However, you should retain the customs
documentation (eg the Entry for Home Consumption document) as evidence that GST has been
paid.

The credit is attributable to the tax period in which you pay the GST on the importation (s 29-15). This
applies whether you are on a cash or accruals basis of accounting. However, if the Commissioner allows
a deferment, the credit will be attributed to the tax period in which the liability arose.
If the goods are to be used only partly for a creditable purpose, the credit will be correspondingly reduced
(s 15-25). For example, if you use the imported goods partly in making input taxed supplies or for private
purposes, you will not be entitled to a credit to that extent.

Example
A registered importer imports an item for $100,000 plus $10,000 GST. It intends to use the item 60% for business and 40% for
private purposes. It can claim an input tax credit of 60% × $10,000 = $6,000. If the importer was not registered, the GST would still
be payable, but no input tax credit at all could be claimed even if the item was used wholly for business purposes.

The Commissioner considers that the “importer” who can claim the credit is the person who: (1) causes
the goods to be brought to Australia with the purpose of supplying, using or otherwise applying those
goods after importation; and (2) completes the customs formalities for entry of the goods (GST Ruling
GSTR 2003/15). If goods are purchased from overseas, and the person transporting the goods enters
them for home consumption, this should be done as agent for the purchaser, not as owner in its own right.
Otherwise, neither party may be able to claim the input tax credit.
Although input tax credits cannot normally be claimed for importations that relate to financial supplies,
there are various exceptions relating to reduced input tax credits, credits that do not exceed a “de
minimis” threshold and borrowing expenses. These are explained at ¶10-030 and following.
[GSTG ¶40-400]
¶9-020 Installation or assembly of goods brought to Australia

For tax periods starting on or after 1 October 2016, special rules apply where the supply of goods
involves them being brought into Australia, and being installed or assembled here (s 9-25(6)). In this
situation:
• the part of the supply that involves the installation or assembly in Australia is treated as if it were a
separate supply. This will potentially be connected with Australia because it is a supply of services
that is “done” here (¶4-100), but there are important exceptions to this, for example, if the recipient is
an “Australian-based business recipient”: see ¶4-101

• the rest of the supply is treated as another separate supply, ie a supply of goods. This will be
connected with Australia if the supplier was the importer (¶4-100). If the supplier was not the
importer, the supplier does not have to pay GST, though the actual importer will be liable to GST on
the taxable importation.

The price of each supply is apportioned according to what reasonably represents the price for that
component (s 9-75(4)).

Example
A non-resident agrees to supply equipment to a recipient in Australia on the basis that the recipient will import the goods and the
non-resident will assemble them in Australia. Assume that the supply is not made through an enterprise that the non-resident carries
on in Australia, and that the recipient qualifies as an Australian-based business recipient.
The supply will be divided into a supply of goods (the equipment) and a supply of services (the assembly). The effect is:
(1) the supply of goods is not taxable, as the non-resident did not import them, so GST does not apply

(2) the supply of services, although done in Australia, is not connected to Australia because the recipient is an Australian-based
business recipient, so GST will not apply

(3) the recipient is liable for GST on the taxable importation, but is entitled to an input tax credit. To the extent that the acquisition
of the assembly services was not wholly creditable (eg was not wholly for business purposes), the recipient is liable for GST
on that supply under the reverse charge rules (¶9-100).

Previously, the installation or assembly of goods brought into Australia was connected with Australia as
part of the supply of the goods (former s 9-25(3)).
For transitional rules, see ¶19-250.
[GSTG ¶40-600]

¶9-030 Non-taxable importations of goods

The rules explained above do not apply if the importation of the goods is non-taxable (s 13-5). An
importation is non-taxable if it involves GST-free or input taxed goods, or if it is eligible for certain customs
duty concessions.
(1) Imports of GST-free or input taxed goods
An importation of goods does not attract GST if the sale of those goods within Australia would have been
GST-free or input taxed anyway (s 13-10).

Example
Zoe imports a wheelchair into Australia. Sales of wheelchairs are GST-free (¶13-350). Therefore, the importation of the wheelchair
does not attract GST.

(2) Goods returned unaltered

An importation is not taxable if goods that were exported are returned to Australia in an unaltered
condition, for example, where a manufacturer sends its goods for sale overseas and they are returned
unsold (s 42-10). For this to apply: (1) the importer must be the manufacturer of the goods; or (2) the
importer must have previously acquired the goods for a GST-inclusive price; or (3) the importer must have
previously imported the goods and paid GST on the importation.
In either case, the importer must not have been entitled to a payment under the Tourist Refund Scheme
when the goods were exported.
The Tax Office considers that in the racing industry, any treatment or training of an animal while overseas
means that it is unlikely that the animal will be returned in an unaltered condition. This includes a mare
returning to Australia in foal. On this basis, it is unlikely that the re-importation of race animals or animals
used for breeding would be a non-taxable import (ATO Fact Sheet GST for the Racing Industry).
(3) Imports of other concessional goods
An importation of goods is not subject to GST if the goods qualify for specified exemptions under customs
law (s 13-10; 42-5).
The exemptions include the following goods, subject to various restrictions. Item numbers in this list refer
to the Customs Tariff Act 1995, Sch 4, effective from 1 March 2013; previous numbering where different is
also shown:
• calendars and catalogues (item 4, previously 33A)

• goods of foreign governments (item 10, previously 4)

• goods for foreign services (item 11, previously 8)

• personal effects for passengers and ship or aircraft crew (item 15)

• warranty and safety recall goods (item 18, previously 18A–18C)

• goods for repair, alteration or industrial processing which are to be exported (item 21)

• Tradex scheme goods (item 21A) (see below)

• containers that are used to import goods that will be exported without any other use (item 22,
previously 34)

• donations or bequests (item 23, previously 23A–23B)

• will or intestacy goods not for sale or trade (item 24)

• trophies, medallions and prizes (item 25, previously 25A–25C)

• “low-value” goods (item 26, previously 32A–32B). This exemption is to be replaced: see below

• samples of negligible value (item 27, previously 33B).

Official guidelines on the application of these concessions are given in the government’s Schedule 4
Guidelines, November 2015, accessible at www.customs.gov.au.
If and when appropriate regulations are made, exemptions may also apply to goods of a scientific,
educational or cultural kind (item 1), books, visual and auditory goods (item 3), works of art (item 7),
Trade Commissioner goods (item 12), goods subject to the Torres Strait Treaty (item 13) and goods for
persons with disabilities (item 29).
Duty-free purchases at inwards duty-free shops by certain inbound passengers and crew are GST-free
under s 38-415 (¶12-020).
As noted above, goods imported under the Tradex scheme are non-taxable importations. The Tradex
scheme is intended to assist importers who bring goods into Australia temporarily for activities such as
processing, packaging or warehousing prior to export. If it happens that the goods are not exported, or
are dealt with contrary to Tradex requirements — for example, where goods manufactured from the
imported goods are sold in Australia — GST will be imposed by way of an increasing adjustment (Div
141). The amount of that adjustment is the difference, if any, between: (1) the amount of GST that would
have been payable if the importation had been taxable; and (2) any input tax credit to which the entity
would have been entitled for the importation if it had been taxable.
Transporting imported goods
If goods are imported, the international transport of them from overseas to their place of consignment in
Australia is GST-free (¶12-010).
Former exemption for “low-value” goods
A GST and customs duty exemption formerly applied to imported goods with a customs value of no more
than $1,000 (Customs Tariff Act 1995, Sch 4 item 26). The exemption — referred to as the “low value
threshold” (LVT) — was abolished, effective for tax periods commencing on or after 1 July 2018, and
replaced by a new system imposing GST at the point of sale. For details, see ¶9-130.
The exemption does not apply to alcoholic beverages, tobacco products or goods that are the
accompanied or unaccompanied effects of passengers or crew of a ship or aircraft. If the goods arrived by
sea or air, a self-assessed clearance declaration has to be made before customs clearance. This does
not apply to goods arriving by post.
[GSTG ¶40-260]

¶9-040 Where importation is partly taxable

It may happen that the importation of the goods is partly taxable and partly non-taxable. For example, the
importation may consist of some goods that are subject to GST and some that are GST-free. In this
situation, only the taxable part is subject to GST, and the GST value is apportioned accordingly (s 13-25).
If taxable and non-taxable goods are included in the one shipment, and the insurance and freight costs
relate to the whole shipment, it is expected that Customs will apportion those costs to each item on a pro
rata basis according to its customs value.
[GSTG ¶40-340]

¶9-050 Where goods have previously been exported for repair

Goods that are exported for repair or renovation would normally have already been subject to GST. If
those goods are later imported back into Australia, there would be double taxation because GST would
already be included in their taxable value. To overcome this, the GST on the import is, in effect, restricted
to the value added by the repair or renovation (Div 117).
This means that the taxable value is calculated as:
• the cost of the repair or renovation (materials, labour and other charges), plus

• the transport and insurance costs of importing the goods, plus

• the amount paid or payable for loading, handling or facilitation services (excluding exempt taxes, fees
and charges: ¶4-080)

• customs duty (s 117-5).

Example
Company X sends an item of equipment worth $100,000 overseas for repairs. The cost of materials, labour and other charges is
$20,000, transport, insurance and other relevant costs from overseas to Australia are $5,000 and customs duty is $1,000. On the
importation back to Australia, the GST is 10% of ($20,000 + $5,000 + $1,000) = $2,600.

If the costs of transport, insurance and other relevant costs are expressed in foreign currency, they should
be converted at the ruling rate of exchange on the day the goods were exported.
These rules also apply to goods that are part of a “batch repair” process. This covers goods that are
imported as part of a process to replace similar-standard goods that have been exported from Australia
for repair or renovation.
However, it naturally does not apply if the imported goods are of a kind that does not attract GST, as no
GST would be payable on those imports in any event. For details of non-taxable imports, see ¶9-030.
Re-importation of luxury cars
For the luxury car tax exemption for cars re-imported into Australia, following a refurbishment overseas,
see ¶23-020.
[GSTG ¶40-340]

¶9-055 Re-importation of breeding livestock

Where a live animal is exported (eg for breeding) and then re-imported, the importation is only subject to
GST on the increase in value of the animal (s 117-10). Furthermore, in certain circumstances — yet to be
defined — the GST may be refunded if the value of the animal drops after re-importation (s 117-15).

Example
A horse owner sends a brood mare overseas for the purpose of having it serviced at stud. The horse is re-imported in a pregnant
state. GST will apply only on the increased value of the horse — typically, this will be based on the value of the foal carried by the
horse. If the horse subsequently does not produce a live foal, a refund of the GST paid on re-importation may possibly be made.

For these rules to apply, the ownership of the animal must be the same at the time of export and the time
of re-importation. If there is a change of ownership, GST will apply to the full value of the importation.
For further guidelines, see the ATO Fact Sheet GST for the Racing Industry.
[GSTG ¶40-340]

¶9-060 Excisable goods held “in bond”

Excisable goods held “in bond” have not, at that stage, been subjected to excise duty. To cover this
situation, the GST value of those goods is increased to include the excise duty that would have been
payable if they had been entered for home consumption (s 108-5).
This rule does not apply to a supply of the goods to a person registered for GST purposes who acquires
the goods solely for business purposes. If the rule applied to these persons, they would get inflated input
tax credits. The rule will apply, however, if a registered person acquires the goods at least partly for
private or domestic purposes, or for the purpose of providing input taxed goods or services.
It is not necessary for a corresponding rule to apply to customable goods. When those goods are
ultimately entered for home consumption, that entry will be a taxable importation and GST will be paid on
the full value of the goods in accordance with the normal rules.
[GSTG ¶40-610]

¶9-070 Imported second-hand goods

Imported second-hand goods do not qualify for the special input tax credit which applies where goods are
acquired from an unregistered supplier (¶16-110). However, if you had imported second-hand goods on
hand at 1 July 2000, you could have claimed a separate input tax credit equal to the amount of sales tax
you paid when you imported the goods (Transition Act, s 16).

¶9-080 Importations through an agent

In accordance with the normal agency rules, importations made by an agent on behalf of your business
are treated as being made by the business. However, where a registered non-resident makes an
importation into Australia through an agent resident here, the agent is responsible for the GST
consequences of the importation. For full details, see ¶17-400.

Example
Agent acts as the agent for Enterprises, a resident company. Both are registered for GST. If Agent imports and sells equipment for
Enterprises, GST and input tax credits on the importation and sale are claimed by Enterprises, not Agent.
Agent also acts as the agent for Foreign, a non-resident company registered for GST. Foreign does not have a branch in Australia,
but imports equipment into Australia and sells it through Agent. GST and input tax credits on the importation and sale are paid by
Agent, not Foreign.
Note: If Foreign has a turnover of $20m or more, Agent must use monthly tax periods.

SPECIAL RULES RELATING TO OFFSHORE SUPPLIES

¶9-095 Non-resident business supplies: optional reverse charge

In accordance with the normal rules, supplies made by non-residents can be taxable supplies in certain
situations, for example, where the supply is connected with Australia and the non-resident is registered,
or is required to be registered because its GST turnover from supplies connected with Australia is
$75,000 or more (¶9-020).
In cases where the non-resident does not have a presence in Australia, this could cause practical
difficulties. To help overcome this, the non-resident and the Australian recipient can agree that the GST
on the supply should be paid by the recipient, not the non-resident supplier. This is called a “reverse
charge”.
An agreement to reverse charge can be made where:
(1) the supply is not made through an enterprise carried on by the non-resident supplier in Australia (ie
through a “permanent establishment” (¶4-100)), and

(2) the recipient is registered, or required to be (s 83-5).

Exclusions
This rule does not apply to:
• a supply made through a resident agent, who will be liable to pay the GST (¶17-410)

• offshore supplies that are covered by separate rules relating to business supplies of services and
rights (¶9-100) or, with effect from 1 July 2018, to supplies of low value goods to consumers (¶9-
130), or

• offshore supplies of rights or options that are not treated as GST turnover (¶3-030).

Agreements to reverse charge cannot retrospectively apply to taxable supplies that are attributable to
earlier tax periods (Interpretative Decision ID 2004/117).
Payment
The amount of the GST is 10% of the price of the supply (s 83-20). The non-resident is not required to
issue a tax invoice, and the recipient is not required to hold a tax invoice in order to claim an input tax
credit for the GST paid (s 83-35).
If the recipient is a member of a GST group, the GST is payable by the representative member (s 83-10).
If the recipient is a participant in a GST joint venture, the GST is payable by the venture operator (s 83-
15).
Registration and turnover
For registration purposes, supplies that are covered by these reverse charge agreements are not taken
into account in calculating the non-resident’s GST turnover (s 83-25; 83-30). This means that the non-
resident will not need to be registered unless the value of other supplies connected with Australia is at
least $75,000.
Supplies covered by a reverse charge agreement are also not taken into account in calculating the
recipient’s GST turnover (s 188-23).
[GSTG ¶40-710]

¶9-100 Offshore business supplies of services and rights

A reverse charge rule applies where someone overseas provides something other than goods, for
example, services or rights over intellectual property (s 84-5, items (1) to (3)).
If that service or right is not provided through an Australian enterprise of the provider, the effect of the
normal rules (¶4-100) could be that it is not connected with Australia, with the result that GST would not
apply.
To partly cover that situation, GST automatically applies to a supply that is not connected with Australia,
or is an offshore supply of rights or options that is deemed to be connected with Australia (¶4-100), if the
following requirements are satisfied:
• the recipient is registered or required to be registered

• the service or right is provided in return for consideration (¶4-020)

• the recipient acquires the item at least partly for the purposes of an enterprise that it is carrying on in
Australia (ie through a “permanent establishment” (¶4-100)), and

• the recipient does not acquire the item wholly for a creditable purpose, for example, it uses it to
provide input taxed financial services (s 84-5).

In this situation, the services or rights provided to the recipient will be subject to GST and the GST will be
payable by the recipient, not the provider (s 84-10). This “reverse charge” is intended to overcome the
fact that the provider will often not be subject to the Australian GST system. For the situation where the
recipient is a non-business consumer, see ¶9-120.

Examples
(1) Software is downloaded from an overseas third party by a financial institution that carries on business in Australia and is
registered. It uses the software in providing financial supplies. If the normal rules applied, the overseas supplier would not be taxable
because the supply of the software was not connected with Australia (¶4-100). However, GST will be payable by the financial
institution under the reverse charge rules, because it uses the software to provide input taxed financial services.
(2) A private consumer purchases software from an overseas supplier. GST does not apply as the supply is not connected with
Australia, and the reverse charge rules do not apply as the consumer is not registered or required to be registered (ATO GST
Industry Issues — Electronic Commerce Ch 4).

The amount of the GST is calculated as 10% of the price of the supply (s 84-12). The recipient will be
entitled to an input tax credit to the extent that the item was used for creditable purposes. The input tax
credit is 10% more than the credit that would have been allowable if the supply had been a taxable supply
under the normal rules (s 84-13). The Commissioner accepts that the recipient does not need to hold a
tax invoice (¶5-100) in order to claim the input tax credit (WTI 2000/2 — Goods and Services Tax: Waiver
of Tax Invoice Requirement Determination 2017 for intangible supplies from offshore).
Any GST adjustment relating to the acquisition (¶6-000) is worked out assuming that the supply was fully
taxable and the acquisition fully creditable (s 84-30, effective for tax periods starting on or after 1 October
2016).
Transfers between branches
For the purposes of the reverse charge rule, transfers made between an Australian branch and an
overseas branch of the same entity are treated as not being connected with Australia. The same applies if
the overseas branch does something for the Australian branch (s 84-15).

Example
A company acquires the right to use a copyright in Australia. The acquisition is made through an overseas branch and the right is
then transferred to an Australian branch. The transfer is treated as not being connected to Australia and may therefore attract the
reverse charge rule.

Supplies of employee services

The reverse charge does not apply to amounts paid to an overseas enterprise by its Australian branch for
the services of an expatriate employee (s 84-15). This is subject to the proviso that the payment would
have been subject to PAYG withholding if it had been paid to the employee by an Australian employer.

Example
An employee of an overseas bank is transferred to Australia to work for a local branch. The overseas bank continues to pay the
employee’s salary directly, but recoups that salary from the local branch and also charges an administrative fee.
If the employee had been paid directly by the local branch, the salary would have been subject to PAYG withholding (and not subject
to GST). The payment to the overseas bank to reimburse the salary is therefore not subject to the reverse charge rules. However,
the reverse charge will apply to the administrative fee.

If a non-resident entity supplies employee services in Australia to its 100% subsidiary, that supply can be
disregarded in working out the non-resident’s GST turnover, for the purpose of determining whether it is
required to be registered: see ¶3-030.
Financial management and support services
Where the reverse charge rule applies to certain management and support services supplied to an
Australian financial enterprise by a closely-related overseas entity, a reduced input tax credit may be
available (¶10-042).
Employee share ownership schemes
The reverse charge rule does not apply to supplies relating to specified types of employee share schemes
made by an overseas enterprise to an Australian branch or by an overseas entity to a 100% subsidiary in
Australia (s 84-14).
The exemption means that these schemes are treated on the same footing as share schemes offered
directly by domestic employers, which are not subject to GST.
Electronic distribution services to consumers
Effective for supplies made on or after 1 July 2017, a separate procedure for shifting GST liability applies
where supplies are made from offshore to Australian consumers through electronic distribution services
(Subdiv 84-B). This is explained at ¶9-120.
Other aspects
• This reverse charge rule does not apply if the original supply was itself GST-free or input taxed. For
example, imported financial services are input taxed (¶10-010), so are not subject to reverse
charging.

• As this reverse charge rule only applies if the recipient is registered or required to be registered, it will
normally not apply to private consumers in Australia. For special rules applying to inbound supplies of
intangibles to Australian consumers, see ¶9-120.

• Where a supply may potentially be taxed under this reverse charge rule or under the normal rules, the
reverse charge rule will prevail (s 84-10).
 • In certain limited situations, a reverse charge may also apply to offshore supplies of goods to
consumers (¶9-130).

[GSTG ¶40-720]

¶9-120 Offshore supplies of digital products and other intangibles to consumers

Traditionally, services and intangibles supplied to non-business consumers from overseas have generally
not been subject to GST, as they were not “connected” with Australia (¶4-100). This treatment was
justified on the ground that the number of those types of supply was very limited. However, this position
has changed dramatically with the growth of the internet and e-commerce. Accordingly, for tax periods
starting on or after 1 July 2017, supplies of things other than goods or real property — ie services or rights
— are treated as having a connection with Australia if they are made to an “Australian consumer” (s 9-
25(5)). Those supplies therefore may become subject to GST even though the supplier is overseas.
This rule is largely directed at supplies of digital products, such as streaming or downloading of movies,
music, apps, games and e-books, as well as consultancy and professional services. However, it is not
restricted to those things.
Australian consumers
An “Australian consumer” is an entity (¶3-015) that:
(1) is an Australian resident, and

(2) is either not registered, or is registered but does not acquire the things supplied wholly or partly for
the purpose of the entity’s enterprise (s 9-25(7)).

Residents of Australia’s external territories (¶4-100) are not included.

Interaction with other rules
A business recipient of the supply that makes the acquisition only partly for business purposes will not be
an Australian consumer (see (2) above). However, to the extent that it cannot claim an input tax credit on
the acquisition, it will be subject to the reverse charging rules applying to supplies of services and rights.
This generally means that the business is liable for GST on the portion of the acquisition for which a credit
cannot be claimed (¶9-100): see Example 2.
Of course, even where the supply is connected to Australia under these rules, it will not be subject to GST
if it is entitled to a GST exemption under other provisions such as s 38-190. This will particularly apply to
supplies that are connected with property outside Australia, or supplies where the effective use or
enjoyment occurs outside Australia (¶9-240, items (1) and (3)). Such supplies continue to be GST-free.

Examples
(1) Foreign business provides video streaming services from overseas to non-registered Australian resident individual. This
supply is connected to Australia and GST may therefore apply.

(2) Foreign business provides accounting software from overseas to registered individual who acquires it partly for her business
and partly for private purposes. The supply is not connected to Australia under these rules. However, it will be subject to the
reverse charging rules (¶9-100).

For rules for converting amounts of consideration expressed in foreign currency, see Goods and Services
Tax: Foreign Currency Conversion Determination (No 1) 2017.
Determining consumer status
In practice, it may be difficult for an overseas supplier to determine the residency and GST-registration
status of its customers. Accordingly, a supplier is entitled to act on the basis that a customer is not an
Australian consumer if it forms a reasonable belief that this is so, based on reasonable steps which it has
taken to obtain information about that status (s 84-100). This is so, even if it later turns out that this belief
was incorrect.
A belief may be “reasonable” even though it is based on a limited combination of information, such as the
customer’s address, contact numbers, credit card details, phone country code and statements about
location. In some cases, a wide range of such information will be available through the supplier’s normal
business systems. In the particular case of a fully automated system, where there is no human interaction
between supplier and customer, the Commissioner accepts that a reasonable belief can be formed where
it is based on at least two of such pieces of non-contradictory evidence as to residency. Detailed
guidelines on the Commissioner’s approach are in GST Ruling GSTR 2017/1.
Alternatively, where the business systems do not provide sufficient information, the supplier may form a
reasonable belief after taking reasonable steps to obtain the information. The Commissioner considers
that relevant circumstances to be considered in determining what steps are reasonable for a supplier to
take include:
• the level of interaction the supplier has with the recipient in making the supply or in maintaining the
commercial relationship

• the type of personal information that a recipient will usually share, or usually be willing to share, with
the supplier in the course of making a supply or in maintaining the commercial relationship, taking
into account the type of supply, the value of the supply, and the nature of the commercial relationship

• the difficulty and costs involved for the supplier in taking steps to obtain information about whether an
entity is an Australian consumer of a supply (including both direct and indirect costs), and

• the expected reliability of the information about whether an entity is an Australian consumer (GST
Ruling GSTR 2017/1).

The Commissioner also accepts that a supplier will normally be able to rely on a determination that the
recipient is resident outside Australia where it has been made by a comparable overseas jurisdiction
(European Union countries, Norway and New Zealand).
A belief formed on the basis that the customer is not an Australian consumer, based on the fact that the
customer is GST-registered, is not reasonable unless the supplier has obtained the customer’s ABN (¶3-
050) and a declaration from the customer that it is registered.
If the supplier wrongly treats an entity as an Australian consumer, with the result that GST becomes
payable, the normal rules as to repayment of excess GST apply (¶8-115).
A customer that misrepresents its consumer status — for example, in an attempt to escape GST on the
transaction — may be subject to penalties under the rules related to “false and misleading” statements
(¶18-300). In serious cases, false statements about residency or ABNs may constitute criminal offences
(Taxation Administration Act, s 8U; A New Tax System (Australian Business Number) Act 1999, s 23).
It may happen that an Australian business has made a wholly private or domestic acquisition, but
provides information misrepresenting that it is not an Australian consumer of that supply (and that GST
therefore does not apply). In this case, the reverse charge rule (¶9-100) will apply and the recipient, not
the supplier, is liable for the GST (s 84-5).
Transactions through electronic distribution platforms
Special rules apply in allocating GST liability where there is an offshore supply of intangibles — things
other than goods or real property — to an Australian consumer. These are called “inbound intangible
consumer supplies” (s 84-65). For these supplies:
(1) no tax invoice or adjustment note is required (s 84-50)

(2) non-resident suppliers may elect to be limited registration entities (see further below)

(3) where they are made through an electronic distribution platform, such as an e-store, the operator of
the platform, not the actual supplier, is liable for the GST (s 84-55).

These rules do not apply where the thing is done wholly in Australia or is supplied through an enterprise
that the supplier carries on in Australia.
An electronic distribution platform includes a website, internet portal, gateway, store or marketplace (s 84-
70). It enables entities to make supplies available to end-users electronically. Merely providing a payment
system, or advertising does not qualify. Nor does a carriage service, such as those provided by internet
service providers.
Where a supply is made through the platform, the operator of the platform is treated as having made the
supply as part of its enterprise (s 84-55). There is an exception if all the following conditions are satisfied:
• the operator and the actual supplier have agreed in writing that the supplier is liable for the GST

• the recipient is notified, and

• the operator does not control any of the key elements of the supply, for example, in directly or
indirectly setting any of the terms and conditions of the supply, or in authorising payment or delivery.

Where a supply is made through multiple distribution platforms, the first operator to authorise a charge or
receive consideration for the supply is normally treated as making the supply. Failing that, it is the first
operator to authorise delivery. Alternatively, the operators can agree among themselves which operator is
liable.
An operator and a supplier may also agree to these distribution platform rules applying to other types of
supply made by electronic communication — not just offshore supplies of intangibles to Australian
consumers — made through the platform (s 84-60). For this to apply, the operator must be registered for
GST, and the supply must not be input taxed or GST-free.
For the Commissioner’s rulings on the operation of these rules, see Law Companion Ruling LCR 2018/2.
These rules as to electronic distribution platforms will also apply under the provisions governing supplies
of low value goods (¶9-130).
The Treasurer has the power to declare inbound intangible consumer supplies made by non-residents to
be GST-free where this is necessary to comply with Australia’s international obligations, and the supply
would be GST-free if made within Australia (s 38-610). A corresponding rule applies for input taxed
supplies (s 40-180). This has been applied to ensure that supplies of bank accounts and superannuation
interests by foreign financial institutions remain input taxed (GST Regulations s 40-5.09(3); ¶10-010).
“Limited registration” option for non-resident suppliers
Non-resident suppliers of inbound intangible consumer supplies can elect to take advantage of simplified
registration requirements (¶3-075).
Transitional rules for transactions spanning 1 July 2017
These provisions about inbound intangible consumer supplies apply in working out net amounts for the
tax periods starting on or after 1 July 2017. A transitional rule applies to ensure that entities cannot avoid
GST on supplies by entering into long-term supply arrangements before that date. The effect is that
where there is a periodic or progressive supply over a period that spans that date, the supply is treated as
being made continuously and uniformly over that period. Any consideration for the part of the supply that
is taken to be made on or after that date is treated as being received in the first tax period on or after that
date. However, this transitional rule does not apply to:
• warranties, if the value of the warranty was included in the price of the goods or services supplied, or

• supplies that are taxable in any event.

Example
On 1 May 2017, a non-business Australian consumer takes out a one-year subscription to an online magazine and pays the full
subscription fee. Under the transitional rule, 334/365 of the fee will be attributed to the first tax period on or after 1 July 2017.

¶9-130 Offshore supplies of “low-value” goods to consumers

Until 1 July 2018, a GST and customs duty exemption generally applied to goods imported in a
consignment with a customs value of no more than $1,000. The exemption — referred to as the “low
value threshold” (LVT) — did not apply to alcoholic beverages, tobacco products or goods that are the
accompanied or unaccompanied effects of passengers or crew of a ship or aircraft. If the goods arrived by
sea or air, a self-assessed clearance declaration had to be made before customs clearance. This did not
apply to goods arriving by post.
Imposition of GST from 1 July 2018
The $1,000 exemption is abolished, effective for tax periods commencing on or after 1 July 2018, and is
replaced by new rules imposing GST at the point of sale (Subdiv 84-C). This is intended to provide
competitive neutrality for domestic retailers that have historically been at a disadvantage against foreign
retailers, who have been able to sell equivalent goods online to Australian customers exclusive of GST.
The Tax Office has reported that in the first year of operation, the new rules yielded over $250m and
enjoyed a “very strong overall level of compliance” (ATO media release, 1 July 2019).
The effect of the new rules is that an offshore supplier will normally be required to register, collect and
remit GST where the following conditions are satisfied:
• there is an offshore supply of goods, ie goods are brought to Australia with the assistance of the
supplier, for example, where the supplier delivers the goods to Australia, or procures, arranges or
facilitates their delivery to Australia (s 84-77). For the meaning of “goods”, see ¶4-100

Example
While on holidays overseas, Russell buys two items costing $400 each from a shop. He brings one item back home to
Australia himself, and arranges with the shop to arrange for the second item to be transported and delivered to him in
Australia. The supply of the first item is not an offshore supply, but the supply of the second item is.

• the goods are “low value” goods. This requires that their customs value (¶9-005) would have been
$1,000 or less if they had been exported at the time when the consideration for the supply was first
agreed. Tobacco or alcoholic beverages are excluded and continue to be treated as taxable
importations, as under the former rules (s 84-79). For the method of converting foreign currency
amounts, see Goods and Services Tax: Foreign Currency (Customs Value of Low Value Goods)
Determination 2018

Example
An order includes two goods with customs values of $600 each, totalling $1,200. This is a supply of low value goods.

• the supplier has a (Australian) GST turnover of $75,000 or more ($150,000 for non-profit bodies),
including the GST turnover from the relevant supply, and

• the supply is connected with Australia (¶4-100). Subject to the exception detailed below, this
requirement is satisfied if the recipient is a “consumer” of the supply — for example, is not GST-
registered, or is GST-registered but does not acquire the thing for use in an enterprise that it carries
on in Australia (s 84-75). There is a “safe harbour” for suppliers where the customer provides its ABN
and a declaration that it is GST-registered (s 84-105). A reverse charge mechanism also applies
where the recipient misrepresents that the supply is being made to a consumer. Where a purchaser
arranges for the goods to be delivered to someone else, the purchaser is still the recipient.

Where these conditions are fulfilled, they apply irrespective of the way the consumer purchases the
goods, whether online, by telephone, in person in a store overseas or from a store in Australia if the
goods were located outside Australia.
Additional guidelines on the application of these rules are set out in Law Companion Ruling LCR 2018/1.
Exception where there is a taxable importation
A supply is not connected with Australia, and therefore not caught by the low value rules, if the supplier
has taken reasonable steps to obtain information about whether the supply will be a “taxable importation”
(¶9-000) and reasonably believes that the supply will be a taxable importation (s 84-83). In such a case,
the normal rules for taxable importations apply and GST will be paid at the border.
Under customs law, a supply is a taxable importation if goods are included in a consignment with a
customs value exceeding $1,000. Goods are considered to be in the same consignment if they are (1)
sent by international mail from one person to another, or (2) sent by air or sea cargo, from one person to
another, where the goods are all transported to Australia in the same ship or aircraft (see further Law
Companion Ruling LCR 2018/1). This means that if the combined customs value of the goods in one
consignment exceeds $1,000, the supply is a taxable importation, even if individual items in the
consignment are low value items and they were ordered at the same time. However, it is up to the
supplier to establish this. If the supplier knows that the goods will be consigned separately or is uncertain
whether the goods will be sent together, then the low value rules may apply.
Taking “reasonable steps” generally requires the supplier to seek to obtain information, whether directly or
by setting up business systems and processes, about how the goods are to be consigned (Law
Companion Ruling LCR 2018/1).
Where a redeliverer is treated as the supplier, the reasonable belief must be held at the time it assists in
bringing the goods into Australia. Where the operator of a distribution platform is the supplier, the belief
must be held at the last time the consideration for the supply changes prior to export.
Various other rules are designed to ensure that if there is a supply of low value goods that is subject to
GST, the importation will be non-taxable (s 84-85; 42-15). Provisions also govern the payment of refunds
where the supply has incorrectly been treated as a taxable supply (s 142-16).
Suppliers may include operators and redeliverers
An entity may also be treated as the supplier if the entity is the operator of an “electronic distribution
platform” (¶9-120) through which the supply is made, and the operator delivers the goods into Australia,
or “procures, arranges or facilitates” the delivery into Australia (s 84-77; 84-81). In this case, the operator
is liable to pay the GST.
An entity may also be treated as the supplier if it is a “redeliverer”. This covers an entity carrying on an
enterprise who:
• under an agreement with the recipient, delivers the goods into Australia, or “procures, arranges or
facilitates” the delivery of the goods into Australia, and

• either provides an address outside Australia to which the goods are delivered, or purchases the
goods, or procures, arranges or facilitates either of those (s 84-77; 84-81).

Typical examples would include providers of offshore mailbox or shopping services. If there are multiple
redeliverers, generally, the first redeliverer to deal with the customer is liable for the GST.

Example
Penny, an Australian resident who is not registered for GST, has an account with a mail forwarding service based in the US. She
purchases low value goods from a US store for a non-business use. The store does not ship to Australia, so she instructs it to send
the goods to a US-based address provided to her by the forwarding service, which then forwards the goods to Penny. The
forwarding service, not the store, will be treated as the supplier of the goods. This results in the supply having a connection with
Australia, so the forwarding service will be subject to the low value goods rules and will be required to register and remit GST if its
GST turnover (from other transactions connected to Australia) is $75,000 or more.

Where a redeliverer, rather than the supplier, is liable for GST, the pricing of the supply by the supplier
will not reflect the application of GST. As a result, GST applies to the supply on the basis that the price is
GST-exclusive. This means that the amount of GST on the supply in the hands of the redeliverer is 10%
of the price set by the actual supplier rather than 1/11th of that price (s 84-91).
Procuring, arranging or facilitating the delivery of the goods includes making arrangements with third
parties for the transport of the goods or facilitating the individual making those arrangements, eg by
having arranged special terms for its customers for delivery. However, it does not include merely selling
goods to a recipient, making the goods available for collection or providing contact information for
otherwise unrelated transport companies. The Commissioner’s rulings on redeliverers are in Law
Companion Ruling LCR 2018/3.
These rules apply to the practice of “drop shipping”, for example, where a consumer purchases an item
from an online Australian-based retailer, who arranges for the item to be sent directly to the customer by
sea from the retailer’s offshore supplier. This would be treated as subject to GST in the same way as a
domestic sale.
However, these rules as to supplies made through electronic distribution platforms do not apply if the
supply is connected with Australia under some other provision, eg the merchant is the importer, or the
supply is sourced within Australia. In such cases, the merchant is responsible for the GST.
Documentation requirements
Tax invoices and adjustment notes are not required where the supply is taxed under these provisions (s
84-87). However, the supplier must notify the recipient of the amount of GST on the supply, and failing to
do so is subject to a penalty (¶18-300) (s 84-89). The notice must be in the approved form and be given at
the time the consideration for the supply is first agreed. It may be in electronic form.

The approved notice must contain:

• the name of the supplier

• the GST registration number of the supplier, which is either an ATO Reference Number (ARN) or
Australian Business Number (ABN)

• the name of the recipient (this is only required if the total price of the transaction is over $1,000)

• the date of issue

• a description of what goods were supplied, including the quantity (if applicable) and the GST-
inclusive price of the goods

• the amount of GST payable for each of the goods, and

• information that identifies the extent to which each of the goods were supplied as a taxable
supply (Law Companion Ruling LCR 2018/1).

Specified tax information must also be included in customs documents (s 84-93). For example, suppliers
must ensure that their customs documentation has the supplier’s GST registration number, recipient’s
ABN (if known) and extent to which the supply has been treated as a taxable supply.
Non-disclosure of the recipient’s consumer status which results in non-payment or underpayment of the
GST on the supply may, in certain circumstances, give rise to a “GST benefit” to the recipient that would
attract the general tax avoidance rules (¶20-030).
“Limited registration” option for non-resident suppliers
Non-residents who make offshore supplies of low value goods — including operators of electronic
distribution platforms — can elect to take advantage of simplified registration requirements (¶3-075). The
same applies to non-residents who are, or intend to be, redeliverers of these supplies. Failure to register
exposes the entity to penalties (s 84-5; ¶18-300).
Supplies that are reverse charged
Certain offshore supplies of low value goods may be treated as taxable supplies and be subject to a
“reverse charge” in the same way as offshore business supplies of services and rights (¶9-095). This
means that the supply is taxed in the hands of the recipient, not the supplier (s 84-5, items (4), (5)).
This rule applies where the low value goods are acquired for wholly private purposes but the consumer
wrongly represents to the supplier that they were acquired for business purposes, with the result that the
supplier did not impose GST on the supply. It also applies to the extent that they were acquired for private
purposes even though they may also have been acquired partly for business purposes.
This rule does not apply to GST-free or input taxed supplies.
Sanctions for non-compliance
The Tax Office has released the following summary of steps it will take in the event of mistakes or non-
compliance with these rules (Making Compliance Happen at www.ato.gov.au):

Compliance
category Your behaviour ATO action
Fully compliant — You have: ATO will not contact you unless it believes you
Willing to do the • registered for GST as have made a mistake.
right thing required
• made necessary changes to From 1 July 2018 to 30 June 2019, where you
your business systems have made a mistake, ATO will:
• collected GST as required • ask you to correct it
• reported and paid GST • not impose any penalties.
collected by the due date
• made an honest mistake. From 1 July 2019, where you have made a
mistake, ATO will:
• ask you to correct it
• consider your circumstances
and level of co-operation
before applying penalties.
Mostly compliant You have: ATO will not contact you unless it believes you
— Try to comply • registered for GST as have made a mistake.
but don't always required
succeed • made a genuine attempt to From 1 July 2018 to 30 June 2019, where you
collect, pay and report have made a mistake, ATO will:
GST as required, but • ask you to correct it
have difficulty with any • not impose any penalties.
or all of these
• contacted us about your From 1 July 2019, where you have made a
situation and worked with mistake, ATO will:
us to resolve it. • ask you to correct it
• consider your circumstances
and level of co-operation
before applying penalties.
Partly compliant — You have: As of 1 July 2018 ATO will:
Don't want to • registered for GST as • calculate your liability and
comply required issue an assessment
• not collected GST as • impose an additional 75%
required administrative penalty
• not reported the GST you • take recovery action for the
collected debt.
• not paid us the GST
collected.
Not compliant — You have taken no action to As of 1 July 2018 ATO will:
Have decided not comply with your obligations. • register you for GST
to comply • calculate your liability and
issue an assessment
• impose an additional 75%
administrative penalty —
higher penalties can apply
if you are a significant global
entity
• take recovery action for the
debt.

Transitional rules
The low value goods rules apply in working out GST for tax periods starting on or after 1 July 2018 and to
taxable importations made on or after that date. Typically, this means that they apply where the invoice is
issued or payment received on or after 1 July 2018, irrespective of when the goods are actually delivered.

EXPORTS
¶9-200 Treatment of exports

As GST is primarily a tax on consumption in Australia, it is not intended to apply to things that are not
consumed in Australia, such as exports. Exports are therefore GST-free. This means that no GST
applies, but that the exporter is entitled to input tax credits (¶1-160).
The export exemptions are divided into:
• exports of goods (¶9-210)

• exports of services and things other than goods or real property (¶9-240).

For the meaning of “Australia”, see ¶4-100.

[GSTG ¶41-000]

¶9-210 Exports of goods

A supply of goods is GST-free if the supplier exports them from Australia before, or within 60 days after,
receiving any of the consideration for them. If the goods have been invoiced before any payment is made,
they must be exported before, or within 60 days after, the invoice is given (s 38-185, item 1). For the
meaning of “goods”, see ¶4-100. For what constitutes an invoice, see ¶7-205. As to when consideration is
received, see ¶7-325, but note that a special rule applies to associates (see below).
If the export contract provides for payment by instalments, the goods must be exported by the supplier
before, or within 60 days after, receiving any of the final instalment. If that instalment has been invoiced
before any amount is paid for it, the goods must be exported before, or within 60 days after, that invoice is
given (s 38-185, item 2).

Examples
(1) An exporter exports goods before invoicing or receiving any payment for them. The export is GST-free.
(2) An exporter invoices goods on 1 March, is paid on 30 March and exports the goods on 20 April. The export is GST-free.
(3) An exporter invoices goods on 1 March, is paid on 30 March and exports the goods on 20 May. Although the export is within 60
days of payment, it is not within 60 days of the earlier invoice. The export is not GST-free.
(4) A manufacturer has a contract to build and export a machine. Payments are to be made in two instalments. The first instalment is
invoiced on 1 March and paid on 30 March. The second instalment is invoiced on 1 May and paid on 30 May. The machine is
exported on 15 June. The export is GST-free because it occurs within 60 days of the invoicing of the final instalment. It is irrelevant
that this is more than 60 days after the first instalment was invoiced.
For the supplier to be the exporter, the Commissioner considers that the supplier must be the effective
“sender” of the goods overseas (Australian Trade Commission v Goodman Fielder Industries Ltd (1992)
36 FCR 517). This means that the supplier must either: (1) contract at its own expense with an
international carrier for the overseas transportation of the goods; or (2) be responsible for delivering the
goods to a ship or aircraft operator that has been engaged by another party to transport the goods
overseas (GST Ruling GSTR 2002/6). This also covers the situation where the supplier arranges for a
freight forwarder, consolidator or express courier to deliver the goods to the carrier on the supplier’s
behalf. The supplier may therefore be the exporter, for example, where the relevant contract is CIF , DDP
or FOB. It is not necessary that the supplier be the beneficial owner of the goods at the time they are
exported (Inland Revenue Commr (NZ) v International Importing Ltd 72 ATC 6033; Companhia
Votorantim de Cellulose e Papel v Anti-Dumping Authority & Ors (1996) 42 ALD 7).
Technically, an export does not occur until the ship or aircraft departs from its final Australian port or
airport and clears Australian territorial limits. However, this time may not be known to the supplier.
Accordingly, the Commissioner considers that the 60-day requirement is met if the supplier: (1) hands
over possession of the goods to a freight forwarder, etc, for delivery, before or within the 60-day period; or
(2) delivers the goods to the ship or aircraft operator before or within the 60-day period. This is provided
that the supplier has completed all other actions necessary to export the goods (GST Ruling GSTR
2002/6).
A special rule applies where the supply is to an “associate” (¶17-500). In this case, the export of goods by
the supplier from Australia to the associate can be GST-free even though the supply is without
consideration (s 38-185, item 2A; 38-185(4)).
The supply of coal that is included in an export load as part of a loan or borrow arrangement at the port
may be accepted as a GST-free export where appropriate documentation requirements are satisfied
(ATO GST Industry Issues — Mining and Energy: Ch 5).
The Commissioner also has the power to extend the 60-day limit. This may occur, for example, where
there are physical, practical or commercial circumstances that reasonably explain the delay. Detailed
guidelines are in Practice Statement PS LA 2006/16.

Example
A supplier is exporting goods into a new market and encounters difficulties in organising for the delivery into the foreign country. The
goods were exported outside the 60-day period. Where the difficulties encountered were outside the supplier’s and recipient’s
control, an extension would be granted. (Based on Practice Statement PS LA 2006/16.)

If the export is not made within the allowable period, the export loses its GST-free status. This may mean
that there will need to be an adjustment to increase the GST for a tax period that has been calculated on
the basis that the export would be GST-free (¶6-100).
The export is not GST-free if the supplier re-imports the goods back into Australia.
Keeping records
The general obligation is to keep records that are sufficient to explain all relevant transactions for GST
purposes. As far as exports are concerned, this means that they must verify the export and when it
happened. This could include air waybills, bills of lading, evidence from the Australian Customs Service
that the goods were exported, and evidence from the foreign Customs authority that they were received.
For the Commissioner’s detailed requirements, see GST Ruling GSTR 2002/6.
Deemed export by supplier where goods delivered to purchaser
It may happen that the overseas purchaser of the goods buys them and takes delivery in Australia and
later exports the goods itself. This is treated as an export of the goods by the Australian supplier, if the
following conditions are met:
• the overseas purchaser is not GST-registered, or required to be registered

• the goods must be “entered for export”

 • the overseas purchaser must not alter the goods in any way, except to prepare them for export. For
example, packaging, wrapping, cleaning, dismantling or testing would normally be permissible, but
not taxidermy on hunting trophies. Breaking-in or barrier trialling a horse intended for export would
prevent the exemption from applying (GST Ruling GSTR 2002/6)

• the Australian supplier has documentary evidence that the purchaser actually exported the goods.
The Commissioner considers that this particular requirement is satisfied if the documents held by the
supplier provide a reasonable basis for an independent party to conclude that the goods were
exported (GST Ruling GSTR 2002/6), and

• if the overseas purchaser is a resident in an external territory they must not have claimed a refund of
the GST under the Tourist Refund Scheme (¶12-030; s 38-185(3)).

If these conditions are not met, GST may be payable, and the overseas purchaser would have to be
registered in order to claim an input tax credit.

Example
A taxpayer ran a business of providing hunting expeditions in Australia to foreign clients. At the end of the expedition, he provided
clients with trophies of animals that they had killed, which the clients took home with them. This was not a GST-free export, as the
taxpayer himself was not the actual exporter, and his informally kept records were not sufficient to establish that he could be
deemed to be the exporter under the rules stated above (based on McKay v FC of T 2011 ATC ¶10-201; [2011] AATA 593).

The supplier will be able to ensure that the purchaser is not registered by checking the Australian
Business Register. To determine if the purchaser is not required to be registered, the Commissioner
considers that it will be sufficient for the supplier to obtain a signed written statement from the purchaser,
provided that the supplier has no reason to believe that the statement is wrong (GST Ruling GSTR
2002/6).
[GSTG ¶41-100]

¶9-215 Export of aircraft or ship

The export of an aircraft or ship by the supplier may be GST-free in accordance with the general rules
stated at ¶9-210. In addition, the supply of the craft for export by the recipient is GST-free in the following
situations:
(1) the recipient exports the craft under its own power within 60 days after taking physical possession (s
38-185, item 3), or

(2) if the export contract provides for payment by instalments, the recipient exports the craft before, or
within 60 days after, the earliest of the following events:
• the supplier receives any of the final instalment or gives an invoice for it

• the supplier delivers the aircraft or ship to the recipient, or to someone else at the recipient’s
request (s 38-185, item 4).

The recipient would normally be the new owner or its agent. A ship means any vessel used in navigation,
other than air navigation (s 195-1).
New recreational boats
As a separate measure, the supply of a “new recreational boat” is GST-free where:
• the boat is exported by the supplier or the recipient within a 12-month period (in contrast to the usual
60-day period). The export does not have to be under the boat’s own power, though this would
commonly be the case

• the boat is not used in a disqualifying activity before it is exported within the 12-month period. This
 means that it must generally not be used in commercial activities or for commercial gain. For
example, if the recipient sells the boat, or uses it in carrying on an enterprise, this exemption would
not apply. There are some minor exceptions, eg competing in a race or other sporting event for
prizes would not be a disqualifying activity

• the supply is made under a contract entered into on or after 1 July 2011, and is not pursuant to right or
option granted before that date (s 38-185, item (4A)).

To qualify as a “new recreational boat”, the boat must satisfy all of the following conditions:
• it must be designed and fitted out principally for private recreational pursuits or hobbies

• it must not be a commercial ship. For example, a boat suitable for large-scale commercial fishing
would not qualify

• it must be a new construction, not simply a substantial reconstruction of an existing boat. This would
not prevent modifications of a newly constructed boat in order to meet the requirements of customers
unless they amounted to a substantial reconstruction. For example, refitting the galley with a double
sink and repainting the walls to a different colour would be permissible (GST Ruling GSTR 2002/6)

• it must not have been previously sold, leased or used since its construction (s 38-385(5), (6)).

The 12-month period in which the export must occur is measured from the earliest day on which:
• the recipient takes physical possession of the boat, and

• if the export contract provides for payment by instalments — the supplier receives any of the final
instalment or gives an invoice for it.

Having a 12-month instead of 60-day period enables a purchaser to experience operating the boat in
Australian waters before having to remove it from Australia. However, there is no requirement for this or,
for that matter, no requirement that the boat be sailed or motored at all before export.
Measuring or extending the limit
For the purposes of the 60-day (or 12-month) limit, the Commissioner considers that an aircraft or ship is
exported when it departs from its final Australian port or airport and clears Australian territorial limits (GST
Ruling GSTR 2002/6). The Commissioner also has power to extend the limit.
Where the craft is exported by the recipient, the supplier will need to gather sufficient evidence of the
export from the recipient to satisfy themselves that the export occurred within the relevant time period.
[GSTG ¶41-100]

¶9-220 Other GST-free exports of goods

There are various other less common exports of goods that qualify as GST-free (s 38-185). Again, these
exemptions do not apply if the supplier re-imports the goods back into Australia.
Goods consumed on international flights and voyages
The supply of aircraft or ship stores or spare parts is GST-free if they are to be used or sold on a flight or
voyage that has a foreign destination (s 38-185, item 5). This applies even if part of the trip involves travel
between two places in Australia. However, the Commissioner considers that it must be intended that the
craft must actually lay anchor, or land at a specific foreign location, not just pass through international
waters or airspace (GST Ruling GSTR 2003/4).
The stores or parts may be for the passengers or crew, or for the servicing of the aircraft or ship. “Stores”
include:
• food or beverages intended for consumption on board

• fuel and lubricants

 • goods intended for sale on board (such as souvenirs, film, batteries and confectionery) but not
personal belongings brought on board by passengers or crew (GST Ruling GSTR 2003/4).

It appears that durable goods would not qualify unless it can be established that they are specifically for
the purchaser’s use on the cruise rather than use after the cruise. So, for example, the exemption would
apply to a beach towel sold on a cruise ship that had a swimming pool, and medical products and clothing
relevant to the cruise. However, it would not normally apply to fashion clothing, electronic goods or
jewellery. Consumables such as alcohol and tobacco may qualify but not if they are required to be taken
ashore when the passenger disembarks. Perfumes sold in quantities such that it would not be reasonable
to expect that they would be substantially consumed on the cruise would not normally qualify
(Interpretative Decision ID 2013/37).
Repair of goods from outside Australia
The supply of goods used in the repair of goods that are from outside Australia, and whose destination is
outside Australia, is GST-free (s 38-185, item 6). To qualify, the goods must become attached to the
imported goods, or become part of them, or become unusable or worthless as a direct result of being
used in the repair. Corresponding rules apply where the imported goods are renovated, modified or
treated. However, the Commissioner considers that the exemption does not apply where the imported
goods are changed to the extent that they are no longer essentially the same goods by the time they are
exported, for example, where the work amounts to the manufacture of new goods (GST Ruling GSTR
2005/2).
For goods to qualify as “from outside Australia whose destination is outside Australia”, the Commissioner
considers that: (1) the stay in Australia should normally be temporary; and (2) at the time the goods are
being repaired, it must be intended that the goods will have a destination outside Australia. This
requirement may be satisfied even if, due to a change of circumstances, they do not actually depart
Australia (GST Ruling GSTR 2005/2).
The exemption would apply to repairs done in Australia to a ship (or goods on board) that is from outside
Australia and is in transit to a place outside Australia. It would apply even if the ship, with Customs’
permission, intends to visit various locations in Australia for sightseeing or fishing before it leaves. For the
documentary evidence required to support a claim, see GST Ruling GSTR 2005/2.
In certain situations, where the exemption does not apply because new goods have been created,
another exemption may apply instead. For example, where a supplier is contracted to make new goods
using components provided by a non-resident recipient, the export of the goods to the recipient may be
GST-free under s 38-185, item 1 (¶9-210).
The provision of services in connection with the repair, etc, is also GST-free (¶9-240).
Export of accompanied baggage: sealed bag system
A supply of goods to Australian and foreign national tourists is GST-free if the goods are exported as
accompanied baggage under the sealed bag system (s 38-185, item 7; GST Regulations s 38-185.01;
196-1.01; Sch 1). For details, see ¶12-030.
Australian transport, loading and handling
Transport, loading and handling costs incurred in Australia as part of exporting goods may be GST-free
(¶12-010).
Tourist refund scheme
For details of the refunds available to tourists for GST paid in Australia on goods taken overseas, see
¶12-030.
[GSTG ¶41-100]

¶9-230 Lease of goods used overseas

Leasing or hiring out goods used outside Australia is GST-free (s 38-187).

 Example
Equipco in Australia leases machinery to a New Zealand business to use in New Zealand. No GST is payable on the lease.

This exemption applies pro rata if the leased goods are used partly in Australia and partly overseas.
[GSTG ¶41-100]

¶9-235 Tooling used by non-residents

Supplies of tooling to non-residents are GST-free if the tooling is to be used in Australia solely to
manufacture goods for export (s 38-188). This only applies if the non-resident is not registered and not
required to be registered. “Tooling” means jigs, patterns, templates, dies, punches and similar machine
tools.
It may be difficult for the Australian supplier to verify whether the non-resident is not “required to be
registered”. A statement from the non-resident that it does not make supplies connected with Australia will
generally be sufficient for these purposes.
[GSTG ¶41-100]

¶9-240 Exports of services and other things

So far, the export exemptions we have covered only apply to goods. There are also export exemptions for
other things — such as services, advice, financial supplies or alteration of rights — that are not goods or
real property (s 38-190(1)). (For the meaning of “goods” and “Australia”, see ¶4-100; for “real property”,
see ¶11-000.) These exemptions cover the following.
(1) A supply that is “directly connected” with goods or real property outside Australia.
The ATO considers that this means that there must be a very close link or association, and that there
must be a direct effect on specific goods or real property (GST Ruling GSTR 2003/7; see also Malololailai
Interval Holidays NZ Ltd v C of IR (1997) 18 NZTC 13,137). On this basis, there will typically be a direct
connection where:
• the supply changes or affects specific property in a physical way, for example, the construction,
alteration, demolition, repair or maintenance of a building; the installation, alteration, repair, cleaning,
restoration or modification of goods; or the removal of vegetation or revegetation or decontamination
of land

• there is a physical interaction with specific property, but without changing it, for example, transport or
security

• the supply establishes quantity, size, other physical attributes or the value of specific property, for
example, testing, analysing, surveying, stocktaking or exploration services

• the supply affects or protects the nature or value of specific property, for example, insurance,
architecture, design engineering, town planning or property management

• the supply affects the ownership of specific property, for example, land conveyancing, lease or
mortgage, sale of goods, contract enforcement or supply of options to buy goods (but not, apparently,
the preparation of a will or taxation advice: GST Ruling GSTR 2003/7).

Examples
(1) An Australian buyer of a New Zealand commercial property engages a solicitor in Australia to carry out the conveyance. The
supply of the conveyancing services is GST-free under item (1) as it is directly connected with property outside Australia.
(2) An Australian resident engages an accountant in Australia to provide advice on the capital gains tax implications of selling
property owned and situated in the UK. The services are directly connected to the vendor’s tax position, rather than the property
itself, and they are therefore not GST-free under item (1). Nor are they GST-free under any of the other items. The same result
would apply where an adviser conducted a financial review of the feasibility of an overseas construction project for a resident client
 (GST Ruling GSTR 2003/7).
(3) An architect supplies plans prepared in Australia for the renovation of a building in Hong Kong. The supply of the services is
GST-free under item (1) as it is directly connected with specific property outside Australia.

The mere fact that goods or real property are used in making a supply does not mean that the supply is
directly connected with them.
Eligible emissions units (¶16-220) are personal property rights and are not directly connected with real
property.
(2) A supply made to a non-resident who is not in Australia when the thing supplied is done.
For this exemption to apply, the supply must not be a supply of work physically performed on goods in
Australia at the time, or a supply directly connected with real property in Australia. Alternatively, the non-
resident must acquire the thing in carrying on its enterprise but not be registered or required to be
registered.
Real property includes accommodation (¶11-000).
A non-resident means a non-resident of Australia for tax purposes (for ATO guidelines, see Taxation
Ruling TR 98/17). A supplier can check whether a recipient is not registered by checking the Australian
Business Register. The supplier may assume that the recipient is not required to be registered if it obtains
a statement to that effect from the recipient, and has no reason to disbelieve it (GST Ruling GSTR
2002/2).
The Tax Office considers that:
• a non-resident individual is in Australia if he/she is physically located here

• a non-resident company or partnership is in Australia if: (1) it carries on business here through a place
of business on its own or through an agent; (2) the place of business or agent has a fixed and definite
place in Australia; and (3) the business has continued for a sufficiently substantial period of time. On
this basis, a company may be in Australia even though it is incorporated elsewhere (Interpretative
Decision ID 2008/69). However, the mere presence of directors representing a non-resident company
in legal proceedings in Australia was held not sufficient to establish that the company was in Australia
at the time (Fiduciary Ltd & Ors v Morningstar Research Pty Ltd & Ors 2004 ATC 4633; [2004]
NSWSC 381). For further discussion of some of these requirements, in the context of permanent
establishments, see ¶4-100

• registration of a company with the Australian Securities and Investments Commission is a strong
indicator that the company is in Australia (GST Ruling GSTR 2004/7).

The Tax Office also considers that the requirement that the non-resident must not be in Australia when
the thing supplied is done means that they must not be in Australia in relation to the supply when the thing
supplied is done (GST Ruling GSTR 2004/7). For example, if a non-resident individual merely happens to
be in Australia on holidays at the time the supply is done, and has no contact with the supplier, the
exemption may still apply. For an explanation of when a supply of services, rights, etc, is “done”, see ¶4-
100.
The supply of banknotes to a wholesale customer in another country was considered to qualify for this
exemption in Interpretative Decision ID 2006/203.
The Tax Office considers that the physical performance of work on goods means that the goods are
changed or affected in some physical way, for example, repairs, cleaning or upgrading, but not mere
transport (GST Ruling GSTR 2003/7). On this basis, services such as market research, marketing,
advertising or certification of goods do not amount to work physically performed on the goods and may
therefore qualify for exemption.

Example
An Australian lawyer gives advice to a non-resident who is in New Zealand on the application of Australian trade practices law. This
 would be GST-free under item (2).

This exemption does not apply if under an agreement directly or indirectly with the non-resident the
services, etc, will be provided to another entity in Australia (s 38-190(3)). For example, the exemption
does not apply if overseas parents are billed for services to be provided to their children in Australia.
However, for tax periods starting on or after 1 October 2016, this restriction does not apply to the
following business-to-business transactions where the entity to which the services are provided:
• would be an Australian-based business recipient (¶4-101) if the supply had been made directly to
them, or

• is an individual employee or officer of such a business, or

• is an individual employee or officer of the non-resident whose acquisition is solely for a creditable
(business) purpose and not a non-deductible expense.

Provided that such supplies are not input taxed, they would continue to be GST-free under item (2).
For repairs carried out under a warranty with a non-resident manufacturer, see ¶9-250.
(3) A supply that is made to a recipient who is not in Australia when the thing supplied is done,
where the “effective use or enjoyment” takes place outside Australia.
For this exemption to apply, the supply must not be of work physically performed on goods in Australia at
the time, or a supply directly connected with real property in Australia. This exemption is also intended to
apply if, under an agreement with an Australian resident, the supply is made to someone outside Australia
(s 38-190(4)); this may apply, for example, to the supply of mobile telephone roaming to an Australian
business with an employee overseas, or a supply to an Australian business of a training course to be
conducted overseas (GST Ruling GSTR 2005/6). However, this extension of the exemption does not
apply to the transport of goods on the Australian leg of an international transport, or to associated loading,
handling, facilitation, insurance or arranging costs (s 38-190(5)). Instead, those supplies may be exempt
under s 38-355 (¶12-010).
Although the recipient must not be in Australia, it is not necessary that the recipient be a non-resident.
The Tax Office considers that a company is in Australia if it is incorporated here or if it is a foreign
company that satisfies the test applying to non-resident companies under item (2) above (GST Ruling
GSTR 2004/7).
The Tax Office also considers that the requirement that the recipient must not be in Australia when the
thing supplied is done means that they must not be in Australia in relation to the supply when the thing
supplied is done (GST Ruling GSTR 2004/7). A similar interpretation applies under item (2) above.
Where supplies are made through the internet, it may be hard to know or establish whether the conditions
of the exemption have been met. The Tax Office’s interim non-mandatory guidelines suggest that for
supplies for less than $1,000, the supplier should obtain as a minimum an appropriate declaration from
the recipient and their full address.
The Tax Office also suggests that to meet National Privacy Principles the following clause should be
displayed on the order page: “Information given in the course of this transaction may be used to
determine your liability to Australian GST”.
Although quoted prices must normally be GST-inclusive (¶21-010), the Commissioner accepts that if the
business only makes supplies that are GST-free under this head, it can show GST-exclusive prices only
on its website. However, it should be made clear that the price does not include GST so that any
domestic enquirers are not misled.
Detailed Tax Office guidelines on the requirement that the “effective use and enjoyment” must take place
outside Australia are given in GST Ruling GSTR 2007/2. The Tax Office says that the steps in
determining this are:
• identify the exact nature of what is being supplied
 • identify the entity to which the supply is provided (the “providee-entity”). This need not be the same as
the entity to which the supply is made. For example, if a supplier contracts with a company to audit
that company’s subsidiary, for the purpose of ensuring compliance by that subsidiary, the supply of
that service is made to the company, but it is provided to the subsidiary. Similarly, if a supplier
contracts with an employer to provide training for its employees, the supply is made to the employer
but provided to the employees. If goods from one entity are addressed for delivery to another entity,
the providee-entity is the addressee

• determine the time when the supply that is provided to the providee-entity is “done”, in accordance
with the rules at ¶4-100

• identify whether, at that time, there is a provision of the supply to the providee-entity outside Australia.
This is largely determined by the presence of the entity, ignoring presences that are merely
coincidental. For guidelines on determining presence, see the discussion under item (2) above

• if the supply is provided partly to an entity in Australia and partly to an entity outside Australia, it can
be apportioned on a reasonable basis, which should be documented.

The Ruling also includes guidelines on more complex arrangements, such as subcontracts and global
supplies.
(4) A supply in relation to rights, where the rights are for use outside Australia, or the supply is to
a non-resident entity that is not in Australia when the thing supplied is done.
This exemption applies, for example, where an Australian copyright owner sells to a non-resident the
rights to distribute a product outside Australia. It could also apply where insurance cover is provided
against claims arising from overseas acts (GST Ruling GSTR 2003/8); where a trader of emission credits
supplies them to non-resident entities for use outside Australia; where a credit card facility is provided to a
cardholder to undertake transactions while they are physically overseas (GST Determination GSTD
2017/1); or where brokerage services are supplied to facilitate the sale or purchase of financial products,
such as shares, on overseas securities/futures exchanges (GST Determination GSTD 2015/1).
This exemption applies to the supply of foreign currency to a passenger who had passed through the
departures side of the customs barrier (Travelex Ltd v FC of T [2010] HCA 33). The High Court
considered that the exemption applied because the supply related to “rights” attached to the banknotes,
rather than being simply a supply of banknotes.
In GST Ruling GSTR 2003/8, the Commissioner says that:
• the exemption does not apply to a supply of rights which is also a supply of real property, eg leases
and licences (see also Saga Holidays; ¶12-020)

• a supply made “in relation to” rights covers a supply that is the creation, grant, transfer, assignment, or
surrender of a right, eg a supply of intellectual property rights. Following the decision in Travelex, the
Commissioner considers that a supply in relation to rights also includes (1) supplies of things
comprising a bundle of rights that derive their value exclusively, or almost exclusively, from those
rights, eg shares or foreign currency; and (2) supplies of services that are directly connected with
rights. Examples of these would be legal services for the preparation of a contract for the sale of
copyright; enforcement of intellectual property rights or applying for the registration of a trademark;
and brokerage services in relation to the sale of shares

• it is not necessary that the rights must bind the parties in some way.

The Commissioner considers that it is not necessary that the right be a proprietary right — for example,
personal rights such as tavern licences may be covered (GST Ruling GSTR 2003/8). Supplies of
insurance and capacity in an international telecommunications network may be treated as a supply of
rights (see further below), but computer software generally is not (¶4-100). Membership subscriptions
could qualify if they involved only a supply of rights, but commonly they would more appropriately be
treated as a supply of services which may be GST-free under item (2) or (3) above (GST Ruling GSTR
2003/8).
Whether a right is “for use outside Australia” depends on the intended use (DFC of T v Stewart & Anor 84
ATC 4146). If the right is only partly for use outside Australia, a partial exemption may apply. To
determine the appropriate proportion, the supplier may need to consult with the recipient (GST Ruling
GSTR 2003/8).
Where the supply was of rights to sell education packages, the exemption did not apply where those
rights were exercised in Australia, even though the ultimate customers were outside Australia
(Interpretative Decision ID 2006/101).
Some of the requirements of this exemption are similar to those applying under exemption (2) and are
explained in the commentary under that heading.
(5) The repair, renovation, modification or treatment of goods that are from outside Australia, and
whose destination is outside Australia.
For the corresponding exemption for goods used in the repair, see ¶9-220.
This exemption was applied where grey waste water was removed from the holding tank of a ship that
had interrupted its overseas journey for victualling in Australia (Interpretative Decision ID 2004/491).
Possibly, if a horse may be treated as goods, the exemption may apply where an Australian stallion
services a foreign mare which has been imported for the purpose and is then exported to their home
country.
For repairs carried out under warranty, see ¶9-250.
Partial exemptions
In certain situations, a partial exemption may apply, for example, where services are provided over time
and the conditions for exemption under item (2) or (3) are satisfied for only part of that time. The Tax
Office considers that in these cases the exemption should be apportioned on any reasonable basis that is
supportable (GST Ruling GSTR 2004/7). For methods of apportionment, see ¶4-200.
Right or option to acquire something connected with Australia
The GST exemption does not apply to the supply of a right or option to acquire something, if the supply of
that thing would be connected with Australia (¶4-100) and would not be GST-free (s 38-190(2)).

Example
An Australian-based hotel chain provides rights to accommodation in Australian hotels to a New Zealand travel agency. The agency
provides accommodation vouchers to NZ tourists to use in obtaining accommodation in Australia. In this situation:
• there is a supply of a right or option to acquire accommodation

• the provision of the accommodation is connected with Australia.

The provision of the accommodation rights to the travel agency is therefore not GST-free.
Note: For the GST position of the NZ agency, see ¶12-020.

It follows that the denial of GST-free status does not apply if the actual supply of the thing would itself be
GST-free, for example, financial services provided to a non-resident.
The Commissioner considers that a supplier cannot claim a decreasing adjustment (¶6-000) if the supply
of goods under an option turns out to be GST-free, even though the original supply of an option to acquire
the goods was taxable (Interpretative Decision ID 2007/185). This situation could arise, for example, if the
parties originally envisaged that the goods acquired under the option would be used in Australia, but it
turns out that they are exported GST-free.
Offshore owners of Australian real estate
Special rules apply to services supplied to offshore owners of real estate in Australia. In the absence of
these rules, these services could be GST-free under item (2), (3) or (4) above.
Under the special rules, supplies of services do not qualify for those exemptions if the services relate to a
supply of the property that would be input taxed (s 38-190(2A)). This means, for example, that the
exemptions would not apply to services that relate to the renting out or proposed renting out of a property
for residential purposes (¶11-310), or to the sale or proposed sale of a non-new residential property (¶11-
010). This applies even if the services only relate indirectly or partly to the input taxed supply.
Services that would be typically affected include architectural services, property management or selling
services, building insurance, repairs, legal services in connection with a mortgage, public liability
insurance and advertising in connection with the property. Accounting services are considered to be
caught where, for example, they relate to: (1) general management of the non-resident’s bank account to
ensure adequate funds were available to meet mortgage repayments; (2) rent statements and accounting
records; (3) occasional liaison with the property managers; and (4) preparing and lodging the non-
resident’s tax returns. For further details of the treatment of tax return services, see GST Determination
GSTD 2007/3 and the ATO Fact Sheet GST and Tax Return Services for Non-resident Property Owners.

Examples
(1) A non-resident who lives overseas owns a residential rental property in Australia. She hires a local gardener to maintain the
garden, and a local real estate agent to advertise the property for rent. Both are registered for GST. As the supply of the rental
property is input taxed, the supply of the gardening and advertising services would not qualify for GST-free status, and would
therefore be taxable.
The same would apply even if the property was partly residential (input taxed) and partly offices (taxable). The services supplied in
relation to the whole property would be taxable, not just those relating to the residential part. However, in accordance with the
normal rules, the owner would, if registered, be entitled to input tax credits only for the portion of the services that relates to the
offices, not the residential part.
(2) A non-resident owns investments consisting of a residential rental property in Australia and also some shares in Australian
companies. It acquires written advice on the tax effectiveness of these investments from an Australian accountant. It is not in
Australia when the services are performed. The acquisition of the advice is partly related to the input taxed supply of the Australian
rental property and partly related to its other investments in shares. The supply of advice is not GST-free, as the acquisition of the
supply relates in part to the making of a supply of residential premises that is input taxed.
If the non-resident sought advice only about its investments in Australian shares (eg whether it should sell some shares and acquire
other shares), the acquisition of the advice would not relate directly or indirectly to the making of a supply of real property in
Australia, and may therefore be GST-free if it otherwise qualifies for exemption. (Based on GST Determination GSTD 2007/3.)

Supplies of telecommunication services

Global roaming: a separate exemption applies for mobile telephone global roaming and mobile internet
roaming services provided to subscribers of non-resident suppliers while in Australia (s 38-570; GST
Determination GSTD 2012/10). For global roaming services outside Australia, the Commissioner accepts
that an exemption under item (3) above may be available in certain circumstances (GST Determination
GSTD 2012/8).
Interconnection: the Commissioner accepts that supplies of interconnection services made by an
Australian resident telecommunications supplier to a non-resident may be exempt under item (2) above in
certain circumstances (GST Determination GSTD 2012/7).
Capacity: for the Commissioner’s views on the application of the exemption in item (4) above to a supply
of capacity in an international telecommunications network by a resident supplier, see GST Determination
GSTD 2012/9.
[GSTG ¶41-300]

¶9-250 Repair or treatment of goods under warranty

For tax periods starting on or after 1 October 2016, repairs, renovations, modifications or treatments of
goods carried out for a non-resident are GST-free where they are done to meet the non-resident’s
obligations under a warranty (s 38-191). For this to apply, the non-resident must be outside Australia,
must not be registered (or required to be), and the services must be acquired as part of its enterprise. In
addition, the warranty must either have been sold as part of a package with the supply of goods, or been
a separate taxable supply. The exemption also extends to goods, such as replacement parts, that are
supplied as part of the warranty services.
This exemption could apply, for example, where a non-registered non-resident is required to repair a
defect under warranty in goods it supplied to an Australian recipient, and engages an Australian repairer
to carry out the services. It is designed to prevent the non-resident being unnecessarily drawn into the
GST system.
Before this change, the services would have been treated as taxable, as they would not have qualified for
the exemption in item (2) at ¶9-240 (see former GST Determination GSTD 2006/2). However, a payment
from a non-resident car manufacturer to and Australian distributor under an offshore warranty chargeback
arrangement would not be subject to GST in any event, if the repairs were carried out by the distributor
purely under its own warranty to the customer (GST Determination GSTD 2006/1).
FINANCIAL SUPPLIES AND INSURANCE
FINANCIAL SUPPLIES
Overview ¶10-000
Financial supplies: general requirements ¶10-005
Financial supplies: specific items ¶10-010
What are not financial supplies? ¶10-020
Apportioning input tax credits ¶10-030
“De minimis” test: where credits do not exceed threshold ¶10-032
Input tax credits for expenses of borrowing ¶10-035
75% “reduced” input tax credit for certain services ¶10-040
Reduced credit for offshore management and support services ¶10-042
Provision of fringe benefits by financial suppliers ¶10-045
Exported financial services ¶10-050
Sales of things acquired to make supplies ¶10-060
Sales to satisfy debts ¶10-070
Superannuation funds ¶10-080
Other practical impacts for financial service providers ¶10-090
INSURANCE
Issue of life insurance policies ¶10-100
Issue of general insurance policies ¶10-110
Insurance settlements ¶10-120
Statutory compensation schemes ¶10-130
GST-free insurance ¶10-140
Other special insurance rules ¶10-150

Editorial information

Summary
This chapter looks at the special rules that apply to the financial and insurance industries. Most
financial supplies — such as loans — are input taxed, so GST does not apply and no input tax
credits can be claimed by the supplier. However, this does not apply to advisory services, which are
subject to GST. Limited credits may also be allowed for specified outsourced services and in
certain other situations. Difficult problems of apportionment arise if financial institutions also provide
non-financial supplies or make GST-free exports of their services.
Life insurance is input taxed, general insurance is subject to GST, while health insurance and
“exported” insurance are GST-free.
FINANCIAL SUPPLIES
¶10-000 Overview

Supplies that are classed as “financial supplies” — including loans, share trading and life insurance — are
input taxed (s 40-5). In general, this means that the supply is not taxable and that the supplier cannot
claim input tax credits for the GST component of the things it acquires for the purpose of providing that
supply.

Example
A bank acquires a computer to use in its loans business. Loans are financial supplies and are input taxed. GST therefore does not
apply to the loan, and the bank cannot claim an input tax credit for the GST it paid on the computer.

As an exception to this general rule, certain acquisitions do entitle a financial supplier to claim input tax
credits, but only at a reduced 75% rate. For example, if a bank obtains debt collection services from third
parties, it can claim a 75% input tax credit, even though it uses those services in providing input taxed
financial supplies (¶10-040). Further exceptions apply where the credits satisfy a “de minimis” test (¶10-
032), where credits are being claimed for borrowing expenses (¶10-035) or where supplies are made
through overseas branches (¶10-050).
Not every supply that a financial supplier makes is treated as a “financial supply”. Supplies such as
general insurance, finance leases, professional advice or broking services are treated as taxable (¶10-
020). A financial supplier is also, of course, taxable on other taxable supplies that are not related to
finance, and may make some supplies that are GST-free, for example, where it exports services (¶10-
050).
Conversely, not every financial supply will be made by a financial institution. For example, retailers who
provide credit to their customers are making financial supplies, which will potentially be input taxed.
This range of possible GST treatments makes it essential for all suppliers to identify the various types of
supply that they make, and to identify the inputs that relate to each type of supply. The question of
apportionment is discussed at ¶10-030.
Rationale for treatment of financial supplies
Before explaining the rules in detail, it is useful to understand their rationale. According to the Treasurer,
the general rule is that “where a financial supply provider is able to earn a return on a financial product,
the supply of a financial product will be a financial supply and input taxed. A financial supply provider is
generally able to earn a return by way of margin where they hold a legal interest in the financial product
before it is supplied”. Making these supplies input taxed overcomes difficulties in identifying the value-
added margin on individual transactions, because input taxation does not require the service to be valued.
The Treasurer added that “All other financial services, including agency services, are generally not
capable of being charged for by way of a margin. This is because the facilitators of such financial services
do not hold a legal interest in a financial product before it is supplied. All other financial services will
therefore be taxable. For example, fees and commissions relating to agency services are easily identified
and valued, and are taxable”.
Tax Office guidelines on compliance, records and governance
The Tax Office has issued detailed guidelines for financial suppliers in relation to the GST governance
and record-keeping procedures necessary to mitigate GST risks. In general, when reviewing a supplier’s
compliance, the Tax Office will be looking for evidence that:
• the roles and responsibilities of different parts of the business are defined
 • controls are in place at the board, managerial and operational levels, including oversight of non-tax
functions that are critical to tax outcomes (eg offshore resources and information technology)

• sign-off procedures are undertaken by someone other than the original decision maker – eg in
apportionment methodology, requiring internal or external verification to assess the robustness of the
supplier’s positions

• the supplier has ensured the integrity of the tax positions it has adopted, such as by monitoring
changes in tax law or administrative updates, and documenting the technical analysis it has
undertaken to form its views

• the supplier uses appropriate systems and processes to meet its GST obligations, including methods
for determining the extent of creditable purpose for acquisitions — eg system account codes or
allocation tables to classify transactions appropriately and identify reduced credit acquisitions

• staff are adequately trained in these systems and processes, through regular refresher training and
access to training manuals

• processes are in place to review the supplier’s tax positions regularly or when there are significant
changes to its circumstances, (eg review of apportionment methodology to ensure it remains fair and
reasonable).

The Tax Office considers specific priority issues include:

• determining the extent of creditable purpose (¶10-030)

• reduced credit acquisitions (¶10-040)

• reverse charge for recipients of cross-border supplies (¶9-100)

• rights for use offshore (¶9-240)

• significant or unusual transactions (www.ato.gov.au/Tax-professionals/Newsroom/Your-practice/GST-

governance-and-record-keeping-for-financial-supplies/).

[GSTG ¶30-000]

¶10-005 Financial supplies: general requirements

What constitutes a financial supply is specified entirely in the Regulations (s 40-5). For there to be a
financial supply, the following must apply.
(1) There must be a provision, acquisition or disposal of an “interest” in specified items (GST Regulations
s 40-5.09). An interest means any form of property (GST Regulations s 196-1.01: former reg 40-5.02).
This is interpreted widely (FC of T v American Express International Inc [2010] FCAFC 122). For
example, it includes:
• a debt or right to credit

• an interest conferred under a superannuation scheme

• a mortgage over land or premises

• a right under a contract of insurance or guarantee

• a right to receive a payment under a derivative

• a right to future property.

A “provision” includes the allotment, creation, grant or issue of the interest (GST Regulations s 196-1.01;
former reg 40-5.03). An “acquisition” includes acceptance and receipt of the interest (GST Regulations s
40-5.05). A “disposal” includes assigning, cancelling, redeeming, transferring and surrendering (GST
Regulations s 196-1.01; former reg 40-5.04).
The reference to an “acquisition” means that a financial supply will include an acquisition and, apparently,
that a supply made includes an acquisition received. This has been described as “perhaps counter-
intuitive” and a “rather strange use of the regulation making power” which could raise a question of validity
(Hill J in HP Mercantile Pty Limited v FC of T 2005 ATC 4571; [2005] FCAFC 126). These financial
supplies that take the form of an acquisition are referred to as “acquisition supplies”.
(2) The provision, acquisition or disposal must be “for consideration” (¶4-020). In the case of an
acquisition supply (see above), it appears that this requirement will be satisfied even though the
consideration actually flows from, rather than to, the deemed supplier (AXA Asia Pacific Holdings Ltd v
FC of T [2008] FCA 1834). For special rules applying to associates, see ¶17-500.
(3) It must be in the course of an enterprise (¶3-020). So, for example, an occasional share trade by a
private individual is not a financial supply, where that individual is not carrying on an enterprise.
(4) It must be connected with Australia (¶4-100). For example, a mortgage over land or goods will be
connected with Australia if the land or goods are situated here. However, a mortgage over a copyright or
debt will be connected with Australia if the supply is made through a business situated in Australia,
irrespective of where the mortgaged property is situated.
(5) The entity that provides, acquires or disposes of the interest must be a “financial supply provider”
(GST Regulations s 40-5.06). This covers the owner of the interest immediately before its supply, the
creator of the interest, and the acquirer of the interest. For example, if you sell shares, both you and the
purchaser are financial supply providers. If you sell the shares through an agent, you are a financial
supply provider, but the agent is only a financial supply facilitator (GST Regulations s 40-5.07). It follows
that if all other relevant conditions are fulfilled, your sale of the shares will be input taxed, but the provision
of the agent’s services to you would be taxable.
(6) The financial supply provider must be registered or required to be registered (¶3-000).
Imported financial services are treated as financial supplies, even though they are not connected with
Australia and the supplier is not registered.
[GSTG ¶30-020]

¶10-010 Financial supplies: specific items

Interests in the following numbered items may be the subject of a financial supply (GST Regulations s 40-
5.09; Sch 2). More detailed lists are provided in GST Ruling GSTR 2002/2.
Accounts (item 1)
This covers services provided by banks to banking account holders and includes:
• opening, keeping, operating, maintaining and closing of cheque, debit card, deposit and savings
accounts for account holders (for debit card surcharges, see ¶4-080)

• cash collection, handling and sorting for account holders by account providers

• Automatic Teller Machines (ATMs), electronic and telephone operation of accounts, ATM withdrawals,
deposits, electronic transfers and balance notifications supplied by any entity (not just an authorised
deposit-taking institution) are input taxed, provided that the fee does not exceed $1,000 (GST
Regulations s 40-5.09(4A); GST Ruling GSTR 2014/2). Foreign ATM transactions may, however, be
GST-free (GST Ruling GSTR 2002/2)

• supply of standard cheque and deposit books for account holders

• supply of debit and smart cards

• cashing cheques and payment orders

 • preparation, reconciliation and replacement of account statements

• notification of dishonoured transactions and unpaid fees. For the treatment of the actual fees, see ¶4-
080

• stopping payment of cheques

• operation of authorised overdraft facilities

• services related to unauthorised usage of overdraft facilities

• retention and storage of vouchers

• making information about accounts available

• garnishee of accounts

• recovery of Commonwealth, state and territory fees, duties and taxes

• audit confirmation of accounts

• electronic funds transfer

• money transfer for account holders

• making disbursements for account holders.

An actual EFTPOS transaction between the bank and the customer is a financial supply. However, where
a service provider allowed another business to use its EFTPOS facilities for a fee, that was a taxable
supply, not an input taxed financial supply (Interpretative Decision ID 2004/820).
The supply of transaction information to a client in relation to a transaction on the client’s account would
be covered, but not information related to a transaction of the client’s customer (Interpretative Decision ID
2007/33). The provision of a prepaid card facility was considered to be a financial supply in Interpretative
Decision ID 2010/225.
The supply of access to internet banking services and the supply of internet transaction facilities would be
financial supplies under this head (Interpretative Decisions ID 2006/32; ID 2006/33), although the supply
of software access and maintenance would be taxable (GST Ruling GSTR 2002/2).
Loans, debt and credit (item 2)
This covers debts, credit arrangements or rights to credit and includes:
• borrowing and lending, including establishing, maintaining and discharging loans

• opening, keeping, operating, maintaining and closing charge and credit card facilities (provision of
credit card facilities for use overseas may be GST-free: ¶9-240)

• supply of credit cards (for credit card surcharges, see ¶4-080)

• establishing, operating and terminating letters of credit

• rights to an income stream under a securitisation arrangement (for details, see GST Ruling GSTR
2004/4 (subject to changes: see GSTR 2004/4DC))

• recovery of Commonwealth, state and territory fees, duties and taxes

• recovery of lender’s mortgage insurance fees.

The concept of “credit” bears its ordinary meaning and should not be construed narrowly (FC of T v
American Express International Inc [2010] FCAFC 122).
The Commissioner considers that item (2) may also apply to assignments of rights to payment streams
under loan agreements, finance and operating leases, residential or commercial property leases, royalty
agreements, credit card receivables arrangements and debt factoring (GST Ruling GSTR 2004/4 (subject
to changes: see GSTR 2004/4DC); Interpretative Decision ID 2007/158). Where the underlying supply is
subject to GST (eg in the case of a commercial property lease), the supplier remains the entity liable to
account for the GST.
A “debt” may include a contingent debt (Interpretative Decision ID 2007/29).
For the Tax Office’s provisional views on acquisitions made by a credit card or charge card issuing
business with a four party (open loop) payment system, see Draft GST Determination GSTD 2018/D1.
For its views on the circumstances in which fuel card transactions involve financial supplies of credit,
taxable supplies of fuel, or both, see GST Ruling GSTR 2005/1.
Mortgages and charges (item 3)
This covers mortgages and charges over real and personal property and includes:
• a mortgage over land or premises

• a mortgage over a chattel

• a charge over the assets of a company

• documentation or valuation of the collateral or security for a credit or advance

• a mortgage over a share or bond.

Superannuation, annuities (items 4 and 5)

• Interests in a regulated superannuation fund, an approved deposit fund, a pooled superannuation
trust, public sector superannuation scheme or retirement savings account. This would also apply
where the fund trustee supplies information to the member about that member’s interest in the fund
(Interpretative Decision ID 2006/246). However, where that information is supplied, for a fee, to a
non-member spouse under family law rules, this would be treated as a taxable supply (Interpretative
Decision ID 2006/245).

• Annuities or allocated pensions.

Life insurance (item 6)

• A contract of insurance that provides for the payment of money on the death of a person, or on the
happening of a contingency dependent on the termination or continuance of human life.

• A contract of insurance that is subject to payment of premiums for a term dependent on the
termination or continuance of human life.

• A contract of insurance for a term dependent on the termination or continuance of human life that
provides for the payment of an annuity.

• A contract that provides for the payment of an annuity for a term not dependent on the continuance of
a human life.

• A continuous disability policy.

• Investment account contracts and investment-linked contracts.

Guarantees and indemnities (items 7 and 7A)

This covers:
 • a guarantee, ie an agreement under which the guarantor agrees to be liable for the obligations of
another if the other entity defaults

• an indemnity that protects a person from any loss as a result of a transaction the person enters into
with a third party.

This does not apply to warranties for goods, or non-life insurance or reinsurance. These are not financial
supplies (¶10-020). The Tax Office considers that this category also does not cover the situation where a
lessor guarantees a lessee’s income from the business operated from the leased premises (GST Ruling
GSTR 2003/16).
For detailed guidelines on guarantees and indemnities, see GST Ruling GSTR 2006/1.
Pre-1 July 2012 hire-purchase agreements (item 8)
Supplies made or credit provided under hire-purchase agreements entered into on or after 1 July 2012
are not financial supplies and are fully taxable (¶10-020). However, credit under a pre-1 July 2012 hire-
purchase agreement in relation to goods is a financial supply if the credit is provided for a separate
charge disclosed to the recipient. This means that the credit (interest) component and associated fees
and charges is input taxed, but the principal payments are subject to GST in the normal way.
If the credit component of a pre-1 July 2012 hire-purchase agreement is not shown separately and
disclosed to the recipient, the entire agreement is subject to GST.
Post-30 June 2012 changes made to pre-1 July 2012 hire-purchase agreements do not affect their GST
treatment unless the changes amount to a new agreement.
For special attribution rules applying to hire-purchase agreements, see ¶7-438.
Finance leases are not treated as financial supplies and are wholly subject to GST (GST Regulations s
40-5.12, item 6; ¶10-020).
Currency (item 9)
This covers Australian currency, foreign currency and agreements to buy and sell currency, and includes:
• digital currency (such as Bitcoin) from 1 July 2017 (¶4-010)

• foreign currency in cash form

• foreign currency drafts

• traveller’s cheques

• international cheques

• collection, negotiation and endorsement of instruments (including cheques) for payment in foreign
currency, including message services

• forward contracts for transactions to buy or sell foreign currency

• options to buy or sell foreign currency

• conversion of Australian currency into foreign currency and conversion of foreign currency into
Australian currency.

Although the supply may be a financial supply, it will be treated as GST-free rather than input taxed if it
qualifies for the export exemption. For example, the supply of foreign currency to a passenger travelling
overseas who intended to use the currency overseas, and had passed the departure side of the Customs
barrier was held to be a GST-free export in Travelex Ltd v FC of T [2010] HCA 33 (¶9-240). So was the
supply of banknotes to a wholesale customer in another country (Interpretative Decision ID 2006/203).
The supply of currency with a market value above its face value is not a financial supply (¶10-020).
Where a non-bank entity cashed a cheque for a fee, this was considered to be a financial supply of
currency by the entity, and a financial supply of an interest in a security by the other party, provided that
the general requirements (¶10-005) were satisfied (Interpretative Decision ID 2007/146). Conversely,
where the entity provided a cheque to a client in exchange for an equivalent amount of cash, plus a fee,
this was considered to be a financial supply of an interest in a security by the entity, and a financial supply
of currency by the client (Interpretative Decision ID 2007/159).
For the Commissioner’s views on the availability of input tax credits for acquisitions related to retail
foreign currency exchange transactions with customers in Australia, see GST Determination GSTD
2012/5.
For the treatment of bitcoin transactions, see ¶4-010.
Securities (item 10)
• Bonds, stocks or debentures issued, or proposed to be issued, by a government entity.

• Shares, debentures or convertible notes.

• Subordinated notes.

• Structured notes.

• Interests in the capital of a trust. This would cover units in a unit trust (see, for example, AXA Asia
Pacific Holdings Ltd v FC of T [2008] FCA 1834), but is apparently not restricted to this. Possibly, it
may extend to any transfer of a trust asset. However, it did not apply where a unit holder in a unit
trust entered into a contract to appoint a proxy to vote at a meeting of unitholders (Interpretative
Decision ID 2011/20), or where a trustee of a unit trust constituting a registered managed investment
scheme executed a deed irrevocably appointing a proxy to vote against resolutions at a meeting of
unitholders (Australian Style Investments Unit Ltd v FC of T 2013 ATC ¶10-341; [2013] AATA 847).
Trustee services are also not treated as financial supplies.

• Dealings in floating rate notes, commercial bills, commercial paper, extendable bill investments and
other financial instruments.

• Interests in the capital of a general law partnership, as distinct from a tax law partnership (¶3-015).
This includes all the interests that a partner acquires from the partnership as a consequence of being
a partner, and includes the partner’s interest in the partnership (GST Rulings GSTR 2003/13; GSTR
2004/6).

• Promissory notes and bills of exchange. (For the implications of cashing or providing cheques for a
fee, see under heading “Currency” above.)

• Bank cheques.

• Warrants.

• Securities lending.

Example
GST does not apply where a share trader buys or sells shares, as this is an input taxed financial supply. However, brokerage on the
transaction will normally be subject to GST (¶10-020). If the trader is registered for GST, it may claim a reduced input tax credit for
75% of the GST on the brokerage (¶10-040), with the balance of the GST on the brokerage being tax deductible (¶24-030). If the
trader is not registered for GST (and not required to be), no input tax credit at all can be claimed for the GST on the brokerage, but it
may be tax deductible (¶24-030).

In determining whether a share trader exceeds the turnover threshold for compulsory registration (¶3-
000), the turnover from input taxed share trading activities is not taken into account (¶3-030). However, if
the threshold is not exceeded and the trader does not register, it cannot claim the reduced input tax credit
for GST on the brokerage.
If you are a share investor, not a trader, GST will typically not apply in any event because you are not
carrying on an enterprise. No input tax credit or tax deduction can be claimed for GST on any brokerage,
but GST will be included in the cost base of the shares for capital gains tax (CGT) purposes (¶24-060).
Interests in managed investment schemes are generally included, as are time-sharing schemes. For an
example involving a forestry managed investment scheme, see Interpretative Decision ID 2010/129. As to
whether participants in agricultural managed investment schemes can be treated as carrying on an
enterprise, see ¶3-020.
For the treatment of barter trade exchange schemes, see ¶7-435. Share-for-share swaps involve financial
supplies by both parties.

Example
The following is based on Tax Office decisions on the GST implications of various transactions associated with time-share schemes:
(1) An accommodation time-sharing scheme issued timeshare points to a participant in the scheme. This was treated as a financial
supply to that participant. In addition, to the extent that the developer’s interest in the scheme was proportionately reduced when the
timeshare points were issued, there was a financial supply by the developer to the scheme. The requirement that there can only be
a supply where the supplier “does something” (¶4-010) was met, because the developer had agreed to be bound by the scheme’s
constitution which provided for the reduction in its interest whenever timeshare points were issued (Interpretative Decision ID
2010/18). It is possible that in certain circumstances such a supply might constitute a GST-free supply of a going concern (¶11-500).
(2) Conversely, when the developer made a property contribution to the scheme, thus increasing its interest, this constituted a
financial supply by the scheme to the developer (Interpretative Decision ID 2010/18).
(3) The supply of short-term excess accommodation by the scheme was taxable. It was not input taxed, either as a financial supply
or as a supply of “commercial residential premises” (¶11-030) (Interpretative Decision ID 2010/19).
(4) The supply of an interest in the scheme to an overseas non-resident was not a GST-free export of services (s 38-190), because
the interest constituted rights over real property (¶11-000; Interpretative Decision ID 2010/20).
(5) The annual maintenance fee paid by a participant in the scheme is consideration for the input taxed supply of an interest in the
scheme (Interpretation Decision ID 2010/23).

Securities included an interest acquired as a single member in a limited liability company formed under
Delaware law. That interest was considered to be broadly equivalent to a “share” in the share capital of a
company limited by shares (Interpretative Decision ID 2010/125).
A company was treated as having made a financial supply when it redeemed redeemable preference
shares from its shareholders (Interpretative Decision ID 2012/66).
Derivatives (item 11)
• Forward contracts, futures contracts, swap contracts and options contracts whose value is related to:
(1) the price of debt securities or debts securities index values or interest rates; (2) foreign exchange
or currency values or currency index values; (3) share or stock prices or equity index values; (4)
credit spreads or credit events; (5) macroeconomic indicators or variables; or (6) climatic events or
indexes.

• Commodity derivatives that involve no option, right or obligation to delivery of the commodity (eg
electricity derivatives).

• Reciprocal repurchase agreements.

• Options over input taxed supplies of precious metals.

• Securities lending agreements.

• Initial and variation margins in respect of exchange traded futures contracts.

• Cash settlements of derivatives over the counter or on the exchange, rather than the physical delivery
of the underlying tangible assets.

A guaranteed fixed interest rate facility may be treated as a derivative (Interpretative Decision ID
2003/1061). So may financial spread betting contracts and “contracts for difference” (GST Determination
GSTD 2005/3), but not an arrangement where a taxpayer sold a commodity to a financial institution and
agreed to subsequently repurchase it at a price reflecting the original sale price plus interest and holding
charges (Interpretative Decision ID 2004/76).
A commodity trader does not make a taxable supply when it makes a cash settlement payment in relation
to a deliverable commodity forward contract where there is a formal default. The payment is simply
treated in the same way as damages (¶4-085; Interpretative Decision ID 2004/359). The same would
apply when a party is in default due to insolvency.
The grant of an option may be the supply of a derivative, but it is not an input taxed financial supply if the
option is to make or receive a taxable supply (¶10-020).
For the treatment of bitcoin transactions, see ¶4-010.
Foreign bank accounts, superannuation (items 12, 13)
Supplies of bank accounts and superannuation interests by foreign financial institutions (tax periods
starting on or after 1 July 2017).
Services to non-account holders
Services of these types that are provided by authorised deposit-taking institutions to a non-account holder
are also treated as a financial supply if the fee charged is $1,000 or less. For example, this could apply
where an application fee is charged for a loan that is not approved or taken up.
The supply of transaction information to a client who was not an account holder would be covered where
it relates to the client’s own transaction (Interpretative Decision ID 2007/32), but not information related to
a transaction of the client’s customer (Interpretative Decision ID 2007/33).
Incidental financial supplies
Anything that is supplied directly in connection with a financial supply is itself a financial supply, provided:
• it is incidental to the main financial supply

• both supplies are made at about the same time, but not for separate consideration

• the supplier and the recipient are the same in each case

• making the supplies together is the usual practice of the supplier in the ordinary course of its business
(GST Regulations s 40-5.08; 40-5.10). “Usual practice” is not limited to already-established practices
— it can be a practice new to the supplier, or a usual practice established by other financial supply
providers, that the supplier intends adopting (GST Ruling GSTR 2002/2).

This rule is intended to avoid the need for financial suppliers to allocate a separate price to relatively small
non-financial components of a larger financial supply.

Examples
(1) In accordance with its normal practice, a bank values a home as part of making a home loan. No separate charge is made. As
the valuation is directly connected to the loan (which is a financial supply), the valuation would be treated as an incidental financial
supply. Both the valuation and the loan would therefore be input taxed. However, if the valuation was supplied by a third party not
acting for the bank, it would not be an incidental financial supply, as it is not provided by the same supplier as the loan. The
valuation would therefore be subject to GST in the normal way.
(2) In accordance with its normal practice, a bank provides “free” financial advice as part of making a home loan. The advice would
be treated as an incidental financial supply and both the advice and the loan would be input taxed. However, if the bank later
provides general financial advice for a fee to that same customer, this would not be an incidental financial supply as it is not “directly
connected” to the loan. The advice would therefore be subject to GST in the normal way.

Incidental financial supplies are treated as financial supplies even if they are covered by an exclusion
noted at ¶10-020 below.
[GSTG ¶30-040]
¶10-020 What are not financial supplies?

The supply of any of the following items, or interests in them, is not a financial supply and would therefore
normally be subject to GST (s 40-5; GST Regulations s 40-5.12; Sch 3). (Detailed lists are given in GST
Ruling GSTR 2002/2.)
(1) Cheque and deposit forms and books supplied to a banking business.
(2) Special forms, or overprinting of special forms, to the requirements of particular account holders.
(3) Professional services, including information and advice, in relation to a financial supply. This includes:
• advice by a legal practitioner or accountant in the course of professional practice

• taxation advice, including tax return preparation

• actuarial advice

• rating services for securitisation vehicles.

For broking services, see (11) below.

(4) Payment systems, ie funds transfer systems that facilitate the circulation of money, including any
procedures that relate to the system. This includes:
• supplies of services covered by membership, processing, service, marketing, risk management and
multi-currency fees

• access to payment systems

• supplies of services by one participant in a payment system to another in relation to charge, credit and
debit card transactions

• processing, settling, clearing and switching the following: direct credit and debit; other debit and credit
transactions; charge credit and debit card transactions; cheques; electronic funds transfer; ATM;
BPAY; internet banking; Bank@Post; SWIFT; approved RTGS systems; and Austraclear

• supplies of services for processing of account data and electronic payment.

A “payment system” does not include the arrangement for the provision of a credit card or charge card
facility (FC of T v American Express International Inc 2010 ATC ¶20-212; [2010] FCAFC 122). Nor, with
effect from 1 July 2017, does it include digital currency, such as Bitcoin (¶4-010).
(5) Stored value facility cards and prepayments, other than those linked to accounts of the type specified
at ¶10-010. Fees for prepaid travel cards denominated in a foreign currency are GST-free to the extent
that the card is intended to be used when the cardholder is outside Australia (GST Ruling GSTR 2002/2).
(6) Goods supplied in accordance with lease agreements where the lessors dispose of their rights in the
goods to the lessees, or where the lessees have no obligation or option to acquire the rights of the lessors
in the goods. This would include finance leases. As to hire-purchase agreements, see (20) below.
(7) Options, rights or obligations to make or receive a taxable supply. This means that GST may apply to
any premium on a deliverable commodity option, such as a deliverable wool option or wheat option.
However, the provision of margin in respect of exchange traded futures is input taxed. Mortgages and
charges over real and personal property are also input taxed (¶10-010). The grant of a call option to make
or receive an input taxed supply would be input taxed, and the grant of a call option to make or receive a
GST-free supply would be GST-free (¶11-068).
(8) Supplies made as a result of the exercise of an option or right, or the performance of an option, to
make or receive a taxable supply. This means that the supply of the taxable commodity when delivery
takes place is not a financial supply, and GST is payable on the basis of the settlement price, ie GST is
payable on the strike or exercise price when the commodity such as wool or wheat is delivered under the
option. However, if the futures contract is cash settled without delivery of the commodity, no GST is
payable as the settlement is a financial supply (ATO GST Industry Issues — Primary Production: Issue
20.9.1). Item (8) includes supplies made as a result of an option, etc, under a mortgage or charge.
(9) Facilities for trading securities or derivatives and the clearance and settlement of those trades.
(10) Insurance and reinsurance business, except for life insurance. This includes insurance against loss,
damage, injury or risk. Health insurance is not a financial supply but is GST-free (¶13-370).
(11) Broking services, for example, services by stock brokers and insurance brokers. These are subject to
GST. If the customer is a business, it can claim a 75% credit for this GST under the reduced input tax
credit rules (¶10-040). If the broker transfers shares in its own right, that will be an input taxed financial
supply. If the broker carries on both types of activity, an apportionment will be necessary.

Example
A broker rents office premises where it carries on brokerage trading (taxable) and share trading on its own account (input taxed). It
will need to apportion the GST on the rent between the two activities and claim input tax credits only in relation to the brokerage
component. As to the method of apportionment, see ¶10-030.

(12) Management of the assets or liabilities of others or acting as a trustee, including investment portfolio
management and administration services for trusts or superannuation, pension or annuity funds. These
services would include maintaining account holder records and associated accounting, processing of
contributions and returns, storage and retrieval of archives, statement processing and bulk mailing.
(13) Debt collection services.
(14) Sales accounting services under a factoring or similar arrangement.
(15) Trustee services. This would include management fees for acting as a trustee of a trust or other
entity, or for acting as a trustee under a will or settlement.
(16) Custodian services in relation to money, documents, digital currency (from 1 July 2017: ¶4-010) and
other things.
(17) Australian or foreign currency if the market value exceeds its stated value as legal tender, and
agreements to buy or sell that currency. An acquisition of currency at face value involves a financial
supply even though the acquisition was made with a view to possible re-sale of the currency as
collectibles (Interpretative Decision ID 2006/202).
(18) Providing goods to an entity for display or demonstration pending disposal to a third party, ie
bailment and floor plan arrangements.
(19) and (20) Supplies of goods or credit provided under a hire-purchase agreement entered into on or
after 1 July 2012. The “credit” may relate to the cost of the goods or associated costs such as stamp duty,
registration and insurance. It may also include an amount financed to discharge a debt incurred under a
separate hire-purchase agreement entered into earlier with the same financier (Interpretative Decisions ID
2013/31; ID 2013/32).
For pre-1 July 2012 agreements, credit could be a financial supply in certain circumstances (¶10-010).
(21) Warranties for goods.
National Guarantee Fund payments
No GST consequences arise from National Guarantee Fund payments made to companies in order to
fund the clearing and settlement system support provided for under s 891A of the Corporations Act 2001.
This, however, does not apply to payments made from the Fund to compensate investors (Taxation Laws
(Clearing and Settlement Facility Support) Act 2004).
[GSTG ¶30-040]

¶10-030 Apportioning input tax credits

It will often happen that an institution such as a bank provides input taxed financial supplies together with
other services that are taxable or GST-free. For example, a bank may provide a loan that is input taxed,
advisory services that are subject to GST and exported services that are GST-free. In this situation, the
bank can generally only claim full input tax credits for business inputs so far as they relate to the advisory
services and the exported services. This means that an apportionment will have to be carried out (s 11-
30).
Commissioner’s guidelines
The general rule for apportionment is that the method for doing this must be fair and reasonable, must
reflect the intended use of the acquisition, and must be appropriately documented.
The Commissioner’s preferred methods of apportionment are set out in GST Ruling GSTR 2006/3. See
also the ATO’s “GST Apportionment Decision Making Guide for Financial Supply Providers” at
www.ato.gov.au.
The Commissioner considers that you should use the “direct estimation” method to the greatest extent
possible. This method involves matching the cost of certain “sole purpose” acquisitions to certain
activities, and allocating mixed purpose costs to specific outputs in accordance with an internal cost
allocation system. If the accounting system that you use satisfies Australian Accounting Standards, the
Commissioner will generally accept it as being a reasonable basis for direct estimation.
An entity-based “general formula” method may be used for unallocated costs, or to the extent that direct
attribution is not possible. Under this general formula, the proportion of input tax credit which will be
allowed is calculated as:

revenue in relation to taxable and GST-free supplies

total revenue including input taxed supplies

Example
A business has GST-free financial services revenue of $50,000, revenue from taxable supplies of $100,000 and input taxed supplies
of $150,000. It has overheads of $30,000 that cannot be directly attributed to any particular activity. Under the general formula, the
percentage of input tax credit that it can claim on the overheads is:

50,000 + 100,000
= 50%
(50,000 + 100,000 + 150,000)
Therefore, the business can claim input tax credits in relation to expenses directly attributable to its GST-free and taxable supplies,
and on $15,000 (ie 50% of $30,000) of the overheads.

Detailed examples of the use of the general formula are given in GST Ruling GSTR 2006/3. In applying
the formula, it has been held that payments of late payment fees under a credit card facility should be
treated as revenue from input taxed (financial) supplies (FC of T v American Express International Inc
[2010] FCAFC 122).
Special formulas may also be acceptable if they are better suited to the particular business.

Example
A business rents out commercial premises (taxable) and also makes financial supplies (input taxed). It can directly attribute $4,000
of its expenses to the taxable activity and $6,000 to the financial supplies. It has overheads of $200 that it cannot directly attribute to
either activity. Using an input based method, the proportion of overheads that could be allocated to the taxable activity is:

4,000
= 40%
(4,000 + 6,000)
Therefore, the business can claim input tax credits on $4,000 directly attributable expenses, and on (40% of $200) = $80 of the
overheads.

Provided the apportionment method you choose is appropriate, reasonable, accurate, well documented
and justifiable, you can choose the method that gives you the most advantageous result.
 Example
Corporate Treasury acquires a new photocopier. On a dollar turnover basis, Corporate Treasury produces 50% GST-free supplies
(exports) and 50% input taxed supplies. On a number of transactions basis, the ratio is 65/35. On a headcount basis, the ratio is
40/60. As input tax credits can only be claimed to the extent that the supplies are GST-free, the most advantageous method is the
transactions basis. Assuming that this conforms with Australian Accounting Standards, and adequate records are kept, this will be
acceptable to the Commissioner, provided that the number of export transactions is not artificially inflated (eg by “churning”), in
which case the anti-avoidance measures may be applied (¶20-000; based on GST Ruling GSTR 2006/3).

You can also retrospectively change an apportionment made for an earlier tax period by applying a
different apportionment method which is more advantageous, provided that this method is also fair and
reasonable (Interpretative Decisions ID 2008/75; ID 2008/76). For time restrictions, see ¶5-010.
For the Commissioner’s views on the availability of input tax credits for acquisitions related to retail
foreign currency exchange transactions with customers in Australia, see GST Determination GSTD
2012/5.
Credit unions, building societies and member-owned banks
A shortcut method applies to customer-owned banking institutions (COBIs) such as mutual banks, credit
unions and building societies. For tax periods starting on or after 1 July 2017, the Commissioner accepts
a rate of no more than 18% as the extent of the creditable purpose, subject to specified conditions
(Practical Compliance Guideline PCG 2017/15).
Acquisitions in relation to transaction accounts
The Commissioner has issued draft apportionment guidelines for acquisitions by banks, credit unions or
building societies in relation to the supply of transaction accounts, such as everyday savings, cheque,
deposit, online savings and term deposit accounts (Draft GST Ruling GSTR 2019/D1).
Reduced credit acquisitions
The position is further complicated where the financial supplier makes a reduced credit acquisition (eg for
debt collection services). In this case, a combination of approaches is necessary (¶10-040).
[GSTG ¶30-300]

¶10-032 “De minimis” test: where credits do not exceed threshold

The general rule is that you cannot claim input tax credits on acquisitions related to making financial
supplies. However, there is an exception to this if you do not exceed the financial acquisitions threshold
(FAT) (s 11-15(4)). This exception is sometimes called the “de minimis” test. It is designed to ensure that
most entities are not denied input tax credits for making financial supplies that are not part of their
principal commercial activities.
Whether you satisfy this test is determined each month. The test has two separate components — a
current year component and a projected year component. To satisfy the test, you must satisfy both
components.
The current year component requires you to calculate the financial acquisitions that you have made or are
likely to make in the current month and the previous 11 months. You then work out the input tax credits
that would apply to those acquisitions if they had been made for a creditable purpose. If these credits
exceed either $150,000 or 10% of your total input tax credits for that year (including the potential credits
for the financial acquisitions), you have exceeded the threshold and cannot satisfy the test (s 189-5).
In a similar way, the projected year component requires you to calculate the financial acquisitions that you
have made or are likely to make in the current month and the next 11 months. You then work out the input
tax credits that would apply to those acquisitions if they had been made for a creditable purpose. If these
credits exceed either $150,000 or 10% of your total input tax credits for that year (including the potential
credits for the financial acquisitions), you have exceeded the threshold and cannot satisfy the test (s 189-
10).
Financial acquisitions
The “financial acquisitions” referred to in these tests are acquisitions that relate to the making of a
financial supply (s 189-15). This means that the acquisition must be used or intended to be used for the
making of a financial supply (GST Ruling GSTR 2003/9). In cases of doubt, the ATO considers that the
relevant intention may be evidenced by a business plan, accounting budget, previous experience
concerning usage of similar acquisitions, correspondence with third parties or a board resolution. If there
is a subsequent change of intention, this only operates prospectively, though a GST adjustment may be
appropriate (¶6-300).
Acquisitions that relate to borrowing are not treated as financial acquisitions, so you ignore the potential
credits for borrowing expenses in working out whether you satisfy the test. However, if you do satisfy the
test, you can claim input tax credits for borrowing expenses as well as for your financial acquisitions. If
you do not satisfy the test, you may still be able to claim input tax credits for borrowing expenses in
certain situations.
Financial acquisitions from an associate for no consideration are treated as giving rise to input tax credits
which may be taken into account in calculating the threshold (Interpretative Decision ID 2008/123).
However, acquisitions of supplies that were GST-free, input taxed or outside the GST system when they
were supplied to you (eg where the acquisition is from a non-registered supplier) are not included in
calculating whether you exceed the threshold.
Future financial acquisitions
As noted above, the test requires you to determine the financial acquisitions that you are “likely” to make
within the relevant time frame. In determining this, you should make a reasonable estimation in good faith.
The Tax Office considers that the estimate may be based on your previous experience, transactions that
are currently being negotiated, your business plan, accounting budget or some other reasonable basis
(GST Ruling GSTR 2003/9).

Examples
(1) Current year threshold exceeded. In May 2019, Traders calculates that its total acquisitions for the current year from 1 June 2018
to 31 May 2019 are $330,000. Of that amount, Traders calculates that $44,000 was spent on financial acquisitions. Its input tax
credits for its total acquisitions (including the financial acquisitions) would be $30,000. Its input tax credits for the financial
acquisitions would be $4,000. Although this $4,000 does not exceed $150,000, it exceeds 10% of the total input tax credits (ie it
exceeds 10% of $30,000). Traders therefore fails the test and will be denied input tax credits in relation to its financial supplies. It is
not necessary to consider whether Traders will satisfy the threshold for the projected year.
(2) Neither current nor projected year threshold exceeded. In May 2019, Enterprises calculates that its total acquisitions for the
current year from 1 June 2018 to 31 May 2019 are $660,000. Of that amount, Enterprises calculates that $44,000 was spent on
financial acquisitions. Its input tax credits for its total acquisitions (including the financial acquisitions) would be $60,000. Its input tax
credits for the financial acquisitions would be $4,000. This $4,000 does not exceed $150,000 and does not exceed 10% of the total
input tax credits for the current year (ie it does not exceed 10% of $60,000). Enterprises therefore satisfies the current year
component of the test.
In relation to the projected year component, Enterprises calculates the total acquisitions for the year from 1 May 2019 to 30 April
2020 are $770,000 and the likely financial acquisitions will be $55,000. The total input tax credits for that year would therefore be
$70,000 and the input tax credits for the financial acquisitions would be $5,000. As the $5,000 will not exceed $150,000 and will also
not exceed 10% of the total input tax credits for the projected year (ie it will not exceed $7,000), Enterprises satisfies the projected
year component of the test. As it satisfies both components, it will be eligible to claim input tax credits for acquisitions related to its
financial supplies.

GST groups
For the purposes of the threshold, a GST group is treated as a single entity. This means that if the
combined credits for financial acquisitions made by members of the group exceed the threshold, all
members are treated as exceeding the threshold. This does not apply to GST religious groups (¶15-052).
Company floats
Guidelines on the application of these rules to company floats are given in the ATO Fact Sheet GST
Issues on Flotation of a Company, available on the Tax Office website.
[GSTG ¶30-350]

¶10-035 Input tax credits for expenses of borrowing

Borrowing is a financial supply and would normally be input taxed. However, as noted at ¶10-032, you
can claim input tax credits for borrowing expenses if you satisfy the “de minimis” test. Even if you do not
satisfy that test, your borrowing-related expenses may be eligible for input tax credits if the borrowing
itself does not relate to making input taxed supplies (s 11-15(5)). This means that if you borrow money
and use it to make taxable or GST-free supplies, you may claim input tax credits for the borrowing-related
expenses.

Examples
(1) Mega borrows $20,000 to renovate one of its residential rental properties. It pays $1,100 for borrowing expenses. As the loan
relates to making an input taxed supply (supply of the residential rental premises), the borrowing-related expenses do not qualify for
input tax credits under this test.
(2) Assume the same facts, except that Mega uses the $20,000 to renovate a commercial property. As the loan relates to making a
taxable supply (supply of commercial premises), the borrowing-related expenses qualify for an input tax credit of $100.
(3) Enterprises borrows $1m to buy a factory for its manufacturing business. Expenses related to the borrowing will qualify for input
tax credits.
(4) Handibank borrows $1m to use in making input taxed financial supplies. Its borrowing-related expenses will not qualify for input
tax credits under this test.

The borrowing may be secured or unsecured, and includes the raising of funds by the issue of a bond,
debenture, discounted security or other document evidencing indebtedness (s 195-1). The Tax Office
considers that a debtor–creditor relationship must be involved (GST Ruling GSTR 2003/9). This may
include the issue of convertible notes to raise capital (Interpretative Decision ID 2004/902), but not equity
issues, for example, the issue of redeemable preference shares.
The provision of deposit accounts does not qualify as a borrowing for these purposes.
[GSTG ¶30-430]

¶10-040 75% “reduced” input tax credit for certain services

As financial supplies are input taxed, the supplier normally cannot claim input tax credits for acquisitions it
makes in making those supplies. However, there is provision for a special 75% input tax credit to be
allowed for certain types of services acquired by financial supply providers. These are called “reduced
credit acquisitions” (s 70-5).
The 75% credit does not apply to the extent that the supplier would be entitled to an input tax credit in any
event, for example, under the “de minimis” rule (¶10-032) or for borrowing expenses (¶10-035).
Reduced credit acquisitions are set out in GST Regulations s 70-5.02. They largely represent services
that financial institutions have outsourced in recent years. They include:
• transaction banking and cash management services, such as operating accounts, processing account
information and credit reference services

• certain payment and funds transfer services

• arranging the provision, acquisition or disposal of interests in securities

• securities and unit registry services

• loans services including providing loan facilities, broking, insurance; and loan application, processing
and management services, such as loan origination, credit reference and mortgage valuation.
Lenders mortgage reinsurance is included in this category

• services supplied to a credit union by jointly owned subsidiaries. This also applies to credit unions who
“rebrand” as banks without otherwise changing their corporate structure

• debt collection. The Federal Court has rejected an argument that a full input tax credit for debt
collection services can be claimed where the collection services are acquired after the debt is
 acquired. It also rejected a claim that a full input tax credit was allowable for due diligence advice as
to whether to acquire the debts for collection (HP Mercantile Pty Limited v FC of T 2005 ATC 4571;
[2005] FCAFC 126)

• arranging hire-purchase (pre-1 July 2012)

• trade finance processing, recording and remittance

• services in connection with (1) the supply of derivatives or foreign currency, or an agreement to buy or
sell that currency, (2) sale of a forward contract or (3) effective from 1 July 2017, the supply of digital
currency, or an agreement to buy or sell that currency

• certain investment portfolio management services and administration services provided to

superannuation funds (excluding taxation and auditing services). This includes processing and
assessing claims under life insurance policies

• insurance brokerage and certain administration services provided to life insurers

• certain services remunerated by commission and franchise fees (for example, certain services
provided to a credit card provider by a co-branding partner: GST Determination GSTD 2007/1)

• trustee and custodial services (but not safe custody of money, documents or other things). For the
treatment of cash transportation from ATMs, see Interpretative Decisions ID 2011/105; ID 2011/106,
and

• certain money-laundering monitoring and reporting services.

As an anti-exploitation measure, the RITC rate is reduced to 55% for certain services acquired by
recognised trust schemes (GST Regulations s 70-5.02(2), item 32; s 70-5.03). For the application of this
rule to a managed investment trust, and a suggested method of calculation, see GST Determination
GSTD 2013/3.
Costs incurred for the preparation of tax returns or Business Activity Statements do not qualify for
reduced credits.
In certain circumstances, reduced credits will also apply to management and support services supplied
from overseas by closely-related entities (¶10-042).
Detailed guidelines on reduced credit acquisitions are given in GST Ruling GSTR 2004/1, which should
be read in conjunction with GST Ruling GSTR 2002/2. The Tax Office has issued a warning about
artificial arrangements designed to create or increase reduced input tax credits for an entity that makes a
financial supply of acquiring shares in a company as part of a takeover (GST Determination GSTD
2011/3; Taxpayer Alert TA 2010/1).
Calculation of reduced credit
Where these eligible services are used for making financial supplies, this is regarded as a creditable
purpose entitling the recipient to an input tax credit (s 70-10). This credit is normally calculated as 75% of
the credit that would otherwise have been available (s 70-15).

Example
A credit union pays an agency $11,000 for a debt collection service which it uses wholly in its business of making financial supplies.
It can claim an input tax credit of 75% × 1/11 × $11,000 = $750.

As with other input tax credits, the credit is further proportionately reduced if:
• the recipient does not provide the whole of the consideration, or

• the acquisition is partly for private purposes (s 11-30).

If the acquisition is partly for making financial supplies and partly for normal creditable purposes, the 75%
credit applies only to the financial component and normal rules apply to the balance (s 70-20).

Example
A credit union acquires eligible services for $110,000. Using the direct attribution method (¶10-030), it works out that the services
are used 40% in making financial supplies and 60% in making taxable supplies. It can claim an input tax credit of $9,000, calculated
as follows:
1/11 × [60% + (75% × 40%)] × $110,000 = $9,000

For further guidelines, see GST Ruling GSTR 2006/3.

Rationale for reduced credit
The 75% rate of credit is designed to reduce the bias between insourcing and outsourcing the relevant
services. This bias can arise because GST can apply to services rendered by independent contractors,
but not by employees.
In the situation where the contractor’s client cannot claim input tax credits, this increases the effective
cost of the contractor’s services. This may provide an incentive to have the services provided in-house,
rather than being outsourced. (This incidentally is not regarded as infringing the anti-avoidance rules if
there are other economic justifications: ¶20-000.) It may also provide an advantage to larger service
providers that can afford to maintain a large in-house staff. It is therefore expected that the credit will
particularly benefit smaller finance organisations, such as credit unions which operate with a large range
of outsourced activities.
Company floats
Guidelines on the application of these rules to company floats are given in the ATO Fact Sheet GST
Issues on Flotation of a Company, available on the Tax Office website.
[GSTG ¶30-200]

¶10-042 Reduced credit for offshore management and support services

Under the reverse charge rules, certain supplies of services by overseas entities to Australian financial
enterprises may be subject to GST (¶9-100). This could potentially disadvantage enterprises such as
branches or subsidiaries that receive management and support services from related overseas entities,
as compared to resident financial institutions that receive these services from internal sources within
Australia. To offset this disadvantage, a reduced input tax credit is available where:
(1) the following types of services are acquired:
• senior executive management

• human resources support

• corporate marketing and communications

• financial management

• supply procurement and management

• credit, operational and risk management

• relationship management

• in-house legal services, including company secretary functions and regulatory and legal compliance

• technology systems
 • business services, ie property management, transport, security and mail services

(2) the supply of those services is taxable under the reverse charge rules in s 84-5. Essentially, this
means that the services are acquired from overseas for the purpose of carrying on business in Australia
and would not otherwise be taxable because they were not sufficiently connected with Australia (¶9-100)
(3) the supplier and the recipient of the services are closely related (GST Regulations s 70-5.02A).
Enterprises are “closely related” if:
• they are both carried on by the same entity, or by 100% subsidiaries of the same entity, or

• one enterprise is carried on by a 100% subsidiary of the entity that carries on the other enterprise
(GST Regulations s 70-5.01A).

Example
Mega, an overseas-based international bank, has a branch in Sydney. It charges the Sydney branch for training assistance and
legal advice provided by divisions of Mega. The Sydney branch can claim a reduced input tax credit on the acquisition of these
services. It can also claim a reduced input tax credit for its share of the cost of payroll services provided by a 100% subsidiary of
Mega.

Services supplied by third parties

The reduced credit is not available where the services are supplied by a third party that is not closely
related to the supplier, and the cost is passed on to the recipient. This is called an “unabsorbed
contribution” (GST Regulations s 70-5.02A).

Example
Mega charges its Sydney branch for a share of the cost of acquiring telecommunications services from an overseas Telecom which
are used by the branch. No reduced credit will be available.

[GSTG ¶30-200]

¶10-045 Provision of fringe benefits by financial suppliers

No input tax credit can be claimed where a financial supplier who exceeds the financial acquisitions
threshold acquires or imports things that: (1) are provided to its employees as taxable fringe benefits; and
(2) relate to input taxed supplies (s 71-5). This will in turn affect the fringe benefits tax (FBT) gross-up rate
(¶24-210).

¶10-050 Exported financial services

Exported financial services are generally GST-free, not input taxed, under the general rules described at
¶9-240. GST-free treatment applies, for example, in the following situations:
• a financial supply is directly connected with goods or real property outside Australia (s 38-190, item 1)

• a financial supply is made to a non-resident who is overseas, and the service is not directly connected
with goods or real property in Australia (s 38-190, item 2)

• a financial supply is made to an overseas recipient, the “effective use or enjoyment” takes place
outside Australia, and the service is not directly connected with goods or real property in Australia (s
38-190, item 3), or

• a supply of rights (eg an overseas overdraft or credit facility) is made available to be used overseas or
to a non-resident who is overseas (s 38-190, item 4: see, for example, GST Determination GSTD
2015/1 at ¶9-240).
Where the residence status of the counterparty in an on-market securities transaction cannot be
determined, it may be assumed to be the location of the relevant securities exchange. If this is not known,
it can be assumed to be where the security is listed or, failing that, where the counterparty’s broker is
ordinarily resident (GST Ruling GSTR 2002/2).
To the extent that the financial service is GST-free, input tax credits can be claimed, so there is an
incentive to clearly identify these transactions.
Supplies through an overseas branch
Financial services that are provided through an overseas branch that is separately registered are treated
as GST-free. A similar result applies even if the branch is not separately registered, as input tax credits
may be allowed in this situation (s 11-15).

¶10-060 Sales of things acquired to make supplies

If you acquire something for the purpose of making financial supplies, you will either not be entitled to an
input tax credit or be entitled to a reduced credit. If you later sell that thing, you may be entitled to a
decreasing adjustment. For details, see ¶6-310.

¶10-070 Sales to satisfy debts

Say that you repossess goods under a hire-purchase agreement and sell them to recover the debt. In
effect, you are making a sale on behalf of the debtor. In such a situation, you are liable for GST in the
same way as if the debtor had made the sale.
This means that the sale attracts GST if it would have attracted GST if the debtor had made it. It does not
matter whether you yourself made it in the course of business, or whether you are registered (s 105-5).
This rule applies whenever you supply the property of another person to satisfy a debt which that person
owes to you. It is not limited to repossession situations, and it is not necessary that the property you
supply was property you originally sold to the debtor.
The rule applied where a sale of real estate was completed by the agent of the mortgagee in possession,
even though the original owner had previously signed the contract for sale, as the supply did not occur
until completion (Trustee for Naidu Family Trust v FC of T 2011 ATC ¶10-227; [2011] AATA 910).
You are not treated as having made a taxable supply if:
• the debtor has given you a written notice stating that the supply would not be subject to GST if made
by the debtor, and giving full reasons, or

• you cannot obtain such a notice, but you believe on the basis of reasonable information that the
supply would not be subject to GST if made by the debtor (eg where the debtor is not registered or
required to be registered).

A mortgagee in possession who sells a business can use this rule to claim that the sale is a GST-free
supply of a going concern (GST Ruling GSTR 2002/5).
The sale of land by a sheriff, as a government employee, under an enforcement warrant falls outside
these rules because the relevant debt is owed to the creditor, not the government/supplier (Interpretative
Decision ID 2004/315). Similarly, the rules apparently may not apply to the sale of impounded livestock by
a council, even though the costs of impounding and selling the livestock were withheld from the proceeds
of the sale (Interpretative Decision ID 2004/485). In each case, however, the sale would be subject to
GST under general principles, as a supply by the sheriff or council, though not by the debtor.
Where the mortgagee sells the property of a corporation, these rules apply rather than the “incapacitated
entity” rules (¶18-250). This may arise in circumstances where a representative of an incapacitated entity
is a creditor of that incapacitated entity, and the representative makes a supply of the incapacitated
entity’s property in satisfaction of a debt that the incapacitated entity owes to the representative.
GST returns and payment
If you make a supply attracting GST under these rules, and you are not registered or required to be
registered at the time, you must lodge a special GST return within 21 days after the end of the month (s
105-15). You must pay the GST within the same time, or at the time when any earlier assessment is
notified by the Commissioner (s 105-20).
[GSTG ¶48-420]

¶10-080 Superannuation funds

Both superannuation funds and their trustees are “entities” (¶3-015), although only trustees (or managers)
can be registered, as funds do not have the legal capacity to carry out GST obligations.
Where the fund is a “complying” fund for income tax purposes, any activities of the trustee constitute the
carrying on of an enterprise. If the fund is non-complying, the determination of whether the activities
constitute the carrying on of an enterprise is made in accordance with the general rules described at ¶3-
020 (GST Determination GSTD 2006/6).
Registration is compulsory where the GST turnover of the enterprise is $75,000 or more, in accordance
with the normal rules (¶3-000). However, most of the supplies will typically be input taxed financial
supplies, and will not be included in GST turnover. It follows that for some smaller funds, the turnover will
be less than $75,000, so registration will be optional. In deciding whether to register, the trustee may
need to compare the costs of compliance with the limited amounts of input tax credits it could claim.
Those credits may include the 75% credits allowed for certain inputs (¶10-040) or credits allowed in
relation to taxable non-financial supplies, for example, where the fund leases out commercial premises
(¶11-330). For other pros and cons of registration, see ¶3-010.
The provision of an interest in a superannuation fund to a member is an input taxed financial supply (¶10-
010), so no GST applies and input tax credits are normally not available. The same applies to the
provision of life insurance, but the provision of salary continuity insurance would normally be subject to
GST. Entry fees, exit fees and management fees charged to fund members do not attract GST.
Where outsourced administration or management services are supplied to superannuation funds, a
reduced input tax credit for any GST could normally be claimed (¶10-040). The same applies to debt
collection services and certain custodial services, but not taxation, legal or audit fees.

Example
This example is adapted from the Tax Office’s GST and financial supplies for self managed super funds (NAT 71512).
Hazel Super Fund is a SMSF and is registered for GST. It has made the following purchases (amounts include GST):
• repairs to residential property: $7,000

• repairs to commercial property: $14,300

• management of investment portfolio: $1,100

• maintenance of member records and associated accounting (excluding auditing and tax services): $880

• brokerage on share sale: $440.

Financial acquisitions the fund made are:

• investment portfolio management

• maintaining member records and associated accounting, and

• brokerage on share sale.

Total GST credits on financial acquisitions = $220 ($1,100 + $880 + $440) × 1/11.
Total GST credits that the fund could claim = $1,520 ($14,300 + $1,100 + $880 + $440) × 1/11.
The fund has exceeded the financial acquisitions threshold (¶10-032), as its total GST credits on financial acquisitions exceeds 10%
of the total GST credits the fund could claim ($220 / $1,520 × 100 = 14.47%).
Providing a residential property for lease is an input taxed supply (¶11-310), so Hazel Super Fund cannot claim GST credits for GST
they paid on purchases that relate to making that supply.
Providing a commercial property is a taxable supply (¶11-330). Hazel Super Fund can claim GST credits for GST they paid on
purchases that relate to making taxable supplies. The GST credit is $1,300 ($14,300 × 1/11).
 Fees paid to manage the fund’s investment portfolio, brokerage costs and maintaining its member records and associated
accounting are all purchases that relate to making financial supplies.
The fund can claim reduced GST credits for these purchases because they:
• are listed as reduced credit acquisitions, and

• relate to making financial supplies.

Therefore, the fund can claim reduced GST credits for:

• portfolio management: $75 ($1,100 × 1/11 × 75%)

• records maintenance and associated accounting: $60 ($880 × 1/11 × 75%)

• brokerage costs: $30 ($440 × 1/11 × 75%).

Total reduced GST credit it can claim is $165 ($75 + $60 + $30).
Total GST credit it can claim on purchases it uses to make taxable sales is $1,300 ($14,300 × 1/11).
Total credit it can claim as GST credits and reduced GST credits is $1,465 ($1,300 + $165).

The trustee cannot claim an input tax credit for the annual superannuation supervisory levy (Interpretative
Decision ID 2002/78).
Where a member of a self managed superannuation fund made a contribution of a commercial property to
the fund trustee, this was not a taxable supply as the trustee provided no consideration. The “associate”
rules, which may deem consideration to have been provided (¶17-500), did not apply because the trustee
was registered and intended to use the property for a creditable purpose (Interpretative Decision ID
2005/70).
Payments by employer
The ATO’s preferred approach is for all fund expenses to be paid directly out of the fund itself, and for
superannuation contributions to be made directly to the fund. However, in certain situations, a sponsoring
employer may, for administrative convenience, pay superannuation fund expenses on behalf of the fund,
with the payment being reclassified as a superannuation contribution in the employer’s accounts. In such
a case, the ATO considers that the employer is not entitled to an input tax credit if the superannuation
fund makes an acquisition (eg it receives legal advice) and the employer pays the expense (eg solicitors’
fees) on the fund’s behalf. This is because the acquisition is made by the fund and not the employer.
However, the ATO considers that the fund itself may be able to claim a reduced input tax credit under the
financial supply rules (¶10-040; GST Determination GSTD 2016/1).
[GSTG ¶31-200]

¶10-090 Other practical impacts for financial service providers

Apart from the important issue of outsourcing (¶4-090), there are some practical implications for providers
of input taxed financial services. These include:
• as financial supplies are input taxed, financial service providers will probably either have to absorb the
GST which they pay on their business inputs, or seek to effectively recover those costs indirectly
through restructuring the fees they charge their customers

• where input tax credit entitlements can be determined at branch level, it may be administratively
simpler to separately register those branches

• suppliers of exported financial services will have an advantage over suppliers to the domestic market,
because exports are GST-free. Apportionment will be necessary when both domestic and overseas
services are provided

• in general, financial institutions that provide financial advice to customers as part of other services
may need to bill this separately so that input tax credits may be claimed.

INSURANCE
¶10-100 Issue of life insurance policies

Life insurance is treated as a financial supply and is input taxed (¶10-010). This means that there is no
GST on life insurance cover, but the insurer will generally not be able to claim input tax credits on
business inputs relating to its life business.
[GSTG ¶32-200]

¶10-110 Issue of general insurance policies

General insurance is not treated as a financial supply and is taxable (¶10-020). GST therefore applies to
general insurance cover, but the insurer will be able to claim input tax credits on business inputs relating
to its general insurance business. If an insurer provides life and general insurance, apportionment of the
business inputs would be appropriate.
If the person taking out general insurance is a private individual, there would normally not be any question
of that person claiming input tax credits for premiums. However, if the insured is a registered business,
input tax credits may be claimed by the insured.
In GST Ruling GSTR 2006/1, the Tax Office summarises the distinguishing features of insurance as
follows:
• the insurer has primary liability under the contract

• the insurer bears the risk of loss. It has no right to be indemnified by the insured under the contract

• the contract is made in utmost good faith. The insured must disclose anything relevant to the insurer’s
risk

• the insured is not entitled to profit from the contract. If the insured salvages anything from the loss, the
amount salvaged is reflected in the settlement by the insurer

• the contract is usually made in a commercial context, and the insurer receives a premium

• the contract of insurance is usually formed by the insurer issuing a policy in response to a proposal by
the insured

• a contract of insurance is void if the insured has no insurable interest in the subject matter, and

• the insurer must be an entity authorised to carry on an insurance business.

Contracts of insurance can be distinguished from guarantees and other forms of indemnity, which are
normally treated as input taxed financial supplies (¶10-010; GST Ruling GSTR 2006/1).
[GSTG ¶32-000]

¶10-120 Insurance settlements

Special rules apply where there is a settlement of an insurance claim.

On a settlement, the insured is technically making a supply to the insurance company by giving up its
rights under the policy. However, the settlement it receives from the insurance company — whether in the
form of money or goods and services — is generally not treated as consideration received or provided.
GST will therefore not be payable (s 78-45) and the insurance company will not claim an input tax credit
(s 78-20).
Duty to notify entitlement
There is an exception to the general rule where the insured — or other entity paying the premium — was
entitled to an input tax credit for the premium but failed to notify the insurance company of its credit
entitlement, or understated it (s 78-50). To this extent, a pro rata amount of GST will be payable on the
settlement. The insured will remain liable for this GST even if it has ceased to be registered by the time
the settlement is made, but in this situation it may need to lodge a special GST return (s 78-80; 78-85; 78-
90). However, none of this applies if the insured was not registered or required to be registered at the
time of the understatement or non-disclosure, for example, where it was a private consumer.
The notification may be made when, or at any time before, a claim is first made under the policy. It is
normally done as part of the renewal process.

Example
A registered business is partly taxable and partly input taxed. It takes out insurance for a purely taxable purpose, pays a $550 GST-
inclusive premium and claims a 100% input tax credit of $50. However, it informs the insurance company that the credit entitlement
was 70%. It later suffers a loss and claims under the policy.
The insurance company would have had to account for $50 GST on the issue of the policy. Proceeding on the basis of what the
business told it — ie that only a 70% credit was available — it claims a decreasing adjustment, as described below. To compensate
for this, the business will be liable for GST calculated as (100% − 70%) × 1/11th × payout.

Decreasing adjustment where premiums not creditable

As the insurance company normally pays GST on the provision of insurance, it is appropriate that its net
GST liability should be reduced when it is called on to settle a claim. Given that it is not permitted to claim
an input tax credit, this reduction is achieved by allowing the insurance company to claim a decreasing
adjustment (s 78-10). This adjustment only applies if the issue of the policy was taxable — it does not
apply to wholly GST-free or input taxed insurance (eg health insurance, overseas travel insurance, life
insurance or exported insurance: ¶10-140). In addition, the insured must not have been entitled to an
input tax credit on the premiums it paid under the policy, or alternatively, its input tax credit must have
been less than the GST payable by the insurer on the issue of the policy (s 78-10).
The decreasing adjustment is calculated as 1/11th of the settlement amount. In general terms, this
settlement amount is calculated as:
• the amount of money paid, plus

• the market value of goods and services for which the insurer was not entitled to an input tax credit, for
example, where the insurer provides the insured with a voucher up to a stated monetary value (¶4-
060) from a third party such as a retailer.

Ex gratia payments made in response to a claim are included (GST Determination GSTD 2011/1).
If the insured was entitled to a partial input tax credit for the premium, a proportion of the decreasing
adjustment will be allowed, based on the extent to which there was no credit entitlement. In addition, the
settlement amount is grossed up by a factor calculated as 11/(11 − proportion of credit allowed for
premium) (s 78-15). For the treatment of excesses, see “Insurance excesses” below. In determining the
insured’s entitlement to input tax credits, the rules allowing annual apportionment of credits (¶5-020) are
ignored.

Examples
(1) A registered business takes out insurance 100% for business purposes and claims a full input tax credit for the premium. It later
suffers loss and claims under the policy. The GST results of the settlement are:
• the insurance settlement is not subject to GST

• the insurance company is not eligible for a decreasing adjustment because the business was entitled to a full input tax credit for
the premium.

(2) An unregistered business takes out insurance. It cannot claim an input tax credit on the premium because it is not registered. It
later suffers loss and claims under the policy. The GST results of the settlement are:
• the insurance payout is not subject to GST

• the insurance company is entitled to a decreasing adjustment calculated as 1/11th of the settlement.

The same would apply if the insured was a private person.

 (3) A registered business takes out insurance. The supply of the policy is 60% taxable and 40% GST-free. The business claims an
input tax credit on the premium. It later suffers loss and claims under the policy. The loss relates to the GST-free part of the policy.
The GST results of the settlement are:
• the insurance payout is not subject to GST

• the insurance company is not entitled to a decreasing adjustment as the settlement relates to the non-taxable part of the policy.

(4) A registered business consists partly of providing financial services and is 60% taxable and 40% input taxed. It takes out
insurance over the whole of its business. It claims a 60% input tax credit on the premium. It later suffers a loss of $5,200 and claims
under the policy. The GST results of the settlement are:
• the settlement is not subject to GST
• the insurance company is entitled to a decreasing adjustment, calculated as follows:
“Gross up” the payout: $5,200 × 11/(11 − 0.6) = $5,200 × 11/10.4 = $5,500
Decreasing adjustment: 40% × 1/11 × the grossed up payout of $5,500 = $200

Subrogation
Under its rights of “subrogation”, an insurance company may be able to recover part of its payout from
third parties who were liable for the loss. In this situation, any decreasing adjustment to which the
insurance company was entitled will be reduced to reflect the amount recovered. The payment by the
third party is not treated as a payment for a taxable supply, and the third party cannot claim an input tax
credit for it (s 78-35; 78-75).

Example
An insurance company makes a payout of $11,000 to an unregistered business. The business was not entitled to any input tax credit
on the premium, so the insurance company is eligible for a decreasing adjustment of 1/11th of $11,000 = $1,000. Later it recovers
$6,600 of the payout from a third party. It will be liable for an increasing adjustment of 1/11th of $6,600 = $600. The result is a net
decreasing adjustment of $1,000 − $600 = $400. This is the decreasing adjustment appropriate to its net payout of $4,400.

Goods or services supplied to insurer by insured

Sometimes an insurance company acquires goods or services from the insured solely for the purpose of
settling a claim. GST does not apply to this transaction (s 78-20; 78-60).

Example
A business vehicle is written off in an accident. The insurance company makes a payout under the insurance policy and takes
possession of the vehicle. The giving of the vehicle to the insurance company does not attract GST. The business owner does not
pay GST and the insurance company does not claim input tax credits for its acquisition (see also Interpretative Decision ID
2005/206).

Goods and services supplied by insurer

A supply of goods or services that an insurer makes in settlement of a claim is not a taxable supply, so
GST will not apply and the insured will not claim an input tax credit (s 78-25).
An insurer can claim an input tax credit under the normal rules where it purchases new replacement items
and acquires title in the goods before it supplies them to the insured. However, it cannot claim an input
tax credit for goods or services it acquires to settle a claim if the policy was GST-free (s 78-30).
An insurer may pay a supplier to provide goods or repair services in settling an insurance claim. The Tax
Office considers that if an insurer enters into a binding obligation with a supplier to provide goods, perform
services or do something else for the insured in settlement of an insurance claim, and is liable to pay for
that supply, the supplier is making a supply to the insurer, even though the supply may be provided to the
insured. In this case, the insurer can claim a normal input tax credit for the acquisition (GST Ruling GSTR
2006/10). The Tax Office also considers, on the basis of the Department of Transport case (¶5-010), that
this may also apply in certain cases where there is a pre-existing framework which contemplates that
insurer and supplier will act in a certain way in relation to goods or services that are to be provided by the
supplier to the insured or a third party (2011 Addendum to GST Ruling GSTR 2006/10). As for GST-free
heath supplies, see ¶10-140.
Vouchers
If the insurer acquires a face value voucher from a third party, and provides it to the insured, the third
party will be liable for GST when the voucher is redeemed (¶4-060). The insurer is not entitled to an input
tax credit on the acquisition of the voucher from the third party (because that supply was not taxable), but
may be entitled to a decreasing adjustment on settlement of the claim.
The position is different if the voucher is not a face value voucher, but instead entitles the holder to
specific items — for example, a voucher to replace stolen goods. In this case, the supply of the voucher to
the insurer is taxable, and the insurer can claim an input tax credit. The supply of the voucher by the
insurer to the insured is not taxable (s 78-25). GST does not apply on the redemption of the voucher,
except to the extent that additional consideration is provided by the insured.
Insurance excesses
The payment of an excess by the insured to an insurance company is not consideration for a supply, so
does not attract GST (s 78-55). This does not apply if the excess is paid to another entity such as a
repairer.
If the insurance company settles a claim by making a supply or payment, the excess is excluded from the
settlement amount in the calculation of the insurance company’s decreasing adjustment (s 78-15).
A corresponding rule applies if the insurance company makes acquisitions “directly” for the purpose of
settling the claim. The effect of this rule is that there will be an increasing adjustment calculated as 1/11th
of the excess paid (s 78-18). If the settlement is partly by supplies or payments, and partly by
acquisitions, the excess is apportioned, with part being taken into account in calculating the decreasing
adjustment and part giving rise to an increasing adjustment.
An acquisition is not made “directly” for the purpose of settling the claim if it is made simply to enable the
insurer to determine what its liability is, eg where it acquires the services of an assessor, or acquires a
police or medical report (ATO GST Industry Issues — Insurance: Issue 31).

Example
An insurer settles a claim by paying $1,100 cash to the party damaged by the insured. The insurer also pays $2,200 under a
contract with a chosen repairer to provide repairs to that party, making a total settlement of $3,300.
In simplified terms, if the insured pays a $660 excess to the insurer, the effect is:
• one-third of the excess ($220) will be excluded from the calculation of the insurer’s decreasing adjustment

• 1/11th of the balance (ie 1/11 × $440 = $40) will be an increasing adjustment to the insurer.

In the absence of this rule, the whole of the excess would simply be excluded from the calculation of the insurer’s decreasing
adjustment.

ATO guidelines for apportionment of excesses, known as safe harbour arrangements, are set out in ATO
GST Industry Issues — Insurance: Issue 34.
Where there has been an increasing adjustment in relation to an excess that is later refunded, the
insurance company will be entitled to a decreasing adjustment to reflect the amount refunded (s 78-42).
For guidelines, see ATO GST Industry Issues — Insurance: Issue 33.
Position of third parties
Payments or supplies of goods and services that are made to third parties as part of an insurance
settlement do not have any GST consequences for the third party. This applies whether the payment or
supply is made by the insured or the insurance company (s 78-65; 78-70).
Portfolio transfers
Where an insurer transfers its insurance portfolio to another insurer, the GST rules apply as if the
transferee insurer were the insurer in relation to the insurance policy (s 78-118). This will, for example,
allow the transferee to claim decreasing adjustments on settlement as if it were the original insurer.
CTP settlements
The GST insurance rules are modified to ensure that they operate as intended in relation to payments or
supplies made in settlement of claims under a compulsory third party (CTP) motor vehicle insurance
scheme (Div 79; 80). These rules also extend to various other insurance-related payments or supplies
made by CTP insurers, for example, payments of hospital and ambulance charges for services provided
directly to injured persons, that are paid by an insurer via CTP scheme bulk-billing arrangements. In
addition, there are provisions ensuring that the GST insurance rules apply to payments and supplies
made by CTP insurers under “settlement sharing” arrangements.
[GSTG ¶32-020]

¶10-130 Statutory compensation schemes

Settlements made under statutory compensation schemes are treated in the same way as ordinary
insurance claims (s 78-100). These schemes cover specified Commonwealth, state and territory statutory
schemes for workers compensation, sporting injuries insurance and military rehabilitation and
compensation (GST Regulations s 78-105.01; former Sch 10). They do not include compulsory third party
schemes, which are treated separately (¶10-120).

Example
Under a workers compensation policy, the insurer reimburses a worker for medical costs incurred from visits to the worker’s own
physiotherapist. The insurer is not entitled to an input tax credit because it did not have a contractual relationship or binding
agreement with the physiotherapist and there was therefore no supply to it. The insurer is also not entitled to a decreasing
adjustment on the settlement because the employer was entitled to a full input tax credit on the premium (based on GST Ruling
GSTR 2006/10).
Note: If the GST-registered physiotherapist had been nominated by the insurer, and had agreed with the insurer to provide the
services and invoice the insurer, the insurer would have been entitled to an input tax credit on the supply of the services. Those
services would not have been GST-free because the supply was not for the treatment of the insurer, but the worker (¶13-330).

Sometimes a settlement may be made under a statutory compensation scheme even though the relevant
contributions or premiums were not paid, for example, workers compensation may become payable to a
worker even though the employer has defaulted in its payments. For GST purposes, the employer would
be treated as having complied with its obligations (s 78-100(2)).
Separate provisions may be made for certain government insurance or compensation schemes (s 78-
115). This could possibly apply, for example, to certain loss-making statutory schemes, though these
have not yet been specified.
[GSTG ¶32-080]

¶10-140 GST-free insurance

The supply of private health insurance is GST-free (¶13-370), so no GST applies to contributions and the
insurance company can claim input tax credits on its normal business inputs. The same applies to travel
insurance for travel outside Australia (¶12-020) and insurance for the international transport of goods
(¶12-010).
There is a specific provision designed to ensure that supplies by health care providers paid for by a
statutory compensation scheme operator are GST-free if the underlying supply from the health care
provider to the individual is also GST-free (s 38-60).
An insurance company cannot claim a decreasing adjustment on settlements made under GST-free
insurance policies (s 78-10). If the policy is partly GST-free, a partial adjustment may apply as described
at ¶10-120.
Corresponding rules apply to insurance policies that constitute GST-free exported services (¶9-240), for
example, where a life insurance company issues a life policy for a non-resident overseas, or a policy is
issued to a non-resident covering a car to be used outside Australia. These are treated as GST-free, even
though life insurance is normally input taxed (s 9-30(3)).
[GSTG ¶32-010]

¶10-150 Other special insurance rules

Tax invoices.
Normally, you cannot claim an input tax credit for a payment unless you hold a tax invoice from the seller.
In the case of insurance premiums, it is sufficient if an insurance broker holds the tax invoice on your
behalf. Brokers can also issue tax invoices on behalf of the insurance company (s 153-25). Insurance
renewal notices may qualify as tax invoices in certain circumstances (¶5-130).
Joint ventures.
Business entities engaged in providing general insurance can form GST joint ventures (¶17-210).
Stamp duty on premiums.
GST on insurance premiums is worked out as if the state stamp duty had not been charged (s 78-5; 78-
95). Conversely, it appears that state governments charge stamp duty on the GST-inclusive amount of
the premium. This issue is discussed further at ¶11-070.

Example
The premium on a policy is $240, including $20 stamp duty. GST is calculated as 1/11th of $220 = $20.

Compensation
ordered by a court on an insurance claim is treated in the same way as compensation paid directly under
the insurance policy (s 78-110).
REAL ESTATE • ACCOMMODATION • SALE OF
BUSINESS
SALE OF REAL PROPERTY
Summary of GST position on sales ¶11-000
Sale of pre-existing non-commercial residential premises ¶11-010
Sale of “new” residential premises ¶11-020
Purchaser of new premises to remit GST from 1 July 2018 ¶11-022
Sale of commercial residential premises ¶11-030
Sale of non-residential premises ¶11-050
Long-term leases ¶11-060
Development leases ¶11-062
Subdivision and sale ¶11-063
Partitions of co-owned land ¶11-064
Attribution of GST and credits on taxable sales ¶11-065
Easements, restrictive covenants and options ¶11-068
Other matters associated with property ¶11-070
SPECIAL “MARGIN” RULES
How the margin scheme works ¶11-100
How to calculate the margin ¶11-110
Requirements for valuation ¶11-120
Bad debts under the margin scheme ¶11-130
Special situations ¶11-140
BODIES CORPORATE
Bodies corporate ¶11-200
RENTED OR LEASED PREMISES
Summary of GST position on leases ¶11-300
Accommodation in residential premises ¶11-310
Accommodation in commercial residential premises ¶11-320
Leased commercial premises ¶11-330
Sale of real property subject to lease ¶11-335
Leases entered into before 1 July 2000 ¶11-340
CROWN AND FARM LAND
Grants of Crown land ¶11-400
Certain sales of farms are GST-free ¶11-410
Where farm land is subdivided ¶11-420
BUYING AND SELLING A BUSINESS
GST-free supplies of going concerns ¶11-500
Enterprise must be carried on until day of supply ¶11-503
Supply must be of all things necessary ¶11-506
If “going concern” exemption does not apply ¶11-510
Assumption of liabilities by purchaser of business ¶11-515
Subsequent GST adjustment if recipient makes input taxed or private supplies ¶11-520
Sale of business by selling shares ¶11-530
Sale of franchise ¶11-540
Option to purchase business ¶11-550

Editorial information

Summary
The GST status of real estate sales depends on whether the premises are new, residential or
commercial. Sales of existing homes are input taxed, but would not normally be subject to GST in
any event because most owners would not be registered as dealers. The sale of new houses is
subject to GST, as is the sale of commercial residential premises such as hotels. Special rules
enable taxpayers such as dealers and developers to calculate their GST on a “margin” basis.
GST does not normally apply to residential rent, but special rules apply to long-term commercial
residential accommodation. Rent on commercial premises is subject to GST, but renters could
normally claim offsetting input tax credits if they are in business. Certain grants of Crown land, farm
land sales and farm subdivisions may be GST-free.
The chapter concludes with an explanation of the GST-free status of sales of businesses.

SALE OF REAL PROPERTY

¶11-000 Summary of GST position on sales

The general GST treatment where real property is sold is as follows:

Type of premises Example GST treatment

New residential premises New house Generally taxable (¶11-
020)
Commercial residential premises Hotel Taxable (¶11-030)
Other residential premises Existing home Input taxed (¶11-010)
Non-residential premises Office building Taxable (¶11-050)
Part of going concern Sale of business GST-free (¶11-500)
Farm land Sale to intending farmer GST-free (¶11-410)
Vacant land Development Taxable (¶11-010)
Private sale Not taxable (¶11-010)

In general, unless a specific exemption applies (eg for sales of going concerns), sales of “real property”
are taxable, but are input taxed in the following situation:
• the property is “residential premises” (¶11-010)

• the premises are to be used predominantly for residential accommodation (¶11-010)

• the premises are not “commercial residential premises” (¶11-010), and

• the premises are not “new residential premises”, except for those used for residential accommodation
before 2 December 1998 (¶11-020).

Meaning of “real property”

“Real property” includes:
• an interest in land or a right over land. The ATO considers that this is limited to legal or equitable
interests or rights, such as legal estates in fee simple, leaseholds, easements and profits à prendre
(GST Ruling GSTR 2003/7)

• a personal right to be granted such rights or interests, for example, options

• a licence to occupy land (see below), or

• any other contractual right exercisable in relation to land, for example, a restrictive covenant (s 195-1).

In the UK, it has been held that there will not be a licence to occupy land if the right is merely ancillary to
some other supply that does not involve land (Customs and Excise Commissioners v Sinclair Collis Ltd
[1998] BVC 335). For example, a licence to occupy a particular car parking space is a supply of real
property, but the supply of valet car parking services is not. Similarly, the supply of a particular secure
storage space is the supply of real property, but storage services without rental of a specific site are not.
The hire of a room for a function is a supply of real property, but not the sales of tickets to entertainment
or sporting events. Similarly, it appears that the supply of hotel accommodation is a supply of real
property on the basis that it provides a right exercisable in relation to land (Saga Holidays Limited v FC of
T [2006] FCAFC 191; GST Ruling GSTR 2003/7; see also ¶12-020).
Fixtures.
Real property includes fixtures attached to the land. However, the ATO considers that a house that has
been physically removed from the land and sold separately is not real property (Interpretative Decision ID
2002/523). For the ATO’s views on tenants fixtures, see ATO GST Industry Issues — Primary Production:
Issue 6.5.2.
Chattels included in sale.
Unlike fixtures, chattels included in a sale of real property would normally be treated separately from the
real property itself. For example, if a registered taxpayer purchased chattels used in furnishing/renovating
a residential property which it then sells, the ATO would normally treat the sale of the chattels as taxable
and the sale of the premises as input taxed. However, if the property was previously the subject of an
input taxed lease, the sale of chattels that were used solely in connection with that lease would also be
treated as input taxed under the special rules in s 9-30 (¶1-170; Interpretative Decisions ID 2004/401; ID
2004/402).
Where new residential premises are sold with certain chattels included, the ATO says that the
consideration should be apportioned to enable the real property element eligible for the margin scheme to
be identified (GST Advice GSTA TPP 013).
Foreign property.
The sale of foreign real property is not subject to GST (¶4-100). For the position where real property is
compulsorily resumed, see ¶4-010.
Time-sharing schemes.
An interest in an accommodation time-sharing scheme may constitute real property: Interpretative
Decision ID 2010/20 (¶10-010).
Emissions units.
Eligible emissions units (¶16-220) are treated as personal property rights, rather than real property rights.
Time of supply.
Technically, a supply by way of sale of land under the Torrens title system does not take place until
registration of the transfer document. As a matter of practice, however, the ATO accepts that the supply
(and acquisition) occurs on settlement — typically, this happens when a registrable transfer document is
unconditionally provided to the purchaser (GST Ruling GSTR 2006/7; Central Equity Ltd v FC of T [2011]
FCA 908; Trustee for Naidu Family Trust v FC of T [2011] AATA 910). For the transitional rules that apply
where a sale straddled the commencement of GST on 1 July 2000, see ¶19-100.
[GSTG ¶35-000; ¶35-020]

¶11-010 Sale of pre-existing non-commercial residential premises

In general, the sale of non-commercial residential premises that are not new is input taxed, if the
premises are real property to be used predominantly for residential accommodation (s 40-65). This means
that no GST is payable and input tax credits for acquisitions relating to the sale are not available. For the
meaning of “new”, see ¶11-020. For commercial residential premises, see ¶11-030.

Example
A home owner sells the home. The sale will be input taxed. No GST is payable and no input tax credits can be claimed.

In many cases, the sale of an existing residence is not subject to GST in any event, as the owner will
normally not be selling in the course of business, and will not be required to be registered.
A “sale” would normally require consideration. For special rules applying to transactions involving
associates, see ¶17-500.
What are “residential premises”
“Residential premises” means land or a building that is:
(a) actually occupied as a residence or for residential accommodation, or

(b) intended to be occupied as a residence or for residential accommodation, provided that it is capable
of being used in that way (s 195-1).

This test must be satisfied at the time of the relevant supply (Marana Holdings Pty Ltd & Anor v FC of T
2004 ATC 5068).
The term of the occupation or intended occupation is irrelevant. This overcomes the Federal Court’s
earlier view that the premises must have a “significant degree of permanence of occupation”. It means
that the premises do not have to be a home or permanent place of abode. On this basis, for example,
serviced apartments let on a short-term basis may be residential premises (South Steyne Hotel Pty Ltd v
FC of T 2009 ATC ¶20-145; [2009] FCAFC 155). Lodging, sleeping or overnight accommodation is
included (GST Ruling GSTR 2012/5).
It is primarily the physical characteristics of a building that mark it out as residential premises. The crucial
requirement is that it must provide the occupants with shelter and basic living facilities, such as are
provided by a bedroom and bathroom (Marana Holdings; Vidler v FC of T 2010 ATC ¶20-186; [2010]
FCAFC 59; GST Ruling GSTR 2012/5). The premises must also be fit for human habitation; this test may
be satisfied even though they are in a minor state of disrepair, or there is temporary disruption to
occupation pending repairs.
Where it is clear that the physical facilities are simply ancillary to the function of some other type of
premises (such as a private hospital or office building), they are not treated as residential premises (GST
Ruling GSTR 2012/5).
There is no specific restriction on the area of land that can be included with a building and be treated as
part of the residential premises. The ATO says that a relevant factor is the extent to which the physical
characteristics of the land and building as a whole indicate that the land is to be enjoyed in conjunction
with the residential building. The use of the land is not a determining factor in deciding if the land forms
part of the residential premises (GST Ruling GSTR 2012/5).
Vacant land is not residential premises, even if it is intended to erect residential accommodation on the
land in the future (Vidler v FC of T 2010 ATC ¶20-186; [2010] FCAFC 59; GST Ruling GSTR 2012/5).
Paragraph (b) of the definition (above) is not satisfied in such a case, as it is directed at situations where
the premises already exist at the time of the supply but are not actually occupied as such. Whether the
supply of vacant land is taxable will therefore depend on the usual conditions (¶4-000). For example, if the
vacant land was sold as part of a developer’s business, it would be taxable, but a non-business private
sale would not be taxable.
A floating home is residential premises, provided that it is permanently affixed to a floating platform and is
not capable of being adapted for self-propulsion (s 195-1). Leasing a floating home is therefore input
taxed (s 40-35). However, the sale of a floating home is subject to GST — it is not input taxed under s 40-
65 because it is not “real property”. Most ships and houseboats would not qualify as floating homes
because they are capable of self-propulsion, or of being adapted for self-propulsion by the fitting of an
outboard motor. However, they may qualify as commercial residential premises (¶11-030).
The ATO considers that where an investor buys premises from the builder then leases them back to the
builder as a display home, the lease is a supply of premises to be used predominantly for residential
purposes and is therefore input taxed (GST Ruling GSTR 2012/5).
A transportable or demountable house with the usual facilities is residential premises once it is placed on
land and installed ready for occupation (GST Ruling GSTR 2012/5). The ATO has previously expressed
the view that “home parks” in which sites for demountable homes are rented are commercial residential
premises (¶11-030). In GST Ruling GSTR 2012/6, the ATO says that this issue is being reconsidered, but
that in the meantime taxpayers may continue to rely on the previous view.
An “over-55s” retirement village would normally be residential premises, but a care hostel or nursing
home would not (GST Ruling GSTR 2012/5).
The ATO considers that road vehicles — including motor homes, caravans and campervans — are not
residential premises (GST Ruling GSTR 2012/5). This applies even if they are left on site for permanent
occupation. However, caravan parks and camp sites can qualify as commercial residential premises (¶11-
030).
Most employee accommodation provided by employers would be accommodation in residential premises.
The ATO considers that camp-style accommodation in a remote area, or accommodation on an offshore
oil rig, may be commercial residential premises if operated in a business-like manner, even though not
available to the public generally (GST Ruling GSTR 2012/6): see ¶11-310.
Individual units in a strata title block are residential premises. When aggregated with other units under the
control of one management, the premises as a whole may be commercial residential premises (¶11-030).
As indicated above, residential premises also include premises that are intended to be occupied as a
residence, provided that they are capable of being occupied as such. This is apparently determined on an
objective basis, without reference to the subjective intention of the parties. The objective intention is
indicated by the suitability of the premises to be occupied as a residence (Marana Holdings).
There can be a supply of residential premises even though, under the contract, the purchaser enters
possession and destroys the premises before settlement (GST Advice GSTA TPP 072).
“To be used predominantly for residential accommodation”
For their sale to be input taxed under s 40-65, premises must not only be residential as described above,
but must also satisfy the further condition that they are “to be used predominantly for residential
accommodation”. It appears that this should be determined objectively, by reference to the physical
characteristics of the property at the date of acquisition. The subjective intention of the purchaser is
therefore not determinative; for example, it does not matter whether the purchaser intends to use the
property for residential accommodation or not. Conversely, premises that lack the requisite physical
characteristics do not satisfy the condition even if they are actually occupied as a residence, for example
by a squatter in a disused factory (Sunchen Pty Ltd v FC of T 2010 ATC ¶20-229; [2010] FCAFC 138;
GST Ruling GSTR 2012/5).
The term of the accommodation is irrelevant. The residential accommodation may be long-term or short-
term.
For the application of these rules to “White Popi Option” Agreements, see Product Ruling PR 2013/13.
Partial residences
If only part of the premises is residential, or to be used predominantly for residential purposes, the
transaction must be apportioned.

Example
A building consists of a ground floor shop and a first floor where the owner lives. The owner sells the building. The sale will be input
taxed to the extent that it relates to the residential area and will attract GST to the extent that it relates to the shop.

This apportionment would presumably be on a value basis (¶4-200). If so, the value allocated in the
contract will be important. Attention should also be given to the special anti-avoidance rules (¶20-000).
Similarly, if a dealer sells a house with an adjoining unused paddock that has no significant connection to
the house, the sale may be input taxed to the extent that it relates to the house, but taxable to the extent
that it relates to the paddock.
If the premises are only partly constructed, and not yet fit for habitation, they are not residential premises
(GST Ruling GSTR 2012/5).
Separately-titled garages
Residential apartments may be sold together with garages, car parking spaces or storage areas located
within the building complex. The ATO considers that this may be treated as a composite supply of
residential premises to be used predominantly for residential purposes. This applies whether or not the
garage, etc, is on a separate title, provided that it is physically located within the building complex (GST
Ruling GSTR 2012/5). However, the sale of a separately-titled garage by itself, without the residential
unit, would be treated as taxable.
Sale with development consent
The assignment of a development consent as part of the input-taxed sale of residential premises may be
a separate taxable supply if it provides substantive rights to the purchaser in addition to those naturally
attached to the premises. This would not apply if the consent automatically flows with ownership of the
premises and the assignment is merely formal (Interpretative Decision ID 2004/303).
[GSTG ¶35-200]

¶11-020 Sale of “new” residential premises

The sale of new residential premises is normally taxable (s 40-65). This means that GST may be payable
if the vendor is registered. This will typically apply to builders and developers.
However, there is an exception to this rule if the premises were used for residential accommodation
before 2 December 1998. In that case, the sale will be input taxed. For this to apply, the premises must
also have been within the definition of residential premises (¶11-010) at that time (Marana Holdings Pty
Ltd & Anor v FC of T 2004 ATC 5068; [2004] FCAFC 307). Use of premises as commercial residential
premises (¶11-030) is not treated as use for residential accommodation (GST Determination GSTD
2012/11).

Example
A developer sells a strata-titled unit in a block that had been operated in 1997 as a hotel. The use of the unit for providing
accommodation in commercial residential premises before 2 December 1998 does not prevent the sale of the unit from being
taxable.

For special withholding rules for remitting GST on certain sales of newly constructed residential premises
or new subdivisions of potential residential land, see ¶11-022.
“New” residential premises
New residential premises fall into the following three categories:
(1) those that have not previously been sold as residential premises (¶11-010), or have not previously
been subject to a long-term lease, or

(2) those that have been created by “substantial” renovations, or

(3) those that have been built to replace demolished premises (s 40-75).

“New” residential premises do not include residential premises that have been used solely for rental
purposes for the period of at least five years since they were built, substantially renovated or replaced.
The Commissioner considers that this five-year period may include short periods between tenancies, but
not periods when the premises are used for a private purpose or left vacant with no attempt to rent (GST
Ruling GSTR 2003/3).
It is also specifically provided that residential premises that qualify as new under categories (2) or (3)
cease to qualify as new once they fail to satisfy category (1), ie when they are sold or supplied under a
long-term lease as residential premises.

Example
As a result of substantial renovations to premises that had been previously sold as residential premises, the renovated premises will
qualify as “new” under category (2). However, once the renovated premises themselves are subsequently sold as residential
premises, they cannot be treated as “new” as they fail to satisfy category (1).

The categories of new residential premises are more fully explained below.
(1) Residential premises that have not previously been sold as residential premises (other than
commercial residential premises), or have not been subject to a long-term lease (¶11-060). The
Commissioner’s views on this requirement are set out in GST Ruling GSTR 2003/3, as follows:
• if land with a building that has previously been sold as residential premises is subdivided, so that
those premises now occupy a smaller block, that does not make those premises “new”. If the new
vacant block created by the subdivision is sold, that may be taxable, as vacant land is not residential
premises in any event (¶11-010). If instead a house is built on the new vacant block, that house
would be treated as new

• if the land on which a building that has previously been sold is increased in size, and then sold, the
original house and land package would not be new residential premises and may therefore be input
taxed. To the extent that the sale relates to the additional land, it may be taxable

• where a residential building is relocated from one block of land to a different vacant block, the building
and new block of land become new residential premises. However, if a previously sold residential
building is relocated to a different part of its original allotment, which is reduced in size, the house
and land package is not treated as new
 • where a block of flats is under company title, and the company that built the block strata titles the flats
and sells them, that is treated as a sale of new premises.

The sale of a new strata-titled accommodation suite in a newly constructed hotel to a purchaser who
licensed it back to the vendor under a registered managed investment scheme was considered to be a
taxable supply of new residential premises (Interpretative Decision ID 2008/37).
The granting of a 99-year lease over newly constructed premises would mean that they are no longer new
(Interpretative Decision ID 2014/19), but note that special provisions may apply in certain circumstances:
see “Subdivisions, strata titles and development leases” below.
(2) Residential premises that have been created by “substantial” renovations, ie involving the removal or
replacement of all of a building, or substantially all of a building. This can apply even though the
renovations do not involve removal or replacement of foundations, external or internal supporting walls,
floors, roof or staircases (s 195-1). The Commissioner’s views on this requirement are set out in GST
Ruling GSTR 2003/3, as follows:
• the renovations need to affect the building as a whole. (An individual strata unit or apartment is treated
as a building in itself.) For example, a building is not treated as being substantially renovated if there
are radical changes to only one or two rooms and only minor work done on the remainder. However,
there would be a substantial renovation where, for example, the fibro exterior of a house was
replaced by brick; some interior walls were removed; flooring throughout the house was completely
replaced by polished hardwood floors; the existing kitchen was removed and a new extended kitchen
was installed; and the existing bathroom was removed and a new bathroom including a spa bath was
installed

• additions, landscaping or cosmetic improvements such as painting are not treated as renovations

• the renovations must have been carried out by the current owner.

The mere addition of a second storey or additional rooms to a building that otherwise remained
substantially unchanged was not a “substantial renovation” (GST Ruling GSTR 2003/3).
(3) Residential premises that have been built to replace demolished premises on the same land, or which
contain a building that has been built for that purpose (s 40-75). The Commissioner considers that
premises may be “demolished” even though some of the foundations are retained (GST Ruling GSTR
2003/3).

Examples
(1) A developer builds and sells new homes. These sales will be subject to GST (but see ¶11-100).
(2) A developer knocks down some existing residences and replaces them with a new one. This will be treated as new residential
premises, even though there were previously residences on the land, and GST will apply on its sale. The same would apply if the
developer substantially rebuilt the existing premises.
(3) Residential premises in a CBD are converted for commercial use. A developer later buys the building, knocks it down and builds
an apartment block. This will be treated as new residential premises, even though there was previously a residence on the land, and
GST will apply on its sale.
(4) A Housing Authority sells a house that it has held for use as public housing since 1997 but which had not previously been sold.
As the premises were used for residential accommodation before 2 December 1998, the sale is input taxed.
(5) A developer constructs a block of apartments, which it uses for short-term rentals for a period of six years. It then sells them. This
sale is input taxed and is not subject to GST.
(6) A taxpayer constructed a motel in 1997. In 2018, it strata titles one of the units and sells it as residential premises. This will be
treated as the sale of new residential premises and will be subject to GST. The use of the unit as part of commercial residential
premises before 2 December 1998 is not treated as use for residential accommodation before 2 December 1998. (Based on
Interpretative Decision ID 2008/136.)

New residential premises are excluded from the rule that a supply will be treated as input taxed if it is a
supply of anything that you have used solely in connection with other input taxed supplies that you make
(¶1-170).
 Examples
(1) A property developer constructs and sells a new dwelling. The developer let the dwelling during the period between
exchange of contracts and settlement. As the letting of the dwelling was an input taxed supply (¶11-310), s 9-30(4) may
normally have the effect that the sale would also be input taxed. However, this will not apply as new residential premises are
excluded from that rule. The sale will therefore be subject to GST.

(2) As part of its development business, a property developer demolishes and removes a house that it had used previously for
leasing purposes. It then sells the vacant land. This sale would be taxable. The input taxing rule in s 9-30(4) does not apply —
although the land was not exempted as new residential premises, the demolition was connected with the property
development business, not the previous input taxed leasing. The position may be different if the destruction of the house had
been as a result of a fire, unconnected with the property development business (based on Interpretative Decisions ID 2009/18;
ID 2009/19; ID 2009/40).

Subdivisions, strata titles and development leases

Special provisions apply to subdivisions and development leases in determining whether premises are
new.
(1) Where premises are created under a property subdivision plan of existing residential premises that are
not new, this does not by itself result in the subdivided premises becoming new premises (s 40-75(2AA)).
“Property subdivision plans” include strata title plans or plans to subdivide land (s 195-1). This provision,
which applies from 27 January 2011, confirms the Commissioner’s previous practice and was inserted to
overcome doubts arising as a result of the Federal Court decision in FC of T v Gloxinia Investments Ltd
2010 ATC ¶20-182. It does not prevent the subdivided premises from being treated as new if they
themselves are then substantially renovated, or are demolished and rebuilt.
(2) Where there is a grant of strata-lot leases in relation to newly constructed residential premises on the
registration of a property subdivision plan, this does not by itself mean that those premises cease to be
new (s 40-75(2C)). In effect, the grant is disregarded. This provision particularly relates to jurisdictions
where land tenure is by way of long-term leasehold, eg the ACT. It applies to grants made on or after 27
January 2011. However, as a transitional measure, it does not apply if the grant related to a property
subdivision plan that was lodged for registration before 27 January 2011.
(3) There is also a specific provision designed to ensure that certain sales of newly constructed residential
premises by a developer to home buyers and investors will be taxable supplies of new residential
premises, even though there may have been an earlier “wholesale supply” of the premises (s 40-75(2B)).
The effect is that the earlier supply is disregarded if the residential premises have been constructed
pursuant to an arrangement between a developer or builder and a land holder, under which the developer
or builder (or an associate) becomes entitled to the freehold or long-term leasehold title in the premises
conditional on specified building or renovation work being undertaken.
It may happen that a supply potentially falls within both rules (2) and (3). In such a case, it seems that
neither rule will apply if the supply falls within the transitional provision for rule (3) even though it does not
fall within the transitional provision for rule (2) (Interpretative Decision ID 2014/19).
For the general treatment of development leases, see ¶11-062.
Supplies within groups
New residential premises do not lose that status simply by being supplied within a GST group or between
joint venture partners (s 40-75(2A)). This measure was primarily directed against artificial arrangements
designed to exploit the group or joint venture rules, though it was likely that these arrangements could
have been struck down in any event under the anti-avoidance rules, or been ineffective on other grounds.
Previous sale as commercial residential premises
Premises can still be treated as new residential premises even though they have previously been sold as
commercial residential premises (¶11-030). For example, if a motel is sold, then strata titled, the
subsequent sale of the individual units could be treated as a sale of new residential premises.
Time of supply
Under most standard forms of sale contract, it seems that the supply would not take place until settlement
(¶11-000). If so, there can be no taxable supply if the settlement occurred before 1 July 2000. However,
GST may potentially apply if the settlement occurs on or after that date, even though the contract was
signed and a deposit paid before that date. For the attribution rules applying to taxable sales, see ¶11-
065.
Adjustment where sale deferred
A GST adjustment may be necessary where there is a delay in selling the units in a property
development, and they are rented out pending sale (¶6-300).
[GSTG ¶35-200]

¶11-022 Purchaser of new premises to remit GST from 1 July 2018

With effect from 1 July 2018, purchasers of newly-constructed residential premises or new subdivisions of
potential residential land have an obligation to withhold an amount on account of GST and remit it directly
to the Tax Office (Administration Act, Sch 1, s 14-250). This measure is intended to avoid the practice of
some developer/vendors who fail to remit the GST despite having claimed input tax credits on their
construction costs (“Improving the Integrity of GST on Property Transactions”,
treasury.gov.au/consultation/c2017-t220266). A major example of this, known as “phoenixing” (¶20-000),
is where the developer simply dissolves the business before their next BAS lodgment.
Application date
In general, the withholding obligation applies to any supplies for which any of the consideration (other
than a deposit) is first provided on or after 1 July 2018. However, if the contract was entered into before 1
July 2018, the obligation does not apply if the consideration is first provided before 1 July 2020. This
provides a two-year transitional period for pre-existing contracts. Special transitional rules also apply to
pre-existing property development arrangements under which there are agreed distribution or “waterfall”
payments (Treasury Laws Amendment (2018 Measures No 1) Act 2018, Sch 5, s 26, 27 and 28).
Inclusions
The obligation arises where there is a supply by way of sale or long-term lease (¶11-060) of:
• new residential premises (¶11-020), other than those created through a substantial renovation of a
building

• subdivisions of potential residential land that is included in a property subdivision plan and does not
contain any building that is in use for a commercial purpose. This will typically apply, for example, to
house and land packages in areas zoned for residential premises (s 195-1; Administration Act, Sch 1,
s 14-250).

Exclusions
The obligation does not apply to:
• non-taxable supplies

• transactions between members of a GST group or participants in a joint venture

• commercial residential premises (¶11-030), or

• supplies of potential residential land if the purchaser is GST-registered and acquires it for a creditable
purpose. This ensures that the obligation does not apply to certain business-to-business
transactions.

Timing and amount

The obligation to withhold falls on the recipient of the supply, typically the purchaser. In the case of joint
purchasers, each is liable for the payment, and either may discharge it. Tenants in common are each
liable for a share of the payment, proportionate to their interest in the property.
The amount required to be remitted to the ATO is based on the (GST-inclusive) price for the supply,
which will normally be ascertainable from the contract. If the sale is subject to the margin scheme (¶11-
100), 7% of the price needs to be remitted, with any subsequent adjustment needed to cover the actual
margin scheme liability being made through the developer’s BAS. Otherwise, 1/11th of the price should be
remitted. In the special case where the supply is made between associates for less than the GST-
inclusive market value (¶17-500), the purchaser must remit 10% of that market value, and this must be
done on the day on which the supply is made.
The amount must generally be paid to the ATO on or before the day that any consideration for the supply,
other than the deposit, is first provided. Typically, this will occur on settlement of the sale. It appears that
the full amount must be paid even if the purchase price is paid in instalments, though the Commissioner
has power to provide by legislative instrument that the amount be paid progressively as each instalment is
paid. The purchaser also has the option of providing the supplier with a bank cheque for the relevant
amount made out to the Commissioner. In this case, the purchaser is protected from any penalties if the
supplier does not pass this on to the Commissioner.
The position is summarised in the following table (based on Law Companion Ruling LCR 2018/4):

Type of supply: Amount to be paid by purchaser:

General rule, that is where none of the other 1/11th of the “contract price” or “price”
circumstances in this table apply
The margin scheme applies to the supply 7% of the “contract price” or “price”
The supply is between associates and is without 10% of the GST-exclusive market value of the
consideration or is for consideration that is less supply
than the GST-inclusive market value of the supply:
(a) The supply is only partly a supply of new A “reduced amount” that is the proportion that
residential premises or potential residential land to relates to the supply to which the withholding rule
which the withholding rule applies, and applies of the amount otherwise determined in the
(b) it is practicable to ascertain the portion of the relevant circumstance of this table
consideration that relates to the supply of new
residential premises or potential residential land to
which the withholding rule applies when
consideration is first provided
There are multiple recipients (not joint tenants) For each recipient, the proportion of the supply that
is deemed to be made to them of the amount
otherwise determined in the relevant circumstance
of this table

Guidelines for purchasers for notifying the Tax Office of the purchase and making payment are in its GST
property settlement online forms and instructions www.ato.gov.au/Business/GST/In-detail/Your-
industry/Property/GST-property-settlement-online-forms-and-instructions/).
Where the purchaser has fulfilled this requirement, the amount remitted reduces the price it is liable to
pay to the supplier, and when the supplier lodges its BAS it will get a corresponding credit from the
Commissioner for the amount paid (Administration Act Sch 1, s 18-60). Refunds or partial refunds may be
available to the vendor where the purchaser has withheld in error (Administration Act Sch 1, s 18-85).

Example
Purchaser buys a new apartment for $880,000. As the margin scheme does not apply, the purchaser remits $80,000 (1/11 ×
$880,000) to the Commissioner. On settlement, the purchaser gets a credit for the $80,000 from the supplier. In its BAS, the supplier
will receive a credit for the same amount.

Vendor’s notice requirements

Before making the supply (normally settlement), the vendor must provide the purchaser with a written
notice, stating whether the purchaser must remit the GST and if so, specifying how much, and when, plus
other details such as the vendor’s ABN (Administration Act Sch 1, s 14-255). This applies to supplies of
any residential premises or potential residential land, except (1) commercial residential premises or (2)
where a GST-registered purchaser acquires potential residential land for a creditable purpose. Failure to
provide the notice, where required, attracts a penalty, as does failure by the purchaser to pay any
required GST (Administration Act, Sch 1, s 16-30). There may be a defence in cases of reasonable
mistake.

¶11-030 Sale of commercial residential premises

Input taxation does not apply to the sale of commercial residential premises (s 40-65(2)). This means that
GST may apply if the vendor is registered.
What are “commercial residential premises”
There are various types of commercial residential premises (s 195-1). They are as follows:
(1) Hotels, motels, inns, hostels, boarding houses or “similar” premises.
None of these terms are defined, so they bear their ordinary meanings.
The ATO says that in determining what premises are “similar” to hotels, etc, the following characteristics
should be considered:
• Commercial intention. The establishment must be run in a business-like manner. However, this does
not exclude non-profit operators.

• Multiple occupancy. The establishment must provide sleeping accommodation on a multiple

occupancy basis. This therefore excludes premises that only offer accommodation to one person or a
small group living or travelling together. It also excludes premises limited to a single occupancy, even
if regularly let for short-term stays (eg cottages let as weekenders).

• “Held out” to the public. The establishment must be held out as premises that will receive travellers
who are willing and able to pay. The “public” can include a particular segment or a niche market.

• Accommodation is the main purpose. Compliance with the necessary zoning, building code and health
regulations necessary to operate premises as a hotel, motel, inn, hostel or boarding house would
indicate that the main purpose of the premises is to provide accommodation. Incidental
accommodation provided in a high level medical centre or nursing home would not qualify.

• Central management. The establishment must be centrally managed. The management ordinarily
accepts reservations, allocates rooms, receives payment and arranges services.

• Management not agents. The management must have control of the premises as a whole, whether or
not it owns the property. It must let the premises in its own right, rather than as an agent.

• Services offered. An absence of services, such as cleaning, indicates that the premises may not be
commercial, though to a large extent this varies according to the tariff.

• Status of guests. Guests and lodgers can expect a reasonable amount of privacy from management
and other guests, but do not usually enjoy an exclusive right to occupy any particular part of the
premises in the same way as a tenant. For an exception to this general rule, see Example (4) below
(GST Ruling GSTR 2012/6).

Other factors, such as zoning and overall physical character may also be relevant. The fact that the
premises are not actually operating as such at the time of sale does not prevent them from being
commercial residential premises.
 Checklist
Factors that may indicate that premises are not a hotel, motel, inn, hostel, boarding house or similar
premises include:
• the operator and occupant agree for accommodation to be supplied for a periodic term (which
may be for a period of months or years at a time), such as in a residential lease

• the operator and occupant document the condition of the premises under a written contract
before the accommodation is initially supplied and when the occupant ceases to occupy
premises

• the operator has the right to impose a cleaning fee on the occupant when the occupant ceases to
occupy the premises

• the occupant is permitted, subject to the terms of the lease or licence, to alter the part of the
premises occupied by the occupant, such as by attaching hanging devices on a wall

• the occupant is permitted, subject to the terms of the lease or licence, to keep pets in the
premises

• the occupant must separately arrange and pay for the connection of a telephone, electricity or
gas service

• the occupant is responsible for the cleaning and minor maintenance of the premises, such as
changing light bulbs in their room

• the premises are unfurnished, and

• the right to occupy the residential premises is supplied to the occupant in exchange for the
occupant loaning an amount to the operator together with other fees (GST Ruling GSTR
2012/6).

Examples
(1) A retirement village was not commercial residential premises as it was not sufficiently “similar” to a hotel, motel, etc. Relevant
factors included the fact that residents agreed to occupy the accommodation for months or years at a time, had a right to make
certain alternations and keep pets, and had to arrange their own telephone, electricity and gas services (Wynnum Holdings No 1 Pty
Ltd v FC of T 2012 ATC ¶10-274).
(2) A dual occupancy rental dwelling did not qualify as a boarding house, or as similar to a boarding house, because it did not
provide food with the lodging. The dwelling also was not similar to a hotel or motel as it had none of their characteristics, ie there
was no signage, no proprietor on the premises, no offer of short-term or overnight accommodation and no meals provided (Karmel &
Co Pty Ltd (as trustee for Urbanski Property Trust) v FC of T 2004 ATC 2075; 2004 AATA 481).

Because of the requirement for multiple occupancy, a single strata titled unit or suite cannot, by itself, be
commercial residential premises. It will retain its character as residential premises if sold individually, and
the sale will therefore generally be input taxed (¶11-010) unless the unit is new (¶11-020; South Steyne
Hotel Pty Ltd v FC of T 2009 ATC ¶20-145; [2009] FCAFC 155). See also Example (3) below.

Examples
The following are examples of the ATO’s approach (GST Ruling GSTR 2012/6).
(1) Farm stay: guests at a farm-stay business are invited to participate in farm activities and stay in renovated buildings that sleep up
to 12 in four separate suites. Accommodation is offered on a bed and breakfast basis, the suites are cleaned daily, there is an on-
site manager and the business is advertised nationally. This would be treated as commercial residential premises.
(2) Room in house: a single room in a house is advertised as being available for short-term accommodation, with linen provided.
This would not be treated as commercial residential premises, and the supply would be input taxed.
 (3) Single strata unit: an individually-owned apartment in a block of strata-titled holiday apartments is let out for short-term stays
during the year through on-site managers acting as the owner’s agent. The on-site managers provide keys to guests, clean the
rooms between stays, and refresh linen, towels and the tea and coffee making facilities. The body corporate maintains common
areas but does not otherwise involve itself with occupants. The supply of the apartment would not be treated as accommodation
provided in commercial residential premises, and the supply would be input taxed. This would apply even if the managers also act
as agents for other owners in the block. However, the position may be different if the managers supply the accommodation in their
own right.
(4) Boarding house: certain premises that have the capacity to provide board and lodging to 25 occupants are marketed as a
boarding house. The average stay of a resident is six months. Under state law, the landlord is required to enter into a rooming
agreement, requiring that residents are given “quiet enjoyment” of their rooms. Each resident is provided with daily meals. Despite
these additional rights, the premises would still be treated as a boarding house, and therefore as commercial residential premises.
Note, however, that the supply of meals to the residents would be a taxable supply.

The result in Example (4) represents a change — based on the Southbank case — in the ATO’s previous
practice. Under that practice, situations where the occupants had tenant-like rights additional to normal
guests were treated as involving an input taxed supply of residential accommodation. In recognition of the
fact that this changed treatment may require operators to change their systems to correctly account for
GST, a special rule may enable them to continue to treat such a supply as input taxed for a transitional
period. For details, see GST Ruling GSTR 2012/6, paras 127 and 128.
Commercial residential premises such as motels may include a unit or apartment occupied by a manager
or caretaker. Where this is a physical part of the motel building, it is treated as part of the premises (GST
Ruling GSTR 2012/6). Accommodation provided to that person in the unit would therefore be taxable
(¶11-320).
(2) School accommodation or similar premises.
School accommodation means premises used to provide accommodation in connection with a pre-,
primary or secondary school. This would potentially apply to school boarding house accommodation
provided to teachers, staff and students.
Student accommodation which falls outside this category — for example, because it does not have any
connection with a school — may be treated as commercial residential premises in certain situations. This
was held to be the case where an establishment for student accommodation was run by a controller with
a commercial purpose, had multiple occupancy, was held out to a section of the public, had a central
management, and was used for the main purpose of accommodation. Even though meals were not
provided, the premises were considered to be “similar” to a hostel and were therefore commercial
residential accommodation premises. The Commissioner’s argument that the accommodation should be
treated as input taxed residential accommodation, as the occupants were equivalent to tenants, was
rejected (ECC Southbank Pty Ltd & Anor v FC of T 2012 ATC ¶20-336).
Note that certain non-tertiary student accommodation is specifically made GST-free, eg where it is
provided by the school or is for rural or remote students (¶14-004). Accommodation provided to students
at tertiary institutions — such as residential colleges — is non-commercial and therefore input taxed (¶14-
004).
(3) Charter vessels and cruise ships.
This covers ships that are mainly let out on hire, or used mainly for entertainment and transport, in the
ordinary course of business.
(4) Marinas.
This covers marinas where one or more of the berths are for occupation by ships used as residences in
the sense of being occupied on a permanent or long-term basis. The requirements of any government or
statutory authorities may be relevant, but not necessarily conclusive, in working out whether a berth at a
marina may be occupied by a ship used as a residence.
(5) Caravan parks, camping grounds or similar premises.
Guests at these facilities may stay in a caravan, a moveable home, a permanent cabin or villa, or a tent
provided by the operator on the site. Alternatively, they may park their own caravan, motor home, camper
trailer or the like on a site, or pitch their own tent on a site (GST Ruling GSTR 2012/6).
“Home parks” in which sites for moveable homes are rented and the homes themselves either rented or
occupied by their owners fall into this category.
Excess accommodation provided in a resort under a time-sharing scheme was in “commercial residential
premises” (Interpretative Decision ID 2010/19).
Although commercial residential premises may be “residential premises” (¶11-010), this will not always be
the case. For example, a ship may be commercial residential premises, as defined above, but could not
be residential premises because it is not land or a building.
[GSTG ¶35-320]

¶11-050 Sale of non-residential premises

Sales of non-residential premises are subject to GST, as are sales of new residential premises and
commercial residential premises (s 40-65).

Example
The registered owner of an office block sells it. The sale will be subject to GST.

If a tenanted commercial building is sold, it may be that this can be treated as the GST-free sale of a
going concern (¶11-500).
For the meaning of residential premises, see ¶11-010.
[GSTG ¶35-320]

¶11-060 Long-term leases

A “long-term lease” of premises is treated in the same way as the sale of premises (s 40-70). So, for
example, a long-term lease of new residential premises, commercial residential premises or non-
residential premises is generally taxable, but a long-term lease of an established home is input taxed. A
long-term lease of vacant land may be taxable, irrespective of whether it is subject to a condition that the
lessee constructs residential premises on the land (Interpretative Decision ID 2010/22).
A long-term lease means a lease for at least 50 years, where it is reasonable to expect that it will continue
for at least that period (s 195-1).

Examples
(1) The owner of a hotel leases it for 99 years. The lease may be subject to GST in the same way as if the hotel building had
been sold.

(2) A lease of a retirement village unit for more than 50 years would not be a long-term lease because it would not be reasonable
to expect that it would continue for that period. The lease would therefore remain input taxed (Interpretative Decision ID
2001/635).

Unless the lessor is an Australian government agency, the terms of the lease must be “substantially the
same” as those under which the lessor held the premises. This requirement may be relevant, for example,
where a lessee under a head lease grants a sublease.

Example
S held land under a head lease in perpetuity. S granted a number of subleases over parts of the land for a period of 99 years with an
option for a further 99 years. The ATO accepted that the period of the subleases and the head lease were substantially the same.
However, the amount of rent, the way in which it was worked out, the area leased and the restrictions on usage in each sublease
were all significantly different from under the head lease. The subleases were therefore not long-term leases (based on
Interpretative Decision ID 2006/340).
Renewals or extensions may, in themselves, qualify as long-term leases. They are treated as supplies
separate from the original grant.

Example
A grant of a lease for less than 50 years did not qualify as a long-term lease even though it contained an option to renew for a period
of more than 50 years. The lease created by the exercise of that option could, however, qualify (based on Interpretative Decision ID
2006/113).

These rules apply equally to hiring or licensing arrangements.

A supply by way of sale of a long-term lease takes place on settlement. Typically, this is when the
registrable transfer is unconditionally provided to the recipient. The recipient acquires the lease at the
same time (GST Ruling GSTR 2006/7).
For the separate rules that apply where commercial residential premises are rented out for “long-term”
accommodation (more than 28 days), see ¶11-320.
For GST implications of development lease arrangements, see ¶11-062.
[GSTG ¶35-360]

¶11-062 Development leases

Under various types of development lease arrangements, a private developer undertakes a development
on land owned by a government agency, on the contractual basis that the land will be supplied to the
developer on a short-term lease (or licence) during the development phase, and will then be transferred to
the developer by way of the freehold or a long-term lease once the development is completed. According
to ATO guidelines, the main GST implications are as follows:
• the grant of the short-term development lease is treated as a taxable supply of the vacant land to the
developer by way of lease or licence. Any rent, or lump sum payable by the developer on the grant,
would be consideration for that supply

• in completing the development works, the developer is supplying services to the government agency.
The ultimate supply of the land by way of freehold or long-term lease by the agency would be
consideration for that supply. Both of those supplies are taxable (GST Ruling GSTR 2015/2).

Specific rules apply in situations where “in kind” developer contributions are made in return for the grant
of subdivision or rezoning approvals (Div 82); see ¶4-080. For the situation where the developer
subsequently sells residential premises on the developed land, see ¶11-020.
The ATO has warned that it is reviewing certain arrangements where there is an inconsistency between
the ways the developer and government entity are reporting the value of the supplies under these
arrangements (Taxpayer Alert TA 2018/3).

¶11-063 Subdivision and sale

The subdivision and sale of land by a registered developer would form part of the developer’s business
enterprise and would be potentially subject to GST. The transaction is not input taxed because if the land
is sold vacant, it would be treated as non-residential (¶11-050) and if it is sold with newly erected houses,
it would be treated as new residential premises (¶11-020).
Even if the subdivision and sale is an isolated transaction, it would generally be treated as “an adventure
in the nature of trade” and therefore part of the registered seller’s enterprise (¶3-020). GST would
therefore potentially apply. This may not apply, however, where there is a mere advantageous realisation,
for example, where land which is inherited or held for some purpose is subsequently subdivided and sold
off to the best advantage (FC of T v NF Williams 72 ATC 4188; Casimaty v FC of T 97 ATC 5135). As to
when an enterprise of land development can be said to have commenced, see ¶3-020.
In the case of isolated transactions, the ATO considers that if several of the following factors are present it
may be an indication that there is an enterprise being carried on, rather than a mere realisation:
(1) there is a change of purpose for which the land is held

(2) additional land is acquired to be added to the original parcel of land

(3) the parcel of land is brought into account as a business asset

(4) there is a coherent plan for the subdivision of the land

(5) there is a business organisation, for example a manager, office and letterhead

(6) borrowed funds financed the acquisition or subdivision

(7) interest on money borrowed to defray subdivisional costs was claimed as a business expense

(8) there is a level of development of the land beyond that necessary to secure council approval for the
subdivision, and

(9) buildings have been erected on the land (Miscellaneous Taxation Ruling MT 2006/1).

For details of GST withholding rules applicable from 1 July 2018 in relation to subdivisions of potential
residential land, see ¶11-022.
Requirement to register
If the seller is not registered and not required to be, GST will not apply. The requirement to register is
determined according to GST turnover. This does not include transactions that substantially and
permanently reduce the size of the enterprise (¶3-030). It may be that some cases of subdivision and sale
may fall into this category. If so, this may make a difference to whether the seller is required to register.
However, it must be remembered that if the seller is not registered and not required to be, the seller
cannot itself claim input tax credits on its own acquisitions and cannot take advantage of the margin
scheme (¶11-100).
Farm land
In certain cases where farm land is subdivided, the supply may be GST-free, either under specific
concessions or under the general exemption for the sale of going concerns (¶11-420).
Application of margin scheme
For changes affecting the application of the margin scheme to sales of subdivided land, see ¶11-100.
[GSTG ¶35-390]

¶11-064 Partitions of co-owned land

There is a partition of land where it is divided up and redistributed among the former co-owners. This may
occur, for example, as a result of a dispute between the co-owners, or the conclusion of a business
venture. The ATO considers that a partition has the following GST implications:
• if the partition is by agreement between the parties, each transfer by a co-owner to the others is a
supply. However, the mere fact that land held by co-owners is subdivided does not amount to a
supply

• this also applies even if the partition is made by the parties pursuant to a court direction. Although
there cannot be a supply unless the supplier “does something” (¶4-010), that does not mean that the
act must be voluntary

• the supply by each co-owner will normally be made as part of carrying on an enterprise, if the land
was applied or intended to be applied as part of an enterprise carried on by that co-owner. This is so
 even if the partition results in the termination of the enterprise (¶3-020)

• the consideration for the supply is that each co-owner gives up their interests in part of the land in
return for the same from the other co-owners

• the margin scheme can be applied to work out the amount of GST payable on the supply: see further
¶11-140

• a partnership makes a supply to the partners in the course of its enterprise when it makes an in specie
distribution of partnership land to them, or when it supplies an interest in the land by way of a
partition (GST Ruling GSTR 2009/2).

¶11-065 Attribution of GST and credits on taxable sales

Where the sale of real estate is a taxable supply — for example, where it is non-residential, new
residential or commercial residential — it is necessary to attribute the GST and input tax credit to the
appropriate tax periods.
The ATO’s views on how this applies in the case of a standard contract for the sale of land (GST Ruling
GSTR 2000/28) are as follows:
• the supplier should attribute the GST on the sale to the tax period in which the supply occurs, ie when
settlement of the sale takes place (¶11-000). This applies whether the supplier is on the cash basis or
the accruals basis

• similarly, the purchaser should claim the input tax credit for the tax period in which settlement of the
sale occurs. Again, this applies whether the purchaser is on the cash basis or the accruals basis.
However, the purchaser must be registered and hold a tax invoice in accordance with the normal
rules

• these rules apply irrespective of whether the contract is subject to conditions such as a “subject to
finance” clause.

The mere fact that contracts have earlier been exchanged and a deposit paid is not relevant, even if there
is an early release of the deposit to the vendor pending settlement.

Example
A registered, accruals basis vendor with monthly tax periods contracts to sell a commercial property to a registered, cash basis
purchaser with quarterly tax periods. The sale price is $550,000 and a deposit of $50,000 is paid to the agent on exchange of
contracts. Settlement occurs in January 2019, when the vendor provides a transfer and the title documents to the purchaser in return
for the purchaser paying the balance of the sale price ($500,000) and the agent releasing the deposit.
The vendor attributes the whole of the GST (1/11 × $550,000 = $50,000) to the monthly tax period ending 31 January 2019.
Assuming that it holds a tax invoice, the purchaser claims an input tax credit of $50,000 for the quarterly tax period ending 31 March
2019.

If the deposit is refunded as a result of a default by the vendor, there are no GST consequences. For the
position where the deposit is forfeited as a result of a default by the purchaser, see ¶4-070.
[GSTG ¶35-120]

¶11-068 Easements, restrictive covenants and options

For GST purposes, the granting of an easement or restrictive covenant affecting land is a “supply” of a
real property interest or right. Provided that the land is in Australia, GST may therefore apply if the grantor
is registered (or required to be registered), there is consideration, and the grant is made as part of an
enterprise carried on by the grantor (¶4-000).
If GST applies, the grantee can claim an input tax credit if the grantee is registered (or required to be
registered), pays consideration, and acquires the interest as part of its enterprise (¶5-010).

Examples
(1) Jackie grants her neighbour a right of way over part of Jackie’s backyard, to enable the neighbour to widen the driveway access
to her house. In return Jackie receives $10,000. There are no GST implications as the transaction is not part of an enterprise carried
on by either party.
(2) As part of its business, a registered property developer pays $100,000 to acquire an easement over land which will assist it to
carry out its development plans. The land is owned by a registered land trader. Assuming that the grant is part of the trader’s
enterprise, GST will apply. Assuming that the acquisition is part of the developer’s enterprise, it will be able to claim an input tax
credit.
(3) Assume the same facts as in Example 2 except that the land was owned by an unregistered private individual. GST would not
apply and no input tax credit could be claimed.
(4) Assume the same facts as in Example 2 except that the easement was acquired by an individual for private purposes. GST
would apply to the grant, but no input tax credit could be claimed.

Options
The grant of an option to acquire land is a “supply” of a right over real property.
Whether the supply is taxable will depend on the circumstances. The supply of a right to receive a taxable
supply (eg of commercial property) is itself taxable if it meets the usual requirements as to consideration,
connection with Australia, etc, (¶4-000). The supply of a right to receive an input taxed supply (eg of
residential premises) is itself input taxed, and the supply of a right to receive a GST-free supply (eg of
farm land) is itself GST-free (s 9-30; Interpretative Decisions ID 2005/182 to ID 2005/184).
As to whether consideration is received, see ¶4-020.
[GSTG ¶35-030]

¶11-070 Other matters associated with property

▸ Home loans are input taxed as financial supplies (¶10-010), so no GST is payable on them. Similarly,
where a purchaser is given time to pay under an instalment contract, this is a credit arrangement
(¶10-010) that may be treated as an input taxed financial supply. This is separate from the supply of
the property itself (Interpretative Decision ID 2005/194).

▸ There will be a GST adjustment if a property development originally carried out for the purpose of sale
is actually used for rental purposes (¶6-300).

▸ Water, sewerage and stormwater drainage supplies are GST-free (¶16-200).

▸ GST does not apply to local government services for which rates are payable (¶4-080).

▸ Electricity and gas supplies are taxable.

▸ GST does not apply to development or building applications (¶4-080), but building inspections are
taxable.

▸ Stamp duty is not treated as part of the consideration (¶4-080), and therefore do not attract GST.
However, it appears that stamp duty will be imposed on the GST-inclusive price (Ambiance (Arncliffe)
Pty Ltd v Chief Commr of State Revenue (NSW) 2002 ATC 2257; Commr of State Revenue (Vic) v
Royal & Sun Alliance Insurance Australia Ltd 2003 ATC 4998; [2003] VSCA 177). Some state
governments have also passed legislation designed to confirm this.

▸ The former NSW vendor duty was not treated as part of the consideration (¶4-080), and therefore did
not attract GST.

▸ Adjustments for rates, land taxes and other outgoings on the settlement of a taxable sale of real
property are taken into account in calculating the consideration on which GST is based (GST
 Determination GSTD 2006/3; see also ¶11-110).

▸ For the treatment of rental guarantee payments, see ¶6-100.

▸ Home insurance is taxable (¶10-110).

▸ Estate agents’ and solicitors’ fees and advertising costs on property transfers are subject to GST. This
applies irrespective of whether the property is residential, non-residential, newly constructed or
existing. However, input tax credits for the GST cannot be claimed where the property is an existing
dwelling.

▸ Special rules apply to services provided to offshore owners of Australian real estate (¶9-240).

▸ New house construction costs are subject to GST.

▸ House alterations are subject to GST.

▸ If an amount under a building contract is retained pending satisfactory completion, the GST is
deferred until it is actually paid over (¶7-440).

SPECIAL “MARGIN” RULES

¶11-100 How the margin scheme works

The margin scheme enables the GST on certain sales of real estate to be calculated on a concessional
basis (Div 75). It is typically applicable to new residential property developments.
Normally, GST on a supply is calculated as 1/11th of the GST-inclusive price, and a purchaser can claim
an input tax credit for the GST component. Under the margin scheme, however, the GST on the sale is
instead calculated as 1/11th of the “margin”, and no input tax credit is allowed to the purchaser.
In broad terms, the margin is calculated as follows:
• if you acquired the property before 1 July 2000, the margin is the increase in value since that date

• if you acquired the property after 30 June 2000, the margin is the difference between your sale price
and the price you paid.

Eligibility rules
The margin scheme applies in working out the GST where:
• you make a taxable supply of real property. For there to be a taxable supply, it must be made for
consideration, in the course of a registered supplier’s enterprise, and it must be connected with
Australia and be neither GST-free or input taxed (¶4-000). The supply of real property must be the
sale of a freehold interest, a strata unit, or the grant or sale of a long-term lease (¶11-060). Freehold
interests include the fractional interest of a co-owner (Nullagine Investments Pty Ltd v Western
Australian Club Inc (1993) 177 CLR 635; GST Ruling GSTR 2006/8), and

• both parties agree that the margin scheme will apply (see “Documentation” below) (s 75-5).

The margin scheme cannot be applied to a supply that you make if you had acquired the property in any
of the following circumstances:
(1) you acquired it under a taxable supply on which the GST was worked out without using the margin
scheme. The rationale for this exclusion is that in such a case, you would have been entitled to an
input tax credit on the purchase, and should therefore not be entitled to any further relief by way of
the margin scheme

(2) you acquired it by inheritance, if the deceased person had acquired it through a supply that was not
 eligible for the margin scheme (see also ¶11-140)

(3) you acquired it from another GST group member, and the last supply of the property from a non-
group member had been ineligible for the margin scheme (¶11-140)

(4) you acquired it from the operator of a joint venture in which you were a participant, and the operator
had acquired it through a supply that was ineligible for the margin scheme (¶11-140)

(5) you acquired it as a GST-free supply of a going concern (¶11-500), a farm (¶11-410) or subdivided
farm land (¶11-420), from an entity that was registered or required to be, and that entity had acquired
it through a taxable supply on which GST was worked out without applying the margin scheme. For
other rules applying where there are GST-free supplies, see ¶11-140

(6) you acquired it for no consideration from an associate (¶17-500) that was registered or required to
be, where the supply by that associate was not a taxable supply in the course of an enterprise (¶4-
090), and the associate had acquired the property through a taxable supply on which the GST was
worked out without using the margin scheme. This exclusion can also apply where, for example, a
government entity acquires the property for no consideration from an associate without the associate
technically making a “supply”. For other rules applying to associates, see ¶11-140.

The ineligibility rules in (5) and (6) are intended to prevent arrangements under which taxpayers
“refreshed” their eligibility to use the margin scheme by interposing a GST-free or non-taxable supply
before selling the property. These rules apply to supplies of things that you acquired through a supply that
was: (1) made on or after 9 December 2008; and (2) not made under a written contract made before that
date, or pursuant to an option granted before that date that specified the consideration or a way of
working it out.

Example
In this example, it is assumed that all parties are registered.
X sells a property to Y. X accounts for GST in the normal way and Y claims an input tax credit. Y sells the property to Z as a GST-
free going concern. Z develops the property for residential use and sells it to Purchaser.
Ineligibility rule (1) does not prevent Z from using the margin scheme on the sale to Purchaser, because Z itself did not acquire the
property under a taxable sale on which GST was calculated in the normal way. However, ineligibility rule (5) prevents Z from using
the margin scheme because Z acquired the property from Y, who in turn acquired it under a taxable sale on which GST was
calculated in the normal way.

The ineligibility rules in (5) and (6) do not apply if more than one GST-free or non-taxable sale is
interposed. This recognises the complexity that would arise if it were necessary to look back through
multiple transactions. However, it is likely that the general anti-avoidance rules in Div 165 may apply in
any event where there is a contrived arrangement designed to exploit this rule (¶20-040).
Pros and cons of margin scheme
The upside of the margin scheme is, of course, that the GST is reduced. The downside is that the
purchaser cannot claim an input tax credit (s 75-20). This means that the margin scheme will be
particularly relevant where the purchaser may not have been entitled to an input tax credit in any event,
for example, where a developer sells new residential units, a project builder sells house and land
packages, or land is sold to an unregistered purchaser. It also means that a developer could consider
using the margin scheme on sales to purchasers who cannot claim input tax credits in any event — for
example, unregistered purchasers — and using the normal method of calculating GST on sales to
registered purchasers who can claim the GST back as an input tax credit.
Documentation
As mentioned above, the decision to apply the margin scheme must be agreed, in writing, by both parties
(s 75-5). This agreement must be made on or before the supply is made — this will normally be when
settlement occurs (¶11-000). The Commissioner has the discretion to extend this date. This discretion
may be exercised where the Commissioner is satisfied that all the other requirements for application of
the margin scheme have been met and there is no arrangement that produces an outcome contrary to the
policy of the legislation. An example of this is where the failure to make the agreement arose because of
a mistaken belief that the supply was GST-free (Practice Statement PS LA 2005/15).
It would appear that once a supply has been made on the basis of an agreement to apply the margin
scheme, the GST consequences cannot be changed by the parties subsequently agreeing to revoke the
agreement (Interpretative Decision ID 2010/83).
The ATO considers that where the transaction is in the name of a bare trustee, the trustee can sign the
agreement (GST Ruling GSTR 2008/3).
As use of the margin scheme prevents input tax credits being claimed, there is no obligation on the
vendor to issue a tax invoice (s 75-30). A developer who purchased property under the margin scheme
and incorrectly claimed substantial input tax credits on the basis of a tax invoice supplied by the vendor
was held to be penalisable for a reckless false statement (Barcia Pty Ltd v FC of T [2008] AATA 1073).
Selling land as part of selling a business
It appears that the margin scheme can apply where land is being sold as part of closing down a business,
as such a sale is treated as being made in the course of carrying on an enterprise (¶3-020).
However, this would not apply if the sale was a GST-free supply of a going concern (¶11-500).
Subdivisions
Taxpayers may use the consideration method, the valuation method or the GST-inclusive method,
whichever is appropriate, when calculating the margin on a taxable supply of subdivided land (s 75-15).
[GSTG ¶35-210]

¶11-110 How to calculate the margin

The margin is generally calculated as the difference between your cost (ie the consideration for your
acquisition of the real property) and the amount you charge on disposing of it (ie the consideration for
your supply of the real property). The GST is calculated as 1/11th of that margin (s 75-10).
Property held at 1 July 2000
Special rules apply to real property held on 1 July 2000. These rules reflect the fact that GST applies only
from that date. Their effect is:
• if you acquired the property before 1 July 2000, the cost is calculated as the value as at 1 July 2000.
In effect, you will be liable for GST only on the value added since that date

• if you were not registered or required to be registered at 1 July 2000, the cost is calculated as the
value as at the date you become registered. In effect, you will be liable for GST only on the value
added by you after registration.

Example
A developer buys land in 1999 for $75,000. At 1 July 2000, the developer is registered and the land is valued at $100,000. The
developer subsequently sells the land for $144,000. The margin is therefore $44,000 and GST is $4,000.

In this example, note that after allowing for GST, the developer clears $140,000. If the developer had not
adopted the margin scheme, it would have had to sell at $154,000 to achieve this result. Using the margin
scheme therefore enables it to make the price more attractive to those purchasers who cannot claim input
tax credits (eg private purchasers). This may also lead to savings on stamp duty.
If the Commonwealth, a state or territory (¶11-400) held unimproved land as at 1 July 2000 and
subsequently sells it in an improved state, the cost of the land is calculated as the value of that
unimproved land on the date the sale is made. (For the meaning of improvement, see GST Ruling GSTR
2006/6; ¶11-400.) The effect is that GST will only be charged on the difference between the sale price
and the value of the unimproved land at that time. This applies even though, in the meantime, there has
been a change, for no consideration, in the government agency that held the land (GST Determination
GSTD 2006/4). This is consistent with the rule that the sale of government land is GST-free (¶11-400).
Where a grant of the government land results from the post-30 June 2000 conversion of a short-term
lease issued before 1 July 2000, the valuation date is 1 July 2000.
Where a taxpayer granted a long-term lease over improved freehold land acquired before 1 July 2000, the
relevant valuation was that of the freehold as at 1 July 2000 (Interpretative Decision ID 2006/255).
Where the cost is based on a valuation, it will of course be the case that a lower valuation will increase
the margin, and therefore the GST. The possibility of dispute over the valuation should therefore be
considered in drafting the contract. For a case involving an unsuccessful attempt to sue a valuer over a
valuation for margin purposes, see Derring Lane Pty Ltd v Fitzgibbon (Civil Claims) 2006 ATC 4182;
[2006] VSC 46.
It appears that there does not have to be strict identity between what the taxpayer acquired before the
valuation date and what it subsequently supplied. For example, a developer was able to use the margin
scheme in relation to the sale of strata units, even though as at 1 July 2000 it had only held an equitable
interest under a contract to buy the building and no strata titles had been issued (Brady King Pty Ltd v FC
of T 2008 ATC ¶20-034). This decision reverses an earlier restrictive court ruling that had cast doubts as
to the circumstances in which the margin scheme could be used by unit developers. There is continuing
litigation in this case over valuation issues.
Calculating the cost
In calculating the margin, your cost does not include any consideration for improvements, construction or
development costs of building work, additional costs such as solicitors’ fees and stamp duty, or any
expenses in bringing the property into legal or physical existence (s 75-14; Sterling Guardian Pty Limited
v FC of T 2006 ATC 4227; [2006] FCAFC 12).

Example
The cost of eligible land is $250,000. Improvements of $50,000 are carried out, on which input tax credits are claimed. The land is
then sold for $360,000. In calculating the margin, the improvements are ignored. The margin is therefore $110,000 and the GST is
$10,000.

The cost would include any additional amount you paid as an adjustment for council rates and land tax
paid in advance by the vendor of the property prior to settlement (GST Determination GSTD 2006/3), but
not legal fees, stamp duty or registration fees on the purchase.
If the sale is part of a subdivision, your cost is calculated on a pro rata basis (s 75-15). You may use any
reasonable method of apportionment, for example, on the basis of area, or expected resale price. Note
that certain subdivisions by farmers are GST-free in any event (¶11-420).

Example
(1) A developer acquires land for $500,000 which it subdivides into five blocks. The land has a uniform value per square metre and
each block is of equal size. It is therefore reasonable to allocate a cost of $100,000 to each block. The developer sells one block for
$155,000 and later sells the remaining four blocks for $166,000 each. Using the margin scheme, the GST on the first block is $5,000
(ie 1/11th of $55,000). The GST on each of the other four blocks would be $6,000 (ie 1/11th of $66,000).
(2) Assume instead that one of the blocks is 1,200 square metres and the others are 600 square metres. It would be reasonable to
allocate a cost of $166,667 (ie 1,200/3,600 × 500,000) to the first block and $83,333 (ie 600/3,600 × 500,000) to each of the other
four blocks. If the first block is sold for $300,000, the margin would therefore be $133,333 and the GST would be $12,121.18. If the
other blocks are each sold for $150,000, the margin on each would be $66,667 and the GST on each would be $6,060.63.
(3) A developer buys land for $400,000 and builds four strata units on it. The expected sale prices of the units are $540,000,
$480,000, $600,000 and $780,000, a total of $2,400,000. It is reasonable to allocate the cost of those units as follows:
Unit 1: 540,000/2,400,000 × 400,000 = $90,000
Unit 2: 480,000/2,400,000 × 400,000 = $80,000
Unit 3: 600,000/2,400,000 × 400,000 = $100,000
Unit 4: 780,000/2,400,000 × 400,000 = $130,000
If, say, Unit 3 is sold for $610,000, the margin would be $510,000 and the GST would be $46,363.63.
Where the full price under the contract has not been paid, the margin will reflect only the amount paid (s
75-12). If there is a subsequent additional payment, the supplier will be entitled to a decreasing
adjustment (s 75-27).
In calculating the margin where land was sold on the exercise of a call (purchase) option, the
consideration for the supply did not include the amount paid for the call option, even though it was applied
to the purchase price (GST Determination GSTD 2014/2). The option fee is instead treated as
consideration for the supply of the call option, not for the separate supply of the land (¶4-020). This
applies even if the contract specifically states that the purchase price is inclusive of the option fee (The
Trustee for the Whitby Trust v FC of T 2017 ATC ¶10-450).
For special rules for calculating the margin in particular situations, see ¶11-140. The ATO has also
warned that it is investigating the efficacy of certain schemes designed to minimise the GST payable
under the margin scheme through the use of associates (Taxpayer Alert TA 2009/4).
For the ATO’s practice on time limits for refund claims made where GST liability was miscalculated using
the margin scheme, see ¶8-110.
[GSTG ¶35-210]

¶11-120 Requirements for valuation

Valuations may be needed for real property acquired by the supplier before 1 July 2000 (¶11-110) or in
other special situations (¶11-140). The methods of valuation must be approved by the ATO (s 75-35).
Broadly, the approved valuation methods are:
(1) a written valuation by a professional valuer. If unimproved government land held at 1 July 2000 has
subsequently been improved, the valuation must be on an unimproved basis

(2) adoption of the amount of consideration received by the supplier in a contract signed or exchanged
before the valuation date by parties dealing at arm’s length. This method does not apply where
unimproved government land held at 1 July 2000 has subsequently been improved, or

(3) adoption of the value determined by the government as the most recent valuation of the land for
rating or land tax purposes before the valuation date.

Valuations under these methods must be made by the due date for lodgment of the BAS for the tax period
to which the GST on the supply is attributable. However, if the Commissioner has allowed an extension of
the period for the parties to agree that the margin scheme is to be applied (¶11-100), the valuation must
be made by the later of:
• eight weeks from the end of that extended period, or from the date of the Commissioner’s decision to
grant the parties the extended period.

• an additional period that the Commissioner may allow. This may apply, for example, where: (a) the
valuation obtained by a supplier was invalid; (b) the parties contracted on the incorrect basis that the
supply was GST-free, input taxed or otherwise non-taxable; (c) the supplier mistakenly believed that
a valuation was not required or that a valuation had already been obtained; (d) the supplier and
recipient agreed to use the margin scheme but the supplier forgot to instruct the valuer or failed to
notice that the valuer had not valued all the lots in a subdivision; or (e) the valuation was not
undertaken for reasons outside the control of the parties, for example, if a settlement is close to the
end of a tax period and the supplier has taken reasonable steps to obtain a valuation on time but
there is insufficient time to obtain one (Practice Statement PS LA 2005/16).

A valuation may also be approved if it is obtained by the Commissioner in specified circumstances where
this is appropriate to ensure that GST is payable only on the value added after the commencement of the
GST system or the taxpayer’s entry into it (Margin Scheme Valuation Requirements Determinations MSV
2009/1, MSV 2005/3 and MSV (No 53) 2015).
In determining whether a method of valuation is approved, it is relevant and appropriate to consider
whether it has been made in accordance with relevant professional standards (Decleah Investments Pty
Ltd and Anor as Trustee for the PRS Unit Trust and FC of T 2018 ATC ¶20-656). Additional guidelines are
in GST Rulings GSTR 2006/7 and GSTR 2006/8.
Different valuation required for builder
It is important to distinguish the valuation required under the margin scheme from the valuation required
for construction contracts. The valuation under the margin scheme is for the purpose of determining the
developer’s GST liability on the eventual sale of the property, and includes the land. The valuation for
constructions in progress is for the purpose of determining the builder’s liability for GST on work and
materials supplied, and does not include the land (¶19-230).
[GSTG ¶35-210]

¶11-130 Bad debts under the margin scheme

If the buyer defaults, there may be a GST bad debt adjustment for the supplier (¶6-200). This adjustment
is limited to 1/11th of the margin (s 75-25). There is no adjustment for the purchaser because a purchaser
under the margin scheme is not eligible for input tax credits.

Example
A developer buys land in 1999 and sells it after 2000 under an instalment contract for $200,000. The value of the land at 1 July 2000
was $156,000. Adopting the margin basis, the margin is therefore $44,000. The developer subsequently writes off $77,000 of the
debt. The amount of the adjustment reducing the developer’s GST is the lesser of:
• 1/11th of the bad debt ($77,000) = $7,000

• 1/11th of the margin ($44,000) = $4,000.

The supplier’s adjustment is therefore $4,000. There is no adjustment for the purchaser.

[GSTG ¶35-210]

¶11-140 Special situations

The following rules govern how the margin scheme applies in particular situations.
Property acquired from or supplied to associate
• Where real property was acquired on or after 9 December 2008, the taxable supply of that property to
an associate may be deemed to be a “sale” — and may therefore fall within the margin scheme —
even though no consideration is provided (s 75-5(1B)): see ¶11-100. Note that under a separate rule,
a supply to an associate for less than market value may be treated as a sale: see ¶17-500.

• The margin scheme may not apply in certain situations where there has been an interposed non-
taxable supply to an associate prior to the sale of the property by the supplying entity (¶11-100).

• Generally, if you acquired the property from an associate (¶17-500), the margin on your subsequent
supply of the property will be the amount by which the consideration for that supply exceeds an
approved valuation of the property as at 1 July 2000 (if you acquired the property before 1 July
2000), or its GST-inclusive market value as at the time you acquired it (if this is on or after 1 July
2000). However, a special rule applies if you originally acquired the property on or after 9 December
2008 for no consideration from a registered associate under a non-taxable supply made in the course
of the associate’s enterprise. In such a case, the margin on your subsequent sale of the property is
calculated as the difference between: (1) the price you sell the property for, and (2) the price for
which the associate acquired the property, or its market value at the date of that acquisition. If the
acquisition by the associate was pre-1 July 2000, a valuation is made as at that date (s 75-11).

• If you supply the property to an associate, the margin is calculated as if the consideration for the
 supply was the GST-inclusive market value of the property (s 75-13). For property that you acquired
on or after 9 December 2008 (¶11-100), this applies whether or not the supply was for consideration.

The ATO considers that if a general law partnership (¶4-010) supplies real property that was acquired
from its partners by way of capital contribution, the margin is calculated under s 75-11 in the same way as
stated above. The ATO also considers that the margin scheme can apply where: (1) a partner supplies
real property as a capital contribution to a partnership, in exchange for an interest in the partnership,
provided that the interest becomes partnership property; or (2) the partnership distributes real property to
a partner as a result of a general dissolution, provided that the real property becomes the property of the
partner and is no longer partnership property. However, the margin scheme does not apply where there is
merely a reconstitution of a partnership that holds real property (GST Ruling GSTR 2009/1).
Inherited property
If you inherited the property, you and the deceased are treated, in effect, as one entity for the purposes of
the margin rules (s 75-11). This rule is beneficial to taxpayers, as it overcomes a previous anomaly that
the full price was subject to GST because the beneficiary had not paid any consideration.
In calculating the margin on your subsequent supply of the property, you can treat the cost as the
consideration for the acquisition of the property by the deceased. Alternatively, you may determine the
cost on the basis of a valuation, in accordance with the following rules:
(1) if the deceased acquired the property on or after 1 July 2000, the margin on your subsequent supply
of the property is the amount by which the consideration for that supply exceeds an approved
valuation of the property as at the date the deceased acquired it

(2) if the deceased acquired the property before 1 July 2000, and was registered (or required to be), the
date of the valuation is the later of 1 July 2000 or the first day on which the deceased registered or
was required to register

(3) if the deceased acquired the property before 1 July 2000, and was not registered (or required to be),
the date of the valuation is the later of 1 July 2000, the date of inheritance, or the first day on which
you registered or were required to register.

“Inherit” includes acquiring property from a deceased estate by way of court order or deed of
arrangement.
These rules do not apply if the special rules covering acquisitions from fellow GST group members apply.
The margin scheme will not apply in any event if the deceased would not have been eligible to apply it on
a subsequent supply (see ineligibility rule (2) in ¶11-100).
Multiple acquisitions and amalgamated property
The general rule is that real property is not eligible for the margin scheme if it was acquired by the
supplier through a taxable supply to which the margin scheme was not applied (see ineligibility rule (1) in
¶11-100). The margin scheme may also apply even though part of the property was not eligible. However,
in this case, there will be an increasing adjustment to recover any input tax credits that have been claimed
in relation to the ineligible property (s 75-22). Corresponding adjustments must be made if the real
property is partly ineligible under other ineligibility rules in ¶11-100.
For property acquired on or after 9 December 2008 (¶11-100), there is also provision for apportionment of
the margin in cases where the property was acquired though several acquisitions which involve different
ways of calculating the margin (s 75-16).
Partitions
For the ATO’s guidelines on the application of the margin scheme where co-owned land is partitioned,
see GST Ruling GSTR 2009/2.
GST groups and joint ventures
The intention is that GST group transactions cannot be used to “re-open” eligibility to the margin scheme.
This means that if you acquire real property from a fellow GST group member, the margin scheme cannot
apply to your subsequent supply of the property unless the group member who first acquired the property
from outside the group could have applied the margin scheme to a supply outside the group (s 75-5). The
government regards this specific statutory rule simply clarifies the law, and does not change it.
The margin on a supply to outside the group is generally the difference between the consideration for the
supply and the consideration paid by that first acquiring member. However, if the acquisition by that
member was before 1 July 2000, the margin is the difference between the consideration for the supply
and an approved valuation of the property as at 1 July 2000 (s 75-11). For sales made before 16 March
2005, when s 75-11 was introduced, it has been held that the margin could be calculated on the basis of
the consideration paid by the member making the supply (FC of T v Unit Trend Services Pty Ltd 2013
ATC ¶20-389).
Corresponding measures apply to supplies made by joint venture operators to venture participants.
GST-free acquisition of farm land or going concern
Under the margin scheme, the general rule is that GST is only paid on the value added by the supplier of
a taxable supply of real property. This has meant that it did not apply to value added where the supply
was GST-free. To overcome this deficiency, a special rule applies where the supplying entity acquired the
property on or after 9 December 2008 under a GST-free supply of a going concern (¶11-500), a farm
(¶11-410) or subdivided farm land (¶11-420). In such cases, the margin on the subsequent supply is
calculated as the difference between:
• the price for which the entity sells the property, and

• the price for which the prior owner acquired the property, or its market value at the date of that
acquisition. If its acquisition by that owner was pre-1 July 2000, a valuation is made as at that date (s
75-11).

A corresponding rule applies if the supplying entity acquired the property for no consideration from an
associate.
Subdivisions
For a special rule governing the application of the margin scheme to certain real property subdivisions,
see ¶11-100.
Additional guidelines
Additional guidelines on the operation of some of these provisions are contained in GST Ruling GSTR
2006/8.
[GSTG ¶35-218]

BODIES CORPORATE
¶11-200 Bodies corporate

A body corporate is an “entity” for GST purposes (¶3-020), and is considered to carry on an “enterprise”
by providing services to members, contracting with contractors, acting in a business-like way and
undertaking to discharge its responsibility to manage and maintain the building (Miscellaneous Taxation
Ruling MT 2006/1; Body Corporate, Villa Edgewater Courts 23092 v FC of T 2004 ATC 2056).
However, where a body corporate is a non-profit body (¶3-030), it is not required to register unless its
GST turnover is $150,000 or more. For the pros and cons of opting to register where the turnover is less
than $150,000, see ¶3-010.
The ATO says that a body will be a non-profit body where:
• it is prevented from distributing its profits or assets among its members (both while the body is
functional and on its winding up) by its constituent documents or by operation of law (for example, a
statute governing the body’s activities), or
 • if the law or the constituent documents do not prohibit such distributions, but it is clear from the
objects, policy statements, history, intention, activities and proposed future directions of the body
corporate that there will be no such distributions to its members (Interpretative Decision ID 2016/1).

A return of the members’ own funds is a return of capital, not a distribution of profits. However, the ATO
will treat a body corporate as not qualifying as a non-profit body in the exceptional case where it has the
intention to distribute interest or other income to members (whether the body is in operation or is
considering winding up). In this case, the compulsory registration threshold is the usual $75,000, not
$150,000.
If the body corporate is registered, or required to be registered, it is liable for GST when it levies
contributions to its sinking and administrative funds (Body Corporate, Villa Edgewater Courts 23092). The
registered owner of commercial residential premises can claim that GST as an input tax credit. Levies
(but not the GST component) form part of the body corporate’s turnover for the purpose of determining
whether it is obliged to register (¶3-030).
A registered body corporate can claim input tax credits for the GST included in costs such as
maintenance, cleaning, repairs, management and electricity. For the position where a property
management company carries out services, see ¶17-400.
The creation of a new residential lot out of the subdivision of the common property would have the effect
of terminating the lot’s status as common property, so its subsequent sale to a third party could be a
taxable supply by the body corporate (Interpretative Decision ID 2008/81). In such a case, the creation of
the new lot would not constitute a supply by the existing lot proprietors to the body corporate
(Interpretative Decision ID 2008/82).
Services provided to the body corporate by an office holder will not normally be subject to GST even
though an honorarium is paid.
[GSTG ¶35-410]

RENTED OR LEASED PREMISES

¶11-300 Summary of GST position on leases

The general GST treatment where real property is leased or hired is as follows:

Type of premises Example GST treatment

Private residential Flat Input taxed (¶11-310)
Commercial residential Motel Generally taxable (¶11-320)
Long-term commercial residential On-site van Input taxed or concessional (¶11-
320)
Commercial Shop Taxable (¶11-330)
Leases for at least 50 years 99-year lease Treated as sale (¶11-000)

The lease of overseas real property would not be subject to GST. Leases of goods used outside Australia
are GST-free (¶9-230).
The assignment of the right to rental income under a real property lease may be an input taxed financial
supply (¶10-010).
Development leases
For the GST implications of development lease arrangements, see ¶11-062.
Schemes involving associates
The ATO considers that certain arrangements where an entity uses an associate to secure input tax
credits on the construction of residential premises for lease, and to defer the corresponding GST liability,
are not tax-effective (GST Ruling GSTR 2010/1 (¶20-000); Taxpayer Alert TA 2009/5).

¶11-310 Accommodation in residential premises

The provision of private rented residential premises is input taxed to the extent that the premises are to be
used predominantly for residential accommodation, regardless of the term of occupation (s 40-35). This
means that GST does not apply and the landlord is not entitled to claim input tax credits.
This applies whether the premises are leased, hired or licensed, and to accommodation provided through
online rental sites such as Airbnb. However, “long-term leases” are treated in the same way as a sale
(¶11-060). Accommodation provided to employees is treated in the same way as accommodation
provided to others. Renting out a car parking space is not in itself a supply of residential accommodation.
Although no GST may be payable on private rented accommodation, it may happen in practice that
landlords pass on some or all of the GST-inflated costs they incur in maintaining the premises. For
example, maintenance and repair costs on the premises that are incurred by the landlord are subject to
GST, which the landlord cannot recover by claiming input tax credits. The same applies to the cost of
replacing appliances, body corporate levies and management, advertising, legal and accounting services.
(For special rules applying where the owner is offshore, see ¶9-240.)
For the meaning of residential premises, and the treatment of display homes, see ¶11-010.
If a lease relates partly to residential accommodation and partly to other (taxable) purposes, the rent will
need to be apportioned. For example, if a rural property including a residence is leased to a farmer, the
supply will be input taxed to the extent that the value of the lease relates to the residence and taxable to
the extent it relates to the farm land. For the method of apportionment, see ¶4-200.
Rental bonds would presumably be treated as security deposits (¶4-070).
The rent from input taxed supplies of residential accommodation is not taken into account in determining
the landlord’s turnover for GST purposes (¶3-030).
Employee accommodation
The ATO considers that, depending on the circumstances of the case, a supply of accommodation made
to an employee or contractor may be either:
• an input taxed supply by way of lease, hire or licence of residential premises to be used predominantly
for residential accommodation, or

• a taxable supply of accommodation in commercial residential premises (GST Ruling GSTR 2012/6).

Examples
The following examples are based on GST Ruling GSTR 2012/6.
(1) Mining Co owns houses which it either leases or provides under licence to employees. The employees are responsible for
the costs of utilities and grounds maintenance, while Mining Co is responsible for repairs and other maintenance. The houses
do not have the features of a hotel, motel, inn, hostel or boarding house and are, therefore, not commercial residential
premises. The supplies of the houses by way of lease or licence are input taxed supplies of residential premises.
(2) Exploration Co establishes camp-style accommodation consisting of single person quarters at a mine site to accommodate
its mine employees and contractors. The quarters consist of a separately keyed room with a bed, small wardrobe and separate
bathroom. Exploration Co has a central office at the site for the management, maintenance and servicing. Cleaners service the
rooms regularly. Meals are provided in a communal canteen. Communal laundry facilities are provided. Televisions and bar
facilities are provided at the site. Authorised mining company personnel are able to enter and inspect rooms without providing
notice. Employees and contractors are subject to restrictions on fixtures and fittings being added to the single person quarters,
and are prohibited from smoking and the keeping of pets. On balance, despite not being available to the public generally, this
would be regarded as a taxable supply of accommodation in commercial residential premises (¶11-320).

A mining company which acquired apartment-style residential accommodation to lease to its employees
in remote areas was denied input tax credits, notwithstanding its argument that this supply was not a
commercial objective in itself, but was made as a purely incidental part of running its (taxable) mining
operations (Rio Tinto Services, ¶5-010).
Accommodation in retirement villages
Supplies of accommodation at retirement villages are GST-free in specified care situations (¶13-340; ¶15-
015). Where these exemptions do not apply, and the resident is not receiving care, the ATO’s views are
as follows:
• supplies of residential accommodation are input taxed (so input tax credits are not available)

• to the extent that the supplies cannot reasonably be expected to be provided as part of rent — for
example, where it covers personal laundry, cleaning, meals, diversional activities or bus services —
they are subject to GST (so input tax credits may be available)

• maintenance fees paid by residents who have strata or freehold title are subject to GST (see also
ATO GST Industry Partnership examples).

The AAT has said that input tax treatment should apply to facilities or services that are integral, ancillary
or incidental to the lease (Living Choice Australia Ltd and FC of T [2014] AATA 168). This would apply to
the provision of, say, an indoor heated pool, but only to the extent that it is used by residents or for non-
commercial purposes.
The ATO is investigating arrangements under which village operators seek to claim input tax credits for
electricity and other services which they on-supply to residents of independent living units (Taxpayer Alert
TA 2010/7). These claims are based on an argument that the supply of electricity is a (taxable) supply
which is separate from the (input taxed) supply of accommodation.
For the GST treatment of deferred management fees, see ¶15-015.
[GSTG ¶35-300]

¶11-320 Accommodation in commercial residential premises

A supply of residential premises by way of lease, hire or licence is generally taxable if the supply is of:
• commercial residential premises (¶11-030)

• accommodation in commercial residential premises provided to an individual by the owner or

controller of the premises. It appears that “control” should be interpreted in a practical way (South
Steyne Hotel Pty Ltd v FC of T 2009 ATC ¶20-145; [2009] FCAFC 155), or

• commercial accommodation to which the long-term accommodation rules (see below) may apply.

Examples
(1) Cosy Stays runs a bed and breakfast business and is registered for GST. The supply of the accommodation is subject to GST
and it can claim input tax credits on its business outgoings.
(2) Under a management agreement, a hotel owner appointed another party as the operator of the hotel, as agent of the owner. The
owner was taxable on the supply of accommodation as it was provided by it through its agent (Paul J Castan & Son Pty Ltd ATF
Castan Investments Unit Trust v FC of T [2015] AATA 298): see also Crown Estates at ¶17-400.
(3) A hotel in Australia sells rights to accommodation in its premises to a (non-agent) tour provider, which subsequently supplies the
rights to tourists as part of a holiday package in Australia. The Tax Office considers that both the supply by the hotel to the tour
provider and the supply by the tour provider to the tourists are taxable supplies of a right to accommodation in commercial
residential premises, as in each case the accommodation is provided by the owner of the hotel (based on GST Ruling GSTR
2012/6).

However, where an owner of an individual strata-titled unit in the commercial premises sublets the unit,
this is input taxed.
The lease, hire or licence of a berth at a marina is input taxed if the berth is occupied, or intended to be
occupied by a ship used as a residence, and the supply is of commercial accommodation (s 40-35(1A)).
For the treatment of “home parks” for demountable houses, see ¶11-010. For accommodation provided to
on-site motel managers or caretakers, see ¶11-030.
Concessions for long-term commercial residential accommodation
Special rules apply if there is a taxable supply of “commercial accommodation” which is provided to
individuals in commercial residential premises (¶11-030) that are used for long-term accommodation, ie
accommodation in the same premises for a continuous period of 28 days or more (Div 87).
“Commercial accommodation” means the right to occupy the whole or part of any commercial residential
premises, such as hotels, motels or caravan parks. Incidental supplies of cleaning, maintenance, power,
air conditioning, heating, telephone, television, radios or similar things are also covered (s 87-15). The
“right to occupy” implies a right to stay rather than necessarily requiring permanent or long-term residence
(Meridien Marinas Horizon Shores Pty Ltd v FC of T 2009 ATC ¶20-138). The Commissioner also
considers that the right to occupy must extend to the full duration of the supply (GST Ruling GSTR
2012/7).
If you provide long-term accommodation to an individual, you have the following choice:
• you may treat the transaction as subject to the concessional form of GST described below, and claim
input tax credits in the normal way (s 87-25), or

• you may treat the supply as input taxed (s 40-35).

Whatever choice you make, the same treatment must apply to all provisions of long-term accommodation.
Choices cannot be revoked for at least 12 months.
The ATO says that accommodation may be provided “to an individual” even though it is booked and paid
for by the company that employs that person (GST Ruling GSTR 2012/7). It also considers, on the basis
of Meridien Marinas, that it is only necessary to establish that the supply of commercial accommodation is
available under the terms of the agreement to be taken up by an individual, even if it not actually taken up
by an individual.
Where a caravan park operator moves a caravan from one site to another within the park for
convenience, but maintains the booking, this is regarded as a continuous site rental (GST Ruling GSTR
2012/7).
Option 1: concessional GST treatment
If you opt for the concessional GST treatment for long-term accommodation, rather than input taxation,
the effect is as follows:
• the GST value will only be 50% of what would otherwise be the GST-inclusive price, provided that the
premises are predominantly for long-term accommodation (s 87-5), or

• if the premises are not predominantly for long-term accommodation, GST is paid at the full rate for the
first 27 days. For the balance of the stay, the 50% rule applies (s 87-10).

In either case, full input tax credits are available for creditable acquisitions that relate solely to the supply
(States and Territories Industry Partnership minutes, 24 February 2010).
“Predominantly” for long-term accommodation
Premises are “predominantly” for long-term accommodation if at least 70% of the individuals staying in
the premises are provided with long-term accommodation (s 87-20). According to the ATO, the 70% is
calculated on the basis of the number of supplies of accommodation (eg rooms), or the number of
bookings, rather than the number of occupants of those rooms (GST Ruling GSTR 2012/7).
Where a school provides staff accommodation in premises that also include GST-free accommodation for
students (¶14-004), both staff and students are taken into account in calculating whether the 70% test is
satisfied (Interpretative Decision ID 2003/976). This does not apply to tertiary institutions, as the supply of
accommodation to students in this case is treated as non-commercial (¶14-004) (Interpretative Decision
ID 2003/977).
If premises such as a caravan park or camping ground have separate zones or areas for “permanent” and
“holiday” stays, these may be treated as separate premises. This means that you determine whether the
70% threshold is met by calculating what proportion of the stays in the permanent zone are for a period of
28 days or more (GST Bulletin GSTB 2001/2).
In determining whether the 70% test is satisfied, you can rely on any “fair and reasonable” method. The
ATO accepts calculations based on actual occupancy for the preceding 12 months, projected occupancy
for the next 12 months, a combination of both, or some other “reasonable alternative” (GST Ruling GSTR
2012/7).
Calculation of 50% reduction
The 50% reduction applies to the provision of the right to occupy the premises, and any of the following if
they are provided as part of that right:
• cleaning and maintenance

• electricity, gas, air conditioning or heating

• telephone, television, radio or any similar appliances (s 87-15).

The 50% reduction does not apply to the provision of other incidental goods and services, such as meals,
drinks, laundry or service charges. These are subject to GST at the full rate.

Examples
(1) Ernest stays for 14 days at a resort hotel. This is not long-term accommodation and the concessions do not apply. GST is
payable at the full rate.
(2) Rhonda lives in a caravan at a camping ground that is used predominantly for long-term accommodation. The normal
accommodation charge would be $220 per week including $20 GST. The camping ground operator opts to apply the concessional
GST method. For Rhonda’s accommodation, the GST is therefore calculated as 10% of 50% of $220, ie $11. Her GST-inclusive
accommodation charge is therefore $200 + $11, ie $211. (This represents an effective GST rate of 5.5%.) The camping ground
operator can claim input tax credits in the normal way.
(3) Enrico stays for 30 days at a hotel which, like most hotels, is used predominantly for short-term stays. Under the concessional
GST method, the GST on Enrico’s accommodation will be charged in the normal way for the first 27 days, but for the remaining
three days it will be calculated on the 50% value basis. Assuming the accommodation charge was $100 per day plus GST, Enrico
would therefore be charged as follows:

$
27 days @ ($100 + $10) .................................... 2,970.00
3 days @ ($100 + $5.50*) .................................... 316.50
$3,286.50
* Calculated as 10% of 50% of $110.
The full amount of Enrico’s meal, mini bar and dry cleaning purchases would all be subject to GST, no matter when purchased. The
hotel operator would continue to claim input tax credits in the normal way.
(4) Assume instead that the hotel opted to treat Enrico’s long-term accommodation as input taxed. This would mean that no GST
applies, and no input tax credits can be claimed for relevant business inputs (ie inputs that are directly related to the long-term
accommodation, plus a proportion of other expenses such as overheads).

The 50% reduction rule is designed as a matter of convenience for accommodation providers. It is
intended to avoid the need to apportion input tax credits between the charges that relate to
accommodation and those that relate to services.
Option 2: treating the supply as input taxed
Instead of opting for the concessional GST treatment, the supplier may treat supplies of long-term
accommodation as input taxed (s 40-35). This means that GST does not apply to the supply, and the
supplier cannot claim input tax credits for acquisitions relating to it.
If you also provide short-term accommodation, which is taxable, you will need to apportion input tax
credits for overheads that cannot directly be related to either type of accommodation. The various
methods of apportioning input tax credits for overheads are explained at ¶5-020. As a further alternative,
a simpler “formula” method may be used by caravan park operators (GST Bulletin GSTB 2001/3; Goods
and Services Tax: Simplified Method to Apportion Input Tax Credits Determination (No 32) 2016 for
Caravan Park Operators). Under the formula method, the input tax credit for overheads may be calculated
as:

(GST paid on general overheads)

LESS
(1.75% of total income from long-term accommodation)

Example
(1) Standard apportionment method
This example, taken from GST Bulletin GSTB 2001/2, shows how the Commissioner applies the output method of apportioning input
tax credits (¶5-020).

Inputs $
Electricity and cleaning overheads .................................... 4,400
Outputs
Taxable supplies of short-term accommodation .................................... 3,000
Input taxed supplies of long-term accommodation .................................... 1,000
Taxable non-accommodation supplies (eg kiosk) .................................... 500
Total .................................... $4,500

$3,000 + $500
Input tax credit for overheads: 1/11 × × $4,400 = $311.11
$4,500
(2) Formula method
For a particular tax period, a caravan park operator’s overheads that cannot directly be related to either long-term or short-term
accommodation are $27,500, including $2,500 GST. The total income from long-term accommodation is $100,000. The input tax
credit for the overheads is therefore $2,500 − $1,750 = $750.
Note: (1) the formula method does not apply to input tax credits for capital expenditure (eg on roads). These are apportioned in the
normal way, with only the proportion attributable to short-term accommodation qualifying for credit; (2) where there are non-
accommodation supplies, for example sales from a shop, input tax credits are available on stock purchases other than for GST-free
goods.

Offshore suppliers of hotel accommodation

Offshore suppliers of rights to use commercial accommodation (such as hotels) in Australia must include
those supplies in working out their GST turnover (¶3-030), in the same way as local sellers, with effect
from 1 July 2019. Removing the exemption that previously applied in this situation is designed to level the
playing field by ensuring the same tax treatment of Australian hotel accommodation, whether booked
through a domestic or offshore company. The new rule applies to supplies for which consideration is first
received on or after 1 July 2019; or if before any consideration is received, an invoice is issued on or after
1 July 2019.
Accommodation supplied by charities
Accommodation supplied by charities for less than 75% of the market value or cost is GST-free (¶15-010).
[GSTG ¶35-320]

¶11-330 Leased commercial premises

Leases of commercial premises such as shops and offices are subject to GST. However, the lessees
would normally be able to claim input tax credits for the GST if they are in business. For the rules on
allocating rent to tax periods and the issue of tax invoices, see ¶7-420.
As explained earlier, long-term leases (for at least 50 years) are treated like outright sales (¶11-060).
Outgoings payable by tenant
Where outgoings of the lessor in relation to the premises are paid or reimbursed by the tenant, this cost
would normally be treated as part of the rent on which GST is calculated. The Commissioner considers
that this applies irrespective of whether the outgoings are for services that would have been GST-free, or
not subject to GST, if paid direct by the lessor, for example, rates or land tax (GST Determination GSTD
2000/10).

Example
The consideration under a commercial lease is $1,000 plus the rates on the property, which are $220. The GST will be 10% of
($1,000 + $220) = $122.

If the outgoing is one for which the lessor is entitled to an input tax credit (eg cleaning or maintenance),
the lessee should ensure that this is reflected in the amount that it is required to reimburse. Otherwise,
this will inflate the amount of rent and produce a windfall gain for the lessor.
Lease incentives, premiums and payouts
If the lessor provides a money incentive to the lessee to enter the lease, that is treated as a taxable
supply by the lessee, because it has received consideration for agreeing to do something as part of its
enterprise (¶4-000). The lessee is therefore liable to account for GST on that amount. Conversely, if the
lessee pays a lease premium in addition to the normal rent so as to secure a lease, that is a supply by the
lessor, who will be liable to account for GST on the premium.
Details of the ATO’s views on various specific types of inducements are as follows (GST Ruling GSTR
2003/16):
• Non-monetary. If an inducement is non-monetary, there may be two supplies. For example, if a
lessor induces a lessee by providing a car, there will be a supply by the lessee in agreeing to enter
into the lease, and a supply by the lessor in providing the car. Both supplies could be taken to be
made for a consideration equal to the GST-inclusive market value of the car.

• Fit-outs. If the lessor provides a free fit-out, and retains ownership of it, GST will not apply. However,
if the lessor contributes an amount equal to the amount spent by the lessee on a fit-out owned by the
lessee, this is treated in the same way as a cash incentive, so GST may apply. The same applies if
the lessor provides plant whose ownership passes to the lessee.

• Income guarantees. Where a lessor guarantees a lessee’s income from a business operated from
the leased premises, that is normally treated simply as a taxable supply of the premises and of the
income guarantee for a consideration equal to the rent. The position is different if it is clear that the
lessee’s entry into the lease is specifically in consideration of the income guarantee. In this case, the
lessee is making a taxable supply of its agreement to enter the lease and is liable for GST of 1/11th of
the GST-inclusive value of the guarantee. The lessor also makes a taxable supply of the guarantee,
for which the consideration is the lessee’s agreement to enter the lease.

• Rent-free periods. GST does not apply where there is simply a rent-free period. However, if that
inducement is specifically provided in exchange for the lessee agreeing to do something extra (eg
carry out repairs that benefit the lessor), the value of those services forms part of the consideration
for the lessor’s supply of the premises. The lessee’s supply of the services is taken to be made for a
consideration equal to the GST-inclusive value of the supply of the premises for the rent-free period.

Lessors and lessees may also pay to get out of a lease. If the payment is made by the lessor, the lessee
must account for GST and the lessor claims an input tax credit. If the payment is made by the lessee, the
lessor must account for GST and the lessee claims an input tax credit.
GST may apply even though the incentive or payout is related to the commencement or cessation of the
business (¶3-020).
Solicitors’ costs
The lease will normally require the lessee to reimburse the lessor for its solicitors’ costs of preparing the
lease. If the solicitor sends the bill direct to the lessee, that cannot qualify as a tax invoice because the
solicitor has not supplied anything to the lessee. The lessee therefore cannot claim an input tax credit.
The correct procedure would appear to be for the solicitor to issue a tax invoice to the lessor (to whom it
has supplied services), and for the lessor to then issue its own tax invoice to the lessee (to whom it has
supplied the premises).
[GSTG ¶35-250]

¶11-335 Sale of real property subject to lease

Where real property is sold subject to a continuing lease (ie there is a sale of the “reversion” in the
property), the assumption and continued observance of the vendor/lessor’s obligations by the purchaser
constitutes a supply by the purchaser to the tenant (FC of T v MBI Properties Pty Ltd [2014] HCA 49).
That supply may be:
• taxable if the lease is of commercial property (GST Determination GSTD 2012/2). In this case, the
purchaser is liable for the GST relating to the continuing lease and would be entitled to input tax
credits on the purchase (if the margin scheme is not used) and for acquisitions related to the ongoing
lease. The ATO also considers that the vendor of commercial premises that are subject to a lease is
liable for GST on all of the prepaid rent it receives and retains for a particular month when the supply
of the reversionary interest occurs part-way through that month.

• input taxed if the lease is of non-new residential property. In this case, the purchaser would therefore
not be liable for the GST on the rent it receives under the continued lease, nor would it be entitled to
claim input tax credits for the acquisition of the reversion or acquisitions related to the ongoing lease,
for example, legal, management, insurance or maintenance costs (GST Determination GSTD
2012/1). For the possible application of the GST adjustment provisions in this situation, see ¶11-520.

For an article discussing some of the implications of this ruling, see CCH Tax Week ¶1085 (19 December
2014). For the ATO’s transitional administrative arrangements, see its Decision Impact Statement on the
MBI Properties case (ato.gov.au).
Modified tax invoice requirements may apply where there is a creditable acquisition by a lessee or sub-
lessee following a sale of a reversion in commercial premises (WTI 2013/9: see ¶5-130).
[GSTG ¶35-320]

¶11-340 Leases entered into before 1 July 2000

If a commercial lease spanned 1 July 2000, only the part from 1 July 2000 is subject to GST (¶19-210).
A lease may set the rent according to the amount of the turnover of the lessee. Where the contract
extends beyond 1 July 2000, it will need to be made clear whether that turnover amount includes GST.
Turnover clauses are not treated as constituting opportunities to review.
[GSTG ¶75-600]

CROWN AND FARM LAND

¶11-400 Grants of Crown land

The initial grant of unimproved Crown land is GST-free (s 38-445). The grant must be of the freehold or
be a long-term lease, ie a lease that is for a term of at least 50 years and that is reasonably expected will
not be terminated before that time (¶11-060).
Governments may grant short-term leases over unimproved land subject to conditions that enable the
recipient to have the grant converted to freehold or long-term lease. Both the initial short-term lease and
the subsequent conversion are GST-free. A similar rule applies where the short-term conditional lease is
surrendered in return for a grant of freehold or a long-term lease (s 38-445(1A); 38-450).
These exemptions apply only where the land was supplied by the Commonwealth, a state or a territory.
This may include government departments and agencies, and certain local governments (GST Ruling
GSTR 2006/5). A supply by a government-related body could qualify if the body was wholly owned and
controlled by the government and acted solely in the interests of the government (SGH Ltd v FC of T
2002 ATC 4366; [2002] HCA 18; GST Ruling GSTR 2006/5).
Meaning of improved land
The ATO considers that “improvements” are not limited to visible structural improvements, and include
clearing, draining and any other operation by humans on the land that enhances its value and/or
usefulness (GST Ruling GSTR 2006/6).
[GSTG ¶35-385]

¶11-410 Certain sales of farms are GST-free

If a farm is sold as a going concern, that transaction may be GST-free in accordance with the rules
explained at ¶11-500.
The supply of farm land, even if it does not qualify for the going concern exemption, is GST-free if:
(1) there has been a farming business carried on, on the land, for at least the period of five years before
the sale, and

(2) the buyer intends that a farming business be carried on, on the land (s 38-480).

This concession applies to the supply of:

• the freehold interest in the land

• the lease of the land from the government or a government authority, or

• the long-term lease of the land (¶11-060).

Although the concession extends to fixtures and fittings on the land, it does not apply to livestock, plant or
equipment. Natural growth such as grass, trees and fruit on trees would normally be considered part of
the land. However, depending on the circumstances, unharvested annual crops such as potatoes may be
subject to GST as a separate supply of goods (ATO GST Industry Issues — Primary Production: Issue
2.9.1).
The supply of a government lease apparently includes not only the initial grant of the lease, but also a
supply by way of assignment or transfer of the lease (Interpretative Decision ID 2004/674).

Example
After 20 years on the land, Farmer Jenks decides to sell the farm and move to the Gold Coast. The stock and machinery are sold
separately in clearing sales, and the land and buildings are sold to Mr Slicker who intends to use the land for commercial gladioli
production. As the land itself does not constitute a going concern, the going concern exemption does not apply. However, the sale of
the land and improvements (but not the stock and machinery) will be GST-free.

Farming business
A “farming” business means a business of cultivating or propagating plants, fungi or their products or
parts; maintaining animals for the purpose of selling them or their bodily produce (including natural
increase); manufacturing dairy produce from raw material produced by the taxpayer; or planting or
tending trees for felling (s 38-475(2)). What constitutes a “business” is discussed at ¶3-020. Providing
agistment for animals, by itself, would not normally be considered to be a farming business. See generally
ATO GST Industry Issues — Primary Production: Issue 6.2.
Five years requirement
The requirement that a farming business must have been carried on for the period of five years refers to
the five years immediately before the supply. The Commissioner accepts that the requirement can be met
even though there has been a temporary break in the business because of holidays, bad weather or land
lying fallow. The same applies if there is a temporary cessation of the activities of the farm due to the sale
process itself (ATO GST Industries Issues — Primary Production: Issue 6.2; GST Determination GSTD
2011/2) or, it seems, where there is a break in the farming activities due to the administration of the estate
of a deceased taxpayer (Interpretative Decision ID 2001/779). However, the Commissioner considers that
the requirement may not be met if there has been a conscious decision to cease farming altogether, even
if this only takes effect for a relatively short period prior to the sale (Interpretative Decision ID 2004/632).
In determining the use of land, it is necessary to look at the land being sold in its entirety. If farming
activities represent the predominant activity carried out on the land in its entirety, then it can be accepted
that a farming business has been carried out on the land. On this basis, the sale of farm land qualified for
the exemption even though it included certain rights over some land dedicated for use as a future road on
which no farming had been carried out (Interpretative Decision ID 2004/674); or where it included land on
which there were two residential cottages (Interpretative Decision ID 2005/92). The same applied where a
minority portion of the land was affected by a restrictive covenant that prohibited farming activities from
being carried on (Interpretative Decision ID 2004/730). It is suggested in that Decision that this may also
apply where: (1) the value of the covenanted area is less than the value of the land used directly for
farming; (2) regardless of the area or value of the covenanted land, the covenant is essentially restrictive
in nature and does not place substantial positive obligations on the landowner in relation to the
covenanted area; or (3) regardless of the area or value of the covenanted land, the only activities other
than farming relate to obligations under the covenant which are merely to do with maintaining the natural
state of the land not directly used for farming.
It is not necessary that the seller of the land be the entity that was carrying on the farming business.
Intent to carry on farming business
Although the legislation requires that the buyer must intend that a farming business be carried on, it does
not specify any time period within which the business must actually commence. However, the
Commissioner considers that it is not sufficient that there is simply a long-term goal or hope, and that the
intention must be backed up by some activity which should commence in the “immediate or foreseeable
future” (ATO GST Industry Issues — Primary Production: Issue 6.2.6).
It is not necessary that the buyer itself be the entity that it is intended will carry on that business, or that
the business be the same type of farming as the seller’s business. The exemption has also been held to
apply where the buyer’s intention was to simultaneously on-sell the land to a third party who intended that
a farming business would be carried out on the land (Interpretative Decision ID 2005/103); but not where
there was a time gap between the acquisition and the resale to the third party during which there was no
intention to carry on a farming business (Interpretative Decision ID 2004/631).
As the seller’s exemption depends on the intended future usage of the land, it would be wise to have this
covered by a specific clause in the contract, or by a written warranty.
Interaction with other rules
Normally, if the exemption does not apply, the GST on the sale would ultimately be recoverable by the
purchaser as an input tax credit, in the same way as under the going concern rules (¶11-510). However,
in accordance with the normal rules, this would not apply if the purchaser did not acquire the property in
the course of carrying on its enterprise (¶5-010).
Even if the exemption does not apply, GST would not apply to that part of the sale that related to a
specified part of the property which had been used as a private residence and had not been used as part
of the profit-making activity (Property and Construction Industries Partnership Issues Register 6.1).
Where the farm business is being sold, it may happen that the supply of the land is also GST-free under
the going concern rules (¶11-500). However, the “predominant use” rule means that the category of land
that qualifies for the farm land exemption may be wider than the category of land that qualifies for
exemption under the going concern rules (see Interpretative Decision ID 2005/92).
GST adjustments may be necessary in certain cases where the purchaser intends to make supplies that
are neither taxable nor GST-free (¶11-520).
The sale of water rights would normally be GST-free (¶16-200).
Margin scheme
Special rules apply to counter schemes designed to exploit the interaction of this concession and the
margin scheme (¶11-100; ¶11-140).
[GSTG ¶49-000]

¶11-420 Where farm land is subdivided

If a farm is subdivided and sold as a number of going concerns, the sales may be GST-free in accordance
with the rules explained at ¶11-500. If the subdivided lots are not going concerns, the sale of the land to
an intending farmer may nevertheless be GST-free under the rules explained at ¶11-410.
A further, more limited, concession applies where farm land is subdivided and sold to associates for
residential purposes (s 38-475). Such a sale will be GST-free if the following conditions are satisfied:
• the land must be subdivided from land where there has been a farming business (¶11-410) being
carried on for at least five years. It is suggested in Interpretative Decision ID 2009/131 that this
business must be carried on up to the commencement of the subdivision. It is, however, not
necessary that the seller of the land be the entity that was carrying on that business

• it must be permissible to use the land for residential purposes. However, the land must not actually
contain any buildings occupied as a residence or buildings that are intended for residential use and
are capable of being used in that way

• the land must be sold to an associate of the seller (widely defined to include relatives, partners,
related companies and trusts, and other entities associated with the seller in various ways)

• the sale must be for no payment, or for less than the GST-inclusive market value.

Example
A farmer who has run a large farm for 20 years subdivides part of it and sells vacant lots to his children at a nominal cost to enable
them to build their homes. The sales would be GST-free.

If the sale is made at market value, GST will be payable in accordance with the general rules. In this
case, the seller may choose to use the margin rules explained at ¶11-100.
This concession applies only to the supply of the freehold interest in the land, or the lease of the land from
the government or the government authority, or the long-term lease of the land (¶11-060). It is not clear,
however, how it applies where there is a transfer of a long-term lease, as distinct from its grant.
Margin scheme
Special rules apply to counter schemes designed to exploit the interaction of this concession and the
margin scheme (¶11-100; ¶11-140).
[GSTG ¶49-200]

BUYING AND SELLING A BUSINESS

¶11-500 GST-free supplies of going concerns

The supply of a going concern is GST-free in certain circumstances (s 38-325). The purpose of this
exemption is to remove the need for the recipient to obtain additional funds to cover the GST that would
otherwise apply (¶11-510). It also may enable a reduction in stamp duty on the amount otherwise
payable.
A “going concern” means, in effect, a continuing “enterprise” (¶3-020). The most typical example of a
supply of a going concern is the sale of a business. In this commentary, it will generally be assumed that
this is the type of transaction involved, but it must be remembered that this is a simplification.
To obtain the exemption, the following conditions must be satisfied:
• the sale must be for consideration (¶4-020)

• the buyer must be registered or required to be registered for GST purposes. The Commissioner
considers that this requirement must be satisfied on and from the date of the sale (GST Ruling GSTR
2002/5)

• the seller and buyer must have agreed in writing that the sale is of a going concern

• under the arrangement between the parties, the seller carries on the enterprise until the date of sale
(¶11-503)

• under the arrangement, the seller supplies the buyer with all the things necessary for the enterprise’s
continued operation (¶11-506).

Agreement re going concern

The requirement for the parties to agree in writing that the sale is of a going concern is designed to avoid
one source of dispute where the purchaser claims an input tax credit on a sale that the vendor believes is
GST-free. However, as explained below, it does not by itself guarantee that the sale is in fact GST-free.
The agreement that the supply is of a going concern must be explicit — it is not sufficient that it is implicit
in the nature of the sale or documentation (Midford v DFC of T 2005 ATC 2189; Case 12/2009, 2009 ATC
¶1-016). Furthermore, it should be expressed in clear and unequivocal terms. In a New Zealand case, for
example, it was held that there was no such agreement as it was conditional on the property sold being
tenanted, whereas in fact there was only a licence in existence (Fatac Ltd (in liq) v Commr of IR [2002]
NZCA 269).
A specific statement in a contract that the supply was of a going concern was held to be overridden by a
later statement in the contract that, in the event that the supply was ultimately held to be taxable, the
margin scheme should apply (MSAUS Pty Ltd atf the Melissa Trust & Anor v FC of T 2017 ATC ¶10-463).
The Tribunal rejected earlier decisions to the contrary on the ground that they had been based on an
interpretation of the legal nature of the supply which had been superseded by the MBI Case (¶11-335).
Although it is not explicit in the GST legislation, it appears that the agreement that the supply is of a going
concern must be made on or before the date on which the supply is made (GST Ruling GSTR 2002/5;
Midford’s case; Brookdale Investments Pty Ltd v FC of T 2013 ATC ¶10-301). Accordingly, if the parties
are in doubt as to whether this requirement has been satisfied, and a private binding ruling is sought to
determine the matter, it seems that this should be obtained before the supply occurs.

Example
The following sample agreement is contained in the ATO’s Sale of a Business as a Going Concern — Checklist:
“The vendor and the purchaser agree that the supply of [enterprise being supplied] pursuant to this Agreement is the supply of a
going concern for the purposes of s 38-325 of the GST Act and that the supply is GST-free for the purposes of the GST law.
The Vendor will supply to the purchaser all of the things necessary for the continued operation of the enterprise for the purposes of
that subdivision and the Vendor will carry on the enterprise until the day of the supply.
The supply is for consideration, and the purchaser warrants that it is registered or required to be registered for GST.
For the purpose of this clause the following words have the following meaning or meanings:
‘GST’ means the tax that is payable under the GST law and imposed as goods and services tax as set out in the GST Act.
‘GST Act’ means the A New Tax System (Goods and Services Tax) Act 1999, as amended, or if that Act does not exist for any
reason, any other Act imposing or relating to the imposition or administration of a goods and services tax in Australia.
‘consideration’; ‘enterprise’; ‘GST-free’; ‘GST law’; ‘registered’; ‘required to be registered’; ‘supplier’; ‘supply’; and ‘supply of a going
concern’ have the respective meanings given to each of those terms in the GST Act.”
The “going concern” agreement does not have to be part of the contract for sale (GST Ruling GSTR
2002/5). However, where different essential components of the sale itself are covered in separate
contracts, care must be taken to ensure that that going concern agreement applies to all of them. In one
case, the requirement for the agreement to be in writing was held to be satisfied by a combination of the
contract of sale, the tax invoice and a goods statutory declaration exchanged at settlement indicating that
the sale was of a going concern (SDI Group Pty Ltd v FC of T 2012 ATC 10-282; [2012] AATA 763).
The following example illustrates the type of dispute that may arise.

Example
The parties entered into a sale of the goodwill and business assets of a hotel business, and agreed in the contract that the supply
was of a going concern. They also entered into a separate contract for the sale of the land on which the hotel stood. Both contracts
provided for simultaneous settlement. However, the purchaser subsequently claimed that the sale of the land should be treated
separately, and that it was taxable, thereby entitling the purchaser to claim 1/11th of the land sale price as an input tax credit. The
AAT rejected this. It was obvious that the parties intended the sale of the business to be GST-free and that the sale of the land was
an essential part of that sale. The GST-free status therefore applied to both contracts (Debonne Holdings Pty Ltd v FC of T [2006]
AATA 886).

The ATO considers that where a supply or acquisition is made in the name of a bare trustee, the trustee
can sign the agreement even though it is not itself carrying on an enterprise (GST Ruling GSTR 2008/3).
Enterprise part of larger enterprise
It is possible to sell a going concern that consists of an enterprise which is part of a larger enterprise.
However, this does not apply if what is sold does not comprise an enterprise in itself.

Example
A single bakery forming part of a chain of bakeries is sold. This may be a GST-free supply of a going concern as the bakery is an
enterprise in its own right as well as being part of a larger enterprise (GST Ruling GSTR 2002/5).

For further guidelines see ¶3-020. A corresponding issue arises in connection with the capital gains tax
treatment of business goodwill. For the Commissioner’s views on the issue in that context, see Taxation
Ruling TR 1999/16.
If seller is not registered
If the seller is not registered, and is not required to be registered, the sale will not be subject to GST in
any event.
Partnerships and joint ventures
The going concern exemption can apply where a general law partnership sells its partnership business, or
where a single entity sells an interest in its enterprise to form a partnership (GST Ruling GSTR 2003/13).
In the case of a tax law partnership (¶3-015) which is carrying on an enterprise, there may be an eligible
sale of a going concern where, for example, a jointly owned leased property is sold. This also applies in
certain circumstances where a co-owner’s interest in the property is sold (GST Ruling GSTR 2004/6).
However, merely admitting new partners cannot be the supply of a going concern (GST Ruling GSTR
2002/5).
In the Commissioner’s view, the disposal of a partner’s interest by the partner is not a taxable supply in
any event, as the supply is not in the course of an enterprise carried on by the partner (GST Rulings
GSTR 2002/5; GSTR 2003/13). However, if the partner is carrying on a business of dealing in partnership
interests, the supply of a partnership interest may be input taxed as a financial supply (¶10-010). This also
applies where a partnership issues a new interest in the partnership (GST Ruling GSTR 2003/13).
If a business is run as a joint venture, as distinct from a partnership, the Commissioner accepts that each
joint venturer is capable of conducting an enterprise (GST Ruling GSTR 2002/5). It is therefore possible
for each joint venturer to make a supply of a going concern if it supplies all the things necessary for the
continued operation of the business (¶11-506).
Future conduct of business
It is apparently not necessary that the purchaser carries on the same type of business as that carried on
by the seller, or even that it carry on the business at all (Pine v CIR (1998) 18 NZTC 13,570; GST Ruling
GSTR 2002/5).
Schemes involving the margin scheme
Special rules apply to counter schemes designed to exploit the interaction of these concessions (¶11-100;
¶11-140).
[GSTG ¶48-100]

¶11-503 Enterprise must be carried on until day of supply

Under the arrangement, the seller must carry on the enterprise until the day of supply to the purchaser (s
38-325(2)(b)). The Commissioner accepts that this requirement may be satisfied even though the seller
temporarily ceases some activities of the enterprise for a short period to facilitate the sale (GST Ruling
GSTR 2002/5).
The effect of this requirement is complicated by the fact that “carrying on” an enterprise is also defined to
mean doing things in the course of terminating the enterprise (¶3-020). The Commissioner concedes that
where an enterpriseceases to carry on activity and is in the course of selling off the assets, the enterprise
is still being carried on. However, that enterprise could not satisfy the separate requirement (¶11-506) that
all things be provided for the continued operation of the enterprise (GST Ruling GSTR 2002/5).
In the case of a commercial building, the Commissioner considers that an enterprise of leasing would still
be carried on in a situation where: (1) the building had been leased for a number of years; (2) various
floors were vacant but were being actively marketed; and (3) the remaining floors were being refurbished
(GST Ruling GSTR 2002/5). For further details of leasing enterprises, see ¶3-020.
The sale of a motel would not satisfy this requirement where the motel business had been closed down,
and the buildings were sold with vacant possession and without forward bookings (Belton v Commr of IR
(NZ) (1997) 18 NZTC 13,403). Similarly, the sale of a purported residential development enterprise was
held not to qualify where the vendor had already abandoned the development, and the only work being
carried on was certain earthworks required by the purchaser for its intended use of the land (Aurora
Developments Pty Ltd v FC of T [2011] FCA 232). The same would apply if the business had become
non-operational as a result of circumstances such as fire. However, if the damage was minor and the
business could still be operated, it may qualify even though it is only running at a reduced capacity.
Date of supply
The “day of the supply” is the date on which the recipient assumes effective control and possession of the
enterprise. This applies even though the economic risk and benefit may be deemed under the contract to
have passed at an earlier date (GST Ruling GSTR 2002/5). Subject to the terms of the contract, the day
of supply would therefore typically be the date of settlement, rather than the date of the contract (Aurora
Developments). Considerable care may need to be taken to ensure that this requirement is satisfied.
[GSTG ¶48-320]

¶11-506 Supply must be of all things necessary

To obtain the exemption, the seller must supply the purchaser with all things necessary for the continued
operation of the business (s 38-325(2)(a)). It is not necessary that all those things must be provided in the
same single supply. There may be more than one supply, provided that they are all made under the one
arrangement.
In some cases, it is not technically possible for the seller to supply all things necessary for the continued
operation of the business. For example, there may be an essential non-assignable licence or quota that
can only be reissued to the purchaser by a government authority. The Commissioner considers that such
a reissue will be treated as a supply of the licence by the seller if the seller makes all reasonable efforts to
facilitate the reissue (GST Ruling GSTR 2002/5). Alternatively, if assignment is possible, but normal
commercial practice is for the right to be surrendered and reissued, such a reissue may be treated as a
supply if it is facilitated by the seller.
Care must be taken if a business such as a farm and the land on which it is conducted are owned by
separate entities (eg a family trust and a family company). The reason is that neither may be able to
supply all the things necessary, even though together they could. If each of them is carrying on a
separate enterprise, each enterprise must be capable of continued operation by the purchaser (GST
Ruling GSTR 2002/5). Corresponding difficulties may arise if the sale is to two entities.
What is “necessary” for the continued operation of the business will vary according to the circumstances.
For example, a fitted-out vehicle may be necessary for the continued operation of a mobile mechanic
business, but a car may not be necessary for a broking business that operates from fixed premises. On
the other hand, where a business is necessarily conducted from premises, for example, a hotel, either
premises or the right to occupy them must be supplied (see also Debonne Holdings Pty Ltd v FC of T
[2006] AATA 886). If the premises are leased, the lease should be assigned; alternatively, the lease could
be surrendered and the lessor should facilitate the entry of a new lease to the recipient. This also applies
where a lease has already expired and the supplier continues to occupy under a short-term periodic
tenancy — in this case, the benefit of that tenancy should be supplied to the recipient. However, the
Commissioner considers that where the supplier occupies premises under a tenancy which is terminable
“at will”, this cannot be assigned and the conditions for exemption therefore cannot technically be satisfied
(GST Ruling GSTR 2002/5). If there is significant goodwill attached to a key site, or a site has special
features essential to the operation of the business, that particular site or the right to occupy it would
normally need to be supplied.
Where the enterprise has goodwill that is capable of being transferred, that goodwill would be treated as
necessary for the continued operation of the business. For example, the sale of the assets of a business
without a transfer of goodwill or of forward bookings was held not to be the supply of a going concern in
Allen Yacht Charters Ltd v CIR (1994) 16 NZTC 11,270. Providing introductions to existing clients and
facilitating continuity of marketing arrangements would also be a typical part of a supply of a going
concern. So would an assignment of trade debts (GST Advice GSTA TPP 014).
Where there are key personnel whose skills are essential to the running of the business, the seller must
take all reasonable steps to facilitate the transfer of those skills and knowledge, for example by training
sessions or provision of training manuals (GST Ruling GSTR 2002/5). Similarly, the Commissioner
accepts that where non-transferable personal qualifications of a sole proprietor are essential to the
business, it will be sufficient that everything else necessary is transferred.
In the case of a trading name, it is sufficient if this is licensed to the purchaser, rather than sold
(Interpretative Decision ID 2002/237).
It may happen that only part of the things necessary for the continued operation of the business needs to
be supplied because the purchaser already has some of them already available. In this situation, the
Commissioner considers that the requirements for exemption have not been met (GST Ruling GSTR
2002/5).
The arrangement may also include things that are not essential to the continued operation of the
business, even though they are actually used in it (GST Ruling GSTR 2002/5). However, the exemption
will not apply to the supply of such things if they are supplied independently of the arrangement
(Interpretative Decision ID 2012/54).
If surplus non-essential assets are retained by the seller, the exemption may still apply, but the supplier
may be liable for an increasing GST adjustment (¶6-410).
The supply of property that would have been taxable if sold by itself may become GST-free if sold as part
of a going concern. For example, a milk quota sold by a dairy business is normally taxable, but if sold as
part of the business, the whole sale may be GST-free under the going concern exemption. The same
would apply to the sale of a commercial fishing licence.
The Commissioner considers that if the enterprise consists solely of the leasing of property, even if
carried on as part of a broader enterprise, the supply of associated management and service contracts is
not necessary for the continued operation of that enterprise. However, the benefit of the covenants in the
lease must be supplied and there could therefore not be a supply of a going concern to the lessee where
the property is simply transferred to it (GST Ruling GSTR 2002/5). For the position where the property is
held by a tax law partnership, see ¶3-020.
The Commissioner considers that where a property development enterprise involves the supply of
residential houses or strata units under construction, the necessary things may include: title to the land;
council or local authority applications and approvals; construction schedules; intellectual property such as
names, project plans, construction plans and drawings, and details of covenants; marketing plans and
contracts, and “off the plan” sales contracts; quality assurance plans; assignment of subcontracts and lists
of subcontractors; and a site sales and marketing office. In the case of an enterprise involving the supply
of lots or development land, necessary things may include: rezoning applications, approvals or deeds;
intellectual property such as engineering plans for headworks construction and utilities infrastructure, and
environmental impact studies; and rights of access (former GST Ruling GSTR 2005/5).
For the sale of a business by a mortgagee, see ¶10-070. For the position where liabilities for long service
leave are transferred to the purchaser, see ¶4-010.
[GSTG ¶48-260]

¶11-510 If “going concern” exemption does not apply

If the exemption does not apply, any GST payable could normally be claimed back by a registered
purchaser as an input tax credit when the next GST return is lodged. To this extent, the only disadvantage
to the purchaser is a cashflow disadvantage. The exemption basically only relieves the purchaser of
having to fund the tax on settlement (and may possibly result in savings on stamp duty). For the position
where the business involves input taxed supplies, see ¶11-520.
It is important to realise that the agreement between the parties that the sale is of a going concern cannot
guarantee that it is GST-free. The existence of that agreement is just one of the conditions that must be
fulfilled. This has important implications for a seller who does not include GST on the basis of an incorrect
belief that the conditions for the exemption have been satisfied. In this situation, the burden of paying the
GST will effectively fall on the seller if there has not been any allowance made for it in the contract price.

Example
(1) The registered vendor of a business sells it to “X or its nominee”. Although X is not registered (or required to be), the vendor
understands that the sale will be to the nominee, which is registered. In fact, X makes no nomination. The sale is therefore to the
unregistered X, so the going concern exemption will not apply. The vendor will be required to account for GST on the sale (based on
CIR v Capital Enterprises Ltd (2002) 20 NZTC 17,511).
(2) The registered vendor of a business with a small turnover sells it as a going concern for a price that is “inclusive of GST (if any)”.
The contract says that the supply is a GST-free supply of a going concern. The vendor subsequently finds out that the purchaser
was not registered, and was not required to be registered because its GST turnover, including the new business, was less than
$75,000. This condition for exemption is therefore not satisfied. The vendor will therefore be liable to account for GST on the sale.
On the other hand, the buyer could not claim input tax credits because it was not registered.

Actually, the facts of example (2) are not typical. A buyer will normally be registered or be required to be
registered because its GST turnover is $75,000 or more — particularly when it is remembered that the
turnover of the new business must be taken into account (¶3-030). If the buyer is registered (or required
to be registered) it may enjoy the windfall of being able to claim input tax credits for the GST payable,
even though the GST was not reflected in the purchase price.

Example
The vendor of a business sells it as a going concern for a price that is “inclusive of GST (if any)”. The contract says that the supply is
a GST-free supply of a going concern. However, the vendor fails to comply with the condition that it carries on the business until the
date of the sale. The vendor will therefore be liable for GST based on the sale price, and the (registered) buyer will be able to claim
an input tax credit. Effectively this is a windfall for the buyer.

As you can see, the burden of this error falls on the seller. Sellers should therefore ensure that these
eventualities are covered in the contract. For example, it could be specified in the contract that the
purchase price is “plus GST (if any)”, and that any GST payable could be recovered from the buyer if it
turns out that the supply is not GST-free.
Conversely, difficulties can arise for the purchaser if there is an incorrect assumption that the sale is
taxable.

Example
The vendor of a defunct farm sells it for a price that is “inclusive of GST (if any)”. The purchaser assumes that the sale will be
taxable, and budgets on the basis that it will get back 1/11th of the purchase price as an input tax credit. In fact, as it happens, the
sale is GST-free because the vendor is not registered (or required to be). The vendor will not be liable to account for any GST on the
sale and the purchaser will not be entitled to any input tax credit.

If sale includes a residence

If the exemption does not apply and GST is payable, the GST will not apply to the component of the sale
price that relates to residential premises (¶11-010). To that extent the sale is input taxed (s 40-65).

Example
Irma sells her farm for $500,000 including GST. Assume that a farming business had only been carried on for two years (so that the
exemption at ¶11-410 does not apply) and that the sale does not comply with the going concern exemption rules. The farm includes
a homestead valued at $60,000. The GST is 1/11th of $440,000 = $40,000. Irma can claim an input tax credit of 440/500 of general
expenses of the sale, such as agents’ and legal fees.

¶11-515 Assumption of liabilities by purchaser of business

Where an enterprise is sold, the purchaser commonly takes on various liabilities, both contractual and
statutory, previously borne by the vendor. The question arises as to whether the value of those liabilities
should be taken into account in determining the consideration paid for the business for GST purposes.
The ATO’s views, as set out in GST Ruling GSTR 2004/9, are as follows:
• rates, land tax, rent: where there is the usual adjustment in the contract price to reflect the
apportionment of rates for the period in which the sale occurs, that adjusted price is taken as the
consideration. However, if the adjustment reflects the purchaser’s assumption of a liability to pay
rates already overdue by the vendor for a period ending before the time of sale, the consideration
would be taken as the contract price without any adjustment. Similar rules apply to land tax and rent.

• long service leave, annual leave: where there is an adjustment to reflect the purchaser’s
assumption of liability for long service leave of continuing employees, the adjusted price is taken as
the consideration for the business. This does not apply where there is an adjustment in the
purchaser’s favour for accrued annual leave liabilities. The difference in treatment is because, under
statute, liability for accrued long service leave normally passes to the purchaser, but liability for
accrued annual leave stays with the vendor (Example (2) below).

• non-statutory liabilities to third parties: the contractual assumption of liabilities to third parties
would normally be taken to be part of the consideration, for example, where the purchaser agrees to
discharge the vendor’s existing obligation to a trade debtor, or to assume product warranty
obligations for defective products already sold (Example (1) below).

Examples
(1) Under a contract for sale of a business for $90,000, the purchaser agrees to assume an existing $10,000 liability to a trade
creditor. The ATO would consider the consideration for the sale to be $100,000. The same would apply if the contract price was
$100,000 but the vendor allowed a $10,000 adjustment on sale to cover the liability.
(2) Under a contract for sale of a business for $100,000, the purchaser agrees to retain existing employees and honour their accrued
entitlements to long service ($8,000) and annual leave ($2,000). The amount allowed in the contract, after taking into account the tax
effect of this settlement adjustment, is $5,600 for long service leave and $1,400 for annual leave. The purchaser therefore pays an
adjusted price of $93,000 on settlement. The consideration is taken to be $95,000, ie $93,000 plus the $2,000 for annual leave
 (based on GST Ruling GSTR 2004/9).

These principles apply whether or not the going concern exemption applies.
Retirement village arrangements
Under certain arrangements for developing and selling retirement villages, the developer receives
interest-free loans from incoming residents to secure their accommodation entitlements, and these loans
are repayable (less deferred management fees) when the accommodation ends. Under the sale
agreement, the liability to repay the outstanding loans falls on the purchaser. In GST Ruling GSTR
2011/1, the Commissioner states that: (1) the amount of that liability imposed on the purchaser should be
treated as forming part of the consideration for the sale, thus increasing the amount of GST on the sale;
and (2) the developer’s entitlement to input tax credits for its acquisitions depends on the extent to which
the supplies it makes are taxable. This may require apportionment on a fair and reasonable basis where
those supplies are a mixture of (say) input taxed leasing of residential premises and a taxable (or GST-
free) supply of the village. The Commissioner will accept as fair and reasonable a method which
determines the extent of non-creditable purpose for development acquisitions based on the following
formula:

Total value of economic benefits reasonably expected to be obtained

from making input taxed supplies
Total value of economic benefits reasonably expected to be obtained in
respect of the arrangement

For an example of impermissible use of this formula where the taxpayer had made an unreasonable
estimate of the “economic benefits” component, see Case 4/2016, 2016 ATC ¶1-082.

¶11-520 Subsequent GST adjustment if recipient makes input taxed or private

supplies

You will be liable for an increasing GST adjustment if you purchase an enterprise GST-free as a going
concern and you intend that some or all of the supplies made through that enterprise will be input taxed
(eg providing credit facilities or residential leases) (s 135-5).
The adjustment is calculated as:
1/10 × supply price × proportion of input taxed supplies
In the case of a residential lease, the “supply price” in this formula is the rent to be paid by the tenant (FC
of T v MBI Properties Pty Ltd [2014] HCA 49).
The “proportion of input taxed supplies” in the formula is the proportion of all the supplies made through
the enterprise that you intend will be input taxed goods and services. The proportion is worked out on the
basis of the prices of those supplies. If this proportion changes over time, appropriate additional
adjustments will need to be made. The proportion may be 100% where all the supplies made through the
enterprise are input taxed.
The ATO considers that your subsequent sale of the enterprise is itself a supply made through the
enterprise (Interpretative Decision ID 2007/180). It also apparently considers that the adjustment is
attributable to the tax period in which you acquired the business (Interpretative Decision ID 2007/72).
In the same way, there will be an increasing GST adjustment if you intend to make private or domestic
supplies.
If a change in business purposes means that your actual input taxed or private supplies are different from
those intended, an adjustment should instead be made under the corresponding rules noted at ¶6-300 (s
135-10).
The same rules apply to purchasers of farm land that is GST-free under the rules described at ¶11-410.
Where sale includes residence
If the going concern is on land that also contains a private residence unrelated to the business, the ATO
considers that the going concern concession would not apply to that residence, so no question of an
adjustment would arise. However, if the residence is used in the business, for example it is leased to the
manager of the business, the going concern concession could extend to the residence. Even here,
though, an adjustment may not be necessary.

Example
A supplier sells farm land in circumstances such that the sale does not qualify for the specific exemption under s 38-480 (¶11-410),
but qualifies for the going concern concession. The land includes a residence that is leased to a farm manager. The ATO says that
the residence could qualify as part of the going concern, and that an adjustment would not be necessary, provided that: (1) the
manager’s residence forms part of land that has the essential characteristics of farm land, and (2) the recipient continues to use the
farm land as a whole for operating a farming business (GST Advice GSTA TPP 092).

[GSTG ¶48-440]

¶11-530 Sale of business by selling shares

A business operated by a company may also be sold by disposing of the shares in the company. In this
situation, the “going concern” exemption is normally not relevant, as the supplier (the shareholder) is not
the same as the entity carrying on the business (the company). Instead, the sale of the shares is treated
as a financial supply and is therefore input taxed, ie GST will not be payable, but the seller will not be able
to claim input tax credits (unless it is below the financial acquisitions threshold: ¶10-032). This means, for
example, that GST on lawyers’ or accountants’ advice in relation to the sale would not be recoverable by
the vendor. On the other hand, any GST on their services will be recoverable to the extent that it relates
to activities of the vendor which are subject to GST.
Where the shares in the operating company are acquired, the purchaser will inherit the company’s tax
and financial history. The normal due diligence enquiry in such cases will need to include the company’s
GST status and liabilities. It will be important to check that the company has complied with its GST
obligations, that it has correctly categorised its supplies, monitored thresholds, maintained an effective
accounting system and so on, and express warranties sought where appropriate. In fact, many of the
points you needed to consider in preparing your own business for GST (¶2-010) will also need to be
explored in relation to the vendor company.
Where the company being acquired is a member of a GST group, the purchaser should normally ensure
that an Indirect Tax Sharing Agreement is in place (¶17-025).
In some cases, shares may form part of the assets of the business being sold, for example, where there
is a shareholding in a subsidiary company that holds assets used in the business, or shares are held as
trading stock of the business. In these cases, the transfer of the shares can be treated as part of the
supply of a going concern.
[GSTG ¶48-600]

¶11-540 Sale of franchise

The sale of an existing franchise by a franchisee may qualify as the sale of a going concern.
To obtain the exemption, the franchisee must transfer the benefit of the franchising agreement to the
purchaser. However, if this is not allowable under the franchise agreement, or the franchisor withholds
permission, or the purchaser wishes to extend the term, the Commissioner accepts that the requirement
will be satisfied if: (1) the franchisee surrenders its rights in favour of the purchaser; and (2) a new
agreement is entered into by the franchisor and the purchaser (GST Ruling GSTR 2002/5).
If a franchisor sells a new franchise to a franchisee, that would not be the sale of a going concern,
because there was no business being carried on before the sale.
If a franchisee terminates the franchise, there will be an adjustment event (¶6-100) if the GST on unpaid
instalments has already been accounted for.
 [GSTG ¶48-280]

¶11-550 Option to purchase business

The grant of an option to buy a going concern will itself be GST-free if the supply of the concern would be
GST-free (s 9-30). The Commissioner considers that this requires that the parties to the option must
agree that, on the exercise of the option, the supply will be GST-free, and must specify that all the
conditions for the exemption will be satisfied (GST Ruling GSTR 2002/5). For other rules relating to
options, see ¶4-020.
[GSTG ¶48-400]
TRANSPORT, TRAVEL AND VEHICLES
TRANSPORT AND TRAVEL
Overseas and domestic travel ¶12-000
Transporting, handling and insuring goods ¶12-010
Travel insurance, agents and related matters ¶12-020
Tourist Refund Scheme ¶12-030
International mail ¶12-050
MOTOR VEHICLES
GST on supply of cars ¶12-080
Input tax credits on cars above car limit ¶12-110
Second-hand vehicles ¶12-120
Trade-ins ¶12-125
Evaluation and product launches ¶12-128
Taxis, limousines and ride-sourcing ¶12-130
Sale of car on termination of lease ¶12-145
Cars and other vehicles for the disabled ¶12-150
Refunds for diplomats ¶12-160
Associated transport costs ¶12-170

Editorial information

Summary
International travel is GST-free, but domestic travel is generally subject to GST except where it
forms part of an overseas trip. Visiting tourists may be entitled to refunds of GST on items
purchased in Australia, provided they take them home with them.
Exemptions apply to export and import transport costs.
Special rules apply to taxis and “luxury” cars. Certain sales or leases of cars to disabled people are
GST-free. Petrol and diesel are subject to GST.

TRANSPORT AND TRAVEL

¶12-000 Overseas and domestic travel

Supplies of transport that are effectively consumed outside Australia are generally GST-free (s 38-355).
This means that no GST is payable, but that the supplier can claim input tax credits for the GST
component of anything acquired to make the supply.
Overseas travel
Transport of passengers from Australia to a destination outside Australia is GST-free. So is transport
between destinations outside Australia, or to Australia from a place outside Australia (s 38-355, item 1).
This applies whether the transport is by air or sea.

Example
Mr Page flies from Sydney to New York, then to Chicago, then back to Sydney. All this transport is GST-free. This, however, does
not apply to meals and accommodation consumed in Australia.

The ATO says that a destination outside Australia must be a specific physical location outside Australia to
which the passenger is going, and that this location is objectively significant to the passenger (GST
Determination GSTD 2015/2).

Examples
(1) Ms Finn leaves from Cairns on a booked diving trip to a particular coral reef in international waters, returning to Australia. This
transport is GST-free.
(2) Mr Ahab leaves from Sydney on a booked whale-spotting cruise which travels around following whales according to where they
happen to be. The trip may involve occasional stops in international waters for viewing. It then returns to Sydney. This transport
would be considered to be domestic, as there was no specific physical destination outside Australia (based on GST Determination
GSTD 2015/2).

Domestic travel
Normally, domestic travel is subject to GST. However, there are some exceptions.
(1) If the passenger is a non-resident, domestic air travel within Australia is GST-free, provided that the
ticket was purchased while the passenger was outside Australia (s 38-355, item 3). In practice, it may be
difficult to determine whether a passenger is a “non-resident”, particularly, if they book over the internet
and pay by credit card.
The ATO considers that “domestic air travel” involves movement from one place to another. Accordingly,
this exemption will not apply to a scenic flight or hot air ballooning trip within Australia that returns to the
same place without landing elsewhere. Similarly, a non-stop round trip sightseeing flight to Antarctica that
starts and ends in Australia may not qualify for this exemption, nor for the international flight exemption as
there is no “destination” outside Australia. However, to the extent that the flight occurs outside Australia, it
may qualify as partially GST-free under the export of services rule (see category (3) at ¶9-240). The ATO
says that the GST-free component could be calculated on a time basis or, preferably, on a distance basis
(ATO GST Industry Issues — Tourism and Hospitality: Issues 11, 12).
(2) The Australian domestic flight leg of any passenger’s international flight is GST-free if it forms part of
the international ticket, or was cross-referenced to such a ticket (s 38-355, item 2). This applies even
though there may be a stopover of any length between the international and domestic legs.

Examples
Ms Bates, a non-resident, is staying in Australia on a three-month working holiday. She flies from Adelaide to Cairns on a ticket that
she bought before coming to Australia. The flight to Cairns is GST-free. If she had bought the ticket in Australia, GST would have
applied.
Ms Crowley flies from the UK to Dubbo on the one ticket. The domestic leg from Sydney to Dubbo is GST-free. However, the flight to
Dubbo would not be GST-free if Ms Crowley had travelled from London to Sydney by ship, unless she was a non-resident and the
ticket was purchased while she was overseas.

(3) The Australian domestic leg of any passenger’s international sea voyage is GST-free if it is provided
by the same transport supplier (s 38-355, item 4).
 Example
Mr Capstan sails from the UK to Melbourne. The ship docks first at Sydney. The voyage from Sydney to Melbourne is GST-free.
However, the voyage to Melbourne on the ship would not be GST-free if Mr Capstan had travelled from the UK to Sydney by air.

Rail, bus or car transport within Australia is subject to GST. This applies irrespective of whether the
traveller is a non-resident, or whether the travel was purchased outside Australia.

Example
As part of a package holiday to Australia, Gina buys a 30-day bus pass entitling her to travel anywhere in Australia. This will be
subject to GST.

For cancellations or passenger “no shows”, see ¶12-020.

[GSTG ¶41-810]

¶12-010 Transporting, handling and insuring goods

If goods are exported from Australia, the international transport of them to their destination overseas from
their place of export is GST-free (s 38-355, item 5).
The “place of export” is the place from which they are posted, depart Australia, or are placed on board a
ship or aircraft (s 195-1). If non-postal goods were packed in a freight container, the place of export is the
last place from which they were collected, or to which they were delivered, before being packed.
However, if this did not occur, it means the place where they were packed in the container.
To the extent that the transport is within Australia, the exemption only applies if:
• the transport was supplied by the same transport supplier that transported the goods from Australia,
or

• the transport is supplied to a recipient that is a non-resident and is not in Australia at the time (s 38-
355(2)).

Transporting goods from one overseas place to another, and insuring that transport, is GST-free (s 38-
355, item 5).
Transporting goods to Australia
If goods are transported to Australia, the international transport of them from overseas to their place of
consignment in Australia is GST-free (s 38-355, item 5).
The place of consignment is explained at ¶9-005. Essentially, for postal goods, it means the place in
Australia to which the goods are addressed. For non-postal goods, it generally means the place in
Australia to which the goods are delivered under the main contract between the supplier and the recipient.
To the extent that the transport is within Australia, the exemption only applies if:
• the transport was supplied by the same transport supplier that transported the goods to Australia, as
distinct from a local contractor, or

• the transport is supplied to a recipient that is a non-resident and is not in Australia at the time (s 38-
355(2)).

The exemption applies where the relevant supply is of international transport. In Interpretative Decision ID
2013/20, the view is taken that the exemption therefore does not apply where the transport is merely
incidental to the supply of the goods and is not a separate supply in itself. In accordance with GST Ruling
GSTR 2001/8, this would be treated as a single, composite supply of delivered goods (¶4-200).
Accordingly, the exemption did not apply where an online overseas supplier sold and delivered goods to
an Australian purchaser, where (1) there was a single contract for goods and delivery, (2) it was not open
to the purchaser to make their own delivery arrangements, and (3) the supplier bore all the risks until
delivery was made.
Loading, handling and facilitation
Loading and handling goods during the course of their GST-free export or import is GST-free. So are
services that facilitate that GST-free transport, such as fumigation (s 38-355(1), item 5A). To the extent
that these services are done in Australia, the exemption applies only if the recipient is a non-resident and
is not in Australia at the time, or if the services are done by the international transport supplier (s 38-
355(2)). For further discussion of the exemption, see Interpretative Decision ID 2015/26.
Loading and handling would include a security and safety assessment of the goods (Interpretative
Decision ID 2011/10).
Insurance
Insuring the transport of the goods to their place of consignment in Australia is GST-free (s 38-355, item
6). So is insuring the subsequent transport of those goods within Australia, if this is an integral part of the
travel from outside Australia, and insuring any associated loading and handling within Australia.
Relationship to other provisions
• The value of transport, insurance or loading/handling costs may be included in the value of the goods
when assessing the value of a taxable importation (¶9-005).

• Transport, insurance or loading/handling relating to offshore supplies of low value goods to Australia
(¶9-130) are not GST-free under these rules.

[GSTG ¶41-810]

¶12-020 Travel insurance, agents and related matters

Arranging any GST-free transport or travel is itself GST-free (s 38-355, item 7). So, for example, a travel
agent’s commission for arranging overseas air fares would be GST-free, but the commission for arranging
a domestic holiday will be taxable.
GST-free status also applies to travel agents’ fees for arranging other supplies that will effectively be used
or enjoyed outside Australia, for example, overseas accommodation, visa applications, rail transport, care
hire, meals, entertainment and sightseeing (s 38-360).
Insuring or arranging insurance for GST-free passenger travel is GST-free (s 38-355, item 6, 7). For
example, insurance for overseas travel — including baggage, cancellation and emergency assistance —
is GST-free, and a travel agent’s commission for arranging it would also be GST-free. However, if the
travel was domestic, the travel would be taxable so the insurance and the commission would also be
taxable.

Example
Robyn, a travel agent, organises a travel package consisting of:
• a flight from Sydney to Perth and return

• three nights accommodation in Perth

• a flight from Sydney to New York, with hire car and theatre tickets

• travel insurance for the overseas trip.

GST is payable on Robyn’s commissions for the Perth/Sydney travel and the Perth accommodation. The commissions for the other
components are GST-free. (See ATO Fact Sheet NAT 4518 GST — Travel Agents and Commissions.)

Standard insurance policies for international travel may include the domestic travel involved in travelling
to and from the airport or other place of departure. This domestic component is normally so small it can
be ignored, so the whole amount of insurance and commission will be GST-free (GST Ruling GSTR
2000/33).
Executive or corporate policies may cover all varieties of travel over a set period such as 12 months. For
executive policies, the ATO considers that the taxable (domestic) component should be based on the
claims history for that type of policy. For example, if that history indicates that 45% of claims relate to
domestic travel, 45% of the insurance is taxable. For corporate policies taken out on the basis of an
estimate of the number of international and domestic trips, the taxable component of the insurance and
the commission should be based on that estimate. This may later need to be adjusted if the premium
changes to reflect a change in the proportion of domestic trips actually taken (GST Ruling GSTR
2000/33).
It would appear that the medical component of a domestic travel insurance policy is GST-free if the cover
is provided by a registered health insurance organisation.
Where taxable travel is arranged by a travel agent, the travel provider (eg the airline) — not the agent —
must account for the GST on the travel ticket to the ATO. The agent will, however, apply GST to its
commission. The tax invoice may be issued by either the agent or the travel provider, but not both.

Example
A travel agent, acting as an agent for an airline, sells an airline ticket for domestic travel. The travel is taxable. The airline must
account for the GST.

If an agent takes a deposit for an international flight, and the deposit is forfeited, the commission will still
be GST-free.
Where an inbound tour operator organises Australian tour packages for non-residents outside Australia,
the operator’s commission is GST-free if it is acting as an agent for the non-resident (¶17-400). However,
if the operator is acting as a principal, the entire supply of the package may be taxable. Whether the
operator is acting as an agent or a principal will depend on the contractual arrangements. For
circumstances in which the ATO will accept that the operator is acting as an agent, see Practical
Compliance Guideline PCG 2018/6.
Travellers’ cheques and foreign exchange
Exchanging foreign currency and issuing travellers’ cheques are input taxed financial supplies, so GST
does not apply (¶10-010).
However, where a travel agent or other operator is selling traveller’s cheques or exchanging currency as
an agent of another body, and charges a fee or commission for those agency services, GST will be
payable (ATO GST Industry Issues — Tourism and Hospitality: Issue 17).
Other travel-related matters
(1) Frequent flyer programs. Under frequent flyer programs, a traveller receives points for air travel made
with an airline. When these points reach a certain amount they can be redeemed for other travel or
benefits. GST does not apply to the award of these points, or to the supply of the travel or benefits
acquired on redemption of the points, as there is no consideration. See further ¶4-062.
(2) Local accommodation sold to non-residents. If a registered tour operator sells non-residents rights to
accommodation in Australia, for example, as part of a package, that may be treated as a taxable supply.
The accommodation is treated as real property (¶11-000); it therefore has the requisite connection with
Australia (¶4-100), and is excluded from the export exemption (¶9-240). This applies whether the tour
operator is resident or non-resident. “Accommodation” may extend to porterage or recreational facilities
(Saga Holidays Limited v FC of T [2006] FCAFC 191).

Example
An inbound tour operator sold rights to non-resident travel agents to pre-booked accommodation, transfers, car hire, tours, guides
and meals. These were to be provided by third parties. The price charged by the operator was the price it paid the third parties plus
its margin.
The supply of the accommodation component (including the arranging or packaging of the accommodation) was not GST-free, as it
 was a supply of real property.
The non-accommodation components of the tour package were also taxable. They were not entitled to the export exemption for
services (¶9-240) because they were supplies of rights to acquire something connected to Australia, within the exclusion in s 38-
190(2) (based on ATS Pacific Pty Ltd v FC of T [2014] ATC ¶20-449; ATO Decision Impact Statement at www.law.ato.gov.au).

The ATO considers that the whole land content of such a package — including car hire, domestic
transfers, entertainment tickets and restaurant meals — would be taxable, not just accommodation. See
also ATO Fact Sheet GST and Australian travel packages sold by foreign tour operators (NAT 13904).
(3) Free tickets are not subject to GST (¶4-030).
(4) Deposits are not subject to GST when they are paid, but attract GST once they are applied towards
the payment for the travel or if they are forfeited (¶4-070).
(5) Cancellations and “no-shows”. The general principles in relation to cancellation fees are explained at
¶4-065. The High Court has ruled that if a customer reserves a (domestic) airline seat, but cancels or
simply fails to turn up, and no refund is available or claimed, there is nevertheless a taxable supply by the
airline consisting of its conditional promise to use its best endeavours to provide a flight for the passenger
(FC of T v Qantas Airways Ltd 2012 ATC ¶20-352; [2012] HCA 41).
If a customer cancels a package tour that they have booked through an agent, the ATO considers that the
cancellation fee is consideration for the agent’s work in arranging the tour. If the tour is domestic, the
supply of that work would be taxable. If international, it would be GST-free (GST Ruling GSTR 2009/3).
(6) Inwards duty-free purchases. GST does not apply if you buy tobacco, alcoholic spirits or perfume at an
inwards duty-free airport shop (s 38-415). You must have arrived in Australia on an international flight as
a passenger or crew member.
(7) Aircraft noise levy is a non-taxable charge (¶4-080) imposed on airlines and passed on to passengers.
It is treated as part of the price of the airfare. GST therefore applies in the same way as it does to the
underlying transport service, eg GST-free if the travel is international (ATO GST Industry Issues —
Tourism and Hospitality: Issue 16).
(8) Excess baggage fees are treated as part of the supply of transport. GST therefore applies in the same
way as it does to that transport, eg GST-free if the travel is international (ATO GST Industry Issues —
Tourism and Hospitality: Issue 15).
Offshore suppliers of hotel accommodation
In the 2018/19 Budget, the Treasurer said that offshore sellers of hotel accommodation in Australia will be
required to calculate their GST turnover in the same way as local sellers from 1 July 2019. A Bill to
implement this measure has been introduced (¶11-320).
[GSTG ¶41-810; ¶41-820]

¶12-030 Tourist Refund Scheme

International travellers visiting Australia and Australians travelling overseas may be able to claim a refund
of GST paid on goods bought in Australia (s 168-5; GST Regulations, Div 168). The rationale for this is
that the goods are effectively being exported, and should be GST-free like other exports.
The refund is provided under the Tourist Refund Scheme (TRS). It applies where the following conditions
are satisfied:
• the goods cost $300 or more and were bought within 60 days before leaving Australia

• the purchase is accompanied by a tax invoice. In order to meet the $300 threshold, travellers may
aggregate several lower-priced items from a single retailer, made at the one time or on several
occasions within the 60-day period, provided that the total of those purchases is $300 or more and
each of the purchases is accompanied by a tax invoice

• the goods are taken with the traveller as hand baggage, or worn, when he/she departs from Australia.
The retailer must have an ABN and be registered for GST, but no further registration is required. The
goods cannot be consumed or partly consumed in Australia (eg in the case of perfume or chocolates), but
it is permissible for them to be used here before departure (eg as in the case of a camera or clothes). The
scheme is open to overseas visitors and Australian residents, except air and sea operating crew. Refunds
are claimed at TRS booths at airports and terminals and will require production of the tax invoice. There
are various payment options.
If or when the traveller re-enters Australia, the traveller will be required to declare goods that were
exported tax-free if they exceed the normal passenger concessions.
Wine
A similar refund scheme applies to WET paid on wine. In this case, the refund is calculated as 14.5%
(WET Act, s 25-5; WET Regulations, Div 25). The refund scheme does not apply to beer or spirits.
Application to external territories
The TRS extends to genuine residents of Australia’s external territories (Norfolk, Cocos & Keeling and
Christmas Islands), provided that they can show proof of shipping of exported goods to their external
territory. The intention is to provide a direct mechanism for those residents to obtain refunds of GST and
WET on goods that are unable to be exported as accompanied baggage.
Sealed bag system
The Sealed Bag System (SBS) allows international travellers to purchase goods GST-free from duty free
stores and certain retail stores. Goods purchased through the SBS are placed in a sealed bag which
remains sealed to ensure that the traveller takes the goods out of the country, so that the goods cannot
be consumed in Australia (s 38-185, item 7; GST Regulations s 38-185.01; Sch 1). The period within
which the SBS applies is limited to acquisitions made within 60 days prior to departure.
For a case in which the supplier was unable to establish that its relevant paperwork was bona fide, see
Sogo Duty Free Pty Ltd v FC of T 2011 ATC ¶20-249.
[GSTG ¶41-500]

¶12-050 International mail

Australia Post issues special postage stamps specifically for overseas mail in order to take advantage of
the exemption for exports. If these stamps are used for overseas mail, no GST applies.
Charges imposed on foreign governments for delivering or transporting overseas mail in Australia are
GST-free (s 38-540). For limited import duty and GST concessions on goods delivered from overseas,
see ¶9-030.
[GSTG ¶65-500]

MOTOR VEHICLES
¶12-080 GST on supply of cars

In accordance with the normal rules, the supply of a car as part of an enterprise may be subject to GST.
The GST would apply to the retail selling price, the cost of accessories, dealer delivery charges and
insurance, but not to registration or stamp duty.
An additional luxury car tax applies where the market value of the car exceeds a certain limit (¶23-000).
Input tax credits may also be limited in that situation (¶12-110). For apportionment of input tax credits
where the vehicle is used only partly for business, see ¶5-020.
Special considerations apply to second-hand vehicles (¶12-120), trade-ins (¶12-125) and taxis (¶12-130).
Supplies of cars to disabled people may be GST-free (¶12-150). Special rules apply if a vehicle is
transferred to an associate for less than market price (¶17-500).
For a detailed checklist of GST considerations relevant to motor vehicles, see ¶25-200.Note also that the
Tax Office is conducting a data matching program (¶18-175) for vehicles that have been transferred or
newly-registered in the period 2016/17 to 2018/19. This will involve obtaining data from all Australian
registry offices, so as to check compliance with tax, superannuation and GST requirements.

¶12-110 Input tax credits on cars above car limit

The input tax credit allowable on the acquisition of a business car will normally be limited if the market
value of the car, without any reduction for GST or luxury car tax, exceeds the “car limit” applying for the
financial year in which the taxpayer first used the car for any purpose. In this situation, the credit is limited
to 1/11th of that limit (s 69-10).
The car limit is:

Financial years Car limit

2016/17 to 2019/20 $57,581
2010/11 to 2015/16 $57,466
2008/09 and 2009/10 $57,180
2007/08 $57,123
2002/03 to 2006/07 $57,009
2000/01 to 2001/02 $55,134

Example
(1) In January 2020, a car is purchased for $77,000 (including GST and luxury car tax) and is used entirely for business purposes.
As the 2019/20 car limit is $57,581, the input tax credit is limited to 1/11 × $57,581 = $5,234. If the purchaser acquired the car for
only 70% business use, the input tax credit would be further reduced to $3,664.
(2) Four months after the purchase of the car in Example (1), a tow bar is purchased and fitted to the car for $2,200. This will be
treated as a separate transaction from the acquisition of the car, so the limit does not apply and the full input tax credit of $200 can
be claimed. In contrast, if the tow bar had been included in the original purchase, it would have been treated as part of the
acquisition cost of the car, on which only a reduced credit would have been available (based on GST Advice GSTA TPP 074).

This limit applies to “cars”. For present purposes, these are defined as motor vehicles designed to carry a
load of less than one tonne and fewer than nine passengers. Motor cycles and similar vehicles are
excluded. For the meaning of “motor vehicle”, see ¶23-100, but note that a different tonnage requirement
applies for LCT purposes. The ATO view is that the limit is not confined to cars that are “luxury cars” for
purposes of the LCT rules (¶23-100; Draft minutes of NTLG GST sub-group meeting, 12 September
2012).
The limit does not apply if you are entitled to quote your ABN (¶23-250), ie if you intend to use the car
solely for the following purposes:
• as trading stock. This includes holding the car for sale under a hire-purchase arrangement (GST
Ruling GSTR 2000/29), but not holding the car for hiring or leasing to others

• for research and development for the car’s manufacturer, or

• as a GST-free export.

Example
A finance company acquired a car to supply to a customer under a hire-purchase arrangement, but later terminated the arrangement
and replaced it with a lease. This did not alter the fact that the company was entitled to quote at the time of acquisition, and that it
was therefore entitled to a full input tax credit (Interpretative Decision ID 2005/186).

The limit also does not apply to:

 • motor homes or campervans

• commercial vehicles that are not designed for the principal purpose of carrying passengers

• specified emergency vehicles, such as ambulances or firefighting vehicles

• cars fitted to transport disabled people that do not qualify as GST-free under the rules at ¶12-150, or

• cars that are acquired by lease or hire. This exemption would apparently not include cars acquired
under a hire-purchase arrangement.

Example
Peta leases a luxury car for $2,200 a month. If the car is used entirely for business purposes, Peta can claim an input tax credit of
$200 on each lease payment. The credit is not limited even though the market value of the car exceeds the luxury car limit.

If the car was supplied fully or partly GST-free as a car for the disabled (¶12-150), no input tax credit at all
can be claimed on its acquisition.
Effect on capital allowance claims
Under the income tax law, capital allowance (formerly depreciation) does not apply to the extent that the
cost of the car exceeds an amount equal to the car limit (ITAA 1997 s 40-230). In working out the cost,
any available input tax credit is deducted (¶24-070).

Example
Assume, as in the earlier example, that a car is purchased in January 2020 for $77,000 entirely for business purposes and that the
maximum input tax credit is therefore $5,234. This reduces the allowable cost to $71,766. This is further reduced to the limit of
$57,581. This means that capital allowance is calculated as if the cost were $57,581.
If the car had been purchased for $60,000, the maximum input tax credit would still be $5,234. This would reduce the allowable cost
to $54,766. As this does not exceed $57,581, capital allowance is calculated as if the cost were $54,766 (based on Taxation
Determination TD 2006/40).

Car on hire purchase

If a taxpayer acquires a car on hire purchase (¶7-438), the input tax credit can be claimed in full when the
taxpayer makes the first payment or a tax invoice is issued to it. The credit is 1/11th of the principal, the
credit component and any associated fees and charges. This applies whether the taxpayer is on the cash
or accruals basis (s 158-5) (www.ato.gov.au/Business/GST/In-detail/Rules-for-specific-
transactions/Agent,-consignment-and-progressive-transactions/GST---Hire-purchase-and-leasing).
[GSTG ¶15-350]

¶12-120 Second-hand vehicles

If you buy a second-hand vehicle as part of your registered business, and the seller is registered, GST
normally applies to the sale and you can claim an input tax credit for that GST in the normal way. If the
seller is not registered, GST will not apply to the sale. However, if you are a dealer, you may still be able
to claim an input tax credit calculated as 1/11th of the cost (¶16-110).
[GSTG ¶15-660]

¶12-125 Trade-ins

If you trade in a car on the purchase of a new car, this is treated as a supply by you of your old car for a
consideration equal to the agreed trade-in price (¶4-020). If you are registered and the car was used in
your business, you may be liable for GST and must provide a tax invoice. However, if the car was used
only partly for business, you may be entitled to claim a GST adjustment under Div 132 so that the trade-in
reflects only the business use (¶6-310).

Examples
(1) Priya, a registered sole trader, buys a new van for $19,800 for business purposes only, and claims an input tax credit of 1/11 ×
$19,800 = $1,800. She later trades in the van on a new business van. The price of that new van is $22,000 and the trade-in value is
$5,500. Priya can claim an input tax credit of 1/11 × $22,000 = $2,000 on the new van and must account for 1/11 × $5,500 = $500
GST on the trade-in. Conversely, the trade-in dealer accounts for the $2,000 GST and claims an input tax credit for the $500.
(2) Assume instead that Priya uses both vans 75% for business and 25% for private purposes. On the original purchase Priya
therefore claims an input tax credit of 75% × 1/11 × $19,800 = $1,350. On the later trade-in, Priya will:
• claim an input tax credit of 75% × 1/11 × $22,000 = $1,500 on the new van

• account for 1/11 × $5,500 = $500 GST on the trade-in. However, in accordance with the rules at ¶6-310, she can also claim a
downwards GST adjustment of 1/11 × $5,500 × (1 − 1,350/1,800) = $125.

As in example (1), the trade-in dealer will account for $2,000 GST and claim an input tax credit for $500.

From the dealer’s perspective, the trade-in is an acquisition of second-hand goods, so that normally an
input tax credit may be claimed even where the customer is not registered (¶16-110). The dealer may
also have the option to apply a global accounting method (¶16-120).
The ATO has issued a useful Charities and Motor Vehicle Trade-Ins Fact Sheet.

¶12-128 Evaluation and product launches

If a vehicle is supplied to another person for evaluation, GST would not apply to the supply unless the
supplier receives something back in return. GST would therefore not apply in situations such as where a
vehicle is supplied to:
• a motoring writer to enable them to write a driving test report to be published in a newspaper or
magazine

• employees of a dealer to enable them to become familiar with the vehicle, or

• a potential customer for evaluation.

However, GST can apply if the supply is for money, or is conditional on the recipient providing services
back to the supplier, eg if the motoring writer’s report is to be made to the supplier for the supplier’s
benefit. In that case, the consideration would be the market value of those services.
Normally, GST would not apply where a manufacturer provides a vehicle for a product launch, as there
would be no supply of the vehicle to the launch organiser (ATO GST Industry Issues — Motor Vehicles:
Issue 11).

¶12-130 Taxis, limousines and ride-sourcing

If you supply taxi travel as part of your enterprise (¶3-020), you are required to be registered, regardless
of turnover (s 144-5). The purpose of this rule is to avoid the confusion that would be created if some taxis
had to charge GST and others did not.
“Taxi travel” means travel that involves transporting fare-paying passengers by taxi or limousine (s 195-1).
This would presumably be restricted to motor-powered vehicles, for example, pedal-powered cycle
rickshaws would not be covered (Interpretative Decision ID 2004/478). It may also be restricted to motor
cars, with the result that a motor-powered tricycle was not covered (Interpretative Decision ID 2004/523).
For discussion of what constitutes a “limousine”, see ¶23-100.
“Taxi” bears its ordinary, everyday meaning as “a vehicle available for hire by the public, and which
transports a passenger at his or her direction for the payment of a fare that will often, but not always, be
calculated by reference to a taximeter”. On this basis, it includes vehicles supplied under “ride sourcing”
services such as Uber. This is so even though the software technology used in providing the Uber service
may not have been known at the time the legislation was introduced (Uber BV v FC of T 2017 ATC ¶20-
608; Interpretative Decision ID 2002/23). However, it would not apply to non-commercial car pooling or
car sharing arrangements (see “Ride-sourcing and tax”, www.ato.gov.au/General/Ride-sourcing-and-tax/?
=redirected). Nor would compulsory registration apply where a vehicle is used only for private hire for
weddings, or for fixed-price reception and transfer services for overseas students (Interpretative Decision
ID 2002/24).
The ATO is undertaking ongoing data matching programs (¶18-175) to check on compliance in this area.
Data is being collected from financial institutions that have been identified as having accounts operated
by ride-sourcing facilitators. The ATO says that it has already contacted 120,000 ride-sourcing drivers in
relation to their tax obligations.
Although the taxi operator is required to be registered, a person who is simply employed as a driver by
the operator at an hourly rate is not carrying on a business and is not required to register. However, if the
driver is acting under a bailment arrangement with the licence owner and has a share of the takings, the
driver may not be considered to be an employee and may be required to register. In addition, the hire of
the taxi by the owner to the bailee/driver is a taxable supply (Interpretative Decision ID 2001/215; Huynh
& Anor v FC of T 2008 ATC ¶10-020).
A taxi plate owner who simply leases the plate to a taxi company and does not supply taxi travel is not a
taxi operator, and is therefore not subject to the compulsory registration rule (Interpretative Decision ID
2002/486). The same would apply if that person sells the plate outright. In addition, even if the proceeds
from the sale of the plate exceed the compulsory registration threshold, this in itself will not require the
seller to be registered because the plate is a capital asset (¶3-030).
The sale of a taxi licence plate, together with all things necessary to carry on the business (eg vehicle and
equipment), may be GST-free under the “going concern” rule (¶11-500). For this exemption to apply
where the taxi is leased to various bailee-drivers, the purchaser must also receive the benefit of the
leases. The sale by a taxi operator of a taxi licence plate on its own would be taxable.
Calculating GST and credits
Taxi services to passengers are subject to GST. The amount of consideration on which GST is calculated
includes any tip, but no GST is payable if the passenger evades payment altogether (¶4-030). In the case
of “ride-sourcing” services (see above), the consideration is the full fare, not the net amount received after
deducting fees or commissions paid to the third-party facilitator of the service.
Input tax credits can be claimed for the GST included in any associated road tolls.

Example
A taxi operator transporting a passenger pays a toll of $3.30 including 30 cents GST. The operator could claim an input tax credit of
30 cents. The metered fare is $22 including $2 GST. The total charge including toll would therefore be $22 + $3.30 = $25.30. The
operator’s GST liability on the fare is 1/11 × $25.30 = $2.30. The passenger, if registered and if the fare is a business expense,
could correspondingly claim an input tax credit of 1/11th of $25.30 = $2.30.

Input tax credits must be apportioned if the vehicle is also used for private purposes. This may have
particular relevance to ride-sourcing arrangements.
In accordance with the normal rules (¶5-170), there is no obligation to issue a tax invoice if the GST-
exclusive price does not exceed $75.

Example
A registered business traveller is charged $88, including $8 GST, for a taxi trip to the airport. As the GST-exclusive price is over $75,
the traveller will need to receive a tax invoice from the taxi operator in order to claim an input tax credit for the $8.
Note: If the invoice provided does not qualify as a tax invoice because it does not show the taxi operator’s ABN, no input tax credit
can be claimed. In addition, under the PAYG rules, the business traveller will be obliged to withhold tax at the top rate (¶3-050) from
the fare and account for this amount to the ATO. This will not apply if the travel is not a business activity.

An exemption from the requirement to produce a tax invoice applies for certain taxi travel (WTI 2013/8;
see ¶5-130).
For GST purposes, Cabcharge vouchers are treated as payment as soon as they are signed and handed
over (¶7-325).
GST applied where a business operator applied a 10% service fee on processing a debt for taxi services
paid for by credit card (Interpretative Decision ID 2004/135).
The original issue of a taxi licence is not taxable (¶4-080). Certain transitional assistance payments made
to participants in the Queensland taxi and limousine industry have been ruled not to have any GST
consequences (Class Ruling CR 2017/43).
The ATO has compiled a useful How to Complete Your Activity Statement for Taxi Drivers (NAT 11368).
A taxi driver failed in a challenge to an assessment that was based on the ATO’s taxi industry
benchmarks (¶18-175), where his records were inadequate or failed to contradict the Commissioner’s
amounts (Baini v FC of T 2012 ATC ¶10-259).
Advance payments of GST
Accredited taxi, hire car and limousine drivers can make advance payments on account of their GST or
other BAS liabilities by using an Activity Statement Payment Card issued by the ATO. This is, however,
limited to payments made through Australia Post, Billpay or Bpay. Payments by cheque through the mail
must still be done with paper payment advice slips.
[GSTG ¶5-150]

¶12-145 Sale of car on termination of lease

The ATO considers that the sale of a vehicle by the lessor on the termination of the lease is a separate
supply from the lease itself (GST Determination GSTD 2001/2).
The lease may provide that if the goods are sold to a third party, the lessee will be liable for any shortfall
between the sale proceeds and the residual value, or be entitled to any excess. The ATO considers that
where this occurs, it will constitute a change of consideration for the lease, as distinct from the sale (GST
Determination GSTD 2001/2). This means that if the lease is fully taxable, the payment of the excess or
shortfall will result in GST adjustments to the lessor and lessee.

Example
Enterprises enters into a four-year car leasing agreement with Finance Co. Both parties are registered for GST and the car is used
wholly for business purposes. On termination of the lease, Enterprises returns the car. The residual value is $6,000. Finance Co
sells the car to a third party for $11,000 (including $1,000 GST). As the agreement allows Finance Co to exclude GST from the net
sale proceeds, the refund due to Enterprises is $4,000.
The sale for $11,000 is a taxable supply and Finance Co will account for GST of $1,000.
As the lease was a taxable supply, the payments made under it by Enterprises included GST. Finance Co therefore accounted for
1/11th of this amount and Enterprises claimed a corresponding amount as an input tax credit. However, the refund of $4,000 is
treated as an adjustment event reducing those payments. This will result in a decreasing adjustment of $363 to Finance Co and an
increasing adjustment of $363 to Enterprises.

If the lease was a pre-8 July 1999 lease that was GST-free, the payment of the excess or shortfall had no
GST implications. If it was not GST-free, but was only partly taxable because it spanned 1 July 2000 (¶19-
210), the GST adjustments resulting from payment of the shortfall or excess were apportioned according
to the taxable portion of the lease.
If the lessee has the right or obligation to purchase the car on termination of the lease, this would be
treated as a hire-purchase agreement (¶10-010). If the agreement was made before 1 July 2000, it was
not subject to GST even if the option to purchase was exercised on or after that date (¶19-200).
For the position where a lease is terminated early, see ¶4-020.
[GSTG ¶10-115]
¶12-150 Cars and other vehicles for the disabled

Supplies of cars to disabled veterans and other disabled people may be GST-free.
Disabled veterans
The supply of a car to a disabled veteran is GST-free in certain circumstances. To qualify, the veteran
must intend to use the car for personal transportation during the whole of any of the following:
• the first two years after acquisition

• the period up to the time the car becomes incapable of being used for its ordinary purpose, or

• a period that the Commissioner considers appropriate in special circumstances. This is interpreted as
being the period ending when the vehicle reaches 40,000 km (s 38-505; 195-1).

Provided that the veteran has the relevant intention at the time of acquiring the car, it does not matter if
the veteran actually sells the car before any of these periods expire. However, if such a sale was made
without any reason, this could cast doubt on whether the intention was genuinely held in the first place.
The disabled veteran must be a person who: (1) has served in the Defence Force or in any other armed
force of Her Majesty; and (2) as a result, has lost a leg or both arms; or had a leg or both arms made
permanently and completely useless; or receives a total disability pension under the Veterans
Entitlements Act 1986; or is a severely injured individual who receives the Special Rate Disability Pension
under the Military Rehabilitation and Compensation Act 2004.
The car must be designed to carry a load of less than one tonne and fewer than nine passengers. Motor
cycles are not eligible; however, a special rebate may be claimed from the Repatriation Commission by
Totally and Permanently Incapacitated (TPI) war veterans to cover the cost of GST paid on motor cycles
designated as their personal vehicle (Statutory Rules No 209 of 2001). The rebate also applies to the cost
of replacement parts. However, it apparently does not apply to quad bikes (George v Repatriation
Commission [2003] AATA 538).
It appears that the exemption would cover dealer delivery charges, as these would be treated as
incidental to the supply of the car (Customs & Excise Commissioners v British Telecommunications plc
[1999] 3 All ER 961): see ¶4-200. It would also presumably apply to accessories fitted at the time of
delivery.
If the market value of the car (including GST) is higher than the “car limit” (¶12-110), the supply of the car
is only GST-free up to that limit. Above that limit, GST will apply. For the LCT threshold above which
luxury car tax may apply, see ¶23-150.
However, even though the supply of the car may therefore be partly taxable, no input tax credit can be
claimed (¶12-110). In working out the market value, you can disregard the value of modifications made
solely to adapt it for disabled use (eg hand controls). For a limited luxury car tax exemption for cars
modified for wheelchairs, see ¶23-100.
Car parts for cars which are GST-free under these rules are themselves GST-free. The ATO says that
this includes items such as batteries, tyres, oil filters, petrol filters, fuel pumps, spark plugs, water pumps,
radiator hoses, windscreens, and head and tail light globes. However, it says that items such as oils,
greases, paints, hydraulic fluids, radiator additives, refrigerant gases, petrol additives, brake fluids and
petrol are not car parts and will therefore be subject to GST (ATO Fact Sheet NAT 4325). Car parts also
include certain equipment fitted to cars for purposes of transport/delivery.
The ATO now accepts that a GST-free supply of car parts also includes the labour services involved in
fitting those parts to the car, eg where tyres are replaced or a new windscreen, battery or muffler is fitted.
However, this does not apply if the supply of the parts is merely incidental, eg where spark plugs are
supplied in the course of a routine car service (GST Ruling GSTR 2001/8).
The supply of a car to a spouse of an eligible veteran, or to a company that on-sells to the veteran, does
not qualify.
If the disabled veteran sells or trades-in the vehicle, this will be a non-taxable supply, in accordance with
the normal rules, if the veteran is not registered or required to be registered. For the position of a second-
hand dealer who deals with a disabled veteran, see ¶16-110.
Other disabled persons
The supply of a car to other disabled persons may also be GST-free if the person has a disability
certificate to the effect that he/she has lost the use of one or more limbs and cannot use public transport
(s 38-510). In this case, however, the person must intend to use the car for personal transportation to or
from gainful employment for the whole of the relevant period. Otherwise, the time limits and other
conditions are the same as for disabled veterans.
In a related sales tax context, it was held that:
• “gainful employment” means an occupation, profession or work that is productive of some advantage
or pecuniary gain

• it therefore does not include volunteer work even where there is some reimbursement of expenses

• it is not necessary that there be a contract of service or an employment relationship. However, if that
exists, it seems that relatively small gains may satisfy the requirement that it be gainful

• it is not necessary that the person be in gainful employment at the date of purchase of the vehicle. In
this particular case, it was sufficient that the person was in active — and ultimately successful —
pursuit of gainful employment (Kellow v FC of T 2002 ATC 2179).

In sharp contrast, the ATO has taken the view that the gainful employment test cannot be satisfied if the
person is unemployed at the time the car is supplied. It considers that to be in gainful employment a
person must be: (1) undertaking paid work, or working in his/her own business, for at least eight hours
weekly on a regular basis; and (2) receiving a monetary reward which is commensurate to the person’s
age, experience and capabilities (ATO Fact Sheet NAT 4325).
To obtain a disability certificate, use the ATO form Application for Medical Assessment to Obtain a Car or
Car Parts GST-free (NAT 3417). The application includes a medical report which must be completed by a
medical practitioner. Depending on the circumstances, Disability Certificates may be issued in either
temporary or permanent form. Temporary certificates cover only the current purchase, and a further
assessment will need to be made for subsequent purchases.
Supply may be sale or lease
The supply may be by sale or lease. The Commissioner accepts that an eligible person will be able to
lease a car GST-free where the period of the lease is for at least two years or until the car has travelled
40,000 km. The eligible person must intend to use the car for the prescribed purpose for the whole of that
period.
If the lease company enters into a full novation arrangement with the disabled person and the disabled
person’s employer, the ATO treats this as a supply to the employer, so the lease is not GST-free.
However, if the lease company leases a car to a disabled person, who sub-leases it to their employer
under a partial novation arrangement, the exemption may apply (ATO Fact Sheet NAT 4325).
Declarations to supplier
All eligible disabled persons should provide the supplier with a declaration in the approved form, ie a
Declaration to the Commissioner of Taxation: GST — Disabled Veteran (NAT 3418) or a Declaration to
the Commissioner of Taxation: GST — Person with a Disability Gainfully Employed (NAT 3419). The
declaration should be retained by the supplier as authority for the GST-free supply.
Medical aids and appliances
Other relevant GST-free aids and appliances, including motorised scooters or wheelchairs, are listed at
¶13-350 under the headings “Mobility of people with disabilities — physical: wheelchairs and accessories”
and “Mobility of people with disabilities — motor vehicles”.
[GSTG ¶68-140]
¶12-160 Refunds for diplomats

Diplomatic missions, consular posts and their employees may be entitled to refunds of GST and luxury
car tax on the purchase of locally manufactured or imported vehicles. The refund is made under the
Indirect Tax Concession Scheme (¶16-230). Precise entitlements vary from country to country, and the
position held. For details, see the ATO Fact Sheet Motor Vehicle Sales to the Diplomatic Community
(available online at www.ato.gov.au).

¶12-170 Associated transport costs

GST applies to goods and services such as:

• repairs

• petrol and diesel fuel

• car rental

• public transport fares

• taxi services (¶12-130)

• vehicle insurance (¶10-110; ¶10-120).

Motor vehicle registration fees and the issue and renewal of driving licences are not subject to GST,
though driving tests are taxable. Parking fees are taxable, but not parking fines or penalties for driving
infringements (¶4-080). Extended vehicle warranties are subject to GST.
If a dealer registers and pays compulsory third party insurance on behalf of the purchaser of a car, and
recoups that amount from the purchaser, a tax invoice for the insurance should be issued by the
registration authority (as agent for the insurer), not the dealer.
“Wholesale holdback” and “retail holdback” payments made by a car manufacturer or importer of new
cars to a dealer that are made under an arrangement that does not form part of a dealership agreement
are not consideration for a supply. GST therefore does not apply (GST Determination GSTD 2005/4).
For the GST treatment of vehicle modification permits, see the example at ¶4-080.
FOOD, HEALTH AND MEDICAL
Overview ¶13-000
FOOD
GST-free supplies of food ¶13-100
Definition of “food” ¶13-110
Restaurant, catered or eat-in food ¶13-120
Hot takeaway food ¶13-130
Prepared meals and food ¶13-140
Bakery products ¶13-150
Confectionery, snacks, ice-cream and biscuits ¶13-160
Food combinations and hampers ¶13-170
Drinks ¶13-180
Wine, beer and spirits ¶13-190
Food additives ¶13-195
Food packaging ¶13-200
Simplified GST accounting for food suppliers ¶13-210
Other simplified methods for food retailers ¶13-215
Other optional methods ¶13-216
Giveaways and promotions ¶13-220
ATO food and beverage checklist ¶13-230
HEALTH AND MEDICAL
GST-free health services ¶13-300
Medical practitioners’ services ¶13-310
Allied health professionals’ services ¶13-320
Hospital services ¶13-330
Residential care, home care and disability services ¶13-340
Medical aids and appliances ¶13-350
Drugs, medicines and health goods ¶13-360
Private health insurance ¶13-370
Funerals ¶13-380

Editorial information

Summary
 Most supplies of food, health and medical services are GST-free, although there are some
important exceptions, particularly, in the case of food.
GST-free means that no GST is payable on the supply but that the supplier can claim input tax
credits for the GST paid on business inputs relating to that supply. Various other important GST-
free supplies — such as education and exports — are dealt with in other chapters.

¶13-000 Overview

This chapter explains two of the most common GST-free supplies — food and health care. For a full list of
GST-free supplies, see ¶1-160.
Being GST-free means that no GST is payable on the supply. However, the supplier can claim an input
tax credit for any GST it paid on the things it acquired to make the GST-free supply. To take a simple
example, assume that a hospital buys a computer to use in providing health care to patients. The health
care is GST-free, so no GST applies to it. The hospital can, however, claim a credit for any GST it paid
when it acquired the computer. For further details about claiming input tax credits, see ¶5-020.
It is important to note that it is the supply which is GST-free, not the supplier. For example, all of a
hospital’s supplies are not automatically GST-free, only those that are covered by exemptions.

FOOD
¶13-100 GST-free supplies of food

Most food for human consumption is GST-free (s 38-2). To take a few common examples, GST typically
does not apply to fruit, vegetables, meat products, fish, bread, cheese, eggs, milk, soup, sugar, tea and
coffee.
However, there are some important exceptions to this. Food is not GST-free where it falls within any of
the following categories:
• restaurant, catered or eat-in food

• hot takeaways

• prepared meals and other prepared food

• bakery products (but bread is GST-free)

• confectionery, snacks, ice-cream and biscuits

• alcohol, most soft drinks and certain other drinks

• certain food additives (s 38-3).

In deciding whether a supply of food is GST-free, you therefore need to ask the following questions:
(1) Is it “food” (¶13-110)?

(2) If so, does it fall under any of the taxable categories (¶13-120 and following)?

If the item is food, and none of the taxable categories applies, it is GST-free. If any of the taxable
categories apply, it is not GST-free. As some of the taxable categories overlap, you may need to check
each one to be sure of the item’s GST-free status.
Food sold through non-profit school tuckshops may be input taxed (¶14-010). Community meals on
wheels services are GST-free (¶13-340). Discounted food supplied by charities is GST-free in certain
situations (¶15-010). For the GST treatment of food ordered over the internet, see ¶4-200.
[GSTG ¶50-000]

¶13-110 Definition of “food”

Food means food or drink for human consumption (s 38-4).

Food also includes:
• ingredients for food or drink for human consumption

• goods to be mixed or added to food for human consumption, for example, condiments, spices,
seasonings, sweetening agents or flavourings. This includes dried rosemary skewers (Interpretative
Decision ID 2004/373) and dried bamboo leaves used to wrap and flavour food (Interpretative
Decision ID 2004/372). For special rules affecting some additives, see ¶13-195

• fats and oils marketed for culinary purposes.

Live animals, such as cows, sheep, pigs, fish and poultry, are not food. They only become food when they
have been processed into meat for human consumption. This means, for example, that GST applies to
the sale of a live cow, or fat lamb, but not to the sale of a raw steak or lamb cutlet. A special rule applies if
livestock or game are delivered for slaughter or processing into food, and there is an arrangement that
ownership only passes after they have become food. In this case, the supply is taken to have occurred on
delivery, ie before it has become food (s 9-10). That supply is therefore not GST-free.
Live crustaceans and molluscs, such as lobsters, oysters and crabs, are treated as food and are GST-
free if supplied for human consumption.
Unprocessed grains, cereal and sugar cane are also not treated as food. This means that they will be
subject to GST. However, they will become GST-free once they have been processed or treated in some
way that results in an alteration in their form, nature or condition, and are supplied for human
consumption. The treatment may be as simple as cleansing; for example, wild rice that has had impurities
removed and is then repackaged for sale will be GST-free. Raw/unprocessed olives are evidently treated
as food even though they are unpalatable in that state.
The Commissioner considers that dried pulses (eg dried peas, lentils or beans) become food only after
they have been machine dressed by the removal of impurities; it is not sufficient that they simply be “farm
dressed” (GST Bulletin GSTB 2001/1).
Edible plants are not treated as food while they are still under cultivation. For example, a living herb plant
is not GST-free, but a bunch of picked herbs is. A hydroponically-grown lettuce will be GST-free once
picked and sold (ATO GST Industry Issues — Food: Issue 2).
Food marketed for consumption by animals — for example, pet food, birdseed and food for livestock — is
not treated as food. Nor is rotten food that is not fit for human consumption. However, it may be treated as
food at all earlier stages in the chain of supply while it is still potentially fit for human consumption.
Exceptionally, rotten grapes used in the process of making wine or vinegar are treated as food on the
basis that they are food ingredients (ATO GST Industry Issues — Primary Production: Issue 20.4.3).
Unprocessed cow’s milk is not treated as food. However, cow’s milk becomes GST-free once it has been
processed, eg by separation, evaporation, pasteurisation, re-hydration, homogenisation or reconstitution
(but not simply by filtration). Goat’s milk is GST-free whether or not it has been pasteurised (ATO GST
Industry Issues — Food: Issue 2).

Examples
(1) A farmer sells vegetables GST-free to a wholesaler who on-sells them. If at this stage they are fit for human consumption, the
wholesaler’s sale will also be GST-free. If they are bought by a pet food maker and processed into pet food, the sale of that pet food
to a retailer, and the subsequent sale to a customer, will be subject to GST.
(2) A dairy farmer sells unprocessed cow’s milk to a processor. This unprocessed milk is not yet fit for human consumption and is
 specifically made subject to GST. The processor processes the milk and sells it to a retailer who sells it to a consumer. Both of those
sales are GST-free. If the processor sells processed milk to a chocolate manufacturer, that sale is GST-free. However, sales of
chocolates to consumers will be subject to GST because they are confectionery.
(3) A nursery sells broccoli seedlings to a market gardener. The sale is subject to GST as the seedlings are still under cultivation.
The market gardener grows the broccoli, picks it and sells it to a wholesaler, who sells it to a retailer who sells it to a consumer. All
those sales are GST-free. If the wholesaler sold broccoli to a restaurant that sale is GST-free, but a meal including the broccoli
served to a customer by the restaurant is subject to GST.
(4) A farmer sells wheat to a mill. That sale is subject to GST as the wheat is unprocessed. The mill processes the wheat into flour,
so it is now “food”. The mill sells it GST-free to a pie maker who sells pies to retailers. The sale to the retailers will be subject to GST
as pies are taxable bakery products.
(5) A grazier sells a live cow to an abattoir. The live cow is not food, and the sale is subject to GST. Once the abattoir slaughters and
processes the carcass, it is fit for human consumption and is food. The sale of the carcass to a wholesaler, and the subsequent sale
to a butcher, is therefore GST-free. If the butcher sells the meat to a customer it will also be GST-free. If the butcher sells it to a
restaurant, that sale will be GST-free, but the steak served to a customer of the restaurant will be subject to GST (¶13-120).
See generally ATO GST Industry Issues — Food: Issue 1.

If an item is not fit for human consumption, or is otherwise excluded from being food, the sale will not
qualify as GST-free under this head no matter how the item is used by the purchaser.

Examples
(1) A farmer sells unprocessed grain. As this is excluded from being food, this sale will not be GST-free even if the grain is used by
the purchaser to make GST-free breakfast cereal.
(2) A farmer sells grapes, which qualify as food. The sale will be GST-free even if the grapes are used by the purchaser to make
wine which is not GST-free.

Food that also may be used for other purposes is still food. For example, rice flour is a food even though
the identical product may be used in the processing of aluminium. However, it is not GST-free unless it is
“for” human consumption. This may be indicated by its name, method of storage, label, marketing or
method of delivery. For example, food-grade fish sold as bait was not GST-free (Interpretative Decision ID
2002/912). Nor were products sold as edible body paint or massage products, even though some of the
product could be consumed during use (Interpretative Decisions ID 2004/37; ID 2004/38). In addition,
some items are classed as food only if they are specifically marketed as such, for example, culinary fats
and oils. Therefore, orange oil marketed as a food ingredient is GST-free, but not if it is marketed as an
aromatherapy oil. For the treatment of food additives, see ¶13-195.
Live animals that do not qualify as GST-free food may be GST-free if they are exported (¶9-200).
Cashflow considerations
Cashflow difficulties can arise for food-related businesses, such as meat processors, that pay GST-
inclusive prices for stock that is then sold in the form of GST-free food. The difficulty arises because there
will typically be a delay between paying the GST-inclusive price and claiming the credit (¶21-070).
[GSTG ¶50-020]

¶13-120 Restaurant, catered or eat-in food

GST applies to all food supplied for consumption on the premises where it is supplied (s 38-3). This
applies, for example, to restaurants, cafes, snack bars or similar businesses that provide eat-in facilities
on the premises.
The “premises” include not only the actual place where the food is supplied but also the surrounding
grounds. They also include the whole of any enclosed space such as a football ground, garden,
showground, amusement park or similar area where there is a clear boundary or limit (s 38-5). The ATO
describes these as premises associated with “leisure, sport or entertainment”. This could apply, for
example, to sports grounds, golf courses, gyms, ice-skating rinks, motor racing circuits, exhibition halls,
theme parks, aquariums, galleries, race courses, swimming pools, tennis centres, tenpin bowling alleys,
air show venues, amusement parks/arcades, museums, zoos, cinemas, concert halls, entertainment
centres and theatres (GST Determination GSTD 2000/4).
On this basis, any food or drink sold at a football ground, for consumption at the ground, will be taxable.
The same applies to food and drink sold at a kiosk within an enclosed Botanical Gardens.
Some food outlets are within larger general purpose areas that do not fit within the “leisure, sport or
entertainment” description. In these cases, the ATO accepts that the relevant premises will be limited to
the food outlet and associated surrounding grounds (eg seating areas), not the whole larger area (GST
Determination GSTD 2000/4). This would apply, for example, to:
• a shop in a caravan park or camping ground

• a school tuckshop

• a canteen in a hospital, office or factory, or

• a cafe in a shopping centre, university or airport.

The ATO considers that if you hire caterers for a party at your own home, the supply of the food will be
taxable because it is supplied for consumption on the premises (the home).
The premises do not include any part of a public thoroughfare, unless the area is designated for use in
connection with supplying food from an outlet, as may happen with a street food fair. Tables and chairs
set up on the footpath as part of a cafe would form part of the cafe’s premises, but not seats at a bus stop
outside the cafe. For the situation where the supplier sells both takeaway and eat-in food, see ¶13-130.
[GSTG ¶50-050]

¶13-130 Hot takeaway food

GST applies to hot food supplied for consumption away from the premises where it was supplied (s 38-3).
This may include items such as soup, tea, coffee, hot chips, hamburgers, hot chicken, pies, sausage rolls
and pizzas sold from takeaway outlets. It also includes complete meals that are heated and ready for
immediate consumption (eg meat, vegetable and rice dishes supplied in containers by a restaurant or
takeaway outlet).
Food will not be taxed as a hot takeaway item simply because it happens to be hot at the time of
purchase, provided it is not intended to be consumed hot. For example, bread remains GST-free under
the rules described at ¶13-150, even though it may be purchased warm from the oven.
If the takeaway food is supplied cold, it may nevertheless be taxable if it falls within one of the other
categories of taxable food, for example, confectionery (¶13-160), sandwiches or prepared meals (¶13-
140), bakery products (¶13-150) or soft drinks (¶13-180). Items such as milk and bread bought from a
takeaway remain GST-free.
The GST legislation does not define what “hot” food is. The official view is that it means food that is
heated to above room temperature or above the surrounding air temperature, and that “you do not need
to check the precise temperature”. Presumably, you can tell by looking, smelling, poking or feeling it.
If hot and cold food is supplied as a single item for consumption (eg a kebab), it is treated as hot.
Combined eat-in and takeaway facilities
Some places provide food both for takeaway and to eat on the premises. In this situation, the supplier
must be able to identify which is which. In GST Determination GSTD 2000/5, the ATO says that this can
be done where the supplier’s business operations involve:
• separate ordering and serving processes for eat-in and takeaway

• different packaging (eg drinks provided in a glass, compared to an unopened bottle), or

• different menus or product lines.

If the business operations do not discriminate in this way, the ATO will accept that food may be treated as
a takeaway if it is served in its original or takeaway form and is not served in circumstances indicating that
consumption will take place on the premises (eg it is not served at a table).

Examples
(1) A food court snack bar asks its customers if they want to eat at the food court or take the food away. If they say they want to eat
in, the snack bar provides a tray, a plate for food and opens bottled drinks. If they say they want to take away, the snack bar
provides none of these things. The snack bar should treat food in the first category as eat-in and food in the second category as
takeaway.
(2) If the snack bar does not ask its customers whether they will eat in or takeaway, items such as an unopened bottle of water or a
piece of fruit would be treated as GST-free takeaways if they are not served at a table, or with a meal or returnable tray, or in any
other way that would indicate that they will be consumed on the premises. (Based on GST Determination GSTD 2000/5.)

For drinks purchased at vending machines, see ¶13-180.

[GSTG ¶50-060]

¶13-140 Prepared meals and food

GST applies to food marketed as a prepared meal (s 38-3; Sch 1). In determining how food is “marketed”,
the Commissioner takes into account its name, price, labelling, instructions, packaging, promotion,
advertising and distribution (ATO GST Industry Issues — Food: Issue 5).
Food marketed as a “prepared meal” includes items such as curry and rice dishes; mornays and similar
dishes sold cold by a takeaway outlet or supermarket that only need reheating to be ready for
consumption; fresh or frozen prepared lasagne, sushi, cooked pasta dishes sold complete with sauce;
frozen TV dinners; and fresh or frozen complete meals, for example, single serves of a roast dinner
including vegetables, and low-fat dietary meals.
Food marketed as a prepared meal does not include soup, frozen vegetables, uncooked pasta products,
fish fingers and canned baby food, baked beans, spaghetti or Irish stews.
To be taxable as a prepared meal, the item must, in its unopened state, require refrigeration or freezing
for its storage. For example, a tin of baked beans is not taxable as a prepared meal because it does not
require refrigeration until it is opened.
Apart from this, prepared meals are taxable irrespective of whether they are sold hot, cold or frozen, and
irrespective of whether they require any cooking, heating, thawing or chilling before consumption.
Other prepared food
GST also applies to the following other types of “prepared food” (s 38-3; Sch 1):
• quiches

• sandwiches (using any type of bread or roll)

• pizzas, pizza subs, pizza pockets and similar food (but pizza rolls, which require the addition of fillings
or toppings to make them ready to eat, are GST-free: Interpretative Decision ID 2008/132)

• platters, etc, of cheese, cold cuts, fruit or vegetables and other arrangements of food

• hamburgers, chicken burgers and similar food. However, hamburger patties sold separately (eg in
packets at supermarkets) are GST-free

• hot dogs.

These items are taxed irrespective of whether they are sold hot, cold or frozen, and irrespective of
whether they require any cooking, heating, thawing or chilling before consumption.
[GSTG ¶50-070]
¶13-150 Bakery products

GST applies to the following “bakery products”:

• cakes, slices, cheesecakes, pancakes, waffles, crepes, muffins and puddings. The ATO considers
that “puddings” include rice puddings, self-saucing puddings, Christmas pudding, tapioca puddings
and steamed puddings, yoghurt, crème caramel, custard, dessert mousse, dairy desserts or jelly. So-
called “Chinese pancakes” may be treated as GST-free bread, as they do not contain eggs or milk
(Interpretative Decision ID 2002/908)

• pavlova and meringues

• pies (meat, vegetable or fruit), pasties and sausage rolls

• tarts and pastries

• doughnuts and croissants

• pastizzi, calzoni and brioche

• scones and scrolls

• bread (including buns) with a sweet filling or coating, for example, tea buns, finger buns and cream
buns. Other types of bread are GST-free, as explained below.

These items are taxed irrespective of whether they are sold by bakeries or other businesses. It does not
matter whether they are sold hot, cold or frozen, nor whether they require any cooking, heating, thawing
or chilling before consumption (s 38-3; Sch 1).
Bread is GST-free
The following types of bread are not treated as bakery products and are GST-free:
• plain bread and rolls (white, wholemeal, multi-grain, etc)

• sesame seed or poppy seed rolls

• cheese-topped bread

• pumpkin bread

• plain focaccia

• hamburger buns

• damper

• sour dough or rye bread

• tortillas

• unleavened bread, gluten-free or yeast-free bread

• pita, Lebanese or lavash bread

• fruit loaves, even if they are glazed, but not if they have a sweet coating or filling.

[GSTG ¶50-090]

¶13-160 Confectionery, snacks, ice-cream and biscuits

GST applies to the supply of:
(1) confectionery, food marketed as confectionery or confectionery ingredients, and food consisting
principally of confectionery. The Commissioner considers that this would typically apply to chocolate,
boiled sweets, lollipops, sherbet, marshmallow and fruit lollies. It also applies to popcorn,
confectionery novelties, muesli bars, health food bars, energy/sports bars (Interpretative Decision ID
2002/1046), breakfast bars (GST Determination GSTD 2008/2), crystallised fruit, glacé fruit and
drained fruit, crystallised ginger, preserved ginger and edible cake decorations. However, candied
peel is GST-free. Chocolate-covered coffee beans are considered to be taxable, but not chocolate
marketed for non-confectionery purposes, for example, cooking chocolate. Jars filled with fruit in
alcohol were also held to be GST-free (Interpretative Decision ID 2004/289), as was raw fruit
preserved in brine that required cleaning before consumption (Interpretative Decision ID 2004/645)

(2) savoury snacks such as potato crisps, sticks or straws; corn crisps or chips; bacon or pork crackling;
prawn chips; and salted, spiced, smoked or roasted nuts or seeds. However, tinned boiled nuts used
in stir-fries are GST-free (Interpretative Decision ID 2004/434), as are unshelled nuts or raw nuts.
GST also applies to food that is similar to this category of taxable items, irrespective of whether it
contains vegetable, herb, fruit, meat, seafood or dairy product, and irrespective of whether it is
artificially flavoured

(3) caviar or similar fish roe

(4) ice-cream, ice-cream cakes and substitutes, frozen confectionery, frozen yoghurt, frozen fruit
products (but frozen whole fruit is GST-free), flavoured iceblocks and similar items

(5) biscuits, cookies, crackers, pretzels, cones and wafers. These are taxable whether they are
supplied hot or cold, and whether or not they require cooking, heating, thawing or chilling prior to
consumption. However, breakfast cereal biscuits that are not separately wrapped, and infant or
invalid rusks, are GST-free (s 38-3; Sch 1).

Imported Italian “mini ciabatte” was a cracker, and therefore not GST-free, despite being labelled as
“Italian flat bread” (Lansell House Pty Ltd & Anor v FC of T [2011] FCAFC 6). Relevant factors included
the product’s ingredients, its uses, and the fact that supermarkets displayed it and crackers as
comparable products.
Food that consists principally of the items in categories (2), (3) and (5) is also taxable.
[GSTG ¶50-080]

¶13-170 Food combinations and hampers

Food that consists of a combination of GST-free food and taxable prepared food, bakery products,
confectionery, snacks, ice-cream or biscuits is itself taxable (s 38-3; Sch 1). For example, a single snack
pack containing cheese and biscuits which are designed to be consumed together is not GST-free
because it includes biscuits which are taxable, even though the cheese by itself would be GST-free.
However, this does not apply where separately packaged goods are simply packed and sold together. For
example, where a hamper or decorative box contains a (taxable) box of chocolates and a (GST-free) jar
of coffee, the GST is calculated on a proportional value basis (¶4-200). The same would apparently apply
if the previously-mentioned GST-free cheese and taxable biscuits each had their own packaging and
were then wrapped together (Interpretative Decision ID 2010/145). This distinction could produce rather
arbitrary results in some cases.
The value of paper serviettes and plastic cutlery supplied with picnic hampers may be ignored (GST
Ruling GSTR 2001/8). See also ¶13-200.
For the position where a hot takeaway item also includes cold food, or where separate hot and cold
takeaway food is sold, see ¶13-130.
[GSTG ¶50-120]
¶13-180 Drinks

The following types of drinks or drink ingredients are GST-free, unless they are supplied for consumption
on the premises or as a hot takeaway item:
• milk products, lactose, soy milk and rice milk. Flavoured drinks are excluded, but dry preparations for
flavouring milk (eg Milo) are GST-free. Unprocessed cow’s milk is taxable (s 38-4), but unprocessed
goat’s milk is GST-free

• tea (including herbal tea, fruit tea and ginseng tea), coffee, chicory and malt. This does not include
beverages that are marketed in a ready-to-drink form, for example, packaged iced coffee or tea will
be taxable. Malt extract is covered if it is marketed principally for drinking purposes, as are
preparations for drinking purposes that are marketed principally as tea preparations, coffee
preparations or preparations for malted beverages. Dry chocolate and cocoa, which require the
addition of liquid to be drinkable, are GST-free (Interpretative Decision ID 2008/144)

• fruit and vegetable juices. These comprise: (1) concentrates or cordials for making non-alcoholic
beverages, if the concentrates consist of at least 90% by volume of juices of fruits; (2) non-alcoholic
carbonated beverages that consist “wholly” of juices of fruits or vegetables. It has been held that this
means that the existence of any additives (other than carbonation itself) disqualifies a carbonated
drink from exemption. It would appear that this would disqualify most reconstituted carbonated drinks
that require preservatives (P&N Beverages Australia v FC of T [2007] NSWSC 338); (3) non-
carbonated non-alcoholic beverages that consist of at least 90% by volume of juices of fruits or
vegetables

• beverages, and ingredients for beverages, marketed principally as food for infants or invalids (eg milk
substitute formulas, post-operative liquid meal formulas). An “infant” means a babe in arms or a child
in the first period of its life, and would not include five to six year olds (Cascade Brewery Company
Pty Limited v FC of T [2006] FCA 821). In that case, the Federal Court ruled that a premium
blackcurrant syrup marketed fairly generally did not qualify for exemption under this head

• non-carbonated natural water without additives (s 38-3; Sch 2).

Processes such as fermentation may change the nature of a fruit or vegetable juice so that it no longer
bears that character. This means, for example, that wine cannot qualify even if it has been de-alcoholised
(¶13-190).
To qualify as GST-free, these drinks must be for human consumption (s 38-4). It also appears that the
drink must be intended to quench thirst or for nourishment (Bristol-Myers Co Pty Ltd v FC of T 90 ATC
4553; GST Determination GSTD 2002/2). On this basis, for example, aloe vera juice would not qualify as
it is taken for medicinal purposes (Food Industry Register Issue 31). However, herbal or ginseng teas
would qualify provided that they are not differentiated as medicinal, for example, by the making of
remedial claims or the prescription of a “dosage” (Food Industry Register Issue 25).

Example
Milk powder of a standard that is not fit for human consumption is not GST-free, even though it could be used as animal feed.

As an exception to the general rule, if a drink is GST-free under this head, it remains GST-free even
though it is supplied from a vending machine for consumption on the premises (GST Regulations s 38-
3.01).
All other drinks, for example, alcohol (¶13-190) and the usual types of soft drinks, are taxable.
[GSTG ¶50-150]

¶13-190 Wine, beer and spirits

Alcoholic beverages such as wine, beer and spirits are taxable.
Individual products that are sold as home brew ingredients would also be taxable. However, if those
ingredients are sold as food, they may be GST-free under the normal rules. For example, malt sold as
food would be GST-free, but brewers’ yeast would be subject to GST (Food Industry Register Issue 24).
Jars filled with fruit in alcohol were held to be GST-free (Interpretative Decision ID 2004/289). De-
alcoholised wine is taxable (JMB Beverages Pty Ltd v FC of T [2010] FCAFC 68).
A wide range of wine-related products may also attract a 29% wine equalisation tax (WET), in addition to
GST.
The GST on the wine is imposed on the WET-inclusive price. For full details of WET, see ¶22-000.

¶13-195 Food additives

Food additives may qualify as “food”, for example, as ingredients or flavourings (¶13-110). However,
additives are not GST-free unless either:
(1) they are supplied packaged and marketed for retail sale, for example, a small bottle of vanilla
essence, or
(2) they have a measurable nutritional value, are supplied for use solely or predominantly as a food
component and are essential to the composition of the food (s 38-3; GST Regulations s 38-3.02). The
ATO accepts that a product has “measurable nutritional value” if the nutritional information prepared in
accordance with the Food Standards Code contains measured values of nutrition such as sugars, protein,
fat or carbohydrates. It treats a product as “essential” to the composition of the food where it is
manufactured specifically for use in foods. Meat cure was GST-free under this test (Interpretative
Decision ID 2004/444).
Lecithin sold in granular or powder form is a food and is GST-free (Interpretative Decision ID 2005/361),
but not if sold in tablet form. It is GST-free if sold as a food emulsifier, but not if sold as a beauty product
emulsifier (Interpretative Decision ID 2005/272).
[GSTG ¶50-100]

¶13-200 Food packaging

The general rule is that if the food is GST-free, so is the packaging (s 38-6). For example, as pure orange
juice is GST-free, the bottle or container that it comes in will also be GST-free. However, to the extent that
the packaging is more than is normal and necessary for that food, it will be taxable. For example, the ATO
says that food packaging will be treated as normal and necessary, and therefore GST-free, if:
• it includes items of relatively small value to assist purchasers to prepare or consume the food, for
example, disposable thermometers supplied with a turkey, or a straw with a fruit juice tetra® pack, or

• it satisfies a “de minimis” test, ie the packaging is not separately charged for, and its cost price is the
lesser of $3 (excluding GST) and 20% of the wholesale value of the whole supply (GST
Determination GSTD 2000/6). This could apply, for example, where breakfast cereal is supplied in a
special plastic container.

The de minimis test is applied by the packager, who will normally be the manufacturer or wholesaler.
Suppliers further down the distribution chain (eg retailers) who rely on the supplier’s calculation for
treating packaging as GST-free will be accepted by the ATO as having met their obligations. Alternatively,
the general rule of thumb for identifying composite supplies (¶4-200) may be used.
The ATO also says that:
• if items such as spoons or straws are supplied separately, without being part of the packaging, they
will not be subject to GST if they are provided “free” and have no lasting value, for example, straws
supplied to purchasers of bottled water

• if an extra charge is raised to cover the loan, hire or use of a container, this would be a separate
 supply and would be taxable

• promotional items such as recipe cards or drink containers that accompany the packaged food are not
considered normal and necessary and are also not eligible for the de minimis test. They would be
treated as a separate supply. In such a case, the GST is calculated on a proportional value basis (¶4-
200). This could apply, for example, to a coffee mug supplied with a jar of coffee

• for a group of items, normal and necessary packaging includes the carton or box that contains a
number of items. For example, if a manufacturer supplies multiple jars of jam in a carton, the GST-
free packaging would include the carton as well as the jars. It is not clear, however, if this would
extend to a wrapped pallet of food items.

Non-food promotional items, such as clocks, cricket balls and cups which were supplied “free” with GST-
free food, were considered to be separate taxable supplies in Food Supplier v FC of T 2007 ATC 157.
The AAT noted that:
• the promotional items had intrinsic value and would not be consumed with the food, even though in
the case of cups they might be used to serve the food

• a proportion of the single amount paid as consideration for the supply of the food and the promotional
item could be attributed to the item, even though it was described as free. That proportion could
possibly be determined on the basis of the relative cost to the supplier of the food and the item.

Where food containers are returnable, they are treated as second-hand goods (¶16-100).
[GSTG ¶50-200]

¶13-210 Simplified GST accounting for food suppliers

Suppliers may well find themselves in the position of selling some food that is GST-free, some lines of
food or other merchandise that are taxable, and others that are a mixture of the two. To assist them in
identifying the GST status of these products, various simplified methods are available:
(1) manufacturers and other suppliers can rely on “GS1net” GST classifications for food and grocery
products. GS1net is an online catalogue of unique numbers and barcodes used for identifying
products, which also identifies their GST status. The ATO says that where suppliers rely on GS1net
GST classifications there will be no risk of penalties or of unfavourable retrospective adjustments to
their GST liability. For further details see the ATO Fact Sheet Simpler GST Accounting for the Food
and Grocery Industry (NAT 7162); Practice Statement PS LA 2012/2 (GA)

(2) certain food retailers can use a Simplified Accounting Method (¶13-215).

[GSTG ¶50-250]

¶13-215 Other simplified methods for food retailers

Food retailers may be able to use one or other of the Simplified Accounting Methods (SAMs) approved by
the ATO (s 123-5).
There are three general SAMs available — see below — and some separate optional methods for certain
types of retailers (¶13-216).
The three general SAMs are:
• the business norms method

• the snapshot method, and

• the stock purchases method (Simplified GST Accounting Methods Determination 2017 for Retailers
who sell Food, effective 28 September 2017). Retailers who were eligible under previous SAMs
 continue to be eligible under this Determination.

You can use these methods if you satisfy all these conditions:
• you are a retailer that sells taxable and GST-free food from the same premises, eg a business that
sells both fresh fruit (GST-free) and soft drinks (taxable)

• your “SAM turnover” does not exceed $2m. SAM turnover means either the total GST-exclusive
amount of trading sales for the last financial year or the projected GST-exclusive amount of the
trading sales for the current financial year. If you start running the business part-way through a
financial year, you must make an estimate of trading sales for a 12-month period commencing from
when you started to run the business. If the business norms method is used, the SAM turnover of a
pharmacy does not include dispensary sales of pharmaceutical benefit (PBS) prescriptions, including
any patient contributions; and the SAM turnover for a rural convenience store does not include fuel
sales and trading sales from operating an Australia Post agency

• you do not have adequate point-of-sale equipment to identify and record each separate supply as
being taxable or GST-free, and the total amount of GST-free sales and total sales. Adequate
equipment would include electronic scanning systems, touch screen registers and product-specific
cash registers.

Both cash basis and accruals basis retailers are eligible. Once you choose a method, you cannot change
your choice for 12 months (s 123-10).
These SAMs only apply to sales and purchases of trading stock. They do not apply to sales of items other
than stock, or capital items, nor to purchases such as rent, telephone or capital equipment. The SAMs are
also not relevant to pricing (¶21-010).
Business norms method
Under the business norms method, you use a standard percentage of your trading sales, appropriate for
your type of business, to calculate your GST-free and taxable sales and purchases. The ATO has set the
following business norms.

GST-free GST-free
sales purchases
Continental delicatessens, except where the majority of sales
are mainly grocery items, or there are café or restaurant
supplies 85% 90%
Cake shops (not cafes) 2% 95%
Health food shops that are not converters* 35% 35%
Fish shops that mainly sell fresh fish and other seafood 35% 98%
Pharmacies that have dispensary sales and non-claimable
private prescriptions and over-the-counter sales including
food (deduct patient contribution from sales)
• dispensary: non-claimable 98% 0%
• over the counter 47.5% 2%
Rural convenience stores that do not sell alcohol (deduct fuel
or Australia Post agency trading sales from total sales and
total purchases)
• converters* 22.5% 30%
• resellers* 30% 30%
Hot bread shops 50% 75%
Convenience stores**, where the income is not predominantly
from sales of takeaway or dine-in food
• converters* that do not sell fuel or alcohol 22.5% 30%
• resellers* that do not sell fuel or alcohol 30% 30%
* A store is a “converter” if it converts GST-free inputs to taxable outputs, for example, where it converts GST-free bread and fillings into
taxable sandwiches, or GST-free potatoes and fish into taxable fish and chips. A “reseller” is a retailer that purchases stock GST-free and
resells it in an unchanged form.

** For an additional optional method for calculating input tax credits, applicable to convenience stores that have adequate point-of-sale
equipment, see ¶13-216.

If you use the business norms method, you must use it to calculate your GST-free purchases as well as
your sales.

Example
Toasties Hot Bread Shop lodges GST returns on a quarterly basis. For the quarter, its total sales are $200,000 and its total
purchases of stock are $160,000.
As the business norm for sales is 50%, Toasties can estimate its GST-free sales as 50% of $200,000 = $100,000.
As the business norm for purchases is 75%, Toasties can estimate its GST-free purchases as 75% of $160,000 = $120,000.

Stock purchases method

The stock purchases method can only be used by retailers who simply resell and do not convert any
GST-free products into taxable products. For example, it could apply to a fruit shop that simply sells the
fruit it bought at the market, but not to a sandwich shop which converts GST-free ingredients into taxable
sandwiches.
The basis of the stock purchases method is that if you only resell, the percentage of your GST-free sales
will be about the same as your percentage of GST-free purchases.
There are three ways in which you can use this method:
(1) The first way is to calculate your percentage of GST-free stock purchases for a tax period in the
normal way — ie without using any simplified accounting method — but use that percentage to estimate
the GST-free sales for that tax period. If you do this, you must do it separately for each tax period.

Example
Resellers Shop decides to use the first variant of the stock purchases method.
Over the tax period, Resellers’ total sales are $200,000 and its total stock purchases are $160,000, including $120,000 GST-free
purchases.
The percentage of GST-free purchases is therefore 120,000/160,000 = 75%. Resellers can apply this percentage to total sales to
estimate the GST-free sales, ie 75% of $200,000 = $150,000.

(2) The second variant of the stock purchases method reduces your administrative workload even further.
Under this “two sample periods” variant, you calculate your percentage of GST-free purchases during a
four-week sample period, and use that percentage to estimate your total GST-free sales and purchases.
To take account of seasonal fluctuations, the estimate must be made twice a year. One sample is taken
during the period 1 June to 31 July, and will be used for your July to December tax periods. The second is
taken during the period 1 December to 31 January and is used for your January to June tax periods.
Each sample must be for a four-week continuous period. This means that you must keep a worksheet,
updated daily, of:
• the total amount of your stock purchases over the four weeks

• the total amount of GST-free stock purchases over the four weeks.
The percentage figure you derive from this is used to estimate the percentage of your total GST-free
sales and stock purchases during the relevant tax period.
(3) The third option is to use a 5% GST-free stock estimation basis for goods that you purchase and resell
GST-free, if it is reasonable to conclude that those purchases will not exceed 5% of total stock purchases.
Snapshot method
The snapshot method is similar to the stock purchases method but applies to both resellers and
converters.
Keeping records
Records substantiating the method you choose should be kept for five years, in the normal way (¶18-
040).
Tax invoices
If the GST-exclusive value of the sale is more than $75 (¶5-170), the retailer must provide a tax invoice if
requested by the buyer (¶5-100). This may have to be manually prepared where the point-of-sale
equipment is not adequate.
Notifying the ATO
If you choose to adopt a simplified accounting method, you must notify the ATO in an Election To Use A
Simplified GST Accounting Method (NAT 4370-6.2001).
[GSTG ¶50-280]

¶13-216 Other optional methods

The following additional options may also be available.

Sales percentage method for supermarkets, convenience stores
An additional optional method for calculating input tax credits — the “sales percentage” method — applies
to supermarkets and convenience stores that have a GST-exclusive turnover of $2m or less (A New Tax
System (Goods and Services Tax) Act 1999 Simplified GST Accounting Methods Determination (No 29)
2015). The rationale for this method is that the percentages of acquisitions that are creditable for these
retailers would be expected to be in-line with the percentage of sales that are taxable. The input tax
credits can therefore be calculated by subtracting estimated GST-free acquisitions from total acquisitions
and multiplying the result by 1/11. The GST-free acquisitions are estimated by using the percentage that
represents the GST-free proportion of sales and multiplying it by total acquisitions (trading stock only) for
each BAS period.
The retailer must have adequate point-of-sale equipment, and any conversion of food from GST-free
inputs to taxable sales must represent less than 5% of its total sales. The method does not apply to
alcohol or other products that are uncommon or are in substantially greater quantity or variety than those
generally sold in supermarkets or convenience stores.
When this method is used, tax invoices for the acquisitions need not be held.
Purchases snapshot method for restaurants, cafes and caterers
An additional optional method for calculating input tax credits for acquisitions of trading stock applies to
restaurants, cafes and caterers that have a GST-exclusive turnover of $2m or less (A New Tax System
(Goods and Services Tax) Act 1999 Simplified GST Accounting Methods Determinations SAM 2006/1;
SAM 2016/38). This method — the “purchases snapshot” method — can be used, for example, to
calculate the input tax credits that relate to the purchase of food and non-food items that are trading
stock, but not the credits that relate to the purchase of non-stock items such as tables, chairs and
crockery. The rationale for this method is that the percentage of acquisitions which are creditable
acquisitions at one point in time would be expected to be in-line with the percentage of creditable
acquisitions in subsequent tax periods.
The method allows the input tax credits on trading stock to be estimated by taking a sample of
acquisitions over a four-week test period and calculating the percentage that represents GST-free
acquisitions. Two new calculations of the GST-free percentage must be done (about six months apart) for
each financial year. This percentage is used for six months to calculate the amount of GST-free
acquisitions for subsequent tax periods. The percentage is multiplied by total trading stock acquisitions in
each tax period to determine an estimated amount of GST-free acquisitions in each tax period. The
method will allow the input tax credits to be calculated by subtracting the estimated GST-free acquisitions
from total acquisitions and multiplying it by 1/11. Where this method is used, tax invoices for the
acquisitions need not be held. It is irrelevant whether the taxpayer has adequate point-of-sale equipment.
Government prisons
A separate optional method for calculating the net GST amount applies to government prisons (A New
Tax System (Goods and Services Tax) Act 1999 Simplified GST Accounting Methods Determination (No
28) 2015).
[GSTG ¶50-280]

¶13-220 Giveaways and promotions

For the position where food or drink is provided as part of a promotion, see ¶4-030.

¶13-230 ATO food and beverage checklist

The ATO has released a comprehensive “Detailed food list” of food and drink items together with their
GST status and relevant notes. As the list comprises more than 100 pages, it is not feasible to reproduce
it here. The latest version (effective 30 June 2016) may be accessed on the ATO website under “Detailed
Food List”.
Where an item is shown as GST-free, it should be borne in mind that it loses this status if it is sold for
consumption on the premises (¶13-120), is a hot takeaway (¶13-130) or is a part of a prepared food or
meal (¶13-140).
[GSTG ¶565]

HEALTH AND MEDICAL

¶13-300 GST-free health services

Supplies of most health and medical services are GST-free.

The health and medical services that are GST-free fall into the following categories:
• services of a medical practitioner or pathologist (¶13-310)

• services of allied health practitioners, such as physiotherapists, naturopaths, nurses and optometrists
(¶13-320)

• hospital treatment (¶13-330)

• residential, community care and specialist disability services (¶13-340)

• medical aids and appliances (¶13-350)

• drugs, medicines and health goods (¶13-360)

• health insurance (¶13-370).

Note also that first aid and life saving courses are GST-free (¶14-002). So are special education courses
for children or students with disabilities (¶14-012) and certain occupational health and safety courses
(¶14-020).
If a mixture of GST-free and taxable services are provided, the supplier’s records will need to distinguish
between the two.
Some non-profit healthcare providers, such as hospitals and nursing homes, will qualify as charities and
can therefore claim the concessions allowed to charitable institutions (¶15-000).
[GSTG ¶50-500]

¶13-310 Medical practitioners’ services

In general, the provision of medical services is GST-free (s 38-7). The services must be made by, or on
behalf of, a medical practitioner or an approved pathology practitioner, and must be generally accepted in
the medical profession as being necessary for the appropriate treatment of the recipient of the supply (ie
the patient). Alternatively, they must be services for which Medicare benefit is payable (s 195-1).
Common examples of GST-free services would be general practitioner and specialist consultations,
electrocardiograms, radiology, ultrasound, magnetic resonance imaging, respiratory function tests,
pathology, and therapeutic procedures such as anaesthesia, surgery, obstetrics and oncology. Laser
vision correction surgery carried out by an ophthalmic surgeon was GST-free (Interpretative Decision ID
2004/51).
The ATO considers that services carried out by assistants on behalf of practitioners may be eligible if the
practitioner accepts full responsibility for the service and is involved in at least part of it. For example, a
vaccination carried out by a nurse as part of GST-free treatment carried out by a practitioner would itself
be GST-free.
Goods supplied to an individual in the course of providing GST-free medical services are themselves
GST-free, if they are supplied at the same premises as the medical services. Examples would include
bandages, dressings and antiseptics. For rulings on a corresponding exemption applying to allied health
professionals, see ¶13-320. Other specific exemptions apply to medical aids (¶13-350) and drugs (¶13-
360).
HIV detection screening and check-ups are GST-free, as are pap smears and specified organ transplants.
GST-free status also extends to medical reports made for determining social security entitlements such
as disability support pension, carer payment and sickness allowance. A doctor’s report for a person who
is required to obtain medical certification to get an extension of a driver’s licence is also GST-free.
However, the ATO considers that this does not apply to doctors’ reports used by patients for gaining
vocational qualifications, where no Medicare benefit is payable and the service cannot be described as
“treatment”. Supplying a medico-legal report or assisting as an expert medical witness is also treated as
taxable where fees are charged (see also ¶17-425). So is providing a patient with access to their health
records, without any additional medical explanation (Interpretative Decision ID 2003/1156); or the
collection, processing and storing of blood products obtained from a healthy individual for use in the
treatment of possible future illnesses of that individual.
Psychotherapy and psychoanalysis may be GST-free if provided by a medical practitioner such as a
psychiatrist. They may also be GST-free if provided by a psychologist registered under state law (¶13-
320).
Generally, there will be no difficulty in working out what is included in GST-free medical services.
However, some borderline cases could cause difficulties. For example, there are sometimes differences
of opinion about the usefulness of certain types of treatment, so in some cases it may be difficult to
decide what is “generally accepted”. Relevant factors here may include whether the treatment has been
published in a reputable medical journal, recommended by the relevant Australasian medical college, or
adopted for incorporation in the Medicare Benefit Schedule (ATO GST Industry Issues — Health: Issue
1.a.5). There may also be disagreement about who is included in the “medical profession”; for example, to
what extent are medical academics included? Finally, the requirement that the services be accepted as
“necessary” seems rather restrictive for cases where two equally valid and equally accepted methods of
treatment are available.
Non-GST-free medical services
Treatments that are carried out for cosmetic purposes are not GST-free unless they qualify for Medicare
benefits. For example, the government considers that a nose reconstruction for purely cosmetic reasons
is not GST-free, but a reconstruction that alleviates a breathing difficulty or is performed following an
accident would be GST-free. A Botox treatment simply to remove frown lines would presumably be
regarded as cosmetic, but not an endoscopic brow lift designed to improve the patient’s visual field.
In general, the ATO considers that a procedure to alter a person’s appearance is medical, rather than
cosmetic, if it mainly involves the alteration of a significant defect caused by disease, trauma or congenital
deformity and either: (1) it is recommended by a psychiatrist or psychologist as being necessary for the
patient’s psychological wellbeing, or for the appropriate treatment of a psychiatric condition; or (2) the
patient is less than 18 years and the defect is in an area of the body which normally would not be clothed.
Skin grafting performed on a burn victim would normally not be considered cosmetic and would be GST-
free (ATO GST Industry Issues — Health: Issue 1.b.1).
Anaesthetic services for patients undergoing cosmetic surgery that is not GST-free would themselves
also not be GST-free (ATO GST Industry Issues — Health: Issue 1.b.2).
Certain other prescribed services are also not GST-free, for example, removal of tattoos, or the injection
of specified substances in the management of obesity. Skin peeling would also not be GST-free.
Workers compensation
For a detailed ATO case study on GST issues for medical practitioners in connection with workers
compensation, see “GST and workers compensation case study” at www.ato.gov.au.
[GSTG ¶50-520]

¶13-320 Allied health professionals’ services

The following types of health services are GST-free if they are provided by recognised professionals in
those services, and are generally accepted in that profession as being necessary for the appropriate
treatment of the recipient of the supply (ie the patient):
• Aboriginal or Torres Strait Islander health services

• acupuncture

• audiology, audiometry

• chiropody

• chiropractic

• dental (including orthodontics)

• dietary

• herbal medicine (including traditional Chinese herbal medicine)

• naturopathy

• nursing

• occupational therapy

• optometry

• osteopathy

• paramedical

• pharmacy (subject to conditions, see below)

 • psychology

• physiotherapy

• podiatry

• speech pathology

• speech therapy

• social work (s 38-10).

To be a recognised professional, the practitioner must be approved or registered under the relevant state
law, or be a member of a professional organisation with uniform national registration requirements (s 195-
1). In the case of audiology or audiometry services, the practitioner may be an accredited service
provider. In the case of Chinese herbal medicine, recognised professionals could possibly include
professionals in acupuncture, naturopathy or Chinese herbal medicine (ATO GST Industry Issues —
Health: Issue 2.b.4).
The ATO considers that services carried out by assistants on behalf of recognised professionals may be
eligible if the professional “directly supervises” the treatment. For example, in the case of physiotherapy,
there would be direct supervision where the professional: (1) attends the patient at the commencement of
each new treatment and determines the treatment; (2) is readily available during the treatment and for
emergencies; and (3) can show that they monitor the treatment (ATO Fact Sheet NAT 4650).
Where the supplier of the service is actually a practice company or partnership, it is sufficient that the
service is actually performed by the recognised professional (ATO GST Industry Issues — Health: Issue
2.b.11).
If a practitioner provides training services to other practitioners, that would not be a GST-free health
service, as no treatment is involved. A limited range of training courses may, however, qualify as GST-
free education courses (¶14-030).
The ATO now appears to accept that iridology performed by a naturopath or herbalist may be GST-free.
A registered nurse’s supply of colonic irrigation to a patient would be a GST-free nursing service.
To be GST-free, pharmacy services must relate to the supply of drugs, medicinal preparations or
pharmaceutical items that are themselves GST-free (¶13-360), or to the conduct of a medication review.
So, for example, if you buy ordinary cosmetics at a pharmacy, they will not be GST-free.
Group therapy sessions are accepted as part of psychological treatment (Interpretative Decision ID
2001/390). Counselling, hypnotherapy, psychotherapy or psychoanalysis services are not in themselves
GST-free, but may be GST-free if they are provided by an appropriately qualified medical practitioner or
psychologist (ATO GST Industry Issues — Health: Issue 2.a.2). Similarly, massage by a massage
therapist would not be GST-free, but would be GST-free if administered as part of physiotherapy services.
Kinesiology would not be GST-free if provided by a natural therapist, but would be GST-free if provided by
a naturopath (Interpretative Decision ID 2001/663). Orthoptic services provided by an orthoptist would not
be GST-free. Music therapy supplied by an otherwise unqualified music therapist would not be GST-free,
but may qualify if supplied by a psychologist.
Homeopathy services provided by a registered homeopath are not GST-free, but may be GST-free if
provided as part of other services (eg naturopathy, herbal medicine) that are GST-free.
Antenatal or postnatal exercise classes conducted by a physiotherapist or other recognised professional
may be GST-free if they are assessed as being appropriate treatment for the attendees and are
specifically directed to the needs of mothers or post-childbirth problems. Similar considerations apply to
breast-feeding classes (ATO GST Industry Issues — Health: Issue 2.a.13). General aerobic or “get back
in shape” classes do not qualify.
Speech therapy conducted in a group environment is acceptable, provided it has been preceded by an
initial assessment of each patient (Interpretative Decision ID 2004/501). The exemption would also
probably apply where the therapist provides training to the parent of a child for the purpose of treating that
child’s assessed language difficulties.
Goods supplied as part of treatment
Goods supplied to a person in the course of providing any of the GST-free health services to that person
are themselves GST-free, if they are supplied at the same premises. This does not apply to optometry
and pharmacy services.
The ATO considers that this exemption is limited to goods supplied at the same time as the GST-free
services are supplied. In addition, the goods must be either (1) customised or manipulated for the
exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free
service; or (2) necessarily utilised as an integral part of the patient’s treatment required immediately
during that specific consultation. On this basis, this exemption would apply where a physiotherapist
applies bandages to the patient (ATO Fact Sheet NAT 4650), but apparently not where the
physiotherapist supplies gym balls or generic lumbar supports for ongoing use. Similarly, the exemption
may not apply to generic back supports or nutrients supplied by a chiropractor for the future use of the
patient at home; books, audio tapes or videos provided by a health practitioner; or a standard weight
management kit provided by a dietician (Interpretative Decision ID 2004/443).
In the special case of naturopathy or herbal medicine, goods supplied to a patient in the course of
providing the service are only GST-free under this head if they are supplied at the same premises and
also used or consumed there. The ATO considers that this means they must be totally used or consumed
there, not just partially (ATO GST Industry Issues — Health: Issue 2.c; Interpretative Decision ID
2001/661).
For detailed Class Rulings dealing with exemptions for goods and services supplied by dentists, dental
prosthetists and technicians, see CR 2013/14 and CR 2011/58.
Where the exemption does not apply, the goods may nevertheless be exempt under the separate rules
that apply to medical aids (¶13-350) and drugs (¶13-360).
Ambulance services
Supplies made by ambulance services are GST-free if they are provided in the course of the treatment of
the recipient of supply (s 38-10). The ATO considers that an ambulance service covers ambulances in the
normal sense, entities that provide emergency treatment and transport for sick and injured persons, and
air ambulances. It is not necessary that the air ambulance service have an Air Operator’s Certificate
(Aquatic Air Pty Limited v Siewert & anor [2015] NSWSC 928; ATO Decision Impact Statement).
Eligible supplies would include advice, treatment and transport. The service of monitoring a medical alert
device by an ambulance service would also be GST-free if the device had been installed as part of the
patient’s ongoing medical treatment (Interpretative Decision ID 2002/522).
Contracts with third parties
For allied health or ambulance services to be GST-free, the recipient of the supply must be the person
treated, ie the patient. However, it may occur that the recipient is someone else, and the exemption
therefore will not apply. For example, the ATO considers that where an ambulance service contracted
with a private hospital to be paid to transport patients in accordance with the hospital’s instructions, the
service would not be considered to be GST-free because it was not provided to the “recipient” of the
supply, ie the hospital (GST Ruling GSTR 2006/9; though if the hospital is a government agency, the
supply may be GST-free under s 38-60, unless the parties agree otherwise). The same would apply
where an occupational therapist contracted with a company to be paid for providing specified treatment to
a company employee.
This narrow view was questioned in the Aquatic Air case (above), with the court concluding that “hospitals
often arrange for specialist attendances and investigations on patients. It seems to me that in each of
those cases, the recipient of the supply is, at least ordinarily, the patient — not the person who calls the
ambulance, nor the hospital that arranges the specialist investigation”. The Tax Office disagrees with this
view (Decision Impact Statement on Aquatic Air case).
The mere fact that the health service supplier was a preferred provider with the patient’s health fund does
not prevent its health services being GST-free.
Other government-funded health services
Certain other government-funded health services are GST-free if they are related to medical or health
services that are themselves GST-free under the rules described above (s 38-15). This applies, for
example, to accommodation, meals and certain other services provided to patients at private Western
Australian psychiatric hospitals or at full-time residential institutions for the prevention and control of
substance abuse by Aboriginal and Torres Strait Islander peoples (GST-free Supply (Health Services)
Determination 2000).
First aid and life saving courses
First aid and life saving courses are GST-free (¶14-002).
[GSTG ¶50-540]

¶13-330 Hospital services

Hospital treatment is GST-free (s 38-20). This covers treatment to manage a disease, injury or condition,
which is provided by an authorised person (or under their management) at a hospital or with its direct
involvement (s 195-1). “Treatment” includes accommodation, nursing, medical, surgical, podiatric
surgical, diagnostic, therapeutic, prosthetic, pharmacological or pathology services. In this context,
“accommodation” can include meals. It can also include services such as telephone and television if they
are included in the accommodation charge, but not if they are separately charged (GST Determination
GSTD 2012/4). The exemption extends to treatment provided to a patient under a “hospital-in-the-home”
arrangement where the patient remains an inpatient of the hospital and remains under the care of the
treating doctor in the hospital (GST Determination GSTD 2012/4).
The same exceptions apply as for medical practitioners’ services, for example, GST applies to treatments
that are carried out for cosmetic purposes and do not attract a Medicare rebate (¶13-310).
Goods supplied as part of a GST-free hospital service are themselves GST-free if they are supplied by
the hospital. This will apply to goods that are directly related to the medical and health services supplied
in the hospital. For example, the hire of a breast pump will be GST-free if it is for a patient as part of their
hospital treatment, but not for an outpatient (ATO GST Industry Issues — Pharmaceutical Health: Issue
1j). However, it does not apply to food served in hospital cafeterias, goods such as flowers sold at
hospital shops, or televisions hired separately to patients — these are not GST-free.
[GSTG ¶50-560]

¶13-340 Residential care, home care and disability services

The following types of care services are GST-free.

Residential care
(1) Residential care is GST-free if it is provided by an approved residential care service. Residential care
includes personal care and/or nursing care provided to a person in a facility in which the person is also
provided with accommodation, appropriate staffing, meals, cleaning, furniture and equipment, ie nursing
homes. It applies to aged, frail or disabled people, and includes respite care (s 38-25).
(2) Specified services provided to aged or disabled people are also GST-free if they are:
• provided by a government-funded body, or

• provided by a private facility in a residential setting, where the services include daily living activities
assistance or nursing services, and are supplied only to persons who require them (s 38-25).
Privately funded nursing homes and aged-care hostels that provide care to aged or disabled people
are considered to be a residential setting if: (1) the residents do not have a proprietary interest in the
property; (2) residents can be moved at the operator’s discretion under certain circumstances; (3)
premises are marketed and held out to the public as a place for care and accommodation, rather
 than just accommodation; and (4) residents have limited rights compared to residents who lease or
own their premises. Independent living units therefore do not qualify. A serviced apartment in a
retirement village (¶15-015) may be a “residential setting” if there is a written agreement with the
operator to provide daily meals and heavy laundry services to all residents of the apartment (GST
Ruling GSTR 2012/3). The apartment must be part of a single complex accessible from a common
corridor, there must be a responsible person on call to render emergency assistance, and there must
be a communal dining facility available for use by residents.

The specified services eligible for this exemption include maintenance, utilities, bedding, waste disposal,
meals, social activities, daily living activities assistance, rehabilitation and nursing services, and certain
hotel-type services (GST-free Supply (Residential Care — Government-Funded Supplier) Determination
2000, 2015; GST-free Supply (Residential Care — Non-Government-Funded Supplier) Determination
2000, 2015).
In each case, the services must be of the type covered by Sch 1 of the “Quality of Care Principles” set out
in the Aged Care Act 1997. Additional services such as hairdressing or television hire would be subject to
GST.
(3) Accommodation provided in the course of supplying any of these GST-free services is also GST-free.
This may include the supply of a serviced apartment in a retirement village if at the time the resident
requires daily living activities assistance or nursing services. A separate exemption applies to supplies of
retirement village accommodation by charities (¶15-015).
(4) The supply of rights to receive GST-free care services is itself GST-free (s 9-30).
For detailed lists of services covered in each category, see “GST and residential care — consultation” at
www.ato.gov.au.
Amounts retained by the operator of a residential care facility from accommodation bonds paid by
residents are treated as consideration for the GST-free supply. The same applies to non-refundable
periodic payments of an accommodation bond (GST Determination GSTD 2011/4).

Example
Mavis pays her accommodation bond as a lump sum (subject to partial retention by the provider) plus non-refundable periodic
payments. The periodic payments are consideration for the GST-free services and accommodation that she receives. When she
later leaves the facility, the amount retained by the provider from the lump sum is also treated as consideration for the GST-free
services and accommodation.

Separate rules apply where accommodation is provided at an “over-55s” retirement village without
residential care. This would normally be input taxed (¶11-310), except in certain situations where the
village is operated by a charity (¶15-015).
Home care
Home care is a package of personal care services and other personal assistance that is provided to a
person who is not being provided with residential care. It therefore typically applies where services are
provided to people at their homes instead of, say, a nursing home or similar facility (s 195-1).
Home care is GST-free if:
• the supplier receives a community care subsidy from the Commonwealth Government. This will cover
services such as meals on wheels, home maintenance, personal care assistance and respite care.
Similar services provided by other government-funded bodies are also GST-free where they are
provided to a frail, older or younger person who has a disability, lives at home and would otherwise
be at risk of needing long-term care in an institution (GST-free Supply (Care) Determination 2000). A
person who lived independently in the community in supported, shared accommodation was treated
as living “at home” (Interpretative Decision ID 2005/41), or

• they are specified services provided to aged or disabled people by private bodies. These services
include assistance with bathing, eating, personal hygiene, incontinence, mobility and communication.
 However, the provision of goods associated with these services will not be GST-free unless it
qualifies under some other heading, such as medical appliances (s 38-30). Services such as
hairdressing, grocery shopping, rehabilitation or advocacy are not covered under this category.

For detailed lists of services covered in each category, see “GST and home care — consultation” at
www.ato.gov.au.
By their nature, these care services cannot be supplied to a business entity. Where the services are
provided to aged people under a contract with a business entity that determines the type of care and pays
for it, the business entity is actually the recipient of the supply. It follows that the supply by the care
provider is not GST-free. However, the position would be different if the business entity did not engage
the care provider but merely made payment on behalf of the patient — in such a case, the exemption
could apply.
Flexible care
Flexible care looks after the needs of aged people in alternative ways to the care provided by residential
care or community services. It is provided in a residential or community setting through an aged care
service. It is GST-free if the supplier is subsidised by the Commonwealth (s 38-35).
Specialist disability services and NDIS
Specialist disability services including accommodation, community support, and community access and
respite services are GST-free if the supplier receives funding under disability services legislation in
respect of the services (s 38-40). The funding may be either “package” funding (directed at particular
clients) or “block” funding (available for any clients) (Interpretative Decision ID 2003/993). However, it is
apparently not sufficient that the patient or patient’s family receives the funding and passes it on to the
supplier.
In addition, effective until 30 June 2021, certain services and supports supplied under the National
Disability Insurance Scheme (NDIS) are GST-free, even though the government funding is received by
the disabled recipient or the funding manager instead of the supplier (s 38-38; GST-free Supply (National
Disability Insurance Scheme Supports) Determinations 2013; 2017). To be exempt, the supply must be
reasonable and necessary for implementation of the recipient’s disability plan and must meet various
substantiation requirements. This potentially applies to:
• specialist disability accommodation and accommodation/tenancy assistance

• assistance in coordinating or managing life stages, transitions and supports

• household tasks

• assistance with and training in travel/transport arrangements, excluding taxi fares

• interpreting and translation

• assistance to access and maintain education and employment

• assistive equipment for recreation

• early intervention supports for early childhood

• management of funding for supports in a participant’s plan

• assistance with daily personal activities

• specialised assessment and development of daily living and life skills, including community
participation

• assistive equipment for general tasks and leisure, including assistive technology specialist
assessment, set up and training
 • behavioural support and therapeutic supports

• home modifications.

[GSTG ¶50-580]

¶13-350 Medical aids and appliances

Medical aids and appliances of the type set out below are GST-free, provided they are designed
specifically for people with an illness or disability, and are not widely used otherwise (s 38-45; Sch 3; GST
Regulations s 38-45.01). It is not necessary that the item be supplied directly to the patient, for example
the exemption extends to intermediate supplies to a practitioner who holds the item for sale to a patient.
Spare parts specifically designed for any of these GST-free items are themselves GST-free. Generic
batteries would not qualify as a specifically designed spare part.
Installation, labour or repair costs are not covered, unless they are incidental to the supply of the GST-
free aid itself (¶4-200), or where modifications are specifically included in the description of the medical
aid (eg “motor vehicle modifications”). Installation of a Braille directional sign overlay was considered to
be incidental to its GST-free supply in Interpretative Decision ID 2005/80.
For detailed Class Rulings dealing with exemptions for medical aids and appliances supplied by dentists,
dental prosthetists and technicians, see CR 2013/14 and CR 2011/58.

Medical aids and appliances

Category
Advanced wound care
Cardiovascular
Communication aids for
people with disabilities
Medical aids or appliances
alginate
hydro colloids
hydro gel
polyurethane film
polyurethane foam
heart monitors (this does not include an anaesthesia monitor
(Interpretative Decision ID 2004/805))
pacemakers
surgical stockings
communication boards and voice output devices
communication cards

page turners
eye pointing frames
software programs specifically designed for people with disabilities
printers and scanners specifically designed for software and hardware
used by people with disabilities
switches and switch interfaces
mouth/head sticks/pointers
alternative keyboards
electrolarynx replacements
 speech amplification/clarification aids
tracheostomy appliances and accessories
laryngotomy appliances and accessories
Continence urine/faecal drainage/collection devices
waterproof covers or mattress protectors
absorbent pads for beds and chairs
disposable/reusable continence pads, pants and nappies required for
continence use (excluding nappies for babies), menstrual products from
1 January 2019 (including maternity pads, menstrual cups, menstrual
pads, menstrual liners, menstrual underwear, tampons and other similar
products: (GST-free Health Goods) Determination 2018)
enuresis alarms
incontinence appliances
hospital/medical/continence deodorising products
waterproof protection for beds and chairs
sterile plastic bags
electric bag emptiers
enemas, suppositories and applicators
urinals and bedpans
skin bond
penile clamps
Daily living for people with customised eating equipment for people with disabilities
disabilities (eg plate surrounds: Interpretative Decision ID 2004/467)
customised toothbrushes for people with disabilities
dentures and artificial teeth
environmental control units designed for the disability of a particular
person
computer modifications required for people with disabilities
“medical alert” devices. This does not include emergency flashing lights
(Interpretative Decision ID 2002/12), a vital signs monitor (Interpretative
Decision ID 2004/804) or an anaesthesia monitor (Interpretative
Decision ID 2004/805). Monitoring of the device may be GST-free where
conducted by an ambulance service (¶13-320), by a nurse in the course
of treatment, or as part of GST-free community care (¶13-340) (ATO
GST Industry Issues — Health: Issue 4.a.9)
artificial ears
nose prostheses
Diabetes finger prickers
alcohol skin wipes
test strips
needles and syringes
glucose monitors
Dialysis
Enteral nutrition
Footwear for people with
disabilities
Hearing/speech
Home modifications for
people with disabilities
Infusion systems for the
delivery of a measured dose
of a medication
Mobility of people with
disabilities — motor vehicles
Mobility of people with
disabilities — physical:
bedding for people with
disabilities
home dialysis machines
enteral nutrition and associated delivery equipment
surgical shoes, boots, braces and irons (see Interpretative Decisions ID
2005/88 to ID 2005/91)
orthotics
hearing aids
visual display units specifically designed for deaf people, or for people
with a speech impairment, to communicate with others
telephone communication devices specifically designed to allow deaf
people to send and receive messages by telephone
batteries designed specifically for use with hearing aids
visual/tactile alerting devices (eg flashing doorbell alerts (Interpretative
Decision ID 2001/280))
interactive and broadcast videotext systems
closed caption decoding devices
external processors for cochlear implants
hearing loops
bidet/bidet toilet attachments
special door fittings relating to the disability of a particular person (this
may not include providing a widened doorframe for wheelchair access:
Interpretative Decision ID 2002/991)
infusion sets (eg spinal catheter kits: Interpretative Decision ID
2005/295)
infusion pumps
special purpose car seats
car seat harness specifically designed for people with disabilities
wheelchair and occupant restraint
wheelchair ramp
electric/hydraulic wheelchair lifting device
motor vehicle modifications (apparently this may not apply to items that
are simply installed and do not form an integral part of a conversion
process (Interpretative Decision ID 2003/1159))
manually operated adjustable beds
electronically operated adjustable beds
hospital-type beds (this may include both frame and mattress
(Interpretative Decision ID 2005/4))
customised bed rails for people with disabilities
bed cradles
 bed restraints
bed poles and sticks
pressure management mattresses and overlays
backrests, leg rests and footboards for bed use
Mobility of people with spinal orthoses
disabilities — physical:
orthoses lower limb orthoses

upper limb orthoses

pressure management garments and lymphoedema pumps
calipers
corsets (surgical)
handsplints and cervical collars
mandibular advancement splints
compression garments (this includes isotonic gloves for people with
lymphoedema: Interpretative Decision ID 2004/492); and multi-purpose
compression socks, which benefit people with vein thrombosis, people
with poor circulation such as diabetics and people who stand on their
feet for long periods. The product can also benefit aircraft travellers as a
preventive measure against deep vein thrombosis (Interpretative
Decision ID 2003/953)
Mobility of people with alternative positional seating corner chairs
disabilities — physical:
positioning aids alternative positional seating abduction cushions or long leg wedges
alternative positional seating modifications
standing frames
standing frames or tilt table modifications
side lying boards
night-time positioning equipment modifications. This included a product
designed to position the body in bed to reduce the incidence of snoring
(Snugfit Australia Pty Ltd v FC of T 2013 ATC ¶10-339; [2013] AATA
802)
Mobility of people with artificial limbs and associated supplements and aids
disabilities — physical:
prostheses mammary

supplements and aids associated with mammary prostheses (eg

mastectomy bras (Interpretative Decision ID 2001/472))
Mobility of people with postural support seating trays
disabilities — physical:
seating aids electrically operated therapeutic lounge/recliner chairs specifically
designed for people with disabilities
cushions specifically designed for people with disabilities (this may
include lumbar rolls: Interpretative Decision ID 2002/38), or contoured
pillows specifically designed to support the neck and head of ill or
disabled persons during sleep (Interpretative Decision ID 2014/21).

Mobility of people with
disabilities — physical:
transfer aids
Mobility of people with
disabilities — physical:
walking aids
Mobility of people with
disabilities — physical:
wheelchairs and accessories
Pain relief delivery systems
However, it does not include computerised massage cushions
(Interpretative Decision ID 2002/83), or cushions with overlays designed
to assist people using heavy machinery (Interpretative Decision ID
2002/3)
postural support seating
manual, electric, ceiling track or pool hoists specifically designed for
people with disabilities (including slow-speed vertical lifts: Interpretative
Decision ID 2006/37)
hoist slings
goosenecks
transfer boards
transfer sheets, mats or belts
stairlifts
portable stair climbers
monkey rings for people with disabilities
crutches
walking sticks — specialised
walking frames — standard adult
walking frames — standard child
walking frames — specialised
walking frame modifications
specialised ambulatory orthoses
specialised ambulatory orthosis modifications
quadrupod and tripod walking aids
accessories associated with walking frames (including carry aprons:
Interpretative Decision ID 2004/450) or specialised ambulatory orthoses
wheelchairs, motorised wheelchairs, scooters, tricycles, spinal carriages
and other goods for the carriage of people with disabilities
accessories associated with wheelchairs, motorised wheelchairs,
scooters, tricycles, spinal carriages and other goods for the carriage of
people with disabilities (eg shock absorbent wheelchair cushions
(Interpretative Decision ID 2001/386) or wheelchair gloves
(Interpretative Decision ID 2004/451))
battery chargers for wheelchairs, scooters, tricycles, spinal carriages
and other goods for the carriage of people with disabilities
stair-aid apparatuses designed for carrying people with disabilities in
wheelchairs up or down stairs
syringe drivers
patient control analgesia
Personal hygiene for people bathboards or toilet seats for people with disabilities
with disabilities
bath supports

shower chairs or stools

Respiratory appliances
Respiratory appliances —
other products for those with
breathing difficulties
shower supports
shower trolleys
mobile shower chairs
commodes
commode cushions
commode pans
toilet frames
toilet supports
self-help poles
customised modifications and accessories for above aids/appliances
ventilators
continuous positive airway pressure (CPAP) appliances
respiratory appliance mask assemblies — complete
respiratory appliance mask assemblies — components
respiratory appliance accessories
sleep apnoea machines
tilt tables
(Rather surprisingly, a portable stand-alone airway suction device was
not GST-free: Interpretative Decision ID 2004/218.)
peak flow meters
nebulisers

spacers

vaporisers
respirators
air pumps
bottled oxygen and associated hardware
oxygen concentrators
breathing monitors
ventilators
Safety helmets specifically safety helmets specifically designed for people with disabilities
designed for people with
disabilities
Skin jobst suits
 transcutaneous nerve stimulator machines
Stoma stoma products including all bags and related equipment for patients
with colostomies and ileostomies

stoma products including all bags and related equipment for patients
with urostomies
Vision tactile or Braille books, magazines or newspapers
electronic reading aids
talking book machines (and parts) specifically designed for people with a
vision impairment
enlarged text computer monitors for people with a visual impairment
Braille note takers
Braille printers and paper
Braille translators (hardware and software)
money identification equipment
auditory/tactile alerting devices (eg Braille direction signs or sign
overlays, but not if they also include information for the sighted:
Interpretative Decisions ID 2005/78 to ID 2005/80)
sonar canes
reading magnification devices (excluding magnifying glasses)
artificial eyes
lenses for prescription spectacles (including prescription lenses for
swimming goggles: Interpretative Decision ID 2004/440)*
prescription contact lenses* (including substrates that have some part of
a corrective prescription in them; and including coating or tinting carried
out as part of the overall single supply of the lens: ATO GST Industry
Issues — Health: Issues 4.a.15 and 4.a.16)
ultrasonic sensing devices specifically designed for use by people with a
vision impairment
viewscan apparatus specifically designed for use by people with a vision
impairment
* Frames are taxable (¶4-200)

The supplier and recipient of a medical aid or appliance are free to agree that its supply should not be
GST-free (s 38-45). This may be administratively convenient for a supplier that makes both taxable and
GST-free supplies. For the recipient, it would normally only be appropriate if the aid or appliance is a
business purchase, so that it would entitle the recipient to an input tax credit.
Cars for the disabled
Supplies of cars to disabled veterans and other disabled people may be GST-free in certain
circumstances (¶12-150).
[GSTG ¶50-600]

¶13-360 Drugs, medicines and health goods

Drugs and medicinal preparations are GST-free where:

 • they are supplied on prescription and supply without prescription is restricted

• they qualify as pharmaceutical benefits and are sold on prescription

• they can only be supplied by a medical practitioner, dental practitioner or pharmacist (eg Ventolin,
tinea creams, pain relief products), or by other legally permitted people (eg optometrists or
chiropodists)

• they are eligible analgesics, ie small retail packs of paracetamol, aspirin or ibuprofen products in their
various forms, as prescribed in GST-free Supply (Drugs and Medicinal Preparations) Determinations
issued by the Health Minister, or

• they are supplied under special arrangements (the Special Access Scheme) that enable certain non-
approved goods to be used by people with life threatening or other serious conditions (s 38-50).

Drugs, medicines and pharmaceutical items are also GST-free if they are supplied on prescription under
the Repatriation Pharmaceutical Benefits Scheme, or under the Military Rehabilitation and Compensation
Act 2004.
To be GST-free, the drug or preparation must be for human use or consumption, and must be supplied to
an individual for private or domestic use. Accordingly, although a drug may be GST-free when supplied to
a patient on prescription, its supply to the pharmacist may be subject to GST. However, this can be
claimed back by the pharmacist as an input tax credit.

Example
A pharmacist buys prescription drugs in bulk from a chemical company for $550 (including $50 GST) and sells them GST-free. The
pharmacist can claim $50 as an input tax credit.

Even though the pharmacist can claim the input tax credit, there may be cashflow difficulties because of
the delay between paying the GST-inclusive price and claiming the credit. This has influenced many
pharmacies to opt for monthly reporting (¶21-070).
The ATO says that where a pharmacist or their staff members know or reasonably should know that the
drugs or medicines being sold are not likely to be used for private and domestic human use or
consumption, then the sale should be treated as a taxable supply unless the customer indicates
otherwise. For example, where goods are ordered by a business purchase form, the supply should be
treated as taxable (ATO GST Industry Issues — Pharmaceutical Health: Issue 3f).
Public health goods
GST-free “public health” goods are:
• skin sunscreen products (including lip balms) that are marketed principally for use as sunscreens, with
a sun protection rating of 15 or more. This would include sunscreens even though they are marketed
as also having a subsidiary benefit of being an insect repellent

• preparations containing folic acid as a single active ingredient, with a recommended daily dose of
400–500 mg

• condoms and certain female contraceptive devices

• personal and surgical lubricants

• nicotine replacement therapies (skin, mouth or throat) used as aids in withdrawal from tobacco
smoking (GST-free Supply (Health Goods) Determination 2011).

To be eligible, these goods must be required to be included in the Australian Register of Therapeutic
Goods.
Suppliers and recipients are free to jointly opt out of this GST-free treatment in the same way as with
medical aids (¶13-350).
Tampons and other specified menstrual products are GST-free from 1 January 2019 (¶13-350).
Pharmacies that sell food
SAMs may be available where a pharmacy sells a mixture of GST-free food and taxable food (¶13-215).
[GSTG ¶50-620]

¶13-370 Private health insurance

Private health insurance with a registered health insurance organisation is GST-free (s 38-55). Insurance
that provides against liability to pay for ambulance services is also GST-free. This exemption does not
apply to Overseas Student Health Cover policies (ATO GST Industry Issues — Health: Issue 6.a.3). For
the position of the insurance company, see ¶10-140.
[GSTG ¶50-640]

¶13-380 Funerals

The supply of funeral services (or the right to funeral services) is subject to GST.
Where a funeral has been prepaid, the actual provision of the funeral services does not amount to a
further taxable supply, as no additional consideration is involved.
The following transitional rules apply in the case of some prepaid funerals (Transition Act, s 15):
Conditionally GST-free.
If the funeral contract was entered into before 1 December 1999, the supply was GST-free if it was paid
for before 1 July 2005. Funerals are subject to GST to the extent that they have not been paid for by that
date.

Example
Rupert agreed to pre-pay for his funeral in annual instalments, starting in November 1999. The instalments paid before 1 July 2005
were GST-free. The remaining instalments would be subject to GST.

The ATO considers that a pre-1 December 1999 funeral contract loses its exempt status if it is varied after
that date, so that a new contract comes into existence. However, a mere change of venue for the funeral,
for no additional cost, would not be regarded as a variation of the contract. Additional services contracted
for by the deceased’s family after 30 June 2000 would not be exempt (ATO Fact Sheet The Funeral
Industry).
Fully subject to GST.
If the funeral contract is entered into on or after 1 December 1999, GST applies in full if the funeral is on
or after 1 July 2000. This applies even though payment may have been made before that date.
Other aspects
Where a funeral provider transferred the rights and obligations under a prepaid funeral contract to another
provider, without any upgrades or variations, there were no GST implications. However, if the client
separately agreed with the new funeral provider for an upgrade (eg a superior casket), the new provider
would be liable for GST on the value of that upgrade (Interpretative Decision ID 2008/41).
The repatriation of a preserved deceased body or cremated remains to an overseas country may be GST-
free under the export rules applicable to goods (¶9-240) (Interpretative Decision ID 2008/124).
Autopsies are not GST-free.
[GSTG ¶76-740]
EDUCATION AND CHILD CARE
EDUCATION
GST-free educational supplies ¶14-000
Education courses ¶14-002
Other educational supplies ¶14-004
School tuckshops and canteens ¶14-010
“Special education” courses ¶14-012
Adult and community education courses ¶14-015
Professional or trade qualification courses ¶14-020
Education checklist ¶14-030
Other options for educational institutions ¶14-040
CHILD CARE
GST-free childcare services ¶14-100

Editorial information

Summary
Most supplies of education are GST-free, as are supplies of child care. GST-free means that no
GST is payable on the supply but that the supplier can claim input tax credits for the GST paid on
business inputs. Various other important GST-free supplies — such as food, medical services and
exports — are dealt with in other chapters.

EDUCATION
¶14-000 GST-free educational supplies

Most educational services are GST-free. This covers:

• education courses (¶14-002)

• administration services (¶14-004)

• course materials (¶14-004)

• lease or hire of curriculum-related goods (¶14-004)

• certain excursions and field trips (¶14-004)

• certain student accommodation (¶14-004).

 [GSTG ¶55-000]

¶14-002 Education courses

The supply of an education course is GST-free (s 38-85). This covers:

• pre-school and primary school courses delivered in accordance with a curriculum by a recognised
school. Pre-school curricula include programs for the development and education of children in the
years prior to the commencement of primary school. (For a convenient guide, see the ATO booklet
GST for Pre-schools (NAT 12579).) Playgroups are treated separately (¶14-100)

• secondary and tertiary courses. These are the secondary or tertiary courses that may entitle
students to student assistance under social security legislation, masters or doctoral courses, or
courses that have been separately declared by the Education Minister. They include accredited
secondary courses, school-based apprenticeship or traineeship courses, special school secondary
courses, English as a second language (ESL), pre-vocational courses, remedial education or courses
that aim to achieve basic skills to prepare students for further education, approved vocational,
educational and training programs, Technical and Further Education (TAFE) courses, open learning
courses, the New Apprenticeships Access Programme, and higher education courses such as
bachelor degrees, postgraduate diplomas, graduate degrees and masters qualifying courses. They
also include approved flying school training courses for cadets in the Australian Air Training Corps,
Naval Reserve or Army Cadet Corps. Part-time tertiary courses qualify on the same basis (A New
Tax System (Goods and Services Tax) (Tertiary Courses) Determination 2014; 2017). “Hobby”
courses are not included

• special education courses for children or students with disabilities (¶14-012)

• adult and community education courses (¶14-015)

• English language courses for overseas students. These must be accredited, for example, courses
provided by ELICOS centres. Accredited education courses for overseas students which include
education in the English language are also GST-free. The ATO considers that the students must be
foreign nationals who hold a student visa or another form of temporary visa that is not subject to a
“no study” condition, and who are enrolled to study in Australia (Interpretative Decision ID 2005/248)

• first aid and life saving courses. These are courses of study or instruction that principally involve: (1)
first aid, resuscitation or similar life saving skills, including personal aquatic survival skills. This
particular exemption does not include courses that principally involve “swimming lessons”. According
to an ATO Fact Sheet, this means that lessons teaching basic swimming skills are eligible for this
exemption, but not lessons designed to improve the skills of swimmers who are already proficient; (2)
surf life saving; or (3) aero-medical rescue. The course must be provided by an entity that (1) is a
government-approved body or its agent; or (2) uses instructors with training qualifications from
Austswim Ltd, Surf Life Saving Australia Ltd, or The Royal Life Saving Society — Australia; or (3)
uses instructors with other prescribed qualifications provided by a registered training organisation
under the National Training Framework (GST Regulations s 195-1.02)

• professional or trade courses (¶14-020)

• tertiary residential college courses. This covers courses provided within a university college to
resident students undertaking tertiary, masters or doctoral courses. For further explanation of the
treatment of university college fees, see “Student accommodation” at ¶14-004.

It does not matter whether the educational body is public or private.

The ATO considers that the GST-free supply of the course includes the provision of:
• tuition

• facilities
 • curriculum-related instruction and activities (GST Rulings GSTR 2000/30; GSTR 2001/1).

In the case of schools and tertiary bodies, “facilities” include buildings, libraries, sports grounds, computer
and science laboratories, and access to the internet. It is irrelevant whether the amount charged for
facilities is voluntary or compulsory. In general, it is also irrelevant whether the amount is included in the
course fees, or whether it is charged separately, for example, a capital improvement levy on parents.
However, a bus service provided for students could not qualify as a facility unless the service is made
available to all students who have paid the same fee for the supply of the education course, regardless of
whether they use the bus service or not (Interpretative Decision ID 2004/217). The provision of an airport
pick-up service for a foreign student in an English language course was not GST-free (Interpretative
Decision ID 2004/155).
“Curriculum-related” activities include visits to schools by organisations such as animal farms, theatre
companies and science fairs. (As to visits by the school, see ¶14-004.) Curriculum-related instruction
includes remedial or advanced teaching or instruction by external tutors engaged by the school. However,
if the tutor is paid direct by the student, this will not be GST-free unless the tutor is itself approved by the
government to conduct education courses.

Example
A school engages a private tutor to assist a student with her reading skills. The tutor charges the school a GST-inclusive fee. The
school claims an input tax credit for the GST. The school’s supply of the tutor’s services to the student is GST-free. If instead the
student had engaged and paid the tutor directly, the student would have had to pay the GST-inclusive amount, unless the tutor was
an approved provider.

Recreation, leisure and personal enrichment courses of the type generally run as evening classes on a
non-award basis are not treated as education courses and are not GST-free.
LOTE courses
Certain “Languages Other Than English” (LOTE) courses provided by non-profit ethnic schools are GST-
free. To qualify, the school must operate on a not-for-profit basis, and its principal aim must be the
teaching of languages other than English. It must also have close links with a community whose
first/heritage language is not English, and be approved to provide such courses by a state or territory
authority (A New Tax System (Goods and Services Tax) (Language Other Than English — LOTE —
Courses Offered by Ethnic Schools) Determination 2017).
Mixed and composite courses
If the dominant part of a course is GST-free, but it also contains some incidental aspects that normally
would not qualify, the course may be treated as a “composite” supply that is wholly GST-free (GST Ruling
GSTR 2001/8: see ¶4-200). This might apply, for example, where an accredited course includes some
supplementary, unaccredited material that simply enables the course to be customised for a particular
state. However, if the non-accredited material constituted a separate unit in itself, the supply would be
treated as a “mixed” supply consisting partly of accredited units and partly of non-accredited units. In such
a case, GST should be apportioned accordingly (GST Ruling GSTR 2001/1).
[GSTG ¶55-050]

¶14-004 Other educational supplies

The GST treatment of other education-related supplies is as follows.

Administration services
Charges by the education provider for administration services that are directly related to a GST-free
course are themselves GST-free (s 38-85). This would include enrolment processing, issue of identity
cards, student assessment, processing of results, record-keeping, administration of a textbook scheme,
administration of the sale or hire of relevant equipment to students and of the supply of course materials.
It would also cover library administration, including the levying of library fees for lost, damaged or late
books. However, if the amount of the fine approximates the price of the book, this is treated as a taxable
sale (GST Ruling GSTR 2000/30). The student services and amenities fee levied by universities is GST-
free where it complies with the provisions of Class Ruling CR 2012/19.
The provision of graduation dinners or academic dress hire is not considered to be GST-free (GST Ruling
GSTR 2001/1). Nor is the provision of general research services (Interpretative Decision ID 2002/1075).
To qualify for the exemption, the entity providing the administrative services must be the entity that
supplies the course.
Placement, waiting list and withdrawal fees
Fees charged for confirming a student’s place at a school are GST-free (s 9-30). However, if payment of
the fee does not guarantee entry (eg a waiting list fee), the ATO considers that the fee will be subject to
GST (GST Rulings GSTR 2000/30; GSTR 2001/1).
If a student withdraws from a course that has already started and forfeits all or part of the tuition fees, the
amount forfeited remains GST-free (GST Ruling GSTR 2001/1). Similarly, if the student cancels before
the course starts, the cancellation fee would be treated as consideration for the supply of GST-free
administrative services (see above) and therefore GST would not apply (GST Ruling GSTR 2009/3).
Course materials
Certain course materials provided for a subject in an education course are GST-free (s 38-95).
The materials must be provided by the supplier of the course and must be “necessarily consumed or
transformed” by the students. The ATO considers that the following are course materials when supplied
by an educational institution:
• photocopied or printed educational materials that specifically relate to the course

• course notes for a particular course

• unexposed film and developing chemicals

• art supplies

• ingredients used in a cooking class, wood used in a woodworking class and chemicals used in a
chemistry class

• workbooks that provide space for students to complete exercises, etc

• consumable stationery items prescribed as necessary to the course (GST Rulings GSTR 2000/30;
GSTR 2001/1).

GST would not apply where a student in a GST-free cabinet-making course kept the cabinet he made
with wood supplied as part of the course, as there would be no additional “supply” by the course provider.

Example
A university bookshop sells notepads and pens to its students and the general public. The sales to its students will be GST-free. The
sales to non-students will be taxable. If the shop is not owned by the university and is not acting as its agent (see below), all the
sales will be taxable, as the materials are not provided by the course provider.

The ATO considers that if a university engages an independent bookseller as an agent to sell course
materials to students, the supply of those materials may be GST-free if: (1) the agent can identify the
student, for example, by a student ID card; (2) the materials are prescribed on the student’s book list; and
(3) the university retains ownership of the goods until they are sold (GST Ruling GSTR 2001/1).
Goods which are sold
Where goods other than course materials are sold, that is not GST-free (s 38-100). This applies, for
example, where uniforms, sports clothes, musical instruments, equipment or textbooks are sold to
students.
If goods are sold second-hand, a separate exemption may apply under s 38-255 (¶15-030).
Lease or hire of curriculum-related goods
The lease or hire of goods by preschool, primary and secondary schools to their pupils is GST-free (s 38-
97). This exemption does not apply to tertiary courses.
The exemption may apply, for example, to hired laptop computers, textbooks, or musical or sporting
equipment. To be eligible, the goods must be for use directly or principally in undertaking a GST-free
course and the school must have the right to decide who uses them and how they are used. There must
not be any transfer of ownership of the goods, or any right or obligation to transfer ownership.
Items which are simply provided “free” for students to use as part of the course, for example computers or
books, are GST-free.
Prizes and awards to students would not be subject to GST in any event as they are gifts (¶4-030).
Student organisations
Fees paid for membership of a student organisation are not treated as part of an education course and
are not GST-free. Student organisations include student unions, student representative councils and
sports associations.
Excursions and field trips
An excursion or field trip is GST-free if it is directly related to the curriculum of an education course and is
not predominantly recreational (s 38-90). In deciding whether it is predominantly recreational, you should
take into account the proportion of the trip spent on recreational activities, in terms of both time and
money (GST Rulings GSTR 2000/30; GSTR 2001/1).

Examples
(1) A school history class excursion to a historical site will be GST-free, even if there are incidental recreational activities.
(2) A structured school camp including abseiling and bushwalking may be GST-free if those activities are directly related to lifestyle
development aspects of the school curriculum.
(3) A recreational day trip to the snow, a fun-park or an interstate trip by staff and students to attend a football match, would not be
GST-free.

The ATO considers that GST is generally not payable by parents or staff for their participation in a GST-
free excursion unless there is a separate charge to them.
If a school pays a third party to provide all or part of an eligible trip, the provision of those services to the
school will be subject to GST and the school can claim an input tax credit for the GST component. The
subsequent provision of the trip to the students by the school will be GST-free. However, if the students
pay the third party direct, without the interposition of the coordinating school, it appears that this will be
subject to GST.

Example
A school arranges for a bus company to supply an excursion to a swimming carnival, including travel and entry fees. The students
and staff pay the bus company directly. The excursion will be subject to GST, as it has not been provided by the school.
If the school had itself paid the bus company, after collecting the fees from the students, the school could have claimed an input tax
credit for the GST on the payment and the excursion provided to the students would have been GST-free, as it was supplied by the
school (based on GST Ruling GSTR 2000/30).

The accommodation component is not GST-free in the case of tertiary, masters, doctoral, or professional
or trade courses. Whether any food provided as part of the excursion is GST-free depends on the normal
food rules explained at ¶13-000 and following. For example, if the food was provided at eat-in facilities, it
would be subject to GST.
Travelling to and from school
Normal travel to and from school is not GST-free. If the travel operator is registered, the fares will be
subject to GST. For a limited exception in relation to certain school-organised transport services, see ¶14-
002.
Swimming lessons
If a school provides swimming lessons to its students as part of an education course, the lessons would
be GST-free. If the school paid a registered private operator to provide those lessons, the operator would
apply GST to the supply to the school, which could claim an input tax credit for that GST if it is registered.
For the separate exemption for life saving and learn-to-swim courses, see ¶14-002.
Student accommodation
Certain student accommodation is GST-free if the student is undertaking a GST-free primary, secondary
or special education course (s 38-105). For definitions of these terms, see ¶14-002. This exemption does
not apply to English language courses for foreign students (Interpretative Decision ID 2004/155).
To be GST-free, the accommodation must be provided by the relevant school that supplies the course or,
alternatively, be provided in a hostel whose primary purpose is to provide accommodation for students
from rural or remote locations. A rural or remote location does not include metropolitan areas with
populations over 100,000, or overseas locations (Interpretative Decision ID 2005/189). However, the test
will be satisfied even though some metropolitan or overseas students were also accommodated, where
the documented main purpose was to accommodate rural or remote students, and preference was given
to those students (Interpretative Decision ID 2004/977).
In this context, accommodation includes cleaning, maintenance, power, air conditioning, heating, and
items such as telephones, televisions and radios. It specifically does not include food, even where this is
bundled with the accommodation (s 38-105(4)). Accordingly, whether the food component is GST-free
depends on the normal food rules explained at ¶13-000 onwards. For example, food supplied to boarders
at a boarding school would be subject to GST (¶13-120). In such a case, if only a single fee is charged for
food and accommodation, it will be necessary to apportion the fee into its GST-free (accommodation) and
taxable (food) components. The ATO says it will accept any apportionment made on a “reasonable” basis
(GST Ruling GSTR 2000/30).
Accommodation provided to tertiary students at university halls or colleges is treated as non-commercial
residential accommodation and is input taxed: see ¶11-030. The same applies to rental accommodation
for students living off-campus.

Example
University College provides accommodation for its students. The accommodation is not subject to GST and the college cannot claim
input tax credits on relevant acquisitions.

In certain situations where the school qualifies as a charity, student accommodation may be GST-free
(¶15-010).
Staff and other accommodation
Accommodation provided at a university residential college to staff or others who are not tertiary students
is treated as commercial accommodation and is taxable, subject to the special rules that apply to long-
term accommodation; for further details, see ¶11-320. The same applies to school boarding house
accommodation provided to teachers or non-students (¶11-030). However, it may be that if a school
provides accommodation for a teacher in a house or flat, that will not be treated as commercial
accommodation and will accordingly be input taxed (Interpretative Decision ID 2002/972) (¶11-310). Staff
accommodation may also be GST-free in certain situations where the school is a charity (¶15-010).
Other exempt supplies
If an educational institution qualifies as a charity, gift-deductible entity or government school, sales of
goods for “nominal” consideration may be GST-free (¶15-010). Sales of donated second-hand goods may
also be GST-free (¶15-030).
The provision of a typical “no strings” scholarship would not be subject to GST as there is no
consideration (¶4-030). For example, GST did not apply where a private school provided a scholarship
covering secondary tuition, boarding school accommodation and music tuition to a student (Interpretative
Decision ID 2003/980).
GST would not apply if the relevant institution is not registered or required to be registered, for example if
its turnover falls below the relevant registration threshold. This means that GST would not apply to
fundraising activities, such as fetes, if they are carried out by unregistered Parents and Citizens
Associations that are below the $150,000 “non-profit” threshold (¶3-030). GST also would not apply to
certain fundraising events if they are treated as input taxed under the guidelines described at ¶15-055.
[GSTG ¶55-100–¶55-550]

¶14-010 School tuckshops and canteens

A school tuckshop run by a non-profit body such as a Parents and Citizens Association (P&C) can choose
to be input taxed (s 40-130). This means that GST does not apply to tuckshop sales, and the non-profit
body cannot claim input tax credits on the things it acquires to make those sales.
For this option to apply, the tuckshop must operate in the grounds of a primary or secondary school. The
option is open even though the tuckshop also sells other items such as school books or uniforms.
However, it does not apply to food supplied to school boarders as part of their board — this is subject to
GST (¶13-120).
If the choice to be input taxed is made, it must apply to all food sold through the tuckshop. Once the
choice is made, it cannot be revoked for 12 months. It appears that the ATO considers that the election
would have to be made before any supplies are made in connection with the event (Interpretative
Decision ID 2005/243).
An advantage of being input taxed is that it simplifies compliance and paperwork by effectively enabling
the P&C to stay outside the GST system. As the tuckshop proceeds are not taken into account in
determining turnover, the P&C is also unlikely to go over the $150,000 “non-profit” threshold for
compulsory GST registration.
If the option is not taken, and the tuckshop operator is registered, food supplied through the tuckshop will
be subject to GST in accordance with the normal rules (¶13-120).
[GSTG ¶55-650]

¶14-012 “Special education” courses

Education courses that provide special programs designed specifically for children with disabilities, and/or
students with disabilities, are GST-free (s 38-85; 195-1). In GST Ruling GSTR 2002/1, the ATO sets out
the following views on the requirements for this exemption:
• to qualify as a “course”, it must include systematic instruction, training or schooling in areas of
scholastic/academic pursuits, vocational skills or personal development. It may be delivered
individually or to classes. It may be a series of lessons or a module that forms part of a larger course.
However, it must have elements of interactive teaching, for example, the mere supply of a self-paced
software program without instruction, support or feedback would not qualify

• the program as a whole must be recognised as a special program, though it is not necessary that
every part of the course is “special”. For example, the course’s content may mirror that of a
curriculum-based school course, but it may be delivered in a way that makes it suitable for children or
students with disabilities

• a “child” is someone under 18 years. A “student” means someone — of any age — enrolled in the
course. The course may contain elements directed at parents or carers, provided that these are an
integral part of the special program

• “disabilities” include learning disabilities; special learning difficulties such as dyslexia; autism spectrum
 disorder; physical, emotional or language disorders; hearing or visual impairments; and intellectual
disabilities. Tutoring services for children who do not have disabilities but who simply have trouble
keeping up with their schoolwork would not qualify

• it is not necessary that the course be provided by a school, special school, government centre or non-
government centre.

Where a school engages an organisation to provide a GST-free education course to the school’s
students, there are two GST-free supplies — the supply of the course by the organisation to the school,
and the supply of the course by the school to its students. However, where students enrol with a course
provider for a GST-free education course and the course provider engages a supplier of teaching services
to provide that course on its behalf, the supply of the course is GST-free but the supplier of the teaching
services provides services that are subject to GST (GST Ruling GSTR 2006/9).
[GSTG ¶55-050]

¶14-015 Adult and community education courses

Adult and community education (ACE) courses are GST-free (s 38-85), provided they are likely to add to
the employment-related skills of people undertaking the course (s 195-1). In addition, the following
conditions must be satisfied:
• The course must be provided by a higher education institution, a recognised provider of such courses,
or a non-profit body. The exemption does not apply to an independent third party who purchases the
right to on-sell an ACE course to students unless that party is itself a recognised course provider.

• The course must be available to “adults in the general community”. In this particular context, the ATO
apparently accepts that “adult” includes a person aged 15 years or more who is not in full-time
education (Interpretative Decision ID 2004/2). The fact that a course is widely advertised and is
available on a first-come first-served basis may indicate that it is available for persons in the general
community. The exemption has been held to apply to a course provided to “women over 18 years”
(Interpretative Decision ID 2003/1013) or unemployed non-students aged 15–17 years (Interpretative
Decision ID 2004/2), but not a course limited to selected non-residents with tertiary qualifications
(Interpretative Decision ID 2003/1097).

• The course must not consist of private tuition, and must not be provided or arranged by employers for
their employees, or by organisations for their members unless that membership is open to the
general community (A New Tax System (GST) (Adult and Community Education Courses)
Determinations 2000 and 2016).

The ATO considers that a course meets the requirement that it be likely to add to employment-related
skills if, on an objective basis:
• it is directed at people who want to add to their employment-related skills

• the skills and the means of imparting them are clearly identified

• there is a reasonable expectation that the skills will be used in a work environment, rather than for
recreational, hobby, artistic or cultural purposes (GST Ruling GSTR 2000/27).

The ATO will also take into account how the course is marketed, whether it is similar to accredited
vocational education and training programs, and whether it in fact helps people in doing or getting work.
The skills would include basic literacy and numeracy skills, as well as new skills and the development of
existing skills. Courses in preparing for work, computer skills and job-seeking would be eligible.
The ATO considers that recreational courses on matters such as belly dancing, cooking, picture framing,
environmental issues or financial planning would not be eligible unless they were promoted, targeted and
structured for people already working or wishing to obtain work in those areas.
[GSTG ¶55-050]
¶14-020 Professional or trade qualification courses

Professional or trade qualification courses are GST-free (s 38-85). This covers courses leading to
qualifications that are “essential prerequisites” for entering into or commencing the practice of a particular
profession or trade in Australia (s 195-1). To be an essential prerequisite, the qualification must be
imposed by:
• a law, award, order or industrial agreement, or

• a professional or trade association that has uniform national requirements for entry or commencing
practice.

If neither of these applies, the relevant qualification-setter may be a professional or trade association
operating in a state or a territory. This may apply, for example, where an association’s requirements vary
from state to state.
It is not necessary for the course to be provided by a recognised education provider. For example,
courses offered by the relevant professional or trade association itself may qualify. However, the
exemption only applies to the course provider. It does not apply to third parties who may be contracted by
the course provider to provide instruction services.
Courses undertaken to maintain qualifications — as distinct from obtaining them — do not qualify.
Accordingly, continuing professional education, re-licensing, re-accreditation, renewal of annual practising
certificates and refresher courses do not qualify (GST Ruling GSTR 2003/1). For the meaning of a
“course”, see ¶14-012.

Examples
(1) A qualification course conducted by a professional association that regulates who can practise in that profession would be GST-
free.
(2) A course to obtain a certificate necessary to operate a particular type of machinery or equipment would be GST-free.
(3) Continuing professional development (CPD) courses that are taken to retain membership of a professional body are not GST-
free.

Commercial pilot training courses may qualify where they are essential prerequisites for entry into the
profession. Where the course is not an essential prerequisite (eg a private pilot’s licence course), it may
be GST-free as a tertiary course (¶14-002) if it is accredited and provided by a higher education institution
or registered training organisation (GST Determination GSTD 2000/11).
The ATO considers that the exemption does not apply to training courses for “return to work”
coordinators.
A course will not be GST-free simply because it leads to a generic qualification commonly required by
employers. For example, the fact that a motor vehicle driver’s licence is a requirement of a number of jobs
does not mean that driving lessons are GST-free. On the other hand, a special heavy vehicle drivers
licence course needed for certain transport jobs, or a firearms training course which must be taken in
order to be licensed to work as an armed security guard, may be GST-free.
It is not clear what the position is with courses undertaken to obtain a special status within a particular
profession or trade, for example, to become an accredited specialist in a particular area of practice. The
ATO takes the view that a course that merely enhances a person’s proficiency to undertake a wider range
of activities in an existing profession or trade will not qualify, for example, where a person who already
has a heavy vehicle drivers licence also obtains a dangerous goods licence. However, in some cases a
specialisation may itself amount to a separate trade or profession, so the course may be GST-free. In
considering whether this applies, the ATO may take into account factors such as whether the
specialisation: (1) enables the person to perform different tasks; (2) enables the person to service a
different client base; (3) has its own distinct professional or trade association; (4) has its own distinct
industrial award; and (5) requires additional study of significant duration (GST Ruling GSTR 2003/1).
Recognition of prior qualifications
The assessment of qualifications is GST-free if it is done for the purpose of enabling access to education,
employment, membership of a professional or trade association, or registering or licensing for a particular
occupation (s 38-110). The assessment must be carried out by:
• a professional or trade association

• an education institution (this means a higher education institution, technical and further education
institution, secondary school or any other institution determined to be an education institution by the
Education Minister, eg a registered training organisation)

• an entity registered by a training recognition authority to provide skills recognition (assessment only)
services

• a relevant government body such as the National Office of Overseas Skills Recognition, or

• a local government body.

This exemption has been applied to assessment of qualifications for the purpose of determining if a
member could change their professional membership status from an “associate” to a “fellow”
(Interpretative Decision ID 2003/1185). It has also been applied to assessments made for the purpose of
a person obtaining a promotion (Interpretative Decision ID 2004/45), obtaining a credit that will exempt
them from some aspects of an education course (Interpretative Decision ID 2004/118), obtaining a work-
related forklift licence (Interpretative Decision ID 2004/144), or determining the type of informal on-the-job
training that the person will require (Interpretative Decision ID 2004/119).
The same rules apply to the issue of qualifications.
Commercial operations of course provider
Where part of a vocational hospitality course involved students serving in a public restaurant operated by
the course provider, the supply of the course to the students would be GST-free, but the supply of the
food to the customers would be taxable (¶13-120).
[GSTG ¶55-050]

¶14-030 Education checklist

The following checklist sets out the general GST status of various educational services and gives a cross-
reference to more details.

Checklist
Accommodation Generally GST-free, except for tertiary
students (¶14-004)
Adult courses if approved as employment-related GST-free (¶14-015)
Apprenticeship courses GST-free (¶14-020)
Art supplies if no charge GST-free (¶14-004)
Bus to and from school Taxable (¶14-004)
Community education courses if approved as employment-
related GST-free (¶14-002)
Computers provided to school children GST-free if not purchased (¶14-004)
Computer courses, if employment-related GST-free (¶14-015)
Course materials GST-free (¶14-004)
Disabled children and student courses GST-free (¶14-012)
Doctoral courses GST-free (¶14-002)
English language for foreign students GST-free (¶14-002)
Excursion GST-free if curriculum-related (¶14-
004)
Field trip GST-free if curriculum-related (¶14-
004)
First aid course GST-free if by approved body (¶14-
002)
Food at tuckshop Input taxed at option of non-profit
operator, otherwise normal food rules
apply (¶14-010)
Food supplied to boarders Taxable (¶14-004)
Fundraising activities Input taxed (optional) (¶15-055)
Goods hired to students GST-free (¶14-004)
Ingredients for cooking class GST-free (¶14-004)
Masters courses GST-free (¶14-002)
Musical instruments GST-free if not purchased (¶14-004)
New Apprenticeships Access Programme GST-free (¶14-002)
Open learning courses GST-free (¶14-002)
Personal enrichment courses Taxable (¶14-002; ¶14-015)
Photocopied educational material if no charge GST-free (¶14-004)
Postgraduate courses GST-free (¶14-002)
Pre-school courses GST-free (¶14-002)
Primary school courses GST-free (¶14-002)
Private tutoring GST-free if supplied by school (¶14-
002)
Prizes Not subject to GST (¶4-035)
Professional qualification courses GST-free (¶14-020)
Recreational courses Taxable (¶14-002; ¶14-015)
Rental off-campus accommodation Taxable (¶14-004)
Resuscitation courses GST-free if by approved body (¶14-
002)
Rural student hostel accommodation GST-free (¶14-004)
Scholarships Not subject to GST (¶14-004; ¶4-030)
Secondary courses GST-free (¶14-002)
Special education courses GST-free (¶14-012)
Sporting tours Taxable (¶14-004)
Sports equipment GST-free if not purchased (¶14-004)
 Staff accommodation Taxable (¶14-004)
Student organisation membership Taxable (¶14-004)
Swimming lessons provided by school for students GST-free if part of course (¶14-004)
Technical and Further Education (TAFE) courses (non- GST-free (¶14-002)
hobby)
Tertiary courses GST-free (¶14-002)
Tertiary residential college courses GST-free (¶14-002)
Textbooks Taxable if sold (¶14-004)
Trade qualification courses GST-free (¶14-020)
Transport to and from school Taxable (¶14-004)
Uniforms sold to students Taxable (¶14-004)

¶14-040 Other options for educational institutions

The ATO says that schools will be registered either at the level of the school, the Education Department,
the Education Commission or the state government.
A registered Education Department may register individual schools as GST branches (¶17-300).
Alternatively, a non-profit school may have the option of separately registering in its own right (¶15-080).
Government schools or other schools that are endorsed charities may be able to account on a cash basis
irrespective of turnover (¶7-300), and choose their tax periods irrespective of their balance date (¶7-100).
They may also qualify for input tax credits for reimbursing volunteers (¶5-040).
Parents and Friends/Citizens Associations may be treated as not-for-profits and need only register if their
GST turnover is $150,000 or more (¶3-030). Turnover from input taxed activities — such as school
canteens (¶14-010) — is not taken into account in calculating the GST turnover. Adopting the option of
not registering will mean that GST does not apply to the association’s activities. However, it will also
mean that input tax credits cannot be claimed for GST paid on purchases.
Schools may also take advantage of the option to treat fundraising activities as input taxed (¶15-055).
If a school provides gifts to members of the school community (eg during times of illness or as tokens of
gratitude for making contributions), it appears that the school can claim input tax credits for the cost
(Interpretative Decision ID 2002/1).
[GSTG ¶55-850]

CHILD CARE
¶14-100 GST-free childcare services

Child care is GST-free if:

• it is supplied by a childcare service approved under Commonwealth family assistance law (s 38-145).
This may typically apply to long day care centres, family day care centres, outside-school-hours care
services and some occasional care services, or

• it is a supply of in-home and long day care for childcare services that do not have approval under the
family assistance law, but for which the supplier is eligible for Commonwealth funding under
guidelines made by the Child Care Minister (s 38-150; GST-free Supply (Child Care) Determination
2017). Before 5 April 2017, this was expressed to be applicable to family day care, occasional care,
 outside-school-hours care, vacation care, in-home care, long day care or other types of approved
care (GST-free Supply (Long Day Care and In-home Care) Determination 2017).

Curriculum-based pre-school courses are GST-free under a separate provision (¶14-002). Not-for-profit
childcare bodies may also qualify for concessions as charities (¶15-000).
Directly-related supplies
Apart from the actual child care itself, the exemption also applies to all directly related goods and services
supplied by or on behalf of the care supplier, for example food, electricity, bed linen and nappy washing
services (s 38-155). This may also apply to separately charged extra activities, such as swimming,
provided as part of the care supplier’s outside school hours care and vacation care services
(Interpretative Decision ID 2003/997).
Family day care centres typically charge administration levies to both the carers and the parents. These
levies commonly cover services such as toy libraries, handouts, newsletters and updates, processing of
attendance sheets and administration of childcare benefit entitlements. The Commissioner considers that
these services are directly related to the child care and are GST-free under s 38-155. However, if part of
the levy represents a parent’s membership fee, that part will be taxable. Similarly, if part of the levy
charged to carers relates to registration or training, that part will be taxable (GST Determination GSTD
2001/1).
In the case of approved childcare centres, excursions directly related to the child care are specifically
GST-free, even if they are not supplied by or on behalf of the care supplier (s 38-145).
Non-recognised childcare services
GST potentially applies to child care supplied by unqualified carers such as private babysitters. However,
in practice, it commonly does not apply because the supplier is not registered for GST and is not required
to be registered for GST.

Example
Russell, a school child, earns $2,000 a year from babysitting. Russell is not GST-registered and, because his turnover is less than
$75,000, he is not required to be GST-registered. Russell’s baby sitting services are therefore not subject to GST.

[GSTG ¶65-600]
CHARITIES, RELIGIOUS AND NON-PROFIT
BODIES
Special rules for charities and not-for-profits ¶15-000
Summary of GST concessions ¶15-005
Supplies for “nominal” value ¶15-010
“Over-55s” retirement village accommodation and services ¶15-015
Raffles and bingo ¶15-020
Donated second-hand goods ¶15-030
Gifts in general ¶15-040
Religious services ¶15-050
GST religious groups ¶15-052
Religious practitioners ¶15-053
Fundraising activities ¶15-055
Simplified accounting methods ¶15-060
Independent branches of non-profit bodies ¶15-080
Ceasing to be a sub-entity ¶15-090

Editorial information

Summary
Charities and other gift-deductible bodies are entitled to a higher registration threshold. They are
also entitled to GST-free treatment on non-commercial activities, certain retirement village services,
raffles and bingo, and sales of donated second-hand goods. Simplified accounting methods may be
available and a range of other concessions apply.
Religious services are GST-free if they are integral to the practice of the religion.
Non-profit bodies can opt to have their independent branches treated as independent bodies for
GST purposes, as an alternative to the normal branch procedures.

¶15-000 Special rules for charities and not-for-profits

Charities, gift-deductible entities, government schools and non-profit bodies are entitled to various
concessions designed to reduce the administrative inconveniences that would otherwise flow from a strict
application of the normal GST rules.
The general intention is that these bodies are subject to GST on their commercial activities, but their non-
commercial activities are GST-free. This treatment is designed to avoid giving them an “unfair”
competitive advantage over other business providers.
The types of body that may qualify for these concessions or special rules are explained below.
“Charities”
Charities have to be endorsed by the Tax Office in order to claim their special GST concessions (Div
176). It is a prerequisite for endorsement that the charity be registered with the Australian Charities and
Not-for-Profits Commission (ACNC). However, charities that were endorsed before 3 December 2012
continue to have endorsed status. Details of an endorsed charity’s GST concession status appear on the
entry for that charity in the ABN Lookup website at www.abr.business.gov.au.
Statutory definition of charity
A new statutory definition of charity, applicable from 1 January 2014, largely adopts the common law
position but introduces some clarifications (Charities Act 2013). It provides that the categories of
charitable purposes are:
• advancing health, education, social or public welfare, religion or culture

• promoting reconciliation, mutual respect and tolerance between groups of individuals in Australia, or
promoting or protecting human rights

• advancing the security or safety of Australia or the Australian public

• preventing or relieving the suffering of animals

• advancing the natural environment

• any other purpose beneficial to the general public that is analogous or within the spirit of any of the
above

• promoting or opposing a change to the law, policy or practice, in Australia or elsewhere, in furtherance
or protection of any one or more of the above. However, this excludes promoting or opposing a
political party or candidate, or engaging or promoting activities that are unlawful or contrary to public
policy (such as the rule of law or the system of government).

The statutory definition also specifies that:

• a charity may have incidental purposes that may be uncharitable when viewed in isolation, but which
aid or further the main charitable purpose

• the public benefits test is relaxed for entities with land-rights related assets that direct benefits to
indigenous Australians who are related

• the public benefit test does not apply to open and non-discriminatory self-help groups, to closed or
contemplative orders, or where the purpose is directed to individuals in necessitous circumstances

• a charitable purpose includes not only the relief of individual distress after a disaster but also certain
assistance with the rebuilding of a community

• funding charity-like government entities does not prevent a contributing fund from being charitable.

Charities do not include government entities.

Principles established under former common law
Before 1 January 2014, the meaning of “charity” was largely determined by the courts under common law.
This established the following main points:
• In general, charities are non-profit organisations established for the advancement of education, the
relief of poverty, sickness or the needs of the aged, the advancement of religion or other purposes
beneficial to the community.

• Government bodies performing statutory obligations are technically not treated as charities (Mines
 Rescue Board of NSW v FC of T 2000 ATC 4580), but may qualify under the later headings of gift-
deductible entities or government schools. The mere fact that a body is dependent on government
funding does not prevent it from being charitable, provided that the body does not change its
purposes to simply carrying out government policy (Central Bayside Division of General Practice Ltd
v Commr of State Revenue (Vic) 2006 ATC 4610).

• A body that undertakes commercial activities to raise funds exclusively to support a charity may itself
be charitable (FC of T v Word Investments Pty Ltd [2008] HCA 55).

• Charities normally would not include bodies set up primarily for sporting, recreational, social, political,
lobbying or promotional purposes. However, an institution which monitored, researched and
campaigned about the delivery of foreign aid, but which did not actually provide any aid itself, was
held to be a charitable institution in Aid/Watch Incorporated v FC of T [2010] HCA 42. The High Court
commented that the lawful generation of public debate on the efficiency of foreign aid directed to the
relief of poverty is itself a purpose beneficial to the community. The Tax Office considers, however,
that this would not extend to political lobbying or party-political electioneering (decision impact
statement on Aid Watch). Similarly, a bicycling organisation was considered to be charitable on the
basis that its overall purpose was to promote health and fitness through cycling, which was to the
benefit of the general community (Bicycle Victoria Inc v FC of T 2011 ATC ¶10-188; [2011] AATA
444). The Tax Office says it will apply this decision to institutions that promote an activity that is
sporting or recreational in nature, if the facts indicate that the activity is a means by which a broader
charitable purpose is achieved.

• Traditional service clubs, such as Lions or Rotary, are not treated as charities, but may qualify as non-
profit bodies for purposes of the independent branch rules (¶15-080).

• The Tax Office’s general views on the meaning of “charitable institution” under these common law
rules are set out in Taxation Ruling TR 2011/4.

• “Charity” specifically includes not-for-profit childcare bodies available to the public, self-help bodies
that have open and non-discriminatory membership, and closed or contemplative religious orders
that offer prayerful intervention for the public (former Extension of Charitable Purpose Act 2004).

“Gift-deductible entities”
An organisation qualifies under this heading if gifts to it are tax deductible. This wide category includes
bodies such as hospitals, public universities, public benevolent institutions (Taxation Ruling TR 2003/5),
medical research bodies, aid agencies, political parties and many other non-profit bodies (s 195-1). All
bodies have to be endorsed by the Tax Office in order to have or maintain gift-deductible status, unless
they are specifically named in the tax law. Only bodies with ABNs can be endorsed, although it is not
essential that they be registered for GST.
Gift-deductible entities include non-charitable public ancillary and prescribed private funds. These funds
are trusts that are established for the purpose of providing money and other benefits to organisations that
are gift-deductible entities.
A body that operates a gift-deductible entity is entitled to the charitable GST concessions only in relation
to the activities of that entity, not the whole of the body’s activities.
“Government schools”
Government schools are those providing preschool, full-time primary or secondary courses (s 195-1). The
need for a specific inclusion of these schools arises because they are technically not charities.
“Non-profit bodies”
For the meaning of non-profit bodies, see ¶3-030.
[GSTG ¶58-000]

¶15-005 Summary of GST concessions

Endorsed charities, gift-deductible entities and public schools are eligible for concessions or exemptions
in the following areas:
• higher registration threshold (¶3-030)

• cash basis of accounting (¶7-300)

• simplified accounting (¶15-060)

• supplies for nominal consideration (¶15-010)

• raffles and bingo (¶15-020)

• supplies of donated second-hand goods (¶15-030)

• reimbursement of volunteers (¶5-040)

• fundraising (¶15-055).

Special concessional rules also apply to:

• independent branches of endorsed charities, government schools, non-profit gift-deductible entities
and certain tax-exempt bodies (¶15-080)

• gifts to endorsed charities and gift-deductible entities (¶15-040) or non-profit entities (¶4-040)

• certain retirement village supplies by endorsed charities (¶15-015)

• religious services supplied by religious institutions (¶15-050)

• school tuckshops supplies by non-profit entities (¶14-010)

• grouping of non-profit entities (¶17-010).

See also the detailed checklist at ¶25-110.

¶15-010 Supplies for “nominal” value

Anything supplied by an endorsed charity is GST-free if the consideration for it is less than 50% of the
market value including GST (s 38-250). In the case of accommodation, the consideration need only be
less than 75% of market value. To claim this exemption, the charity will need to closely monitor its costs
and pricing structure to ensure that the relevant limits are not breached.
This concession applies also to a “gift-deductible entity” or a government school (¶15-000).

Examples
(1) Goods have a market value of $500 and a GST-inclusive value of $550. If the charity sells them for $260 (less than 50% of
$550), the sale will be GST-free.
(2) Food supplied at no charge by a soup kitchen is GST-free.
(3) A supported accommodation agency provides accommodation to a client for $150 a week. The GST-inclusive market value of
the accommodation is $210. The accommodation will be GST-free as the price is 71% (less than 75%) of that market value. If the
GST-inclusive market value had been $180, the exemption would not have applied because the price charged is 83% of that market
value. In that case the accommodation would have been input taxed, or taxable if it was commercial residential accommodation
(¶11-000).

Where a charity provided low-cost accommodation, incentive payments received by the charity from the
government under the National Rental Affordability Scheme were not treated as part of the consideration
for the supply of the accommodation (Interpretative Decision ID 2010/215). Unlike the transport incentives
in the TT-Line case (¶4-020), the payments were not matched to specific tenants or specific supplies of
accommodation.
Alternative test for exemption
Even if this test is not satisfied, the supply by the body is GST-free if the consideration for the supply is
less than 75% of the amount that it was liable to pay for acquiring the relevant goods or services that it
ultimately supplied. (In the case of a motor vehicle, this would not include CTP insurance, registration or
stamp duty: ATO Fact Sheet GST and motor vehicle trade-ins for charities.) In the case of
accommodation, the corresponding threshold is 75% of the cost of providing the accommodation.

Example
A charity buys goods for $1,000 but their market value declines to $500. The charity sells them for $400. Even though this is more
than 50% of the $550 GST-inclusive value, it is less than 75% of the consideration paid by the charity (ie $1,000), so the sale is
GST-free.

The Commissioner accepts that this exemption is not restricted to on-supplies in the strict sense. It may
therefore apply where the goods or services acquired by the body are not the same as the goods or
services it supplies, but are simply used in making that supply, eg where a charitable zoo acquires
animals, feed, enclosures and facilities that it uses to provide zoo admissions (GST Determination GSTD
2013/4). In the case of capital costs, the consideration to be taken into account should be based on any
reasonable methodology that reflects the proportion of the capital costs that relate to each supply.

Example
A charitable zoo spent $2m in constructing animal enclosures in its zoo premises. It reasonably expects that the enclosures will be
used for 20 years and will be equally relevant to zoo admissions throughout the expected life of the enclosures. The enclosures are
not expected to have any residual value after 20 years.
In working out the portion of the construction cost to be allocated to the supply of each admission, an acceptable methodology would
be for the zoo to spread the capital cost of the enclosures equally across 20 years (representing the expected life of the enclosures)
and to allocate $100,000 of the cost of the enclosure to each year, or $25,000 for a quarterly tax period. If it is expected that the
number of admissions is 100,000 in a quarterly tax period, the portion of the consideration for the enclosures that is included in the
cost of each admission would be $0.25 (ie $25,000/100,000). (Based on GST Determination GSTD 2013/4.)

Odd jobs carried out by Scouts during “job week” (or “bob-a-job week”) are not subject to GST.
Market value
Non-commercial newsletters, magazines and journals sold by charities and the other eligible bodies will
normally be GST-free, even though it may be difficult to establish a market value. Publications that are
given away, for example, the Salvation Army’s War Cry, would not be subject to GST in any event, even
though they have a notional cover price and donations may be accepted for them.
Detailed guidelines for working out the market value, and a series of benchmark market values for certain
types of supply, have been prepared by the Tax Office. These include accommodation, newspapers and
theatre tickets (ATO GST Industry Issues — Charities: Non-commercial activities, cost of supply and
market value tests; ATO Fact Sheet GST and Non-commercial Rules — Benchmark Market Values). The
Tax Office has also issued a useful Charities and Motor Vehicle Trade-Ins Fact Sheet.
Scheme to exploit concession
The Tax Office has warned that it is examining certain arrangements designed to exploit this concession,
and expressed the view that they are not effective (Taxpayer Alert TA 2007/1; GST Determination GSTD
2007/2). The arrangements involve a charity leasing property to an associated charity, which then
provides the property to residents as residential accommodation. The associate makes lease payments
by way of book entry. This inflates the cost to the associate of supplying the accommodation, and enables
it to claim that the supply is GST-free — and therefore qualifies for input tax credits — because the rent it
receives is less than 75% of its cost.
Fringe benefits to employees
If the body provides fringe benefits to employees, the consideration will include the value of the services
provided by the employees. This normally means that the fringe benefit is taken to be supplied for a
consideration equal to its market value (¶4-020). It therefore is not GST-free, unless the market value is
less than 75% of the original cost. However, in accordance with the special fringe benefit rules (¶24-200),
the GST will only be calculated on the payment or contribution made by the employee.

Example
A charity buys a car for $25,000 and transfers it to an employee in return for a payment of $11,000. The Commissioner will normally
treat this as a supply for consideration of $25,000 (ie $11,000 payment + $14,000 worth of employee services). Therefore, the
supply is taxable, as it does not qualify under either the 50% of market value test, or the 75% of original cost test. The GST,
however, is limited to 1/11 × $11,000 = $1,000.

If the fringe benefit consists of accommodation, and it is not GST-free, it would normally be input taxed
(¶11-310).
Refunds of incorrectly charged GST
It may occur that charities have incorrectly included GST in entry fees. The Tax Office says that charitable
“organisations meeting the ACCC’s general approach to situations where consumers have been over-
charged are entitled to a refund of relevant GST paid to the Tax Office. In general, the ACCC requires
that organisations make efforts to repay the relevant amounts to their customers. In the event of this
money being unclaimed, eligible organisations can keep it to use to benefit the community”. See also ¶8-
110.
[GSTG ¶58-010]

¶15-015 “Over-55s” retirement village accommodation and services

Supplies of accommodation, accommodation-related services or meals at an “over-55s” retirement village

operated by an endorsed charity are GST-free (s 38-260). This extends, for example, to accommodation
in independent living units or serviced apartments, property maintenance fees, gardening services, meals
and beverages. It applies only to supplies made to residents of the village, not visitors or staff.

Example
GST-free accommodation-related services would include building and garden maintenance, but not laundry, personal care,
hairdressing or bus services (Interpretative Decisions ID 2009/103; ID 2009/104).

To qualify as a “retirement village” for these purposes, the premises must be residential, be intended for
persons who are at least 55 (or more) years old, and must include communal facilities for use by the
residents (s 195-1). The Tax Office considers that “communal facilities” must be physical facilities that are
intended and capable of group use by the residents for recreational, sporting, social, religious, or other
similar uses that enhance a sense of community among the residents. They would ordinarily include a
library, dining room, recreation room, chapel, equipped gymnasium and outdoor recreational and leisure
facilities such as a tennis court, swimming pool or barbeque area. They would ordinarily not include offsite
facilities, reception areas, pathways, gardens, driveways, landscaping or facilities for a resident’s own use
in their individual apartments. Nor would they include facilities that are merely in a planning stage. It is
only necessary that there be one communal facility, and it is not necessary that it be for the exclusive use
of the residents (GST Ruling GSTR 2007/1).
Premises that are commercial residential premises (¶11-030) or residential care premises (¶13-340)
cannot qualify as a retirement village. Where neither the charity exemption nor the residential care
exemption applies, a supply of accommodation would normally be input taxed (¶11-310).
In general, an exit payment or “deferred management fee” that an occupant is required to pay when their
leasehold interest in the village terminates does not attract GST where the accommodation was GST-free
(¶13-340), and is input taxed in other situations. However, to the extent that the exit payment relates to
non-accommodation supplies (meals, cleaning, laundry, social events, medical care, etc) which have not
been fully remunerated, it may be treated as payment for a taxable supply (GST Ruling GSTR 2012/4).
The Tax Office would probably seek to apply the anti-avoidance provisions (¶20-000) to arrangements
that attempted to exploit the concession by supplying meals for more than market value, with the intention
of enabling other supplies to be underpriced so as to qualify under the nominal consideration exemption.
[GSTG ¶58-015]

¶15-020 Raffles and bingo

Raffles and bingo conducted by endorsed charities are GST-free, provided that they are in accordance
with the relevant state or territory law (s 38-270). This exemption does not apply to activities such as
lotteries that are subject to state taxes on gambling.
This concession applies also to a “gift-deductible entity” or a government school (¶15-000).
[GSTG ¶58-020]

¶15-030 Donated second-hand goods

The supply of donated second-hand goods by an endorsed charity is GST-free (s 38-255). However, this
does not apply if the charity has dealt with the goods in such a way that they no longer have their original
character.
This concession applies also to a “gift-deductible entity” or a government school (¶15-000).

Examples
(1) Second-hand clothing is donated to a charity, which cleans and repairs it before selling it to the public. The clothes have retained
their original character and the sale will be GST-free. This would also apply to the separate sale of buttons or lace that have been
removed from the clothes (ATO GST Industry Issues — Charities: Issue 6.6).
(2) Assume instead that the charity cuts up the clothing and sells it as industrial cleaning rags. This would normally mean that the
clothing no longer has its original character. The sale will therefore not be GST-free unless it is for a nominal amount, or possibly
unless it can be shown that the donated clothes were in such poor condition that they had already lost their character as clothes.
(3) Under a marketing promotion, a charity collects donated bottle tops from the public and then redeems them for a payment from
the manufacturer. This would be treated as a GST-free sale of donated second-hand goods (see also ¶4-030).

The same rules apply where the goods pass through a series of charities after being donated.
Second-hand goods would include goods that have been previously owned and possibly goods that have
been previously used. They do not include certain precious metals, plants or animals (¶16-100).
[GSTG ¶58-030]

¶15-040 Gifts in general

If you make a gift of money or property to a charity, that donation is not subject to GST. The nature of a
gift is discussed at ¶4-030.
If you bought goods for a business purpose and later decide to donate them to an endorsed charity or a
gift-deductible entity (¶15-000), you remain entitled to an input tax credit for any GST paid on the
purchase (s 129-45).

Examples
(1) A bread shop donates its excess bread each day to a charity. This donation is not subject to GST. The bread shop can continue
to claim input tax credits for the GST on the things it acquired to make the bread.
(2) A business operates a van entirely for business purposes, except that it also uses it to provide free transport services for a local
charity. It will still be treated as using the van entirely for business purposes and can claim input tax credits accordingly.
If you purchased goods for private purposes, or with the purpose of donating them, you would not be
entitled at all to any credit for any GST paid on the purchase, as it was not for a business purpose. In
either case, the actual donation of the goods to the charity is GST-free (because it is a gift) and the
subsequent sale of the goods by the charity is also GST-free (because they are second-hand goods).
The Tax Office considers that membership fees paid to a charitable organisation are not gifts, because
they confer membership rights.
[GSTG ¶58-040]

¶15-050 Religious services

Services provided by a religious institution will be GST-free if they are integral to the practice of the
religion, and the institution is registered as such with the Australian Charities and Not-for-Profits
Commission (s 38-220).
GST-free status does not apply if:
• services supplied by the religious institution are not integral to the practice of the religion, or

• services corresponding to religious services are supplied by a non-religious institution.

Examples
(1) The supply of a Rabbi’s services at a bar mitzvah is GST-free.
(2) Car hire for a wedding party is not GST-free. It is not integral to the practice of the religion and in any event is not supplied by a
religious institution.
(3) Flowers are supplied by the church as part of a church wedding. The Tax Office considers that this would not be GST-free
because flowers are not an integral part of the wedding service.
(4) A marriage ceremony conducted by a civil celebrant is not GST-free.
(5) A spiritual retreat after school catechism and adult education in the faith would normally be GST-free if provided by a religious
institution. It does not matter if these activities are not conducted at a place of worship.
(6) The training of a student through a religious pastoral ministry course did not qualify as GST-free, as this was not integral to the
practice of the religion (Interpretative Decision ID 2004/438).
(7) An annual conference held by a religious institution was GST-free where it was focused mainly on the institution’s moral and
ethical beliefs and did not include social or recreational activities (Interpretative Decision ID 2006/112).

These rules may be difficult to apply in borderline cases. At a time when the scope and role of religion has
become less settled, there may be differing views, not only over what constitutes a religious institution,
but also over what is “integral” to religious practice.
The Tax Office accepts that religions are not confined to the major religions (Taxation Ruling TR 92/17).
The main characteristics, as set out by the High Court, are that there must be a belief in a supernatural
being, thing or principle, and that there must be an acceptance of a code of conduct that gives effect to
that belief. On this basis, for example, Scientology is a religion (The Church of the New Faith v Commr of
Pay-roll Tax (Vic) 83 ATC 4652).
For a body to be regarded as a religious “institution”, the Tax Office says that its objects and activities
must reflect its character as a body instituted for the promotion of some religious object; and the beliefs
and practices of the members of that body must constitute a religion (Taxation Ruling TR 92/17).
Services that are provided free of charge to the public are, of course, not subject to GST.
[GSTG ¶58-050]

¶15-052 GST religious groups

Certain religious bodies can form a “GST religious group” which will effectively be treated as a single
entity (Div 49). These groups are broadly similar to the GST groups that other types of businesses can
form (¶17-000), though the requirements are less stringent because of the large number of small
organisations involved. The broad effect is that supplies made within the group are not subject to GST
and acquisitions made within the group do not give rise to input tax credits (s 49-30; 49-35). This will
generally reduce compliance costs and may have cashflow benefits.
To be eligible, each member of the group must be registered, be endorsed as a tax-exempt charity, be
part of the same religious organisation and not be a member of any other GST religious group (s 49-10).
The application must nominate a principal member who accounts for changes to group membership and
status (s 49-5). However, each member is liable to lodge its own GST return for its own external
transactions.
[GSTG ¶58-052]

¶15-053 Religious practitioners

Where religious practitioners are acting as employees of religious institutions, they are outside the scope
of GST in the same way as other employees, and do not have to register unless they are carrying on
some other activities that amount to an enterprise (¶3-020).
Similar treatment applies to religious practitioners who are not formally employees of the institution, but
who act in pursuit of their vocation as a practitioner and as a member of the institution (s 50-5). These
activities are treated as being carried out by the institution — which therefore becomes liable for the GST
consequences — not the practitioner. This has been applied, for example, where a non-employee
practitioner bought religious tracts that set out the doctrines and practices of the religion and sold them to
members (Interpretative Decision ID 2004/765). However, it did not apply where that practitioner wrote a
book on the history of the religion with the intention of selling it widely to the general public. That was not
treated as an activity in pursuit of the practitioner’s vocation, but rather as a separate enterprise carried
on by the practitioner, who was personally liable for any GST consequences (Interpretative Decision ID
2004/766).
A “religious practitioner” means a minister of any religion, full-time member of a religious order, or a
student training to be a minister or member of a religious order.

Examples
(1) Gabriel, a non-employee minister, is paid $76,000 by the church for carrying out his pastoral duties, administering a parish and
teaching. As these activities are part of his religious vocation, they are treated as being carried out by the church. Gabriel is not
obliged (or able) to register for GST.
(2) Assume that Gabriel also runs his own farm business. This is treated as an enterprise carried on by Gabriel. Gabriel can register
for GST in relation to these farm activities and is required to do so if the GST turnover from the farm is $75,000 or more, in
accordance with the normal rules.

For the treatment of a religious practitioner’s fringe benefits, see ¶15-010.

[GSTG ¶58-053]

¶15-055 Fundraising activities

The general rules relating to fundraising functions are discussed at ¶4-030. However, endorsed charities
can elect to have fundraising events treated as input taxed (s 40-160). This means that those activities
will not be subject to GST and that the charity will not be able to claim input tax credits for related costs.
This option is also open to gift-deductible entities and government schools (¶15-000).
Eligible events, as specified in s 40-165, include:
(1) fetes, balls, gala shows, dinners, performances and similar events such as charity auctions

(2) events involving the sale of fundraising goods for $20 or less, such as flowers, confectionery and
chocolates, provided that this is not a normal part of the charity’s business. The sale of any alcoholic
or tobacco products will disqualify the event

(3) events approved by the Tax Office. This will require an application to be made by the charity. The
 Tax Office will need to be satisfied that the event is genuinely for fundraising, is not part of a business
and is for the direct benefit of the charity.

Example
A charity runs a fundraising event consisting of planting a tree, burying a time capsule and having a sausage sizzle. It sells people
the right to contribute items to the capsule for $50. This would not qualify under (2) above, as the rights are not goods, and in any
event the consideration exceeds $20. However, the event may be treated as a “similar event” to a fete under (1). If so, the charity
can elect to have all supplies in connection with the event treated as input taxed. This means, for example, that the sale of the rights
would not be subject to GST.

The Tax Office has said, for example, that this concession would allow organisations to use any surplus
funds generated for relieving distress caused by the 2010 Haiti earthquake. It says the way the surplus
funds are used does not affect the GST treatment of the supplies that generated those funds (Non-Profit
News Service No 0265, 4 February 2010).
An event will not be eligible if it forms part of a “series or regular run of like or similar events” (s 40-165).
This means that it will not be eligible if there are more than 15 such fundraising events in any financial
year (A New Tax System (GST) Frequency of Fund-raising Events Determination (No 31) 2016). For
example, monthly events may be eligible, but not weekly events.
If this election is made, it will apply to all supplies made in connection with the event. A record of the
election must be made and retained for at least five years (Administration Act, Sch 1, s 382-5). Making
the election will also have the effect that the proceeds from the event will not be taken into account in
determining the charity’s GST turnover for GST registration purposes (¶3-030). The Tax Office considers
that the election must be made before making the first supply in connection with the event (Interpretative
Decision ID 2005/243).
If the election is not made, the activities will be treated under the general rules that apply to charitable
activities.
[GSTG ¶58-055]

¶15-060 Simplified accounting methods

Charities may well find themselves in the position of making some supplies that are taxable and some
that are GST-free. As they will tend to be high-volume, low-value item businesses, it may be difficult for
them to identify the GST status of each sale. To assist them in this, the Commissioner may issue special
determinations that allow specified types of retailers to use a simplified method of accounting (s 123-5).
To be eligible, the retailer’s business must include:
• sales of food. For the detailed guidelines that have been released on food sales, see ¶13-210

• GST-free sales for nominal value (¶15-010)

• GST-free sales of second-hand goods (¶15-030)

• GST-free supplies of retirement village accommodation (¶15-015), or

• GST-free raffles and bingo (¶15-020).

The supplies must be to people who acquire them for private use or consumption.
Using the simplified methods, these retailers will be able to calculate the percentage of their turnover that
relates to taxable sales, and calculate the GST on that basis.
The simplified method is optional (s 123-10). The retailer can choose to adopt it by notifying the
Commissioner in the approved form. The choice will take effect from the start of the tax period specified in
the notice and cannot be revoked or changed for at least 12 months. Only one simplified method of
accounting can be used at any one time.
 [GSTG ¶58-060]

¶15-080 Independent branches of non-profit bodies

Non-profit bodies carrying on a business must register if their GST turnover is $150,000 or more (¶3-030).
If the turnover is below that threshold, they are not required to register. However, unless they are
registered they will not be able to claim input tax credits on the things they acquire for the business.
However, these bodies may also have the option of splitting their operations into separate independent
units for GST purposes that will only have to register if their individual GST turnover is $150,000 or more
(Div 63).
Which bodies are eligible
This option is open to registered entities that are:
(1) endorsed charities, gift-deductible entities and government schools (¶15-000). In the case of gift-
deductible entities, only non-profit entities qualify, or

(2) the following types of non-profit bodies (¶3-030) that are income tax-exempt under the provisions
specified:
• charitable, educational or scientific associations (ITAA 1997 s 50-5)

• community service associations (ITAA 1997 s 50-10)

• employer and employee associations, trade unions (ITAA 1997 s 50-15)

• associations for promoting aviation, tourism, or agricultural, horticultural, industrial,

manufacturing, pastoral or viticultural resources (ITAA 1997 s 50-40)

• associations for animal racing, art, games, sport, literature or music (ITAA 1997 s 50-45) (s 63-5).

Independence requirements for branch

If the option is adopted, any branch is treated as a separate entity for GST purposes, provided that it
satisfies these requirements as to independence:
• it must maintain an independent system of accounting

• it must be able to be separately identified by the nature of its activities or by its location. The Tax
Office does not consider that being on separate floors of the same building is sufficient

• its separate GST status must be recognised in the parent entity’s books (s 63-15).

Such a branch is referred to in the legislation as a “non-profit sub-entity”, though the term “sub-entity” will
be used here for convenience.
Registration and non-registration
A sub-entity is not required to register if its GST turnover is less than $150,000 (s 63-25), though it can
choose to do so if it wishes. If it does not register, it will not be required to participate in the GST system.
The downside of this is that it will not be able to claim input tax credits for the GST on the purchases it
makes. For further consideration of the pros and cons of registration, see ¶3-010.
The $150,000 threshold applies to the sub-entity even if the parent is not technically a “non-profit” body.

Example
Under a marketing promotion, a non-profit body collects donated bottle tops from the public and then redeems them for a payment
from the manufacturer. The body may run those activities as a sub-entity, which will not have to register and pay GST unless the
turnover is $150,000 or more. In that case, however, the body could not claim input tax credits on its purchases made in carrying out
those activities.
Note: If the body was a registered charity, the activities would be GST-free in any event (¶15-030).
If the sub-entity’s annual turnover is $150,000 or more, it must register. To be registered, it is not
necessary to show that the sub-entity is carrying on an enterprise, or intending to do so (s 63-20). Sub-
entities will also be able to obtain their own ABN.
As with other registered bodies, registration as a sub-entity means that:
• it must pay GST on the taxable supplies it makes

• it can claim input tax credits for the GST component of its acquisitions

• it must lodge its own GST return.

Example
A registered government school runs an annual fete which is expected to raise $70,000. The fete is organised separately from the
school’s normal activities and keeps separate accounting records. The school may elect to treat the fete organisation as a separate
entity for GST purposes. As the turnover is less than $150,000, registration for GST purposes is also optional. If the fete is
registered, it will pay GST on its sales and claim input tax credits on its purchases (eg stall hire). If it is not registered, it will not pay
GST and cannot claim input tax credits.
Note: Schools may also elect to have certain fundraising events treated as input taxed (¶15-055).

The GST grouping provisions may also be applied to registered sub-entities so as to eliminate the GST
effects of transactions within the group. To be eligible for grouping, sub-entities must be registered, have
the same tax periods, account on the same basis, and not be members of any other GST group (s 63-50).
All group members must be sub-entities of either the same parent entity or the non-profit body itself.

Examples
(1) A registered sporting association opts to have its independent branches operate as sub-entities. Each of the sub-entities has a
GST turnover of less than $150,000. All of them elect not to register, which means that they do not apply GST to their supplies,
either to each other or to others, and cannot claim input tax credits for their purchases. The sporting association itself is also not
liable for any GST on the sub-entities’ supplies and cannot claim input tax credits in relation to their purchases. However, it remains
subject to the GST rules on its own transactions, including transactions by its non-independent branches. Similarly, none of the sub-
entities lodges a GST return but the sporting association itself must lodge a return in relation to its own transactions and those of its
non-independent branches.
(2) A charitable association opts to have its independent branches operate as sub-entities. Some of these have a turnover of less
than $150,000 and choose not to register. They are not liable for GST on the supplies they make, cannot claim input tax credits and
do not lodge GST returns. The other sub-entities with turnovers exceeding $150,000 are required to register. They are liable for GST
on the supplies that they make, can claim input tax credits, and must lodge GST returns. The charity itself is subject to the GST rules
on its own transactions and those of any non-independent branches. If desired, the charity and its registered sub-entities can form a
GST group, so that transactions between them are not subject to the GST rules.

It is important to appreciate the distinction between this sub-entity procedure and the normal registered
branch rules (¶17-300). Under those rules, although the branches are registered, the parent always
retains the ultimate responsibility for ensuring that they comply with their GST obligations. Under the non-
profit sub-entity rules, the sub-entities are completely separate entities, and the parent ceases to be
responsible for them for GST purposes.
Entitlement to parent entity’s concessions
A sub-entity is treated as having the same status as its parent body for the purpose of claiming the
following concessions (s 63-27):
• GST-free status for sales for nominal value (¶15-010), retirement village services (¶15-015), raffles
(¶15-020) and second-hand goods (¶15-030)

• school tuckshops and canteens (¶14-010)

• fund-raising events (¶15-055)

 • reimbursement of volunteers’ expenses (¶5-040)

• gifts to gift-deductible entities (¶15-040)

• accounting basis (¶7-300).

The sub-entity is able to claim the benefit of a particular concession even if the parent body has chosen
not to apply that concession to its own activities.
[GSTG ¶58-080]

¶15-090 Ceasing to be a sub-entity

The choice to apply the sub-entity rules takes effect from the time it is made by the parent entity (s 63-10).
The choice ceases to have effect if the parent becomes unregistered, or if it ceases to be an eligible non-
profit body. The parent can also revoke the choice, but not within 12 months of the choice being made. A
further choice cannot be made within 12 months of an earlier revocation.
Once the choice ceases to have effect, or is revoked, the relevant branches are no longer treated as
separate entities for GST purposes (s 63-15(2)) and the parent resumes GST responsibility. Any branch
that ceases to meet the requirements relating to independence will also cease to be treated as a separate
entity. However, if that branch was registered, it will continue to be treated as a separate entity until the
registration is cancelled. Application for that cancellation must be made within 21 days after the registered
branch ceases to comply with the independence requirements (s 63-30). Even if the branch does not
apply for cancellation, the Commissioner must cancel the registration if satisfied from other sources that
the independence requirements are not met (s 63-35).
It may happen that GST adjustments may arise in relation to transactions carried out by the parent
through the branch before the branch became a sub-entity. In this case, any adjustment after the branch
becomes a sub-entity will be attributed to the sub-entity, not to the parent (s 63-40). The converse applies
to adjustments arising after a branch has ceased to be a sub-entity (s 63-45).
[GSTG ¶58-090]
GAMBLING, SECOND-HAND GOODS AND
OTHER MEASURES
GAMBLING
Special accounting for gambling ¶16-000
If gambling debts are not paid ¶16-010
GST thresholds for gambling suppliers ¶16-030
SECOND-HAND GOODS
General position of second-hand goods ¶16-100
Special input tax credit ¶16-110
“Global” accounting for second-hand dealers ¶16-120
Goods held at 1 July 2000 ¶16-130
Supplies by charities and gift-deductible bodies ¶16-140
OTHER MEASURES
Water, sewerage and drainage ¶16-200
Precious metals ¶16-210
Emissions units ¶16-220
Diplomatic staff and international organisations ¶16-230

Editorial information

Summary
Gambling suppliers are subject to GST but can use a “global” method of calculating their overall
GST liabilities.
Dealers who acquire second-hand goods from private unregistered people may nevertheless be
able to claim input tax credits if they use the goods in their business. A “global” method of
accounting for GST and input tax credits on second-hand goods may be available in certain
circumstances.
This chapter also covers the miscellaneous rules governing water, sewerage and drainage,
precious metals and carbon pollution trading.

GAMBLING
¶16-000 Special accounting for gambling

You account for GST on a “global” basis if you make taxable gambling supplies (Div 126). These activities
include:
• supplying tickets in lotteries and raffles

• accepting bets on the outcome of lotteries and raffles

• accepting bets on the outcome of races, games, sporting events or any other events (s 126-35).

This includes gambling in casinos, gaming machines in clubs and hotels, lucky membership draws for
club members, betting (but not participating) in racing, football, and so on (GST Ruling GSTR 2002/3). It
does not include GST-free raffles or bingo conducted by charities (¶15-020), or gambling outside Australia
(see further below).
The special rules are necessary to avoid GST having to be levied on every single gambling transaction.
(In theory, a casino operator should apply GST on every spin of the roulette wheel for every player for
every square on the table.) To avoid this, the rules enable GST to be calculated on a margin basis for
each tax period. The general effect is that the total amount of the prizes is subtracted from the total
amount wagered, and GST is applied to what is left. In other words, GST is imposed on profits rather than
revenue. This is intended to achieve the same result as if GST had applied to individual wagers and input
tax credits had been allowed on prizes paid out.
The rules apply only if the gambling operator is registered or required to be registered for GST purposes.
Steps in calculating GST
For each tax period:
(1) calculate the total amount wagered for all gambling activities attributable to the period

(2) subtract the total monetary prizes (including casino gambling chips and “high roller” rebates) that
you are liable to pay during that period

(3) take 1/11th of the difference. This gives you your gambling GST for the period (the legislation calls
this your “global GST amount”)

(4) add this to any other GST you are liable for on non-gambling activities, and subtract your input tax
credits other than monetary prizes. This gives you the net GST payable (s 126-5; 126-10).

Example
Over one tax period, Percy the bookie receives $100,000 in bets and pays out $45,000 to winning punters. The margin is therefore
$55,000. The GST payable on this is calculated as 1/11th of $55,000, ie $5,000.

The “total amount wagered” excludes refunds that become due. “Total monetary prizes” include declared
betting dividends, irrespective of whether they were paid during the tax period (TAB Ltd v FC of T [2005]
NSWSC 552). The total monetary prizes also include points that are awarded for a winning bet, or for
participation, and are redeemed for money or casino chips. Points may also be awarded as a result of the
purchase of meals, drinks or other non-gambling services, or may be purchased by a participating
member. However, these points do not relate to gambling events, and are not treated as monetary prizes
even when redeemed for cash.
Total monetary prizes exclude prizes paid in relation to GST-free supplies (s 126-10(3), overturning
International All Sports v FC of T [2011] FCA 824). The exclusion of all GST-free supplies ensures that
prizes paid in relation to GST-free bets placed by non-residents (see “Overseas bets” below) are not
included in total monetary prizes.
If the total monetary prizes are more than the total amount wagered, you have no gambling GST for that
period (s 126-10). However, the excess amount can be added to your total monetary prizes for the next
period (s 126-15). In effect, you are carrying your loss forward to be offset against future profits.
Gambling operators can claim input tax credits on their purchases in the usual way, but cannot claim input
tax credits for money prizes, as these have already been taken into account in calculating the margin.
Non-monetary prizes are not taken into account in calculating the margin. It follows that input tax credits
can be claimed on their original acquisition if consideration was paid. The actual granting of the non-
monetary prize to the winner is not treated as a taxable supply, as there is no additional consideration
provided (GST Ruling GSTR 2002/3).

Examples
(1) Purchased non-cash prize. The prize in a commercial raffle is a car that the raffle operator bought from a dealer for $22,000
(including GST). The dealer had itself acquired the car for $15,000 (including $1,364 GST). The total paid for raffle tickets is
$66,000. As there are no monetary prizes, the margin is $66,000, so the operator’s GST is $6,000. However, the operator can claim
an input tax credit of $2,000 (ie 1/11th of $22,000). The net GST payable by the operator is therefore $4,000. The net GST payable
by the dealer is $636 (ie $2,000 less $1,364). The total GST payable by operator and dealer is therefore $4,636. (For simplicity, this
assumes that the raffle was conducted within one tax period.)
(2) Donated non-cash prize. If the car had been donated to the operator (eg by a car dealer), the position would be as follows:
• the dealer could continue to claim an input tax credit of $1,364 on its own acquisition of the car, provided that it could show that
the donation was in its business interests

• the $2,000 GST would not apply on the donation to the operator and no input tax credit could be claimed by the operator on the
car

• GST for the operator would be levied on the margin (ie $66,000).

The net GST payable by the operator would therefore be $6,000 and the dealer would be entitled to an input tax credit of $1,364.
The net amount payable by both ($4,636) would therefore be the same as in the earlier example.
(3) Combination of cash and non-cash prizes. A hotel raffles a cash prize of $900 and a camera which cost $330 including $30 GST.
The proceeds collected from the raffle are $2,000. The margin is therefore $1,100 (ie the proceeds less the cash prize). The amount
of GST is therefore $100 (ie 1/11th of $1,100).
The hotel can claim an input tax credit for the $30 GST included in the purchase of the camera. The net GST is therefore $70. The
hotel has therefore made a net profit of $700 (ie $2,000 − $900 − $330 − $70 net GST).

Casinos and other gambling operators do not need to issue tax invoices for a gambling supply (s 126-33).
Overseas bets
A supply made to a gambler who is outside Australia is a GST-free export (s 38-190). This means that
wagers received from those gamblers are excluded when working out the GST on the margin. The ATO
suggests that a record of the overseas residential address and contact details of the gambler should be
kept as the minimum supporting evidence (ATO Fact Sheet GST and gambling).
Position of gambler
As GST is imposed on the supplier’s margin, no GST is paid by a gambler placing a bet or receiving a
prize. For a similar reason, a gambler cannot claim an input tax credit on the acquisition of gambling
supplies (s 126-30). However, in accordance with the normal rules, a professional gambler, who gambles
in the course of carrying on an enterprise, may claim input tax credits for other creditable acquisitions it
makes.
As a result of the introduction of the offshore intangible consumer supply rules from 1 July 2017 (¶9-120),
it is specifically provided that offshore gambling supplies are connected to Australia (¶4-100) if the
recipient is an Australian resident (s 126-27). This ensures that consistent GST treatment will continue to
apply to all gambling supplies made to Australian residents. A bookmaker who lays off a bet to spread the
risk of loss is treated in the same way as any other professional gambler.
Lotto syndicates
A commercial lotto syndicate which received fees from members and acquired the tickets in its own name
was held to be providing taxable gambling supplies for a consideration equal to the full amount of fees
received (TSC 2000 Pty Ltd v FC of T 2007 ATC 2409).
[GSTG ¶65-100]

¶16-010 If gambling debts are not paid

If the gambling supplier writes off a gambling debt during a tax period, the amount written off is treated as
if it were a monetary prize in that period (s 126-20). This is intended to have the same sort of effect as the
normal bad debt adjustment rules (s 21-5). If any of that bad debt is later recovered, that amount is
treated as an amount wagered in the tax period in which the recovery occurs.
[GSTG ¶65-120]

¶16-030 GST thresholds for gambling suppliers

Under the normal rules, various GST obligations or concessions may depend on the taxpayer meeting or
not exceeding a turnover threshold, eg monthly tax periods are compulsory for businesses with a GST
turnover of $20m or more (¶7-100). For these purposes, a supplier’s turnover from gambling is calculated
on the basis of the gambling margin, rather than the gross amount wagered (s 188-32). The gambling
margin is the difference between the amount wagered and cash prizes paid out.
[GSTG ¶65-140]

SECOND-HAND GOODS
¶16-100 General position of second-hand goods

If you are not registered for GST purposes, your sale of second-hand goods is not subject to GST.
However, if you are registered, for example where you are in business as a second-hand dealer, GST will
apply.
If you buy second-hand goods from a person registered for GST purposes, you would be able to claim
input tax credits in the normal way if you buy the goods for business purposes.
However, the following special rules apply:
• a special input tax credit may be claimed even though you do not buy from a registered seller (¶16-
110)

• a “global” method of accounting for GST and input tax credits may be available in certain
circumstances (¶16-120).

“Second-hand” goods
“Goods” are any form of tangible personal property (¶4-100).
The term “second-hand” has a number of meanings and varies according to context. The ATO considers
that “second-hand” means “previously used” or “not new”. Goods may be second-hand even though they
have not been previously owned and, conversely, it may be that they are not second-hand even though
they have been previously owned (GST Ruling GSTR 2000/8; LR McLean and Company Limited & Ors v
Commissioner of Inland Revenue [1994] 3 NZLR 33). The ATO says that goods will usually be second-
hand if they have previously been used for their “intrinsic purpose”. Although goods used for another
purpose can also be second-hand, goods would not be regarded as second-hand merely because they
have been sold by a manufacturer or a distributor before being retailed.
Goods used as demonstration goods would probably be treated as second-hand goods, unless the use of
them for their intrinsic purpose is negligible or insubstantial, and they are sold as new goods with a full
warranty.

Examples
(1) A refrigerator on display in a store would not normally have been used at all for its intrinsic purpose of refrigerating food. It would
not be treated as second-hand.
(2) A piece of earthmoving equipment that is occasionally used for demonstration purposes at exhibitions or field days is used for its
intrinsic purpose but this would be treated as negligible or insubstantial. If the full warranty is attached, it would be eligible for the
credit.
(3) Demonstration vehicles that are used for test drives and sold with a partial warranty would be treated as second-hand vehicles.
 (4) A bottle of wine that has been held as a collector’s item by an owner who is a wine enthusiast or collector would, in the Tax
Office’s view, be second-hand goods (ATO Fact Sheet NAT 12190).

Second-hand goods include recycled containers, but do not include:

• plants or animals, or

• goods to the extent that they consist of “valuable metal”, ie gold, silver or platinum (s 195-1). However,
this exclusion does not apply to “incidental valuable metal goods” such as collectibles or antiques, or
where the market value of the goods exceeds the market value of any gold, silver or platinum
contained in the goods by 10% or more. (A New Tax System (Goods and Services Tax) (Incidental
Valuable Metal Goods) Determination 2017 (No 1)).

If you incorporate new goods into second-hand goods (eg you put a new gearbox into a used car), the
new goods lose their identity as new and become part of the second-hand goods (GST Determination
GSTD 2000/2).
[GSTG ¶15-660]

¶16-110 Special input tax credit

Normally, you can only claim an input tax credit on the acquisition of goods if the supply of the goods to
you was a taxable supply (¶5-010). However, where the supply to you was of second-hand goods, the
fact that it was not taxable does not prevent you from claiming a special input tax credit, provided that you
bought the goods for the purposes of selling or exchanging them in the ordinary course of your business
(s 66-5).
This means, for example, that the input tax credit may be available where:
• a second-hand dealer acquires goods from an unregistered person, or

• the dealer acquires the goods from a person registered for GST purposes who has only used the
goods privately, for example, where a car has been used for private purposes by a business owner.

The rationale for this concession is that your supplier would normally have paid GST when buying the
goods but was not able to claim input tax credits. The price you pay for the goods therefore includes
some embedded GST for which you should be able to claim a credit.
The amount of the special credit is 1/11th of the cost of the goods. However, if the goods cost more than
$300, the credit cannot be more than the amount of GST payable when you later sell them (s 66-10). This
will require that these goods be able to be traced as they pass through your business.
Purpose of sale or exchange
It is apparently not necessary that the purpose of sale or exchange be the sole or even the dominant
purpose of the acquisition. Accordingly, it has been held that this test was satisfied where a vehicle fleet
leasing company acquired vehicles from private individuals for the purpose of initially leasing them back
to those individuals and only selling them after the lease was terminated (LeasePlan Australia Ltd v FC of
T [2009] FCA 1309). The Tax Office accepts this decision and accepts that the test is satisfied if:
• the taxpayer acquired the goods in the ordinary course of its business

• the contract provides that the taxpayer will lease the goods back to the vendor and then sell them at
the end of the lease

• the contract provides for indemnities or profit splits in cases where the sale proceeds differ from the
residual value, and

• the taxpayer monitors expected sale proceeds for the goods in order to determine their residual value
before they are leased and promptly sells them after the end of the lease (GST Determination GSTD
 2013/2; Case 6/2012, 2012 ATC ¶1-046).

However, the Tax Office does not accept that the test is satisfied in every case where there is an intention
that the goods will ultimately be sold. For example, it considers that it is not satisfied where a
tradesperson simply purchases a second-hand vehicle for use in business but also with a view to selling it
at some future time (GST Determination GSTD 2013/2; Decision Impact Statement on LeasePlan).
The intended sale or exchange must also be in the “ordinary course” of the taxpayer’s business. This
expression normally means that the transaction must fall into place as part of the common flow of
business done, that it should form part of the ordinary course of business as carried on, “calling for no
remark and arising out of no special or particular situation” (Downs Distributing Company Pty Ltd v
Associated Blue Star Stores Pty Ltd (In Liquidation) (1948) 76 CLR 463).
Exclusions
The special input tax credit does not apply if:
• you acquired the goods for manufacture. Mere repair or renovation is permissible but if the work done
on the goods changes them into something of a different character, that is classed as manufacture
and the credit would not be available (FC of T v Jax Tyres Pty Ltd 85 ATC 4001; GST Ruling GSTR
2000/8)

• you acquired the goods for the purpose of leasing, not for sale or exchange (Case 6/2012, 2012 ATC
¶1-046)

• the sale to you was a taxable supply (in this case, the normal rules for input tax credits apply)

• the sale to you was GST-free, for example, from a charity. This exclusion does not apply to sales by
unregistered persons, which are treated as non-taxable rather than GST-free (¶1-160)

• you imported the goods

• the goods were hired to you

• the goods are divided up for resale (in this case, the “global method” applies: ¶16-120), or

• you dispose of the goods by way of a non-taxable supply, for example, you make a GST-free sale of a
traded-in car to a disabled veteran (¶12-150), or you give the goods away or dispose of them outside
your business (s 66-5). However, it seems that a sale to another member of your GST group (¶17-
020) may be treated as a taxable supply for these purposes, even though it is not treated as a
taxable supply for purposes of the grouping rules (Case 6/2012, 2012 ATC ¶1-046).

The Tax Office considers that certain arrangements designed to exploit this concession are invalid. These
arrangements typically involve claims for input tax credits where second-hand goods are acquired by an
interposed associated entity (GST Ruling GSTR 2005/3).
Tax period for claiming credit
If the payment for the goods is $300 or less, the normal rules apply for attributing the credit to a tax period
(¶7-200). So, if you are on an accruals basis, the input tax credit is attributed to the tax period in which
you provided any of the payment, or the period in which you received an invoice, whichever is earlier. If
you are on a cash basis, the credit is attributed to the tax period(s) in which you provided payment.
If the payment is more than $300, a special rule applies (s 66-15). The effect is that if you are on an
accruals basis, the input tax credit cannot be claimed until you subsequently make a taxable supply of the
goods, for example, you sell them as part of your business. The credit will be attributed to the tax period
in which you receive any payment for that sale, or the period when you issue an invoice, whichever is
earlier. This will require you to be able to trace the individual items.

Examples
 These examples illustrate the effect of the rules for calculation of the credit and its attribution to tax periods.
(1) A second-hand dealer on the accruals basis has an item of stock on hand which it acquired for $6,600 from a private individual.
The dealer sells the item on 20 December 2019 for $11,000, including $1,000 GST. The dealer can claim an input tax credit of 1/11th
of $6,600, ie $600 in the tax period in which December 2019 occurs.
(2) Assume the same facts, except that the item was acquired for $13,200. The dealer’s input tax credit will be limited to the $1,000
GST on the subsequent sale.

An accruals basis taxpayer can choose to use this attribution method for all second-hand purchases,
whether they are for more or less than $300 (s 66-15). Although this may involve claiming some credits
later than they otherwise could have been claimed, a consistent method of accounting may be more
convenient.
For taxpayers on a cash basis (¶7-300), the credit can be claimed only to the extent that payment is
received for the subsequent sale of the goods by you (s 66-15(2)).

Example
A second-hand dealer on a cash basis has an item of stock on hand which it acquired for $6,600 from a private individual. The
dealer sells the item on 20 December 2019 for $11,000, including $1,000 GST. This amount is paid in two equal instalments, one on
20 December 2019 and the other on 20 June 2020. The dealer can claim an input tax credit of 1/2 of 1/11th of $6,600, ie $300 in the
tax period in which December 2019 occurs, and a further input tax credit of $300 in the tax period in which June 2020 occurs.

Normally, you must hold a tax invoice from the seller before you can claim any input tax credit (¶5-100),
and you must hold an adjustment note before you can claim a decreasing adjustment for a change in
price or other adjustment event (¶6-110). However, tax invoices and adjustment notes will not normally be
available where the seller is not registered. Instead, the rule in these cases is that the dealer must
prepare its own record of the purchase (s 66-17). This must set out the name and address of the supplier,
a description of the second-hand goods (including their quantity), the date and the price. In cases of
dispute, the onus is on the taxpayer to establish that these details are correct (Case 5/2008, 2008 ATC
¶1-004).
In the case of acquisitions, this detailed requirement does not apply if the value of the supply, excluding
GST, is $75 or less (¶5-170). However, in such a case, the Tax Office expects that some sort of written
evidence will be necessary to substantiate the purchase.
In the case of adjustments, the detailed requirement does not apply if the amount of the adjustment does
not exceed $75 (¶6-135).
Where goods leased before sale
As already noted, the credit does not apply if the purpose of the acquisition was to lease the goods in the
ordinary course of the taxpayer’s business, and not to sell or exchange them. However, it may happen
that the ordinary course of the taxpayer’s business includes both leasing the goods and later selling them,
eg at agreed residual values. In this situation, the credit may apply, and both the lease and the sale are
taken into account in calculating its amount.

Example
A finance company acquires a second-hand vehicle from an unregistered vendor for $5,500. It then leases the vehicle for payments
totalling $4,400. After the lease expires, it sells the vehicle for $2,200. As the total GST on the lease and sale is $600 (ie 1/11 ×
$4,400 + 1/11 × $2,200), the company can claim an input tax credit under s 66-10 of $500, representing the full amount of GST on
the original acquisition (ie 1/11 × $5,500).
If the company is on an accruals basis, it will attribute $400 of the credit to the tax period that any of the consideration is received for
the lease of the vehicle (or the tax period in which an invoice is issued, whichever is earlier). The remaining input tax credit of $100
is attributed to the tax period that any of the consideration is received for the sale of the vehicle (or the tax period in which an invoice
is issued, whichever is earlier). (Based on GST Determination GSTD 2012/6.)

[GSTG ¶15-660]
¶16-120 “Global” accounting for second-hand dealers

Dealers in second-hand goods may be entitled to use a special “global” accounting method. This method
is intended to reduce the need to track individual goods for GST purposes.
The global accounting method applies in two situations:
• where second-hand goods are acquired from an unregistered supplier and are divided up for re-
supply to the dealer’s customers, or

• where specified categories of second-hand goods are acquired from a registered or unregistered
supplier, and the dealer exercises the option to apply the global method.

(1) Goods divided for separate supplies

Some dealers in second-hand goods buy goods in one lot and then sell them in a series of separate
transactions. For example, a car dismantler might buy a car then break it down into its component parts,
which it sells to various purchasers. Or a dealer may buy the whole of the house contents of a deceased
estate, then sell them individually.
In cases like these, it is not practical to match the credit on the purchase to the GST on the subsequent
sales. Instead, the GST is worked out on a “global” accounting basis. This means that you work out the
input tax credits on all your purchases in this category, and offset that amount against the total GST on
everything you sell from that pool of purchases (s 66-65). No GST actually becomes payable until the
relevant credits have been absorbed (s 66-45; 66-50). This, however, does not affect the GST position of
the person to whom you supply the goods (s 66-60).

Example
During a tax period, Trusty Car Wreckers buys five damaged cars from unregistered private individuals for a total cost of $5,500 and
sells parts from its pool of damaged vehicles for $3,300. Trusty has a net credit of $200 for that period, calculated as 1/11th of
($5,500 less $3,300). This credit is not claimed for that period but instead is carried over to the next tax period. In that later period
Trusty buys another four damaged cars for $4,400 and sells parts from its pool of damaged vehicles for $9,900. The GST of $500 (ie
1/11th of ($9,900 less $4,400)) exceeds the prior credit of $200, so a net $300 GST will be payable for that period.
Note: This notional calculation is only for the purpose of calculating Trusty’s GST situation. It does not affect any credits that Trusty’s
purchasers may claim for the parts they purchase — these will continue to be calculated in the normal way.

For this “separate supply” rule to apply, the following conditions must be satisfied:
• you must acquire the second-hand goods for the purpose of sale or exchange — but not manufacture
(¶16-110) — in the ordinary course of business

• the consideration for the acquisition is more than $300. The reason for this is that if the price was
$300 or less, an input tax credit can be claimed immediately on purchase, so the problems of tracing
do not arise. However if you want to, you can choose to apply the global method to these smaller
sales. This may be appropriate if you find it easier to treat all your sales in the same way

• bearing in mind the nature of the goods and the way in which they are supplied, it would be
reasonable to expect you to divide them before supplying them in two or more separate supplies, and

• you do not actually make a single supply of all of them (s 66-40(1)).

The separate supply rule does not apply if:

• the sale to you was a taxable supply (in this case, the normal rules for credits apply)

• the sale to you was GST-free (eg from a charity)

• the goods were hired to you

• you imported the goods

 • you dispose of the goods in a way that does not attract GST, for example, you give them away or
dispose of them outside your business

• the goods you purchased were separately itemised and you sold them in accordance with that (s 66-
40(2)).

Examples
(1) A dealer buys a single lot of various items of antiques for $2,000 from a deceased estate and later puts them up for sale as
separate items — the global method applies.
(2) A dealer buys an individual antique from a private individual for $2,000 — the global method does not apply.
(3) A dealer buys a single lot of various items for $290 from a deceased estate and later puts them up for sale as separate items —
the dealer can choose whether to claim special credits at the time of purchase or to apply the global method.

(2) Optional global accounting for eligible goods

Where global accounting is not available under the “separate supplies” rule, a dealer may nevertheless
elect to use the global accounting method for a wide range of second-hand goods. In this case, it is
irrelevant whether the supplier to the dealer was registered or unregistered (s 66-70; A New Tax System
(Goods and Services Tax) Rules for Applying Subdivision 66-B Determination (No 31) 2015).
The following types of goods are eligible:
• an aircraft

• an antique

• a bag, carry case, suitcase or similar item

• a boat, ship or other marine craft

• a book, newspaper, magazine, folio, manuscript or other printed material

• bric-a-brac

• building materials

• clothing or shoes

• a coin, medallion or other numismatic item

• a collectable

• a compact disc, DVD, record, video or audio cassette

• a cot, pram, stroller, safety seat or other item designed for infants

• computer hardware or software

• a container

• an electric appliance or item of electrical equipment

• electronic equipment

• a firearm

• furniture and furnishings

• a gardening tool or equipment

 • equipment used for hobbies

• household ware, including kitchenware or a bathroom fitting

• jewellery or a personal accessory (including spectacles or a watch)

• machinery, a tool, implement, apparatus or equipment

• a medical or health aid or appliance

• a motor vehicle or any other form of vehicle including a non-powered vehicle such as a bicycle or a
horse-drawn vehicle

• a musical instrument

• an ornament or decorative item

• an item used for outdoor recreation

• a personal item or appliance

• a print, photograph, etching, drawing, painting, sculpture or other similar work of art

• photographic equipment

• scrap materials

• sports equipment

• a trailer or caravan

• a stamp or label

• telephonic equipment including a mobile phone or answering machine

• a toy or game

• a weapon

• a writing implement or stationery

• a part, accessory or component of any of these items.

For this optional global accounting to apply, the dealer must be registered, and must acquire the goods
for the purposes of sale or exchange (but not manufacture) in the ordinary course of business. The option
is not available where:
• the dealer acquired the goods from an unregistered person for a consideration of more than $1,000
and the goods are not divided for supply

• the supply of the goods to the dealer was GST-free, or was a supply by way of hire

• the dealer has claimed or intends to claim an input tax credit for the acquisition under some other
provision

• the dealer imported the goods and the importation was not taxable, or

• the supply or importation of the goods to the dealer was not taxable, and the subsequent supply of the
goods by the dealer is not taxable.
The dealer may elect not to use global accounting for eligible goods, or to use it for only some of the
eligible goods.

Example
A registered dealer buys second-hand books from both registered and unregistered persons in Australia and also imports a readily
distinguishable category of second-hand books. Although all the books may be eligible, the dealer opts only to pool the Australian
purchases. This means that 1/11th of the consideration for those books will be added to the pool, whereas the GST paid on the
imports can be claimed in the tax period of importation.

Other points
For global accounting rules to apply, you must hold records setting out the name and address of the
supplier, a description of the second-hand goods (including their quantity), the date and the price (s 66-
55).
The Commissioner can issue determinations modifying the effect of these rules, for example, determining
that certain acquisitions are — or are not — covered (s 66-70).
[GSTG ¶15-670]

¶16-130 Goods held at 1 July 2000

Both the special input tax credit and the global accounting method extend to second-hand goods you
acquired as stock before 1 July 2000, provided that you still held them as stock at that date (Transition
Act, s 18). This requires that they be held for the purpose of sale or exchange in the ordinary course of
business.
This transitional rule may apply, for example, to antique dealers and used car dealers.
Where this transitional rule entitles you to claim an input tax credit on pre-1 July 2000 acquisitions of $300
or less, you can allocate that credit to any single tax period you choose.
The transitional rule did not apply to imported second-hand goods that were subject to sales tax and
qualified for the input tax credit allowed for stock on hand on 1 July 2000 (Transition Act, s 16).
[GSTG ¶76-780]

¶16-140 Supplies by charities and gift-deductible bodies

A supply of donated second-hand goods may be GST-free if it is made by a charity or gift-deductible

institution. This exemption is explained at ¶15-030.
[GSTG ¶58-030]

OTHER MEASURES
¶16-200 Water, sewerage and drainage

Supplies of water are GST-free unless they are supplied in, or transferred to, a container with a capacity
of less than 100 litres (s 38-285).

Examples
(1) Water is supplied to residential and commercial premises in the normal way through water pipes. This supply is GST-free.
(2) Water is supplied to rural premises in a tanker and is transferred to a storage tank with a capacity of 1,000 litres. This supply is
GST-free.
(3) Purified water is supplied to business premises in 50 litre containers. This supply is not GST-free unless it qualifies as non-
carbonated natural water without additives (¶13-180).
The Tax Office considers that this exemption extends to all activities up to the point of supply, provided
that they are integral to the physical delivery of the water. It therefore extends to initial connection and
meter reading (GST Ruling GSTR 2000/25). However, the Tax Office considers that it does not apply to
supplies of ice or steam, or supplies where water is merely incidental, for example, car washing, laundry
or carpet shampooing.
The sale of a right to receive GST-free water is itself GST-free (s 9-30). This may apply, for example,
where water rights are traded to a third party, or where a water quota acquired from a water authority is
on sold to an irrigator (GST Ruling GSTR 2000/25). However, the Tax Office considers that GST applies
where an irrigator pays a fee to a water infrastructure operator for terminating water rights. The fee is
regarded as consideration for the release of the irrigator from an obligation to pay water access fees
(General Advice Ruling to National Irrigators’ Council, 10 March 2010). To allow for this, operators are
authorised to incorporate a GST component in the fee, effective from 17 February 2011 (Water Charge
(Termination Fees) Amendment Rules 2011). Correspondingly, the irrigators can claim the GST
component of the fee as an input tax credit.
Water, sewerage and drainage supplies may be outside GST altogether if the fees for them are specified
in the Treasurer’s determination of exempt charges (¶4-080). In this case, they would not even need to be
recorded on the supplier’s BAS.
Sewerage, waste removal and septic tanks
Sewerage services are GST-free (s 38-290). The Tax Office considers that sewerage covers the
discharge of waste water, including water containing human waste, into a network of pipes. It may be
either domestic or commercial (GST Ruling GSTR 2000/25). However, the Tax Office considers that the
exemption does not apply to the actual supply, installation or repair of toilets or other waste systems. The
exemption also did not apply to commercial services consisting of emptying sludge into tankers and
transporting it to treatment centres (Interpretative Decision ID 2004/608).
This exemption also applies to the removal of waste matter from non-sewered residential premises, if it is
the type of matter that would ordinarily be disposed of by way of sewers. This applies to the emptying of
“night cans”, sullage systems, and “biosystems”. The cost of servicing a domestic self-contained
sewerage system is also GST-free, though this would not extend to the cost of chemicals used in the
servicing.
Emptying septic tanks is GST-free (s 38-295).
Stormwater drainage
Stormwater drainage services are also GST-free (s 38-300). The Tax Office considers that this exemption
does not apply to the installation or repair of gutters, pipes and other equipment (GST Ruling GSTR
2000/25).
ATO checklists
Detailed checklists setting out the Tax Office’s view of the status of specific items covered by these
various exemptions are contained in GST Ruling GSTR 2000/25 and Class Ruling CR 2013/39. Note also
that there is an exemption for certain rates and taxes (¶4-080).
[GSTG ¶65-200]

¶16-210 Precious metals

The supply of precious metal is normally input taxed (s 40-100). However, the supply of a precious metal
is GST-free if it is the first sale of the refined metal and it is made to a dealer in precious metals, ie one
who regularly supplies and acquires precious metals as a principal part of its business (s 38-385).
The refiner must regularly refine or convert precious metals as part of its business. Refining is not regular
unless the activity occurs with a constant or definite pattern, recurring at short intervals of time, with some
frequency (VIB Pty Ltd v FC of T [2019] AATA 1120).
Meaning of precious metal
A precious metal is:
 • gold of at least 99.5% fineness

• silver of at least 99.9% fineness, or

• platinum of at least 99% fineness.

The metal must be in an investment form. The Commissioner considers that this means that it must be in
a form that:
• is capable of being traded on the international bullion market

• bears an accepted mark or characteristic that guarantees its fineness and quality, and

• is usually traded at a price that is determined by reference to the spot price of the metal it contains.

On this basis, metals in bar or wafer form may qualify as precious metals, but not metals in granular form.
“Bullion” coins whose value is closely related to the metal content, and which are traded by banks, bullion
dealers and brokers, may be treated as precious metals. However, “proof” or numismatic coins which are
marketed as collectibles and whose value is affected by factors such as novelty, rarity and condition are
not precious metals and would be subject to GST in the normal way (GST Ruling GSTR 2003/10). The
sale of gold and silver coin blanks to a mint that stamped them into investment and collector’s coins was
also held to be taxable (AGR Joint Venture v FC of T [2007] AATA 1870).

Example
A refiner supplies gold to a dealer in precious metals. As this supply is GST-free, the refiner is entitled to credits for GST on items it
has acquired to use in the refinery process, but does not apply GST to the supply to the dealer. If the dealer then sells the gold, this
sale will be input taxed, so the dealer will not be entitled to input tax credits and GST does not apply on the sale.

The reason for these rules is that precious metal prices may be internationally fixed, and gold dealers
cannot pass on the GST on sales that they make. Making the initial supply after refining GST-free is
intended to ensure that there is no GST embedded in the price of that sale.
Reverse charge rule from 1 April 2017
From 1 April 2017, entities buying gold, silver or platinum that has been supplied as a taxable supply may
be required to apply a “reverse charge” (Div 86). This means that if an entity buys gold, silver or platinum
from another business, the entity will be responsible for reporting and paying the GST amount to the Tax
Office when lodging their BAS.
The effect is that if an entity sells gold, silver or platinum to another business, it will:
• not need to remit any GST on the sale to the ATO

• need to clearly state that the sale is a reverse-charged sale on the tax invoice they provide. This also
applies if an entity is a buyer and they use recipient-created tax invoices, and

• be responsible for reporting the sale when lodging their BAS.

This reverse charge rule does not apply if the market value of the goods exceeds the market value of any
gold, silver or platinum included in the goods by 10% or more. In such a case, the vendor remains liable
for the GST as normal. However, the parties may agree to voluntarily reverse charge the supply if they
wish.
The Tax Office’s method for determining “market value” is as follows (Goods and Services Tax Valuable
Metals Market Valuation Determination 2018):
(Weight of valuable metal in troy ounces) × (Spot price of the valuable metal on that date according to
published rates)
Where the GST on a supply is reverse charged under these rules, it is not included in the recipient’s GST
turnover (s 188-23; ¶3-030).
The introduction of the reverse charge requirement follows extensive Tax Office investigations into fraud
and GST evasion in the gold bullion and precious metals industries. The Australian Federal Police’s
Serious Financial Crime Taskforce had also been investigating artificial arrangements involving refiners,
bullion dealers, gold kiosks, dealers and buyers involved in gold recycling or carousel type arrangements
(ATO Media Release, 12 October 2016).
Gold nuggets, jewellery
Naturally occurring gold nuggets would not be classed as “precious metals” as they would be less than
99.5% pure and, in any event, would not be in investment form. The sale of those nuggets by a registered
prospector would therefore be subject to GST.
Jewellery fashioned from a precious metal is not itself treated as a precious metal (GST Ruling GSTR
2003/10) and would be subject to GST in the normal way.
The ATO accepts that there may be no taxable supply where, under specified types of bailment
arrangement, a producer delivers gold bullion to a refiner for refining (ATO GST Industry Issues — Mining
and Energy: Ch 8).
[GSTG ¶65-300]

¶16-220 Emissions units

The supply of “eligible emissions units” is GST-free (s 38-590).

The GST-free status was conferred to “allow transactions of eligible emissions permits via an open
exchange to operate without reference to GST rules and on a uniform market price”. However, normal
GST rules would apply to transactions involving derivatives of permits and payments of grants.
Granting a “put” option that enables the grantee to supply emissions units is an input taxed financial
supply of a derivative: see ¶10-010 item 11 (Interpretative Decision ID 2013/25). However, granting a
“call” option that enables the grantee to acquire emissions units is GST-free under s 9-30, as it is a right
to acquire a GST-free supply (Interpretative Decision ID 2013/26).
Eligible emissions units do not include the types of unit covered by the former carbon pricing scheme.
Some transitional provisions applied.

¶16-230 Diplomatic staff and international organisations

Under the Indirect Tax Concession Scheme, refunds of GST, LCT and WET may be paid to diplomatic
missions, consular posts, overseas missions, their privileged staff and international organisations. The
nature of the concessions vary, but in general the concession package for each country has been
negotiated on the basis of what Australian missions and staff receive in that country. Details are set out in
the Diplomatic Privileges and Immunities (Indirect Tax Concession Scheme) Determination 2000. For a
list of entitlements relating each country, see www.ato.gov.au/general/indirect-tax-concession-scheme/
entitlements-by-country.
For refunds of GST and LCT on cars under this Scheme, see ¶12-160.
GST GROUPS, BRANCHES, AGENTS AND
ASSOCIATES
GST GROUPS
Why the need for special rules for groups? ¶17-000
Forming a GST group ¶17-010
Ownership requirements for companies and associations ¶17-012
Ownership requirements for partnerships, individuals and trusts ¶17-014
Requirements for government departments ¶17-016
Effect of having a GST group ¶17-020
Indirect tax sharing agreements ¶17-025
Change of group membership or dissolution ¶17-030
Opportunities presented by grouping provisions ¶17-040
AMALGAMATED COMPANIES
Where companies amalgamate ¶17-100
Supplies and acquisitions ¶17-110
Outstanding GST and credits ¶17-120
JOINT VENTURES
Joint ventures ¶17-200
Formation of joint ventures ¶17-210
Procedure for formation ¶17-212
Consequences of formation of joint venture ¶17-220
Change of joint venture membership or dissolution ¶17-230
BRANCHES
Registration of branches ¶17-300
Cancelling a branch registration ¶17-310
AGENTS
Liability of agents for GST ¶17-400
Agents for non-residents ¶17-410
Agreements for agent to act as principal ¶17-420
Goods sold on consignment, or “sale or return” ¶17-422
Legal services, fees and disbursements ¶17-425
Sharefarming agreements ¶17-430
Other special rules relating to agents ¶17-440
ASSOCIATES
Special rules applying to associates ¶17-500

Editorial information

Summary
In this chapter, we look at the various ways that businesses are organised and the special GST
rules that apply to them. The most far-reaching of these are the rules that enable groups of
companies, trusts, individuals or partnerships to be treated as a single taxpayer for GST purposes.
Also of particular importance are the rules allowing registration of joint ventures, enabling branches
to be treated separately, and those imposing GST liabilities on resident agents. Transactions
involving associates are also treated in a special way to ensure that their GST effects are not
distorted.

GST GROUPS
¶17-000 Why the need for special rules for groups?

Business entities often act in groups, with specialised activities being allocated to the different members.
As their businesses are associated, there will often be transactions within the group. These may only
affect the positions of the separate members without altering the overall position of the group. The GST
group rules reduce the cost of accounting for these purely internal transactions. They also simplify
administration by enabling one member to represent the group for GST purposes.
The concept of a GST group is not the same as that of a “consolidated” group under income tax law.
Because of different entry requirements and taxation benefits, not all GST groups will be consolidated
groups and not all consolidated groups will be GST groups. For the exemption that applies to supplies
resulting from the operation of the consolidated group rules, see ¶24-070.
Although grouping may confer a “GST benefit”, it is not intended that the general anti-avoidance
provisions should be triggered by a decision to group (¶20-040).
[GSTG ¶43-000]

¶17-010 Forming a GST group

GST groups may consist of companies, trusts, individuals, non-profit bodies, partnerships or government
bodies.
Membership requirements
To be eligible to join a group, an entity must satisfy the “membership requirements” (s 48-10). These
require that:
• the entity is registered for GST purposes

• it has the same tax periods as the other members (eg bodies with quarterly and monthly tax periods
cannot be grouped). This is not necessary if the entity’s tax period is a transitional period (¶7-105)
that ends at the same time as a tax period of each of the other members, and is not longer than
those periods

• it accounts on the same basis as the other members (eg bodies that account on a cash basis cannot
be grouped with those that account on an accruals basis)
 • it is not a member of other GST groups, and

• it satisfies an ownership test. This test, which differs according to whether the member is a company,
partnership, individual or trust, is explained below.

Formation procedure
Entities are able to “self-assess” their eligibility to form the group, and to implement this at any time during
a tax period, normally without the need to obtain the Commissioner’s approval, as was required under the
former rules (see below). This is designed to:
• reduce uncertainty that otherwise may arise from the time taken to obtain the Commissioner’s
approval

• increase flexibility by avoiding any need to delay commercial decisions until the beginning of a tax
period

• avoid having to unwind transactions for GST purposes to the beginning of a tax period.

The effect is that two or more entities can form a GST group if:
• each of them satisfies the membership requirements of the group (see above)

• each agrees in writing

• one of the entities notifies the Commissioner, in the approved form

• that entity is an Australian resident and is nominated in the form to be the representative member of
the group (s 48-5).

The formation of the group takes effect from the start of the day specified in the notification. This may be
on, before or after the date on which the entities decided to form the group. There is a proviso to this rule
if the notification is made after the required date for lodgment of the BAS for the tax period in which the
nominated day occurs. In such a case, the date of formation must be approved by the Commissioner,
who has the power to specify some other date if appropriate (s 48-71). The Commissioner’s decision on
this is reviewable (¶18-600).

Example
A, B and C, which all account monthly, agree to form a GST group with effect from 20 April, with C as the representative member. C
notifies the Commissioner on 10 May. This is before the date on which the BAS is due for the tax period in which 20 April occurs (ie
21 May). The date of formation is therefore the nominated date, 20 April.
Assume instead that C makes the notification on 30 May. This is after the date on which the BAS is due for the tax period in which
20 April occurs (ie 21 May). The Commissioner’s approval to the 20 April formation date is therefore required.

An entity ceases to be a member of the group if it leaves or is removed from the group (¶17-030), or if it
ceases to satisfy the membership requirements (s 48-7). The representative member must notify the
Commissioner within 21 days after any member ceases to satisfy the membership requirements.
Consequences of changes during tax period
Where an entity is part of a group for only part of a tax period, its activities in the part of the tax period
prior to membership must be accounted for separately (s 48-51; 48-52). This means, for example, that
where a group is formed during a tax period, the representative member must lodge a BAS for the group’s
activities for the part of that tax period after formation, and each joining entity must lodge a BAS for its
own activities prior to joining.
The effect is that the entity:
• accounts for any GST on taxable supplies to the extent that the GST on those supplies would be
attributed to the period in which the entity was not a member of the group
 • accounts for any GST on taxable importations made during the period in which the entity was not a
member of the group

• claims any input tax credits attributable to the period in which the entity was not a member of the
group, and

• accounts for GST adjustments attributable to the period in which the entity was not a member of the
group.

Example
Entities A, B and C form a GST group on 15 April, with B appointed as the representative member. All entities account on a monthly
basis.
A March BAS must be lodged, in the normal way, by each of the entities for their own activities up to 31 March.
An April BAS must be made by:
• B — for its own activities from 1 April to 14 April, and for the ABC group’s activities from 15 April to 30 April

• A — for its own activities from 1 April to 14 April, and

• C — for its own activities from 1 April to 14 April.

The May BAS is lodged by B for the group’s activities from 1 May to 31 May.
Assume now that A leaves the group on 20 June, with B remaining as the representative member.
A June BAS must be made by:
• B — for the group activities from 1 June to 30 June, including A’s activities up to 20 June, and

• A — for its own activities from 20 June to 30 June.

A July BAS must be made by:

• B — for the BC group’s activities from 1 July to 31 July, and

• A — for its own activities from 1 July to 31 July.

If the representative member is changed during a tax period, the new representative is only responsible
for the group activities from that point (s 48-53).
Other aspects
The fact that an entity would be eligible to join the group does not mean that it must actually do so.
The membership requirements prohibit GST group members from having a registered GST branch (¶17-
300).
For the modified rules relating to religious groups, see ¶15-052.
Transitional rules
The procedure for forming a group, as described above, applies from 1 July 2010. In general, approvals
made under the former, more restrictive, rules continue in force provided no relevant changes are made.
Pending applications for approval made before 1 July 2010 are taken to be notifications under the new
rules (Tax Laws Amendment (2010 GST Administration Measures No 2) Act 2010, Sch 1, s 43).
[GSTG ¶43-020]

¶17-012 Ownership requirements for companies and associations

A company is not restricted to the normal concept of a company. It means a body corporate, and also any
other unincorporated association or body of persons, other than a partnership (s 195-1).
If the group consists entirely of companies, the ownership requirement is that each company in the group
must be a member of the same “90% owned group” as any other companies in the group (s 48-10(1)(b)).
Two companies are members of the same 90% owned group if one of them has at least a 90% stake in
the other, or if a third company has at least a 90% stake in the other two (s 190-1). To have at least a
90% stake in a company:
• you must control at least 90% of the voting power in that company, or be able to have that control, and

• you must have the right to receive at least 90% of its dividends and capital distributions (s 190-5).

This 90% stake may be held directly, or indirectly through other companies. It appears that it may also be
held indirectly through other entities, such as a nominee individual (Interpretative Decision ID 2004/201).
It is important to realise that just because you are in a 90% owned group does not necessarily mean that
you must be included in the GST group (s 48-5). In other words, you may choose which of the eligible
companies form part of the GST group, as long as you do not infringe the anti-avoidance rules.
The following examples are based on those provided by the ATO.

Example

Companies A, B, D and E are part of a 90% group because:

• Company A has a 100% stake in Company D

• Company A has a combined 95% stake in Company B, and also in Company E.

However, Company C is not a member of that 90% group because the maximum stake that any of the other companies has in it is
50%.

Example

Companies A, B, C, E, F and G are part of a 90% group because:

• Company A has a 90% stake in Company B, and a 90% stake in Company C

• Company A has a 100% stake in Company E, and a 90% stake in Companies F and G.

However, Company D is not a member of that 90% group, because Company A only has an 81% stake in it. Company D could be
part of a different 90% group containing Companies B and C but that would mean that those two companies could not be part of the
first 90% owned group, because you cannot be a member of a GST group if you are a member of another GST group.

Companies would not satisfy the ownership requirements simply because an individual has 100% direct
ownership of each of the companies (Interpretative Decision ID 2002/492).
Groups of companies and other entities
If the group consists of companies and other entities, the ownership requirements for the companies are:
(1) each of the companies must satisfy the “90% owned group” requirement, and

(2) at least one of the companies must have the required relationship with the non-company members.
This required relationship is as follows:
• a partnership, trust or individual member has at least a 90% stake in the company

• all the shareholders in the company are partners in a partnership that is a member of the group,
are individuals that are members of the group, or are family members of any of those partners or
individuals. Unless the company is a one-shareholder company, at least two partners in the
partnership must be represented, either personally or by a family member, or

• a trust that is a member of the group only makes distributions of income or capital to: (a) the
company; (b) other companies that are members of the group; (c) endorsed charities or gift-
deductible entities; or (d) members of any of those companies, or their family members, provided
that if that company has more than one shareholder, at least two shareholders must be
represented as beneficiaries of the trust either personally or by a family member (s 48-15).

Example
Three individuals each have a one-third interest in a partnership and in each of two companies. The partnership and the two
companies intend to form a GST group.
The partnership satisfies the membership requirements for grouping with each company (¶17-014), and each company satisfies the
membership requirements for grouping with the partnership (see (2) above). However, the companies do not satisfy the membership
requirements of grouping with each other because they do not satisfy the “90% owned group” test (see (1) above). The entities
therefore cannot form a GST group (based on Interpretative Decision ID 2002/524).

A “family member” means the same as under the partnership and trust rules (¶17-014).
Non-profit bodies
The 90% requirement does not apply if all the members are non-profit bodies which form part of a non-
profit association (s 48-10(2)). However, all the other requirements (registration, etc) continue to apply.
For the special grouping rules that apply to sub-entities which operate as independent branches of non-
profit bodies, see ¶15-080.
[GSTG ¶43-120]

¶17-014 Ownership requirements for partnerships, individuals and trusts

The ownership requirements for partnerships, trusts and individuals are as follows.
Partnerships
A GST group may consist only of partnerships. In this case, there is no further ownership test for one of
the partnerships, but the others must satisfy the conditions in (5) below.
The ownership test for a partnership to join a GST group that includes entities other than partnerships
requires that:
(1) the partnership must have at least a 90% stake (¶17-012) in a company that is a member of the
group

(2) the shares in a company that is a member of the group are held in such a way that at least two
shareholders are associated persons of different partners in the partnership (if there is only one
shareholder, it must be an associated person of a partner in the partnership)

(3) each of the partners is an individual who is a member of the group, or a family member of such an
individual
 (4) a trust which is a member of the group has beneficiaries that include at least two associated
persons of different partners in the partnership, or

(5) there must already be a partnership that is a member of the group under one of the above rules,
and this partnership must have specified connections with the applicant partnership. This will apply,
for example, where each partner of the applicant is an individual, and each of those individuals is a
partner in the member partnership. The required connection may also be established in various ways
via family trusts, family companies or family members (GST Regulations s 48-10.02).

An “associated person” of a partner means the partner itself, or a family member (GST Regulations s 196-
1.01).
Trusts
The ownership test for a trust to join a GST group requires that:
(1) if the group consists only of fixed trusts, the trust must be a member of the same 90% owned group
as all the other fixed trusts, or must satisfy any of the other tests noted below

(2) the trustee of the trust must have at least a 90% stake (¶17-012) in a company that is a member of
the group

(3) the trustee distributes any income or capital of the trust only to “permitted beneficiaries”

(4) the trustee is the sole beneficiary of any distribution of income or capital by the trustee of another
member trust, or

(5) distributions of income or capital by the trustee, and by the trustee of another member trust, are only
to persons who are all family members of the same individual (GST Regulations s 48-10.03; 48-
10.03A).

Distributions may be either direct or indirect (GST Regulations s 48-10.01).

Permitted beneficiaries are:
• a company that is a member of the group

• shareholders in a company that is a member of the group, and their family members. The
beneficiaries of the trust must include at least two beneficiaries who are shareholders or family
members of shareholders. If the company has only one shareholder, the beneficiaries of the trust
must include the shareholder or a family member

• partners in a partnership that is a member of the group, if the trust beneficiaries include partners, or
family members of the partners. The beneficiaries of the trust must include at least two beneficiaries
who are partners or family members of partners

• an individual who is a member of the group, or a family member of such an individual

• a trustee of a trust that is a member of the group, or

• an endorsed charity or a gift-deductible body.

These rules apply to trusts whether they are fixed, discretionary or hybrid. They also apply to
superannuation funds operated through a trust structure.

Example
The members of a self-managed superannuation fund are the directors of the trustee company and also hold shares in that
company. The fund can group with the company as the only beneficiaries are permitted beneficiaries, ie shareholders in the
company.
Individuals
The ownership test for an individual to join a GST group requires that:
• the individual has at least a 90% stake (¶17-012) in a company that is a member of the group, or each
shareholder of that company is either the individual or a family member of the individual

• the individual and/or family members comprise the partners in a partnership that is a member of the
group, or

• the individual and/or family members are beneficiaries — direct or indirect — in a trust that is a
member of the group, and the trustee of that trust distributes income or capital only to “permitted
beneficiaries” (see above) (GST Regulations s 48-10.01; 48-10.04).

Accordingly, there cannot be a GST group that consists solely of two individuals.
Who are “family members”
For the purposes of the above rules, your family members include any parent, grandparent, brother,
sister, nephew, niece, child, or child of a child, of you or your spouse. They also include your spouse and
the spouses of any of your family members (GST Regulations s 196-1.01; former reg 48-10.01).
[GSTG ¶43-130; ¶43-140; ¶43-150]

¶17-016 Requirements for government departments

Government departments can form GST groups. The membership requirements for each department in
the group are:
• it must be registered for GST purposes

• it must not be a member of any other GST group

• it must have the same tax periods as the other members

• it must account on the same basis as the other members

• all the other members must be government departments (s 149-25).

“Government departments” is used here as shorthand for the term “government related entity” which is
used in the legislation (s 195-1). In broad terms, this covers Commonwealth, state and territory
departments, agencies, statutory bodies and local governing bodies.
[GSTG ¶43-170]

¶17-020 Effect of having a GST group

The main effects of having a GST group are as follows.

Single body.
A GST group is treated as if it were a single body for GST purposes. This means that, generally speaking,
supplies and acquisitions made wholly within the group are effectively ignored. In technical terms, they
are not taxable supplies or creditable acquisitions (s 48-40; 48-45). However, if there are transactions
outside the group, they are treated like normal transactions and are covered by the normal GST rules. For
these reasons, it will be important to be able to identify and track all internal transactions between group
members. In some cases, this may represent a significant administrative burden.
The acquisition of an interest in a unit trust of which a fellow group member was the trustee was not
sufficient in itself to make it an intra-group transaction (AXA Asia Pacific Holdings Ltd v FC of T 2008 ATC
¶20-074; [2008] FCA 1834).
If a supply is made partly when both parties were members of the group and partly when they were not,
there will need to be an apportionment (Interpretative Decision ID 2012/34). The treatment of the supply
as non-taxable will therefore apply only to the extent that the supply was carried out during the period of
joint membership. This could happen, for example, where there is a supply of services that continues over
a period.
Special rules ensure that the grouping rules cannot be used to exploit the margin rules (¶11-140) or the
rules covering new residential premises (¶11-020).
GST payable by representative member.
One resident member of the group must be nominated as the representative member (s 48-5). This is the
entity that will be responsible for paying the GST on all sales made to parties outside the group (s 48-40),
although tax invoices should be issued in the name of the member actually making the supply (GST
Ruling GSTR 2013/1). The representative member also claims all the input tax credits for purchases and
other acquisitions made from outside the group (s 48-45), and makes the GST return on behalf of all
members of the group (s 48-60).
Where the GST or input tax credit on a supply or acquisition is attributable to a tax period in which the
relevant member was not a member, that member remains liable for the GST or entitled to the input tax
credit, not the representative member.
It is not essential that the representative member be the biggest or most important member. For the
situation where the group is formed during a tax period, or the representative member changes during a
tax period, see ¶17-010.

Example
Company X is the representative member of a GST group. The other members are Companies Y and Z. Company X has taxable
sales to outside parties of $550,000 and makes creditable acquisitions of $330,000. Companies Y and Z make supplies to Company
X of $100,000 and pay $50,000 for services from that company. They have taxable sales to outside parties of $66,000 and
creditable acquisitions of $44,000.
For GST purposes, the transactions within the group may be ignored. As the representative member, Company X will account for
GST calculated as:

1/11 × ($550,000 + $66,000).................................... $56,000

Less: 1/11 × ($330,000 + $44,000).................................... 34,000
$22,000

If the representative member does not pay the tax, or there is a history of non-payment, the ATO may be
able to claim it from any of the members in the group under the “joint and several liability” rule
(Administration Act, Sch 1, s 444-90). In determining which member(s) to pursue, the factors that the ATO
may consider include:
• whether there is an ability to collect payment promptly from the member

• whether there is an opportunity to include the group debt in an action being initiated against a
particular member for that member’s other tax-related liabilities

• whether there is a need to prove a debt in an insolvency administration of a member

• whether there is the opportunity to collect an amount due to a member from a third party (ATO
Receivables Policy, Ch 34, para 70; Practice Statement PS LA 2013/6).

Joint and several liability does not apply in situations where members are statutorily barred from meeting
the requirement, for example, certain financial institutions. These entities will nevertheless remain liable
for liabilities arising from their own acts or omissions. Group members may also limit their liability by
entering into an “indirect tax sharing agreement” (¶17-025).
Further ATO guidelines on collecting group debts are in Practice Statement PS LA 2013/6.
Refunds.
The representative member is also entitled to any GST refund or credit, but the ATO can offset this
against the tax debts of any of the group members (Administration Act, s 8AAZLA; 8AAZLB).
Importations.
The representative member claims any input tax credit for importations made by any group member (s
48-45). However, if the GST on the importation is payable at the time customs duty is payable (¶9-005),
the GST should be paid by that member. In other cases, the GST is payable by the representative
member in the usual way (s 48-40).
Input tax credits.
In determining whether a purchase outside the group by a group member has been made for business
purposes and is eligible for an input tax credit, the purpose of the group as a whole is taken into account
(s 48-45; 48-55). An election to make annual apportionments of input tax credits (¶5-020) can only be
made if each group member satisfies the eligibility criteria. For special rules relating to the contents of tax
invoices that are required to support claims for input tax credits, see ¶5-100.
Increasing or decreasing adjustments should be made where entities that have made acquisitions enter
or leave a GST group, and there is a change in the extent of business use.
GST adjustments.
The representative member is also responsible for any net GST adjustments that arise (s 48-50).

Example
A group member acquires equipment from outside the group and uses it to make taxable supplies to an outsider. The input tax credit
on this purchase is claimed by the representative member. Later, the group member uses the equipment to make supplies to a
group member who itself makes input taxed supplies. This is a change in purpose which means that an adjustment must be made to
the input tax credit already allowed on the purchase of the equipment.

GST turnover thresholds.

Various thresholds based on GST turnover apply under the GST rules, for example, the thresholds for
registration. Where there is a GST group, these thresholds are based on the GST turnover of the group
as a whole, excluding supplies made within the group (s 188-15; 188-20). Similarly, the “de minimis” test
for determining input tax credit entitlements for financial acquisitions is applied as if the group were a
single entity (¶10-032).
Annual tax periods.
The representative member may elect to adopt annual tax periods, where applicable, where all members
are eligible (¶8-040).
GST instalments.
The representative member may elect to pay GST under the instalments system if all the group members
are eligible. Special rules cover eligibility and the consequence of changes of membership (¶8-037).
Reverse charge.
The “reverse charge” rules (¶9-100) still apply where an offshore supply is made from one group member
to another. In this situation, the supply is still treated as a taxable supply. Similarly, the recipient group
member can claim an input tax credit in this situation (s 48-45(3)). This is an exception to the general rule
that transactions within groups are outside GST (s 48-40(2)).
Joint venture property.
It may happen that a group member is also a participant in a GST joint venture (¶17-200). If it sells joint
venture property to another group member, GST may be payable. This is an exception to the general rule
that transactions within groups are outside GST (s 48-40(2)).
Income tax.
The income tax liabilities of group members are calculated as if they had personally paid the GST or
claimed the input tax credit, even though this in fact was done by the representative member (ITAA 1997
s 17-20; 27-25). For the position where tax losses or net capital losses are transferred within wholly-
owned groups, see ¶24-070.
[GSTG ¶43-200]

¶17-025 Indirect tax sharing agreements

The possibility of becoming directly liable for the group’s tax liabilities if the group representative defaults
(¶17-020) can create considerable uncertainty among group members, especially as the liability can arise
even after the member has left the group. To overcome this problem, group members have the option of
entering into an indirect tax sharing agreement (“ITSA” or “ITXSA”) (Administration Act, Sch 1, s 444-90).
The protection provided by an ITSA will no doubt encourage many groups to implement them. The fact
that there is an ITSA will, of course, also be relevant to a prospective purchaser of a former group
member. Prospective purchasers will normally wish to ensure in any event that there is an adequate
indemnity in respect of any residual GST liability.
Requirements for agreement
The requirements for the agreement are:
• it must be entered into between the representative member and one or more members

• it must be entered into before the date on which the representative member is required to lodge a
BAS for the relevant tax period

• each participating member’s “contribution amount” for the relevant tax period must be ascertainable
from the agreement, and

• the contribution amount must represent a “reasonable allocation” of each participating member’s
liability for the group’s indirect tax payable for that period. ATO guidelines on what it considers will
qualify as a reasonable allocation are at www.ato.gov.au, “Indirect tax sharing agreement —
reasonable allocation of indirect tax law liability”.

The agreement is not effective if:

• the representative member fails to comply with a written notice from the Commissioner requiring it to
provide a copy of the agreement in the approved form within 21 days (see below)

• the agreement was entered into as part of an arrangement which had a purpose of prejudicing the
Commissioner’s recovery of the group’s BAS liability, or

• the representative member enters into more than one agreement for the same period. However, more
than one group member can be included in one agreement.

The agreement may apply to amounts due under “indirect tax laws”, ie GST, wine equalisation tax, luxury
car tax or fuel tax.
Approved form of agreement
The “approved form” for any ITSA that the Commissioner requires to be produced (see above) has the
following minimum requirements (see Indirect Tax Sharing Agreement at www.ato.gov.au). While these
requirements must be met, the actual legal form of the agreement is open to the taxpayers and their
advisers, provided that ITSA legally binds the parties concerned.
The requirements are that the ITSA must:
(1) be in writing

(2) show the date of execution

 (3) specify the names of the representative and each contributing member

(4) specify what indirect tax law liability or liabilities it covers

(5) specify the tax period that the indirect tax law liability or liabilities relate to

(6) specify the method used to allocate group liability or liabilities. This must provide for a reasonable
allocation of the total amount of the indirect tax law liabilities for that tax period

(7) be properly executed by or on behalf of the representative and each contributing member and
either:
• specify the exact contribution amount for each contributing member for the relevant liability, or

• include a schedule signed by the representative (if and when required to be produced to the
Commissioner)

(8) if and when required to be produced to the Commissioner, include any Deeds of Assumption in
relation to the particular liability or liabilities for the particular period (or periods).

If the ITSA includes a schedule signed by the representative, it must:

• specify the relevant liability or liabilities and period (or periods) as specified in the Commissioner’s
notice to produce

• state the name and ABN or ACN of the representative and each contributing member

• state the contribution amount of each contributing member in respect of that liability or each of the
liabilities, and

• declare that “the schedule includes the names of all the ITSA contributing members in relation to that
liability or liabilities for that period (or those periods) and the contribution amount or amounts as
calculated under the ITSA”.

Further guidelines on the contents of the agreement are in Practice Statement PS LA 2013/6.
Effect of agreement
The effect of the agreement is that the member’s potential liability for that tax period is limited to the
contribution amount.
Furthermore, if the member has left the group before the group BAS is required to be given for that tax
period, and has paid its contribution amount (or a reasonable estimate) for that period to the
representative member, the member has no further potential liability for that period. This “clear exit” rule
does not apply, however, if leaving the group was part of an arrangement that had a purpose of
prejudicing the Commissioner’s recovery of the group’s BAS liability.
The existence of the agreement does not affect the representative member’s primary liability for the tax.

Example
Entities A, B, C and X are the members of a GST group, with X as the representative member. On 31 July 2019, they enter into an
indirect tax sharing agreement. This is before the date on which the group’s monthly July BAS is due (21 August).
Entity A leaves the group on 15 April 2020. This is before the date on which the group’s March 2020 BAS was due.
X, as representative member, is responsible for the group’s indirect tax liability. Assume, however, that X defaults for the July 2019
BAS onwards. The effect is as follows:
• A, B and C are jointly and severally liable for amounts payable under the July 2019–February 2020 BASs. However, their
liabilities are limited to their contribution amounts under the agreement

• B and C are jointly and severally liable for amounts payable under the March 2020 and subsequent BASs, though their
liabilities are limited to their contribution amounts. Provided that entity A duly pays its relevant contribution amounts in relation
to both the March BAS (and its proportionate contribution amount for the April BAS), it will have no further liability. Entity A
would, however, retain responsibility for any adjustments arising out of supplies or acquisitions that it made while it was a
 member (¶17-030).

Technically, there is a supply for GST purposes where an entity enters into an indirect tax sharing
agreement, or is released from an obligation as a result of the agreement. Those supplies are not taxable
(s 110-60; 110-65).
[GSTG ¶43-245]

¶17-030 Change of group membership or dissolution

Groups are able to “self-assess” their eligibility to change the membership of the group, and to implement
this at any time during a tax period. There is normally no need to obtain the Commissioner’s approval, as
was required under the former rules (see below). The effect is that:
• the representative member may add an entity to the group, provided that the entity satisfies the
membership requirements (¶17-010) and agrees in writing

• the representative member may leave the group, and may be replaced by another resident group
member nominated by the members

• the representative member may remove any member from the group

• if a member is an incapacitated entity (see below), that entity’s representative (eg the liquidator) may
remove the entity from the group, and

• the representative member may dissolve the group (s 48-70).

The change must be notified to the Commissioner in the approved form. The change takes effect from the
start of the day specified in the notification. This may be on, before or after the date on which the
notification is given. There are two provisos to this rule:
(1) if the notification is made after the required date for lodgment of the BAS for the tax period in which
the nominated day occurs, the date of the change must be approved by the Commissioner, who has the
power to specify some other date if appropriate (s 48-71). The Commissioner’s decision on this is
reviewable (¶18-600).

Example
A GST group consists of A, B and C, with C as the representative member. It accounts on a monthly basis. C notifies the
Commissioner on 10 May that a new member D was added with effect from 20 April. As this is notified before the date on which the
BAS is due for the tax period in which 20 April occurred (ie 21 May), the effective date of the change is therefore the nominated
date, 20 April.
Assume instead that C made the notification on 30 May. This is after the date on which the BAS is due for the tax period in which 20
April occurs (ie 21 May). The Commissioner’s approval to the 20 April change date is therefore required.

(2) a notification of the removal of an incapacitated entity cannot take effect before the date on which the
entity became incapacitated.
A GST group is taken to be dissolved if a member ceases to be the representative member and is not
replaced with effect from that date. Notification of a new representative member must be given within 21
days of appointment.
Effect of joining or leaving group
In accordance with the normal rules (¶17-020), where the GST or input tax credit on a supply or
acquisition is attributable to a tax period before the member joined the group, or after the member left the
group, that member remains liable for the GST or entitled to the input tax credit, not the representative
member.
Subject to that, however, if a new member joins a GST group, the representative member takes over
responsibility for accounting for the member’s GST-related transactions. Similarly, if a member leaves the
group, the representative loses its responsibility for accounting for the member’s GST-related transactions
(s 48-110).
If the ex-member becomes a member of another GST group, the representative member of that group
becomes responsible for any adjustments in the normal way (s 48-50).
It may happen that there is a change in the planned use of the thing acquired or imported by the ex-
member while it was a member. In this situation, any adjustments to GST are calculated as if that
member had been the one who claimed the input tax credit for the acquisition or importation (s 48-115). A
corresponding rule applies where there was an acquisition before becoming a member of the group.
Effect of liquidation, receivership, etc
Some special rules apply if a member of a group becomes incapacitated, eg through liquidation or
receivership (¶18-250). As previously noted, in such a case, the entity will cease to be a member if its
representative notifies the Commissioner in the approved form.
However, in some cases it may be appropriate for the member to remain as a member of the group.
Formerly, this could be difficult to achieve in practice because the member’s tax period would have
become different from that of the other members, as it would end on the day before the time it became
incapacitated (¶7-100). This meant that it could not satisfy the membership requirements (¶17-010).
Accordingly, s 48-73 now enables the group’s representative member to avoid this result by electing to
have the tax periods that apply to group members cease at the same time as the incapacitated entity’s tax
period ceased. This election is made by notifying the Commissioner within 21 days of the member
becoming incapacitated.
Making this election removes the necessity for the incapacitated entity to leave the group. Making the
election may make sense in any event, even if the incapacitated entity does leave, because it would
eliminate the need for revision of the group transactions that occurred before the member became
incapacitated.
If the representative member itself becomes incapacitated, it can still make the election. Apart from that,
however, it ceases to be the group’s representative member, unless all the other members are also
incapacitated (s 48-75; former s 48-72). A disqualified group representative can be replaced by any
member that is not incapacitated.
Transitional rules
The procedure for changing the membership of a group, as described above, applies from 1 July 2010. In
general, approvals made under the former, more restrictive, rules continue in force provided no relevant
changes are made. Pending applications for approval made before 1 July 2010 are taken to be
notifications under the new rules (Tax Laws Amendment (2010 GST Administration Measures No 2) Act
2010, Sch 1, s 43).
[GSTG ¶43-300; ¶43-350]

¶17-040 Opportunities presented by grouping provisions

Here are some possible ways in which the grouping provisions may provide particular advantages or
opportunities.
• If you provide GST-free services (such as education) through a number of companies, you may be
able to avoid GST on intra-group sales by forming a GST group.

• The grouping provisions may make it easier to make transfers of assets to related companies as part
of a group reorganisation.

• The transfer of tax losses to a company that is not a member of the group is a taxable supply if it is
made for consideration or to an associate. However, the ATO accepts that GST will not apply to a
transfer of tax losses between members of the same group.
 • Do not overlook possibly unintended consequences where grouping alters the turnover thresholds, as
described at ¶17-020.

• As group membership is optional, this provides flexibility in deciding the composition and timing of
group formation to the best GST effect.

Example
A group operates on monthly tax periods. A related company that operates on quarterly tax periods provides supplies to group
members. From a cashflow point of view, it may be desirable for that company not to form part of the group, so that the group can
claim input tax credits on a monthly basis while the related company continues to account for GST on a quarterly basis.

In some overseas jurisdictions, companies have tried to exploit the grouping provisions beyond their
intended effect. This has led to specific anti-avoidance measures being introduced. In Australia, the ATO
will no doubt rely on the very wide general anti-avoidance rules and severe penalties provided in the GST
legislation (¶20-000).

AMALGAMATED COMPANIES
¶17-100 Where companies amalgamate

The GST group rules apply where companies retain their own existence but are part of a group. This is
different from the position where companies amalgamate, ie where two companies merge and become a
new company. In this situation, however, there are special rules that ensure that GST generally does not
apply to transactions made as part of the amalgamation process (Div 90). These rules are designed to
avoid unnecessary accounting costs arising from having to account for transactions which are essentially
internal. The rules are also intended to prevent companies manipulating the timing of attribution of GST
and credits.
[GSTG ¶46-000]

¶17-110 Supplies and acquisitions

The basic rule is that supplies made by an amalgamating company to the amalgamated company in the
course of an amalgamation are not subject to GST, where the amalgamated company is registered or
required to be registered immediately after the amalgamation (s 90-5). Of course, if the supplier is not
itself registered or required to be registered, the supplies it makes in the course of the amalgamation will
not be subject to GST in any event (s 9-5).
This means that the supplies may be taxable if:
• the amalgamating supplier is registered or required to be registered, and

• the amalgamated company is not registered or required to be registered.

In this situation, which would be relatively rare, the GST would be 10% of the GST-exclusive market value
of the supply (s 90-10). This would be accounted for in the amalgamating company’s concluding tax
period.
Acquisitions
Acquisitions made by the amalgamated company in the course of the amalgamation will not be creditable,
ie they will not give rise to input tax credits, if the amalgamated company is registered or required to be
registered (s 90-15). If the amalgamated company is not registered or required to be registered, the
acquisition would not be creditable in any event (s 11-5).

Example
Registered Companies A and B merge to form Company C. Because of its GST turnover, C is required to be registered immediately
 after the amalgamation. The supplies of assets made by A and B to C in the course of the amalgamation are not taxable and no
input tax credit can be claimed by C.

[GSTG ¶46-040; ¶46-060]

¶17-120 Outstanding GST and credits

It may happen that, because of prior transactions, the amalgamating companies have GST liabilities or
credit entitlements still outstanding at the date of the amalgamation. The amalgamated company will
assume those liabilities and entitlements to the extent that they were not attributable to a tax period
before the amalgamation (s 90-20; 90-25). A corresponding rule applies to adjustments (s 90-30).

Example
Assume the same facts as in the example at ¶17-110. At the date of amalgamation, the (accruals based) Company A had not issued
an invoice or received payment in relation to an earlier taxable supply, and had not received a tax invoice for an earlier purchase.
Company C will assume the liability for the GST and the entitlement to the credit as if it had made the relevant supply and purchase
itself.

A special attribution rule applies if:

• an amalgamating company was on the cash basis and the amalgamated company is on the accruals
basis

• GST liabilities or credit entitlements had not been accounted for before the amalgamation, but would
have been so attributed if the amalgamating company had been on the accruals basis.

In this situation, the liabilities or entitlements are attributed to the first tax period of the amalgamated
company ending after the amalgamation (s 90-35).

Example
Company X accounts monthly on a cash basis. Before the amalgamation, it purchased goods, with the price payable in three
instalments. After one instalment was paid, X amalgamates with Y to form Z, which is on the accruals basis. X claims the input tax
credit for the first instalment in accordance with the normal rules. Z will claim the input tax credit for the remaining two instalments in
its return for the first tax period that ends after the amalgamation.

[GSTG ¶46-080]

JOINT VENTURES
¶17-200 Joint ventures

Sometimes companies or other entities operate together in joint ventures that do not involve any merger
of structures or common ownership.
Entities engaged in an eligible joint venture can form a “GST joint venture”. This means that the operator
of the joint venture is responsible for the GST liabilities and entitlements arising from the operator’s
dealings on behalf of the venture participants (Div 51). This provides an administrative shortcut on what
are essentially internal transactions.
The joint venture provisions are broadly the same as the GST group rules. The rationale for this is that the
joint venture is operating in a similar way to a group, even though it may be on a limited short-term basis.
However, a joint venture is different from a GST group in that it is not treated as a single body for all GST
purposes.
The ATO considers that a joint venture is characterised by the following factors:
 (1) sharing of product or outcome, rather than sale proceeds or profits

(2) a contractual agreement between the participants (normally evidenced in writing)

(3) joint control

(4) a specific economic project

(5) cost sharing (GST Ruling GSTR 2004/2).

Of these, factor (1) is essential, and the others are indicative.

In contrast, a partnership usually involves a continuous business, joint and several liability of the partners,
and an entitlement to a share of net profits (¶3-015).
A joint venture that does not involve a partnership or the creation of a separate entity is not itself an
“entity”.
For measures affecting running balance accounts for joint venture operators, see ¶8-100.
Joint ventures in energy and resource industry
The ATO has issued guidelines as to how the joint venture requirements will be applied to complex
arrangements involving multiple joint ventures, as for example in the energy or resource industry
(Practical Compliance Guideline PCG 2016/7).
[GSTG ¶44-000]

¶17-210 Formation of joint ventures

Two or more entities may form a GST joint venture (s 51-5). To qualify, the venture must be for eligible
purposes, and the entities must satisfy the participation requirements.
Not all of the entities that are engaged in the joint venture need to become participants in the GST joint
venture.
Eligible purposes
The venture must be for any of the following purposes, or for a combination of the following purposes:
• exploration or exploitation of mineral deposits (including petroleum, natural gas and related
hydrocarbons, sand or gravel)

• research and development, eg for the development of intellectual property

• the provision of insurance (but not life insurance)

• fishing, eg joint ventures involving fishers, boat operators and boat owners

• agriculture, eg where there is joint care of a flock of sheep and the wool clip is shared among the
participants. However, the ATO considers that agriculture does not cover the manufacture of feed
products for livestock

• cultivation or exploitation of timber

• design, building or maintenance of residential or commercial premises. Certain arrangements have

been devised to exploit this category by using non-taxable intra-venture transfers to prevent
residential premises from being “new”, with the intended result that subsequent sales are not subject
to GST. The ATO considers that these arrangements are ineffective on various grounds (GST Ruling
GSTR 2004/3) and specific counter-measures now apply in any event (¶11-020), along with
measures designed to prevent exploitation of the margin rules (¶11-140).

• civil engineering, including the design, construction and maintenance of roads, railways, bridges,
 canals, dams, ports, harbours, airports and similar installations

• generation, transmission or distribution of electricity

• transmission or distribution of water

• receiving, storing or distributing oil and gas products (eg aviation fuel)

• refining or processing oil and gas products

• beneficiation of minerals and primary metal production, including alloy production

• charitable activities, or

• transportation (GST Regulations s 51-5.01).

Participation requirements
The participation requirements for an entity are:
• it must participate, or intend to participate, in the joint venture

• it must be a party to the joint venture agreement with all the other participants or intended participants

• it must be registered for GST purposes

• it must account on the same basis as the other participants (s 51-10).

It is not necessary that the entity be resident in Australia, or that all participants have the same tax period.
A member of a GST group can also be a participant in a GST joint venture.

¶17-212 Procedure for formation

Entities are able to “self-assess” their eligibility to form a GST joint venture, and to implement this at any
time during a tax period. This normally does not need to obtain the Commissioner’s approval, as was
required under the former rules (see below). The effect is that two or more entities can form a joint
venture if:
• the joint venture is for eligible purposes (¶17-210)

• the joint venture is not a partnership. This means that although the venture is carried on jointly, the
income from the venture must not be received jointly

• each of the entities satisfies the participation requirements (¶17-210)

• each of the entities agrees in writing, and the agreement nominates an entity to be the joint venture
operator. This entity does not have to be a party to the joint venture agreement

• the nominated joint venture operator notifies the ATO of the formation of the GST joint venture in the
approved form (s 51-5).

The formation of the GST joint venture takes effect from the start of the day specified in the notification (s
51-5). This may be on, before or after the date on which the entities decided to form the joint venture.
There is a proviso to this rule if the notification is made after the required date for lodgment of the BAS for
the tax period in which the nominated day occurs. In such a case, the date of formation must be approved
by the Commissioner, who has the power to specify some other date if appropriate (s 51-75). The
Commissioner’s decision on this is reviewable (¶18-600).
An entity ceases to be a participant in the joint venture if it leaves or is removed from the group (¶17-230),
or if it ceases to satisfy the participation requirements (s 51-7). The joint venture operator must notify the
Commissioner within 21 days after any participant ceases to satisfy the participation requirements.
Transitional rules
The procedure for forming a GST joint venture, as explained above, applies from 1 July 2010. In general,
approvals made under the former, more restrictive, rules continue in force provided no relevant changes
are made. Applications for approval made before 1 July 2010 are taken to be notifications under the new
rules (Tax Laws Amendment (2010 GST Administration Measures No 2) Act 2010, Sch 1, s 44).
[GSTG ¶44-040]

¶17-220 Consequences of formation of joint venture

The main effects of having a GST joint venture are:

• if the joint venture operator makes a supply or acquisition on behalf of a participant in connection with
venture activities, the operator is liable to pay the GST and is entitled to the input tax credit (s 51-30;
51-35). It also assumes the effect of any subsequent GST adjustments in relation to those
transactions (s 51-40)

• if the joint venture operator makes a supply to a participant in the course of venture activities, that is
not a taxable supply and GST will not apply (s 51-30). The ATO considers that this exemption only
applies to supplies made by the operator in its capacity as such to a participant in its capacity as
such. This is narrower than the intra-group exemption that applies to GST groups (GST
Determination GSTD 2004/2; GST Ruling GSTR 2004/3)

• the joint venture operator makes GST returns on behalf of the venture participants (s 51-50) and
makes GST payments or receives refunds of the GST joint venture’s net GST amount for each period
(s 51-55; 51-60). If the representative member does not pay the tax, the ATO may be able to claim it
from any of the participants (Administration Act, Sch 1, s 444-80). The factors taken into account by
the ATO in these situations are similar to those applying to GST groups (¶17-020). Participants may
limit their liability by entering into an “indirect tax sharing agreement” on terms similar to those
applicable to GST groups (¶17-025).

Example
Companies are participants in a GST joint venture. The joint venture operator will pay the GST on all sales made as part of the joint
venture and claim input tax credits for purchases made as part of the joint venture. Internal sales between the participant companies
in connection with the joint venture will not give rise to GST or input tax credits.

Consolidated returns for multiple ventures

A single entity may be the joint venture operator for a number of GST joint ventures. To reduce
compliance costs, it may elect to prepare a consolidated GST return for all those ventures (s 51-52). This
means that its net GST liability will be calculated by aggregating the net amounts that would otherwise
have applied to each of the ventures. The ATO can disallow the election if the operator has a bad tax
history.
Income tax liabilities
The income tax liabilities of joint venture participants are calculated as if they had personally paid the
GST or claimed the input tax credit, even though this in fact was done by the operator (ITAA 1997 s 17-
20; 27-25).
[GSTG ¶44-100]

¶17-230 Change of joint venture membership or dissolution

Joint ventures are able to “self-assess” their eligibility to change the participants in the venture, and to
implement this at any time during a tax period, normally without the need to obtain the Commissioner’s
approval. The effect is that:
• the joint venture operator may add a participant to the joint venture, provided that the entity satisfies
the participation requirements (¶17-210) and agrees in writing

• the operator may leave the venture (if it was a participant), and may be replaced by another operator
nominated by the participants

• the operator may remove any participant from the joint venture

• the operator may dissolve the venture (s 51-70).

The change must be notified to the Commissioner in the approved form. The change takes effect from the
start of the day specified in the notification. This may be on, before or after the date on which the
notification is given. There is a proviso to this rule if the notification is made after the required date for
lodgment of the BAS for the tax period in which the nominated day occurs. In such a case, the date of the
change must be approved by the Commissioner, who has the power to specify some other date if
appropriate (s 51-75). The Commissioner’s decision on this is reviewable (¶18-600).
A GST joint venture is taken to be dissolved if an entity ceases to be the joint venture operator and is not
replaced with effect from that date. Notification of a new operator must be given within 21 days of
appointment. The venture is also taken to be dissolved if there are fewer than two participants.
Effect of joining or leaving joint venture
If a new participant joins a GST joint venture, the operator takes over responsibility for accounting for the
participant’s GST-related transactions.

Example
Company X joins a GST joint venture. Later, an adjustment arises in relation to purchases X made before joining. This will be
accounted for by the joint venture operator.

The converse applies if an existing participant ceases to be a participant (s 51-110).

Example
A GST joint venture accounts on a cash basis. Participant Y makes a sale to an outsider in return for two instalments. The venture
operator accounts for the GST on the first instalment, and Y then leaves the venture. Y must itself account for the GST on the
second instalment under the accounting rules that apply to it.

However, if the ex-participant becomes a participant in another GST joint venture, the operator of that
venture becomes responsible for any adjustments in the normal way (s 51-50).
It may happen that there is a change in the planned use of the thing acquired by the ex-participant while it
was a participant. In this situation, any adjustments to GST are calculated as if that company had been
the one who claimed the input tax credit for the acquisition (s 51-115).
Transitional rules
The procedure for changing the participants of a GST joint venture, as explained above, applies from 1
July 2010. In general, approvals made under the former, more restrictive, rules continue in force provided
no relevant changes are made. Applications for approval made before 1 July 2010 are taken to be
notifications under the new rules (Tax Laws Amendment (2010 GST Administration Measures No 2) Act
2010, Sch 1, s 44).
[GSTG ¶44-200]

BRANCHES
¶17-300 Registration of branches

A business may operate through branches. Even though they are not separate entities, these branches
will often do their normal accounts separately, with the accounts for all branches being amalgamated
annually. If the normal GST rules applied, this could mean that these accounts would have to be
amalgamated every tax period, instead of once a year.
To avoid the administrative and accounting costs of this procedure, special rules allow you to register
your branches separately (Div 54). This is like the converse of the GST group situation.
For this to apply (s 54-5):
• you (the “parent”) must be registered

• you must carry on an enterprise through the branch (or intend to)

• the branch must maintain an independent system of accounting

• the branch must be separately identifiable by location or by the nature of its activities, for example, the
Melbourne branch or the marketing branch. An events management company which runs various
events from one business premises would not satisfy this condition, even if the events themselves
are held in different locations (Interpretative Decision ID 2002/16).

If a branch is registered, GST is calculated separately for it. This means that all its sales, input tax credits
and GST adjustments are worked out as if it were a separate person (s 54-40). However, the parent
remains legally liable to pay the GST (s 54-60).
A separate return should be made for each GST branch. The ultimate responsibility for seeing that this is
done lies with the parent (s 54-55).
The tax invoice for any taxable supply made through a GST branch must show the branch registration
number (s 54-50). The same applies to adjustment notes.
If the whole of the parent’s business is carried on through branches, and they are all separately
registered, the parent will not have any of its own GST to pay (s 54-45). Nor will it have to lodge its own
return (s 54-55). This, however, would probably be an exceptional situation. In practice, the parent will
normally conduct its own transactions which are not covered in the branches’ activities.

Examples
(1) Company X does business through four state branches. Each maintains an independent system of accounting. If Company X
does not have these branches registered, it will need to collect records from each branch so it can prepare a consolidated GST
return each tax period. If it registers the branches, each branch will independently lodge its own GST return, pay GST and claim
input tax credits. Company X will have to lodge its own return for non-branch activities.
(2) If any of the registered branches makes supplies to Company X, that will be treated as a taxable supply. The branch will impose
GST and Company X will claim an input tax credit. Corresponding rules apply to sales by Company X to a registered branch, or
between registered branches. However, if there was a transaction between Company X and an unregistered branch, GST would not
apply as the branch would form part of Company X for GST purposes.

For exports of financial services to an overseas branch, see ¶10-050.

Registration is optional
You do not have to register all or any of your branches. It is your choice. However, you cannot register a
branch if you are a member of a GST group (s 54-5). The reason for this is that if you are a group
member, you will not be liable for GST yourself.
Non-profit branches
Special rules apply to registration of branches by non-profit bodies (¶15-080).
[GSTG ¶44-500]
¶17-310 Cancelling a branch registration

If the parent stops carrying on any enterprise through a particular registered branch, the parent must
apply for cancellation of the registration. This must be done within 21 days (s 54-70).
The ATO must cancel a branch registration on application, unless the branch had been registered for less
than 12 months. The ATO must also cancel a GST branch registration if it is satisfied that the parent is
unlikely to carry on any enterprise through the branch for at least 12 months (s 54-75).
If the parent’s registration is cancelled, this automatically cancels the registration of any of its branches (s
54-90).
[GSTG ¶44-620]

AGENTS
¶17-400 Liability of agents for GST

If you act through an agent, the agent’s actions will normally be treated as if you did them yourself. This
follows from the general law relating to agents. For GST purposes, it means that if sales are made
through your agent, you are the one liable for GST, not the agent. In the same way, if purchases are
made through your agent, you are the one entitled to claim the input tax credit, not the agent. You will
also be entitled to claim input tax credits for reimbursements you make to your agent for expenses
personally incurred by the agent (¶5-040).
Commission paid to the agent is treated as consideration for a supply of agency services. GST on this
supply would be payable by the agent (who should provide a tax invoice) and an input tax credit claimed
by the principal.
Sometimes it can be difficult to decide whether a person is acting as principal in their own right or is acting
as an agent for another. The fact that a person is described as an agent in the contract is indicative but
not necessarily conclusive. Some of the factors that indicate that a person is acting as a principal are that
the person decides prices, assumes commercial risks, acts in their own name and does not have to
disclose their remuneration. For example, where a supplier of “adult” entertainment provided the services
of lap dancers or stripteasers to customers, it was considered to be acting as a principal, not as agent for
the dancers (Interpretative Decision ID 2004/186). Similarly, a person with extensive real estate
experience who found and introduced potential purchasers of homes to be constructed by an associated
company was found to be acting on his own account as a principal (Climo v FC of T 2012 ATC ¶10-252).
On the other hand, in a UK case, the owner of a website that marketed hotel accommodation and was
remunerated by way of a mark-up was ruled to be acting only as an agent for the hotel operator which
was considered to be the actual supplier of the accommodation (Secret Hotels Limited (Formerly Med
Hotels Limited) v The Commissioners for Her Majesty’s Revenue and Customs [2011] UKUT 308). The
court commented, however, that this result depended on the actual terms of the contract between the
parties. Thus, a website operator could be found to be acting as a principal in a case where the true
nature of the contract was, for example, a sale and sub-sale.
A property management company was held to be carrying out its services as agent for the owners, not as
a principal, and was therefore not entitled to claim input tax credits in relation to those services: Crown
Estates (Sales) Pty Ltd & Anor v FC of T [2016] FCA 335; see also Castan at ¶11-320.
In the absence of express agreement, a trustee normally acts as a principal, not as an agent for the
beneficiaries. This is particularly so in the case of bare trustees (¶4-010).
Special GST rules apply:
• where there are non-resident businesses (¶17-410)

• where there is an agreement for the agent to act as principal (¶17-420).

For guidelines on the application of the agency rules to the sale of indigenous artworks, see the ATO
booklet How Tax Applies to Indigenous Artwork (NAT 12066). For the position of tour operators, see ¶12-
020.
[GSTG ¶47-001]

¶17-410 Agents for non-residents

In general, where a non-resident acts through an agent resident in Australia, the agent is responsible for
the GST consequences of those actions. The reason for this is that it is easier for the ATO to enforce
GST obligations against people who are inside Australia.
The effect of this is as follows:
• if the non-resident is registered, or required to be registered, the agent must also be registered

• GST payable on sales or importations made through the agent is payable by the agent, not the non-
resident

• input tax credits for purchases or importations made through the agent are claimed by the agent, not
the non-resident (s 57-5 to 57-25).

This is summarised in the following table, adapted from one prepared by the ATO.

Resident entity Non-resident principal GST implications

If it has GST turnover in its own
right of $75,000 or more, it is
required to be registered (¶3-
030).
If it has turnover in its own right
of less than $75,000, it is not
required to be registered, but
may choose to be registered (¶3-
000).
Once the turnover of the non-
resident principal meets or
exceeds the turnover threshold,
the resident entity is required to
be registered. The resident
entity’s turnover is irrelevant.
If it has turnover of less than
$75,000, after excluding “reverse
charge” supplies (¶9-095), it is
not required to be registered, but
may choose to be registered (¶3-
000).
If it has turnover of less than
$75,000, after excluding “reverse
charge” supplies, it is not
required to be registered (¶3-
000).
If it has turnover of $75,000 or
more, after excluding “reverse
charge” supplies, it is required to
be registered.
(1) The resident must register
and account only on the supplies
that it makes.
(2) The resident agent is not
entitled to input tax credits for
acquisitions made on behalf of
the principal (¶5-010).
(3) If the non-resident chooses to
register, the resident agent must
register and account for GST on
all supplies.
(1) No registration is required, no
GST is to be accounted for and
there is no entitlement to input
tax credits.
(2) If the resident chooses to
register, the resident agent must
account for GST only on supplies
it makes.
The resident agent must register
and account for GST on all
supplies.

If the non-resident’s GST turnover (¶3-030) is $20m or more, the agent must adopt monthly tax periods (s
57-35). This must take effect from 1 January, 1 April, 1 July or 1 October.
The agent must also lodge GST returns for each tax period in the usual way. The rules enabling you to
make “zero” returns (¶8-043) do not apply unless the non-resident did not make any sales or purchases
through you during that tax period (s 57-45).
If all the non-resident’s sales and importations during the period were made through the agent, the non-
resident itself need not make a return. This also applies if its net amount for the tax period is zero (s 57-
40).
These rules do not apply if the non-resident is a member of a GST group (s 57-50). In this case, the GST
obligations are carried out by the group’s representative member, which must be a resident (¶17-010).

Example
US Co is resident in the United States. It does not have a branch in Australia, but sells its products here through Agency Services. It
has a turnover of $25m and is registered for GST.
Agency Services is also registered. It is liable for the GST on the importation and sale of US Co’s products in Australia. It can claim
input tax credits for the GST paid on the importation (¶9-010). It will also be required to make any GST adjustments relating to the
GST payable or the input tax credits that have been claimed.
As US Co’s turnover is over $20m, Agency Services must lodge a monthly GST return.

For tax periods starting on or after 1 October 2016, the normal agency rules do not apply if the supplier
would not be liable for GST on the supply, or makes it through an enterprise that it carries on in Australia
(s 57-5). This is designed to prevent overlap with the reverse charge rules (¶9-095). In addition, a non-
resident and its resident agent may agree to opt out of the new rules applying to cross-border
transactions between businesses (¶4-101), with the result that the resident agent continues to be liable for
GST on the relevant supplies (s 57-7). For transitional rules, see ¶19-250.
An agent who ceases to act as an agent for a non-resident must notify the Commissioner within 14 days
(s 57-30). The required details are set out in GST Ruling GSTR 2000/37.
[GSTG ¶47-400]

¶17-420 Agreements for agent to act as principal

A principal and agent can enter into a written agreement that the agent should be treated as a principal
for GST purposes (s 153-50). The agreement must specify the type of supplies or acquisitions involved,
and both parties must be registered. The agreement must also specify that where the agent makes
supplies to third parties, the tax invoice and any adjustment note will be issued by the agent in its own
name. A record of the agreement must be kept by the original principal (Administration Act, Sch 1, s 382-
5).
The effect of such an agreement is as follows.
Supplies to third parties
• Supplies that the principal makes to a third party through an agent are treated as if the principal had
made the supply to the agent, who then makes a separate supply to the third party.

• The supply by the principal to the agent is treated as a supply for the amount the agent is required to
pay. This will normally be the amount the third party is charged, less agent’s commission.

• The principal remits 1/11th of the price to the ATO and the agent claims an input tax credit for that
amount.

• On the supply to the third party, the agent remits 1/11th of the price to the ATO and the third party
claims a corresponding input tax credit, if registered (s 153-55).

Examples
The basic agreement, ignoring GST, was that an agent would sell goods for the principal to third parties for $130 and retain $30 as
commission, leaving the principal with a net gain of $100.
(1) Under the GST rules, unless the parties agree that the agent should act as principal, the principal sells the goods through the
agent for $143 including $13 GST. The principal is entitled to the $143, against which the agent claims its commission of $33
including $3 GST.
The principal accounts for the $13 GST to the ATO and claims an input tax credit of $3 for the commission. Its net gain is ($143 −
$33 − $13 + $3) = $100.
 The agent accounts for the $3 GST to the ATO, so its net gain is ($33 − $3) = $30.
(2) Assume instead that the principal and agent agree that the agent will act as principal on the sale to the shop. For GST purposes,
the principal sells the goods to the agent for $110 (ie $100 + GST). The principal accounts for the $10 to the ATO, leaving it with a
net gain of ($110 − $10) = $100.
On the sale to the shop by the agent for $143, the agent accounts for the $13 GST to the ATO and claims an input tax credit for the
$10 on the purchase from the principal. Its net gain is ($143 − $110 − $13 + $10) = $30.

Acquisitions from third parties

• Acquisitions that the agent makes on behalf of the principal are treated as if the third party had made
the supply to the agent, who then makes a separate supply to the principal.

• The agent claims an input tax credit for the GST on the acquisition from the third party, who accounts
for that amount to the ATO.

• The agent’s supply to the principal is treated as a supply for the amount the principal is required to
pay. This will normally be the amount the third party has charged, plus agent’s commission.

• The agent remits 1/11th of the price to the ATO and the principal claims an input tax credit for that
amount (s 153-60).

Example
A principal agrees to buy goods from a seller for a price of $550 (including $50 GST). It makes the purchase through its agent, who
is entitled to a commission of $44 (including $4 GST). The principal and the agent have agreed that the agent will act as principal on
the purchase.
For GST purposes, the seller is taken to have sold the goods to the agent for $550, who is taken to have supplied them to the
principal for $594 (ie $550 + $44). The agent claims an input tax credit of $50 (ie 1/11th of $550) and accounts for $54 GST on the
sale. The principal claims an input tax credit of $54 (ie 1/11th of $594).
After accounting for GST and input tax credits, the agent’s net gain is therefore (sale $594 − GST $54 − cost $550 + credit $50) =
$40. The principal’s net outlay is (cost $594 − credit $54) = $540.

The agreement may cover supplies that are not taxable and non-creditable acquisitions, but will not alter
their GST effect. They should be accounted for as a principal-to-principal transaction, separate from the
taxable supply and creditable acquisition of the agency services (GST Ruling GSTR 2000/37).
These rules do not apply to a supply covered by the special rules which from 1 July 2017 govern offshore
supplies of intangibles to Australian consumers (¶9-120).
Industry-wide arrangements
The Commissioner can make a determination that agents and principals in particular industries will be
treated as having made an agreement for the agents to act as principals (s 153-65). This applies to
multimedia industry products such as magazines, journals, newspapers, calendars, long-term
publications, computer software and compact disks that are supplied through retailers or distributors such
as newsagents, supermarkets, convenience stores and delivery agents (Goods and Services Tax
Application of Agency Arrangements to the Multi-Media Industry Determination (No 33) 2015). This also
applies to music CDs and electronic games (Interpretative Decision ID 2004/519), but not to lottery tickets
or phone cards.
It is possible that this might also apply in other industries with a significant number of agents or principals,
for example, the hair care industry or sectors of the tourism industry. It may also apply where it is hard to
get written agreements, for example, where the parties are geographically isolated (GST Ruling GSTR
2000/37).
An individual agent or principal can opt out of this treatment by notifying the other that they wish to
continue on a normal principal and agent basis. Both parties should keep a record of the notice under the
normal record-keeping rules (Administration Act, Sch 1, s 382-5).
Effects on turnover thresholds
Entering into an arrangement will normally mean that the agent’s GST turnover will increase, because
they are carrying out more transactions as principal. This could mean, for example, that they assume
certain GST obligations because they exceed a turnover threshold. To avoid this result, agents are given
the option of calculating their GST turnover by reference to the situation before they entered into the
arrangement (s 188-24).
Application to other intermediaries
These rules also apply to an intermediary who facilitates supplies or acquisitions but who falls short of
being an “agent” in the technical sense (¶17-400). This may include intermediaries such as a paying
agent, a billing agent or a commission agent.
[GSTG ¶47-310]

¶17-422 Goods sold on consignment, or “sale or return”

Sales on consignment are usually on a “sale or return” basis, rather than an agency basis. Under sale or
return, the title to the goods remains with the original owner until the seller finds a buyer. The sale to that
buyer involves two transactions — the sale of the goods by the original owner to the seller and a
simultaneous sale of the goods by the seller to the buyer. In this situation, the seller is selling in its own
right, not as “agent” for the original owner. The seller, if registered, is therefore liable for GST in the usual
way, and the agency rules do not apply. The seller may also be able to claim an input tax credit if the
original owner was registered or if the goods were second-hand (¶16-110).
In other cases, however, the seller will actually be acting merely as an agent for the original owner. For
example, the ATO considers that this may apply where the ultimate sale price is fixed by the original
owner and title never passes to the seller, who simply gets a commission on sale. In contrast, under a
sale or return, the seller is generally free to set the sale price and provides its own warranty and
guarantee of title. In the agency situation, it is the original owner who is liable for the GST (if registered)
and entitled to any input tax credit, as explained at ¶17-400.
For the attribution of the GST and input tax credits to tax periods, see ¶7-440.
[GSTG ¶47-010]

¶17-425 Legal services, fees and disbursements

Solicitors’ and barristers’ services are normally subject to GST, in the same way as other supplies.
GST normally does not apply to filing fees and court costs (¶4-080). GST applies to land title or ASIC
searches conducted by an information broker or search agency, but not if conducted directly.
A separate question arises where the solicitor on-charges the client for disbursements incurred in carrying
out legal services. The GST implications will vary according to whether the solicitor is acting as an agent
on the client’s behalf. If the solicitor incurs disbursements as an agent for the client, then bills the client for
them, the disbursements are treated as if they were incurred by the client. This means that: (1) if the
disbursements are subject to GST, any input tax credit for them is claimable by the client; and (2) no
additional GST should be applied by the solicitor. The ATO considers that this could typically apply to
application fees, registration fees, court fees, incorporation fees, fines, penalties, stamp duty and taxes,
barrister’s fees (if engaged by the client) and probate fees (GST Ruling GSTR 2000/37). However, the
ATO also considers that a solicitor is commonly not acting as an agent in incurring search fees,
birth/death/marriage certificate fees, witness fees, fees for recording court proceedings or obtaining
transcripts, service of document fees, barrister’s fees (if engaged by the solicitor) or fees for expert
reports. On this basis, additional GST is payable where the solicitor bills the client for those services. GST
would also apply to services relating to telephone, postage, photocopying, couriers, word processing, or
travel of the solicitor and staff. For more discussion of on-charging, see ¶4-080.

Example
A solicitor pays $100 to a government department as a search fee. The supply of the search data by the solicitor to the client is a
taxable supply, on which the GST would be $10. The solicitor should therefore charge the client $110, and account for $10 GST to
 the ATO.

A process server is presumably acting as a principal rather than an agent for the solicitor. If so, conduct
money paid by the server to subpoenaed witnesses would be included in the fee charged by the server to
the solicitor on which GST is imposed. Where an expert witness receives conduct money, the evidence
they provide may be a taxable supply if it is given in the course of their enterprise, for example, where a
registered doctor provides evidence about details of an injury and the treatment of an injured person who
was a patient of the doctor’s medical practice. However, there is no taxable supply where an Australian
government agency provides evidence or documents in court (¶4-080) (GST Advice GSTA TPP 064).
If a solicitor receives an amount into its trust account as security for future services, there is no supply by
the solicitor at that time. For a cash basis solicitor, liability for GST would not arise until the solicitor
became entitled to withdraw funds from the account for its services. For an accruals basis solicitor, liability
would arise earlier if an invoice had been issued (Interpretative Decisions ID 2002/111; ID 2002/113).
In accordance with the usual rules, a client can claim input tax credits in relation to legal fees on which
GST was payable where the legal proceedings have the required connection with the client’s business
(¶5-010). However, a taxpayer carrying on a property development business could not claim input tax
credits in relation to legal fees incurred in defending litigation against a separate company in which he
was a director (VGGL and FC of T 2013 ATC ¶1-059; [2013] AATA 867).
Payments made by a litigation funding company for legal services provided and invoiced to a third party
were held not to be for the acquisition of any taxable supplies by the company, and therefore did not
entitle the company to input tax credits (Professional Admin Service Centres Pty Ltd v FC of T 2013 ATC
¶20-424).
For the situation where a lessee is liable to pay the lessor’s legal advice costs in relation to a lease, see
¶11-330.
Barristers’ fees
Where a solicitor acts on behalf of a client in engaging and paying a barrister, any input tax credit on the
barrister’s fee is claimable by the client. It does not matter that the barrister’s tax invoice is addressed to,
and held by, the solicitor (¶5-190). Similarly, payment for barristers’ fees would not form part of the
solicitor’s GST turnover (¶3-030).

Other GST aspects of legal services

• Certain out-of court settlements or court-ordered payments may be treated as consideration for a
supply, and therefore may attract GST. However there are important exceptions ¶4-085.

• For the treatment of costs awarded against unsuccessful parties, see ¶4-085.

• Transfers of assets on marriage breakdowns normally would not attract GST (¶4-090), but may
give rise to a GST adjustment if input tax credits were claimed on the original acquisition ¶6-300.

• Legal services obtained by a company in defending a takeover bid may be creditable

acquisitions, even though those costs may not be deductible for income tax purposes ¶5-010.

• Legal fees are not taken into account in determining the cost of real property for the purpose of
applying the margin scheme ¶11-110.

• Care must be taken in drawing up contracts to ensure that proper account is taken of GST ¶19-
400.

• In determining whether the GST exemption of exported services applies, the mere presence of
directors representing a non-resident in legal proceedings in Australia is not sufficient to
establish that the company is “in Australia” at the time ¶9-240.
 • The GST exemption for services in connection with rights used outside Australia would include
legal services for the preparation of a contract for the sale of copyright; enforcement of
intellectual property rights or applying for the registration of a trademark ¶9-240.

• Where a company business is sold by disposing of the shares in the company, this is an input
taxed financial supply, and the vendor cannot claim input tax credits for lawyers’ advice in
relation to the sale ¶11-510.

• Where the reverse charge rules apply, reduced input tax credits may be available for offshore in-
house legal services ¶10-042.

• Legal advice incurred relation to input taxed financial supplies may be a taxable supply, but the
recipient cannot claim input tax credits for it ¶10-020; ¶11-310.

• The provision of free legal advice to an “associate” may be subject to GST ¶17-500.

• The correct procedure must be followed to ensure that input tax credits can be claimed where a
lessee reimburses a lessor for lease preparation costs ¶11-330.

• The Commissioner’s power to extract information may be limited by a claim for legal professional
privilege ¶18-140.

• A taxpayer is entitled to have legal counsel present during a ATO examination in order to advise
on legal issues such as privilege ¶18-110.

• Legal advisers are not treated as being liable under the scheme promoter rules simply because
they provide advice about the scheme ¶20-110.

For GST aspects of professional services generally, see the checklist at ¶25-150.
[GSTG ¶47-140]

¶17-430 Sharefarming agreements

Under sharefarming agreements, a landowner may provide land on which the sharefarmer conducts
farming activities and there is some form of sharing of the produce, or the proceeds of the produce. If the
sharefarmer sells a share of the produce on behalf of the landowner, the normal agency rules would apply
— the landowner would be liable to account for the GST on that share.
As between the landowner and the sharefarmer, it would normally be desirable that both parties be
registered, so that the GST on internal transactions can be cancelled out by input tax credit entitlements.

¶17-440 Other special rules relating to agents

• Some special rules apply to tax invoices and adjustment notes for transactions carried out through
agents (¶5-190).

• GST on transactions conducted through agents may be deferred where information about the
transaction is not available to a principal who is on the accruals basis (¶7-440).

• In certain circumstances, a principal can claim input tax credits if it reimburses an agent for expenses
that the agent incurs (¶5-040).

ASSOCIATES
¶17-500 Special rules applying to associates

Special rules apply if you make a supply to an associate below market value or as a gift (Div 72). These
rules mean that the supply will be treated as if it had been for market value, unless the associate would
have been entitled to a full input tax credit.
Associates include relatives, business partners, entities in trustee/beneficiary relationships and
companies and their controllers (s 195-1). The definition is very wide and covers various forms of
extended relationships. However, it does not include employees.
A GST branch is treated as an associate of its parent, of all other GST branches of that parent, and of any
other associates of the parent (s 72-90).
Separately-registered government entities are treated as associates of the relevant government, other
separately-registered government entities, and any other associates of that government (s 72-95; 72-
100). However, the associate rules do not apply between entities of separate governments, for example,
a Victorian Government entity is not an associate of a NSW or Commonwealth Government entity.
Similarly, a local government body would not normally be an associate of state government departments
(Interpretative Decision ID 2005/337). The associate rules do not affect the specific rules applying to
government appropriations (¶4-040).
Non-profit sub-entities (¶15-080) are treated as associates of the principal non-profit body, other non-
profit sub-entities of that body and any other associates of that body (s 72-92).
For discussion of market value, see ¶4-020.
Gifts to associates
Gifts are generally not subject to GST, either because there is no consideration (¶4-030) or because they
are not made in the course of an enterprise (¶4-090). However, where the gift is to an associate, the fact
that there is no consideration is disregarded if either:
• the associate is not registered or required to be registered for GST purposes, or

• the associate did not make the acquisition solely for creditable (business) purposes (s 72-5; 72-40).

In these cases, provided the transaction would otherwise be taxable, the GST and the recipient’s input tax
credit are calculated on the basis that the value of the gift was its market value (s 72-10; 72-45).

Examples
(1) In the course of his business, Raoul gives some equipment that has been used in the business to an unregistered associate who
uses it for private purposes. The (GST-exclusive) market value of the item is $2,000. Raoul accounts to the ATO for GST of $200.
The associate is not entitled to an input tax credit.
Note: If the goods had not been used at all in the business, an adjustment may instead arise under Div 130 (¶6-320).
(2) Assume the same facts except that the associate is registered and uses the item 50% for business purposes. Raoul will account
for GST of $200 as in Example 1, and the associate will be entitled to an input tax credit of $100 (ie 50% of $200).
(3) Assume instead that the associate is registered and uses the item entirely for business purposes. The market value rule will not
apply.
(4) A legal firm provides free conveyancing services to one of its partners who is buying a private home. The partner is an
unregistered “associate” and GST will be payable as if the services had been provided for market value (GST Ruling GSTR
2003/13). If the free services were provided to an employee, and the employee does not fall within any of the categories of
associate, it appears that GST would not apply, as it is a supply for no consideration.

The GST and any input tax credit are both attributed to the tax period in which the gift first becomes
connected with Australia (s 72-15; 72-50). For goods sold within Australia, this is when the goods are
delivered. For imported goods, it is when they are imported or installed. For the rules in other situations,
see ¶4-100.
If a trustee distributes an asset to an unregistered beneficiary under a discretionary trust, this would be
treated as a supply to an associate for no consideration. Unless the supply was GST-free or input taxed,
or not enterprise was being carried on (¶4-090), GST would apply. However, the associate rules would
not apply if the beneficiary was registered and acquires the asset solely for creditable purposes (ie is
entitled to a full input tax credit). In this case, no GST liability would arise because there is no
consideration for the supply (Interpretative Decisions ID 2001/503 to ID 2001/505).
For the Commissioner’s views on the application of these rules to tax law partnerships, see GST Ruling
GSTR 2004/6. For the GST position where tax losses are transferred to an associated company for no
consideration, see ¶24-070.
Supplies to associates below market value
Normally, if you supply something to someone who is not an associate, the GST is worked out on the
actual amount payable — even if it is less than market value. But if the taxable supply is to an associate,
the GST is worked out as if market value had been paid where the supply is for consideration that is less
than the GST-inclusive market value and either:
• the associate is not registered or required to be registered, or

• the associate did not make the acquisition solely for creditable (business) purposes (s 72-70).

Examples
(1) A business owner, Mei-Lee, sells an item of merchandise for $550 to an associate who uses it for private purposes. This is less
than the GST-inclusive market value of $2,200. Mei-Lee accounts to the ATO for GST of $200 (ie 1/10th of the GST-exclusive
market value of $2,000). The associate is not entitled to an input tax credit.
(2) Assume the same facts except that the associate is registered and uses the item 50% for business purposes. Mei-Lee will
account for GST of $200 as in Example 1, and the associate will be entitled to an input tax credit of $100 (ie 50% of $200).

GST and the recipient’s input tax credits are attributed to tax periods under the normal rules (¶7-200).
The GST will continue to be worked out on the actual amount payable if the associate is registered and
acquires the item solely for business purposes.

Example
Assume that Mei-Lee’s associate is registered and uses the item entirely for business purposes. The market value rule will not apply
and GST will be calculated on actual consideration. This means that Mei-Lee will account for GST of $50 (ie 1/11th of $550) and the
associate can claim an input tax credit of $50.

Supplies by partnerships to partners

The ATO considers that the associate rules apply where a partner takes goods held as trading stock from
the partnership for private or domestic use, and provides no or inadequate consideration. In such a case,
the partnership may therefore be liable for GST based on the market value of the goods (GST
Determination GSTD 2009/2).

Example
Tom and Jerry run a hardware business in partnership. Tom is supplied with a set of tools from the business for his own personal
use, for half-price. The market value of the tools was $550, including GST. The partnership is liable for GST calculated as 1/11 ×
$550 = $50.

Distributions to associates of incapacitated entities

The associate rules apply where the representative of an incapacitated entity, eg a liquidator or receiver
(¶18-250), makes a supply to an associate of that entity. This means that the distribution may be treated
as a taxable supply even though no consideration was provided by the recipient (¶4-020).
Supplier’s input tax credit
Whether the supplier can claim an input tax credit for its costs in making free or discounted supplies to
associates will depend on whether those supplies can be treated as a normal part of carrying on the
supplier’s business.
Interaction with margin scheme and other GST rules
Special rules apply to counter schemes designed to exploit the interaction of the associate rules and the
margin scheme (¶11-100; ¶11-140). The ATO is also investigating the efficacy of certain arrangements
involving associates designed to minimise the GST on margins (Taxpayer Alert TA 2009/4).
It is specifically provided that the fact that a supply to an associate is without consideration will not
prevent it being treated as a “sale” (s 72-20). In conjunction with s 72-5, which provides that such a supply
may be a taxable supply if the associate did not acquire the property for a fully creditable purpose, this
means that the margin scheme rules may apply to such a supply (Interpretative Decision ID 2013/18).
It is also specifically provided that the fact that a supply to an associate is without consideration will not
result in an otherwise input taxed (or GST-free) supply being treated as a taxable supply (s 72-25). This
ensures, for example, that:
• a distribution of residential premises to an associate can be treated as an input taxed supply of
residential premises (¶11-010)

• a distribution of a parcel of shares to an associate may be treated as an input taxed financial supply
for consideration (¶10-005), and

• the export of goods to an associate can be treated as a GST-free export for consideration (¶9-210).

[GSTG ¶45-001]
ADMINISTRATION • AUDIT • REVIEW
GENERAL ADMINISTRATION OF THE GST LAW
General administration of GST ¶18-000
Commissioner’s rulings ¶18-030
Obligation to keep records ¶18-040
INFORMATION-GATHERING AND ACCESS POWERS
Overview: Commissioner’s powers ¶18-100
Information-gathering powers ¶18-110
Access to premises, documents and other property ¶18-120
Confidentiality of information ¶18-130
Exchanging GST information with foreign countries ¶18-135
Legal professional privilege ¶18-140
AUDITS AND COMPLIANCE
Role of GST audits ¶18-160
ATO powers and taxpayer rights ¶18-165
Common GST errors ¶18-170
ATO data collection techniques ¶18-175
ATO’s compliance focus ¶18-180
Preparing for an audit ¶18-185
Conduct and management of an audit ¶18-190
SPECIAL LIABILITIES AND OBLIGATIONS
Overview: personal liabilities ¶18-200
Partners ¶18-210
GST joint venture partners ¶18-220
Members of unincorporated associations ¶18-230
Non-profit sub-entities ¶18-235
Members of a GST group ¶18-240
Representatives of incapacitated entities ¶18-250
Company officers ¶18-260
Trustees ¶18-270
OTHER GST-RELATED PENALTIES
Overview of GST penalties ¶18-300
Discretionary remission of penalties and GIC ¶18-305
Other provisions relating to penalties ¶18-310
OBJECTIONS AND APPEALS
Objections to Commissioner’s decisions ¶18-600
Time limit for lodging an objection ¶18-610
Grounds of objection ¶18-620
Decision on objection ¶18-630
Choosing between AAT and Federal Court ¶18-640
Review of objection decisions by AAT ¶18-650
Decision of AAT ¶18-660
Appeals from AAT decisions ¶18-670
Appeals to Federal Court ¶18-680
Review of Commissioner’s discretion ¶18-690
Appeals from Federal Court decisions ¶18-700
Alternative dispute resolution ¶18-750

Editorial information

Summary
The administration of the GST is the responsibility of the Commissioner of Taxation. As well as the
power to assess, collect, recover unpaid GST and refund GST, the Commissioner can request
access to premises and to documents held there.
Failure to comply with the GST law may result in the imposition of a specific GST penalty or
prosecution for an offence. Important liabilities are also imposed on members of certain entities, for
example, on directors of offending companies.
This chapter also explains the procedure for objecting against a GST decision of the Commissioner
and for appealing against a decision made on an objection.

GENERAL ADMINISTRATION OF THE GST LAW

¶18-000 General administration of GST

The Commissioner of Taxation, as the head of the Australian Taxation Office (ATO), has responsibility for
general administration of the GST law (Administration Act, Sch 1, s 356-5).
The term “GST law” does not just refer to the A New Tax System (Goods and Services Tax) Act 1999.
The term “GST law” refers to the following legislation that relates to GST:
• the GST Act

• GST imposition Acts (¶1-300)

• GST transitional provisions (¶19-000)

• the Taxation Administration Act 1953 (Administration Act), so far as it relates to GST. This Act
includes many of the important administrative provisions relating to assessment, recovery, penalties,
 access, prosecutions and offences, departure prohibition orders, objections, reviews and appeals

• other Acts and Regulations, so far as they relate to GST (s 195-1).

Penalty units
Generally, the penalties imposed by the Administration Act are expressed as being a certain number of
“penalty units”. For offences committed on or after 1 July 2017, the value of a penalty unit is $210. It was
formerly $180 for offences committed on or after 31 July 2015, and $170 for offences committed on or
after 28 December 2012.
Taxpayers’ Charter
The ATO’s Taxpayers’ Charter sets out the standards that you are entitled to expect from the ATO in its
administration of the legislation. According to the Charter, you can expect the ATO to:
• treat you fairly and reasonably

• treat you as being honest in your tax affairs unless you act otherwise

• offer you professional service and assistance to help you understand and meet your tax obligations

• accept that you can be represented by a person of your choice and get advice about your tax affairs

• respect your privacy

• keep the information it holds about you confidential, in accordance with the law

• give you access to information it holds about you, in accordance with the law

• give you advice and information that you can rely on

• explain to you the decisions it makes about your tax affairs

• respect your right to a review

• respect your right to make a complaint

• administer the tax system in a way that minimises your costs of compliance

• be accountable for what it does.

[GSTG ¶70-000]

¶18-030 Commissioner’s rulings

Rulings may be given by the Commissioner to clarify a particular aspect of the tax law or to let the official
interpretation of the tax law be known. Rulings can be public (ie generally applicable) or private (ie made
only for a particular entity).
Rulings on GST, WET and LCT are covered by the general tax rulings system (Administration Act, Sch 1,
Div 357 to 359; Taxation Ruling TR 2006/10). Relevant public rulings are therefore limited to rulings in the
GSTR series, determinations in the GSTD series, Product Rulings, Class Rulings and any other published
rulings, such as GST advices or GST Industry Issues that are specifically labelled as Public Rulings.
Unlike public rulings, private binding rulings (PBRs) must be applied for. Approved application forms are
available from the ATO or at www.ato.gov.au. Private rulings may only be published in an edited form to
maintain privacy. Taxpayers have a right of objection for private rulings (Administration Act, Sch 1, s 359-
60). If you have a private ruling, but the law subsequently changes so that it is in conflict with that ruling,
you can continue to fulfil your GST obligations in reliance on the ruling until the date the law changes.
Private rulings are now searchable on the ATO website in the same way as other rulings. Those that do
not have an expiry date continue in effect until they are withdrawn (Administration Act, Sch 1, s 359-25);
however, they are removed from the database after 10 years.
Law Companion Rulings (LCRs), which are intended to provide insight into the practical implications of
recently enacted law, are normally treated in the same way as public rulings, unless otherwise specified.
They were formerly known as Law Companion Guidelines (Law Companion Ruling LCR 2015/1).
Practical Compliance Guidelines (PCGs) typically describe ATO compliance approaches to situations
where the law is uncertain, or is creating a heavy administrative or compliance burden. They are normally
not treated as legally binding public rulings. However, the ATO says that any changes to its approach will
normally not be applied retrospectively against any taxpayer that had relied on the guideline (Practical
Compliance Guideline PCG 2016/1).
There is no provision for oral rulings to be given for GST, WET or LCT (Administration Act, Sch 1, s 360-
5).
Relying on rulings
All public and private rulings are binding on the Commissioner (Administration Act, s 357-60), although
private rulings are only binding in favour of the applicant.
If the Commissioner subsequently changes a ruling that you have validly relied on, so that you owe more
GST than you originally paid, you do not have to make up the shortfall. Similarly, if the Commissioner
overpays a refund as a result of relying on a ruling that is subsequently altered, you may keep the excess
amount of the refund.
For general guidelines on rulings and their effect, see Practice Statement PS LA 2008/3; Taxation Ruling
TR 2006/10.
For a summary of the protection that reliance on various types of ATO rulings gives against penalties and
interest charges, see Levels of protection for indirect tax advice and guidance at www.ato.gov.au.
Conflicting rulings
The general rule is that the most recently issued ruling has precedence over rulings issued in the past on
the same topic. If you are given a GST private ruling, but the Commissioner later issues a GST public
ruling that conflicts with the GST private ruling, the public ruling prevails.
If a GST public ruling is issued and then, at a later date, a conflicting private ruling is issued, the private
ruling prevails (Administration Act, Sch 1, s 357-75). The ATO also takes the view that if there is a conflict
between its views expressed in a ruling and in a subsequent decision impact statement (“DIS”), the view
in the DIS should prevail (GST NTLG minutes, March 2012).
Taxpayer Alerts
Taxpayer Alerts (TAs) are intended to be an early warning of ATO concerns about significant and
emerging potential aggressive tax planning issues or arrangements that it has under risk assessment.
Interpretative Decisions
The Commissioner also issues Interpretative Decisions (IDs), which are summaries of decisions by ATO
officers on particular issues. These are intended to provide non-binding guidance, and are not public
rulings. However, if you legitimately rely on an ID, no penalty will apply if the ID later turns out to be
incorrect. Interest may be payable depending on the circumstances (Practice Statement PS LA 2001/8).
IDs do not go through the same rigorous scrutiny as public rulings, and may not be followed by ATO staff
if they consider them wrong.
Commissioner’s “remedial” power
Effective from 1 March 2017, the Commissioner has a limited discretionary power to issue a legislative
instrument modifying the effect of a taxation law, so as to ensure that it can be administered to achieve its
intended purpose or object (Administration Act, Sch 1, Div 370). It is intended that this type of remedial
modification will not apply to a particular entity where it produces a less favourable result for that entity.
[GSTG ¶70-140]
¶18-040 Obligation to keep records

You must keep records if you:

• make a taxable supply or importation, or make a creditable acquisition or importation

• make a GST-free or input taxed supply

• are entitled to transitional input tax credits

• are liable for wine equalisation tax, or

• make a taxable supply or importation of a luxury car (Administration Act, Sch 1, s 382-5).

In each case, the records must record and explain all your transactions and other acts that are relevant.
The records must:
• be in English or in a form readily accessible and readily convertible into English

• allow your liability under the GST law to be readily ascertained. The ATO recognises that tax officers
need to have accounting skills to be able to readily ascertain a person’s liability (Taxation Ruling TR
96/7).

Records may be kept electronically. This includes encrypted records, e-commerce records and records
stored in the cloud. For ATO requirements on security and accessibility, see Taxation Ruling TR 2008/2.
You must keep the records for five years after the relevant transaction or act has been completed. This
period is extended if:
• the period of review for any GST assessment in relation to the records, transaction or act is still
pending, or

• a “refreshed” four-year period for review of an amendment to the assessment (¶8-090) is still pending.

If you make elections or estimates under the GST law, you must keep records for five years after they are
made, or cease to have effect. For the rule where claims for input tax credits are postponed, see ¶5-125.
The ATO may impose an administrative penalty of up to 20 penalty units (¶18-000) for failure to comply
with the record-keeping requirements, but may reduce or waive this in appropriate circumstances
(Administration Act, Sch 1, s 288-25; 298-20). The ATO says that a taxpayer will generally be given an
opportunity to improve its record-keeping practices before a penalty is imposed. Penalties are graded
according to the taxpayer’s effort to improve its practices. The general effect is that: (1) no penalty would
be imposed if the taxpayer makes a genuine effort to improve or if records have been lost due to
circumstances outside the taxpayer’s control; (2) the penalty would be reduced by 75% where “some”
effort has been made, and by 50% where “very little effort” has been made; and (3) the maximum penalty
would normally be imposed if the taxpayer makes no effort (Practice Statement PS LA 2005/2).
Where the case involves serious non-compliance such as falsifying records and fraud, or where the
imposition of administrative penalties has been ineffective, the ATO may consider referring the matter for
prosecution by the Director of Public Prosecutions. This action presumably could be taken under
Administration Act, Sch 1, s 382-5, which prescribes a maximum penalty of 30 penalty units, or — where
the records that are kept are incorrect — under the general provisions relating to tax records, which allow
for far more severe penalties, including imprisonment (Administration Act, s 8L; 8Q; 8T).

Checklist
You should retain the following records:
• books of account
 • till tapes

• receipts

• tax invoices

• credit and debit notes

• bank statements

• invoices

• motor vehicle log books

• stock on hand records

• vouchers

• lists of debtors and creditors if you change your accounting method

• charts and codes of accounts

• any other documents that verify transactions or entries in any books of account

• accounting instruction manuals

• system and program documentation which describes the accounting system.

You are not required to retain records if:

• you have received notification from the Commissioner that retention of the records is not required, or

• in the case of a company, the company has been dissolved.

Records destroyed in disasters

Where a taxpayer’s records are lost or destroyed as a result of a disaster, and cannot be fully
reconstructed, the taxpayer may be able to lodge a BAS on the basis of a signed statement setting out a
reasonable estimate of their GST liability (Practice Statement PS LA 2011/25; ATO Fact Sheet:
Reconstructing records and making reasonable estimates for individuals). Disasters include any event
causing localised or widespread destruction, including natural disasters such as floods, bushfires or
extreme weather events, and personal disasters such as house/business fires.
The Commissioner also has the power to make assessments even though no (or incomplete) returns
have been lodged (¶8-100). For special rules relating to substitutes for tax invoices, see ¶5-130.
A taxpayer was successful in establishing that assessments issued by the Commissioner following an
audit were excessive, despite the absence of records which he claimed had been lost in the 2010/11
Brisbane floods. The taxpayer was able to show that various amounts credited to its bank account were
not the proceeds of taxable supplies, but were either loans, intercompany transfers, repayments of loans
or other non-taxable deposits (Raschta Coatings Pty Ltd as trustee for the Raschta Coatings Trust v FC
of T [2015] AATA 34).
[GSTG ¶70-160]

INFORMATION-GATHERING AND ACCESS POWERS

¶18-100 Overview: Commissioner’s powers

The Commissioner has wide-ranging information-gathering and access powers. In the exercise of these
powers, the Commissioner may require you to:
• provide information (¶18-110)

• attend and give evidence before any officer authorised by the Commissioner to provide information
(¶18-110)

• produce documents (¶18-110)

• give full and free access to all buildings, books, documents and other papers for any of the purposes
of the GST law (¶18-120).

Two restrictions on the Commissioner’s information-gathering powers are the doctrine of professional
privilege (¶18-140) and the obligation on government employees and others not to disclose confidential
information (¶18-130).
[GSTG ¶70-080]

¶18-110 Information-gathering powers

The Commissioner has wide powers to obtain information from you in relation to GST matters
(Administration Act, Sch 1, s 353-10). The Commissioner may require you to:
• give the Commissioner any information that the Commissioner requires

• attend and give evidence before the Commissioner or an authorised officer, and/or

• produce to the Commissioner any documents in your custody, or under your control.

In each case, the power must be exercised for the purpose of giving the Commissioner information that is
required for administering or operating a taxation law. This includes the GST law, the wine tax law or the
luxury car tax law (ITAA 1997, s 995-1). The “GST law” means the GST Act, the GST Imposition Acts, the
GST Transition Act and related provisions of the Administration Act, Regulations and other legislation (s
195-1 definition). Wine tax law and luxury car tax law have corresponding meanings.
This provision is similar, though not identical, to the information-gathering powers conferred on the
Commissioner under the income tax law (ITAA 1936, former s 264). To that extent, cases on that
provision may be expected to have similar application.
Formal requirements of notice
(1) The notice must be in writing. The Commissioner may direct that the information or answers to
questions be given either orally or in writing, and that they be verified or given on oath or affirmation.
(2) A direction may require a corporation to give information or produce documents (Perron Investments
Pty Ltd & Ors v DFC of T 89 ATC 5038), but only an individual can be required to “attend and give
evidence” (Smorgon v FC of T 76 ATC 4364), or to take an oath or give an affirmation.
(3) Although no time for compliance is specified, the courts have held in the income tax context that the
direction must specify a time and place for compliance, and that the time allowed must be reasonable.
Relevant factors include:
• the complexity and quantity of what is required

• the ability of the person to comply with it in the time stipulated.

(4) The ATO considers that it may nominate any place reasonable for the production of books and
documents. Normally, this will be at an office of a Deputy Commissioner. However, the ATO says that
favourable consideration may be given to a request to nominate some other place, such as the place of
business of the custodian of the documents, provided this is convenient to the ATO and the party
concerned is cooperative and facilitates the inspection and copying of the documents (Taxation Ruling IT
2082).
General scope of information-gathering power
It is not necessary that a dispute of fact must already have arisen between the taxpayer and the
Commissioner before the Commissioner can invoke the statutory information-gathering power. The
section enables the Commissioner to conduct a “fishing expedition”, in the sense of a wide-ranging
enquiry to ascertain a person’s tax position (Industrial Equity Ltd & Anor v DFC of T 90 ATC 5008).
It is not necessary for the Commissioner to exhaust its access rights before exercising its information-
gathering rights, or vice versa (FC of T v Citibank Ltd 89 ATC 4268; Perron Investments).
An information-gathering direction can be issued as part of a “random” audit. Notices issued in connection
with a post-assessment audit of a taxpayer were not invalidated by the fact that the taxpayer had been
selected at random from the top 100 companies (Industrial Equity).
A person served with the notice cannot refuse to answer questions on the ground of self-incrimination
(Binetter v DFC of T 2012 ATC ¶20-345). However, in certain circumstances, an examination of the
person may constitute a contempt of court, eg where other criminal proceedings are pending (Watson v
FC of T 99 ATC 5313).
Requiring information to be given
The first of the specific information-gathering powers relates to the giving of information required for the
purpose of enabling the Commissioner to apply the GST law (Administration Act, Sch 1, s 353-10(1)(a)).
Requiring information in this way may be a preliminary step in enabling the Commissioner to identify
which documents he can require to be produced (Geosam Investments Pty Ltd v ANZ Banking Group Ltd
79 ATC 4418).
The Commissioner can use this power to make wide-ranging enquiries that do not have to relate to a
particular taxpayer. For example, partners of an accounting firm were required to provide a list of clients
for whom services had been provided over a particular period (McCormack & Ors v DFC of T 2001 ATC
4740). Although this action was prompted by the Commissioner’s belief that the partners had been
involved in “aggressive” tax planning arrangements, the requirement applied to all their clients, not just
those involved in arrangements. The court rejected an argument that the requirement was invalid
because it was “disproportionate” or too wide.
Similarly, the Federal Court confirmed the validity of a notice that required a bank to provide information
held in Australia about customers who held accounts in Vanuatu, despite claims that this would breach
confidentiality obligations it had to its customers, as well as extra-territorial Vanuatu secrecy provisions
(ANZ Banking Group Ltd v Konza 2012 ATC ¶20-347).
The Commissioner’s notice may require the provision of information or production of documents by the
liquidator of a company that is being wound up, without the necessity for the Commissioner to first obtain
a court order under s 486 of the Corporations Act (FC of T v Warner [2015] FCA 659).
The mere provision of client lists, without any other information, would not normally be covered by legal
professional privilege (¶18-140).
Direction to attend and give evidence
The second of the specific information-gathering powers enables the Commissioner to direct a person to
attend and give evidence before the Commissioner or an authorised officer, for the purpose of enabling
the Commissioner to apply the GST law (Administration Act, Sch 1, s 353-10(1)(b)).
The fact that a taxpayer has already provided free access to information sought in the course of an ATO
tax strategy review does not make the use of a direction to obtain information in the course of a
subsequent audit harassing or intimidatory within the meaning of the judicial review rules. Similarly, the
fact that certain documents have been produced in relation to topics on which evidence is required to be
given does not have the result that it is harassment or intimidation to ask questions on those topics
(Daihatsu Australia Pty Ltd v DFC of T 2000 ATC 4763). Even if the ATO indicates that a direction will not
be issued, the subsequent issue of a direction is not necessarily invalid on the ground of unfairness. The
fact that “full cooperation” has been provided by the taxpayer does not mean that the subsequent issue of
an information-gathering notice must have been actuated by an improper purpose (Hart v DFC of T 2002
ATC 4445).
Because of the secrecy provisions (¶18-130), the examination must be carried out in private. However,
this does not prevent the Commissioner from admitting persons reasonably necessary to enable the
examination to be conducted (O’Reilly & Ors v Commrs of the State Bank of Victoria 83 ATC 4156). Both
the person being examined and the ATO officer conducting the examination are entitled to have legal
counsel present at the examination to advise on legal issues such as legal professional privilege (Dunkel
v DFC of T 91 ATC 4142). In order to facilitate the investigatory process, counsel retained by the
Commissioner may assist in framing questions and may also actually ask questions during the
examination (Grant & Ors v DFC of T 2000 ATC 4649). Secretarial staff, such as shorthand writers, were
also held to be reasonably necessary to enable an inspector to carry out an examination under the UK
provisions in In re Gaumont–British Picture Corporation Ltd [1940] 1 Ch 506.
Where it appears that the Commissioner is only concerned with assessments for particular years, a
direction to attend and give evidence relating to earlier years may to that extent be invalid (ANZ Banking
Group Ltd v DFC of T 2001 ATC 4140; McLaren v DFC of T 2001 ATC 4136). However, a notice is not
invalid simply because it fails to explicitly limit the period of time in which evidence is required (Daihatsu).
Requirement to produce documents
The third of the specific information-gathering powers enables the Commissioner to require the production
of documents in the custody of a person, or under their control (Administration Act, Sch 1, s 353-10(1)(c)).
The only documents which the Commissioner can direct to be produced under this power are those that
enable the Commissioner to apply an indirect tax law (eg the GST Act) in relation to some person, or to
administer the collection and recovery rules. It appears that this person must be named or otherwise
indicated in the notice, which must also identify with sufficient clarity the documents required to be
produced (FC of T & Ors v The ANZ Banking Group Ltd 79 ATC 4039; Smorgon).

Examples
(1) A notice would be invalid if it simply required a bank to produce all the documents in a safe deposit box without showing that
those documents related to the income or assessment of any person. However, a notice requiring a taxpayer to produce his/her
books of account would be sufficient (The ANZ Banking Group; Snow v Keating (DFC of T (WA)) 78 ATC 4125).
(2) A notice requiring the production of all the trust account cash books of a firm of solicitors for the years 1980–87, whether or not
they related to the taxation affairs of named persons under investigation, was held to be invalid in Clarke v DFC of T 89 ATC 4521.

The Commissioner can require a person to produce the documents only where those documents are in
the person’s custody or under the person’s control. A bank was held to have custody or control of the
contents of safe deposit boxes kept on its premises (FC of T v The ANZ Banking Group Ltd; Smorgon).
The documents must be in the custody or under the control of the recipient when the direction is received.
The power does not extend to requiring the person to produce copies that are brought into existence after
that time (Perron Investments).
The power to require production extends to documents that have been seized by some coercive power,
eg documents that were obtained by the police under a search warrant (Pratten v Commonwealth DPP
[2013] NSWSC 594).
Where the liquidators of a company had obtained documents from other parties under a summons, they
could not use the “Harman obligation” as a basis for refusing to comply with a notice from the
Commissioner to produce those documents (FC of T v Rennie Produce (Aust) Pty Ltd & Ors 2018 ATC
¶20-650). (The Harman obligation restricts what use can be made of documents received under a
summons from another party to litigation.)
For the use of these powers in promoter penalty cases, see ¶20-130.
Enforcement and penalties
Failing to comply with a direction to give information, produce documents or attend may be an offence
(Administration Act, s 8C). Failing to answer questions or produce documents when attending may also
be an offence (Administration Act, s 8D). In addition, the court may order the offender to comply with the
direction (Administration Act, s 8G).
A false or misleading statement made in response to the Commissioner’s direction may give rise to an
administrative penalty. Making a false or misleading statement in response to the direction may also be
an offence (Administration Act, s 8K; 8N). However, this does not apply to statements made in documents
that are required to be produced (Administration Act, s 8J).
Formal third party reporting system
There is a formalised system for requiring certain third parties to report to the Tax Office on transactions
that could reasonably be expected to have tax (including GST) consequences for others (Administration
Act Sch 1, Subdiv 396-B). The system applies to businesses such as:
• building and construction, cleaning or courier services

• (for 2019/20 financial year onwards) road freight, IT or security investigation or surveillance.

[GSTG ¶70-090]

¶18-120 Access to premises, documents and other property

In addition to the information-gathering powers, the Commissioner has wide powers to obtain access to
premises, documents and other property. These are commonly called the “access” powers.
Under these powers, an authorised taxation officer may do any of the following for the purposes of an
indirect tax law:
• enter and remain on any land or premises at all reasonable times

• obtain full and free access at all reasonable times to any documents, goods or other property

• inspect, examine, make copies of, or take extracts from, any documents

• inspect, examine, count, measure, weigh, gauge, test or analyse any goods or other property and, to
that end, take samples (Administration Act, Sch 1, s 353-15).

This provision is similar, though not identical, to the access powers conferred on the Commissioner under
the income tax law (ITAA 1936, former s 263). To that extent, cases on that provision may be expected to
have similar application.
The officer is not entitled to enter or remain on any premises if he/she fails to produce a written authority
after being requested by the occupier to produce it. The authority does not have to specify the premises
to be searched or the documents that are to be the subject of the search (FC of T v Citibank Ltd 89 ATC
4268).
The Commissioner’s access powers are interpreted widely (Citibank). However, the power must be used
bona fide for the purpose for which it was conferred. This purpose may include the conduct of an audit of
the taxpayer’s affairs. This applies notwithstanding that the taxpayer has been “randomly” selected for
audit on the ground that it fell within the category of the top 100 companies (Industrial Equity Ltd & Anor v
DFC of T 90 ATC 5008). Audits may be authorised whether their purpose is to ascertain a taxpayer’s
taxable income or to facilitate the collection and recovery of tax, for example, by collecting information
that would be helpful to the liquidator of the taxpayer in maximising the return to creditors, including the
Commissioner (Simionato Holdings Pty Ltd v FC of T (No 2) 95 ATC 4720).
The access power does not permit ATO officers to take control of a taxpayer’s offices and deny its staff
access to their computer records. Nor does it permit ATO officers to simply copy all documentation
without any consideration as to whether it was required for the purposes of the Act (JMA Accounting Pty
Ltd & Anor v Michael Carmody & Ors 2004 ATC 4916; [2004] FCAFC 274).
Informal vs formal access
The Commissioner considers that use of the formal access powers will not be necessary in many
situations where the taxpayer is prepared to allow an “informal” or voluntary inspection. However, the
formal powers should always be used when dealing with third parties, because of privacy concerns (¶18-
130).
Contempt of court
In certain situations, the issuing of an access direction by the Commissioner may constitute a contempt of
court, where proceedings have already been instituted against the taxpayer.
Where a taxpayer had applied for a court declaration as to its GST liability in a matter in which a ATO
investigation was already in progress, it was arguable that further investigative action by the ATO could
constitute contempt. The court said that to avoid this result, the proceedings should be adjourned in order
to enable the investigation to be completed (Platypus Leasing Inc & Ors v FC of T [2005] NSWSC 376).
Where an undertaking has been made by a taxpayer to a court not to dispose of documents, destruction
of those documents may be punishable as a contempt of court, even if the destruction is done by a third
party (Re Arnot; Ex parte DFC of T & Anor 89 ATC 5314).
Reasonable facilities and assistance
If the officer enters or proposes to enter premises, the occupier must provide “all reasonable facilities and
assistance for the effective exercise” of the officer’s powers. The ATO considers, for example, that this
would entitle the officer to reasonable use of photocopying, telephone, and light and power facilities, work
space and facilities to extract relevant information stored on computer. It also considers that the officer is
entitled to reasonable assistance, such as advice as to where relevant documents are located and the
provision of access to areas where those documents are located, or an explanation of the office index
system.
If full and free access is not provided, the officer is entitled to take whatever steps as are reasonably
necessary and appropriate to remove any physical obstruction to that access. However, this power must
be used bona fide and not be excessive in the circumstances (O’Reilly v Commrs of the State Bank of
Victoria 83 ATC 4156).
Failing to provide reasonable facilities and assistance is an offence (Administration Act, Sch 1, s 353-
15(3)). Alternatively, a refusal to provide all reasonable facilities may give rise to an administrative penalty
(Administrative Act, Sch 1, s 288-35). A person who takes active steps to obstruct or hinder the officer
may be guilty of a further offence under the Criminal Code s 149.1.
Locked facilities
If the owner of a safe deposit box refused to open it, or to supply a key, the officer may be entitled to open
the box with the assistance of a locksmith and, if that fails, to break open the box by the reasonable use
of force (Kerrison v FC of T 86 ATC 4103). Retaining documents in a locked room and hiding the key
could well constitute obstruction or hindrance (O’Reilly).
Electronic records
In the case of electronically stored records, the Commissioner considers that reasonable facilities and
assistance extend, where necessary, to:
• the provision of login codes, keys (including encryption keys) and passwords

• access to printed copies of the records

• allowing officers to read computer and software manuals.

For ATO requirements on what constitutes reasonable assistance, see Taxation Ruling TR 2005/9.
The ATO uses a tool called Computer Assisted Verification (CAV) to provide a quicker and more effective
method of auditing where records are stored in an electronic format. CAV provides a means to gather,
review and analyse records during a GST compliance activity in an electronic format, rather than requiring
a business to produce paper records for review.
Copying, analysing, sampling and removal
The Commissioner may inspect, examine, make copies or take extracts from any documents
(Administration Act, Sch 1, s 353-15(1)(c), (d)).
The Commissioner may also inspect, examine, count, measure, weigh, gauge, test or analyse any goods
or other property, and make relevant samples. The power to analyse and take samples may be
particularly relevant in cases where analysis may be required before there can be a proper classification
for GST purposes, for example, food and medical supplies. A similar power was contained under the
sales tax law.
Apart from the power to analyse and sample, the section does not entitle the Commissioner to seize
property. Seizure may, however, be authorised by a search warrant. The Commissioner may also require
documents to be produced in accordance with a notice to produce, under the powers noted in ¶18-110.
Severing valid and invalid parts of direction
The fact that part of a notice may be invalid does not necessarily mean that the notice as a whole is
invalid. In most cases, the invalid part may be severed from the rest of the document, which remains
valid. However, where invalid components of the direction are “inextricably mixed” with valid components,
severance of the valid components is not possible and the whole notice is invalid (Perron Investments Pty
Ltd v DFC of T 89 ATC 5038).
Where the Commissioner directs a person to both produce documents and to attend and give evidence,
but only one of these requirements is valid, it may be severed from the other (Elliott v DFC of T 90 ATC
4937).
[GSTG ¶70-100]

¶18-130 Confidentiality of information

Recording or disclosing information about the tax affairs of any particular taxpayer is an offence except in
certain limited situations. This applies to taxation officers and others who acquire protected information
(Administration Act, Sch 1, Div 355).
“Protected information” is information that:
• was disclosed or obtained under a taxation law, such as the GST Act

• relates to the affairs of a taxpayer or other entity (¶3-015), and

• identifies the taxpayer, or is reasonably capable of doing so (Administration Act, Sch 1, s 355-30).

Confidentiality rules for officers

A person who obtained protected information in the course of their duties as a taxation officer is prohibited
from recording or disclosing it to anyone else, except where:
• the record or disclosure is made in the course of performing the person’s duties as a taxation officer.
For example, this exception would permit the disclosure of information to the Australian Government
Solicitor or the Director of Public Prosecutions for the purposes of tax recovery proceedings
(Saunders v FC of T 88 ATC 4349)

• it is an authorised disclosure to a minister or for other governmental purposes

• it is by an authorised officer for specified law enforcement purposes, eg the investigation of a serious
offence

• the disclosure is made to the taxpayer itself, or to the taxpayer’s tax agent, BAS agent, lawyer,
liquidator, administrator, legal personal representative (eg executor), guardian or approved agent, or
member of the same consolidated group

• the disclosure is to a court or tribunal, or

 • the information had already lawfully become available to the public (Administration Act, Sch 1, s 355-
25; 355-45 to 355-70).

A “taxation officer” includes ATO employees and other public servants seconded to the ATO. Consultants
and contractors engaged by the ATO are treated in the same way as Tax Office-employed officers
(Administration Act, Sch 1, s 355-30; 355-15).
It is not a defence that the taxpayer consented to the recording or disclosure (Administration Act, Sch 1, s
355-35).
Confidentiality rules for non-officers
Persons who are not taxation officers may also commit an offence if they record or disclose protected
information to someone else.
If they acquired the information in a lawful way, there will be no offence where:
• the disclosure is made to the relevant taxpayer, or taxpayer’s agent

• the disclosure is made to a court or tribunal

• the information had already lawfully become available to the public

• the disclosure is related to the original lawful disclosure or is otherwise authorised

• it is an authorised disclosure to a minister

• it is an authorised disclosure by ASIO officers or members of Royal Commissions, or

• the record of the information was made in compliance with the requirements of Australian law
(Administration Act, Sch 1, s 355-155; 355-170 to 355-200).

It is not a defence to show that the taxpayer consented to the recording or disclosure (Administration Act,
Sch 1, s 355-160).
If the non-officer did not acquire the information in a lawful way, there will be no offence where:
• the disclosure is made to the relevant taxpayer, or taxpayer’s agent

• the disclosure is made to a court or tribunal

• the information had already lawfully become available to the public

• the actions were required or permitted by a taxation law, or reasonably necessary to comply with a
taxation obligation, or

• the records or disclosures was made for or to a taxation officer in connection with the administration of
a taxation law (Administration Act, Sch 1, s 355-265 to 355-280).

Example
Tom, an ATO officer, tells his friend Geoff about a named person’s GST return that he accessed at work. Geoff, in turn, gives the
information to a newspaper. Tom has committed an offence by breaching the confidentiality rules for officers. Geoff has also
committed an offence by breaching the confidentiality rules for non-officers.

Penalties
The maximum penalty for these offences is two years imprisonment. For individuals, a fine of up to 120
penalty units (¶18-000) may be imposed in addition, or in lieu.
An entity cannot be required to produce protected information to a court unless it is necessary for the
purposes of a taxation law (Administration Act, Sch 1, s 355-75; 355-205; 355-280).
 [GSTG ¶70-120]

¶18-135 Exchanging GST information with foreign countries

The confidentiality rules (¶18-130) normally prevent the ATO from providing foreign revenue authorities
with GST information relating to a particular taxpayer. However, this rule can be overridden if Australia
has a double tax agreement (DTA) with the foreign country that enables this information to be transferred
(International Tax Agreements Act 1953, s 23). Similarly, information may be requested by the ATO from
those foreign authorities.
For this to apply, the “exchange of information” provision in the DTA must extend to indirect taxes such as
GST, not just to income tax, capital gains tax or FBT. Most of Australia’s DTAs do not contain such a
provision, but this is progressively being introduced, either by amendments to DTAs or by making
specialised information exchange agreements. An example is provided by Art 26 of the DTA with New
Zealand.
Information may also be provided to foreign authorities in certain situations where it has already been
made publicly available, eg court judgments, or where the taxpayer itself has published the information.
General information that could not identify the taxpayer may also be exchanged in certain circumstances.
For ATO guidelines, see Practice Statement PS LA 2016/6. See also “OECD guidelines” at ¶18-165.

¶18-140 Legal professional privilege

The Commissioner’s information-gathering powers are restricted by the doctrine of legal professional
privilege.
Legal professional privilege protects the confidentiality of information or documents which disclose
communications between a client and their lawyer, made for the dominant purpose of giving or obtaining
legal advice or providing legal services (Esso Australia Resources Ltd v FC of T 2000 ATC 4042). This is
sometimes referred to as “advice privilege”. Examples of privileged documents or communications could
include a solicitor’s advice, legal counsel’s opinions, letters between a solicitor and a client, and a
solicitor’s notes of a conference with a client or officers of a client company. In certain situations, advice
given to the client by third parties (such as an accountant) may also be protected where it is obtained for
the dominant purpose of passing on to a legal adviser in order to get legal advice. However, privilege
does not apply where this was just one of a number of equally important purposes for which the third
party information was obtained (FC of T v Pratt Holdings Pty Ltd 2005 ATC 4903; [2005] FCA 1247).
Privilege may also apply to protect the confidentiality of communications passing between a client or the
client’s lawyer and third parties, for the dominant purpose of use in or in relation to litigation, which is
either pending or in contemplation. This is sometimes referred to as “litigation privilege”.
The privilege belongs to the client, not the lawyer and, accordingly, can only be waived by the client.
However, a waiver may be implied from the circumstances. For example, a client was considered to have
waived his legal professional privilege over written advice from his lawyers where he disclosed the gist of
that advice to support his case in court proceedings (Krok v FC of T [2015] FCA 51).
Legal professional privilege is not limited to court proceedings and may be invoked to resist the giving of
information in investigations or audits. For example, it has been held to potentially apply where:
• the Commissioner issued an access notice (FC of T v Citibank Ltd 89 ATC 4268) or an information-
gathering notice (FC of T v Coombes (No 2) 99 ATC 4634)

• the Trade Practices Commissioner issued a notice to produce documents under the (former) Trade
Practices Act 1974 (The Daniels Corporation International Pty Ltd v ACCC (2002) ATPR ¶41-896;
[2002] HCA 49), or

• a search warrant is issued under former s 10 of the Crimes Act 1914 (Baker v Campbell 83 ATC
4606).

The ATO does not consider that privilege applies to purely non-legal commercial advice or suggestions
given by a lawyer (Balancing Individual Interests and Community Needs — A Focus on Legal
Professional Privilege, address by the Second Commissioner of Taxation, 18 September 2003). Privilege
was held not to apply to certain documents involved in Project Wickenby investigations in Stewart & Ors v
Australian Crime Commission [2012] FCAFC 151.
The person in possession of the documents must be given a reasonable opportunity to make a claim of
privilege. However, privilege is not necessarily infringed if a copy of a privileged document is taken, but
not read. In addition, there may be circumstances where it will be proper for an ATO officer to look at a
document for which privilege is claimed, for the purpose of determining whether it might be covered by
the privilege. The document should not be looked at closely — just enough to enable the officer to decide
whether the document may be copied (JMA Accounting Pty Ltd & Anor v Michael Carmody & Ors 2004
ATC 4916; [2004] FCAFC 274).
The protection that is provided by legal professional privilege is an immunity for the client which enables
them to resist the compulsory disclosure of privileged information. It is a shield rather than a sword — eg
it cannot be used to enforce the return of privileged documents that are already in the public domain
(Glencore International AG v FC of T 2019 ATC ¶20-710; [2019] HCA 26). It has also been held that
assessments based partly on information which had been provided to the Commissioner by a third party
were valid, even if the client itself could not have been compelled to provide that information (FC of T v
Donoghue [2015] FCAFC 183). However, it may be that an action for breach of confidentiality may be
appropriate in certain circumstances to restrain use of the information if, say, it could be shown that the
Commissioner was complicit in its initial disclosure.
“Accountants concession”
Although legal professional privilege does not normally apply to communications between accountants
and their clients, the ATO’s Guidelines to accessing professional accounting advisors’ papers states that,
in practice, a form of this immunity will be applied. This means that Tax Office auditors may not normally
seek access to papers prepared by professional accounting advisers for the purpose of representing a
taxpayer in legal proceedings under a tax law. Certain exceptions apply, such as where there has been
fraud, evasion or other exceptional circumstances. It appears that this could include the situation where a
tax avoidance scheme is involved (Stewart & Ors v DFC of T [2011] FCA 336).
The ATO also concedes that certain documents relating to internal corporate tax risk assessments may
be treated as confidential to the company and its advisers. This means that the ATO will not seek access
to them during a risk review or audit, other than in exceptional circumstances (Practice Statement PS LA
2004/14).
No “spousal privilege”
A person required to attend and give evidence to the Commissioner cannot refuse to answer questions
about their partner on the grounds of a claimed “spousal privilege” (ACCC v Stoddart (2011) AUELR
¶501-281; [2011] HCA 47).
[GSTG ¶70-110]

AUDITS AND COMPLIANCE

¶18-160 Role of GST audits

Under the self-assessment system that applies to GST, taxpayers are normally obliged to provide only
limited information in their returns, without supplying supporting or verifying material. Apart from picking
up some obvious errors, the ATO does not routinely check every return.
Clearly, such a system can only operate efficiently if there is a high level of voluntary compliance by
taxpayers. This can be facilitated by:
• educating taxpayers so that they are aware of their obligations and how to perform them, for example,
by voluntary advisory visits

• encouraging taxpayers to have “faith” in the system by establishing expectations of a level of fair
 treatment from the ATO.

As an enforcement backup to this, the ATO also carries out a series of other compliance activities,
ranging from simple to complex. These may take the form of:
Registration integrity check including walk-ins.
A walk-in is an unscheduled visit to business premises to check the entity’s registration and lodgment
details. When the visit is completed, the field officer will verify the information collected and, if necessary,
follow up on any discrepancies.
BAS review.
This is used to review a BAS where there are more than two identified risks. It is conducted during a visit
to the taxpayer’s premises and requires checking transactions against specific BAS labels using a BAS
review worksheet. It is generally limited to a single tax period, but can be extended where appropriate.
Serious evasion audit.
This is used where there have been significant or deliberate attempts by a taxpayer to be non-compliant,
or where the taxpayer has a history of poor compliance. A full review of one reporting period (one quarter)
will generally be the minimum check undertaken. This involves a full review of records for the most
recently lodged BAS, unless there is specific information for other tax periods.
Review of total supplies.
This is part of the ATO’s cash economy strategy. It is used where there is a risk that all supplies made by
the client have not been disclosed. It uses the testing undertaken in the BAS review, as well as a number
of indicators to determine if there is any understatement of supplies.
Comprehensive audit.
This is used where there is a high likelihood of major non-compliance resulting in the reporting documents
being materially misstated. It includes both direct and indirect testing methods. It generally covers the
period commencing from the beginning of the previous financial year to the end of the most recently
completed BAS reporting period. Examination of issues and records before this time will be undertaken if
there is clear evidence to indicate non-compliance.
Non-lodgment review.
This is designed to secure lodgment of outstanding activity statements and income tax returns and follow
up on any outstanding debt. Where lodgment is not obtained, the case will be referred for possible
prosecution action.
Cancellation of registration review.
This reviews whether an entity is carrying on an enterprise and, if necessary, how to recommend the
cancellation of the entity’s GST and ABN registrations.
Failure to register review.
This determines whether a taxpayer is required to be registered for GST and, if so, whether there are
outstanding BAS forms.
Compliance verification centre check.
This involves phone-based refund integrity checks. The process is particularly directed at identifying
purchases that may lead to unusually high refunds. The process looks to verify valid tax invoices for such
transactions and contact the supplier to verify that the transactions took place.
The ATO’s emphasis in GST has now shifted from education to enforcement. Businesses and their
advisers can therefore expect to see a higher, and tougher, level of ATO compliance activity.
Penalties
Special rules for remission of penalties apply where voluntary disclosures are made before or during an
audit (¶18-305).
 [GSTG ¶85-000]

¶18-165 ATO powers and taxpayer rights

The Commissioner’s most important specific weapons in carrying out its investigative and audit functions
are:
• the power to direct persons to provide information, attend and give evidence and produce documents
(¶18-110)

• the power to obtain access to records and premises (¶18-120)

• the power to issue and amend assessments (¶8-100), and impose penalties (¶18-300).

In general, the ATO says it prefers a “consultative approach”. It will normally attempt to obtain access or
information by an “informal” advance notice or request, but will invoke its formal powers if the taxpayer is
reluctant or unlikely to provide access or information on a cooperative or timely basis.
For its part, the taxpayer must keep records that correctly explain all transactions that may be relevant to
its GST liability (¶18-040). Taxpayers are, however, entitled to rely on various protections and immunities
in resisting claims for disclosure by the Commissioner. Although it seems clear that the privilege against
self-incrimination is not available (¶18-110), protection from disclosure may be available under the
doctrine of legal professional privilege (¶18-140). Documents may also be protected from disclosure
under the separate doctrine of public interest immunity where this is appropriate to protect the interests of
the public. Under the general rules governing contempt of court, the Commissioner’s power to obtain
information may be curtailed where there are already court proceedings relevant to the dispute (¶18-120).
Taxpayers are also entitled to the benefit of certain secrecy restrictions placed on the ATO (¶18-130), and
have some limited rights of access to ATO documentation under the freedom of information rules
(Freedom of Information Act 1982; Practice Statements PS LA 2005/3; PS LA 2005/5; PS LA 2005/6).
They may also claim the protection of reliance on rulings in certain cases (¶18-030) and may be entitled
to certain guarantees of procedural fairness.

Planning point
Taxpayers may be well served by: (1) ensuring that the issues are clearly identified and, if appropriate, having them narrowed; (2)
keeping lines of communication open; (3) collecting and preparing their evidence, and doing it early — over time, key witnesses may
have moved on and records may have gone astray; (4) considering whether the alternative dispute resolution process (ADR: see
¶18-750) may be appropriate; and (5) if there are problem issues with particular auditors, being aware of the ATO escalation
procedures for having the matter dealt with at a higher level (see Rimma Miller, “Taking control in ATO audits” in CCH Tax Week
¶318 (2014)).

The protections provided to individuals by the Privacy Act 1988 are limited by certain exemptions which
apply to: (1) collection of information by the ATO; and (2) use and disclosure of information where it is
authorised by law, or is in connection with criminal law enforcement, or the protection of the public
revenue (National Privacy Principles 1.1, 2.1).
Other ATO statements of principle, such as the Taxpayers’ Charter (¶18-000) and the Access and
Information Gathering Manual, purport to give taxpayers specified “expectations” about how an audit will
be conducted. The ATO has also published Guidelines for the Conduct of Auditors and Taxpayers in
Companies and Large Case Audits and a series of booklets, including Treating you fairly and reasonably,
If you are subject to enquiry or audit, and Fair use of our access and information gathering powers.
Checklist for auditors
According to the ATO’s Guidelines for the Conduct of Auditors and Taxpayers in Companies and Large
Case Audits, auditors are expected to:
• complete audits in the shortest time practicable and with a minimum of inconvenience and disruption
to the taxpayer
 • act in a professional and courteous manner, demonstrate integrity, fairness and impartiality in the
conduct of the audit and to avoid conduct which provokes confrontation or which is abusive

• inform the taxpayer regularly on the progress of the audit

• question the taxpayer in a clear and unambiguous manner

• recognise the right of taxpayers to have advisers present during discussions and meetings, and to
seek advice from advisers when necessary

• recognise the right of taxpayers and their advisers to claim legal professional privilege in respect of
certain documents

• notify taxpayers where an error is detected which has resulted in a taxpayer paying too much tax

• give complete and honest answers and explanations to questions put by the taxpayer.

[GSTG ¶85-020]

¶18-170 Common GST errors

Non-compliance with GST requirements may arise because of lack of knowledge, inattention or deliberate
action or inaction. Transactions, activities or administrative procedures that commonly cause problems
include:
• timing errors in accounting for transactions (¶7-200), for example, claiming the whole input tax credit
for hire goods or lease payments in the period when the goods are delivered (¶7-420), or claiming
input tax credits on real estate purchases at the time of contract rather than settlement

• unauthorised GST adjustments (¶6-000)

• failing to register when required (¶3-030)

• non-enterprises incorrectly registering for GST (¶3-015)

• suppression of transactions

• absent, inadequate or false documentation covering alleged inputs (eg tax invoices), or refunds (¶5-
100)

• making out tax invoices to the wrong entity, especially in group situations (¶5-100)

• incorrect characterisation of supplies (¶4-000)

• changing from monthly to quarterly reporting in the first 12 months of operation without obtaining ATO
approval (¶7-100)

• commission-based businesses using recipient created tax invoices without ATO approval (¶5-140)

• transactions involving non-monetary consideration, such as barter (¶7-435)

• not paying GST for supplies made in exchange for grants received (¶4-040)

• claiming an input tax credit on a deposit paid under a contract for the sale of land before settlement
(¶11-065)

• claiming input tax credits on start-up costs without satisfying all relevant conditions for the claim (¶5-
030)
 • claiming input tax credits on GST-free purchases such as basic food, exports and some health
services; or for bank fees and charges, third party insurance or stamp duty

• claiming full input tax credits on cars above the car limit (¶12-110)

• failing to correctly calculate entitlements to input tax credits on acquisitions associated with company
flotations

• discrepancies between GST and income tax returns

• apportionment of input tax credits and adjustments for private use (¶5-020)

• grouping pitfalls (¶17-000), including apportionment, change of purpose of acquisitions, and the
financial acquisitions threshold (¶10-032)

• changes to the legal structure of a business

• incorrect treatment of employee reimbursements (¶5-040)

• sale of business assets such as computers, motor vehicles and aircraft (¶4-090)

• sales of going concerns (¶11-500)

• using or failing to use the margin scheme (¶11-100), for example, using an incorrect valuation method

• the interaction of GST and FBT (¶24-200).

Errors in GST reporting

According to the ATO, the following five errors make up more than half the total corrections made in GST
reporting
• Incorrect timing and failing to report for the correct tax period (¶7-000)

• accidental miscalculations and simple transcription errors

• inability to substantiate claims for GST input tax credits (¶5-000)

• claiming input tax credits for goods purchased for personal use (¶5-010)

• failing to recognise that the $75,000 GST threshold has been passed (¶3-030).

Errors in business systems and processes

The ATO has identified the following common errors that occur with business systems and processes:
• transactions processed outside the accounts payable or accounts receivable systems, classified
incorrectly and not captured in GST control accounts

• incorrect GST formula defaults or GST codes

• failure to report GST control accounts for reconciliation with business activity statements

• failure to update GST capture and reporting systems when other business systems are changed

• inadequate exception reporting to detect process or system failure, and

• failure to recognise an adjustment event — for example, early payment discounts for customers.

(Source: Speech by Deputy Commissioner Mark Jackson to Corporate Tax Association, 16 October
2006.)
Small business penalty relief for inadvertent errors
In certain cases, the ATO may grant penalty relief for inadvertent errors made by small businesses in their
activity statements: see ¶18-305.

Example
Industry feedback and ATO analysis has identified the following specific GST compliance risks in the scrap metal industry:
• failure to register for GST where the registration turnover threshold was exceeded

• failure to lodge a BAS or to remit payments to the ATO

• failure to report supplies, ie sales of scrap materials

• over-claiming of input tax credits on purchases

• under-claiming of input tax credits on purchases from unregistered entities

• misuse of recipient created tax invoices (RCTIs), for example, no agreements in place, false use of RCTIs

• questionable export arrangements, for example, export status claimed but no exports being made

• low-value tax invoice schemes, for example, lots being divided into parcels with values below the threshold at which a tax
invoice must be issued (¶5-170)

• poor or false record-keeping

• false ABN being quoted by suppliers

• non-monetary consideration, for example, scrap provided in exchange for bins, cleaning, beer

• dealers “outsourcing” non-compliance to “agents” or “contractors” who purchase on their behalf (source: ATO Scrap Metal
Compliance Program).

[GSTG ¶85-110]

¶18-175 ATO data collection techniques

The ATO uses a variety of methods of collecting data that may lead to compliance activity.
Benchmarking and analysis of BAS returns.
Cases may be selected based on deviation from established financial ratios derived from analysis of
BASs. This is called “outliers” methodology and is based on industry benchmarking. Comprehensive
details of these ratios are published in the ATO’s annual Taxation Statistics, which can be accessed
through www.ato.gov.au. Industries covered include:
• agriculture, forestry and fishing

• manufacturing

• wholesale trade

• mining, electricity, gas and water

• construction, transport, storage and communication

• finance, insurance, property and business services

• educational, cultural, recreational, personal, health and community services

• retail trade, accommodation, cafes and restaurants.

The ratios are also broken down according to type of taxpayer (individual, company, partnership or trust),
whether the business is profitable and whether it is new or established. The ATO also publishes details of
small business benchmarks on its website (“Small business benchmarks” at www.ato.gov.au and the ATO
app at www.ato.gov.au/general/online-services/ato-app). The ATO may use these benchmarks in arriving
at default assessments where taxpayers have been audited, but they cannot be applied automatically:
see “Use of industry benchmarks” at ¶5-020.
Internal data matching.
For example, BAS data can be compared with information from ABN registrations, income tax returns, or
excise and diesel grants information.
Third party data matching
from bodies such as:
• banks and credit card providers

• employers

• head contractors

• insurance companies

• Department of Motor Transport

• Harbours and Marine Departments

• local councils

• Family Court

• estate agents, tenants and Rental Bond Boards

• Land Titles Office

• casinos

• industry registration boards

• Centrelink

• Immigration and Customs

• Federal Police

• state revenue authorities, and

• other Commonwealth agencies such as the Australian Transaction Reports and Analysis Centre
(AUSTRAC).

Data matching projects include credit and debit cards, motor vehicles, share market transactions (see
below), coffee supplies and the building industry (Tax Office Cash and Hidden Economy Review and
Audits Guide). Related projects have involved the “adult services” industry, securities dealings in ASX-
listed entities, the horse racing industry (¶4-035), barter transactions (¶7-435), sale of capital business
assets (¶4-090) and ride-sourcing (¶12-130). A general data matching program for online sales of goods
and services with a total value of $12,000 or more was also announced (Commonwealth Government
Gazette C2016G01396, October 2016). The ATO says that in its data matching projects, it complies with
the Privacy Commissioner’s Guidelines on Data Matching in Commonwealth Administration. For a list of
current date matching projects, see “Data matching programs” at www.ato.gov.au
Certain businesses in the building and construction industry are required to report to the ATO on
payments made to contractors (Administration Act, Sch 1, Div 400). These reports can be used to identify
operators in the cash economy who have been avoiding GST reporting obligations or otherwise failing to
comply. For other third party reporting obligations, see ¶18-110.
Tip-offs
and media reports.
Random sampling
to assess the level of risk on particular areas. For example, this has revealed high non-compliance on
capital asset disposals (¶4-090).

Example
In order to identify compliance risks in the scrap metal industry, the ATO has analysed information made available through:
• ATO reviews and audits

• police investigations

• criminal prosecutions

• data and intelligence gathered from dealers, suppliers and other community sources

• data matching from dealers and other sources

• industry forums involving dealers and industry associations

• the analysis of over 400,000 individual transactions between dealers and suppliers (source: ATO Scrap Metal Compliance
Program).

[GSTG ¶85-050]

¶18-180 ATO’s compliance focus

The ATO sets out its compliance aims in Building Confidence (www.ato.gov.au), which takes the place of
its former annual Compliance Program and Compliance in Focus.
Issues identified in recent times include:
GST classification: business systems integrity. The ATO is focusing on taxpayers in the mining,
wholesale trade, manufacturing, financial and insurance services, government and retail trade industries
that are experiencing change or have undergone complex structural change to their business systems. It
will encourage small-to-medium market taxpayers in high-risk industries to conduct a health check on the
integrity of their business systems.
Refund integrity. The ATO reviews all refunds and identifies around 2% of refunds for review where the
refund is unusual or there appears to have been some suspicious activity. In such cases, it contacts the
business, their representative or third parties (or all of them) to understand the nature of the enterprise
and what gave rise to the refund. The aim is to help and educate those who have inadvertently made a
mistake and take stronger action with those who it considers “deliberately flout” the law. The ATO is
currently looking at identity crime and how it is being used to obtain fraudulent refunds. Its detection
systems are being strengthened to make it harder for identity fraud to occur.
Real property. The ATO continues to monitor and investigate taxpayers that incorrectly report GST when
they acquire, use, develop, sell or transfer real property. It uses external data to match property
transactions with business activity statements to identify under-reporting of sales. Follow-up compliance
activity will ensure that each property-related transaction is accounted for correctly.
Serious evasion. Although the ATO says that significant and deliberate non-compliance with GST
obligations is not common, it will take strong action against individuals and businesses that deliberately
do not comply. Aided by data matching, it will increase the number of default assessments issued to
taxpayers that persistently fail to lodge activity statements. Particular emphasis is being placed on
countering the black or cash economy (¶21-045).
Fraudulent “phoenix” activity. Phoenix activity refers to the deliberate liquidation of a business entity to
avoid financial obligations, including GST liabilities, without risking the operator’s assets and with the
intention of resuming business through a new entity. A number of specific measures have been taken to
counter this activity ¶20-000.
Wine equalisation tax (WET) producer rebate. The ATO’s compliance activities include checks to see if
claims for the WET producer rebate (¶22-560) are accurate. A number of specific measures have been
taken to counter exploitation of these provisions: see ¶22-560.
The ATO is also expanding its use of business viability assessment, increasing its use of recovery
measures such as garnishee orders and taking legal recovery actions earlier, including bankruptcy and
winding-up (GST Administration Mid-Year Performance Report 2014/15).
Cooperative Assurance Agreements
The ATO considers that the integrity of business systems is the most significant compliance risk in the
large market (ie taxpayers with a turnover greater than $250m). It is moving to develop relationships with
low-risk taxpayers where the ATO trusts them to give a verifiable assurance that they have made an
adequate investment in their business systems and processes. Under these “Cooperative Assurance
Agreements”, there will be a recognition of taxpayers who use software to:
• integrate the financial data in the business

• integrate the management data

• identify errors, anomalies and issues in the data, and

• address any issues prior to preparation of their business activity statements.

The ATO says that taxpayers who qualify may:

• be placed in a low risk classification

• be eligible for concessional penalty and general interest charge (GIC) treatment, and

• not be subject to business system compliance activity for an agreed period. However, the ATO may
enquire about particular issues that may emerge in relation to the business and reserves the right to
question matters of fact or the interpretation of the law.

Typical requirements for inclusion in the self-assurance model could be:

• the software used by the taxpayer had been implemented and mapped to source systems in a manner
that meets ATO requirements

• all aspects of the business are reported via the assurance software

• the software is used on a frequent basis and its use is regularly reviewed

• the software is kept up to date and any changes to either the software or the business are
incorporated

• the taxpayer notifies the ATO of any significant changes in circumstances

• the taxpayer makes voluntary disclosures as soon as errors are identified, and

• the Chief Financial Officer gives an assurance that the taxpayer satisfies the above requirements.
(Address by Assistant Commissioner Kovic, 19 June 2014.)

Example
In the scrap metal industry, the following risk indicators may be used to identify transactions that are most likely to be non-compliant:
• suppliers requesting “cash under the table”
 • suppliers not quoting an ABN in transactions involving significant dollars or weight

• suppliers using multiple dealers at any given time

• suppliers switching away from dealers that are improving compliance practices

• dealers displaying blatant non-conformist behaviour, for example, threats of violence

• dealers soliciting “cash/no record” clients

• dealer records that do not allow the identification of suppliers

• dealers with a disproportionate and significant number of transactions below the level at which tax invoices must be issued (¶5-
170)

• dealers with split transactions (multiple small transactions with the one supplier)

• dealers with a high proportion of cash turnover

• dealers with disproportionate cashflows/cash deposits

• dealers with a standard of living that is inconsistent with declared incomes/turnovers

• transactions involving certain non-ferrous materials.

The following range of mechanisms may be used for identifying non-compliant transactions:
• exploring large transactions (commercial quantities)

• checking suppliers claiming “hobby status”

• checking the current dealers of any suppliers that change dealers

• analysing cashflow/supplies downward from the top tiers of the industry

• following cashflow/supplies upwards from suppliers

• using transactions to test the system that dealers have in place

• asset betterment on entities, directors and other relevant individuals (source: ATO Scrap Metal Compliance Program).

Annual Compliance Agreements

The ATO has also introduced Annual Compliance Agreements (ACAs), which enable it to collaborate with
companies to provide a level of ongoing assessment of tax risks in relation to major tax transactions. This
is designed to provide companies with a level of certainty in relation to low risk matters and an avenue of
resolving high risk matters.
[GSTG ¶85-050]

¶18-185 Preparing for an audit

Early identification of relevant issues and common errors (¶18-170; ¶18-180) should help ensure that any
subsequent compliance activity by the ATO causes as little disruption as possible.
The major steps that need to be taken in implementing a GST compliance program include:
• ensure that you “know” your business and how GST applies to it

• ensure that internal accounting and information systems reliably and verifiably capture all the
necessary data to calculate and report the GST liability

• educate all relevant staff, including those at the point of supply

• have an ongoing process of reviewing contracts and provisions such as indemnity clauses.

GST positions taken in relation to complex transactions should be documented. You should also be
aware of the extent to which you can rely on ATO rulings, and how this may affect your liability to
penalties. You should also consider providing the auditors with a GST Briefing Document, explaining your
business operations and GST systems.
 [GSTG ¶85-100]

¶18-190 Conduct and management of an audit

Typically, an audit begins when the taxpayer receives notice from the ATO of its intention to carry out the
audit. This may be followed by an initial interview and, later, by the actual investigation of the taxpayer’s
records and processes, including interviews with staff. Where matters may be contentious, formal
statutory notices may be issued requiring information to be produced (¶18-110) or access granted (¶18-
120), although the Commissioner is often keen to keep matters informal or “consultative” (¶18-165).
During the audit, issues will typically arise which require further investigation, consultation or clarification.
If ultimately the ATO believes that there has been taxpayer error, it will normally advise the taxpayer that
it proposes to issue assessments. The issue of penalties may also be discussed as part of any
settlement. The ATO may also provide a written report on the taxpayer’s record-keeping practices,
including suggestions for improvement where required.
In managing the audit process, taxpayers should normally take an active role from the outset. Typically, a
liaison officer should be appointed to deal with the ATO and be the channel for all communications and
interviews dealing with the audit. The physical facilities made available to ATO officers should be
determined and security issues addressed. So far as possible, the scope of the audit should be defined.
Procedures for copying documents should be settled. Staff members need to be briefed accordingly.
Particularly, close attention should be paid to identifying documents that are protected from disclosure, for
example, under legal professional privilege (¶18-140). Presentations on technical issues must be
adequately prepared and, where appropriate, external advice sought. In general, taxpayers need to be
well informed as to their rights and obligations, and be aware of published ATO standards for tax officers’
behaviour (¶18-165).
In terms of general attitude to the audit, some taxpayers adopt an uncooperative approach, not conceding
any issue or volunteering information. Others may adopt the other extreme. However, the reality is that
there is no single correct approach to GST audits, as each case is different. Some things, however, are
basic; for example, the taxpayer should not deliberately lie. Arrogant or high-handed behaviour can also
often be counter-productive. The taxpayer’s behaviour, whether facilitatory or obstructive, may also be
reflected in the amount of any penalties imposed as a result of the audit (¶18-300).
In an audit, there may possibly be unacceptable behaviour by both parties; where this is by ATO officers,
detailed records should be kept. If negotiations to settle differences over behaviour fail, there are various
other options, such as resort to the Ombudsman, the Privacy Commissioner, the Tax Office Problem
Resolution Service and, in some serious cases, judicial review.
Where a taxpayer itself discovers an obvious error in its procedures or calculations in the course of the
audit, it may be advisable to disclose the matter voluntarily to the ATO. Voluntary disclosure may result in
some significant reductions in penalties (¶18-300). Where there is an issue that is open to interpretation,
but the ATO cannot be moved on it, the taxpayer may wish to consider whether or not to pursue the
normal objection and appeal process.
Audits can be lengthy affairs and can impose significant strains on businesses, particularly, where
substantial amounts are involved.

Example
Pending the result of a ATO audit that was still ongoing after nine months, the ATO withheld substantial GST refunds that had been
claimed by the taxpayer. The taxpayer claimed that this action was improper and applied for judicial review (¶18-600). In the normal
course, this review would not be heard for some months. The taxpayer therefore applied for an expedited hearing. This application
was granted, as further significant delays in paying the refunds had the potential to substantially affect the taxpayer’s business
viability (Multiflex Pty Ltd v FC of T [2011] FCA 789).

Settlements and compromises

Once an audit is complete, the Commissioner and taxpayer may reach an “out of court settlement”
covering the amount payable where there is a genuine dispute about the amount. Factors that may be
taken into account by the Commissioner and/or the taxpayer when deciding whether to enter into a
negotiated settlement include:
• the parties’ confidence in their own interpretation of the legal issue

• the level of information on each side

• the amount in dispute

• the likely costs of litigation

• whether the case is of precedent value.

In most cases, the terms of settlement are given effect to by the issue of assessments on an agreed
basis, in accordance with the settlement deed.
Where the taxpayer does not pay by the due date, the Commissioner has a range of collection options,
including:
• allowing the taxpayer to pay by instalments

• commencing recovery action, or

• “compromising” the debt. This will be appropriate only in certain limited cases.

Tax Office guidelines

Further guidelines on the management of audits are given in the ATO’s Cash and Hidden Economy
Review and Audits Guide (www.ato.gov.au).
[GSTG ¶85-200]

SPECIAL LIABILITIES AND OBLIGATIONS

¶18-200 Overview: personal liabilities

The liabilities and obligations imposed on entities by the GST are also specifically imposed on the
members or representatives of those entities. The result is that members of a particular entity are
personally liable for the acts and omissions of the entity and for any resulting penalty. For example, if you
are a director of a company, the liabilities imposed on that company will also be imposed on you.

Entity Liable party

Partnership
Company
GST joint venture
Unincorporated association or body of
people
Non-profit sub-entities
Representative member of a GST group The members of the GST group
Any one of two or more representatives
of a particular bankrupt individual or
entity in liquidation, receivership or
under interim management
The partners
Public officer, director, secretary, agent or attorney
The participants in the GST joint venture
The members of the committee of management of the
association or body
Persons responsible for management
The representatives

Statutory defence
In any prosecution of a member/representative of an entity (for example, a director of a company), for an
offence committed by the entity, a defence is available if the member/representative can prove that
he/she:
• did not aid, abet, counsel or procure the act or omission of the entity that is the subject of the offence

• was not in any way knowingly concerned in the entity’s act or omission, or a party to it.

The defence reverses the normal onus of proof. The onus is on the member, for example, a partner in a
partnership or a director of a company, to establish on the balance of probabilities that he/she was not
knowingly concerned in the commission of the offence.
[GSTG ¶70-180]

¶18-210 Partners

Each partner in a partnership (¶3-015) has personal liability for:

• all the GST obligations of the partnership

• any amount of GST payable by the partnership, and

• any offence against the GST law committed by the partnership (Administration Act, Sch 1, s 444-30).

Any obligations of the partnership may be discharged by any of the partners. For example, each partner
has the obligation to lodge the partnership’s GST return but any partner can discharge that obligation by
lodging the return.

Example
Rob, Keith and Ken are partners in an accounting partnership, Add Right. Add Right does not lodge a GST return for September.
Each of Rob, Ken and Keith will be liable for any penalty that results from the omission. Equally, either Rob, Ken or Keith could
lodge the return on behalf of Add Right and thereby avoid the imposition of a penalty provided the return was lodged on time and in
the correct manner.

[GSTG ¶70-190]

¶18-220 GST joint venture partners

A “GST joint venture” is a joint venture of two or more entities that satisfies certain participation and
activity requirements (¶17-200). The joint venture operator is liable for paying the GST on taxable
supplies made by other members of the joint venture in the course of the joint venture activities. The joint
venture operator is also liable to lodge GST returns for the GST joint venture.
In addition to the specific obligations of the joint venture operator, each participant in the joint venture is
made jointly and severally liable to pay any amount that is payable under the GST law by the joint venture
operator (Administration Act, Sch 1, s 444-80).
Participants may, however, limit their liability by entering into an “indirect tax sharing agreement” (¶17-
220).
Each participant is also taken to have committed any offence committed by the joint venture operator in
relation to the joint venture unless they can establish the statutory defence (¶18-200).
[GSTG ¶70-190]

¶18-230 Members of unincorporated associations

While not a separate legal entity, an unincorporated association or body is an “entity” for the purposes of
the GST law (s 184-1). Such an association is, for example, obliged to apply to be registered under the
GST Act if it is carrying on an enterprise and its GST turnover meets the registration turnover threshold.
Each member of the committee of management of the association is deemed to be liable for the GST
obligations of the association (Administration Act, Sch 1, s 444-5). However, unlike partners, committee
members are not made jointly and severally liable to pay any amount of GST that is payable by the
unincorporated association or body. However, each member is taken to have committed any offence
committed by the association subject to the availability of the statutory defence (¶18-200).
[GSTG ¶70-190]

¶18-235 Non-profit sub-entities

The GST obligations of a non-profit sub-entity (¶15-080) are also imposed on each person who is
responsible to third parties for the management of the sub-entity. These persons are liable for offences
committed by the sub-entity, subject to the statutory defence (Administration Act, Sch 1, s 444-85), and
are jointly and severally liable for any amount of GST payable by the sub-entity.
[GSTG ¶70-190]

¶18-240 Members of a GST group

A “GST group” is a group of two or more companies, trusts, partnerships or other entities that satisfy
certain membership and notification requirements (¶17-000). The representative member alone is liable
for GST on taxable supplies made by the other members of the GST group. The representative member
must also lodge the group’s GST returns (¶17-020).
Despite these obligations of the representative member, the general rule is that members of a GST group
are jointly and severally liable for GST payable by the representative member. Members may, however,
limit their liability by entering into an “indirect tax sharing agreement” (¶17-025).
Each member is also taken to have committed any offence committed by the representative subject to the
availability of the statutory defence (Administration Act, Sch 1, s 444-90).

Example
Companies A, B and C are members of the same GST group. Company A is the representative member. Company A forgets to pay
the group’s net amount of GST for the month of May. The Commissioner may claim payment of the net amount from either
Company B or Company C or may pursue payment from both of them.

[GSTG ¶70-190]

¶18-250 Representatives of incapacitated entities

Special rules apply to an individual who is a bankrupt or an entity that is in liquidation, receivership or
interim management. These persons are called “incapacitated entities” (¶3-080). These rules are intended
to ensure that the representative of the incapacitated entity — ie a trustee in bankruptcy, a liquidator,
receiver, controller, administrator or interim manager — is responsible for the incapacitated entity’s GST
affairs (Div 58).
The effect of these rules is as follows:
• supplies, acquisitions and importations by the representative, in that capacity, are generally treated as
having been made by the incapacitated entity (s 58-5). This ensures that a transaction by the
representative has the same GST consequences as if the incapacitated entity had no representative.
The same applies to other acts or omissions of the representative that are taken into account in
determining the GST status of a supply, acquisition or importation, or in determining whether a GST
adjustment arises

• however, in most cases, the representative is responsible for the GST, input tax credit or adjustment
 consequences that would otherwise arise to the entity (or the representative member of its group)
from a supply, acquisition or importation that falls within the scope of the representative’s authority (s
58-10).

Examples
(1) After the appointment of a receiver, the company premises are sold. The sale is in accordance with the receiver’s authority. The
receiver, not the company, is liable for the GST on the sale.
(2) Before the appointment of a receiver, a company made a taxable sale. The proceeds of the sale are received after the
appointment. The company, not the receiver, is liable for the GST as the sale was not a supply by the receiver in the course of its
administrative duties (Interpretative Decision ID 2012/7).

The following exceptions apply:

(1) the representative is not liable for GST, or eligible for input tax credits, to the extent that
consideration for the transaction was received or provided before their appointment as a
representative. This could typically apply to situations where there is a series of payments, such as
lay-by sales, payment by instalments, or leases

(2) the representative is not liable for GST where the GST is payable by the recipient of a supply under
the reverse charge rules (¶9-095 onwards) and the incapacitated entity provided the consideration
before the representative’s appointment

(3) the representative is not liable for GST on a supply it makes to honour a face-value voucher (¶4-
060) issued by the incapacitated entity, except to the extent that it is entitled to receive additional
consideration.

Example
A customer purchases a $1,000 accommodation voucher from a company that later goes into receivership. Subsequently, the
customer redeems the voucher. The receiver is not liable for GST on the supply of the accommodation. However, if the customer
paid an additional $220 to upgrade the accommodation, the receiver would be liable for the GST of $20 applicable to that amount.

(4) the representative does not have a GST adjustment (¶6-000) to the extent that it relates to a supply
or acquisition for which the incapacitated entity received or provided consideration before the
representative’s appointment. Nor does the representative have an adjustment if it would not be
attributable to a tax period applying to the representative. For example, a representative whose
appointment has ceased will not have adjustments for a change of planned use (¶6-300) after that
date, even though the relevant acquisition may have been made during the period of their
appointment.

If the representative is liable for GST or entitled to an input tax credit in relation to a transaction, the
incapacitated entity cannot also be liable or entitled.
Where a mortgagee in possession makes a sale to satisfy a corporation’s debts, this would be covered by
the specific rules in Div 105 (¶10-070), rather than the incapacitated entity rules (former Interpretative
Decision ID 2010/224). This has now been confirmed by a specific provision (s 58-95).
A body that was acting in a dual capacity as the representative of an incapacitated entity and as the
provider of professional insolvency services, and was separately registered in relation to both capacities,
was entitled to claim input tax credits for fees it paid, as a representative, for insolvency services rendered
by it in its capacity as an insolvency practitioner (Interpretative Decision ID 2012/6).
A bad debt adjustment (¶6-200) cannot arise if the representative accounts on a cash basis, irrespective
of the basis used by the incapacitated entity (s 58-15).
Where an accruals-based representative’s GST or input tax credit would be attributable to a tax period
that ended before the date of appointment, it is instead attributed to the first tax period applying to the
representative that begins on or after that date (s 58-40).
Payment liability and indemnity
A representative that is liable to pay an amount under these rules can apply any money which it receives
in its capacity as representative in order to pay the liability (s 58-65). A representative is not liable to civil
or criminal proceedings for acts done in the purported performance of their GST duties, provided that they
acted in good faith (s 58-70).
If there are two or more representatives of the same incapacitated entity at the same time, they are jointly
and severally liable for GST payable by any of the representatives, and each representative is taken to
have committed any offence committed by any one of the representatives, subject to the availability of the
statutory defence (Administration Act, Sch 1, s 444-70). However, this does not apply where:
• the representatives were appointed to act in different capacities, or

• they were not representatives of the entity at the same time. For example, in the case of successive
appointments, a representative is not liable for actions of an earlier representative whose
appointment had ceased before the later representative was appointed.

Example
A receiver is appointed over an asset of company and a liquidator is separately appointed to wind up the company at the same time.
With the agreement of the liquidator, the receiver enters into a contract of sale and sells the asset that the receiver was appointed
over. The receiver will be liable for GST arising on the sale of the asset, as the sale is within the scope of their responsibility or
authority. The liquidator will not have any GST liability on the transaction as the sale is not within the scope of their responsibility or
authority (ATO GST Industry Issues — Representatives of Incapacitated Entities: Issue 4.1).

Specific obligations are imposed on liquidators and receivers to notify the Commissioner of their
appointment within 14 days and to comply with requirements to set aside sufficient funds to meet unpaid
debts (Administration Act, Sch 1, s 260-45 to 260-90). Notification of an appointment may be done online
or, in some cases, through the ATO Business Portal (see www.ato.gov.au at “Appointment of a
representative of an incapacitated entity”).
Other rules relating to representatives
▸ registration (¶3-080)

▸ adjustments arising before 4 December 2009 (¶6-417)

▸ tax periods (¶7-100)

▸ GST returns (¶8-050)

▸ mortgagees in possession (¶10-070)

▸ GST groups (¶17-030)

▸ associates (¶17-500).

[GSTG ¶70-190]

¶18-260 Company officers

Public officer
Any company carrying on business or deriving investment income in Australia must have a public officer
(ITAA 1936, s 252). The public officer is responsible for the performance by the company of all of its
obligations under the GST law and is subject to the same penalties if the company fails to comply
(Administration Act, Sch 1, s 444-10).
The public officer is not, however, personally liable for the payment of GST due by the company but
he/she may be liable for paying the penalty in the form of the GIC (¶18-300) that accrues on the unpaid
amount of GST.

Example
Liz is the public officer of Potato Ltd. Potato Ltd fails to make payment of its GST liability of $20,000 for a tax period. Liz is not liable
to pay the $20,000 but she will be liable to pay the amount of the GIC that accrues on the $20,000.

The company also incurs certain liabilities in respect of the public officer. For example:
• acts of the public officer are deemed to be acts of the company

• service of any document at the public officer’s address for service or on the public officer of the
company is sufficient service upon the company for the purposes of the GST law

• proceedings brought against the public officer of a company are taken to have been brought against
the company itself, and

• the company and the public officer are jointly liable for any penalty imposed on the public officer.

Service on directors, company officers and agents

Even if a company has a public officer, the Commissioner may instead choose to serve documents on the
company by serving them on:
• any director

• the secretary or other officer of the company, or

• any attorney or agent of the company (Administration Act, Sch 1, s 444-15).

This provision enables the Commissioner to select a person:

• who is more likely than the public officer to fulfil an obligation which the GST law imposes on the
public officer, or

• whose position will probably ensure observance by the company of its taxation responsibilities.

Personal liability of those involved in management

Anyone who is “concerned in, or takes part in, the management” of a company — not just officers — is
deemed to have personally committed any taxation offence committed by the company and will be liable
for the resulting penalty (Administration Act, s 8Y). A manager could include a person who is employed by
a company in a managerial capacity and could also include a person whose directions the company
officers are accustomed to following.
Furthermore, a director is presumed to be concerned in the management of the company unless the
contrary is proved.

Example
Before his retirement, Thomas was the CEO and one of the executive directors of Lacklustre Pty Ltd. Thomas had founded
Lacklustre and had always been its guiding force and strategist. After his retirement from the Board of Directors, Thomas continued
to determine Lacklustre’s business direction and make all the decisions about the day-to-day running of the company. This was easy
for him to do because everyone was used to acting in accordance with his directions.
Lacklustre failed to pay its net amount of GST for April, May and June. As a person concerned in and taking part in the management
of Lacklustre, the Commissioner could impose penalties on Thomas as a result of Lacklustre’s failure to pay the amount of GST it
owed for those months and he would be personally liable for them.

[GSTG ¶70-210]
¶18-270 Trustees

As explained at ¶4-010, a trust is specifically deemed to be an entity for GST purposes, even though it
does not normally have a legal identity. However, the legislation recognises that it is actually the trustee
that carries on the business of the trust. The trustee is itself also an entity for GST purposes. Where there
are multiple trustees, the trustees collectively comprise that entity (s 184-1(2)).
It seems that the entity on which GST liabilities and obligations are actually imposed is the trustee
(Hutson v FC of T 2009 ATC ¶10-099). Where there are multiple trustees, the liability applies to all of
them.
The trustee at the end of the tax period is the entity that has the liability for GST for that period. This is the
case even if there has been a change of trustee during, or after, the tax period (Practice Statement PS LA
2012/2).

OTHER GST-RELATED PENALTIES

¶18-300 Overview of GST penalties

Some other GST-related administrative penalties that may apply include the following. For the current
value of a “penalty unit”, see ¶18-000:

Checklist
Failure to pay GST on time General interest charge
(Administration Act, Sch 1, s 105-80)
Failure to pay a penalty on time General interest charge
(Administration Act, Sch 1, s 105-80)
Failure to register for GST purposes 20 penalty units
(Administration Act, Sch 1, s 288-40)
Failure to cancel registration 20 penalty units
(Administration Act, Sch 1, s 288-40)
Failure to provide a GST return (BAS) on time Base penalty of one penalty unit for each
(Administration Act, Sch 1, Div 286) 28-day period, with maximum of 5
penalty units. Further increases
dependent on size of entity*
Failure to keep records 20 penalty units
(Administration Act, Sch 1, s 288-25)
Failure to issue a tax invoice 20 penalty units
(Administration Act, Sch 1, s 288-45)
Failure to issue an adjustment note 20 penalty units
(Administration Act, Sch 1, s 288-45)
Failure to notify GST to recipient of low value supply 20 penalty units
(¶9-130)
(Administration Act, Sch 1, s 288-45)
Issuing a tax invoice or adjustment note where your 20 penalty units
 agent has also issued an invoice or adjustment note
for the same matter
(Administration Act, Sch 1, s 288-50)
Inadequate information on “low value” supplies in 20 penalty units
Customs documentation (¶9-130)
(Administration Act, Sch 1, s 288-46)
Making a statement that is false or misleading in a Depends on shortfall (if any) and
material particular circumstances (see below)*
(Administration Act, Sch 1, s 284-75)
Misrepresenting consumer status under “low value” Depends on shortfall (if any) and
supply rules (¶9-130) circumstances (see below)*
(Administration Act, Sch 1, s 284-75)
Failing to give notice re GST withholding on new 100 penalty units
residential premises (¶11-020);
(Administration Act, Sch 1, s 14-255, 16-30)
Commissioner determines tax liability without 75% of liability (for guidelines, see
documents that taxpayer was required to provide, Practice Statement PS LA 2014/4; ¶18-
but did not do so 305)
(Administration Act, Sch 1, s 284-75)
Varied instalment amounts too low General interest charge
(Div 162; ¶8-037)
Avoiding GST See ¶20-070

* Penalties imposed on “significant global entities” for false or misleading statements or failure to
disclose on time were doubled with effect from 1 July 2017 (Administration Act, Sch 1, s 284-90).

Penalties for false or misleading statement

Penalty for a false or misleading statement is not imposed if the taxpayer has exercised reasonable care
in making the statement (Administration Act, Sch 1, s 284-75). Otherwise, the base penalty is 75% of the
shortfall in the case of “intentional disregard”, 50% in the case of “recklessness” and 25% in cases of “no
reasonable care”. If there was no shortfall, the base penalty is 60 penalty units for intentional disregard,
40 penalty units for recklessness and 20 penalty units for no reasonable care (Administration Act, Sch 1,
s 284-90).
The amount may be adjusted upwards, typically by 20%, in cases of hindrance (Administration Act, Sch 1,
s 284-220). For example, an additional uplift was imposed where there had been obstruction and
hindering of an ATO audit (The Taxpayers v FC of T [2011] AATA 33), or where the taxpayer has been
involved in previous similar cases of intentional disregard (Sharratt v FC of T [2015] AATA 293).
Conversely, the amount may be adjusted downwards in cases of voluntary disclosure (Administration Act,
Sch 1, s 284-225). If the disclosure was made before the ATO advised the taxpayer that an audit or
examination was to be conducted, the reduction is generally 80% (or 100% if the shortfall was less than
$1,000). A 20% reduction applies for certain later disclosures that save a significant amount of time or
resources. A disclosure would not be regarded as being made voluntarily where the taxpayer has simply
“come clean” after already being caught, or after damning evidence has already been uncovered
(Miscellaneous Taxation Ruling MT 2012/3).
A penalty of 25% for failing to take reasonable care was reduced to 20% because of the taxpayers’
voluntary disclosure in JG and JA Williamson Holdings Pty Ltd v FC of T 2007 ATC 2206; [2007] AATA
1344; and a 25% penalty of $50,000 was reduced to $10,000 on the basis of a voluntary disclosure, and
further reduced to $2,500 under the general discretion to remit, in Loren (as trustee for the Loren Family
Discretionary Trust) v FC of T [2008] AATA 631.
For additional examples of remission of penalty, see ¶18-305.
Reasonable care
“Reasonable care” is determined on an objective basis (Case 3/28, [2008] AATA 415), though the
taxpayer’s knowledge, education, experience, skill level and personal circumstances can be taken into
account. For example, the standard expected of a tax practitioner would be higher than that expected of
an inexperienced small practitioner. The ATO also considers that the taxpayer must have given
“appropriately serious attention” to complying (Miscellaneous Taxation Ruling MT 2008/1).
If the taxpayer is uncertain about the correct tax position, “reasonable care” would normally require it to
make reasonable enquiries to resolve the issue, eg by consulting an advisor or ATO ruling. Where an
advisor is consulted, the taxpayer should ensure that they are fully briefed on all relevant factors and that
the advice addresses the point at issue (Aurora Developments Pty Ltd v FC of T (No 2) [2011] FCA
1090). The ATO considers that it would generally indicate a lack of reasonable care if the taxpayer fails to
query advice that is obviously incorrect, or produces an odd or irregular outcome, or which a comparable,
ordinarily prudent person would investigate further (Practice Statement PS LA 2012/4).

Example
If a cash basis business owner is in any doubt as to whether it should account for sale proceeds in a particular tax period, it should
seek legal or accounting advice about the issue. Upon becoming aware that the sale proceeds have been received, it should provide
that information to the tax agent, so that the agent could consider whether an amended BAS for the period should be prepared or
other steps should be taken so as to fulfil relevant tax obligations. Failure to do so could constitute a failure to take reasonable care.
(Based on Mathoura Property Pty Ltd v FC of T 2013 ATC ¶10-346.)

Recklessness
“Reckless” means more culpable than lack of reasonable care. It means knowing that there is a real risk
that the statement may be incorrect, or being grossly indifferent as to whether the statement is true (BRK
(Bris) Pty Ltd v FC of T 2001 ATC 4111). The conduct must be grossly careless, but need not necessarily
be dishonest (Miscellaneous Taxation Ruling MT 2008/1). Here are some examples of actions that have
been held to be reckless:
• a taxpayer claimed substantial input tax credits but (1) the evidence merely established that there had
been some acquisitions, without any credible details about the identity and reality of the supplier, or
the existence of reliable tax invoices; and (2) the taxpayer had failed to provide relevant information
to the accountants preparing his GST returns (Eastwin Trade Pty Ltd and Commissioner of Taxation
[2017] AATA 140)

• a taxpayer claimed input tax credits for a transaction after they had already been disallowed in an
earlier BAS (Case 14/2005, 2005 ATC 240; [2005] AATA 1028)

• a taxpayer had poor record-keeping practices, failed to deposit income and neglected reporting
obligations (Graham Docker and Associates Pty Ltd v FC of T 2005 ATC 2404; [2005] AATA 1180;
see also Huynh & Anor v FC of T 2008 ATC ¶10-020)

• a taxpayer was a tax agent who had previously offended and had made no attempt to implement
appropriate procedures (Noac Consultants Pty Ltd v FC of T 2006 ATC 2551; [2006] AATA 1035)

• a taxpayer’s error was very large, obvious and foreseeable (Tenvoc Properties Pty Limited v FC of T
2006 ATC 2241; [2006] AATA 529)

• a substantial overstatement of input tax credit entitlements was disclosed only after audit activity had
commenced (Sgardelis & Anor v FC of T 2007 ATC 2335)

• input tax credits were claimed even though the margin scheme had applied to the sale (Barcia; ¶11-
 100)

• a large input tax credit was incorrectly claimed on unsubstantiated grounds (Ajami v FC of T 2007
ATC 2143; [2007] AATA 1231)

• a taxpayer prepared records without any check on their accuracy (Case 5/2008, 2008 ATC ¶1-004)

• a taxpayer with disordered records lodged nil returns on the basis of estimates that the GST would
later be cancelled out by input tax credits (Employee Investment Company Pty Ltd v FC of T 2009
ATC ¶10-089)

• a taxpayer claimed excessive input tax credits on a transaction which the taxpayer’s sole director
knew had been cancelled before lodging the BAS (Print Applied Technology Pty Ltd v FC of T 2011
ATC ¶10-196; [2011] AATA 555)

• a taxpayer who was being advised by a tax agent nevertheless made “basic mistakes” (Clontarf
Developments Pty Ltd v FC of T 2010 ATC ¶10-168; [2010] AATA 1065)

• a taxpayer who claimed a very high level of cost of goods sold, but failed to keep adequate or reliable
records and was unable to explain discrepancies (Carter v FC of T 2013 ATC ¶10-303; [2013] AATA
141)

• a taxpayer’s main justification for a manifest error in claiming input tax credits consisted of general
advice that it received from the ATO hotline after lodging the incorrect BAS return (AJJJ’s Emporium
Pty Ltd v FC of T [2013] AATA 501)

• a taxpayer lacked attention and accuracy in making input tax claims, where the relevant tax invoice
clearly disclosed services being provided to different companies, and where the taxpayer did not
supply the invoice to its tax agent (Cartesian Capital Pty Ltd v FC of T [2014] AATA 49)

• a taxpayer deliberately claimed input tax credits which it knew it would be unable to substantiate
(Yates v FC of T [2014] AATA 279); or was “grossly indifferent” as to the accuracy of credits claimed
for undocumented services allegedly provided by related companies (Advent 7 Pty Ltd v FC of T
[2014] AATA 365).

• a company failed to disclose cash receipts from its restaurant business (Salser v FC of T [2018] AATA
1311).

The ATO considers that once a false statement has been made recklessly, subsequent actions by the
taxpayer cannot alter that fact and make the misstatement a reasonable one. However, factors
subsequent to the making of the statement were taken into account by the tribunal in Barakat & Ors v FC
of T 2007 ATC 2363. The ATO considers that this case turned on its own particular facts (Decision Impact
Statement on Barakat’s case).
Intentional disregard
A person disregards something if they pay no attention to it, or dismiss it as unworthy of consideration.
For the disregard to be intentional, it must be something that they planned to do, or be an aim or purpose
(RV Investments (Aust) Pty Ltd 2014 [AATA] 158; subject to appeal).
“Intentional disregard” is more than mere recklessness. Unlike the test for reasonable care or
recklessness, the test for intentional disregard is completely subjective — it requires that there be actual
knowledge that the statement made is false (Miscellaneous Taxation Ruling MT 2008/1). A 75% penalty
for intentional disregard was confirmed where a cash basis taxpayer claimed input tax credits for
substantial amounts which it had not yet paid, with the stated intention of aligning expected input tax
credit entitlements with GST outgoings (Australian Pasture Seeds Pty Ltd v FC of T [2008] AATA 520);
and where there had been a lack of honesty in making claims (The Taxpayers v FC of T [2011] AATA 33).
A 75% penalty was reduced to 25% where the taxpayer had relied on advice from her accountant that she
was not subject to GST (Addoug v FC of T [2010] AATA 79); and to 50% where the taxpayer believed that
he was doing the right thing, even though his belief was unreasonable (Research Scientist v FC of T
[2014] AATA 242).
Review of penalties
Penalties may also be remitted (reduced) in certain cases, and decisions on remission may be reviewed:
see ¶18-305. For a summary of the protection that reliance on the various types of ATO rulings (¶18-030)
gives against penalties and interest charges, see Levels of protection for indirect tax advice and guidance
at www.ato.gov.au.
“Safe harbour” defences
Statutory defences apply in certain situations where a false statement or failure to lodge is attributable to
acts or omissions of a registered tax agent or BAS agent (¶8-042). The effect is as follows.
A taxpayer is not liable to an administrative penalty for making a false or misleading statement that results
in a GST shortfall if the taxpayer can show that:
• the statement was made by the taxpayer’s registered tax agent or BAS agent

• the taxpayer provided all relevant tax information to the agent to enable the statement to be made
correctly, and

• the shortfall did not result from the agent’s intentional disregard or recklessness, as distinct from a
lack of reasonable care (Administration Act, Sch 1, s 284-75).

A taxpayer is not liable to an administrative penalty for failing to lodge a return (or other required
document) on time if the taxpayer can show that:
• the failure to lodge was by the taxpayer’s registered tax agent or BAS agent

• the taxpayer provided all relevant tax information to the agent to enable the return to be lodged on
time, and

• the failure to lodge did not result from the agent’s intentional disregard or recklessness, as distinct
from a lack of reasonable care (Administration Act, Sch 1, s 286-75).

Examples
(1) An agent failed to lodge a client’s return on time as a result of an isolated and accidental oversight that occurred despite the
agent’s normally good practice management procedures. In this situation, the safe harbour defence would presumably be
open to the client, as the failure was not due to the agent’s intentional disregard or recklessness.

(2) If the agent had deliberately not lodged a return on time because there was an unresolved dispute between the agent and
their client about payment of fees, this would be treated as intentional disregard by the agent, and the safe harbour defence
would not be open to the client. However, the client could apply for a discretionary remission of the penalty. In addition, the
agent’s action may constitute a breach of the Code of Professional Conduct (eg Principle 5: management of conflicts of
interest) (¶8-042).

(3) If the agent’s failure arose because of their knowingly accepting too many clients, taking on an unmanageable workload or
adopting poor practice management standards, the ATO may treat this as “reckless”, and the safe harbour defence would not
be available to the client. However, as in Example (2), the client could apply for a discretionary remission of the penalty. In
addition, the agent’s action may constitute a breach of the Code of Professional Conduct (eg Principle 7: competent service)
(¶8-042).

A taxpayer’s successful use of the safe harbour defence does not mean that the penalty becomes
payable by the agent. It appears, however, that the ATO may keep a record of the number of times this
happens in relation to a particular agent and may report on this to the Tax Practitioners Board (Draft
Minutes of the Small Business Advisory Group, 18 March 2010).
Penalties apply for misuse of ABNs (A New Tax System (Australian Business Number) Act 1999, s 23).
Criminal and other offences
There is also a wide range of provisions that relate to tax offences generally (Administration Act, Pt III),
and various general criminal offences that may apply, such as tax fraud (Criminal Code s 134.2; 135.2);
see for example DPP v Rowson [2007] VSCA 176. For ATO guidelines on the treatment of fraudulently
prepared activity statements, see Practice Statement PS LA 2008/11.
There have been a number of criminal convictions for offences involving GST fraud. In a number of these,
significant terms of imprisonment have been imposed (see, eg the jail term of over six years imposed on a
fraudulent property developer: ATO media release, 17 September 2019). Identity takeover and false
identity creation are of increasing concern in this area.

Examples
(1) A person stole the identities of two others and used them to set up and register companies. He then created false
documentation for the companies and submitted false activity statements claiming GST refunds. He was found guilty of
obtaining a financial benefit by deception, sentenced to three years jail and ordered to make reparation of over $2m (source:
ATO Media Release Nat 2006/36).

(2) A business person who made fraudulent GST refund claims totalling more than $19m over a number of years was sentenced
to seven years imprisonment (R v Bromley [2010] VSC 345).

(3) Director of a business who made fictitious expense claims and fraudulently claimed large amounts in GST refunds without
having tax invoices was sentenced to over five years imprisonment (ATO Media Release 3 October 2018).

(4) Company director was sentenced to 4½ years imprisonment for tax fraud, where he fraudulently reported export sales,
resulting in the company receiving substantial GST refunds, and failed to disclose significant personal taxable income (ATO
Media Release 30 May 2019).

General interest charge

The GIC referred to above varies from quarter to quarter. The rates for recent quarters are:

Quarter GIC annual rate (simple GIC daily rate (compounding)

interest)
January–March 2015 9.75% 0.02671233%
April–June 2015 9.36% 0.02564383%
July–September 2015 9.15% 0.02506849%
October–December 2015 9.14% 0.02504109%
January–March 2016 9.22% 0.02519126%
April–June 2016 9.28% 0.02535519%
July–September 2016 9.01% 0.02461749%
October–December 2016 8.76% 0.02393443%
January–March 2017 8.76% 0.024%
April–June 2017 8.78% 0.02405479%
July–Sept 2017 8.73% 0.02391781%
October–December 2017 8.70% 0.02383562%
January–March 2018 8.72% 0.02389041%
April–June 2018 8.77% 0.02402740%
July–September 2018 8.96% 0.02454794%
October–December 2018 8.96% 0.2454794%
January–March 2019 8.94% 0.02449315%
April–June 2019 8.96% 0.02454794%
 July–September 2019 8.54% 0.02339726%
October – December 2019 7.98% 0.02186301%

The GIC is tax deductible in the year in which it is incurred.

Liability of government bodies
For the liability of Commonwealth, state and territory bodies to penalties and GIC, see ¶1-300.
[GSTG ¶70-500; ¶70-600; ¶70-700]

¶18-305 Discretionary remission of penalties and GIC

The Commissioner has the power to remit (reduce) administrative penalties, wholly or in part
(Administration Act, Sch 1, s 298-20). In addition, the Administrative Appeals Tribunal can generally
review decisions by the Commissioner on remission of penalties (see further below).
It is not necessary to show that there have been special circumstances before any part of the penalty can
be remitted. The real question is whether there should be a remission on the basis that the outcome is
harsh, having regard to the particular circumstances of the taxpayer and the purpose of the legislation.
The mere fact that there has been no loss to the revenue is not relevant. For example, where a false
claim has been made for a refund, the fact that no refund was actually paid by the ATO could not be
taken into account in determining whether the statutory penalty should be remitted (Dixon (Trustee for
Dixon Holdsworth Superannuation Fund) v FC of T 2008 ATC ¶20-015; Craddon v FC of T [2011] AATA
790).
The Tax Office has announced that, reflecting difficulties that have been experienced with its website and
systems, penalties for failure to lodge on time would not be imposed for activity statements due to be
lodged from December 2016 to the end of August 2017, where lodgment was received by 31 August 2017
(Media Release 12 July 2017).
False statements
In the particular case of penalties for false statements (¶18-300), the ATO says that remission may be
appropriate in certain cases where it would be unjust to impose the full amount of multiple penalties for a
false statement that has been repeated a number of times. The same applies where the taxpayer has
made a genuine attempt to comply, but because of the actions of their registered agent they are liable to
a penalty and safe harbour does not apply. (Practice Statements PS LA 2012/4 (where there is no
shortfall); PS LA 2012/5 (where there is a shortfall). As to the effect of voluntary disclosures, see
Miscellaneous Taxation Ruling MT 2012/3.
There would normally not be any remission where the taxpayer had acted recklessly or with intentional
disregard for the law. Remission of a 25% penalty was not appropriate where a taxpayer had falsely
claimed that it had a tax invoice to support a claim for an input tax credit, even though the vendor’s failure
to provide the invoice had allegedly been in breach of its contract with the purchaser (Chalmers & Anor v
FC of T 2008 ATC ¶10-021). The ATO also considers that an administrative penalty should not be
remitted solely on the basis that an error was caused by a tax agent completing an activity statement on a
taxpayer’s behalf (Decision Impact Statement on Keitac Pty Ltd ATF McNamara Property Development
Trust v FC of T [2007] AATA 1206).
The ATO has cautioned taxpayers against lodging BASs on a speculative basis with the idea of
discussing potentially contentious matters with the ATO at a later time (Decision Impact Statement on
Nitram Consulting Pty Ltd v FC of T 2008 ATC ¶10-063).
For the practice where an audit is commenced before an intended correction can be made under the
correction limits, see ¶8-045.
Failure to issue tax invoice
The ATO has issued guidelines on remission of penalties arising from failure to issue valid tax invoices or
adjustment notes in Practice Statement PS LA 2007/3, as follows:
• where the taxpayer has a history of non-compliance, no remission will be considered unless there is
 clear evidence that the imposition of a penalty would be unfair and unjust

• full remission may be appropriate for taxpayers that have a good overall compliance attitude and
make a genuine attempt to comply with their tax invoice or adjustment note obligations

• a 50% remission may be appropriate where a taxpayer has made some attempt to understand its tax
invoice or adjustment note obligations, and its compliance history is good, but its efforts are not
sufficient to justify a full remission

• no remission would be appropriate where the taxpayer makes no effort to comply; or where there are
indicators of fraud, evasion or deliberate avoidance; or where the taxpayer has previously been
penalised for failing to meet its tax invoice or adjustment note obligations and it continues to
deliberately avoid or ignore them

• where there are multiple failures caused by essentially the same offence, it may be appropriate to levy
only one penalty. However, where the taxpayer has a history of disregarding its tax invoice or
adjustment note obligations, it may be appropriate to penalise it for each occurrence in which it failed
to comply.

Failing to register
ATO guidelines on remission of penalties arising from failure to comply with GST registration
requirements are contained in Practice Statement PS LA 2007/4, as follows:
• generally, the penalty will either be imposed in full or remitted in full. However, there may be situations
where partial remission of the penalty is warranted. Factors that are relevant to determining if a
partial remission of the penalty is warranted include: the taxpayer’s overall compliance attitude;
advantage gained by not complying; period of non-compliance; and disruption to other participants in
the tax system

• full remission may be appropriate for taxpayers that have a good overall compliance attitude and
make a genuine attempt to comply with their registration obligations

• a 50% remission may be appropriate where a taxpayer has made some attempt to understand its
registration obligations, and its compliance history has been good, but its efforts are not sufficient for
the penalty to be remitted in full

• no remission would be appropriate where an entity makes no effort to comply, or where there are
indicators of fraud or evasion or deliberate avoidance

• if an entity complies with its registration obligations at a time after it is required to do so, but before
being contacted by the ATO, any applicable penalty generally will be remitted in full

• remission of the penalty may also be appropriate where a taxpayer who has already been contacted
by the ATO complies with its registration obligations within a reasonable time (say, 28 days)

• in exceptional cases, the penalty may be remitted in full or in part where imposition of the full penalty
would be unjust.

Failure to lodge documents

Where the Commissioner has been required to work out a taxpayer’s liability in the absence of documents
which the taxpayer has failed to provide (Administration Act, Sch 1, s 284-75(3)), the ATO says that the
normal 75% penalty will generally be remitted in whole or in part where:
• the taxpayer had a genuine yet mistaken belief that lodgment was not required

• circumstances beyond the taxpayer’s control affected their ability to lodge

• the amount of penalty would cause an unjust result

 • there were credits available to offset the amount of the penalty, or

• there was extraordinary cooperation during an examination (Practice Statement PS LA 2014/4).

“Wash” sales and revenue neutral transactions

A revenue neutral or “wash” transaction can occur in situations where:
• a supplier incorrectly fails to include GST in the price of a taxable supply, and that supply is made to a
recipient who otherwise would have been entitled to claim a full input tax credit

• the wrong entity accounts for the GST or claims an input tax credit. This may occur with associated
entities, under a joint venture or similar type of “partnership” arrangement, or an agency arrangement

• entities transact with each other as if they were members of a GST group when they are not members
of the same group (for example, because one is not eligible to be a member of the group), or

• a transaction has taken place (involving equal and offsetting primary GST amounts), but the ATO
declines to exercise its discretion to treat a document as a tax invoice or adjustment note.

Strictly speaking, the GST position of each party must be treated separately, even though there is no net
loss of revenue to the ATO if the net GST position of both parties were to be taken into account. The ATO
may therefore seek recovery of the GST from the supplier and impose GIC for late payment (¶18-300).
However, in such situations, the ATO may reduce the GIC imposed from the date of the original
transaction up to the time measures are taken to correct the situation. Typically, the GIC may be reduced
by seven percentage points (ie to the base interest rate). Full remission would only be considered in very
limited situations, such as where the taxpayer received no legal or commercial advantage over other
taxpayers who had correctly accounted for GST, or where GST has been accounted for in the correct
period but by the wrong entity (Practice Statement PS LA 2008/9).
It appears that, in certain circumstances, the Commissioner may take the revenue neutral effect of a
transaction into account when considering remission of penalty for a false statement (NTLG Sub-
Committee GST Minutes, June 2010, www.ato.gov.au). For ATO discussion of the circumstances in
which contra accounting may be permissible, see Draft GST Minutes, December 2012, www.ato.gov.au.
Where there are changes to the law
Any changes to the GST legislation cannot impose penalties for any acts or omissions that happen earlier
than 28 days after those changes receive Royal Assent (Administration Act, Sch 1, s 105-85). The ATO
has issued general guidelines as to how GIC and penalties will be imposed where there are retrospective
or anticipated amendments.
AAT review of Commissioner’s remission decisions
The Administrative Appeals Tribunal can generally review decisions by the Commissioner on remission of
penalties (¶18-600).
• Factors taken into account in reducing penalties may include ignorance, ill health, family tragedies,
overwork, cashflow difficulties and an otherwise good tax record (Kizquart Pty Ltd v FC of T 2005
ATC 2198; [2005] AATA 582).

• Penalties of $10,540 imposed for prolonged failure to lodge returns were held to be justified, and the
taxpayer’s claim for remission based on factors such as overwork and claimed ill health was rejected
(Sharkey v FC of T [2007] AATA 1435).

• A 25% penalty of $23,863 for a false input tax credit claim was reduced to $12,000 where the
taxpayer previously had a good record and the error was partly attributable to the actions of others
including the tax agent (Keitac Pty Ltd ATF McNamara Property Development Trust [2007] AATA
1206).

• A 25% penalty for an incorrect input tax credit claim was reduced to 15% in a case where the taxpayer
had cooperated with the ATO in a reasonably timely way and had not sought to hide anything. The
 AAT considered that the Commissioner should have given some advance notice that it was about to
commence an audit and that the taxpayer should have been given an opportunity to make a
voluntary disclosure (DG Empire (as trustee for DG Empire Trust) v FC of T 2007 ATC 2307).

• A recklessness penalty of 50% was reduced to 20% where there had been a disclosure, the mistake
was isolated and the taxpayer had presumably acted honestly (Tavco Group Pty Ltd v FC of T 2008
ATC ¶10-049).

• The same applied where a taxpayer incorrectly claimed an input tax credit for an outgoing before it
had been incurred, acting on misinterpreted advice from the ATO (Outbound Logistics Pty Ltd v FC of
T 2012 ATC ¶10-289; [2012] AATA 899).

• A 75% shortfall penalty imposed for failure to lodge returns for six years was confirmed
notwithstanding the taxpayer’s claim that he was suffering from depression during that period (Pinot
Nominees Pty Ltd & Anor v FC of T 2009 ATC ¶10-096).

• A shortfall penalty of 75%, as increased by 20% for repetition of the conduct, was confirmed against
taxpayers where one of them was a qualified accountant who had considerable experience and was
well familiar with GST obligations. This was so even though the particular transactions were out of
the taxpayers’ normal business experience (Subloo Investments Pty Ltd v FC of T [2012] AATA 703).

• A 75% penalty for failure to lodge multiple GST returns was confirmed where the failure was
deliberate, prolonged and done in the knowledge that the returns should be lodged, and there was
failure to cooperate in a Tax Office audit (The Norwestern Trust and Commissioner of Taxation
[2017] AATA 361).

Remission of GIC
The Commissioner has the discretion to remit the GIC in whole or in part. However, where GIC is payable
because an amount is overdue, it can only be remitted if:
• the circumstances that contributed to the delay in payment were not attributable to an act or omission
of the taxpayer, and that person has taken reasonable action to mitigate those circumstances

• where the circumstances contributing to the delay in payment were attributable to an act or omission
of the taxpayer, that person has taken reasonable action to mitigate those circumstances or their
effect, and it would be fair and reasonable to remit the GIC, or

• there are special circumstances that make it fair and reasonable to remit (Administration Act, s
8AAG).

The Commissioner may take factors such as the following into account in deciding whether to exercise
the discretion to remit the GIC for late payment:
• factors beyond the control of the debtor

• acts or omissions of the debtor

• whether the debtor has taken action to relieve the circumstances affecting the ability to pay

• good payment history

• whether it is fair and reasonable, for example, in cases of serious hardship

• other special circumstances (Practice Statement PS LA 2011/12; ATO Receivables Policy former ch
93).

Where there has been an understatement of GST, the Commissioner may take the following factors into
account in deciding whether to remit GIC imposed for the period from the date on which the proper
amount would have become due, up to the time the understatement is corrected:
 • delays due to the ATO, or to factors outside the taxpayer’s control, such as natural disasters or
serious illness

• pending claims for legal professional privilege

• unprompted voluntary disclosure, amount of understatement, and compliance history

• reasonable reliance on ATO advice or court decisions

• unexpected events affecting liability

• understatement caused by retrospective legislative change (Practice Statement PS LA 2006/8).

For ATO concessions in relation to GIC-free payment arrangements, see ¶8-100.

The Commissioner’s decisions on GIC are subject to judicial review under the Administrative Decisions
(Judicial Review) Act 1977 (Sharp v FC of T [2010] AATA 1023). A letter from the ATO stating that it
would be prepared to accept a payment of a lump sum in full discharge of the taxpayer’s outstanding tax,
inclusive of an estimated GST charge, did not amount to a decision to remit GIC (Pintarich v DFC of T,
2018 ATC ¶20-657).
Penalty relief for small businesses
From 1 July 2018, the ATO provides certain penalty relief for inadvertent errors in Activity Statements by
entities with a turnover of less than $10m. The relief applies where those errors are due to failing to take
reasonable care, or taking a position that is not reasonably arguable (¶20-110). It is not available if relief
has already been granted at any time during the past three years, or if the taxpayer has been involved in
specified tax offences during that time (ato.gov.au at “Penalty relief”).
Other special situations
• For remission of penalties for failure to keep adequate records, see ¶18-040.

• GST “corrections” may be made without penalty in certain situations, see ¶8-045.

• For credit claims made on the basis of invalid tax invoices, see ¶5-130.

• For Annual Compliance Agreements, see ¶18-180.

[GSTG ¶70-590]

¶18-310 Other provisions relating to penalties

Certain acts and omissions may result in more than one penalty being imposed. For example, if you fail to
lodge a GST return, you may be liable for a penalty for late payment, as well as the penalty for failure to
lodge the return.
Acts or omissions relating to GST which give rise to a liability for a penalty may also constitute an offence
under the more general taxation provisions for which the entity may be prosecuted. If a prosecution is
instituted for an offence constituted by the act or omission that gave rise to the penalty, no administrative
penalty will be imposed.
Notification of penalties
If a penalty is imposed, you will be notified in writing by the Commissioner. The notice will specify the date
for payment of the penalty. This information may be included in any other notice, such as a notice of
assessment.
[GSTG ¶70-580]

OBJECTIONS AND APPEALS

¶18-600 Objections to Commissioner’s decisions

A taxpayer may object to a GST assessment made by the Commissioner or, in certain circumstances, to
a failure by the Commissioner to issue an assessment (Administration Act, Sch 1, s 155-30; 155-90). For
further details of assessments, see ¶8-080.
You may also object against a decision made by the Commissioner if you are dissatisfied with it and the
decision is a “reviewable” decision (Administration Act, Sch 1, s 110-50). The decisions that are
reviewable include:
• registering you

• refusing to register you

• deciding the date of effect of your registration

• refusing to cancel your registration

• cancelling your registration

• deciding the date on which a cancellation of your registration takes effect

• determining that one-month tax periods apply to you

• deciding the date of effect of such a determination

• refusing to revoke a determination or election relating to monthly tax periods when you request

• deciding the date of effect of a revocation

• determining that a specified period is your tax period

• refusing your request for a special determination of tax periods

• revoking such a determination

• deciding the date of a revocation

• deciding the date of effect of permission for you to account on a cash basis

• refusing permission for you to account on a cash basis

• revoking permission for you to account on a cash basis

• deciding the date of effect of the revocation of permission for you to account on a cash basis

• refusing an application for a decision that an event is a charitable fundraising event

• refusing approval of a GST group, refusing an application to revoke approval of a GST group,
revoking approval of a GST group, refusing an application for a change of membership of a GST
group, revoking approval of a member of a GST group or deciding the date of effect of any such
approval or revocation

• approving early date of effect for formation of GST group, or revoking such an approval

• various decisions in relation to approvals of religious groups

• refusing approval of a GST joint venture, disallowing an election to consolidate GST returns for
different joint ventures, refusing an application to revoke approval of a GST joint venture, revoking
approval of a GST joint venture, refusing an application to change the GST joint venture participants,
 revoking approval of a joint venture participant or deciding the date of effect of any such approval or
revocation

• approving early date of effect for formation of joint venture, or revoking such an approval

• refusing to register a GST branch

• refusing to cancel registration of a GST branch

• cancelling registration of a GST branch

• deciding the date of effect of registration of a GST branch

• deciding the date of effect of cancellation of a GST branch

• cancelling the registration of a resident agent acting for a non-resident

• determining monthly tax periods for Australian resident agents, and deciding the date of effect of such
a determination

• cancelling the registration of a representative of an incapacitated entity

• directing a representative of an incapacitated entity to lodge a return

• cancelling the registration of a non-profit sub-entity

• refusing or allowing an extension of time in which to agree that the margin scheme will apply

• disallowing an election to pay GST by instalments on the grounds of past tax history

• refusing an extension of time to make an election to pay GST by instalments

• disallowing an annual apportionment election, or refusing a request to vary its date of effect

• disallowing an annual tax period election, or refusing a request to vary election deadlines

• refusing to make requested decision about refund of excess GST

• under the anti-avoidance provisions, making a declaration to negate a GST benefit under a scheme or
to negate or reduce a loser’s GST disadvantage from a scheme (this is restricted to declarations
relating to tax periods commencing before 1 July 2012, or to taxable importations payable before that
date. Later declarations give rise to assessments (see below))

• deciding whether to grant a request for a declaration to negate or reduce such a disadvantage

• refusing to remit certain penalties.

Objections to GST assessments

A taxpayer may object to a GST assessment made by the Commissioner or, in certain circumstances, to
a failure by the Commissioner to issue an assessment (Administration Act, Sch 1, s 155-30; 155-90). For
further details of assessments, see ¶8-080.
Declarations
As a more flexible alternative to the objection and appeal process, it may also be open to the taxpayer to
apply to the court for declaratory relief. Applications may be made to the State Supreme Court, the
Federal Court or the High Court, and may be limited to determining the GST treatment of a specific
transaction. However, a declaration cannot normally be made once a genuine assessment has been
issued (Administration Act, Sch 1, s 105-100; Platypus Leasing Inc & Ors v FC of T [2005] NSWCA 399).
Judicial review
In limited situations, certain decisions of the Commissioner may be reviewed by the Federal Court under
the “judicial review” process (Administrative Decisions (Judicial Review) Act 1977). This may apply, for
example, where there has been a breach of natural justice, a failure to follow proper procedures, a lack of
jurisdiction to make a decision, an improper exercise of a power, a decision not justified on the evidence
or involving an error in law, or unreasonable delay. However, the court may refuse to exercise this review
power if other methods of challenge are available, eg the usual objection process.
A decision by the Commissioner to refuse a refund under discretionary powers (¶8-110) cannot be
objected to in the normal way, but it may be that judicial review of that decision may be available (ATO
Decision Impact Statement on Naidoo case). See, however, PFTF Stock Pty Ltd v FC of T [2010] FCA
557.
[GSTG ¶71-000]

¶18-610 Time limit for lodging an objection

An objection must:
• be in the approved form. Pro forma objection forms are available on the ATO website, though other
documents including the same information are acceptable. The objection must include a declaration
of correctness (Administration Act, Sch 1, s 388-50)

• state the grounds of objection you are relying on fully and in detail (¶18-620)

• with an important exception, be lodged with the Commissioner within 60 days after you received the
decision of the Commissioner to which you object (Administration Act, s 14ZU; 14ZW).

The exception is where the objection is against an assessment, including an amended assessment. The
objection must then be lodged before the later of 60 days after service of the notice of assessment or four
years after the end of the tax period, or after the importation of goods, to which the assessment relates.
Extension of time for lodging objections
If the time for lodging your objection has passed, you may still lodge it if the Commissioner allows it.
If the Commissioner refuses to grant you an extension of time to lodge your objection, you may request
the Commissioner to provide you with reasons for the refusal.
[GSTG ¶71-010; ¶71-020]

¶18-620 Grounds of objection

An objection will only be valid if it is framed so that the Commissioner can appreciate the grounds on
which the decision is disputed. Stating the grounds of objection fully is also important because if the
objection later becomes the subject of review by the Administrative Appeals Tribunal (AAT) or appeal to a
court, the review will generally be limited to the grounds stated in the objection.
[GSTG ¶71-030]

¶18-630 Decision on objection

The Commissioner may either disallow or allow an objection either wholly or in part and serve the
decision on you (Administration Act, s 14ZY).
If the Commissioner does not make a decision on the objection within 60 days after it was lodged, the
Commissioner is taken to have made a decision to disallow the objection (Administration Act, s 14ZYA).
If you are dissatisfied with the Commissioner’s decision on the objection, you can either apply to the AAT
for review of the Commissioner’s decision or you can appeal to the Federal Court against the decision
(¶18-680).
Burden of proof
Whether proceedings are commenced before the AAT or the Federal Court, the burden of proof is the
balance of probabilities. This means that if you are an applicant for review or an appellant, you must show
on the balance of probabilities that:
• the amount of an assessment is excessive, or

• in any other case, a decision of the Commissioner should not have been made or should have been
made differently (Administration Act, s 14ZZK; Waverley Council v FC of T [2009] AATA 422).

In the absence of evidence to the contrary, an explanation provided by the taxpayer which is consistent
with the evidence and is not unreasonable is capable of satisfying the burden of proof if the taxpayer’s
credit has not been impugned (Hua–Aus Pty Ltd v FC of T [2010] FCA 341).
[GSTG ¶71-040]

¶18-640 Choosing between AAT and Federal Court

There are several matters that you should take into consideration when deciding whether to apply to the
AAT for review or to appeal to the Federal Court against an objection decision.
Type of case.
If the dispute concerns the manner in which the Commissioner has exercised a discretion, the AAT would
usually be the appropriate forum. Unlike a court, the AAT has the power to review the Commissioner’s
decision and substitute its own. If a contentious issue of law is likely to arise, a court hearing may be
advisable.
Formality.
The AAT is not bound by the rules of evidence and its hearings are more informal than a court hearing.
Publicity.
Unlike most court proceedings, AAT hearings on tax matters are in private if the person applying for the
review so requests. Where the AAT has heard a case in private, the reasons for its decision must be
framed so as not to be likely to enable the identification of the person, unless an appeal has been lodged.
Costs.
In an AAT hearing the person applying for review and the Commissioner each bears their own costs. In a
court hearing costs are usually awarded against the unsuccessful party. These may be substantial.
Where the amount of tax is less than $5,000, the AAT will, in most cases, be a more suitable forum,
largely because there is a smaller application fee.
Payment of disputed tax
Liability for any GST or other amount (such as a penalty) is not suspended pending the outcome of an
appeal or review. In other words, the Commissioner may enforce a debt for assessed tax against you
even though your objection is still pending (Administration Act, s 14ZZM; 14ZZR).
[GSTG ¶71-210]

¶18-650 Review of objection decisions by AAT

If you are dissatisfied with the Commissioner’s decision on an objection, you may apply to the AAT for
review of the decision. The review will be heard in the Taxation and Commercial Division of the AAT.
Powers of AAT
For the purpose of reviewing the Commissioner’s decision, the AAT exercises all the legislative powers
and discretions of the Commissioner. This means that the AAT steps into the shoes of the Commissioner
and reconsiders the decision on its merits. The powers of a court in this area are much more limited, and
for this reason it is generally preferable for a dispute or a question involving the exercise of the
Commissioner’s discretion to be referred to the AAT.
Conduct of AAT proceedings
The conduct of proceedings before the AAT is governed by the Administrative Appeals Tribunal Act 1975,
subject to various modifications which apply specifically to taxation reviews.
Taxation review proceedings are normally heard by a single member. At a hearing before the AAT, the
parties may either appear in person or be represented by some other person, such as a tax agent,
accountant or solicitor. In disputes involving more complex questions of law, barristers are usually
engaged.
The AAT must comply with the rules of procedural fairness. This means that it must adopt fair procedures
which are appropriate and adapted to the circumstances of the particular case. This would normally
require that the parties be given the opportunity to make submissions on the point decided by the AAT
(see, for example, Fletcher & Ors v FC of T 88 ATC 4834).
The ATO may require documents to be produced if it considers that the document may be relevant to its
review of the decision (Administrative Appeals Tribunal Act 1975, s 37). However, where the question
was whether the taxpayer’s position was “reasonably arguable” for the purpose of assessing a penalty
(¶20-110), the AAT could not require the ATO to produce internal legal advices prepared by its officers in
relation to the taxpayer, as these were not relevant to that issue (FC of T v ACN 154 520 199 Pty Ltd (in
liq) [2018] FCA 1140).
Smaller fees are payable in the AAT where the amount of tax in dispute is less than $5,000.
Simplified procedures for small businesses from 1 March 2019
Effective from 1 March 2019, the AAT has a separate Small Business Taxation Division to deal with
disputes between small business entities (¶1-250) and the ATO. The following simplification and
assistance measures also apply:
• before applying to the AAT, unrepresented small business can receive one hour of legal advice on
payment of a $100 co-payment

• after paying the AAT a reduced application fee — typically $500 — to review an adverse ATO
decision (eg affirming an audit or cancelling an ABN registration), the small business will have a
dedicated case manager throughout the process. Unrepresented small businesses may receive an
additional hour of free legal advice to be administered by the Australian Small Business and Family
Enterprise Ombudsman’s office

• where the ATO engages external legal counsel in the AAT and the small business does not have legal
representation, the ATO will cover the cost of providing the small business with equivalent legal
representation

• the AAT decision will be made within 28 days of the hearing (Asst Treasurer’s Media Release 12
February 2019; Administrative Appeals Tribunal Amendment (Small Business Taxation Division)
Regulations 2019).

[GSTG ¶71-240]

¶18-660 Decision of AAT

Where the AAT decides to set aside the Commissioner’s decision, it must make a substitute decision or
remit the matter to the Commissioner for reconsideration in accordance with the AAT’s directions or
recommendations. Any amendment of an assessment, or other action, necessary to give effect to the
AAT’s decision must be carried out by the Commissioner within 60 days of the decision becoming final.
The AAT has the power to remit an assessment to the Commissioner with a direction that the assessment
be amended by substituting the amount which the AAT determines (Stevenson v FC of T 91 ATC 4476).
The AAT does not, however, have the power to remit a matter to the Commissioner in circumstances
where, in order to give effect to the AAT’s findings, an entirely new assessment would need to be made
(Case 50/93, 93 ATC 534).
[GSTG ¶71-270]

¶18-670 Appeals from AAT decisions

Any party to a proceeding before the AAT may appeal from the AAT’s decision to the Federal Court on a
question of law. The appeal must be brought within 28 days of the AAT’s decision being “furnished”,
although the court can allow further time.
In certain cases, the Federal Court can transfer the appeal to the Federal Magistrates Court.
[GSTG ¶71-275]

¶18-680 Appeals to Federal Court

If you are dissatisfied with the Commissioner’s decision on an objection, you can appeal to the Federal
Court. The appeal is heard by a single judge. In appeal proceedings, your grounds of appeal will usually
be limited to those stated in the objection (¶18-620).
The onus of proof before the court lies on the person appealing. The court will review the Commissioner’s
decision on the objection and may make such order as it thinks fit, including an order confirming or
varying the decision. The Commissioner is then required to give effect to the court’s order within 60 days
of it becoming final.
Where GST is assessed against a partnership, it is open for only one of the partners to bring appeal
proceedings, as each partner’s liability is joint and several. Furthermore, the same proceedings may
incorporate an appeal against that partner’s individual income tax liability, though this does not
necessarily mean that both matters will be heard together — that will be affected by factors such as
whether there are common issues of fact (Russell v FC of T [2008] FCA 342).
[GSTG ¶71-300]

¶18-690 Review of Commissioner’s discretion

Where the Federal Court is hearing an appeal against an objection decision, the court’s power to review
the exercise of a discretionary power of the Commissioner is quite limited. The discretion is open to
review by the court only if:
• the Commissioner has not addressed the correct question

• the decision is affected by a mistake of law, or

• irrelevant factors were taken into account or relevant factors were not considered.

If the Commissioner has not failed any of these tests, the court would not normally interfere with the
decision. For this reason it is generally preferable for a dispute involving the exercise of the
Commissioner’s discretion to be referred to the AAT (¶18-640).
[GSTG ¶71-310]

¶18-700 Appeals from Federal Court decisions

Where a single judge of the Federal Court makes a decision on an appeal against an objection decision,
either the Commissioner or the appellant may appeal from the court’s decision. The appeal will be heard
by the full court of the Federal Court. An appeal from the full court’s decision may be taken to the High
Court, but only where special leave is granted.
[GSTG ¶71-315]

¶18-750 Alternative dispute resolution

Apart from the normal objection and appeal processes, a range of alternative dispute resolution (ADR)
approaches, including mediation, may be used to assist in reaching settlement.
The ATO has embarked on a program to improve its ability to resolve disputes at an earlier point in time,
including issuing a Dispute Management Plan. It has also undertaken a pilot ADR program relating to
smaller, less complex GST cases. These initiatives have resulted in a significant increase in the number
of cases settled by the ATO.
The ATO has developed guidelines for ATO officers on what procedures must be followed when
attempting to resolve or limit disputes by means of ADR (Practice Statement PS LA 2013/3). See also the
article by Rimma Miller, “Resolving tax disputes early” in CCH Tax Week ¶300 (2014).
CONTRACTS • TRANSITIONAL RULES
Overview: transitional rules ¶19-000
TIMING RULES
Timing of supply and acquisition ¶19-100
Rights exercisable after 30 June 2000 ¶19-200
OTHER SPECIAL TRANSITIONAL RULES FOR CONTRACTS
Progressive or periodical supplies ¶19-210
Life memberships or rights ¶19-220
Construction contracts ¶19-230
Subcontracts, renovations and other building services ¶19-240
Cross-border business transactions ¶19-250
GST CLAUSES: RECOVERING GST
Covering GST in the contract ¶19-400

Editorial information

Summary
Transitional rules, now of limited effect, were needed to identify the transactions that are subject to
GST, to clarify timing issues and to cover transactions that spanned the 1 July 2000
commencement date of GST. In particular, attention should also be paid to need to ensure that any
GST payable can be recovered from the appropriate party.

¶19-000 Overview: transitional rules

This chapter explains:

• general timing rules governing supplies and acquisitions (¶19-100)

• special transitional rules that covered the introduction of GST (¶19-210). Most of these rules now have
only very limited application

• transitional rules in relation to changes affecting cross-border supplies (¶19-250), and

• allocating GST in contracts (¶19-400).

The general rule is that GST is payable only on supplies and importations made on or after 1 July 2000.
Similarly, you can only claim input tax credits on acquisitions and importations made on or after 1 July
2000 (Transition Act, s 7). It is therefore important to know exactly when supplies and acquisitions are
made. These timing rules, which are still also relevant in other transitional situations, are explained at
¶19-100.
Special transitional rules apply to particular types of supplies. The rules affecting progressive or periodical
contracts, rights exercisable after 30 June 2000, life memberships, construction agreements and cross-
border supplies are explained at ¶19-200 and following.
After applying these rules, you will be in a position to determine the extent to which your contract is
affected by GST. The next step is to ensure that the contract takes the GST into account, either by
including it in the price or allowing the price to be reviewed. This is explained at ¶19-400.
Abolition of sales tax
GST replaced sales tax, which was levied on “assessable dealings”. The general rule is that no sales tax
is payable where a supply or importation in respect of the dealing was made on or after 1 July 2000
(Transition Act, s 8). To avoid double taxation, a special input tax credit applied for sales tax paid on stock
that was on hand at 1 July 2000 (Transition Act, s 16).
Other transitional rules
Various other transitional rules apply. These include:
• stocks of second-hand goods on hand at 1 July 2000 (¶16-130)

• insurance claims for events occurring before 1 July 2000 (Transition Act, s 22)

• prepaid funerals (¶13-380)

• pre-1 July 2000 payments or invoicing for post-30 June 2000 supplies (Transition Act, s 10)

• GST-free status of pre-8 July 1999 contracts (Transition Act, s 13)

• redeemable vouchers (Transition Act, s 11, 24A)

• offshore supplies of intangibles to Australian consumers (¶9-120).

Separate credit rules applied to pre-GST stocks of alcoholic beverages (Transition Act, s 16A; 16AB; 16B)
and petroleum products (Transition Act, s 16C).
[GSTG ¶75-000]

TIMING RULES
¶19-100 Timing of supply and acquisition

For the purposes of the transitional rules, the time when a particular supply or acquisition is made is
worked out in accordance with the following rules (Transition Act, s 6):
▸ Goods
are supplied or acquired when they are removed. If they are not to be removed, the relevant time is when
they are made available to the recipient.
“Removal” apparently refers to physical removal, so goods can be removed even though legal ownership
has not passed. For the meaning of “goods”, see ¶4-100.
If you make a forward contract to supply goods at a specified price at a future time, the supply is made at
that later time when the goods are removed.
In some cases, goods are removed before it is certain that a supply will be made. In this case, the
relevant time is when it becomes certain that the supply has been made. This may apply, for example,
where goods are sold on approval, or under a “floor plan” arrangement.
If there is a taxable importation of goods, this normally occurs when the goods have been cleared and
entered for home consumption (¶9-000).
▸ Real property
is supplied or acquired when the property is “made available” to the recipient. This occurs when the
recipient obtains the real and practical ability to use the real property interests that it had contracted to
acquire (Central Equity Ltd v FC of T [2011] FCA 908). This will typically (though not necessarily) occur
on settlement, even if there may be an earlier contract for sale. The ATO apparently considers that
property has not been made available to a recipient if the recipient only has a limited right to occupy or
use it. It is not until settlement that the recipient has the full use and enjoyment of the property.
“Real property” includes all types of interests in land, such as ownership, leases, life estates, easements,
licences to occupy or options to acquire any of these things (s 195-1). It also includes fixtures, such as
buildings, and the natural growth of the land, such as timber plantations (see further ¶11-000). Special
rules apply to construction contracts (¶19-230).
▸ Services
are supplied or acquired when they are performed. “Services” would include supplies as diverse as
providing professional advice, catering, transport, tourism services, hospitality and entertainment,
cleaning, maintenance or building work. Special rules apply to progressive or periodic supplies (¶19-210).
The ATO considers that services have been “performed” if you would be entitled to issue an account for
them or sue for the work done. It is not necessary that you have actually issued the account. Typically,
the amount of services performed could be ascertained by referring to time sheets or other records
substantiating the work done (GST Determination GSTD 2000/3).
For the special situation where there is a contract to supply services over a specified period, see ¶19-210.
For building subcontracts, see ¶19-240.
▸ Other things
are supplied or acquired when they are performed or done. This would include transactions such as a
transfer of copyright, the release of a right or the grant of software licences (see also ¶19-200). Again,
special rules apply to progressive or periodic contracts (¶19-210).
▸ Mixed supplies.
If the contract provides for a mixture of any of the above (eg goods and services), each type of supply is
considered separately.
Partial supplies
It may happen that part of a supply under a contract occurred before 1 July 2000 and the balance on or
after that date. In this situation, only the partial supply made on or after 1 July 2000 is subject to GST. If
the supply is continuous and uniform (eg telephone rental), the part subject to GST is worked out simply
on a proportional time basis. This basis will also be applied to supplies made on a periodical basis (¶19-
210).
Importations
In the case of importations (¶9-000), it is the time of the importation that is important, not when the goods
were acquired.
[GSTG ¶75-520; ¶75-540; ¶75-560]

¶19-200 Rights exercisable after 30 June 2000

A special rule applies to rights granted on or after 2 December 1998 and before 1 July 2000. These rights
are taken to be supplied after 30 June 2000 if they could “reasonably be expected” to be exercised after
that date (Transition Act, s 11).
The Commissioner considers that this rule can apply where:
(1) there is a supply of a right for an unlimited duration

(2) a right may be exercised on a fixed number of occasions without any time limitation

(3) a right may be exercised for a fixed number of hours without a specific starting date, or
 (4) a right is only exercisable on a fixed number of occasions within a designated time period (GST
Ruling GSTR 2000/7).

Reasonable expectation
A “reasonable expectation” requires more than just a possibility (FC of T v Peabody 94 ATC 4663). The
Commissioner considers that a reasonable expectation means “about an even chance” (GST Ruling
GSTR 2000/7).
The test is presumably objective. This means that it is determined by what a reasonable observer could
expect to occur. On this basis, it is not to the point that the parties in fact expect the right to be exercised
on or after 1 July 2000.
How to apportion
In the simple case, the GST component of the supply can be calculated by identifying the number of
occasions that the right can reasonably be expected to be exercised on or after 1 July 2000, and dividing
this by the total number of occasions that the right can be exercised. However, often it may not be
possible to do this. For further details of methods acceptable to the Commissioner, see earlier editions of
this book and GST Ruling GSTR 2000/7.
[GSTG ¶75-720]

OTHER SPECIAL TRANSITIONAL RULES FOR CONTRACTS

¶19-210 Progressive or periodical supplies

A special rule applies if the contract provides for something to be supplied for a period, or progressively
over a period, and the period spans the 1 July 2000 commencement date (Transition Act, s 12). In this
situation, the supplies are treated as if they were provided continuously and uniformly over the whole of
that period. The proportion of the supplies that is attributed to the period before 1 July 2000 will not be
subject to GST. In effect, this means that the GST component is worked out on a proportional time basis,
no matter what the contract says.
This rule will typically apply to leases, hiring arrangements, club memberships, subscriptions, insurance
policies, power bills and maintenance or service contracts. It may also apply to certain types of travel
passes or access rights (¶19-200).
The mere fact that a contract has an expiry date for supplies to be made does not mean that the contract
is for periodical or progressive supplies (GST Ruling GSTR 2000/7). Generally such contracts would fall
under the “reasonable expectation” rule (¶19-200). However, to the extent that the two rules overlap, the
periodical or progressive supplies rule will prevail.
Similarly, if there is a completion date for a particular job, this by itself does not make it a contract for
periodical or progressive supplies (GST Determination GSTD 2000/3). Such a contract would generally
be treated under the normal timing rules (¶19-100).
These rules apply equally where, say, goods are supplied for use for a three-year period commencing
before 1 July 2000, or a 10-year lease of a building is entered into and commences before 1 July 2000.
However, they do not apply to “long-term” leases, ie supplies by way of lease, hire or licence for at least
50 years, where there is no reasonable expectation that they will terminate before then. If a long-term
lease was granted before 1 July 2000, it will not be subject to GST at all (¶19-200).
The ATO considers that renovation or building subcontracts would normally provide for a particular job to
be completed, and therefore should not be treated as periodical or progressive contracts (GST Ruling
GSTR 2000/18). For details, see ¶19-240.
Calculating the GST
Detailed guidelines for calculating the GST on periodic or progressive contracts are given in GST Bulletin
GSTB 2000/4.
 [GSTG ¶75-700]

¶19-220 Life memberships or rights

Special rules apply to life memberships. These also apply to other agreements for rights that are granted
or exercisable for the rest of an individual’s life (Transition Act, s 14).
If the right is granted or first exercisable before 1 July 2000, the GST consequences depend on:
• when payment was made

• whether the contract was entered into before 2 December 1998 (the date the GST legislation was
introduced into parliament).

The effects of the rules are as follows.

• If the contract was entered into before 2 December 1998, and full payment was also made before that
date, GST does not apply.

• If the contract was entered into before 2 December 1998, but full payment was not made before that
date, membership services under the contract were GST-free if they were paid for before 1 July
2005. Supplies that had not been paid for by that date are subject to GST. If the contract can be
reviewed, the cut-off date instead is when the opportunity for review arises.

• If the contract is entered into on or after 2 December 1998, GST will apply in full. This is so even
though payment may have been made before 1 July 2000. However, this does not affect services
(such as counselling or food) that are provided in addition to life membership — if these services are
provided before 1 July 2000, they are not subject to GST.

Examples
(1) Philip takes out life membership of a club in November 1998, and fully pays for it on the same date. The life supply of
membership will be GST-free. However, if life members are also entitled to other benefits, those benefits provided on or after 1 July
2000 will not be GST-free under this provision.
(2) Kerry takes out life membership of a club in November 1998 and makes the final payment for it in 2002. The contract is non-
reviewable. The life supply of membership is GST-free.
(3) Nick takes out life membership of a club in November 1998. The contract is non-reviewable. By 1 July 2005, he has paid $1,000
of the $3,000 life membership fees. The services paid for by the $1,000 will be GST-free. Future services will be subject to GST.
(4) Assume the same facts as in Example 3 except that the contract had been reviewable in November 1999. Only services paid for
by that date will be GST-free.

If the life membership was taken out by a business which is entitled to claim full input tax credits, the
same rules apply except that the relevant date for taking out membership is 8 July 1999, not 2 December
1998.
[GSTG ¶76-700]

¶19-230 Construction contracts

A special rule applies where a construction contract was made before 1 July 2000 and the completed
project is made available on or after that date (Transition Act, s 19). In the absence of this rule, the total
value of the contract would be subject to GST at the time when the project was completed (Transition Act,
s 6(3)).
Construction contracts mean written agreements for the construction, major reconstruction, manufacture
or extension of:
• a building (eg a house, block of flats, warehouse, hospital, factory or office building), or

• a civil engineering work, for example a road, waterway, railway, tunnel, dam or bridge.
The ATO considers that these rules only apply to contracts for the supply of the entire construction
project, not the components in its construction (GST Ruling GSTR 2000/14).
The rules require you to value all work and materials that are permanently incorporated in or affixed to the
site of the building or civil engineering work, as at the operative date — typically, 1 July 2000. The GST is
then calculated as the GST-exclusive price of the total project less that amount. In effect, the pre-1 July
2000 component of the project is GST-free.

Example
An industrial building contract is made in December 1999 (ie before 1 July 2000). The total project cost is $2m. As at the start of 1
July 2000, the value of work and materials permanently incorporated into the construction is $1.5m. Supplies to that value made
under the contract are therefore GST-free. The balance will not be GST-free.
If the amount invoiced before 1 July 2000 is $1.6m, the excess $100,000 is treated as consideration for supplies made on 1 July
2000 and is attributed to the first tax period after that day (Transition Act, s 10).

The operative date will be different if the contract was entered into before 8 July 1999. Supplies under
these contracts may be GST-free up to a date later than 1 July 2000 under the largely superseded rules
in Transition Act, s 13. In these cases, the valuation should be made as at that later date, not 1 July 2000.

Example
A construction contract is made in November 1998 (ie before 8 July 1999) and does not include a review opportunity. Supplies made
under this contract are GST-free until 1 July 2005 under the transitional rules. The operative date for valuation is therefore 1 July
2005.

In the case of large construction projects, the ATO considers that the variation of contracts to enable pre-
1 July 2000 stockpiling of goods may attract the anti-avoidance rules (¶20-000).
Valuation methods
The valuation must be made in a way that is approved by the Commissioner. Detailed requirements and
examples are given in GST Ruling GSTR 2000/14.
[GSTG ¶76-500]

¶19-240 Subcontracts, renovations and other building services

Many building or construction services — including most subcontracts — do not amount to a complete
project, and are therefore not covered by the special rule discussed at ¶19-230. Instead, the ATO
considers that they are covered by the general transitional rules for services (Transition Act, s 6; 7). On
this basis, where the contract spanned 1 July 2000, the services were apportioned so that the portion of
the services performed as at the start of 1 July 2000 was not subject to GST (GST Ruling GSTR
2000/18).
[GSTG ¶76-560]

¶19-250 Cross-border business transactions

A special transitional rule applies to cross-border business transactions affected by the new rules
applying for tax periods starting on or after 1 October 2016 (see, for example, ¶4-101). The effect is that
those rules do not apply to a supply if there is a written agreement made before 4 May 2016 that
specifically identifies the supply and either the money consideration for it or a way of working out that
amount (Tax and Superannuation Laws Amendment (2016 Measures No 1) Act 2016, Sch 2, item 27).
This recognises that some supplies of this type may have been negotiated on the basis of the GST law
that previously operated. However, it does not apply to a supply to the extent that it is made on or after a
“review opportunity” has arisen on or after 1 July 2016. In that situation, the changed law will apply from
when that review opportunity arose. An earlier date for application of the changed law may be agreed by
the parties.
A review opportunity means one that arises under the supply agreement for the supplier to:
• change the price directly or indirectly because of the imposition of GST

• conduct a general review, renegotiation, or alteration of the price (Transition Act, s 13).

ATO guidelines on what constitutes a review opportunity are in former GST Ruling GSTR 2000/6. It has
been held that a “general” review requires a complete or almost universal reconsideration of the payment.
There cannot be an opportunity for a general review if restrictions in the rent review clause limit the review
to only part of the consideration, eg where they prevented any review of the part of the consideration that
related to substantial fitout works (FC of T v DB Rreef Funds Management Ltd 2006 ATC 4282;
Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52). Similarly, a pre-GST lease of a
supermarket did not contain a “review opportunity” because almost 50% of the total consideration for the
supply was not open to review (Westley Nominees Pty Ltd & Anor v Coles Supermarkets Australia Pty Ltd
& Anor 2006 ATC 4363). A review limited to only a minor part of consideration was also not considered to
be a general review in Case M58 (1990) 12 NZTC 2,333.

GST CLAUSES: RECOVERING GST

¶19-400 Covering GST in the contract

If GST is payable on the transaction, but has not been provided for in some way in the contract, the
supplier may find itself liable to account for the GST without any legal right of recovery from the customer.
In this respect, the risk lies on the supplier to:
(1) be clear on whether GST applies, in whole or in part. Particular attention should be paid to contracts
which span 1 July 2000 and to whether any transitional rules apply

(2) if GST applies, ensure that either it is included in the price, or is otherwise provided for.

Some typical ways in which GST is provided for in contracts are as follows:
• the price is specifically stated to include GST

• the price is stated to be subject to GST, which will be added and will be legally recoverable from the
customer, possibly backed up by a guarantee or indemnity

• under a “gross-up” clause, the price is stated to be subject to any additional charges or taxes that may
arise, with the expectation that this would include GST. It may be that this will be satisfied by certain
outgoings recovery clauses (Smale v Fletcher Homes Ltd (1996) 17 NZTC 12,662), or

• the contract states that the price will be reviewed as from the date that GST commences.

Where a contract for the sale of land provided that GST was to be added if the words “plus GST”
appeared in a box (as in the standard Law Institute of Victoria contract), it was not sufficient compliance if
the single word “GST” appeared there (A & A Property Developers Pty Ltd v MCCA Asset Management
Ltd [2016] VSC 643).
Care must be taken where a price is set according to a market valuation, for example, where there is a
renewal clause in a lease. Depending on the circumstances and the market, GST could conceivably
produce a range of increases in the rental, or no increase at all (Orti–Tullo & Anor v Sadek & Anor 2001
ATC 4688; [2001] NSWSC 855). In that case, the NSW Supreme Court said that “the view is reasonably
open that GST on rent received is not a primary concern of the valuer, and is not a prominent
consideration at all in determining the current market rent for the premises”. However, it said that in
identifying the comparable transactions on which the market valuation is based, it is necessary to
discriminate between leases where there is no separate treatment of GST and those where it is agreed
that GST should be passed on.
Similarly, where land was acquired for its GST-inclusive market value, it was not permissible for the
acquirer to claim that the amount payable should be calculated as the market value reduced by a GST
component of 1/11th (CSR Ltd v Hornsby Shire Council 2004 ATC 4966; [2004] NSWSC 946). The court
said that the marketplace has adjusted to the imposition of GST, and embedded it in the market valuation.
The seller’s liability for GST, if any, is not the acquirer’s concern.
Where a contract for the taxable supply of property stated that the price was GST-inclusive, subject to a
special condition that the purchaser would pay the vendor the GST for which the vendor was liable, this
was held sufficient to impose a liability on the purchaser to reimburse the vendor for that amount in
addition to paying the contracted price (AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC
985).
The contract should also specifically cover the possibility that the amount of GST may be changed
because of an adjustment, for example, if it is later realised that the price was understated (¶6-000).
Allowance may also need to be made for the eventuality that:
• the anticipated GST on the transaction may be wrong (eg because of an incorrect interpretation of the
law, or because the consideration (¶4-020) has been determined incorrectly, or the law changes
retrospectively, or the GST rate increases)

• there may subsequently be a dispute between the parties as to the amount payable under the
contract, or the amount of GST, or the margin on the sale of real property (¶11-120)

• a deposit may be forfeited (¶4-070)

• the anticipated GST may increase because the Commissioner acts under the anti-avoidance
provisions (¶20-070)

• the GST liability may change, for example, if a supplier’s registration status has changed by the time
of the supply. This is particularly relevant if the contract has a deferred settlement, or if an option is
exercisable at some time in the future, or

• a transaction that the supplier expects will be a GST-free or input taxed supply is in fact taxable, for
example, where a purchaser of a going concern is not registered (¶11-510), or there is an ineffective
agreement that a sale is of a going concern (¶11-500), or the supplier wrongly assumes that the
premises are residential (¶11-010).

The contract may need to take into account the possibility that the sale may be a mixed supply, ie partly
taxable and partly non-taxable.

Example
A contract for the sale of property provided that the sale was a taxable supply. It also stipulated that if the sale turned out not to be a
taxable supply, the vendor should refund the purchaser 1/11th of the price. In fact, it appeared that the sale was partly taxable and
partly non-taxable, as it included vacant land as well as residential premises. Doubts as to the effect of the contract in this situation
eventually resulted in litigation. (The result, incidentally, was that the court ruled that the refund clause did not apply because the
sale was “not within the category of not a taxable supply”: ETO Pty Ltd v Idameneo (No 123) Pty Ltd 2004 ATC 5080; [2004]
NSWCA 368.)

In one case, under a pre-GST lease, a sub-lessor had to account to the owner for the gross rent less
certain deductibles, including a letting fee. The court held that although GST had not been specifically
mentioned in the lease, it should be treated as a deductible as a matter of interpretation and business
commonsense. This effectively cast the ultimate burden of the GST back onto the owner (No Worries
Management Pty Ltd v Dolman 2004 ATC 4628; [2004] QSC 153).
If commission, or the consideration under a lease or franchise, is fixed as a percentage of turnover, it will
need to be made clear whether the turnover figure is intended to include GST.

Example
 A 25-year lease drafted in 1994 stated that the rent was based on gross sales, which were defined as excluding “value added tax, …
goods and services tax, or any similar tax which the Lessee is required to add to the price of goods sold”. The court held that this
was sufficient to require the exclusion of GST from the calculation of gross sales. As a matter of construction of the contract, the
court rejected an argument that: (1) the exclusion only applied to taxes which the lessee was required to add to the price; and (2) it
therefore did not apply to GST, because there is no such statutory requirement (Pebruk Nominees Pty Ltd v Woolworths (Victoria)
Pty Ltd & Anor 2003 ATC 4932).

The contract should also cover the time at which the anticipated GST component is to be paid by the
purchaser, for example, when consideration is first paid under the contract. In Fineglow Pty Ltd v
Anastasopoulos & Ors 2002 ATC 5158; [2002] NSWSC 1181, the court said that the failure to stipulate a
time for payment in a real estate sale meant that the GST component was not payable by the purchaser
until the time the supplier became liable to account for the GST to the Commissioner — this was 21 days
after the end of the quarter in which the sale consideration was received.
If the purchaser simply refuses to pay the GST component of the price, this does not alter the supplier’s
liability for GST. In such a case, however, an adjustment for a bad debt may become appropriate (¶6-
200).
Effect on purchaser
Where the contract secures the right of the supplier to pass on GST, the onus then passes to the
purchaser to ensure that it is able to cover the potential increase in price.
A registered purchaser should also ensure that it receives a tax invoice so that it can claim an input tax
credit.
A difficulty that can arise in these cases is that the purchaser may not be able to claim the input tax credit
for the additional payment because the standard four-year limit for claiming input tax credits (¶5-010) has
expired. However, in this situation, the purchaser may instead claim a special GST adjustment reducing
its GST by an amount equal to the input tax credit that would have been attributable to the additional
payment (Div 133). This applies to GST returns or assessments after 7.30 pm on 12 May 2009. The
adjustment only applies if the supplier is still liable to pay the GST on the supply, so it would not apply if
that liability has expired under the normal limit for recovery of GST (¶8-100).
If there is an incorrect assumption or belief by the purchaser that the sale is taxable, this may create a
problem for the purchaser who has factored its supposed entitlement to an input tax credit into the
purchase price (eg Empire Securities Pty Ltd v Miocevich & Anor 2004 ATC 4640; [2004] WASC 118). A
similar problem may arise on the sale of a business (¶11-510).

Example
A developer purchased a residential property with a view to developing a number of units there. The contract stated that the price
was “$916,000 GST inclusive”, and the vendor provided a tax invoice to the purchaser stating that the price was $832,727 plus GST
of $83,273. However, the purchaser’s claim for an input tax credit was disallowed on the ground that the sale was not taxable. The
vendor declined to refund the $83,273. The court ruled that there were no grounds for rectifying the contract or for ordering the
vendor to make the refund. (Based on Duoedge Pty Ltd v Leong and OCMC Pty Ltd [2013] VSC 36.) Note: As the sale to the
purchaser was not taxable, the purchaser would potentially become entitled to use the margin scheme (¶11-100) when it later sold
the developed units.

See also other cases discussed below, under the heading “Other remedies”.
Tax Office checklist
The Tax Office has issued guidelines to assist property professionals, such as solicitors and
conveyancers, to properly account for GST when preparing contracts for the sale of interests in real
property. The checklist has been adapted below:
(1) Is the vendor registered, or required to be registered? If neither, GST will not apply (¶3-000)
(2) What is the correct GST treatment of the transaction — taxable (¶4-000), GST-free (¶25-010), input
taxed (¶25-020) or mixed? (¶4-200)
(3) Do any special rules apply? For example, the rules in relation to residential premises (¶11-000),
commercial residential premises (¶11-030), commercial premises (¶11-050), retirement villages (¶15-
015), farmland (¶11-410), going concerns (¶11-500) or margin scheme transactions (¶11-100)
(4) Are the clauses in the contract appropriate for the GST treatment? The contract should not simply
state that the contract is “subject to GST”, as this does not clarify whether the contract price is inclusive or
exclusive of GST. Where GST applies, the contract should include:
• a clause that recognises the contract price is inclusive of GST or a clause that requires the purchaser
to pay GST in addition to the contract sale price

• a clause that clarifies whether the GST (if any) has been determined by reference to the margin
scheme.

Consideration should also be given to any clauses that limit the liability of either the vendor or purchaser if
the GST treatment included in the contract is later found to be incorrect.
(5) Are there any settlement adjustments? These need to be incorporated within the contract (¶11-515)
(6) Is a tax invoice required? A tax invoice (¶5-100) should only be issued if all of the following apply:
• a sale, or part of a sale, is taxable

• the vendor is registered for GST, and

• the margin scheme has not been applied.

A settlement statement or a contract of sale for real property is generally not a valid tax invoice that the
recipient of the supply can rely on in order to claim an input tax credit. Generally, the vendor making a
taxable supply must issue a tax invoice within 28 days of receiving a request from the recipient of the
supply.
(7) Are the necessary details included on the tax invoice? See ¶5-110.
Possible remedies
Where GST is not provided for, the seller may have to resort to arguing that a provision for GST should
be implied. It is unlikely that such an argument would typically be successful. Alternatively, the seller may
seek to rely on remedies such as rectification for mistake, or restitution for unjust enrichment, although
those remedies are quite limited (see generally Codelfa Construction Pty Ltd v State Rail Authority of
NSW [1982] HCA 24). For example, in a rectification claim it must be shown that the mistake was
common to both parties.

Example
Acting on incorrect information from the lessor’s estate agent, the lessor’s solicitor drew up a lease on the basis that the rent was
GST-inclusive. Earlier negotiations had been on the clear basis that the lease would be GST-exclusive, but there had been
substantial changes discussed since then. The lessor failed in its attempt to have the court rectify the lease to make it GST-
exclusive, as it could not establish that the lessee knew that there had been a mistake (based on Cermak & Anor v Ruth
Consolidated Industries & Anor (No 2) 2004 ATC 4985; [2004] NSWSC 882).

Where property is auctioned, there is a potential for disputes to arise over whether a sale is GST-
exclusive or GST-inclusive, where it is claimed that the auctioneer has proceeded on a basis different to
that set out in the contract. For examples of how some of these disputes have been resolved, including
rectification of the contract, see ¶4-210.
A claim for restitution could possibly be appropriate where purchasers of going concerns enjoy windfall
gains in the circumstances described at ¶11-510.
Depending on the circumstances, a purchaser who is misled by a contractual statement as to the GST
status of a sale may have a remedy on the basis that the statement is an error or misdescription, or a
false or misleading statement under fair trading legislation. In certain situations, it may also amount to a
breach of warranty, though this apparently did not apply in the case of the 2000 NSW edition of the
standard form of contract for sale of land (ETO Pty Ltd v Idameneo (No 123) Pty Ltd 2004 ATC 4013;
2004 ATC 5080). However, the 2005 edition of this contract was redrafted with the intention of ensuring
that the GST information in the contract has contractual force.
A claim for rectification of the contract by the purchaser, who had wrongly thought that the contract price
was inclusive of GST, was unsuccessful in Igloo Homes Pty Ltd v Sammut Constructions Pty Ltd 2005
ATC 4986; [2005] NSWCA 280.
Indemnities for GST on court awards
The possibility that GST may apply to payments made as a result of court orders or out-of-court
settlements (¶4-085) means that a plaintiff may need to take steps to ensure that this additional liability is
covered in any award or settlement that it receives. For example, it may seek to include the GST liability
in the claim itself, or apply for a court order that it is entitled to be indemnified by the defendant for any
GST that may become due.
An application for such an indemnity was refused in Interchase Corporation Ltd v ACN 010 087 573 Pty
Ltd & Ors 2000 ATC 4552 on various grounds, including: (1) the claim had only been made at a very late
stage in the proceedings; (2) the liability for GST was possibly too remote; and (3) it had not been shown
that GST could apply to the damages in any event (¶4-085). This issue has also arisen, rather
inconclusively, in the context of capital gains tax (eg Provan v HCL Real Estate Ltd & Ors 92 ATC 4644;
Carborundum Realty Pty Ltd v RAIA Archicentre Pty Ltd & Anor 93 ATC 4418).
In drafting an offer of compromise, it should be made clear whether it is exclusive or inclusive of any GST.
An indemnity relating to GST that relates only to the discontinuance supply (¶4-085) would not be
effective in relation to the GST on the earlier supply which gave rise to the proceedings (AJ Lucas Drilling
Pty Ltd v McDonnell Dowell Constructors (Aust) Pty Ltd [2010] VSCA 128).
For the treatment of legal costs, see ¶4-085.
Where GST overpaid
For the converse situation where GST is incorrectly applied to a non-taxable supply, see ¶8-110.
WET and LCT changes
A special rule applies where a change in the law on wine equalisation tax or luxury car tax affects the cost
of complying with an existing contract. In this situation, the contract is deemed to be altered to authorise
an appropriate increase or reduction in the agreed price. This does not apply if the contract has an
express written provision to the contrary, or if it is clear from the contract that the change to the law had
been taken into account in the agreed price (Administration Act, Sch 1, s 111-60).
ANTI-AVOIDANCE RULES
GENERAL ANTI-AVOIDANCE PROVISION
The general anti-avoidance provision ¶20-000
What attracts the anti-avoidance rules? ¶20-010
First requirement: there must be a scheme ¶20-020
Second requirement: there must be a GST benefit ¶20-030
Third requirement: benefit must be from the scheme ¶20-040
Fourth requirement: reasonable conclusion ¶20-050
What are the relevant factors? ¶20-060
Powers of the Commissioner ¶20-070
SCHEME PROMOTERS
Summary of scheme promoter rules ¶20-100
“Promotion” of “tax exploitation scheme” ¶20-110
Non-conforming implementation of scheme ¶20-120
Imposition of penalty ¶20-130
Injunctions and voluntary undertakings ¶20-140

Editorial information

Summary
This chapter explains how the Commissioner can counter schemes that may be devised to gain
special GST benefits. The Commissioner can, in effect, cancel the claimed benefits and impose
penalties based on the amount of tax avoided. The scope of these powers is very wide and there is
some uncertainty about their limits. This chapter also explains the special rules applying to scheme
promoters.

GENERAL ANTI-AVOIDANCE PROVISION

¶20-000 The general anti-avoidance provision

The Commissioner has a powerful weapon to use against schemes that are designed to avoid GST. This
weapon is contained in Div 165, which gives the Commissioner broad powers to:
• cancel GST benefits

• impose severe penalties.

Division 165 is a general anti-avoidance provision — sometimes abbreviated to “GAP” or “GAAP” — and
is really the only major anti-avoidance measure in the GST legislation. The drafters of the legislation
proceeded on the basis that additional complex anti-avoidance measures to counteract particular
schemes should not be necessary. This, of course, may change in the light of experience.
The Division has many similarities to the income tax anti-avoidance provisions in ITAA 1936 Pt IVA.
However, as noted below, there are also some important differences. Apart from widening the scope of
Div 165, these differences reflect the transaction-based nature of the GST law.
Division 165 is in fact expressed so widely that it potentially could apply to many fairly innocent
transactions. Some limitation on its possible scope, however, is provided by the “explanatory section” s
165-1, which states that:
• the division is “aimed at artificial and contrived schemes”

• its object is to deter schemes that would produce benefits by reducing GST, increasing refunds, or
altering the timing of payment of GST or refunds.

These explanatory statements are quite important. Although they do not have operative force in
themselves, they may be considered in determining the purpose or object underlying the legislation (s
182-10). This is one of the factors that the Commissioner is required to take into account in determining
whether the anti-avoidance provisions apply (¶20-060).
A further important limitation on Div 165 is that it does not apply to GST benefits that flow from making a
choice that is expressly provided by the legislation. This limited version of the “choice” principle is
explained further at ¶20-040.
Some examples of how rules may apply
Some examples of where the anti-avoidance rules are not intended to apply are given in s 165-1 itself.
These are where:
• an exporter elects to have monthly tax periods in order to bring forward the entitlement to input tax
credits (¶21-070)

• a supplier of child care applies for approval under Commonwealth family assistance laws so as to
make supplies of child care GST-free (¶14-100)

• a supplier chooses under the wine equalisation tax (WET) legislation to use the average wholesale
price method for working out the taxable value of retail sales of grape wine (¶22-000). However, the
Commissioner considers that Div 165 may apply to certain uncommercial marketing arrangements
where a retailer uses an interposed associated marketer to buy wine from suppliers, then sells the
wine as an agent for the marketer and calculates WET on the half retail price method, instead of
using wholesale selling price (WET Determination WETD 2010/1).

The government has also indicated that Div 165 is not intended to apply in situations such as where:
• a financial institution has economic reasons for bringing its legal and accounting services in-house,
even though it may get a GST benefit by doing so (¶10-040), or

• a financial institution chooses to use the most advantageous methodology in apportioning its input tax
credits, provided that the methodology is appropriate, reasonable, accurate, well-documented and
justifiable (GST Ruling GSTR 2006/3).

It has been speculated that Div 165 could potentially apply to innocuous actions such as a purchaser
insisting on receiving a tax invoice so as to enable it to claim an input tax credit. While that situation may
fall literally within the terms of the legislation, the statements in s 165-1 make it extremely unlikely that the
anti-avoidance provisions would be applied in such a situation.
The Commissioner considers that Div 165 may possibly apply where a contract for a large construction
project is altered to enable pre-1 July 2000 stockpiling of goods, with a view to avoiding the transitional
valuation rules (¶19-230) (GST Ruling GSTR 2000/14). The Commissioner has also suggested that Div
165 may apply where:
• vehicles were artificially “used” so as to become second-hand, with the dominant purpose of obtaining
input tax credits (¶12-120)

• input tax credits are claimed under certain arrangements where second-hand goods are acquired by
an interposed associated entity (¶16-110)

• attempts are made by charities to use artificial pricing to exploit the retirement village and nominal
consideration exemptions (¶15-015)

• certain artificial barter exchange agreements operate with grossly inflated payments (¶7-435)

• inconsistent methods are used in converting foreign prices into Australian currency (¶4-200)

• property developers seek to exploit the joint venture provisions or the grouping provisions to avoid
GST on the sale of new residential premises. This is done by artificially creating an “internal sale” of
new home units by a joint venture operator or group member, so as to support a claim that the units
are no longer “new residential premises” (¶11-020) and therefore not subject to GST: see ¶17-210

• associates are used to minimise GST under certain real estate schemes (GST Ruling GSTR 2010/1
(¶20-060); Taxpayer Alerts TA 2009/4; TA 2009/5), or

• an entity claims an input tax credit on a purported acquisition of an intangible right (on non-
commercial terms), with the provision of vendor finance where payments are contingent on a future
event (Taxpayer Alert TA 2012/5).

As part of its Compliance Program, the Tax Office typically targets arrangements that involve tax havens
and other low-tax jurisdictions, and which appear to artificially generate unintended GST consequences. It
is also investigating certain arrangements designed to avoid the application of GST in the distribution of
intangible products and services into Australia (Taxpayer Alert TA 2016/8).
Sham transactions
If a transaction is a sham, it has no legal effect in any event and there will be no need for the
Commissioner to apply Div 165 at all.

Example
A supplier and a purchaser agree to create a tax invoice for a fictitious transaction, so as to give the purchaser an inflated claim for
an input tax credit. This would be a sham and would not be legally effective for tax purposes.

WET and LCT

The anti-avoidance rules in Div 165 also cover avoidance schemes involving WET or luxury car tax (LCT).
Countering “Phoenix” activities
Under certain types of so-called “phoenix” schemes, the payment of tax is avoided through the systematic
liquidation of related entities to which the taxpayer’s assets have been passed. It is arguable that Div 165
may be ineffective against such schemes, mainly because: (1) the aim is simply to avoid payment of a tax
liability, as distinct from reducing its amount; and (2) Div 165 only provides a remedy against the avoiding
entity, which would be the phoenixed company, not the company that has obtained the benefit of the
scheme.
New rules directed at these schemes enable the Commissioner to require taxpayers to lodge security
deposits for existing or future GST liabilities (¶8-100). Other measures to counter phoenix activity have
also been introduced, including the withholding of GST on supplies of new residential property (¶11-020).
Under additional proposed countermeasures, directors would be made personally liable for their
company’s GST liabilities in certain situations, and the Commissioner would be empowered to collect
estimates of anticipated GST liabilities in the same way as anticipated income tax collections (Treasury
Laws Amendment (Combating Illegal Phoenixing) Bill 2019; Draft Practical Compliance Guideline PCG
2019/D4).
An ongoing investigation, including access visits without notice, is also being conducted into pre-
insolvency advisors and their involvement in illegal phoenix activity (ATO Media Release, 12 August
2016). The ATO also has a “Phoenix Hotline” for employees, creditors and the general public to report
suspected phoenixing activities (1800-807-875; ato.gov.au/reportphoenixactivity). On the black economy,
see also ¶21-045.
[GSTG ¶83-150]

¶20-010 What attracts the anti-avoidance rules?

For Div 165 to apply, the following requirements must be satisfied:

• there must be a scheme entered into on or after 2 December 1998 (or, if not, a scheme that is carried
out or commenced on or after that date)

• an entity (the “avoider”) must get a GST benefit

• this benefit must be from the scheme and must not be attributable to a choice expressly allowed by
the legislation

• it is reasonable to conclude that the purpose or effect of the scheme was to obtain a GST benefit (s
165-5).

These requirements are explained below.

[GSTG ¶83-170]

¶20-020 First requirement: there must be a scheme

A scheme covers almost any set of imaginable circumstances — arrangements, agreements,

understandings, promises and undertakings. It does not matter whether these are express or implied, and
they do not need to be legally enforceable. A scheme also covers any scheme, plan, proposal, action,
course of action or course of conduct. These may be unilateral or not (s 165-10). It is arguable, however,
that a proposal that was not actually implemented could by itself be classed as a scheme.
In any particular situation, it is likely that there will be a number of schemes that can be identified. In the
context of the corresponding income tax provision (ITAA 1936 s 177A), the High Court has said that a set
of circumstances may not amount to a scheme if those circumstances are not capable of standing on their
own without being “robbed of all practical meaning” (FC of T v Peabody 94 ATC 4663 at p 4,670).
However, the precise scope of this qualification is not clear (FC of T v Hart & Anor 2004 ATC 4599; 2004
HCA 26). In any event, this may not have great significance in the present context, because s 165-10
clearly contemplates that a GST benefit can arise from part of a scheme (¶20-040).
The scheme does not have to be entered into or carried out in Australia (s 165-5).
Timing of the scheme
Division 165 applies only to schemes that are entered into on or after 2 December 1998 or, failing that, to
schemes that were carried out or commenced to be carried out on or after that date (s 165-5).
The timing of the scheme is also important for other reasons. For example, timing is one of the factors
that must be taken into account in determining the dominant purpose or effect (¶20-050). It also appears
that the dominant purpose or effect should be determined by reference to the law as it stood when the
scheme was entered into or carried out (¶20-060).
Where there is a pre-2 December 1998 arrangement, it may be that a subsequent amendment to that
arrangement might be interpreted as triggering a new scheme, thus bringing Div 165 into operation.
 Example
An arrangement is entered into in November 1998 which will produce significant GST benefits in the future. The arrangement is
varied in 2018 for purposes unrelated to GST. It is possible that the revised arrangement as a whole will be treated as a new
scheme that may be attacked under Div 165.

Similarly, care may also need to be taken where informal pre-2 December 1998 arrangements are
formalised on or after that date.
Correct identification of scheme
As the definition is so wide, there will not normally be any dispute over whether there is a scheme. It is
more likely that the dispute will arise over the identification or appropriateness of the particular scheme(s)
on which the Commissioner is seeking to rely. This will be important because:
• the identification of a GST benefit depends on a reconstruction of the situation that would have
applied if the scheme had not been entered into. This requires that the scheme be precisely identified

• the relevant purpose must be exhibited by a person who is a party to the particular scheme

• the relevant effect must be an effect of the scheme

• a number of the factors that are taken into account in considering whether the relevant purpose or
effect exists relate to characteristics of the particular scheme.

However, it will not necessarily be fatal to the Commissioner’s case if the scheme is erroneously
identified, or if the Commissioner misconceives the connection between the GST benefit and the scheme.
In the income tax context, the High Court has said that such mistakes are fatal only if the benefit which
the Commissioner purports to cancel is not a benefit under the legislation (FC of T v Peabody 94 ATC
4663). This is unlikely to be the case if the error relates to a mere detail of the scheme. However, it may
apply where there is a more fundamental error, for example, where the wrong taxpayer is identified as
receiving the benefit.
The Commissioner is also entitled to vary the scheme from that on which it originally relied, or to put
forward alternative schemes. For example, in Peabody, although the Commissioner had originally relied
on a scheme involving 10 steps, he was entitled to later rely on a much narrower scheme involving fewer
steps in seeking to defend the assessment.
[GSTG ¶83-250]

¶20-030 Second requirement: there must be a GST benefit

For Div 165 to apply, some person — known as the avoider — must get a GST benefit. A GST benefit
typically arises in these ways:
(1) the person does not pay GST, or pays less GST

(2) the person gets a GST refund, or an increased GST refund

(3) the person pays GST later, or

(4) the person gets a refund earlier (s 165-10).

The first two of these cover net reductions in the amount of GST payable, either by reducing the GST
directly or by increasing an input tax credit. The second two cover timing advantages — they can apply
even though there is no change, or even an increase, in the amount of GST that is ultimately paid
(Practice Statement PS LA 2005/24).
In limited situations, effective from 1 July 2018, a GST benefit can also arise to the recipient of an
offshore supply of low value goods (¶9-130) where the GST on the supply is not paid by the supplier. This
could arise, for example, where the recipient’s consumer status was concealed from the supplier.
 Example
As a result of a scheme, a company defers its liability to account for GST on a transaction to a later tax period. This is a GST benefit.

The person getting the benefit must be an “entity”, ie an individual, a company, a partnership, an
unincorporated association, a trust or a superannuation fund (¶3-015). It is not necessary that the person
actually be a party to the scheme. In fact, it is feasible though not likely that the person be entirely
ignorant that the scheme has been entered into or carried out.
[GSTG ¶83-270]

¶20-040 Third requirement: benefit must be from the scheme

You are treated as getting a GST benefit from a scheme if the benefit would not have occurred, or could
not reasonably be expected to have occurred, if the scheme or a part of the scheme did not exist (s 165-
10). Cases on the corresponding income tax provision (ITAA 1936 s 177C) indicate that a “reasonably
expected” result is one which is more than just a possibility, and must be one which is reasonably
probable (eg FC of T v Peabody 94 ATC 4663). In determining what might reasonably be expected to
occur, the court can take into account commercial reality. This means the court can consider what
alternative courses of action the parties might have taken if the scheme had not been entered into.
According to the Explanatory Memorandum for the GST Act, the enquiry will be in relation to “the most
economically equivalent transaction” to what actually occurred.
A GST benefit can arise from only part of a scheme. This is designed to ensure that Div 165 can apply
even though the benefit arises from a single transaction, even if that transaction does not itself constitute
a scheme.
You can also be treated as getting a GST benefit from a scheme even if there was no economic
alternative to the activities you engaged in (s 165-10(3)).
This is a controversial measure. On one reading, it seems to expose you to penalties for transactions
even if there was no economic alternative to them.
Benefits attributable to choices
For the anti-avoidance provisions to apply, the GST benefit that the taxpayer gets from the scheme must
not be attributable to the making of a “choice, election, application or agreement” that is expressly
provided for in the GST or associated legislation (s 165-5). This gives effect to a limited version of the
“choice” principle that has existed in various guises in the income tax legislation.
To take some simple examples, Div 165 will obviously not apply if:
• a food retailer simply takes advantage of the option to use a simplified accounting method (¶13-210)

• parties agree that the sale of a business is a (concessional) supply of a going concern (see further
below)

• a business with a turnover of less than $75,000 simply exercises the option to register (¶3-000)

• businesses decide to form a GST group in order to reduce compliance costs (¶17-000), or

• a business elects to account on a monthly basis (¶7-100).

Other situations can arise where an arrangement has been artificially structured so as to take advantage
of a choice allowed by the legislation. For example, the ATO claims that the choice rule does not enable a
person to artificially create a state of affairs to take advantage of a choice to escape the operation of Div
165 (Practice Statement PS LA 2005/24). So, the mere fact that the legislation provides for GST-free
status may not necessarily mean that any scheme designed to take advantage of that status will be
successful. Similarly, the Tax Office says that the fact that an artificial arrangement takes advantage of
the option to form a GST joint venture does not mean that Div 165 cannot apply, where the claimed GST
benefit actually flows from some other aspect of the arrangement (GST Ruling GSTR 2004/3).
The Tax Office’s view has been incorporated into the legislation by s 165-5(3), which provides that a
taxpayer cannot take advantage of the choice rule if the scheme was carried out for the sole or dominant
purpose of creating a state of affairs, and the existence of that state of affairs is necessary to enable the
choice to be made. This measure is intended to apply in situations such as where a taxpayer using the
margin scheme (¶11-100) enters a scheme that seeks to use multiple applications of the going concern
rule to avoid GST on the value added by registered entities. However, it applies generally and is not
restricted to such situations.
The scope of the choice principle was considered by the High Court in FC of T v Unit Trend Services Pty
Ltd 2013 ATC ¶20-389, a case involving the application of the margin scheme on the sale of properties:
see ¶11-100. The court ruled that the GST benefit in that case was not something to which the taxpayer
became entitled as a matter of exercise of any statutory choice. Rather, it was sourced in the commercial
choice to sell the relevant properties after there had been a substantial increase in the properties’ values.
The anti-avoidance provisions could therefore apply. The court also considered that this would be so even
without the express provision in s 165-5(3).
The Commissioner regards Unit Trend as establishing that the inclusion of a statutory choice as a step in
a GST scheme does not automatically preclude the anti-avoidance provisions from applying. That would
only occur if the GST benefit arising from the scheme was the particular benefit that the taxpayer was
entitled to as a result of exercising that choice (ATO Decision Impact Statement, 26 June 2013).
[GSTG ¶83-290]

¶20-050 Fourth requirement: reasonable conclusion

The fourth requirement for the operation of Div 165 is that on the basis of all the relevant circumstances it
must be reasonable to conclude that either:
• the sole or dominant purpose of at least one of the parties to the scheme (not necessarily the avoider)
was to get a GST benefit, or

• the principal effect of at least part of the scheme is that the avoider gets the benefit, either directly or
indirectly (s 165-5).

Dominant purpose test

The first of these — the “dominant purpose” test — is similar to the test in the income tax legislation (ITAA
1936 s 177D). In its ordinary meaning, “dominant” indicates the ruling, prevailing or most influential
purpose (FC of T v Spotless Services Ltd & Anor 96 ATC 5201). This indicates that the purpose may be
dominant even though it does not outweigh all the other purposes put together.
The purpose may be that of any of the persons who entered into or carried out the scheme, or part of the
scheme. It need not be the common purpose of more than one participant, nor need it be the purpose of
the person who receives the GST benefit. Nor is it necessary that the benefit which is intended be the
benefit that actually eventuated. Where parties enter into a scheme on the advice of professional
advisers, it seems that the objective purpose of those advisers may be attributed to the parties (FC of T v
Consolidated Press Holdings Ltd & Anor 2001 ATC 4343).
The fact that a transaction represents a rational commercial decision does not mean that there cannot
also be a dominant purpose of obtaining a tax benefit (FC of T v Spotless Services Ltd & Anor 96 ATC
5201; FC of T v Hart & Anor 2004 ATC 4599; 2004 HCA 26). So the mere fact that a scheme makes
commercial sense does not automatically protect it from Div 165.
It appears that the dominant purpose or effect should be determined at the time when the scheme was
entered into or carried out, and by reference to the law as it then stood (Consolidated Press Holdings
Ltd).
Principal effect test
The second test — the “principal effect” test — is new. It considerably broadens the scope of the GST
anti-avoidance provision (although a reference to “effect” appeared in ITAA 1936 s 260, the predecessor
to Pt IVA). It enables the anti-avoidance rules to apply even though none of the parties, or the avoider,
had any intention or purpose of getting a GST benefit.
It is important to note that the legislation talks of the principal effect, not a principal effect. This evidently
means that it may not apply where the effect of getting a GST benefit was only one of a number of equally
or more important effects of the scheme.
It is also important to note that it will be sufficient that only part of the scheme has the relevant effect,
even if the principal effect of the scheme as a whole is not to obtain a GST benefit.
The AAT has said that the effect should be measured from the perspective of the participants in the
scheme, not just the representative taxpayer in the case (Case 3/2010, 2010 ATC ¶1-022; FC of T v Unit
Trend Services Pty Ltd 2013 ATC ¶20-389).

Example
A scheme has two equally important effects, one of which is to obtain a GST benefit and the other which has no connection with
GST. The principal effect test would not be satisfied in this situation. However, if the principal effect of part of the scheme was to
obtain a GST benefit, the principal effect test would be satisfied, even though the principal effect of another part of the scheme, or of
the scheme as a whole, was unrelated to GST.

The principal effect may be direct or indirect. One result of this is that the Commissioner may look at all
the surrounding circumstances to determine what is the principal effect.
The combined effect of these provisions is so wide that it is difficult to imagine circumstances in which
they do not apply, at least potentially. Here is one situation where they may not be attracted.

Example
Parties enter into a normal commercial arrangement. Avoiding GST is the last thing on their innocent minds. Nevertheless, due to a
fortuitous combination of unexpected circumstances, an incidental GST benefit arises. Assuming that this could not reasonably be
expected to have arisen from the arrangement, Div 165 may not apply.

[GSTG ¶83-290]

¶20-060 What are the relevant factors?

Although all relevant circumstances must be taken into account, certain factors are specifically identified
(s 165-15). Many, but not all, of these also appear in the income tax provisions (ITAA 1936 Pt IVA), so
some guidance as to their scope can be obtained from earlier decisions on those provisions. The factors
are as follows.
(1) The manner in which the scheme was entered into or carried out. This might include considerations
such as:
• the degree of unnecessary complexity

• the extent of the taxpayer’s involvement

• whether the scheme was sold by a promoter (Taxation Ruling TR 98/22), and

• whether a tax haven is involved.

In cases on Pt IVA, some of the factors that have been taken into account include:
• the fact that the scheme was implemented by retrospective book entries and was not disclosed to
third parties (CC (NSW) Pty Ltd (in liq) v FC of T 97 ATC 4123 at p 4,148)

• the fact that a scheme involving a round robin of cheques was implemented without bargaining or
negotiation with unrelated third parties (Clough Engineering Ltd v FC of T 97 ATC 2023 at p 2,052)
 • the fact that a non-arm’s length entity was created for no reason other than the implementation of the
scheme (Case Z38, 92 ATC 350), and

• the fact that the trust involved in the scheme was suggested by the taxpayer’s accountant, that there
was no specific commercial reason for it to be created, and that the distributions from the trust were
at levels designed to minimise tax (Case W58, 89 ATC 524).

On the other hand, the fact that each party pursued its own commercial ends in negotiation was
considered favourably for the taxpayer, even though the parties were not entirely at arm’s length (WD &
HO Wills (Australia) Pty Ltd v FC of T 96 ATC 4223 at p 4,252).
(2) The form and substance of the scheme. This means that you can take into account the economic and
commercial effects as well as the legal form. For example, in Clough Engineering, the court took into
account the fact that many of the transactions had little substance and were more illusory than real, and
that the same commercial result could easily have been achieved in a much easier and more direct way.
The fact that a scheme would have been uncommercial for a party unless the GST benefit was allowed
was also considered relevant in GST Ruling GSTR 2010/1.
(3) The purpose or object of the GST Act, or any relevant provisions of that Act or the Customs Act 1901.
The primary source for determining this would be the objects stated in s 165-1 (¶20-000). There is no
equivalent provision in Pt IVA.
(4) The timing of the scheme and the period over which it is entered into or carried out. For example, this
may include the fact that the scheme was implemented just before or immediately after 1 July 2000, or at
the start or end of a tax period. It may also be relevant that the scheme was carried out over a period
much shorter than ordinary transactions of that type, or had effect for only a very limited time. Conversely,
the fact that under the scheme the payment of a GST liability may be indefinitely delayed may also point
to there being the relevant purpose or effect (GST Ruling GSTR 2010/1). The fact that implementation of
the scheme was delayed could also suggest that the dominant purpose was to obtain a GST benefit, if the
delay increased the amount of the GST benefit and reduced the claimed commercial benefit (Case
3/2010, 2010 ATC ¶1-022; FC of T v Unit Trend Services Pty Ltd 2013 ATC ¶20-389).
(5) The GST effect the scheme would otherwise have had. This evidently does not allow other effects (eg
on stamp duty or income tax) to be taken into account.
(6) Any change — actual or reasonably expected — in the avoider’s financial position related to the
scheme. For example, a scheme that produces a tax benefit, without any change in the real financial
position, may indicate avoidance.
(7) Any change — actual or reasonably expected — in the financial position of bodies connected with the
avoider. This applies to family, business or any other connections.
(8) Any other consequence for the avoider or a connected body.
(9) The nature of the connection, including whether any dealing was at arm’s length.
(10) The circumstances surrounding the scheme.
(11) Any other relevant circumstances. There is a question as to whether this may enable the actual
subjective purpose of the parties to be taken into account (Case 14/2006, 2006 ATC 187). This factor
does not apply under the income tax provisions, where the enquiry is apparently objective (FC of T v
Peabody 94 ATC 4663). If it is the case that subjective purpose can be taken into account, this could be
an important extension, as it would enable ostensibly innocent transactions to be seen in a new light. Of
course, obtaining reliable evidence as to subjective purpose is a notoriously difficult task for the
Commissioner. It appears that the actual subjective purposes or motives of the taxpayers are an
irrelevant consideration (Unit Trend Services Pty Ltd v FC of T 2012 ATC ¶20-342; [2012] FCAFC 112,
para 139).
The Tax Office considers that factors (10) and (11) would enable it to have regard to prevailing economic
conditions or industry practice relevant to the scheme (Practice Statement PS LA 2005/24).
It will often happen that the various factors overlap or point in different directions (Peabody v FC of T 93
ATC 4104 at p 4,113). However, the legislation gives no guidance as to the weight to be given to any of
the factors, nor the relative significance of any of them. Although all the factors must be taken into
account, it is permissible for the court to decide the matter on the basis of an overall assessment (FC of T
v Consolidated Press Holdings Ltd & Anor 2001 ATC 4343). If the evidence is equivocal, it would seem
that the burden of proof would lie on the taxpayer, in accordance with the normal rules.

Example
S owned a residential property worth about $250,000. He was on the cash basis. In 2003, he agreed to sell the property to a private
company that he had set up and controlled. The price was $770,000, with a deposit of $550 payable on contract, two instalments of
$11,000 payable every five years and the balance to be paid in 2018. The company was on the accruals basis. Title did not pass till
2018. There was no provision for default in payment by the company.
Apart from Div 165, the effect of the scheme would be that S would only pay very limited amounts of GST initially and not pay the
bulk of the GST till 2018. The company, on the other hand, could claim a full input tax credit of $70,000 immediately.
The AAT considered that Div 165 applied because the dominant purpose of the scheme was to get a GST benefit. The Tribunal took
into account various uncommercial and artificial elements of the arrangement, the fact that the parties were related, and the
substantial benefit to the company which was contrary to the intention of the Act. The AAT therefore affirmed the Commissioner’s
decision to disallow the $70,000 input tax credit and to impose a penalty of $35,000 (Case 14/2006, 2006 ATC 187).

[GSTG ¶83-410]

¶20-070 Powers of the Commissioner

Once it is established that anti-avoidance provisions apply, the Commissioner can make declarations
negating the GST benefit and making compensatory adjustments. Penalties may be imposed and
additional tax for late payment may also apply.
Negating the GST benefit
The Commissioner can make a declaration to increase the net tax payable for particular tax periods, or
the GST payable on an importation (s 165-40; 165-50). If the benefit was a timing benefit, the
Commissioner may also make declarations for reductions for other tax periods so as to ensure that the
correct GST result is achieved.
Compensating “losers”
It may happen that, under the scheme, you get a GST benefit but someone else gets a GST
disadvantage. This can happen if they pay more GST, get a lower refund, pay GST earlier or get a refund
later. If the Commissioner negates your benefit, a compensating adjustment may be made in favour of
that person if the Commissioner considers that it is “fair and reasonable” (s 165-45). However, at best,
this adjustment can only restore the status quo — it cannot put the person in a position that is more
favourable than it would have been in if the scheme had not been entered into.
Persons who are in this position should ensure that they apply in writing for an adjustment to be made,
rather than relying on the Commissioner taking the initiative. The Commissioner must give written notice
of his decision on the request.
It is expected that this provision may be used, for example, to prevent double taxation that might
otherwise arise.
Procedural provisions
For the purposes of negating a benefit or making a compensatory adjustment, the Commissioner can
reconstruct the facts by ignoring certain events, or treating others as if they had occurred (s 165-55).
One declaration can cover more than one tax period and more than one taxable importation (s 165-60). A
copy of the declaration must be given to the entity affected (s 165-65).
The Commissioner must take such action as is necessary to give effect to the declaration. For the
purpose of making an assessment, a statement in a declaration has effect according to its terms (s 165-
40; 165-50).
For objections, see ¶18-600.
Alternative assessments
A series of transactions undertaken as part of a scheme may give rise to alternative GST assessments
where it is unclear to the Commissioner which entity has obtained a GST benefit. For the Commissioner’s
practice, see Practice Statement PS LA 2006/7.
Contractual implications
Drafters of contracts will need to keep in mind that GST liabilities may be increased or decreased under
these provisions. For example, a seller may need to ensure in the contract that the sale price will be
adjusted if the anticipated GST is increased under Div 165 (¶19-400).
Penalties
In general terms, the amount of the base penalty is 50% of the benefit you would otherwise have
received. For an example of where this penalty was imposed, see Case 14/2006, referred to in ¶20-060. If
it was “reasonably arguable” that the anti-avoidance provisions did not apply (¶20-110), the base penalty
is 25%.
These penalties may be reduced in certain situations, for example, where you have taken reasonable
care, relied on Tax Office statements or made a voluntary disclosure. They may be increased in situations
such as where you deliberately hinder the investigation, or have a past record (Administration Act, Sch 1,
Subdiv 284-C; 284-D). For Tax Office guidelines, see Practice Statement PS LA 2008/18.
This penalty is additional to any other penalties that you may be liable for; for example, penalties for not
keeping records, making false or misleading statements, or interest on underpayments of tax.
Penalties may be remitted (reduced) under the rules in the Taxation Administration Act 1953 (¶18-305).
Where the conduct amounts to tax fraud, there may be a criminal prosecution under the Criminal Code
(¶18-300).
[GSTG ¶83-500]

SCHEME PROMOTERS
¶20-100 Summary of scheme promoter rules

Special measures that are designed to deter the promotion of tax exploitation schemes apply equally to
GST.
Under these measures, there are two types of prohibited conduct. An entity must not engage in:
(1) conduct that results in it or another entity being a promoter of a tax exploitation scheme (¶20-110),
or

(2) conduct that results in a scheme that has been promoted on the basis of a product ruling being
implemented in a way that is materially different from that described in the ruling (¶20-120).

The relevant entity may be an individual, a company, a partnership, an unincorporated association, a trust
or a superannuation fund.
The Federal Court can impose civil penalties (fines) for contraventions (¶20-130). The Commissioner can
also apply to the court to grant injunctions for contraventions or potential contraventions, and may enter
into enforceable voluntary undertakings with taxpayers (¶20-140).
The scheme promoter rules are set out in the Administration Act, Sch 1, Div 290.
Detailed guidelines on how the Tax Office interprets these rules are in Practice Statements PS LA 2008/7;
PS LA 2008/8; and the Tax Office guide Good Governance and Promoter Penalty Laws (NAT 73779).
[GSTG ¶83-750]

¶20-110 “Promotion” of “tax exploitation scheme”

The first prohibition specifies that an entity must not engage in conduct that results in:
 • the entity being a “promoter” of a “tax exploitation scheme”, or

• some other entity being a promoter of a tax exploitation scheme (Administration Act, Sch 1, s 290-50).

Meaning of “promoter”
An entity is a promoter of a tax exploitation scheme if it satisfies these three conditions:
• it markets the scheme or otherwise encourages the growth of the scheme or interest in it. This should
be interpreted in a wide sense. The marketing does not need to be spoken or expressly written (FC
of T v Ludekens [2013] FCAFC 100)

• the entity or its associate(s) receives direct or indirect payment or consideration in respect of that
marketing or encouragement. This does not require a strict correlation, provided that the overall
connection is sufficient and clear (Ludekens). The consideration may also include non-monetary
consideration. An associate of an entity includes a relative, a partner, a trust that benefits the entity,
or a company that the entity influences (¶17-500), and

• it is reasonable to conclude that its role in the marketing or encouragement is substantial

(Administration Act, Sch 1, s 290-60).

Whether the role is substantial depends on the circumstances. These would include the degree of
involvement, whether the role is active or passive, whether it involves management or not, and the nature
and level of the consideration received. For example, someone who plays a key role in devising the
scheme, who gives instructions to others and is rewarded at a higher level, obviously has a more
substantial role than someone whose function is limited to carrying out instructions of others for a more
modest reward.
Exemption for advisers
You are not a promoter simply because you provide advice about the scheme — even if that advice
provides alternative ways to structure a transaction, or sets out the tax risks of the alternatives. This
exemption is particularly important for financial planners, tax agents and planners, accountants, legal
practitioners and related advisers. Anything going beyond mere advice may, however, attract the
promoter rules.
Exemption for employees
An employee is not taken to have had a substantial role in the marketing or encouragement of the
scheme merely because the employee distributes information or material prepared by another entity. Note
also that some of the exceptions to the penalty rules may have particular application to employees (¶20-
130).
Meaning of “tax exploitation scheme”
Broadly, a tax exploitation scheme is a scheme that exploits the tax system through avoidance or evasion
(Administration Act, Sch 1, s 290-65).
There are two pre-conditions for a tax exploitation scheme to exist. At the time the scheme is promoted:
(1) it must be reasonable to conclude that an entity that entered into or carried out the scheme had the
sole or dominant purpose of getting a scheme benefit for itself or another entity, and

(2) it must not be reasonably arguable that the scheme benefit was available under the tax laws.

If the scheme has not yet been implemented at the time of promotion, it must be reasonable to conclude
that these conditions would have been satisfied if the scheme was implemented.
Some of these terms need further explanation:
• a scheme has its normal wide meaning of any arrangement, scheme, plan, proposal, action, course of
action or course of conduct (¶20-020)

• tax includes GST

 • in determining what is an entity’s “sole or dominant” purpose, their subjective intention may be taken
into account (Ludekens). The required purpose may exist at any time during the whole period prior to
and after implementation, whether or not the scheme was implemented or whether it is partly or fully
implemented (Ludekens)

• there is a scheme benefit if (1) a tax-related liability of the entity for an accounting period is, or could
reasonably be expected to be, less than it would have been apart from the scheme; or (2) a tax-
related amount due to the taxpayer for an accounting period is, or could reasonably be expected to
be, higher than it would have been apart from the scheme. This is essentially a test of the entity’s
purpose, not a requirement that it be shown what the alternative position would have been
(Ludekens). In this respect, this differs from the test applying under the general anti-avoidance
provisions (¶20-040) (Administration Act, Sch 1, s 284-150)

• what is reasonably arguable is determined objectively at the time of the promoter’s conduct, not with
the benefit of hindsight. When examining what is reasonably arguable, the court can take into
account anything that the Commissioner can do under a taxation law, including issuing a
determination cancelling a GST benefit (¶20-070). To be reasonably arguable, the taxpayer’s position
must be about as likely as not to be correct, when regard is had to the relevant legal authorities
(Pridecraft Pty Ltd v FC of T 2005 ATC 4001; Miscellaneous Taxation Ruling MT 2008/2). Subjective
considerations are irrelevant (FC of T v Traviati 2012 ATC ¶20-321; [2012] FCA 546). Internal legal
advice obtained by the Commissioner in relation to a taxpayer’s case was not liable to be produced
to the tribunal in determining whether the position adopted by that taxpayer was reasonably arguable
(FC of T v ACN 154 520 199 Pty Ltd v FC of T (in liq) [2018] FCA 1140).

Examples
(1) If a scheme is implemented in accordance with an Tax Office public ruling, it would not be a tax exploitation scheme because it is
reasonably arguable that the scheme is in accordance with the tax law. The same may apply if the implementation was in
accordance with private rulings that had been issued to all participants.
(2) By the time a scheme is being promoted, a respected tax counsel’s opinion has been obtained saying that the scheme is in
accordance with tax law. Some years later, after protracted legal battles in which the different courts took different positions, the
scheme is struck down under Div 165 by a narrow majority of the High Court. In these circumstances, it could be said that it was
reasonably arguable at the time of the promotion that the scheme accorded with GST law and was, therefore, not a tax exploitation
scheme.

Tax Office’s compliance focus

The Tax Office has indicated that it will be concentrating on schemes that are unnecessarily complex or
lack commercial or economic benefit, lack risk, have non-commercial terms or non-arm’s length dealings,
or have a gap between substance and form. These schemes are sometimes flagged by the Tax Office
issuing a Tax Alert (¶18-030).
The Tax Office’s current areas of concern include:
• problematic marketing of tax services

• contingent fees impeding objectivity of advice

• ineffective use of caveats

• misrepresentation of facts in ruling applications

• misuse of Tax Office advice

• incorrect implementation (¶20-120) and marketing of product ruling arrangements.

Factors taken into account by the Tax Office in prioritising cases include:
• whether the arrangement has a legitimate commercial purpose
 • whether the arrangement is reasonably arguable

• the age of the arrangement — the longer it has proliferated, the more important intervention may be

• likelihood of proliferation

• role of the promoter

• number and role of participants involved in the scheme

• degree of significant assessed risk to the revenue.

The nature of the Tax Office compliance’s activity varies according to the risk rating of the promoter, as
measured by the likelihood and consequences of non-compliance. Visible, ongoing and interventionist
activity is directed at the higher end of risk, ranging down to regular and systematic monitoring at the
lower end. In determining the specific actions that should be taken in a particular case, the Tax Office will
also consider factors such as the seriousness and deliberateness of the conduct, the taxpayer’s
compliance history and degree of cooperation, its willingness to address the conduct (for example, by
recompensing participants) and the availability of other sanctions; see also ¶20-130.
The Tax Office suggests that good governance practices for tax advisers and other intermediaries would
include:
• prevention and detection of contraventions

• containment and rectification of effects of contraventions (Tax Office guide Good Governance and
Promoter Penalty Laws (NAT 73779)).

In promoter penalty cases, the Tax Office’s practice is to exercise its formal information gathering powers
(¶18-110) at first instance, instead of first seeking the information informally on a voluntary basis (Address
by Deputy Commissioner Dyce, “Administration of the Promoter Penalties Regime and recent Court
decisions”, 22 May 2014).
Other entity being a promoter
The prohibition on conduct that results in another entity being a promoter has particular application to
individuals that attempt to act through other structures which may have minimal assets. However, the
prohibition is not triggered by merely peripheral conduct. It is apparently necessary that there be some
active engagement in causing another to be a promoter. This could apply, for example, where a
managing director of a company or a partner takes decisions that result in the company or partnership
becoming a promoter.
Conduct outside Australia
The promoter penalty rules extend to conduct taking place outside Australia (Administration Act, Sch 1, s
290-10).
[GSTG ¶83-760]

¶20-120 Non-conforming implementation of scheme

The second prohibition applies to conduct that results in a scheme that has previously been promoted on
the basis of conformity with a product ruling being implemented in a way that is materially different from
that described in the ruling (Administration Act, Sch 1, s 290-50). It is not necessary that the scheme is a
“tax exploitation scheme”.
There will only be a “material” difference if there is a potential for a different tax outcome. If the scheme is
implemented in a different way than described in the product ruling, but has the same tax outcome for
scheme participants, the prohibition does not apply.

Example
 An investor in a plantation scheme installs a drip system for watering seedlings instead of micro-sprayers, on advice from experts
that this would result in more efficient irrigation of the plantation. This is a difference from the implementation plan set out in the
product ruling application. However, if it does not impact on the commercial viability of the scheme or on the tax consequences for
investors, then it would not be a “material” difference. (Based on Explanatory Memorandum.)

The mere fact that an entity which is not within the class of entities to whom the product ruling applies
enters into the scheme does not cause the scheme to be “implemented in a way that is materially different
from that described in the product ruling” (FC of T v Ludekens [2013] FCAFC 100).
For an income tax case involving non-conforming implementation of a scheme, see Barossa Vines at ¶20-
130.
[GSTG ¶83-770]

¶20-130 Imposition of penalty

The maximum penalty for either form of prohibited conduct is the greater of:
• 5,000 “penalty units” (¶18-000) for an individual, or 25,000 penalty units for a body corporate, and

• twice the consideration received or receivable by the entity or its associates in relation to the scheme
(Administration Act, Sch 1, s 290-50).

For this purpose, the consideration may be direct or indirect, and be in money or in kind. It is not limited to
the consideration for the actual promotional or implementation activities.
Relevant factors in setting the penalty include:
• the amount of consideration

• likely deterrent effect

• loss or damage suffered by participants in the scheme

• nature and extent of the contravention

• deliberateness, duration and other circumstances of the contravention

• steps taken by the entity to avoid the contravention

• previous record in this area, and

• degree of cooperation.

The extent to which the conduct was due to an honest and reasonable mistake about the law may be
taken into account. As noted below, reasonable mistakes of fact may constitute a complete defence.
As there may be more than one promoter or implementer of a scheme, each may be liable according to
their particular circumstances. For example, in FC of T v Barossa Vines Ltd & Ors 2014 ATC ¶20-436, a
case involving non-conforming implementation of a scheme (¶20-120), penalties of $625,000 were
imposed on a corporate offender and $125,000 on individual directors. The court also said, however, that
where there are multiple offences containing common elements, offenders should not be punished twice
for the commission of the elements that are common.
In setting a penalty of $180,000 in a case where over $5m was received by the promoters, the court noted
that (1) where there are multiple similar contraventions, the penalty must ensure that the offender is not
punished twice for what is essentially the same conduct; and (2) the fact that the offender is bankrupt and
has virtually no assets should also be taken into account (FC of T v Ludekens & Anor [2016] FCA 755).
A penalty of $1m was imposed on a scheme promoter, together with penalties totalling $500,000 on two
associated companies, where the nature and extent of the contraventions were substantial and extensive,
the conduct was deliberate, there was a failure to cooperate with the Commissioner at any point, and
there was no remorse or contrition shown (FC of T v Arnold & Ors 2015 ATC ¶20-486).
A civil penalty cannot be imposed if the entity has already been convicted of a criminal offence arising out
of the relevant conduct. Once criminal proceedings have been started, any civil penalty proceedings
pending in relation to the same conduct should be stayed. However, criminal proceedings may be
instituted even though a civil penalty has already been imposed.
Reasonable mistake, precautions or reliance
An entity is not liable for penalty if:
• the conduct was due to a reasonable mistake of fact, or

• the conduct was due to the act or default of another (not an employee or agent), or due to an accident
or some other cause beyond the entity’s control, and the entity took reasonable precautions and
exercised due diligence to avoid the conduct.

In addition, the Commissioner cannot apply for a penalty against a promoter if the scheme is based on an
application of the tax law that agrees with a statement in an approved Tax Office publication, or with
advice given to the promoter by the Tax Office. Advice given in a private ruling to a scheme participant
would not qualify, as it is not advice to the promoter (Administration Act, Sch 1, s 290-55).
Ignorance
If the entity’s conduct is prohibited on the ground that it results in another being a promoter, the entity is
not liable for penalty if it satisfies the court that it did not know that its conduct would have that result, and
could not reasonably be expected to have known. A corresponding defence applies where the conduct
consists of a non-conforming implementation of a scheme.
Employees
An employee is not liable for penalty if their employer has already been penalised in relation to the same
scheme.
Time limits
The Commissioner cannot apply for a penalty if more than four years have elapsed since the entity last
engaged in the relevant conduct. This mirrors the period for which taxpayers are at risk of scheme
penalties. However, the four-year limitation does not apply where the scheme involved tax evasion, eg
fraud or intentional disregard of tax law.
As long as the Commissioner can show that the entity engaged in the relevant conduct within four years
of the Commissioner’s making the application, all related conduct that occurred before that date may also
be relied on (FC of T v Ludekens [2013] FCAFC 100).
Factors in favour of a civil penalty as the appropriate remedy, rather than an injunction or voluntary
undertaking (¶20-140), include where the entity:
• is knowingly engaging in conduct that is likely to be prohibited and evidence indicates that the entity is
unwilling to modify its behaviour

• has as its main income source the promotion of schemes

• has a history of promoting as a major source of income

• has a large degree of control or influence over whether the prohibited conduct occurs

• uses tactics to frustrate the progression of the ATO’s investigation

• has engaged in prohibited conduct on a significant scale in terms of the number of entities or amounts
involved, and/or

• has promoted a tax exploitation scheme for which participants have or will receive penalties (Address
by Deputy Commissioner Dyce, “Administration of the Promoter Penalties Regime and recent Court
 decisions”, 22 May 2014).

[GSTG ¶83-780]

¶20-140 Injunctions and voluntary undertakings

The Commissioner can apply to the Federal Court to grant an injunction where an entity is engaging in
prohibited types of conduct, or is proposing to do so (Administration Act, Sch 1, s 290-120). The injunction
may restrain the entity from doing something (eg from promoting a scheme), or may require it to do
something (eg to remedy a contravention). This procedure may be used as an alternative to imposing a
penalty, or in addition to it. Interim injunctions can be granted pending a full hearing. However, no
injunction can be granted against an entity while the entity’s application for a product ruling in relation to
the scheme is still unresolved by the Tax Office.
Factors in favour of an injunction application as the appropriate strategy include:
• the potential for further participation in the arrangement as a result of future prohibited conduct

• degree of significant ongoing level of risk to revenue

• the entity has an adequate degree of control over whether the prohibited conduct occurs

• the entity is not willing to assist the Commissioner in resolving the issue or to modify its conduct
without compulsion, and/or it has breached or circumvented undertakings, and/or

• there is a need for urgency in addressing prohibited conduct, such as a forthcoming promotional
seminar (Address by Deputy Commissioner Dyce, “Administration of the Promoter Penalties Regime
and recent Court decisions”, 22 May 2014).

Voluntary undertakings
As part of its administration of the tax scheme promoter rules, the Tax Office can also accept voluntary
undertakings from entities. If the terms of the undertaking are breached, the Commissioner can apply to
the Federal Court for an order compelling the entity to comply (Administration Act, Sch 1, s 290-200).
Voluntary undertakings provide an opportunity for an outcome that is more flexible, timely and cost-
effective than normal injunction or penalty proceedings. In many cases, the Commissioner may explore
the possibility of this procedure before proceeding to those, but is not under any obligation to do so.
Factors in favour of an undertaking as the appropriate remedy include:
• the entity is willing to provide full disclosure about its own activities and the activities of others involved
in the scheme

• the entity is willing to rectify its conduct including by recompensing participants

• the entity has alternative sources of income other than that derived from engaging in the prohibited
conduct

• the entity was lower in the chain of command/decision making structure than other entities involved in
the scheme

• the risk to revenue is low

• the argument in relation to the availability of the scheme benefit is not clear cut, and/or

• the conduct was apparently inadvertent.

[GSTG ¶83-790]
PLANNING • PRICING • CASHFLOW
PRICING
Failure to disclose GST in price ¶21-010
Pricing in the black economy ¶21-045
CASHFLOW
Impact on cashflow ¶21-050
Effect of accounting basis on cashflow ¶21-060
Other factors affecting cashflow ¶21-070
OTHER PLANNING ISSUES
Some other planning issues ¶21-100

Editorial information

Summary
In this chapter, we look at some of the practical impacts of GST and the opportunities and traps that
it presents. Two crucial areas are the impact of GST on pricing and on cashflow. Other planning
issues are also highlighted.

PRICING
¶21-010 Failure to disclose GST in price

Where a company’s supply is taxable, quoting only a GST-exclusive price may contravene certain
provisions of the Competition and Consumer Act 2010 (CCA). This legislation was formerly known as the
Trade Practices Act 1974 (TPA). The provisions relate to:
• misleading or deceptive conduct (CCA Sch 2, s 18; former TPA s 52), or

• false or misleading statements with respect to price (CCA Sch 2, s 29(1)(i); former TPA s 53(e)).

For example, where the GST-exclusive price of a product was $295, the Federal Court held that
advertising the product as costing $295 without any reference at all to the GST contravened both of these
provisions. The same applied to advertising the product as costing “from $295” even though there was an
asterisk to a fine print qualification on another page stating “plus GST where applicable” (ACCC v
Signature Security Group Pty Ltd [2003] FCA 3).
The Federal Court said that advertising the product as costing “$295 plus GST” did not contravene these
provisions, provided the reference to the GST was given adequate prominence. However, it contravened
the separate provision in TPA s 53C (see now CCA Sch 2, s 48), which requires the cash price to be
specified in cases where there has been a representation as to part of the price. The court indicated that
to comply with that requirement it would have been sufficient to state that the price was “$295 plus GST of
$29.50”. It was not necessary to also state the total price, ie $324.50.
The court also ruled that falsely claiming that a business had a special arrangement with the Tax Office
enabling it to quote GST-exclusive prices was a breach of TPA s 53(d), relating to false claims of approval
(see now CCA Sch 2, s 29).
ACCC guidelines
According to the ACCC guidelines, displayed prices should be GST-inclusive. In other words, consumers
should know the selling price before purchasing the item at the cash register. Similarly, where prices are
quoted to end-use customers, the quote should be on a GST-inclusive basis.
However, there are some exceptions to this rule. Auction prices may be GST-inclusive or GST-exclusive
as long as the basis of the bidding is made known at the beginning of the auction. Furthermore, if a price
list is used exclusively for business consumers who are able to claim input tax credits, and the
established practice was to list sales tax exclusive prices, that practice may continue, provided that it is
clearly indicated that GST has not been included.
Difficulties can arise where sales are made over the internet. Under guidelines agreed between the ACCC
and the eBay Australian auction site, all sellers on that site must include any applicable GST in the
auction or “Buy It Now” price. This means that all listings on the site should be GST-inclusive. For the
situation where sales to non-residents may be GST-free exports, see ¶9-240.

¶21-045 Pricing in the black economy

The government’s stated hope was that GST would help to counter the “black” or “cash” economy. This
economy includes businesses that provide goods and services, typically for cash and at a discounted
rate, and do not disclose their income to the Tax Office. Under the GST system, these businesses have to
pay GST on the things they purchase and have to register if they want to claim input tax credits for that
GST. They may also, as a practical matter, need to keep better records — this may in turn create paper
trails for Tax Office auditors who will be familiar with normal industry trading margins. The obligation to
quote an Australian Business Number on invoices in order to avoid tax being withheld also acts as a
disincentive for potential avoiders (¶3-050), as did — to a limited extent — the reduction in income tax
rates that accompanied the introduction of GST.
However, this may not apply in all cases. Some black economy operators may not have significant
business inputs on which GST has applied, and may not need to claim input tax credits. For these
operators, continuing in the black economy with complaisant consumer customers may still look
attractive. Although the risks of detection — and penalties — have probably increased, they have the
added price advantage of not having to add GST, as well as the advantage of evading income tax.
Alternatively, they might fraudulently charge an amount as “GST”, but not account for it to the Tax Office.
To the extent that black economy operators are eliminated, their removal might actually reduce price
competition in some markets as one source of discounting is removed.
The government has estimated that the size of the black economy could be as large as $25b.
Countermeasures
The detection and discouragement of GST evasion in the cash economy continues to be one of the
priorities in the Tax Office’s compliance activities, including:
• comparisons of businesses against the relevant small business benchmarks (¶18-175)

• high-risk businesses (for example, plasterers and coffee shop operators)

• tax agents with large numbers of clients outside the benchmarks

• data matching (¶18-175).

In 2019/20, the Tax Office expects to visit around 10,000 small businesses in order to check compliance,
with particular attention being paid to Northern Territory, Queensland and Victoria (ATO Media Releases
23 May 2019).
In addition, countermeasures apply to:
(1) prohibit the creation, distribution and possession of electronic sales suppression tools in relation to
tax-related transactions or records, effective from 4 October 2018 (Administration Act, Sch 1 ss
8WAA to s 8WAE; ss 288-125 to 288-135), and

(2) impose third party reporting obligations for certain types of transaction (¶18-110).

For the extension of the Director Penalty Regime to GST, LCT and WET, see ¶20-000.

CASHFLOW
¶21-050 Impact on cashflow

One of the claimed advantages of the GST is that businesses get cashflow benefits, because they have
the benefit of holding the GST they have received from their customers before having to remit it to the Tax
Office. On the other hand, however, businesses also have to pay GST-inclusive prices for their own
business purchases, and cannot recover this as a credit until the return is lodged for the relevant tax
period. This amount will normally be less than the GST received from their customers, but it must
obviously be taken into account in evaluating the cashflow benefits.
Suppliers of GST-free or input taxed goods and services also do not get the cashflow benefit of charging
GST-inclusive prices.
All other things being equal, a business may normally have an interest in collecting GST on sales early in
the tax period and incurring GST on purchases late in the period. This will maximise the benefit of holding
GST while minimising the delay between incurring GST and getting a credit for it. This can be particularly
significant for businesses with quarterly tax periods.

Example
Goliath Manufacturing has quarterly tax periods and operates on a cash basis. During the tax period ending 30 September, it:
• receives $165,000 (including $15,000 GST) on 1 July, as the proceeds of a sale

• pays out $110,000 (including $10,000 GST) on 30 September, as the cost of a purchase.

Goliath lodges its return and pays the $5,000 net GST to the Tax Office on 28 October. It has therefore had the use of the $15,000
GST it has collected for 119 days. It has lost the use of the extra $10,000 GST it has paid for only 28 days.

To the extent that the GST generates a positive cashflow, businesses may use or invest the temporary
extra funds as appropriate. However, they must also ensure that they will have enough to pay the GST to
the Tax Office when the time comes. This may require special monitoring.
[GSTG ¶80-050]

¶21-060 Effect of accounting basis on cashflow

Cashflow may be easier to monitor if, as in the example above, the business operates on a cash basis.
However, the cash basis is normally limited to small business entities, or to businesses that can convince
the Tax Office that a cash basis is appropriate (¶7-300). This may be difficult or impracticable if the
business uses an accruals basis for income tax purposes.
Many businesses are therefore required to operate on the accruals basis for the purposes of the GST.
This generally means that the business includes GST when it issues invoices and claims an input tax
credit when invoices are issued to it. In other words, the GST liabilities are set, even though payment has
not yet been made or received. As a result of the time gap between invoicing and payment, an accruals
basis business may therefore find that it is accounting for GST that it has not yet collected, and getting
credits for tax that it has not yet paid. In a case where the GST exceeds credits claimed, this could have a
negative effect on cashflow.
 Example
Donald Ltd operates on the accruals basis and has quarterly tax periods. On 24 June, it is invoiced for $22,000 (including $2,000
GST) worth of supplies. It is allowed 30 days to pay and pays on time. Also on 24 June, Donald Ltd issues an invoice for $33,000
(including $3,000 GST). The invoice allows the customer 40 days to pay.
The company has to account for the net GST amount of $1,000 (ie $3,000 less $2,000) in its return for the June quarter, which it
pays on 28 July. Even if the customer pays on time (by 3 August), the company will effectively have paid the Tax Office $1,000 that
it has not yet collected. If the customer is late in paying, the company is out of pocket for an even longer time.

This is particularly likely to happen if:

• the business allows its customers a longer time to pay than the business is allowed by its own
suppliers

• the customers of the business are slow payers

• the business has little or no input tax credits (eg where the main expenses of the business are salary
and wages), or

• the business sells on credit but buys for cash.

To minimise these problems, you may need to investigate the following:

• reducing the time allowed to your customers to pay

• educating your customers to pay on time

• providing incentives for customers to pay early, and

• obtaining extensions of the time allowed for you to pay your own suppliers.

In some cases where an invoice is about to be issued near the end of a tax period, there may be an
advantage in deferring the issue to the start of the next tax period, particularly, if the amount involved is
large and the supplier has quarterly tax periods. (This may not be appropriate if it means that revenue is
deferred into the next financial year, affecting revenue and profit figures.)

Example
Pluto Ltd operates on the accruals basis and has quarterly tax periods. During the period ending 30 September, it negotiates a major
sale of $5.5m (including $500,000 GST). If it invoices the sale on 30 September, it must account for the GST in its return lodged on
28 October. If it invoices the sale on 1 October, it need not account for the GST until its return lodged on the following 28 February
(¶8-005).

On the other hand, an accruals basis purchaser may wish to accelerate its claim for a credit by being
invoiced on the earlier date, particularly, if it has quarterly tax periods.

Example
Reliable Ltd is the purchaser from Pluto in the previous example. It operates on the accruals basis and has quarterly tax periods. If it
is invoiced on 30 September, it can claim an input tax credit in its return lodged on 28 October. If it is invoiced on 1 October, it
cannot claim the credit until its return lodged on the following 28 February (¶8-005).

You need to be aware, however, that the anti-avoidance measures may apply where businesses try to
obtain timing advantages in such situations. As a minimum, you may need to ensure that your invoicing
procedures reflect business reality and that the transaction is commercially based. Beyond this, it is
difficult to say how far the anti-avoidance measures may reach. For other arrangements designed to
achieve timing benefits between cash basis sellers and accruals basis purchasers, see ¶21-070.
There will also be an incentive for accruals based businesses to have efficient procedures for identifying
and writing off bad or overdue debts (¶6-210), so as to ensure that GST adjustments in their favour can
be made as early as possible.
[GSTG ¶80-050]

¶21-070 Other factors affecting cashflow

Cashflow may also be affected by a number of other factors.

If supplies are input taxed
A business will normally not be able to claim input tax credits at all to the extent that its supplies are input
taxed. So, for example, residential lessors will not be able to claim input tax credits for the GST they pay
on the goods and services they buy in connection with their leasing business. In some cases, this will
mean that there is an incentive to use employees rather than outsourced labour to provide those services,
as GST is not payable on wages. In the case of financial suppliers, special rules apply to help overcome
this possible bias (¶10-040).
Use of monthly tax periods
If a business is making GST-free supplies (eg as an exporter, meat processor or pharmacist), it will not be
liable for GST and therefore will not be collecting it from its customers. On the other hand, it will be
entitled to claim input tax credits on its own business purchases. That business may therefore have an
incentive to adopt monthly tax periods, rather than quarterly, so as to reduce the delay in claiming those
credits. The government has indicated that this type of arrangement would not be caught by the anti-
avoidance provisions.
There may also be an advantage in having monthly tax periods where:
• the business requires expensive capital equipment, and therefore has large amounts of input tax
credits that it wishes to claim as quickly as possible, or

• the business is new or developing and expenses exceed revenue.

Where GST is payable by instalments

The option for small businesses to pay GST by instalments (¶8-037) can affect cashflow in various ways,
particularly, if there has been a change in trading patterns. For example, if the instalments notified by the
Commissioner are based on a period of unusually high business activity, a variation may be appropriate
in order to preserve cashflow. On the other hand, if the instalments notified by the Commissioner are
based on a period of unusually low business activity, there may be a cashflow benefit in simply accepting
those amounts.
Primary producers and other averaging professionals may also get a cashflow benefit by deferring
payment of the first two instalments (¶8-037).
Taxable importations
Unless importers are approved under the GST deferral scheme, they will have a cashflow disadvantage
compared to domestic suppliers because they will have to pay GST up-front (¶9-005). To obtain approval,
however, importers must use monthly rather than quarterly tax periods.
Deferred settlements and instalment purchases
If a cash basis taxpayer sells real estate to an accruals basis purchaser, the seller is only liable to account
for GST on money actually received, but the purchaser can claim an input tax credit for the total purchase
price once the contract is signed and a tax invoice is provided. This may create incentives to defer
settlement to a later tax period.
Similar considerations apply where there is a contract involving payment by instalments. Taking this to an
extreme, some schemes have been devised where a cash basis seller sells goods to a related accruals
basis purchaser at a commercially unrealistic price, payable in instalments over a protracted period. This
is designed to enable the purchaser to claim an immediate input tax credit for the whole amount, whereas
the seller is only required to account for the GST on the instalments as they are received (if ever). The
ATO has warned that these arrangements are under review (Taxpayer Alert TA 2004/1).
Where the purchaser is on the cash basis, the parties cannot accelerate the claiming of input tax credits
by agreeing that an amount representing the GST component of the whole consideration is payable at the
time of the first instalment (¶7-320). Note also that the payment of a deposit does not of itself have GST
consequences unless and until the deposit is either applied or forfeited (¶4-070).
The position is different for a seller who is on the accruals basis. For example, an accruals basis seller
under an instalment contract will become liable for GST on the whole of the price once the invoice is
issued, even though instalments may not be received until later tax periods. This can have a negative
impact on cashflow.
You should also refer to the Tax Office’s practice on special types of contracts, such as agricultural
pooling arrangements and contracts subject to cooling-off periods (¶7-440). Lay-by transactions are also
subject to special rules (¶7-430).
If business is entitled to a refund
If input tax credits exceed the GST for a tax period, the business is entitled to a refund from the Tax
Office. As refunds are payable within 14 days after the return is lodged, there is an incentive to lodge the
return early. There is no requirement to wait the usual period after the end of the tax period.
Grouping provisions
Forming a GST group may improve cashflow because GST does not apply to intra-group supplies, and
because refunds due to some members can be offset against the GST payable by others. As explained at
¶17-040, cashflow may also be improved by appropriate choices as to who should form part of the group.
Recovery of GST
Businesses can suffer significant problems if contracts do not allow them to recover GST as part of the
price paid by the customer, or if contractual provisions limit their capacity to claim input tax credits on their
acquisitions (¶19-400).
Changed or irregular sales patterns
There can be difficulties if a business’s sales are concentrated into one part of the year, so that it has a
positive cashflow effect from GST for that period but a negative cashflow effect for the majority of the
year.
Non-quotation of ABN
As noted at ¶3-050, if a business does not quote its ABN on invoices to other businesses, those
businesses may be required to withhold tax from the payment. Although this will effectively be accounted
for in the next tax return, the loss of revenue in the meantime will have a negative effect on cashflow.
Nature of industry
GST liabilities are typically high for industries such as wholesalers, property/business services,
manufacturing and retail. On the other hand, industries that provide mainly GST-free supplies — such as
government administration, defence, export-based mining, agriculture, education, health and community
services — typically have low GST liabilities, or even net entitlements to refunds.
Effect of compliance costs
In evaluating cashflow benefits, you will also need to take into account the effects of GST compliance
costs. These include:
• initial set-up costs involved in making a newly-registered business “GST-ready”. These include
accounting, training, records, administration and stock valuation costs (¶2-010)

• ongoing administrative and paperwork costs of complying with the GST system.

Particularly with smaller businesses, these may have a significant impact on any cashflow advantages.
Any penalties that are imposed may also have a significant effect.
 [GSTG ¶80-050]

OTHER PLANNING ISSUES

¶21-100 Some other planning issues

Apart from the pricing and cashflow issues already mentioned, here are some other planning suggestions
for areas affected by GST.
Managing GST.
Businesses need to have a strategy to manage the GST. For the factors involved, see ¶2-010.
Registration.
If your GST turnover is less than $75,000, you may choose not to register for GST. For the pros and cons
of registration, see ¶3-010.
Auctions.
When buying at an auction, you must be clear as to whether it is being conducted on a GST-inclusive or
GST-exclusive basis (¶4-210).
Incidental supplies of credit.
If you provide credit as an incidental part of your business, you may still be able to claim input tax credits
on related acquisitions (¶5-020; ¶10-030).
Tax invoices.
When claiming input tax credits, you must ensure that documents purporting to be tax invoices supporting
the claim in fact comply with the detailed requirements (¶5-110).
Sale of business.
(1) Anomalous results may occur where the seller of a business does not allow for GST on the basis of an
incorrect belief that the conditions for exemption are satisfied. Sellers should therefore ensure that this is
covered in the contract (¶11-510); (2) where a company is involved, consideration should be given to the
relative merits of acquisition of shares and acquisition of underlying assets (¶11-530); and (3) use of the
going concern exemption may ultimately be GST neutral, but produce cashflow advantages and savings
in duty (¶11-510).
Turnover clauses.
A contract such as a lease or franchise may impose obligations or set fees according to the amount of the
turnover of one of the parties. For contracts spanning 1 July 2000, it will need to be made clear whether
that turnover amount includes GST (¶11-340).
Accounting provisions.
Where there is uncertainty about the impact or amount of GST on particular business transactions, it may
be appropriate to make a provision in the accounts for any adjustments that may ultimately be required.
Grouping.
The special rules that enable some groups to be treated as a single taxpayer provide some opportunities
(¶17-020).
Quantity discounts.
As GST is based on price, purchasers who are in a position to negotiate discounts will get the benefit not
only of a reduced price but also of reduced GST.
Outsourcing.
There are differences in the GST treatment of in-house employees and independent contractors which
can become important if the services are being provided to an input taxed business (¶4-090).
[GSTG ¶80-000]
WINE EQUALISATION TAX
OUTLINE OF WINE EQUALISATION TAX
Outline of WET ¶22-000
What is wine? ¶22-010
ASSESSABLE DEALINGS
Summary of assessable dealings ¶22-150
Wholesale sales ¶22-160
Certain retail sales ¶22-165
Application to own use ¶22-170
Local entry of imported wine ¶22-180
Removal from customs clearance area ¶22-185
CALCULATING AND PAYING WET
Calculating WET and taxable value ¶22-280
Notional wholesale selling price ¶22-290
Paying WET ¶22-300
EXEMPTIONS FROM WET
Summary of exemptions ¶22-400
Quoting on a dealing ¶22-420
Form of quoting ¶22-430
WET CREDITS
What is a WET credit? ¶22-530
Grounds for claiming WET tax credits ¶22-550
Wine producer rebate ¶22-560
Changes to rebate to apply in 2018 ¶22-570

Editorial information

Summary
Wine equalisation tax (WET) is levied at a rate of 29% on dealings in wine, wine products including
non-grape wines, cider, perry, mead and sake. WET is payable by wine manufacturers, wine
wholesalers and wine importers, though some important exemptions, such as the producer rebate,
apply. Generally, WET is imposed on the last wholesale sale of wine in Australia (or an equivalent
transaction). The amount of WET that must be paid is added to the net amount payable for each
tax period.
In most cases, WET is calculated on the GST-exclusive value of the wine.
OUTLINE OF WINE EQUALISATION TAX
¶22-000 Outline of WET

Wine equalisation tax commenced operation on 1 July 2000. It is commonly abbreviated to WET or “wine
tax”. It was introduced to avoid “dramatic and dislocating” price falls that would otherwise have resulted
from the abolition of sales tax.
WET applies to a wide range of alcoholic wine products (¶22-010). It is normally levied on the final sale at
the wholesale level of the wine in Australia (¶22-150), and is calculated as 29% of the wholesale selling
price. It applies to imported wine as well as Australian wine. It applies only to entities that are registered,
or required to be registered, and is additional to any GST that is payable (¶13-190).
If there has not been any wholesale sale — for example, where the grower sells the wine direct by retail
— WET may be imposed on the appropriate retail sale or use (¶22-165).
Various exemptions are allowed, for example, for wine that is exported or for dealings where the
purchaser is entitled to quote its ABN (¶22-400). Credits apply in some situations, such as where there
would otherwise be double taxation (¶22-530). An annual WET rebate is allowed to producers for
wholesale wine sales up to a certain level (¶22-560).
WET is governed by the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act), and associated
Imposition Acts and Regulations. It is collected in the same way as GST (¶22-300).
A transitional credit applied to wine stocks held at 1 July 2000 which had already been subject to the
former sales tax (Transition Act, s 16A; 16AB; 16B).
ATO flowchart
The following simplified flowchart, based on WET Ruling WETR 2009/1, shows how liability for WET is
determined in common situations.
¶22-010 What is wine?

“Wine” means any of the following beverages, provided that they contain at least 1.15% of alcohol by
volume:
• grape wine

• grape wine products

• fruit or vegetable wines

• cider or perry

• mead

• sake (WET Act, s 31-1).

Beverage has its normal meaning of a drink of any kind (Bristol–Myers Company Pty Ltd v FC of T 90
ATC 4553).
Grape wine is the product of the complete or partial fermentation of fresh grapes or products derived
solely from fresh grapes, and must not contain more than 22% of alcohol by volume (WET Act, s 31-2;
WET Regulations, reg 31-2.01). It includes traditional products such as table wine, sparkling wine, dessert
wine, brandy and beverages that have grape spirit or brandy added to them. It may include non-
fermented additives, such as grape juice, if they are a normal part of the production process, but this
would not extend to situations where the additive comprised 60% by volume of the final beverage
(Interpretative Decision ID 2011/92). A beverage that consisted of only 30% grape wine was considered
not to be grape wine (Interpretative Decision ID 2007/192). The definition does not impose any
requirements as to the appearance, state or other characteristics of the final product, other than the
requirement that for the beverage to be produced from the fermentation of fresh grapes or products
derived solely from fresh grapes. There is also no requirement that the product must have the “essential
character” of wine (Diva Beverages Holdings Ltd v FC of T [2018] FCA 576).
Grape wine products must contain at least 70% of grape wine. Their alcohol content must be at least
8% but no more than 22% by volume. They must not contain alcohol from any other source, except grape
spirit or — in certain circumstances — alcohol used in preparing vegetable extracts (WET Act, s 31-3;
WET Regulations, reg 31-3.01).
The effect is that they include marsala, vermouth, green ginger wine, and wine-based cocktails, creams
and imitation liqueurs. They do not include spirit-based cocktails, creams and liqueurs. Wine coolers,
ready-mixed or “designer” drinks usually have a low alcoholic content and would therefore not be grape
wine product because of the 8% alcoholic threshold. Designer drinks based only on non-grape spirits
would not be covered in any event.
Grape wine products also must not have added to them the flavour of any alcoholic beverage other than
wine, irrespective of whether that flavouring agent is itself alcoholic (WET Regulations, reg 31-3.01). They
therefore exclude products that mimic the taste of a spirit flavoured beverage. For example, a product that
has a non-alcoholic additive that gives it the flavour of a cosmopolitan cocktail is not a grape wine product
(Interpretative Decision ID 2011/5). These products are therefore not taxed as wine subject to WET, and
are instead taxed at higher rates under the Excise Tariff Act 1921.
Fruit or vegetable wine is the product of the complete or partial fermentation of the juice of fruit or
vegetables, or of products derived solely from fruit or vegetables. Grape spirit or neutral spirit may be
added to it, but not any other alcohol or any liquor or substance that gives colour or flavour. Where spirit
is added, the alcoholic content of the fortified wine must be at least 15% and not more than 22% (WET
Act, s 31-4; WET Regulations, reg 31-4.01). Ready-mixed drinks or designer drinks containing alcohol
distilled from fruits would usually not be fruit or vegetable wine because of the relevant alcohol threshold.
Cider or perry is the product of the fermentation of the juice of apples and/or pears. Traditional, draught,
dry or sweet cider and perry may all qualify. It must not have alcohol added from any other source, and
must not have any liquor or other colouring or flavouring substance added, other than water, apple or
pear juice (WET Act, s 31-5). For example, it would not include a beverage that had lemon, blackcurrant
or cola added.
Mead is the product of the complete or partial fermentation of honey. Honey mead, fortified mead, liqueur
mead and spiced mead may all qualify. Grape spirit or neutral spirit may be added to mead, but not any
other alcohol or any liquor or substance that gives colour or flavour, other than honey, herbs and spices,
caramel (after fermentation of the mead) or non-fermented fruit or fruit product (before fermentation of the
mead). If fruit or fruit product is added, the honey content of the mead must be at least 14% and the fruit
content no more than 30%; in addition, the alcoholic content of the mead must be at least 8% and not
more than 22%. If grape wine or neutral spirit is added to mead, the alcoholic content of the fortified mead
must be at least 15% and not more than 22% (WET Act, s 31-6; WET Regulations, reg 31-6.01).
Sake is the product of the complete or partial fermentation of rice. No alcohol from any other source can
be added, nor any liquor or substance that gives colour or flavour (WET Act, s 31-7). Sake includes
fermented sake and rice wine, but not distilled sake.
The Commissioner considers that wine may include “raw wine”, provided that it satisfies the relevant
requirements set out above. Raw wine is wine that has undergone primary fermentation, even though it
may require further processing in order to make it more commercially saleable (WET Ruling WETR
2009/1).

ASSESSABLE DEALINGS
¶22-150 Summary of assessable dealings
Essentially, WET is a value-based tax directed at the final sale of wine at the wholesale level or an
equivalent transaction. Intermediate steps are covered by a system of exemptions (¶22-420).
For WET to apply, there must be a “taxable dealing” in wine that is in Australia. A taxable dealing is an
“assessable dealing” which does not qualify for an exemption (WET Act, s 5-5).
The categories of assessable dealings are:
(1) wholesale sales (¶22-160)

(2) certain retail sales (¶22-165)

(3) applications to own use (¶22-170)

(4) local entries of imported wine (¶22-180)

(5) removal from a customs clearance area (¶22-185).

To be liable for WET, an entity must be registered or must be required to be registered (¶3-000).
Registration for GST automatically acts as registration for WET.

¶22-160 Wholesale sales

Wholesale sales are the most common category of assessable dealings that may attract WET. There are
three types of wholesale sales that are assessable dealings:
• AD1a — wholesale sale of Australian wine by a wine manufacturer in the course of business

• AD1b — wholesale sale of Australian wine by a person other than the wine manufacturer

• AD11b — any wholesale sale of imported wine (WET Act, s 5-5).

In each case, the entity liable for WET on a wholesale sale is the seller, and the liability arises at the time
of sale.
A wholesale sale is a sale made to an entity that purchases the wine for the purpose of resale (WET Act,
s 33-1 definition). So, for example, it would include a sale:
• by a winery to a retailer (such as a bottle shop, hotel or restaurant)

• by a winery to a distributor, or

• by a distributor to a retailer.

The Commissioner considers that a “sale” occurs when ownership is transferred from one person to
another for a price (WET Ruling WETR 2009/1). This may include a supply by an entity, such as a wine
club, to its members (Interpretative Decision ID 2010/152). A sale also specifically includes a barter and
exchange transaction (WET Act, s 33-1 definition).

Example
Bacchus, a wine manufacturer, trades ten cases of wine in return for previous promotional activities supplied by a local bottle shop.
Although no money has changed hands, the transaction is a sale for the purposes of WET.

Sales made by a retailer to relieve a temporary stock shortage of another retailer, wine wholesaler or wine
manufacturer are not treated as wholesale sales.

Example
Bacchus, a wine manufacturer, underestimated demand for its chardonnay and has run out of stock. It will not be able to get any
more from its warehouse until after the weekend. To satisfy the demand over the weekend, it buys ten cases from the local Wine
 World retailer. Even though the chardonnay is sold to Bacchus for the purposes of resale by it, this is not a wholesale sale.
The same would apply if, say, a restaurant temporarily ran out of stock.

Where the price for a wholesale sale includes WET, the amount of WET must be specified on any invoice
given to the purchaser (WET Act, s 27-5). Failing to do this is an offence.

¶22-165 Certain retail sales

Retail sales are sales that are not wholesale sales. Normally, retail sales to end users are not assessable
dealings. However, they are treated as assessable dealings, and may therefore attract WET, in the
following limited situations (WET Act, s 5-5):
• AD2a — retail sale of Australian wine by a wine manufacturer, eg by cellar door or mail order to the
public

• AD2b and AD12b — retail sale of wine by someone who purchased the wine “under quote” (¶22-420)

• AD2c and AD12c — royalty-inclusive sale of wine (see below)

• AD2d and AD12d — indirect marketing sale of wine (see below)

• AD2e and AD12e — untaxed sale of wine (see below)

• AD2f and AD12f — wine repackaged after wholesale sale (see below).

In each case, the entity liable for WET on these retail sales is the seller, and the liability arises at the time
of sale.
Royalty-inclusive sale. This occurs where a retail sale occurs in the course of business and a royalty is
payable by the seller, an associate, or another entity under an arrangement (WET Act, s 5-15). In such a
case, the amount of the royalty will be factored into the taxable value of the sale (¶22-280). This only
applies, however, if the sale is not covered by any other category of assessable dealing.
Indirect marketing sale. This occurs where an entity other than the manufacturer makes a retail sale of
the wine, and the sale is made through some other entity under an arrangement (WET Act, s 5-20).
Examples of this include a consignment sale (but not if it is on a “sale or return” basis), an auction sale,
door-to-door sales and party-plan sales. There will also be an indirect marketing scheme where the non-
manufacturer makes a retail sale through premises that are held out to be another entity’s retail premises.
The reason that these retail sales are treated as assessable dealings is to ensure that the wine is taxed
on the full wholesale value.
Untaxed sale. There will be an “untaxed sale” where a retailer sells wine it purchased from a grower that
was not GST-registered (WET Act, s 5-25). There will also be an untaxed sale if a registered grower
makes a retail sale of wine that was produced from the grower’s grapes by a contract winemaker. In such
a case, the supply of the winemaking services by the contractor is not an assessable dealing (as it does
not involve a sale of the wine), though it will be subject to GST if the contractor is registered (WET Ruling
WETR 2009/1).
Wine packaged after wholesale sale. A special rule covers the situation where Australian or imported
wine is repackaged for retail sale after WET has already been applied at the wholesale level. This can
apply, for example, where a large retailer buys wine in bulk and then itself repackages the wine for retail
sale. In such a case, the retail sale of the repackaged wine will be considered an assessable dealing,
giving rise to WET, with a credit being allowed for the WET already imposed at the wholesale level.
This special rule does not apply where an organisation undertakes bottling/labelling/packaging activities
for non-commercial purposes, for example, for fundraising as part of charity.

¶22-170 Application to own use

“Applications to own use” (AOUs) are the third category of assessable dealings that may attract WET.
There are four types of AOU that are assessable dealings:
• AD3b — AOU of Australian wine by a wine manufacturer

• AD3c and AD13c — AOU by entity that purchased the wine “under quote” (¶22-420)

• AD3d and AD13d — royalty-inclusive AOU

• AD3a and AD13a — untaxed AOU (WET Act, s 5-5).

In each case, the entity liable for WET on an AOU is the applier, and the liability arises at the time of the
application.
An AOU means using or dealing with the wine for one’s own purposes. It includes:
• consuming wine

• giving wine away

• transferring property in wine under a contract that is not a contract of sale

• granting any right or permission to use wine

• if someone other than the owner has locally entered imported wine, anything done by that person that
would be an AOU of the wine by the owner if it had been done by the owner (WET Act, s 33-1
definition).

Example
A winery takes wine from its stock for personal consumption. It provides its cellar door visitors with free tastings. It provides wine for
tasting at exhibitions and wine shows. It uses wine for its promotions, donates it to charity, gives it to potential customers as
samples, or to its staff as an incentive or reward. All these are AOUs.

An AOU does not include selling the wine or consigning it for sale by consignment. Nor does it include
using wine as part of the process of manufacture, or treating or processing wine or other goods with wine.
In the case of imported wine, an AOU also does not include anything done with the wine after importation
and before it is locally entered.

Example
A winery uses some of the grapes it grows to manufacture gourmet wine vinegar which it sells to visitors to the winery. The use of
the wine in the manufacturing process is not an AOU.

The Commissioner considers that wine included as bonus wine with the sale of other wine is not being
applied to the seller’s own use (WET Ruling WETR 2009/1). For example, if a bottle of wine is provided
“free” with every dozen sold, that is simply treated as the sale of 13 bottles for the normal price of 12.

¶22-180 Local entry of imported wine

The fourth category of assessable dealings that may attract WET is the “local entry” of imported wine
(WET Act s 5-5; AD10). The types of local entries that attract WET are similar to those specified in the
provisions of the Customs Act 1901 relating to delivery and dealing of imported goods (WET Act, s 5-30).
The most common is an entry for home consumption.
Typical types of local entries would include the commercial shipment of wine that requires a formal
customs entry; wine delivered from a customs warehouse; and a personal shipment of wine via
international mail that does not require formal customs entry.
The entity liable for WET on a local entry is the entity that makes that entry, and the liability arises in the
same way and at the same time as customs duty (WET Act, s 23-5).

¶22-185 Removal from customs clearance area

The final category of assessable dealings that may attract WET is the removal of wine from a customs
clearance area by a traveller from an inwards duty free shop (WET Act, s 5-5; AD4b and AD14b). The
“traveller” is a person who has alighted from an international flight, whether as a passenger or crew
member.
The entity liable for WET on the dealing is the traveller, and the liability arises in the same way and at the
same time as customs duty (WET Act, s 23-5).

CALCULATING AND PAYING WET

¶22-280 Calculating WET and taxable value

Wine equalisation tax applies where there is a “taxable dealing” in wine. A taxable dealing is an
“assessable dealing” which does not qualify for an exemption (WET Act, s 5-5).
The tax is calculated as 29% of the taxable value of the dealing.
The rules for calculating the taxable value of assessable dealings are set out in the Assessable Dealings
Table (WET Act, s 5-5). In summary:
• the taxable value of a wholesale sale is the price for which the wine was sold (excluding GST and
WET)

• the taxable value of something other than a wholesale sale is normally the notional wholesale selling
price of the wine (¶22-290)

• for an AOU of wine by a person who obtained the wine under quotation, the taxable value will usually
be the purchase price (excluding GST)

• the taxable value of imported wine subject to tax at the time of entry for home consumption is the GST
importation value (¶9-005).

WET is additional to GST. The GST on the wine is imposed on the WET-inclusive price.
Any state or territory rebate, refund or credit to which you may be entitled is not relevant to the calculation
of taxable value.
The following table sets out the taxable value of the various assessable dealings in more detail.

Assessable dealing Taxable value

Wholesale sale of Australian wine by
manufacturer (AD1a)
Wholesale sale of Australian wine by
non-manufacturer (AD1b)
Wholesale sale of imported wine
(AD11b)
Retail sale of Australian wine by
manufacturer (AD2a)
Retail sale by non-manufacturer — wine The notional wholesale selling price
obtained under quote (AD2b and
AD12b)
The price (excluding WET and GST) for which the wine was
sold
The price (excluding WET and GST) for which the wine was
sold
The price (excluding WET and GST) for which the wine was
sold
The notional wholesale selling price
Royalty-inclusive sale (AD2c and The amount that would be the notional wholesale purchase
AD12c) price if the manufacturer/importer had incurred the eligible
royalty costs
Indirect marketing sale (AD2d and The notional wholesale selling price
AD12d)
Untaxed wine sale by non-manufacturer The notional wholesale selling price
of the wine (AD2e and AD12e)
Retail sale — wine packaged after The notional wholesale selling price
wholesale sale (AD2f and AD12f)
Untaxed AOU of Australian wine by non- The notional wholesale selling price
manufacturer (AD3a)
Untaxed AOU of imported wine (AD13a) The notional wholesale selling price
AOU of Australian wine by manufacturer The notional wholesale selling price
(AD3b)
AOU by non-manufacturer of Australian If the wine was purchased under quote — the purchase price
wine obtained under quote (AD3c) (excluding GST)
Otherwise, the notional wholesale selling price
AOU of imported wine obtained under If the wine was purchased under quote — the purchase price
quote (AD13c) (excluding GST)
If the wine was locally entered under quote by the applier —
the GST importation value (¶9-005)
Royalty-inclusive AOU (AD3d and The amount that would be the notional wholesale purchase
AD13d) price if the manufacturer/importer had incurred the eligible
royalty costs
Removal of airport shop wine (AD4b and The price for which the wine was purchased by the relevant
AD14b) traveller
Local entry of imported wine (AD10) The GST importation value (¶9-005), excluding WET

Example
Swillo Winery sells five cases of its wine to a bottle shop. The GST-exclusive price is $120 a case. This is a wholesale sale and
WET therefore applies.

Price of wine: 5 × $120 600.00

WET: 29% × $600 174.00
774.00
Plus GST: 10% × $774 77.40
Total wholesale price $851.40

Calculating “price”
The price means any payment (or act or forbearance) for the wine, whether expressed in monetary or
non-monetary terms. To the extent that the consideration is expressed in non-monetary terms, it means
the market value (GST Act, s 9-15; 9-75).
The Commissioner considers that:
• the price for which wine is sold includes delivery charges such as freight, postage or insurance where
 the delivery is an essential part of the sale, but normally not otherwise

• the price includes any surcharge imposed for payment by credit card

• the price is net of trade discounts, volume rebates and settlement discounts

• in the case of a purchase at an auction, the price does not include any buyer’s premium

• the price includes an amount representing a container deposit (WET Ruling WETR 2009/1).

Wine packaged with other goods

The taxable value of wine includes the value of containers (including gift containers) in which the wine is
packed in the ordinary course of business (WET Act, s 9-65). This does not apply to containers that are
imported in the same consignment but packed separately, irrespective of the classification of the goods
for customs tariff purposes (Interpretative Decision ID 2007/221).
When wine is sold packaged with other goods, for example, as part of a hamper or gift basket, the taxable
value of the wine is calculated by apportioning the price of the goods making up the package. The taxable
value of the wine will be the price of the wine if it was sold separately (WET Act, s 27-15).

Example
A gourmet food hamper containing wine is sold by wholesale for the GST-exclusive price of $500. The value of the food in the
hamper is $350 and the wine is valued at $150. In calculating the taxable value of the wine, the goods are considered separately
and the WET payable on the sale of the hamper will be 29% of $150 = $43.50.

The Commissioner considers that if the total price for the package of goods represents a discount on the
prices of the goods considered separately, the discount should be apportioned pro rata between the
goods (WET Ruling WETR 2009/1).
Arm’s length transaction assumed
If the price paid for wine is below the price that one would expect to pay under a commercial transaction
conducted at arm’s length, the price of that sale will be recalculated so that the sale is treated as if it was
conducted at arm’s length (WET Act, s 27-10). This could apply, for example, to sales to staff,
shareholders, related entities or growers at discounted prices.

¶22-290 Notional wholesale selling price

Where the assessable dealing is not a wholesale sale, the taxable value is generally taken to be the
notional wholesale selling price. As can be seen from the table at ¶22-280, this applies, for example, to
retail sales or AOUs by the manufacturer, retail sales which are indirect marketing sales, and so on.
In broad terms, the notional wholesale selling price is the equivalent of the wholesale selling value of the
wine. The methods for calculating it vary according to the type of dealing.
(1) Retail dealings with grape wine
There are two methods for calculating the notional wholesale selling price where the assessable dealing
consists of a retail sale of grape wine, or an AOU connected with such a sale. The methods are:
• the half retail price method, or

• the average wholesale price method.

The half retail price method is used unless the taxpayer chooses to use the average wholesale price
method (WET Act, s 9-25).
Half retail price method. Under the half retail price method, the taxable value of a retail sale of grape
wine is 50% of the price of the sale. In the case of an AOU connected with retail sales of grape wine, the
taxable value is 50% of the price the wine would have been sold for if there had been a retail sale (WET
Act, s 9-35).

Example
Cases of grape wine are sold at the Swillo cellar door for $120 each. The taxable value of each case of wine under the half retail
price method is ½ × $120 = $60. The WET payable in respect of each case is 29% × $60 = $17.40.

For the practical operation of this method in a case involving the importation of wine from New Zealand
under a multi-party arrangement, see NZWINEIMPORTS Pty Ltd v FC of T 2016 ATC ¶10-438.
Average wholesale price method. Under this method, the taxable value of a retail sale of grape wine is
the weighted average of the price (excluding GST and WET) for wholesale sales of that vintage and
variety of grape wine made during the tax period in which WET must be paid (WET Act, s 9-40). The
same applies to an AOU connected with retail sales of grape wine.

Example
During a tax period, 70% of the wholesale sales of grape wine of a particular vintage and variety are made to a distributor at $80 per
dozen and the remaining 30% to hotels and restaurants at $90 per dozen (both amounts calculated exclusive of GST and WET).
The weighted average price of all wholesale sales during the tax period is:
(70% × $80) + (30% × $90) = $83 per dozen
Under the average wholesale price method, the WET on a retail sale would be 29% × $83 = $24.07 per dozen.

You can only use the average wholesale price method if, during the tax period in which WET must be
paid, your wholesale sales of the wine are at least 10% by value of your total sales of that wine (WET Act,
s 9-25(3)).

Example
For the tax period, Swillo winery’s total sales of its 2009 chardonnay are $5,000. The value of Swillo’s wholesale sales of that wine
for the tax period is $1,000. As the value of the wholesale sales exceeds 10% of the value of total sales, Swillo can use the average
wholesale price method to calculate the taxable value of its cellar door sales of the wine.

(2) Retail dealings with non-grape wine

The half retail price method — see above — is used to calculate the notional wholesale selling price
where the assessable dealing consists of a retail sale of wine other than grape wine (WET Act, s 9-30). It
is also used for AOUs connected with such a sale.
(3) Other non-wholesale assessable dealings
The remaining category consists of assessable dealings that are neither retail sales of wine, nor AOUs
connected with such sales. In such a case, the notional wholesale selling price would be the price
(excluding GST and WET) for which the wine could reasonably have been expected to be sold by
wholesale under an arm’s length transaction (WET Act, s 9-45).

¶22-300 Paying WET

WET is collected in the same way as GST, and is taken into account in determining the entity’s net BAS
amount for each tax period (WET Act, s 21-5); see ¶8-100.
The WET on a dealing which is a taxable supply is attributed to the same period as the supply would be
attributed under the normal GST rules (¶7-100). If the dealing involves a non-taxable supply, the WET is
attributed to the tax period in which the supply would have been attributed if it had been taxable. In the
case of AOUs — which do not involve a supply — the WET is attributed to the tax period in which the
application to own use is made (WET Act, s 21-10). For the attribution of WET where a contract for sale
includes a retention of title clause and the purchaser sells or uses the wine before title passes, see
Practical Compliance Guideline PCG 2019/3.
Where a member of a GST group is liable for WET, that WET is payable by the representative member
(WET Act, s 21-40). Similarly, where WET is payable on a taxable dealing that a joint venture operator
makes on behalf of another participant, that WET is payable by the operator, not the participant (WET
Act, s 21-70). There is no exclusion from WET for intra-group taxable supplies of wine as there is for
GST.
If the taxpayer company has an administrator appointed, the company rather than the administrator is the
entity liable for dealings made before the appointment, even though the consideration for the dealing is
received after the appointment (Interpretative Decision ID 2003/992).
Correction of earlier errors
In certain circumstances, where a taxpayer has made an error in a WET calculation in an earlier tax
period, they may correct it in a return for a later period (Wine Equalisation Tax: Correcting WET Errors
Determination 2015: www.comlaw.gov.au/Details/F2015L01190). This option is not available where an
ATO tax audit is under way, and special time restrictions apply to correction of debit errors.

EXEMPTIONS FROM WET

¶22-400 Summary of exemptions

The following assessable dealings are exempt from WET:

• a supply that is GST-free (WET Act, s 7-5). For example, this could cover a supply of wine that is
exported (¶9-210), or a supply made in connection with a hospital meal (¶13-330)

• a sale or importation of wine made under quote (¶22-420)

• a local entry relating to an importation that is a non-taxable importation under the GST Act (¶9-030)
(WET Act, s 7-5)

• a customs dealing that is an importation of wine covered by certain sections of the Customs Tariff Act
1995 (WET Act, s 7-15)

• a local entry of wine that has been taxed while in bond or under the control of Customs (WET Act, s 7-
20)

• a local entry of wine that was exported and subsequently returned in an unaltered condition (WET Act,
s 7-25).

As with GST (¶5-010), the Commonwealth Government and untaxable Commonwealth entities are not
liable for WET, but have a notional liability for the purposes of their dealings with others (WET Act, s 27-
20).
For refunds of WET under the Tourist Refund Scheme, see ¶12-030. Overseas travellers can purchase
wine from a duty free store free of WET and GST under the sealed bag system.

¶22-420 Quoting on a dealing

A sale of wine is not taxable if the purchaser quotes its ABN for the sale at or before the time of the sale.
Similarly, a customs dealing in the wine is not taxable if the importer quotes its ABN for the dealing at or
before the time of the dealing (WET Act, s 7-10).
The general purpose of this exemption is to ensure that WET does not become payable until the last
wholesale sale of the wine. Quoting can therefore only be done in certain circumstances (see below), and
must also be done in the approved form (¶22-430).
Grounds for quoting
In order to quote, the quoter must be registered (¶3-000) and must, at the time of quoting, intend to deal
with the wine in any of the following ways:
(1) to sell the wine by wholesale (¶22-160), or by indirect marketing sale (¶22-165), while the wine is in
Australia

(2) to sell the wine by any kind of sale while it is in Australia (for this ground, the quoter must be “mainly
a wholesaler” at the time of quoting)

(3) to use the wine in manufacturing or other treatment or processing (such as a winemaker’s blending).
This does not have to result in the production of other wine. It might result, for example, in wine
vinegar. Applications to own use (¶22-170) do not qualify

(4) to make a supply of wine that will be GST-free (WET Act, s 13-5). For example, this could cover an
intention to export the wine (¶9-210), a hospital that intends to provide the wine as part of patients’
meals (¶13-330), a religious institution that intends to supply the wine as part of a religious service
(¶15-050) or a TAFE college that intends to supply the wine to winemaking students (¶14-004).

A quote may also be made if there are special circumstances and the Commissioner has authorised a
quote to be made (WET Act, s 13-10).
For the purposes of ground (2), a quoter is “mainly a wholesaler” if wholesale sales and indirect marketing
sales account for more than half of the total value of all sales of assessable wine made by the quoter
during the previous 12 months. Alternatively, the quoter must have a reasonable expectation that this test
will be satisfied in the next 12-month period.
Failing to deal according to quote
A purchaser that quotes to the producer that they intend to make a taxable dealing with the wine will itself
be liable for WET if it makes a GST-free supply of the wine, sells it under quote or uses the wine as an
input into manufacture (WET Act s 5-50). This applies for dealings in the 2018/19 financial year onwards.

¶22-430 Form of quoting

A quotation must be made in writing, at or before the time of the dealing, in the approved form (WET Act,
s 13-20). The Commissioner has given the following guidelines:
• where wine is ordered over the telephone, a purchaser may claim exemption over the telephone, and
provide the signed written quotation when later paying the account. A single written statement that
the wine was bought under quotation can cover all wine which is quoted for during the whole billing
period, either by listing the invoice numbers on the quotation or by referring to the statement which
includes the invoice numbers

• where wine is purchased from a particular supplier by means of electronic data interchange, there is
no need for a written quotation of ABN provided that the purchaser indicates on the electronic order
that their ABN is being quoted, and the supplier agrees to accept an electronic order

• where wine is ordered by facsimile, the full form of quotation should be used (WET Ruling WETR
2009/1).

For dealings in the 2018/19 financial year onwards, a quote is ineffective if made to an entity that
purchased the wine for a price that included WET (WET Act s 13-32): see ¶22-560.
In the case of imported wine, the quotation is made to Customs. Importers can authorise their customs
broker to quote on their behalf.
Periodic quoting
Quotation generally operates on a transaction-by-transaction basis. However, a purchaser may, if it
wishes, make a single quotation for all of its purchases from a particular supplier for a period of up to one
year (WET Act, s 13-15). This type of quotation is known as a periodic quotation. If you make a periodic
quotation, you are taken to have quoted your ABN for all purchases from the supplier during the next 12
months. You must, however, notify the supplier at or before the time of the purchase if you are not entitled
to quote for a particular purchase during that 12-month period. Failure to do so is an offence. At the end
of the 12-month period, the purchaser may, if it wishes, make a new periodic quotation.

Practice pointer: For approved forms for one-off or periodic quoting, see “Approved quoting forms” at
www.ato.gov.au

Making an unauthorised quotation is an offence (WET Act, s 13-35). However, the supplier is entitled to
treat it as effective to make the dealing exempt, unless the supplier has “reasonable grounds for
believing” that:
• the quoter is not entitled to quote

• the quote is not made in the approved form, or

• the quote is false or misleading in a material particular (WET Act, s 13-25; 13-30).

WET CREDITS
¶22-530 What is a WET credit?

A wine equalisation tax (WET) credit may be claimed in certain circumstances (WET Act, Div 17). It is
normally claimed by the entity that has paid or borne the WET for which the credit is sought.
The credit is normally claimed as a reduction in the net amount due in the taxpayer’s Business Activity
Statement (¶8-100).
Where the entity is neither registered nor required to be registered, a credit may instead be claimed as a
direct refund from the Commissioner (WET Act, s 17-10; 21-15). That refund must be claimed within four
years after the credit arises. Direct refunds are not available for amounts of less than $200 (WET Act, s
17-15). However, individual claims may be aggregated to reach that amount.
Where members of a GST group are entitled to WET credits, the representative member claims them
(WET Act, s 21-45). Similarly, it is the joint venture operator who is entitled to claim WET credits when
taxable dealings in wine have been made on behalf of the joint venture (WET Act, s 21-75).
For refunds of WET under the Tourist Refund Scheme, see ¶12-030.

¶22-550 Grounds for claiming WET tax credits

The situations in which a WET credit can be claimed are set out in a table in WET Act, s 17-5. In broad
terms, for dealings in the 2018/19 financial year onwards, they can be grouped into the following
categories:
• Overpaid WET. For example, where an amount has been paid as WET that was not legally payable
(CR1 in the table).

• Double taxation. For example, a retailer/wholesaler that pays WET on the wholesale sale of wine from
stock which was purchased at prices including WET is entitled to a credit for that earlier WET (CR4).

• Producer rebate available. If a wine producer is entitled to the producer rebate on an assessable
dealing (¶22-560), this is allowed by way of a credit (CR9).

• Import-related credit. For example, a credit is available where you have become liable to WET on a
local entry of wine for which drawback of customs duty has been allowed (CR14).

• Bad debts. For example, where a wholesaler pays WET on a sale, but part of the amount of the sale
price is written off as a bad debt, the wholesaler is entitled to a credit for a proportion of the WET paid
equal to the proportion of the debt written off (CR15) (WET Act, s 17-5).
Other aspects
The Commissioner can enter into an agreement with a taxpayer regarding the manner in which credits
are calculated or claimed (WET Act, s 17-40). This may be appropriate, for example, where the taxpayer
would have difficulty in determining the amount of the credit. Guidelines on this option are contained in
WET Ruling WETR 2009/1.
Special “clawback” rules apply in certain situations, eg to counter arrangements where the credit for
exports is exploited by subsequently importing the wine for sale in Australia (WET Act, s 17-30 to 17-35).
For time restrictions on claiming refunds, see ¶8-100.
The Commissioner must notify the taxpayer of a decision to disallow a claim for a credit (WET Act, s 17-
45). The decision is a reviewable decision (Administration Act, Sch 1, s 111-50).

¶22-560 Wine producer rebate

An annual “producer” rebate is allowed to wine producers who are potentially liable for WET on grape
wine, grape wine products, fruit or vegetable wine, cider, perry, mead or sake (WET Act, Div 19).
A “producer” means an entity that manufactures the wine, or supplies to another entity the grapes, other
fruit, vegetables (including rice) or honey from which the wine is manufactured on the supplier’s behalf
(WET Act, s 33-1; WET Ruling WETR 2009/2). An investor in a wine statutory Managed Investment
Scheme is not a producer where their grapes are simply pooled with those of the other investors and the
pooled grapes are then manufactured into grape wine (Interpretative Decision ID 2009/98).

Examples
(1) The rebate would extend to an owner of grape wine who supplies a contract winemaker with the grape wine and other
materials and specifications necessary for the contract winemaker to manufacture a grape wine product on the owner’s behalf.

(2) The rebate would apply to a person who purchases raw grape wine and processes it into finished grape wine on their own
behalf.

(3) The rebate would not apply to a grower who would not be liable for WET in any event and who simply provides grapes, fruit
or vegetables to another entity that produces the wine on its own behalf (WET Ruling WET 2009/2).

Calculating the rebate

For wholesale sales, the rebate is calculated as 29% of the price (excluding WET and GST) for which the
wine was sold. For retail sales and applications to own use, the rebate is 29% of the notional wholesale
selling price (¶22-290) of the wine (WET Act, s 19-15). The rebate takes the form of a WET credit (CR9;
see ¶22-530).
The maximum rebate for a producer in a financial year is $350,000, effective from 1 October 2017 for
dealings in wine for the 2018/19 financial year onwards. Previously the cap was $500,000.
If the producer is “associated” with other producers, the maximum limit applies to the group as a whole
(WET Act, s 19-15; 19-20). The fact that companies are separately owned does not mean that they are
not associated. Rather, the test is whether one is acting under the effective control of the other (SJ Buller
Pty Ltd v FC of T 2013 ATC ¶10-334). For dealings in wine from 1 October 2017, this associate producer
rule is tightened, so that a producer is treated as associated for a financial year if it is associated at any
time during that financial year.
Eligibility for rebate
For dealings in wine in the 2018/19 financial year onwards, the following conditions must be satisfied in
order to claim the rebate:
• at least 85% of the wine by volume in its final form must originate from source product owned by the
producer before the wine-making process started, and the producer must maintain that ownership
throughout that process
 • the wine is packaged in a container not exceeding 5 litres (51 litres for cider or perry), be suitable for
retail sale in that container and be branded with a registered trademark associated with the producer,
and

• WET has been paid or is liable to be paid on the wine. This requires that either the producer be liable
for WET on the wine, or a purchaser quotes (¶22-420) that they intend to make a taxable dealing with
the wine, thus attracting a liability for WET. This applies no matter what the purchaser actually does
with the wine (¶22-520). A quote is ineffective if made to an entity that purchased the wine for a price
that included WET (WET Act s 19-5; 13-32).

As a transitional rule for 2018 vintage wine, these conditions also apply if the crushing (or initial
fermentation in the case of mead or sake) of the source product for more than 50% of the wine occurred
on or after 1 January 2018. Further transitional rules apply to earlier vintages and the “ownership of
source product” requirement (Treasury Laws Amendment (2017 Measures No 4) Act 2017. Sch 1, item
19, 20, 21).
The rebate does not apply if the purchaser quotes for the sale and notifies the supplier that it intends to
make a subsequent GST-free supply of the wine (for example, as an export), or to use it as an input into
manufacture, or on-sell it under quote (WET Act, s 19-5). The rebate also does not apply to the extent
that the producer is entitled to some other WET credit for the dealing.
The purchaser of the wine will only be able to claim a WET credit for WET included in the purchase price
if it makes a taxable dealing with the wine (WET Act s 19-5).
Effect of rebate
The following table illustrating the effect of the rebate is based on one prepared by the ATO
(www.ato.gov.au — Calculate and claim your rebate). In the case of retail sales and applications for own
use, it assumes that the producer uses the “half retail price” method (¶22-290) to calculate the notional
wholesale selling price.

Type of dealing Selling price WET payable Producer rebate

Retail sale to end $20,000 (including WET and $2,900 (ie 29% × $2,900
consumer GST) 1/2 × $20,000)

Wholesale sale to a $30,000 (excluding WET and $8,700 (ie 29% × $8,700
restaurant GST) $30,000)

Wholesale sale to $20,000 (excluding WET and Nil Nil

distributor. Buyer quotes GST)
their ABN and notifies
intention to sell the wine
GST-free
Wholesale sale to $15,000 (excluding WET and Nil $4,350 (ie 29% ×
distributor. Buyer quotes GST) $15,000)
their ABN
Wine used for tastings Retail value of wine is $2,000 $290 (ie 29% × 1/2 $290
(including WET and GST) × $2,000)

The rebate is claimed in the BAS in a similar way to other WET credits. The entitlement to the rebate is
taken to arise immediately before the end the financial year in which the dealing occurs and therefore,
strictly speaking, should be claimed in the BAS for the final tax period for the year. However, due to
ambiguity in the legislation, the Commissioner concedes that the rebate may be claimed progressively
throughout the year, in the BAS for the tax period in which the WET on the dealing is attributed (WET
Ruling WETR 2009/2, para 67, footnote 37).
ATO guidelines on the operation and calculation of the producer rebate are in WET Ruling WETR 2009/2;
The ATO considers that the amount of the rebate is assessable income for tax purposes.
Tax Office’s compliance focus
The 2018/19 restrictions on eligibility for the rebate described above are designed to counter various
artificial schemes that have been devised to exploit the producer rebate (see, for example, WET
Determination WETD 2011/1; Taxpayer Alert TA 2009/7). The Tax Office has also previously stated that
the general anti-avoidance provisions (¶20-000) would apply to the following types of arrangement:
(1) Wine producer arranges for another entity to be the producer of some of its wine. The other entity
has no real role in the manufacturing process and sells the wine produced to the wine producer for
resale to third parties. Both entities then claim rebates, even though the wine is actually
manufactured by the wine producer.

(2) Wine producer sells wine to other entities for blending or further manufacture. However, it is the
wine producer who organises and controls all the blending or further manufacture. Sales of the
blended or further manufactured wine occur between the entities within the arrangement. All entities
claim rebates on the sales of the wine even though it is actually manufactured by the wine producer.

New Zealand producers

The producer rebate also applies to producers in New Zealand whose wine is exported to the Australian
market and who have paid WET during the financial year (WET Act, s 19-5). The producer must be
approved as a New Zealand participant (WET Act, s 19-7 to 19-9), lodge claims for the rebate and keep
records to substantiate that the WET has been claimed. Claims may be made up to four years after the
financial year in which WET is paid on the wine (Wine Equalisation Tax New Zealand Producer Rebate
Claim Lodgment Determination (No 34) 2016).
The rebate for these producers is calculated as 29% of the “approved selling price” (WET Act, s 19-15).
Currency conversion guidelines for calculation of the rebate are given in the Wine Equalisation Tax New
Zealand Producer Rebate Foreign Exchange Conversion Determination (No 57) 2016. There is also a
useful ATO Fact Sheet Wine Equalisation Tax (WET) — Foreign Currency Conversions for New Zealand
Wine Producers.
ATO guidelines for claims by producers in New Zealand are in WET Ruling WETR 2006/1.
LUXURY CAR TAX
Overview of LCT ¶23-000
Liability for luxury car tax ¶23-050
Luxury cars ¶23-100
LCT value and LCT threshold ¶23-150
Calculating luxury car tax ¶23-200
Refund for primary producers and tourist operators ¶23-210
Quoting an ABN ¶23-250
Accounting for LCT ¶23-260

Editorial information

Summary
Luxury car tax (LCT) is payable where there is a taxable supply or a taxable importation of a luxury
car. The tax applies to the portion of the value of the car above the luxury car tax threshold, which
varies from year to year. The rate of LCT is 33% for most cars. It is additional to the normal GST
payable.
A quotation system using the ABN ensures that the incidence of tax is delayed until the car is sold
at the retail level.
LCT is added to the net amount of GST payable for each tax period, and is included on the normal
Business Activity Statement. This ensures that taxpayers do not have additional payment and
administrative obligations. There are no separate registration procedures for LCT.
LCT does not apply to private sales of motor vehicles by an unregistered person.
Input tax credits cannot be claimed for LCT.

¶23-000 Overview of LCT

Where a “luxury” car is supplied or imported, luxury car tax (LCT) may be imposed in addition to GST.
The rate of LCT is normally 33%, though a lower rate may apply to certain primary producers and tour
operators (¶23-210).
GST and LCT together replace the former sales tax on cars that applied before 1 July 2000. As the sales
tax on “luxury cars” was particularly high (45%), the imposition of LCT on top of the normal GST rate was
considered necessary in order to prevent the substantial drop in prices that would have occurred if only
GST had been applied.
The substantive rules governing LCT are set out in the A New Tax System (Luxury Car Tax) Act 1999
(LCT Act). Supporting regulations are in the A New Tax System (Luxury Car Tax) Regulations 2000 (LCT
Regulations).
The tax is formally imposed by the A New Tax System (Luxury Car Tax Imposition — Customs) Act 1999,
the A New Tax System (Luxury Car Tax Imposition — Excise) Act 1999 and the A New Tax System
(Luxury Car Tax Imposition — General) Act 1999.

¶23-050 Liability for luxury car tax

Luxury car tax is payable where there is a:

• taxable supply, or

• taxable importation,

of a luxury car (LCT Act, s 5-5; 7-5). A “luxury car” is explained at ¶23-100.
Taxable supplies
A taxable supply requires that:
• the supply is made in the course of an enterprise (¶3-020)

• it is connected with Australia (¶4-100), and

• the supplier is registered (or required to be so): ¶3-000 (LCT Act, s 5-10).

However, supplies are not taxable supplies, and are not subject to LCT, if:
• the recipient of the car quotes its ABN (¶23-250)

• the car was locally manufactured more than two years before the supply is made (as indicated by the
built date plate), or the car was entered for home consumption more than two years before the
supply, or

• the supplier exports the car and that exportation is GST-free (LCT Act, s 5-10).

Taxable importations
There is a taxable importation of a luxury car if it is imported into Australia and entered for home
consumption (LCT Act, s 7-10). Unlike the position with a taxable supply, there is no requirement for the
importer to be registered. Nor is the importer required to be carrying on an enterprise.
The importation includes any car parts (¶12-150), accessories or attachments that are imported at the
same time as the car and that could reasonably be expected to be fitted to the car. “Accessories and
attachments” would cover peripheral items such as car stereos, air-conditioning units, car alarms, spare
tyres and car jacks.
There is not a taxable importation where:
• the importer quotes its ABN, for example, where a registered dealer imports a car that it uses as
trading stock (¶23-250)

• LCT has already become payable on the car

• the car is covered by specified duty-free categories under the Customs Tariff Act, Sch 4, item 10
(foreign government goods); item 11 (goods for foreign services); item 15 (personal effects imported
by passengers and ship or aircraft crew); item 18 (warranty and safety recall goods); item 21 (goods
imported for repair, alteration or industrial processing and subsequent export); or item 24 (personal
bequeathed goods), or

• it is a non-taxable re-importation. This includes situations where the car is returned unaltered after
being exported, and there has been a previous taxable importation or supply of the car. It also
includes cars re-imported into Australia on or after 1 July 2019 following a refurbishment overseas
without a change of ownership (LCT Act, s 7-20).
Government bodies
As with GST, the Commonwealth Government and untaxable Commonwealth entities are not liable for
LCT, but have a notional liability for the purpose of their dealings with others (LCT Act, s 21-1).
Public museums and art galleries
From 1 March 2017, GST-registered public museums, public libraries and public art galleries that have
been endorsed as deductible gift recipients are able to import or acquire cars free of luxury car tax. This
applies only to cars that are works of art or collector’s pieces and that are acquired for the purpose of
public display, consigned to the collection and not used for private purposes.

¶23-100 Luxury cars

A luxury car is a car whose value exceeds the luxury car tax threshold (¶23-150), and which does not fall
within any of the exemptions (LCT Act, s 25-1).
This means that:
(1) it must be a “car”. For LCT purposes, this means a motor-powered road vehicle that is:
(a) designed to carry a load of less than two tonnes and fewer than nine passengers. This would
include station wagons, four-wheel drive vehicles and light trucks, but not motorcycles or similar
vehicles

(b) a limousine, irrespective of its passenger-carrying capacity (LCT Act, s 27-1). A limousine is a
large luxurious vehicle, typically driven by a chauffeur (Uber BV v FC of T 2017 ATC ¶20-608:
see the example below).

The ATO considers that whether a vehicle is a “road vehicle” depends on the class of vehicle, not the
actual use to which a particular vehicle may be put. On this basis, it will be a road vehicle if it is in a
class of vehicle that is designed for use on public roads, even though it in fact is not used on them.
For example, a rally vehicle would be treated as a road vehicle unless its nature and fundamental
design made it incapable of being registered for use on public roads (GST Advice GSTA TPP 077). A
racing car designed only for use on a racetrack, which cannot be registered for use on public roads,
would not be caught (ATO Guide to Luxury Car Tax NAT 3394).

Example
A massive imported Hummer, which could not legally be used on Australian roads without substantial modification, was a “road
vehicle”, as its essential character was that of a vehicle designed for on-road and off-road use. It was also a “limousine”, as it
was an oversized chauffeur-driven vehicle that was promoted and perceived as luxurious, even though it was classed as a bus
by the Department of Transport. It was therefore subject to LCT even though it was designed to carry 14 people (Dreamtech
International Pty Ltd v FC of T 2010 ATC ¶20-204).

It has been held in a different context that the designed load carrying capacity of a vehicle should be
determined by reference to the Australian Design Rules (Case J63, 77 ATC 537). On this basis, the
designed load carrying capacity is calculated as: Maximum loaded vehicle weight, ie gross weight (as
indicated on the Compliance Plate) less Unladen weight, ie the weight of the vehicle with a full
capacity of lubricating oil, coolant and fuel, but without goods, occupants or options other than
options which are essential to the test for which the unladen weight is specified.
In determining the number of passengers a vehicle is designed to carry, the driver would be included
(Case J63, 77 ATC 537 at p 539).

(2) the car must not fall within any of the following exemptions:
(a) emergency vehicles, such as ambulances or firefighting vehicles, as specified in the LCT
Regulations reg 25-1.01

(b) cars that have been specially fitted out to transport people confined to wheelchairs (unless the
 supply of the car is GST-free under the rules explained at ¶12-150)

(c) commercial vehicles that are not designed for the principal purpose of carrying passengers.
Where a vehicle is designed to carry both passengers and goods, the principal purpose is
determined according to what the majority of the designed load capacity is attributable to. In this
calculation, the load capacity attributable to passengers is determined by multiplying the
designed seating capacity (including the driver’s) by 68 kg. If this amount is less than the
balance of the load capacity, the vehicle satisfies the exemption (ATO Guide to Luxury Car Tax
NAT 3394). A hearse is considered not to be designed for the principal purpose of carrying
passengers and is therefore exempt. See also Class Ruling CR 2012/37 in relation to Toyota
HiLux vehicles that are not treated as luxury vehicles, and Class Ruling CR 2012/81 in relation to
Toyota Landcruiser Series 70 vehicles

(d) motor homes or campervans (LCT Act, s 25-1).

In addition, LCT does not apply to supplies of cars that are over two years old (¶23-050).

¶23-150 LCT value and LCT threshold

LCT applies where the luxury car tax value of the car exceeds the luxury car tax threshold applying for the
year in which the car is supplied or — in the case of importations — for the year in which it is entered for
home consumption (LCT Act, s 25-1).
LCT value for supplied cars
Where a car is supplied in the normal way, the luxury car tax value generally means the price paid for the
supply, including GST and customs duty, but excluding any other Australian tax, fee or charge (eg stamp
duty, transfer fees, registration, compulsory third party insurance, extended warranties or financing costs)
(LCT Act, s 5-20). In the case of a wholly or partly GST-free car for the disabled, it includes the GST that
would have otherwise have been payable.
The price means the consideration for the supply, including the GST-inclusive market value of any non-
monetary consideration (LCT Act, s 27-1; GST Act, s 9-75).
The LCT value includes the price of all accessories, modifications and treatments made to the car, or paid
for by the recipient or their associate, provided that they are made before delivery or under a pre-delivery
arrangement. If those supplies were made by an associate of the recipient for no or inadequate
consideration, their price is their GST-inclusive market value. The LCT value does not include the price of
modifications made solely to adapt the car for driving by a disabled person or for their transportation (LCT
Act, s 5-20).
If a car is supplied by way of lease or hire, the LCT value is the GST-inclusive market value, excluding
LCT and any other Australian tax, fee or charge, and excluding the price of modifications for the disabled
(LCT Act, s 5-20).
The ATO considers that the LCT value for a car acquired under a hire purchase agreement does not
include the consideration provided for the supply of credit under that agreement (LCT Determination
LCTD 2014/1).
If the car is supplied for no or inadequate consideration to an associate (¶17-500), or to an employee or
officer of the supplier or an associate, the LCT value is the GST-inclusive market value, excluding LCT
(LCT Act, s 5-20).
LCT value for importations
In the case of an importation, the LCT value is the sum of:
• the customs value of the car and of any car parts, accessories and attachments included in the
importation

• the costs of international transport of the car to the place of consignment in Australia (¶9-005), plus
insurance (to the extent that these costs are not already covered in the customs value)
 • customs duty payable, and

• GST payable (or, in the case of a wholly or partly GST-free car for the disabled, the amount of GST
that would otherwise be payable) (LCT Act, s 7-15).

LCT threshold
The luxury car tax threshold applying to a car is the threshold for the year in which the supply of the car
occurred (in the case of purchases) or in which the car was entered for home consumption (in the case of
importations).
The thresholds vary according to whether or not the car is classed as a “fuel efficient” car:

Financial year of supply/entry Luxury car threshold

General Fuel efficient
2019/20 $67,525 $75,526
2018/19 $66,331 $75,526
2017/18 $65,094 $75,526
2016/17 $64,132 $75,526
2015/16 $63,184 $75,375
2014/15 $61,884 $75,375
2013/14 $60,316 $75,375
2012/13 $59,133 $75,375
2010/11 to 2011/12 $57,466 $75,375
2009/10 $57,180 $75,000
2008/09 $57,180 $75,000
2007/08 $57,123
2002/03 to 2006/07 $57,009
2000/01 to 2001/02 $55,134

Note: the luxury car threshold is not the same as the “car limit” (formerly known as the car depreciation
limit) that applies for income tax depreciation purposes (LCT Act, s 25-1; ITAA 1997 s 40-230).

Example
In 2019/20, Enterprises Ltd buys a car (not a fuel-efficient car) for the GST-inclusive price of $90,000. The luxury car tax is
calculated as 33% × 10/11 × $(90,000 – 67,525) = $6,742. The total payable is therefore $(90,000 + 6,742) = $96,742.
If the car had been bought in 2018/19, the threshold would have been $66,331, luxury car tax would have been $7,100 and the total
payable would be $97,100.

Fuel-efficient cars
A fuel-efficient car is one with a fuel consumption (according to combined ratings under vehicle
standards) that does not exceed 7 litres per 100 km (LCT Act, s 25-1).

Example
A fuel-efficient car is supplied on 1 February 2020. A threshold of $75,526 applies, even though the general threshold for 2019/20 is
$67,525.
¶23-200 Calculating luxury car tax

The luxury car tax is calculated by applying the LCT rate to the excess of the car’s value over the luxury
car tax threshold. This rate is applied after excluding the GST component of that excess (LCT Act, s 5-15;
7-15).
The LCT rate, as prescribed in the relevant Imposition Acts (¶23-000), is 33%. However, primary
producers and tourist operators are entitled to refunds that may reduce their effective rates to 25% for
certain cars (¶23-210).
The formula for calculation of LCT is therefore:
LCT rate × 10/11 × (LCT value − LCT threshold)

LCT on sales
To calculate the amount of LCT payable on a sale of a luxury car, the following steps should be followed:

Step 1: Calculate the amount by which the luxury car tax value of the car exceeds the luxury car tax
threshold.
Step 2: Exclude GST from this amount by multiplying it by 10/11.
Step 3: Apply the relevant rate of LCT to the GST-exclusive amount calculated in Step 2. This will
give you the amount of LCT payable.
Step 4: Add the amount of LCT payable to the GST-inclusive price of the car. This will give you the
LCT-inclusive price of the car.

Example 1: general threshold

In November 2018, Diamond Motors supplied a car (not a fuel-efficient car) to Robert Enterprises for the GST-inclusive price of
$90,000 (this is its luxury car tax value). The LCT payable on the purchase is calculated as follows:

Step 1: The price of the car in excess of the 2018/19 threshold is $23,669 (ie $90,000 −
$66,331).
Step 2: Exclusive of GST, this amount is $21,517 (ie $23,669 × 10/11).
Step 3: Multiply the amount calculated in Step 2 by 33% to determine the LCT payable (ie
21,517 × 33% = $7,100).
Step 4: Add this amount to the GST-inclusive price of the car to determine the total cost (ie
$90,000 + $7,100 = $97,100).

Example 2: fuel-efficient threshold

Assume the same facts as in Example 1, except that the car qualifies as a fuel-efficient car. The LCT payable on the purchase is
calculated as follows:

Step 1: The price of the car in excess of the 2018/19 fuel-efficient threshold is $14,474 (ie
$90,000 − $75,526).
Step 2: Exclusive of GST, this amount is $13,158 (ie $14,474 × 10/11).
Step 3: Multiply the amount calculated in Step 2 by 33% to determine the LCT payable (ie
$13,158 × 33% = $4,342).
Step 4: Add this amount to the GST-inclusive price of the car to determine the total cost (ie
$90,000 + $4,342 = $94,342).
If the car is sold for an “all-up” price including GST and LCT, these amounts can be worked out as
follows:

Example 3: all-up price

Assume the same facts as in Example 1, except that the $90,000 price was an all-up amount including GST and LCT (but not stamp
duty, registration, etc). The GST and LCT components are calculated as follows:
• Take out the GST and LCT component (10% + 33% = 43%) of the amount of the price above the LCT threshold. The balance
is therefore: ($90,000 − $66,331) × 100/143 = $16,551

• Multiply this balance by the LCT rate to get the LCT payable: 33% × $16,551 = $5,462

• The luxury car tax value is therefore $90,000 − $5,462 = $84,538

• The GST is 1/11 × $84,538 = $7,685.

This means that the all-up price of $90,000 included GST of $7,685 and LCT of $5,462.

The amount of LCT is reduced by any LCT that applied to a previous sale or importation of the car (LCT
Act, s 5-15(2), (3)). This means that LCT on the later sale only applies in the relatively unlikely event that
the car has increased in value. Relevant documentation substantiating that the earlier amount had been
paid should be kept.
LCT on importations
The formula used to calculate the amount of LCT payable on an importation is the same as for a taxable
sale of a luxury car. The difference lies in the calculation of the luxury car tax value of the car. As noted at
¶23-150, this is calculated as the customs value of the car together with customs duty payable on the car
and relevant freight and insurance costs (LCT Act, s 7-15).

Example 4
In November 2018, Robert imported a car (not a fuel-efficient car). The car has a customs value of $60,000. Relevant freight and
insurance costs for the car are $2,000. The LCT payable on the purchase is calculated as follows:

Step 1: Calculate the customs duty payable: 15% of the customs value =
$9,000.
Step 2: Add the customs value, customs duty, freight and insurance:
$
Customs value.................................... 60,000
Customs duty.................................... 9,000
Freight and insurance.................................... 2,000
Total.................................... $71,000
Step 3: To calculate the GST, Robert needs to calculate 10% of the taxable value of the car:
1/10 × $71,000 = $7,100
Step 4: The amount of GST is added to the taxable value of the car so that the luxury car tax
value is:
$71,000 + $7,100 = $78,100
Step 5: Calculate the amount subject to LCT:
$78,100 − $66,331 (ie 2018/19 threshold) = $11,769
Step 6: The amount of $11,769 includes GST, so multiply it by 10/11 to exclude GST:
10/11 × $11,769 = $10,699
 Step 7: To calculate the amount of LCT payable, multiply this amount by the LCT rate of 33%:
33% × $10,699 = $3,530

The amounts Robert pays Customs are:

$
Customs duty.................................... 9,000
GST.................................... 7,100
LCT.................................... 3,530

Cars bought on hire purchase

Where a luxury car is purchased under a hire-purchase agreement, the credit charges are subject to GST
as well as the cost of the car (¶10-020). However, they are not taken into account in determining the GST-
inclusive price which is used in calculating the LCT payable.
For pre-1 July 2012 hire-purchase agreements, the credit component was input taxed as a financial
supply (¶10-010), and was not subject to GST.

¶23-210 Refund for primary producers and tourist operators

GST-registered primary producers and tourist operators who acquire specified types of car on which LCT
has been paid at the 33% rate are able to apply for a refund of 8/33rds of the LCT (LCT Act, Div 18). This
will normally reduce their effective LCT rate to 25%. However, the maximum amount of the refund is
limited to $3,000 (for a proposed increased refund of $10,000, see below). The refund applies even if the
car is purchased through a financing arrangement.
The car must be a four-wheel or all-wheel drive car that is in the category described as “passenger car
(MA)” and has a ground clearance of not less than 175 mm; or is in the category described as “off-road
passenger vehicle (MC)” under the vehicle standard rules.
Primary producers must show that at the time of the acquisition they were carrying on a primary
production business. This has the same meaning as it does under the income tax legislation. They can
only make a refund claim for one car per financial year (LCT Act, s 18-5).
Tourist operators must show that they will use the car solely for the purpose of carrying on a business
whose principal purpose is carrying tourists for “tourist activities” (LCT Act, s 18-10). This means a leisure
activity involving a visit by a tourist to a site of scenic beauty, cultural interest, environmental interest,
historical interest or recreational interest. It must be of a touring nature, and must not involve the
transporting of passengers by taxi or limousine for fares or by a hire car service.
Refund claims must be made on the approved form within four years (LCT Act, s 18-15).
Proposed increased refund up to $10,000
Exposure draft legislation was introduced on 1 August 2019 to implement a Federal Budget proposal that
would enable eligible primary producers and tourism operators to apply for a refund of any luxury car tax
paid for vehicles acquired on or after 1 July 2019, up to a maximum of $10,000
(http://treasury.gov.au/consultation). The eligibility criteria and types of vehicles eligible for the pre-
existing partial refund will remain unchanged.

¶23-250 Quoting an ABN

As noted at ¶23-050, LCT does not apply to a supply or importation where the recipient “quotes” its ABN
in the approved format (LCT Act, s 5-10; 7-10). The purpose of this is to prevent LCT becoming payable
until the car is sold or imported at the retail level.
To be entitled to quote, the recipient must be registered and must intend to use the car for one of the
following purposes (and no other):
• holding the car as trading stock, excluding holding it for hire or lease. This would cover the typical
situation where, as part of its ordinary business, a dealer or wholesaler acquires a car for re-sale (or
for sale under a hire-purchase agreement: GST Ruling GSTR 2000/9; Interpretative Decision ID
2005/186). It would also include a situation where the car is held as a demonstrator vehicle, or where
a car restorer acquires a vehicle for restoration and subsequent re-sale. It would not include cars that
are intended for personal use, rally or racing driving, staff salary packaging, promotion or
sponsorship (ATO Guide to Luxury Car Tax NAT 3394). Nor would it cover the situation where a
dealer acquired vehicles to facilitate the making of an investment by a relative (Melbourne Car Shop
Pty Ltd v FC of T [2010] FCA 373), nor where the taxpayer’s activities in selling one car at a loss did
not, in the circumstances, amount to carrying on a business (Criterion Prestige Pty Ltd v FC of T
[2015] FCA 468)

• using the car for research and development for the manufacturer of the car, or

• making a GST-free export of the car (LCT Act, s 9-5).

Example
Jack is a car dealer. He has just sold several vehicles and needs to get some more cars to put in his car yard for display purposes.
He purchases five cars, each costing $100,000, with the intention of holding them as trading stock. Jack will be able to quote his
ABN for the purchase of each of the cars and no LCT will be payable on those purchases. However, LCT may be payable when
Jack on-sells the cars to his customers.

Approved format
The quotation should be in the following format:

I hereby quote Australian Business Number … in relation to the supply of the luxury car as detailed
above/attached.
Name of business:
Name of person authorised to quote:
Signature of person authorised to quote:
Date:

The quote must be made at or before the time of the supply or importation (LCT Act, s 9-15 If the quote is
not in the approved form, it may nevertheless be effective unless the supplier has reasonable grounds for
believing that it was improperly made (LCT Act s 9-20; s 9-25).

Example
A finance company acquired a $100,000 car to supply to a customer under a hire-purchase arrangement, but later terminated the
arrangement and replaced it with a lease. This did not alter the fact that the company was entitled to quote at the time of acquisition
(Interpretative Decision ID 2005/186).

The quotation must be on, or attached to:

• the order for the car, or

• any other document provided to the supplier or to Customs that clearly identifies the car. This may be
a contract, import warrant or letter.

There is provision for periodic quoting for a period up to 12 months and penalties for improper quoting
(LCT Act, s 9-10 to 9-30).
If a taxpayer quoted, but was not entitled to do so, the LCT could be levied by way of an adjustment (LCT
Act, s 15-30). The ATO has previously warned that it was investigating cases where taxpayers were
seeking to avoid LCT by falsely representing themselves as wholesalers.
Where a supplier disputes an assessment of LCT on the basis that an effective quote has been made, the
onus is on the supplier to establish that this is so. For an example of the difficulties that may arise where
appropriate records are not available, see Mavris v FC of T [2018] AATA 1825.
Input tax credits
The limit on the amount of input tax credit claimable on the acquisition or importation of a car (¶12-110)
does not apply where the taxpayer is entitled to quote an ABN.

¶23-260 Accounting for LCT

Luxury car tax on supplies of luxury cars is normally added to the net amount of GST payable for the
relevant tax period. The usual GST rules for attribution and payment apply. In the case of importations,
however, LCT is generally paid with customs duty (LCT Act, Div 13).
There are also administrative rules covering adjustments (LCT Act, Div 15), GST groups and joint
ventures (LCT Act, Div 16) and credits (LCT Act, Div 17).
The LCT payable on a supply by way of lease or hire is entirely attributable to the first tax period to which
the supply of the car is attributable (LCT Act, s 13-15(1A)).
Input tax credits
No input tax credit can be claimed for luxury car tax. Furthermore, the input tax credit allowable on a car
is normally limited if the GST-inclusive market value of the car exceeds the “car limit”. For details, see
¶12-110.
Adjustments for bad debts
As GST is calculated on the price of a car excluding LCT, the GST will be less than 1/11th of the total
price. In such cases, a special rule applies under GST Act, Subdiv 136-B for calculating any bad debt
adjustments (¶6-200).
INCOME TAX AND FBT
RELATIONSHIP BETWEEN GST AND INCOME TAX
GST and income tax ¶24-000
GST is not assessable ¶24-010
Whether GST component of price is deductible ¶24-030
Payments of net GST in returns ¶24-040
Changes in planned business usage ¶24-050
Effect of GST on capital gains tax ¶24-060
Other special rules ¶24-070
Tax deductions for GST start-up costs ¶24-100
RELATIONSHIP BETWEEN GST AND FBT
Fringe benefits and GST ¶24-200
Acquisitions used to provide fringe benefits ¶24-210

Editorial information

Summary
Basically, GST is factored out of most income tax calculations — it is generally not treated as
income of the supplier, and the purchaser cannot claim it as a cost unless it cannot claim an input
tax credit for it.
In general, supplies of goods and services to employees as fringe benefits will not be subject to
GST if the supply is subject to FBT.

RELATIONSHIP BETWEEN GST AND INCOME TAX

¶24-000 GST and income tax

For registered businesses, the general rule is that GST can be ignored in calculating your tax deductions
or assessable income. The reason for this is that GST generally has no net effect on your costs (because
businesses can claim input tax credits for the GST component of their purchases) or on your income
(because you have to pay the ATO the GST component of your sales).
However, there will be situations where GST will have an effect — for example, where:
• you cannot claim input tax credits, or

• there is an adjustment to your GST liability because you change your business use.

These rules are explained below.

 [GSTG ¶95-000]

¶24-010 GST is not assessable

A business entity will not normally be assessable for income tax on the GST component of the supplies
that it makes (ITAA 1997, s 17-5). The reason is that the business has to pay the GST over to the ATO,
so it is never effectively a gain.

Examples
(1) As part of its business, Joyful Co, a registered entity, sells equipment for $5,500 including $500 GST. It must account for the
$500 GST to the ATO. This GST is not assessable income. Its assessable income from the transaction is therefore $5,000.
(2) Under a clause in the sale contract, Joyful later receives an additional $1,100 for the equipment, including $100 GST. Joyful must
account for the $100 GST to the ATO. This GST is not assessable income. Joyful’s total assessable income from the transaction is
therefore $5,000 + $1,000 = $6,000.

[GSTG ¶95-050]

¶24-030 Whether GST component of price is deductible

Registered business entities normally cannot claim income tax deductions for the GST component of the
things they acquire (ITAA 1997, s 27-5). The reason is that they can normally claim the GST back as an
input tax credit, so they do not ultimately have any additional cost.
If the entity gets an assessable refund of an amount it has paid, the GST component of the refund is not
assessable (ITAA 1997, s 17-5).

Example
Happy Co buys business items costing $550, including $50 GST. It is registered, and can claim the $50 as an input tax credit. This
$50 is not tax-deductible. Happy can only claim a tax deduction for $500.
Under a clause in the purchase contract, Happy later has to pay an additional $110 for the equipment, including $10 GST. It can
claim the additional $10 as an input tax credit. This $10 is not tax-deductible. Happy’s total deduction from the transaction is
therefore $500 + $100 = $600.
Assume that instead of an additional payment, Happy gets a refund of $330 of the purchase price, including $30 GST. It must
therefore pay $30 GST to the ATO to offset against the $50 input tax credit it claimed earlier. This $30 is not assessable. Happy’s
total deduction from the transaction is therefore $500 − $300 = $200. This is equal to its net cost, ignoring GST.

However, a tax deduction can be claimed to the extent that an input tax credit cannot be claimed. This
can happen, for example, if:
• an employee makes tax deductible purchases

• the supply of the thing to the purchaser was not a taxable supply by the supplier, eg it was GST-free
or input taxed

• a business purchaser is not registered (or required to be registered), or

• the purchaser uses the acquisition wholly or partly for making input taxed financial supplies.

Examples
(1) Happybank provides only input taxed financial services. It buys business items costing $550, including $50 GST. It is registered,
but because its supplies are input taxed it cannot claim any of the $50 as an input tax credit. It can claim a tax deduction for $550,
representing its effective cost.
(2) Assume that Happybank also provided ordinary business services and buys the business items to use 40% in general business
and 60% in providing financial services. It can claim an input tax credit of $20 (40% of $50). It can therefore claim a tax deduction for
$530, representing its effective cost.
(3) Natalie, an (unregistered) employee, buys tools for $550, including $50 GST, which she will use in her job. She can claim the
 whole $550 as a tax deduction, as she is not entitled to any input tax credits.
(4) Mr Kindly, a landlord of a residential rental premises, pays $1,000 including GST for repairs to the property. As the supply of the
premises is input taxed, he cannot claim an input tax credit for the repair costs. His tax deduction is therefore for the full amount of
$1,000.
(5) Louise Ltd, which is registered, pays interest on a loan to acquire an item that it sells in its business for a price including GST. No
input tax credit is allowed on the interest, as the loan is input taxed. Louise Ltd is therefore entitled to a deduction for the amount of
the interest. It is irrelevant that part of the income from the sale of the item includes non-assessable GST. (Based on Taxation
Determination TD 2005/35.)

Where acquisition is partly deductible

If a registered entity is only entitled to a tax deduction for part of the expenses, that part-deduction is
reduced by the amount of the input tax credit component.

Example
A registered sole trader uses her telephone 50% for business and 50% for private purposes. The telephone bill is $550, including
GST. She is entitled to an input tax credit of 50% × 1/11 × $550 = $25. Her tax deduction is therefore (50% × $550) − $25 = $250.

[GSTG ¶95-100]

¶24-040 Payments of net GST in returns

You cannot claim a deduction for the amount of net GST that you are liable to pay the Commissioner with
your GST return (ITAA 1997, s 27-15).
However, GST paid on an importation will be deductible to the extent that the importation does not give
rise to input tax credits.
Wine equalisation tax or luxury car tax which is included in your net liability is tax deductible, provided that
the normal requirements for deductibility are met. The same would apply if the liability was used to reduce
an amount owed by the Commissioner to the taxpayer.
[GSTG ¶95-100]

¶24-050 Changes in planned business usage

If you change your planned business use, that can mean that your GST liability may need to be adjusted
(¶6-300). This in turn can affect your income tax position.
Decreasing GST adjustments
If you are entitled to a decreasing adjustment for a change in planned use (ie your net GST goes down),
the adjustment is treated as assessable income (ITAA 1997, s 17-10). This can happen, for example, if
you buy something for a private purpose, but use it for business purposes. In this situation, you will
become entitled to an input tax credit, even though you could not have claimed it originally. The amount of
that credit will be assessable.
The same applies if you acquire something for making input taxed supplies (such as providing financial
services), but later use it for ordinary business purposes.
The same rules also apply where you become entitled to a decreasing adjustment under Div 132, ie
where something acquired for the purpose of making financial supplies is later sold as part of a taxable
supply or as part of a GST-free disposal of a business (¶6-310).
Increasing GST adjustments
Where you are liable for an increasing adjustment for a change in planned use (ie your net GST goes up),
the amount of the adjustment is tax deductible, provided that it is not the result of an increase in private
usage (ITAA 1997, s 27-10). This deduction will apply, for example, if you acquire something for ordinary
business purposes, but use it for making input taxed sales (such as providing financial services). In this
situation, the input tax credit you originally claimed will effectively be withdrawn. The amount of the
withdrawn input tax credit is a tax deduction.

Example
A finance company buys an item for $2,200 (including $200 GST) with the intention of using it 90% for general business and 10% for
providing financial services. As financial services are input taxed, the company can only claim an input tax credit of 90% of $200 =
$180. This means that it can claim an income tax deduction of $2,020 (ie the deductible purchase cost of $2,200 less the input tax
credit of $180).
Later it turns out that the item is used 50% for providing financial services, so the company is liable for an increasing GST
adjustment. In effect, it must pay a further GST amount of $80, to reduce the net input tax credit to $100 (ie 50% of $200). That
reduction is tax-deductible. The effect is that the net deduction becomes $2,100 (ie the original deduction of $2,020, increased by
the additional deduction of $80). This is the amount which could have been claimed if the general business usage had been
estimated correctly in the first place.

The same rules apply to allow you a deduction where you become entitled to an increasing adjustment on
cancellation of registration (¶6-410), provided that you are still holding the relevant asset for assessable
purposes immediately after the cancellation. This will not apply if you have ceased carrying on the
business.
[GSTG ¶95-050]

¶24-060 Effect of GST on capital gains tax

Capital gains tax (CGT) is generally calculated by reference to the difference between the capital
proceeds from the asset and its cost base. As with the ordinary income tax rules, the intention is that GST
is factored out of CGT calculations unless it represents a real cost or benefit. This would mean, for
example, that:
• the cost base of an asset does not include amounts corresponding to input tax credits to which you
are entitled (ITAA 1997, s 110-45; 110-50)

• the capital proceeds do not include any GST component of the consideration (ITAA 1997, s 116-20)

• an input tax credit for the acquisition of collectables and personal use assets is excluded in
determining whether the relevant CGT exemption thresholds are reached (ITAA 1997, s 118-10).

Examples
(1) Liz Ltd, a registered company, buys shop premises for $220,000, including $20,000 GST. The legal fees are $5,500, including
$500 GST, and the stamp duty is $3,000. Liz Ltd is entitled to input tax credits for ($20,000 + $500) = $20,500. This element is
therefore excluded from the cost base for CGT purposes. The cost base is therefore:
($220,000 + $5,500 + $3,000) − $20,500 = $208,000
Assume now that Liz Ltd sells the premises for $330,000 including $30,000 GST. Liz Ltd will have to account for the $30,000 to the
ATO, so it is no real benefit. For CGT purposes, the capital proceeds from the sale will therefore be ($330,000 − $30,000) =
$300,000.
(2) Denzel, who is not registered for GST, buys shares for $11,000 and pays broker’s fees of $220, including $20 GST. Denzel is not
entitled to any input tax credit for the $20 as he is not registered. (He would not be entitled to an input tax credit for GST on the
shares in any event, as they are an input taxed financial supply on which GST is not levied.) His cost base for CGT purposes is
therefore ($11,000 + $220) = $11,220.

These rules apply:

• irrespective of when the asset was acquired

• to reduce all elements of cost (formerly, capital expenditure incurred in increasing the asset’s value or
to defend title to it was exempt)

• in determining capital losses, as well as capital gains, and

 • irrespective of how the capital gain or loss is worked out (ITAA 1997, s 103-30).

[GSTG ¶95-300]

¶24-070 Other special rules

Trading stock.
In calculating the closing value of trading stock, you disregard an amount equal to the input tax credit that
would arise if the stock had been acquired at that time (ITAA 1997, s 70-45).
Depreciation (capital allowance).
The cost of depreciating assets is reduced by the amount of any input tax credit that you are entitled to on
the acquisition (ITAA 1997, s 27-80).
The depreciable cost is also adjusted to reflect GST adjustments relating to the asset (ITAA 1997, s 27-
85; 27-90). However, this normally does not apply to adjustments arising from a change in planned use
(Div 129: ¶6-300) or from a sale of an asset acquired without full credits (Div 132: ¶6-310); in such cases,
the adjustment is assessable if it is a decreasing adjustment, or deductible if it is an increasing adjustment
(ITAA 1997, s 27-87; 27-92). The GST component is also excluded when calculating balancing
adjustments on the sale of the asset (ITAA 1997, s 27-95). For the effect on “luxury” cars, see ¶12-110.
Withholding tax.
PAYG withholding tax should apparently be calculated on the GST-inclusive value of the supply
(Interpretative Decision ID 2010/89).
Turnover ceiling for small business.
Various income tax (and GST) concessions are available to “small business entities” which, typically,
must have turnovers of less than $10m (¶1-250). The GST on supplies made by the taxpayer is excluded
from this turnover calculation.
Wholly-owned and consolidated groups.
GST does not apply to supplies resulting from: (1) the statutory operation of the consolidation rules; (2)
entering into a tax sharing agreement; (3) leaving a consolidated group clear of group liability; or (4)
entering into a tax funding agreement (s 110-15 to 110-30). It also does not apply in the limited range of
situations in which tax losses or net capital losses may be transferred between members of wholly owned
groups, or to transfers of excess foreign tax credits (s 110-5; former s 110-10).
Advance payments.
Expenditure of less than $1,000 is exempt from the prepayment rules that prevent immediate tax
deductions being claimed for advance payments (ITAA 1936, s 82KZL). In determining whether you
qualify for this exemption, your input tax entitlements may be taken into account. For example, if your
GST-inclusive expenditure was $1,045, and you are entitled to an input tax credit of $95, the net
expenditure is $950. As this is less than $1,000, the prepayment rules do not apply (Interpretative
Decision ID 2004/398).
Groups and joint ventures.
The income tax liabilities of GST group members are calculated as if they had individually paid the GST
or claimed the input tax credit, even though this in fact was done by the representative member (ITAA
1997, s 17-20; 27-25). A corresponding rule applies to participants in joint ventures.
Market value.
In calculating the market value of assets for income tax purposes, you exclude the amount of input tax
credits to which you would be entitled, assuming that you had acquired the asset solely for creditable
purposes. This does not apply to assets such as shares which cannot be the subject of taxable supplies.
Nor does it apply to economic benefits, or equity or loan interests, under the value shifting rules (ITAA
1997, s 960-405).
 [GSTG ¶95-200; ¶95-250; ¶95-350]

¶24-100 Tax deductions for GST start-up costs

A wide range of costs associated with gearing up for the GST are tax deductible as normal business
expenses (ITAA 1997, s 8-1). In former Taxation Ruling TR 1999/12, the ATO said that this could include
expenses such as those set out below. Although the Ruling was directed at the position on the general
commencement of GST in 2000, and has now accordingly been withdrawn, it may still be relevant for new
entrants to the GST system.
Deductions may be available for:
• costs of printing new stationery to show the business’ Australian Business Number (ABN), and
redesigning invoices and other documents to provide for GST

• costs of complying with registration formalities, such as professional fees for advice on completing the
registration form

• costs of professional advice on developing and implementing new practices and procedures that need
to be put in place to enable the business to comply with its obligations under the GST law

• costs of training staff in new practices and procedures required by GST law

• costs of operating the accounting system, monitoring its effectiveness and determining whether it is
GST-ready (if new plant, hardware or software is involved, see below)

• costs of hiring new staff

• costs of termination payments made to staff who are made redundant as a result of efficiencies
introduced in the course of changes made to prepare for GST

• the cost of genuine study tours to comparable overseas countries to examine what changes you need
to make to prepare for the GST. The cost will be deductible outright if it is solely for business
purposes. If you mix business with pleasure, a proportion of the expenses will be deductible.

RELATIONSHIP BETWEEN GST AND FBT

¶24-200 Fringe benefits and GST

Special rules apply to goods or services provided to employees if they are subject to fringe benefits tax
(FBT) or are exempt fringe benefits (such as a mobile phone or laptop computer). The effect is that no
GST will be payable on those benefits unless the employee makes a contribution or payment to the
employer towards the cost of the benefit (s 9-75(3)). Where a payment or contribution is made, it is
treated as consideration for the supply of the benefit. The GST will therefore be calculated as 1/11th of
that amount.

Example
(1) An employer supplies (taxable) food and drink to an employee for no charge, in connection with the employee’s services. No
GST is payable.
(2) An employee pays the employer $1,100 in return for receiving a fringe benefit. The employer will be liable for GST of 1/11 ×
$1,100 = $100.

Of course, GST will not apply in any event if the fringe benefit is GST-free or input taxed. For example, if
a school provides discounted education to the children of its teachers, that would normally be GST-free,
whether or not any payment or contribution is made by the teacher. For special considerations applying to
fringe benefits supplied by charities, see ¶15-010.
Payment or contributions
The payment or contribution may be in any form. However, the mere fact that the employee has provided
services to the employer is not treated as a payment or contribution (GST Ruling GSTR 2001/3).
In the case of benefits classed as “housing” fringe benefits under FBT legislation, payments or
contributions by the employee are not taken into account, so GST liability will not arise. In any event,
these benefits would typically be input taxed as supplies of residential premises (¶11-310), for example,
where a company provides a director with ongoing residential accommodation in a private house. Other
types of accommodation benefits may not qualify as supplies of residential premises, for example, fly-in
fly-out accommodation on an oil rig (¶11-010). In such cases, employee payments or contributions can
attract GST.
If an employee sacrifices salary in return for obtaining a fringe benefit, that is not treated as a payment or
contribution, so it does not give rise to GST (GST Ruling GSTR 2001/3).

Example
Under a salary sacrifice agreement, an employee agrees to a $20,000 reduction in salary in return for receiving a company car. The
employee makes no payments to the employer. The employer will not be liable for GST on the supply of the car because there has
not been any payment or contribution by the employee.

[GSTG ¶95-500]

¶24-210 Acquisitions used to provide fringe benefits

In accordance with the normal rules, an employer who acquires goods or services to provide fringe
benefits to its employees can normally claim an input tax credit for that acquisition. This is called a “type
1” fringe benefit. In this case, FBT is grossed up to effectively recover the amount of the input tax credit.
This is intended to ensure neutrality of treatment between cash salary and fringe benefits. The gross-up
factor for these benefits for the FBT years ending 31 March 2018 or 2019 is 2.0802.
A lower gross-up rate applies to “type 2” fringe benefits, ie benefits for which the employer is not entitled
to an input tax credit. This may occur, for example, where the supply to the employer was GST-free, or
the employer was not registered or provided no consideration, or credits are denied under the rules
relating to employers making input taxed supplies (see below). This gross-up factor for the FBT years
ending 31 March 2018 or 2019 is 1.8868 (Fringe Benefits Tax Assessment Act 1983, s 5B; 149A).

Example
During the FBT year ending 31 March 2019, an employee receives employer-provided fringe benefits consisting of $10,000 school
tuition fees and a $2,000 sound system. If the employer was entitled to an input tax credit for the purchase of the stereo, the
grossed-up value of the benefit will be 2.0802 × $2,000 = $4,160. As the school fees are GST-free, the grossed-up value will be
1.8868 × $10,000 = $18,868.
The employer’s FBT liability will therefore be calculated on a fringe benefits taxable amount of $4,160 + $18,868 = $23,028.

Employer making input taxed supplies

Some careful distinctions must be made where the employer providing the fringe benefit is also making
input taxed supplies. According to GST Ruling GSTR 2001/3, if the benefit simply serves the normal
business ends of the employer, and the benefit to the employee is incidental, the supply of the fringe
benefit is treated as part of the employer’s general business, and input tax credits are calculated
accordingly. For example, if the employer provides employee uniforms, and its general business consists
solely of making input taxed supplies, it cannot claim an input tax credit for acquisitions used in providing
the uniforms. This would also apply to benefits such as a car used solely for work, business travel or the
provision of a computer at work.
On the other hand, if the fringe benefit is simply for the benefit of the employee, the entitlement to an input
tax credit will depend on the nature of the benefit. For example, a financial supplier can claim input tax
credits for acquisitions used in providing a company car solely for the employee’s own private use, even
though its general business consists of making input taxed supplies. However, it could not claim input tax
credits for acquisitions used in providing such a benefit which is itself an input taxed supply, for example,
an employee loan or residential housing.
If the benefit relates partly to making input taxed supplies, no input tax credit will be allowed if the benefit
is subject to FBT (s 71-5; 71-10). In the case of financial supplies, this rule only applies if the supplier
exceeds the financial acquisitions threshold (¶10-032).

Example
A loan company that exceeds the financial acquisitions threshold leases a car and provides it to an employee partly for work
purposes and partly for private purposes. The benefit therefore relates partly to making input taxed supplies. As FBT would be
payable, no input tax credit can be claimed on the lease costs.

This particular rule does not apply to benefits that do not attract FBT, for example, car running costs.
Entertainment
Input tax credits cannot be claimed for the non-deductible cost of entertaining (¶5-010). However, input
tax credits may be claimed by the employer on the cost of providing meal entertainment fringe benefits to
employees. Where both employees and clients are entertained, the creditable component may be
calculated using any of the methods provided in the fringe benefits tax legislation for determining the
taxable value of the meal entertainment fringe benefits, ie the 50/50 split method, the 12-week register
method and the actual expenditure method (Subdiv 69-B). However, as this will commonly have to be
done before the annual FBT election is made, a GST adjustment may be necessary if the actual FBT
method which is actually chosen is different from the method used for GST purposes.
ATO guidelines
Detailed guidelines on the interaction between GST and FBT are given in GST Ruling GSTR 2001/3 and
Taxation Ruling TR 2001/2.
[GSTG ¶95-550]
GST CHECKLISTS
GST TRANSACTION CHECKLISTS
Exempt or concessional transactions ¶25-000
GST-free supplies ¶25-010
Input taxed supplies ¶25-020
Common commercial transactions ¶25-030
GST RATES, DATES AND THRESHOLDS
Rates and thresholds ¶25-040
Contingent GST dates ¶25-055
INDUSTRY CHECKLISTS
Accommodation and residence ¶25-100
Charities and non-profit organisations ¶25-110
Entertainment and culture ¶25-120
E-commerce ¶25-125
Health and care ¶25-130
Primary producers ¶25-140
Professions ¶25-150
Restaurants, cafes and caterers ¶25-160
Retailers ¶25-170
Schools and higher education ¶25-180
Small businesses ¶25-190
Motor vehicles ¶25-200
ATO FORMS • FACT SHEETS • CONTACTS
ATO forms and fact sheets ¶25-500
ATO contacts ¶25-510

GST TRANSACTION CHECKLISTS

¶25-000 Exempt or concessional transactions

This is an alphabetical checklist of the main types of transactions that are exempt from GST in some way,
or are subject to special rules.

General GST status

ATM transactions Input taxed (¶10-010)
Charities:
– Certain fundraising Input taxed (¶15-055)
 – Donated second-hand goods GST-free (¶15-030)
– Non-commercial activities GST-free (¶15-010)
– Raffles and bingo GST-free (¶15-020)
– Retirement village services GST-free (¶15-015)
Child care GST-free (¶14-100)
Deposits No GST if refunded (¶4-070)
Education GST-free (¶14-000)
Emission unit supply GST-free (¶16-220)
Employee services Not subject to GST (¶3-020)
Exports GST-free (¶9-200)
Financial supplies Input taxed (¶10-000)
Fines Not subject to GST (¶4-080)
Food:
– Generally GST-free (¶13-000)
– Restaurant, hot takeaway, snacks, bakery Subject to GST (¶13-120 and following)
products, etc
– School tuckshops Input taxed (optional) (¶14-010)
Frequent flyer points Not subject to GST (¶4-062; ¶12-020)
Funerals contracted pre-1 December 1999 GST-free, subject to conditions (¶13-380)
Gambling “Margin” rules (¶16-000)
Gifts Not subject to GST (¶4-030)
Grants (unconditional) Not subject to GST (¶4-040)
Health and medical GST-free (¶13-300)
Health insurance GST-free (¶13-370)
Hobbies Not subject to GST (¶3-020)
Imports Subject to GST with exceptions (¶9-000)
Insurance:
– Exported GST-free (¶10-140)
– General Subject to GST (¶10-110)
– Health GST-free (¶13-370)
– Life Input taxed (¶10-100)
– Settlements Not subject to GST (¶10-120)
– Travel Depends on status of travel (¶12-020)
International mail GST-free (¶12-050)
Motor vehicles for disabled people GST-free (¶12-150)
Overseas transactions (unrelated to Australia) Not subject to GST (¶4-100)
Pre-1 July 2000 supplies Not subject to GST (¶19-000)
Post-30 June 2000 supplies Subject to GST
Precious metals GST-free/input taxed (¶16-210)
Private, non-business transactions Not subject to GST (¶3-020)
Professional and trade qualification courses GST-free (¶14-020)
Rates and taxes Generally, not subject to GST (¶4-080; ¶16-
200)
Real estate transactions:
– Commercial rent Subject to GST (¶11-330)
– Dealers and developers “Margin” rules (¶11-100)
– Farm sales GST-free (¶11-410)
– Farm subdivisions GST-free (¶11-420)
– Government land grants GST-free (¶11-400)
– Residential rent (commercial) Subject to GST (¶11-320)
– Residential rent (private) Input taxed (¶11-300; ¶11-310)
– Sale of commercial residential premises Subject to GST (¶11-030)
– Sale of existing residence Input taxed (¶11-010)
– Sale of new residence Subject to GST (¶11-020)
– Sale of non-residential premises Subject to GST (¶11-050)
Religious services GST-free (¶15-050)
Sale of business:
– Sale of farm land GST-free (¶11-410)
– Sale of going concern GST-free (¶11-500)
– Sale of shares Input taxed (¶11-530)
Second-hand goods:
– Charities GST-free (¶15-030)
– Dealers Subject to GST/special rules (¶16-110)
Supplier unregistered and not required to be registered Not subject to GST (¶3-000)
Transport and tourism:
– Cars for disabled people GST-free (¶12-150)
– International travel GST-free (¶12-000)
– Inwards duty-free shops GST-free (¶12-020)
– Domestic travel Subject to GST (¶12-000)
– Returning tourists Entitled to refunds (¶12-030)
– Travel agents Depends on status of travel (¶12-020)
Vouchers Not subject to GST on issue (¶4-060)
Water, sewerage and drainage GST-free or non-taxable (¶16-200)

¶25-010 GST-free supplies

This checklist shows the types of supplies that are GST-free, subject to conditions in some cases. For an
explanation of “GST-free”, see ¶1-160. Note also that some supplies are outside the GST system
altogether.
Cars for disabled people (¶12-150)
Charities:
• donated second-hand goods (¶15-030)

• non-commercial activities (¶15-010)

• raffles and bingo (¶15-020)

• retirement village services (¶15-015)

Child care (¶14-100)

Education (¶14-000). See also checklist at ¶14-030
Emission units (¶16-220)
Exported insurance (¶10-140)
Exports (¶9-200)
Food (¶13-000)
Funerals contracted pre-1 December 1999 (¶13-380)
Health and medical (¶13-300)
Health insurance (¶13-370)
International mail (¶12-050)
Pre-GST supplies (¶19-000)
Precious metals, supplies to dealers (¶16-210)
Professional and trade qualification courses (¶14-020)
Real estate transactions:
• Farm sales (¶11-410; ¶11-420)

• Farm subdivisions (¶11-420)

• Government land grants (¶11-400)

Religious services (¶15-050)

Rights or options to acquire GST-free supplies (¶1-160)
Sale of business:
• sale of farm (¶11-410; ¶11-420)

• sale of going concern (¶11-500)

Second-hand goods:
• charities (¶15-030)

Travel and tourism

• international travel (¶12-000)

• inwards duty-free shops (¶12-020)

 • travel agents’ fees on exempt travel, overseas accommodation, etc (¶12-020)

• travel insurance on exempt travel (¶12-020)

Water, sewerage and drainage (¶16-200)

¶25-020 Input taxed supplies

This checklist shows the types of supplies that are generally input taxed. For an explanation of “input
taxed”, see ¶1-170.
ATM transactions (¶10-010)
Financial supplies (¶10-000)
Food sold at non-profit school tuckshops (optional) (¶14-010)
Fundraising by charities through special events (optional) (¶15-055)
Life insurance (¶10-100)
Precious metals, subsequent supplies (¶16-210)
Residential rent (¶11-300; ¶11-310)
Rights or options to acquire input taxed supplies (¶1-170)
Sale of business by shares (¶11-530)
Sale of existing residence (¶11-010)

¶25-030 Common commercial transactions

This simplified, quick-reference checklist enables you to find explanation of the GST treatment of various
common commercial transactions. For more detailed entries, see the Index.

Agency agreements ....................................¶17-400; ¶7-440; ¶5-190

Associates, sales to ....................................¶17-500
Auctions ....................................¶4-210
ATM transactions ....................................¶10-010
Bank account transactions ....................................¶10-010
Bankruptcy ....................................¶18-250; ¶6-417; ¶3-080
Barter ....................................¶7-435; ¶4-020; ¶11-500
Buying a business ....................................¶6-400
Cheques ....................................¶7-325; ¶10-010
Closing down business .................................... ¶6-410; ¶11-500
Construction contracts ....................................¶11-020; ¶11-100; ¶19-230
Contractors ....................................¶3-010
Conveyancing ....................................¶11-070
Credit cards ....................................¶7-325
Discounting ....................................¶6-100; ¶21-100
Electronic transactions ....................................See checklist at ¶25-125
Exports ....................................¶9-200
 Feasibility studies ....................................¶3-020
Floor plans ....................................¶7-440; ¶10-020
Group transactions ....................................¶17-000
Health insurance ....................................¶13-370
Hiring arrangements....................................¶7-420
Hire-purchase ....................................¶7-438; ¶10-010
Importations ....................................¶9-000
Incorporation of company ....................................¶5-030
Insurance settlements ....................................¶10-120
Joint venture transactions ....................................¶17-200
Lay-bys....................................¶7-430
Leases, real estate ....................................¶11-060; ¶11-300
Leases, vehicles ....................................¶7-420
Life insurance ....................................¶10-010; ¶10-100
Liquidation ....................................¶3-080; ¶6-417; ¶18-250
Loans....................................¶10-010
Loyalty programs....................................¶4-062
Mortgages....................................¶10-010
Options....................................¶4-020; ¶11-068
Outsourcing ....................................¶4-090; ¶10-090
Purchase, general ....................................¶5-010
Sale, general ....................................¶4-010
Sale of business ....................................¶11-500
Sale of farm ....................................¶11-506
Sale or return ....................................¶7-440
Second-hand dealings ....................................¶16-100
Security deposits ....................................¶4-070
Share dealings ....................................¶10-010
Software purchases ....................................¶4-030
Sponsorships ....................................¶4-040
Subdivisions ....................................¶11-063
Superannuation ....................................¶10-010; ¶10-080
Trade-ins....................................¶12-125
Writing off debts ....................................¶6-210

GST RATES, DATES AND THRESHOLDS

¶25-040 Rates and thresholds
Rates
GST: 10% of value of taxable supply (¶4-200)
Luxury car tax: 33% (¶23-200)
Wine equalisation tax: 29% of taxable value of dealing (¶22-000).
Withholding rate on newly constructed residential premises or new residential subdivisions: normally
1/11th, but may be 7% if margin scheme used (¶11-022).
Thresholds
Annual returns and payment. Taxpayers can elect to report and pay GST annually if their GST turnover
is below the compulsory registration threshold (see below) (¶8-040).
Annual apportionment of input tax credits. Taxpayers can elect to make annual apportionments of
input tax credits if they are “small business entities” (¶1-250), or if they are non-business entities with a
GST turnover of less than $2m (¶5-020).
Car limit. This indexed limit is relevant in calculating input tax credits on higher priced cars, and in
determining the GST-free status of cars for disabled persons. The limit for 2019/20 and 2018/19 is
$57,581 (¶12-110). See also Luxury car tax threshold.
Compulsory registration. Registration is compulsory for businesses with GST turnover of $75,000 or
more ($150,000 for non-profit bodies) (¶3-030).
Compulsory monthly GST periods. Monthly GST periods are compulsory for businesses with GST
turnover of $20m or more (¶7-100).
Cash basis of accounting. The cash basis of accounting may be chosen by “small business entities”
(¶1-250), or non-businesses with GST turnover of less than $2m (¶7-300).
Electronic lodgment and payment. Electronic lodgment and payment is compulsory for businesses with
GST turnover of $20m or more (¶8-043; ¶8-100).
Financial acquisitions. Input tax credits may be claimed on acquisitions, notwithstanding that they relate
to financial supplies, where the credits do not exceed a $150,000/10% threshold (the de minimis test).
Prior to July 2012, the $150,000 threshold was $50,000 (¶10-032).
Instalments system. The instalments system of paying GST applies only to “small business entities” (¶1-
250), or non-businesses with GST turnovers of less than $2m (¶8-037).
Low value goods. Special rules apply to offshore supplies of low value goods to consumers. These are
goods with a notional customs value of $1,000 or less (¶9-130).
Luxury car tax threshold. This indexed threshold is relevant in determining liability for luxury car tax
(¶23-150). For 2019/20, the general threshold is $67,525 and for 2018/19 it was $66,331. For fuel-efficient
cars, the threshold for 2019/20 and 2018/19 is $75,526. See also Car limit.
Simplified accounting methods for food retailers. These methods can normally only be used if the
relevant turnover is less than $2m (¶13-215).
Small business entities. The aggregated turnover must be less than $10m. For income years before
2016/17 this amount was $2m (¶1-250).
Tax invoices and adjustment notes. There is no obligation to issue a tax invoice if the value of the
supply does not exceed $75. There is no obligation to issue an adjustment note if the amount of the
adjustment does not exceed $75 (¶5-170; ¶6-135).

¶25-055 Contingent GST dates

• For GST taxpayers with monthly tax periods: lodgment of return and payment of net GST due by 21st
day after end of tax period (¶8-005; ¶8-100).

• For GST taxpayers with quarterly tax periods: lodgment of return and payment of net GST due by 28
 July, 28 October, 28 February and 28 April (¶8-005). For quarterly GST taxpayers opting to use the
annual information statement method, this must be lodged by the date the income tax return is due
(or 28 February following the end of the financial year if no income tax return is due) (¶8-036; ¶8-
100).

• For GST taxpayers with turnover of less than $2m adopting the simplified GDP-adjusted instalment
method: payment of specified GST instalments due by 28 July, 28 October, 28 February and 28 April,
with annual GST return due by the date their annual income tax return is due (or 28 February
following the end of the financial year if no income tax return due) (¶8-037).

• For voluntarily-registered GST taxpayers with annual tax periods: lodgment of return and payment of
GST due by the date the annual income tax return is due (or 28 February following the end of the
financial year if no income tax return due) (¶8-040).

• Refunds from ATO due within 14 days after GST return lodged (¶8-110).

• Tax invoices and adjustment notes to be issued within 28 days of request (¶5-100; ¶6-110).

Due dates falling on weekends and public holidays

If the normal due date for paying tax or lodging a form falls on a weekend or public holiday, the due date
will be extended to the next business day (Administration Act, s 8AAZMB; Sch 1, s 388-52). For example,
if the due date for lodging a quarterly return for the period would normally fall on a Sunday, the due date
is instead the following Monday.
A “public holiday” means a day that is a public holiday for the whole of any state or territory in Australia. If
that applies, taxpayers in all states and territories can lodge or pay on the next business day, even if they
don’t celebrate the public holiday.

Example
The normal due date for lodging the quarterly GST return for the tax period ended 30 September 2011 was 28 October 2011. As 28
October (a Friday) was a public holiday in Western Australia, the due date was automatically extended to Monday 31 October 2011
for taxpayers in all states and territories.

INDUSTRY CHECKLISTS
¶25-100 Accommodation and residence

• The sale of existing residential premises is input taxed, but the sale of new residential premises is
taxable (¶11-010; ¶11-020).

• The sale of commercial residential premises, such as a hotel or caravan park, is taxable, subject to
the “going concern” exemption (¶11-030).

• From 1 July 2018, purchasers of newly constructed residential premises or new subdivisions of
potential residential land have an obligation to withhold an amount on account of GST and remit it
directly to the Tax Office (¶11-022).

• Accommodation provided by charities at less than 75% of market value or cost is GST-free (¶15-010).

• The provision of private rented accommodation is input taxed (¶11-300).

• The provision of accommodation in commercial residential premises is taxable, though special rules
apply to long-term stays (¶11-320).

• If you provide a bed and breakfast at your own home, expenses will need to be apportioned to reflect
the business usage in order to calculate input tax credits (¶5-020).
• Leases of commercial premises such as shops and offices are taxable (¶11-330).

• Restaurant, catered or eat-in food is subject to GST (¶13-120).

• Hot takeaway food is subject to GST (¶13-130).

• Tips are not subject to GST (¶4-030).

• Free promotions are not subject to GST (¶4-030).

• No GST is payable on refunded deposits (¶4-070).

• GST may apply to cancellations (¶4-065).

• If items are stolen by guests, no adjustment need be made to the input tax credit claimed for the item
(¶6-100).

• Input tax credits can be claimed for uniforms, tools and equipment purchased for staff, and in certain
cases where staff are reimbursed for purchases (¶5-040).

• Abbreviated forms of tax invoices for smaller sales may be satisfied by cash receipts (¶5-110).

• There is no need to issue a tax invoice if the value of the supply, excluding GST, is $75 or less (¶5-
170).

• GST on sales through coin- or note-operated machines is attributed to the tax period in which the
machine is emptied (¶7-440).

• A free shuttle bus from the airport provided to guests is not subject to GST, but input tax credits can
be claimed for the cost of providing that service (¶4-030).

• Special rules apply to accommodation vouchers (¶4-060; ¶19-200).

• Home loans and home loan fees are input taxed as financial supplies, so no GST is payable on them
(¶10-010).

• Water, sewerage and stormwater drainage services are GST-free (¶16-200).

• Local government ratable services are not subject to GST (¶4-080).

• Land tax is not subject to GST (¶4-080).

• Estate agents’ and solicitors’ fees and advertising costs on property transfers are subject to GST
(¶11-070).

• New house construction costs are subject to GST (¶11-070).

• House alterations are subject to GST (¶11-070).

• If an amount under a building contract is retained pending satisfactory completion, the GST is
deferred until it is actually paid over (¶7-440).

• A body corporate of a block of home units must normally register if its turnover is $150,000 or more
(¶11-200).

• Student accommodation is GST-free if the student is undertaking a GST-free primary, secondary or

special education course (¶14-004).

• GST applies to the services of registered contractors, but not employees (¶4-090).
¶25-110 Charities and non-profit organisations

• Sales by charities are GST-free if they are below specified percentages of market value (¶15-010).

• Charities that operate retirement villages are not liable for GST on supplies of accommodation,
accommodation-related services or meals (¶15-015).

• Raffles and bingo conducted by charities are GST-free (¶15-020).

• The sale of most donated second-hand goods by a charity is GST-free (¶15-030).

• Membership fees are subject to GST (¶4-020).

• Gifts and donations are not subject to GST, even though donors receive “tokens” (¶4-030).

• Certain fundraising events are input taxed (¶15-055).

• Overseas aid delivered by an overseas body is not subject to GST (¶4-040).

• Religious services are GST-free (¶15-050).

• Religious practitioners carrying out pastoral and related duties are not treated as carrying on an
enterprise (¶15-053).

• Charities will be able to claim input tax credits if they reimburse expenses incurred by volunteers (¶5-
040).

• If you buy something for your business and later donate it to a charity, that does not give rise to a GST
adjustment (¶6-300).

• Charities may be entitled to use simplified methods of accounting where they have a mixture of
taxable and GST-free sales (¶15-060).

• Charities can choose to adopt the cash basis of accounting irrespective of their turnover (¶7-300).

• Charities are entitled to the special rules allowing branches to be treated as independent entities for
GST purposes (¶15-080).

• Non-profit bodies can take advantage of the GST grouping provisions (¶17-010) and entities engaged
in charitable activities can form GST joint ventures (¶17-210).

• A grant is treated like a gift, and is GST-free, unless it is made in return for services (¶4-040).

• Sponsorships would normally be subject to GST, as they are provided in return for advertising
services (¶4-040).

• Non-profit school tuckshops can choose to be input taxed on the food they sell (¶14-010).

• GST applies to the services of registered contractors, but not employees (¶4-090).

¶25-120 Entertainment and culture

• A grant is treated like a gift, and is GST-free, unless it is made in return for services (¶4-040).

• “No strings attached” subsidies are not subject to GST. If conditional, this may be a taxable supply by
the recipient (¶4-040).

• Sponsorships would normally be subject to GST, as they are provided in return for advertising
 services (¶4-040).

• Hobby artists cannot register (¶3-020).

• If items are stolen by patrons, no adjustment need be made to the input tax credit claimed for the item
(¶6-100).

• Donations are not subject to GST, even though donors receive “tokens” (¶4-030).

• Special rules apply to movie vouchers (¶4-060; ¶19-200).

• Purchases of entertainment generally do not carry an entitlement to input tax credits (¶5-010).

• At art auctions, the GST-inclusive or GST-exclusive nature of the sale should be disclosed (¶4-210).

• Casinos do not need to issue tax invoices (¶5-110).

• Free shuttle bus services for patrons are GST-free (¶4-030).

• Gambling suppliers are subject to GST but can use a “margin” method of calculating their net GST
liabilities (¶16-000).

• GST will be included in prizes paid by racing clubs (¶4-035).

• GST on sales through coin- or note-operated machines is attributed to the tax period in which the
machine is emptied (¶7-440).

• Food sold to patrons at an enclosed sporting or entertainment facility is taxable (¶13-120).

• Hot takeaway food is subject to GST (¶13-130).

• Alcoholic drinks are subject to GST, and additional tax will apply (¶13-190; ¶22-000).

• Tips are not subject to GST (¶4-030).

• Cover charges are subject to GST (¶4-030).

• GST applies to the services of registered contractors, but not employees (¶4-090).

• Free promotions are not subject to GST (¶4-030).

• No GST is payable on refunded deposits (¶4-070).

• GST may apply to cancellations (¶4-065).

• Transitional rules apply to life memberships of clubs taken out before 1 July 2000 (¶19-220).

¶25-125 E-commerce

• As e-business typically crosses national borders, there will often be questions about whether there is
a sufficient connection with Australia to justify applying GST (¶4-100).

• With internet transactions, it is particularly important to determine the identity of the supplier (¶17-
400).

• Until 1 July 2018, a GST and customs duty exemption generally applied to imported goods with a
customs value of no more than $1,000, but this has been replaced by a new system imposing GST at
the point of sale (¶9-130).
 • In certain cases where goods are ordered over the internet, the GST treatment of delivery charges will
be the same as for the goods themselves (¶4-200).

• There may be a GST distinction between software provided online and provided on a disk (¶4-100).

• A website is normally not a permanent establishment for GST purposes, but a server possibly is (¶4-
100).

• A supply of internet access — as distinct from the content of the transmission — is potentially taxable
if the recipient will “effectively use or enjoy” the supply in Australia (¶4-100).

• If software is downloaded “free” there may be side benefits to the supplier (eg cookies) that amount to
consideration, but these may be hard to value (¶4-030).

• Where web pages are designed in return for web server space, this is treated as a barter transaction
(¶4-020).

• For the purposes of the attribution rules, an invoice posted on a website may be “issued” (¶7-205).

• There are guidelines for determining when electronic payments take effect for GST purposes (¶7-
325).

• Special attribution rules may apply to transactions at internet kiosks (¶7-440).

• GST-exclusive prices may be shown on websites that sell only to non-residents (¶9-240).

• The “reverse charge” rules may apply where there are acquisitions from overseas, for example, where
computer services are accessed from overseas by an Australian financial institution (¶9-095; ¶9-100).

• Separate rules for allocating GST liability may apply where electronic supplies are made from offshore
to Australian consumers through electronic distribution services (¶9-120).

• There are special guidelines for determining whether the exemption for exports will apply (¶9-240).

• Tax invoices and adjustment notes may be issued and stored electronically (¶5-110; ¶6-110).

• In some e-commerce contexts, recipient created tax invoices may be appropriate (¶5-140).

• The normal GST treatment of residential accommodation applies equally to accommodation provided
through online services such as Airbnb (¶11-310).

• Taxi “ride-sourcing” services such as Uber that are booked through websites or smartphone apps are
treated in the same way as conventional taxi services and providers must register irrespective of
turnover (¶12-130).

¶25-130 Health and care

See generally Chapter 13 and in particular the medical aids checklist at ¶13-350.
• Health and medical services that are GST-free fall into the following categories:
– services of a medical practitioner or pathologist (¶13-310)

– services of allied health practitioners, such as physiotherapists, naturopaths, nurses and

optometrists (¶13-320)

– hospital treatment (¶13-330)

– residential, home care and specialist disability services (¶13-340)

 – medical aids and appliances (¶13-350)

– drugs, medicines and health goods (¶13-360)

– private health insurance (¶13-370)

– first aid and life saving courses (¶13-320).

• Supplies of cars to disabled veterans and other disabled people may be GST-free in certain
circumstances (¶12-150).

• Medical practitioners may need to consider forming a GST group in order to avoid having to pay GST
on internal supplies made within the practice (¶17-000).

• Equipment lease payments are subject to GST, though transitional rules may apply (¶19-210).

• Non-profit hospitals and nursing homes may be treated as charities and qualify for special
concessions (¶15-000).

• Special transitional rules apply to funerals prepaid before 1 July 2000 (¶13-380).

• Special education courses for children or students with disabilities are GST-free (¶14-012).

• Child care is GST-free when provided by approved bodies (¶14-100).

• Grants may be subject to GST if there are any strings attached (¶4-040).

¶25-140 Primary producers

• If you are only a hobby farmer and are not carrying on an enterprise, you cannot be registered for
GST (¶3-020).

• Exports are GST-free (¶9-200).

• Livestock sales are taxable, but slaughtered stock for human consumption are GST-free as “food”.
Delivery of livestock to a processor is a taxable supply (¶13-110).

• Live crustaceans and molluscs are treated as food and are GST-free if supplied for human
consumption (¶13-110).

• At auctions, the GST-inclusive or GST-exclusive nature of the sale will need to be disclosed (¶4-210).

• Unprocessed grains, cereal and sugar are not GST-free as “food”. Nor are edible plants still under
cultivation (¶13-110).

• Food fit for human consumption sold at the farm gate is GST-free, except for unprocessed cow’s milk
which is subject to GST (¶13-110).

• “No strings attached” subsidies are not subject to GST. If conditional, this may be a taxable supply by
the recipient (¶4-040).

• If you live on the farm, expenses will need to be apportioned to reflect the business usage in order to
calculate input tax credits (¶5-020).

• Tax invoices may be provided by the recipient, rather than the supplier, for certain types of agricultural
supply (¶5-140).

• Special rules for accounting for GST apply to agricultural pooling contracts (¶7-440).
 • A concessional rule applies to primary producers using the small business instalments system (¶8-
037).

• Where a live animal is exported (eg for breeding) and then re-imported, the importation will only be
subject to GST on the increase in value of the animal (¶9-055).

• A simplified accounting method may be used if GST-free food and other taxable items are sold at the
same location (¶13-210).

• Grants of unimproved Crown land are GST-free (¶11-400).

• Sales of farms as going concerns are GST-free (¶11-500).

• The sale of farm land, even if it is not a going concern, may also be GST-free (¶11-410).

• The sale of subdivided farm land to associates to use for residential purposes may be GST-free (¶11-
420).

• Entities engaged in an approved mining, agricultural, forestry or fishing joint venture can have it
approved as a GST joint venture with simplified GST accounting rules (¶17-200).

• A forward contract to sell a commodity at a fixed price on a given date is not an input taxed financial
supply and will be taxable (¶10-020; ¶19-100).

• An accruals basis primary producer who receives a prepayment for produce will be liable for GST on
the total invoice amount when the invoice is issued, but a cash basis producer will only be liable for
GST on the actual amount received (¶21-060).

• An input tax credit of 1/11th of the cost can be claimed on the purchase of a dairy quota. The
subsequent sale of the quota can be GST-free if it is sold as part of a going concern (¶11-500).

• Rent charged to workers on accommodation supplied to them is input taxed, so no GST applies and
no input tax credits can be claimed for repairs (¶11-310).

• As between the landowner and the sharefarmer, it would normally be desirable that both parties be
registered, so that the GST on internal transactions can be cancelled out by input tax credit
entitlements (¶17-430).

• GST applies to the services of registered contractors, but not employees (¶4-090).

• Wine producers may be liable for wine equalisation tax, though significant rebates apply (¶22-000;
¶22-560).

• Primary producers may be entitled to a partial refund of luxury car tax on specified vehicles (¶23-210).

¶25-150 Professions

See also the Legal services checklist at ¶17-425.

• If you account for income tax on a cash/receipts basis, you can also account for GST on a cash basis
(¶7-300).

• Specified health services are GST-free if they are provided by recognised professional practitioners
(¶13-320).

• Professional advice of lawyers, accountants, etc, is taxable (¶17-425).

• Services provided to non-residents who are overseas may be GST-free in certain circumstances (¶9-
240).
 • GST returns can be prepared by certain qualified people, as well as registered tax agents (¶8-042).

• Professional or trade qualification courses are GST-free, but this does not extend to continuing
professional development or renewal of annual practising certificates (¶14-020).

• Penalties may apply for failure to disclose GST in the price (¶21-010).

• Professional advisers may not be liable under the scheme promoter rules if they only provide advice
and do not engage in promotion (¶20-110).

• GST does not apply to genuine pro bono work (¶4-020).

• A professional practice may form a GST group with its service entity (¶17-000).

• If a solicitor incurs disbursements as an agent for the client, the input tax credit is claimable by the
client (¶17-425).

• If an adviser receives an amount into its trust account as security for future services, there is no
supply at that time (¶17-425).

• Branch offices may be registered separately (¶17-300).

• The Commissioner’s information-gathering powers are limited by the doctrine of legal professional
privilege (¶18-140).

¶25-160 Restaurants, cafes and caterers

• Restaurant, catered or eat-in food is subject to GST (¶13-120).

• Hot takeaway food is subject to GST (¶13-130).

• Tips are not subject to GST (¶4-030).

• Free promotions are not subject to GST (¶4-030).

• No GST is payable on refunded deposits (¶4-070).

• GST may be payable on cancellations (¶4-065).

• If glasses or cutlery are stolen by customers, no adjustment need be made to the input tax credit
claimed for the item (¶6-100).

• Input tax credits can be claimed for uniforms, tools and equipment purchased for staff, and in certain
cases where staff are reimbursed for purchases (¶5-040).

• Stock applied solely for private or domestic use will not be eligible for input tax credits, and a GST
adjustment must be made if input tax credits have already been claimed (¶5-010; ¶6-320).

• Mixed businesses may be entitled to use simplified accounting methods for determining what
proportion of their sales relates to GST-free food and what relates to taxable sales (¶13-210).

• Abbreviated forms of tax invoices for smaller sales may be satisfied by cash receipts (¶5-110).

• There is no need to issue a tax invoice if the value of the supply, excluding GST, is $75 or less (¶5-
170).

• The cash basis may be appropriate for businesses such as hot bread shops where the vast majority of
sales are for cash, even though the normal requirements for using the cash basis are not satisfied
 (¶7-300).

• GST on sales through coin- or note-operated machines is attributed to the tax period in which the
machine is emptied (¶7-440).

• Returnable food or drink containers are treated as second-hand goods (¶16-100).

• Wine manufacturers, wholesalers and importers may be liable for wine equalisation tax (¶22-000).

• GST applies to the services of registered contractors, but not employees (¶4-090).

¶25-170 Retailers

• Special rules apply to gift vouchers (¶4-060; ¶19-200).

• Changes to the price, for example, from early payment or volume discounts, may mean adjustments
to the GST position (¶6-100).

• GST does not apply where goods are obtained “free” under a frequent shopper program (¶4-062).

• No GST is payable on refunded deposits (¶4-070).

• GST may be payable on cancellations (¶4-065).

• Leases of shops are taxable (¶11-330).

• If you live above the shop, expenses will need to be apportioned to reflect the business usage in order
to calculate input tax credits (¶5-020).

• The sale of a retail franchise may qualify as a GST-free sale of a going concern (¶11-540).

• If stock is stolen by customers, no adjustment need be made to the input tax credit claimed for the
item (¶6-100).

• Where there is a product recall, and the goods returned for refund cannot be reused or resold, the
supplier is entitled to a decreasing adjustment for the GST component of the original sale (¶6-100).

• Input tax credits can be claimed for uniforms, tools and equipment purchased for staff, and in certain
cases where staff are reimbursed for purchases (¶5-040).

• You can claim full input tax credits even if you supply credit facilities, provided that the credits fall
below certain thresholds (¶5-020; ¶10-032).

• Abbreviated forms of tax invoices for smaller sales may be satisfied by cash receipts (¶5-110).

• There is no need to issue a tax invoice if the value of the supply, excluding GST, is $75 or less (¶5-
170).

• For food and grocery retailers, recipient created tax invoices may be appropriate in certain situations
(¶5-140).

• Stock applied solely for private or domestic use will not be eligible for input tax credits, and a GST
adjustment must be made if input credits have already been claimed (¶5-010; ¶6-320).

• To a limited extent, tax periods can be aligned with your normal balancing date (¶7-105).

• The cash basis may be appropriate for businesses such as convenience stores and hot bread shops
where the vast majority of sales are for cash, even though the normal requirements for using the
 cash basis are not satisfied (¶7-300).

• Food is generally GST-free, but eat-in and hot takeaway food is taxable (¶13-120; ¶13-130).

• Unnecessary food packaging may nevertheless be GST-free if it satisfies a de minimis test (¶13-200).

• Retailers such as mixed businesses may be entitled to use simplified accounting methods for
determining what proportion of their sales relates to GST-free food and what relates to taxable sales
(¶13-210).

• Lay-by sales are subject to GST, but the GST is adjusted if the lay-by is later cancelled. Special
attribution rules also apply (¶7-430).

• GST on sales through coin- or note-operated machines is attributed to the tax period in which the
machine is emptied (¶7-440).

• GST on contracts subject to “cooling-off” periods is attributed to the tax period in which that cooling-off
period expires (¶7-440).

• Hire-purchase transactions are fully taxable (¶10-020) and are governed by special attribution rules
(¶7-438).

• The normal GST accounting rules apply to goods sold on approval, or on a sale-or-return basis, or
under a floor plan arrangement (¶7-440).

• GST does not apply to sales of tobacco, alcoholic spirits or perfume at an inwards duty-free airport
shop (¶12-020).

• A Tourist Refund Scheme applies to certain goods purchased by people who are departing Australia
(¶12-030).

• Free promotions are not subject to GST (¶4-030).

• The retail sale of second-hand goods is subject to GST. There are special rules for determining
entitlement to input tax credits, and for allocating GST and input tax credits on a global basis (¶16-
100).

• GST applies to the services of registered contractors, but not employees (¶4-090).

¶25-180 Schools and higher education

See generally Chapter 14 and in particular the education checklist at ¶14-030.

• Most educational services are GST-free (¶14-000).

• Professional or trade qualification courses are GST-free (¶14-020).

• Supplies of food by non-profit school tuckshops may be input taxed (¶14-010).

• Certain fundraising events may be input taxed (¶15-055).

• The sale of textbooks is subject to GST (¶14-004).

• Government appropriations are subject to GST when they are provided as grants to educational
institutions (¶4-040).

• Donations and “no strings” grants to schools are not subject to GST (¶4-040).

• Scholarships are not subject to GST (¶14-004).

 • Sponsorships of school activities are normally taxable (¶4-040).

• Memberships of student associations are taxable (¶14-004).

• Parents and Friends/Citizens Associations are not required to be registered if their annual turnover is
less than $150,000. This has important implications for activities such as fetes (¶14-004).

• Non-profit educational institutions including government schools may be eligible for the charitable
concessions on GST-free sales (¶15-000), cash basis accounting (¶7-300), and reimbursement of
volunteers (¶5-040).

• Education Departments may register individual schools as branches. Alternatively, non-profit schools
may register in their own right (¶14-040). The option of separate registration of part of the school’s
operations may also be available (¶15-080).

• Outside school hours child care may be GST-free (¶14-100).

• Travel to and from school is taxable (¶14-004).

• GST applies to the services of registered contractors, but not employees (¶4-090).

¶25-190 Small businesses

• A small business entity (¶1-250) can elect to pay GST by quarterly instalments and lodge annually
(¶8-037).

• A small business entity (¶1-250) can apportion input tax credits on an annual basis (¶5-020).

• A small business entity (¶1-250) can elect to use the cash basis of accounting (¶7-300).

• Registration is not compulsory for businesses with a GST turnover of less than $75,000 ($150,000 for
non-profit bodies) (¶3-000).

• A business that is voluntarily registered for GST can elect to report and pay GST on an annual basis
(¶8-040).

• Monthly tax periods are optional for businesses with a GST turnover of less than $20m (¶7-100).

• Electronic lodgment and payment is not compulsory for businesses with a GST turnover of less than
$20m (¶8-043).

• Simplified accounting methods apply to small food retailers and certain other small businesses (¶13-
215; ¶13-216).

¶25-200 Motor vehicles

• GST may apply where a motor vehicle is sold or leased as part of a business (¶4-000).

• Supplies made or credit purchased under a hire purchase agreement are now fully taxable (¶10-010;
¶10-020).

• Trade-ins are treated as both a supply by the purchaser and a separate supply by the seller (¶12-
125).

• The sale of a car by the lessor on the termination of the lease is a separate supply from the lease
itself (¶12-145).

• GST is normally calculated as 10% of the sale price (including dealer delivery, accessories and
 compulsory insurance), or 10% of the amount of the lease payments (¶12-080; ¶12-170).

• GST on importations is payable by the importer (¶9-005).

• Subject to some important exceptions, an additional tax (luxury car tax) applies where the GST-
inclusive market value of a car exceeds a certain threshold (¶23-100).

• In accordance with the normal rules, the input tax credit is apportioned where the vehicle is acquired
only partly for business purposes. Special apportionment methods may apply (¶5-020).

• Subject to various exceptions, the input tax credit that applies where a car is purchased for business
purposes is limited where its GST-inclusive market value exceeds the car limit (¶12-110).

• GST applies to repairs, parking and fuel (¶12-170), but not to non-taxable charges such as motor
vehicle registration or fines. Special considerations may apply to vehicle modification permits (¶4-
080).

• If you supply taxi travel as part of your business, you are required to be registered for GST,
irrespective of turnover. This also extends to ride-sourcing services such as Uber (¶12-130).

• Taxi services to passengers are subject to GST (¶12-130).

• Driver-training courses may be GST-free (¶12-130; ¶14-020).

• The issue of a taxi plate is not taxable. The sale of a taxi plate, together with the taxi, may be GST-
free under the going concern rules (¶12-130).

• Special GST payment arrangements may apply to accredited taxi operators (¶12-130).

• Supplies of cars to disabled veterans and other disabled persons may be GST-free in certain
circumstances, and a rebate may apply to motor cycles (¶12-150).

• If a vehicle is supplied to another person for evaluation, GST would not apply unless the supplier
receives something back in return (¶12-128).

• Special GST rules apply to insurance claims (¶10-120).

• The normal attribution rules apply to cars under floor plan arrangements (¶7-440).

• Where a vehicle is sold at auction, it should be made clear whether it is being sold on a GST-inclusive
or GST-exclusive basis, and whether the seller is registered (¶4-210).

• Diplomats may be entitled to refunds on GST and luxury car tax on motor vehicles (¶12-160).

• Dealers may be able to claim an input tax credit on second-hand vehicles acquired from non-
registered sellers. They may also be entitled to use a global method of accounting (¶16-110).

• A second-hand car dealer who sells cars, which the dealer has either stolen or has received knowing
they have been stolen, is nevertheless making “supplies” for GST purposes (¶4-010).

• The discounted transfer of a vehicle to an associate may be treated as being made for market value
unless the associate would have been entitled to a full input tax credit (¶17-500).

• Holdback and various incentives paid to dealers may have special GST implications (¶6-100).

• If a dealer registers and pays compulsory third party insurance on behalf of the purchaser of a car,
and recoups that amount from the purchaser, a tax invoice for the insurance should be issued by the
registration authority (as agent for the insurer), not the dealer (¶12-170).
 • Deposits are not subject to GST when they are initially paid, but attract GST once they are applied
towards the payment for the vehicle or if they are forfeited (¶4-070).

• Extended vehicle warranties sold to vehicle purchasers are subject to GST (¶12-170).

• The cash basis of accounting may be more appropriate than the accruals basis where labour is the
major component of the business. For example, the accruals basis may be more appropriate for a
rental company, but the cash basis may be more appropriate for a driving school where the use of
the vehicles is only for the purpose of providing lessons (¶7-300).

ATO FORMS • FACT SHEETS • CONTACTS

¶25-500 ATO forms and fact sheets

This sets out various ATO forms, fact sheets and other publications that are relevant to goods and
services tax (GST), luxury car tax (LCT) and wine equalisation tax (WET), together with edited versions of
the ATO descriptions. These publications may be accessed at www.ato.gov.au. For ATO Rulings,
Determinations and Interpretative Decisions, see the Rulings Finding List.
The order of topics in this checklist broadly follows the same order as in the Guide. The currency of the
publications must be considered in each case.
Registration (Chapter 3)
• Add a new business account Information about registering for GST, fuel tax credits, LCT, WET or
PAYG withholding (NAT 2954).

Credits and adjustments (Chapters 5, 6)

• GST credits for business. Explains how to claim a GST credit for GST included in the price you pay for
goods and services you use in your business (NAT 3019).

• Valid tax invoices and GST credits. Explains the requirements of a valid tax invoice and recipient
created tax invoices (RCTIs) (NAT 12358).

• Request for review of tax invoice decision. To apply for a review of a tax invoice decision, complete
this form (NAT 12381).

• Employee reimbursements and GST. Employers are entitled to GST credits for employee
reimbursements.

• Hire purchase, leasing and GST. This fact sheet explains what hire purchase leasing is, how GST
applies and how you can claim GST credits on hire purchases. It also explains how leasing
agreements operate, how GST is payable and how you can claim GST credits (NAT 3491).

GST accounting, BAS preparation, payment (Chapters 7, 8)

General
• Cash and non-cash accounting. Explains the cash basis and non-cash (accruals) basis of accounting
for GST and when to pay GST and claim GST credits.

• GST calculation worksheet for Business Activity Statement (BAS). This GST calculation worksheet for
BAS will assist you in calculating your GST (NAT 4203-04.2004).

• GST — completing your activity statement. Explains what you need to do to complete the GST section
of your activity statement (NAT 7392).

• Interactive GST calculation worksheet for the BAS. This worksheet allows you to work out GST
amounts for your BAS. Do not lodge the worksheet with your BAS (NAT 5107).
Monthly reporting
• Reporting and paying GST monthly. Explains your obligations if you choose, or are required to report
and pay your GST monthly (NAT 4150).

• BAS Y — Monthly business activity statement. This sample document is for taxpayers with monthly
GST, fuel tax credit and any other obligations (NAT 14171).

Quarterly reporting
• Quarterly GST options. This fact sheet explains the three options for reporting and/or paying GST
quarterly (NAT 4149).

• BAS A — Quarterly business activity statement. This sample document is for taxpayers with a
quarterly GST, PAYG tax withheld and PAYG income tax instalment obligations. Typical users
include sole traders and companies (NAT 4189).

• BAS C — Quarterly business activity statement. This sample document is for taxpayers with a
quarterly GST, PAYG tax withheld and PAYG income tax instalment obligations and any one or
combination of fringe benefit tax instalments, WET or LCT (NAT 4195).

• BAS D — Quarterly business activity statement. This sample document is for taxpayers with a
quarterly GST only. Typical users include partnerships and charities (NAT 4191).

• BAS U — Quarterly business activity statement. This sample document is for taxpayers with a
quarterly GST, fuel tax credit, PAYG tax withheld and PAYG income tax instalment obligations.
Typical users include sole traders and companies (NAT 14167).

• BAS V — Quarterly business activity statement. This sample document is for taxpayers with a
quarterly GST, fuel tax credit, PAYG tax withheld and PAYG income tax instalment obligations and
any one or combination of a fringe benefit tax instalment, WET or LCT (NAT 14168).

• BAS W — Quarterly business activity statement. This sample document is for taxpayers with a
quarterly GST and fuel tax credit role only. Typical users include partnerships and charities (NAT
14169).

• BAS X — Quarterly business activity statement. This sample document is for taxpayers with a
quarterly GST, fuel tax credit and PAYG tax withheld obligations. Typical users include partnerships
and charities (NAT 14170).

Annual reports and returns

• Report your GST once a year. This fact sheet explains who is eligible to report GST annually and
outlines the election, lodgment and payment arrangements (NAT 12906).

• Completing your annual GST return. These instructions explain how to complete your annual GST
return (NAT 13075).

• BAS P — Annual GST return. This sample document is for taxpayers who pay their GST by
instalments and lodge an annual GST return. These clients must have an annual turnover of $2m or
less and pay a GST instalment amount (or varied amount) worked out by the ATO (NAT 4646).

• BAS Q — Annual GST report. This sample document is for taxpayers who have paid and reported
GST quarterly using GST Option 2 (NAT 4647).

• BAS Z — Annual GST return. This sample document is for taxpayers with annual GST, and fuel tax
credit as well as taxpayers with WET or LCT obligations. Taxpayers who pay their GST by
instalments do not use this form as they use BAS P (NAT 14172).

BAS revisions
 • RBAS — Revised activity statement. This sample document is used by taxpayers to revise earlier
activity statements (NAT 3233).

• Making adjustments on your activity statements. Explains how to make changes to current or past
activity statements that increases or decreases the amount of GST to be paid (NAT 11035-4.2012).

• Correcting GST mistakes. Explains when businesses can use a later activity statement to correct
mistakes made on an earlier activity statement. It does not apply to “adjustments” as defined in the
GST law, just errors and omissions.

Other issues
• GST and annual private apportionment. This fact sheet explains how eligible taxpayers can account
for the private portion of their business purchases on an annual basis rather than in every activity
statement (NAT 12877).

• GST and the disposal of capital assets. How to account for GST when disposing of capital assets
(NAT 7682).

• GST and second-hand goods — completing your activity statement. How to calculate and report GST
on sales and purchases of second-hand goods (NAT 10817). This information supplements the
activity statement instructions (NAT 7392).

• GST and progressive or periodic sales and purchases — completing your activity statement. How to
account for and report GST on progressive or periodic sales and purchases (NAT 15398). This
information supplements the activity statement instructions (NAT 7392).

• How to request that the ATO retain your refund. Use this questionnaire to request the ATO to retain
your refund for the purposes of verification.

• Computer assisted verification. Fact sheet outlining the computer assisted verification (CAV) process.

GST instalments (Chapter 8)

• GST instalments. This fact sheet contains information about options for reporting and paying GST,
including the option to pay GST by instalments (NAT 4238).

• Varying your GST instalment. This fact sheet explains how you can vary your GST instalment amount
advised by the ATO (NAT 4239).

• How we work out the GDP adjustment in your GST instalment amount. Explains the GDP adjustment
used to work out GST instalment amounts.

• How we work out the GDP adjustment in your PAYG and GST instalment amounts. Explains the gross
domestic product (GDP) adjustment used to work out your Pay As You Go (PAYG) and GST
instalment amounts (NAT 72216).

• BAS S — Quarterly GST instalment notice. This sample GST instalment notice is for clients who
report and pay GST instalments quarterly, use the GST instalment amount to report, and have no
other reporting requirements (NAT 8056).

• BAS T — Quarterly GST and PAYG instalment notice. This sample quarterly GST instalment notice is
for clients who report and pay GST and PAYG quarterly, use the instalment amounts advised by the
ATO and have no other reporting requirements (NAT 8057).

• Fuel tax credits and GST instalments. This fact sheet provides information about how to claim your
fuel tax credits if you pay GST by instalments.

Imports and exports (Chapter 9)

 • GST and imported goods. Describes how and when you pay GST on imports, circumstances where
you can defer payment of GST on imported goods, how you can claim tax credits and the importation
evidence the ATO requires.

• GST and things purchased from offshore — completing your activity statement. How to account for
GST on purchases from offshore.

• Notifying amounts of GST to recipients of offshore supplies of low-value goods.

Financial supplies, superannuation and insurance (Chapter 10)

• GST and financial supplies — completing your activity statement. Explains what a financial supply is
and how to complete your activity statement. Also clarifies when you can claim GST credits for
financial supplies, the financial acquisitions threshold and calculation methods (NAT 10816).

• GST and financial supplies — claiming reduced GST credits. This fact sheet explains the GST
obligations for self managed superannuation funds and provides details of the requirements for
claiming reduced GST credits on purchases used to make financial supplies.

• Insurance and GST. Explains how GST applies if you are registered for GST and take out general
insurance for business purposes (NAT 3427).

• GST and insurance transactions — completing your activity statement. How to account for GST on
business related insurance you purchase, amounts you claim and excesses you pay (NAT 10668-
04.2012). This information supplements the activity statement instructions (NAT 7392).

• Hire purchase, leasing and GST. This fact sheet explains what hire purchase leasing is, how GST
applies and how you can claim GST credits on hire purchases. It also explains how leasing
agreements operate, how GST is payable and how you can claim GST credits (NAT 3491).

Real property (Chapter 11)

• GST and property. This guide will help you work out how GST applies to GST property sales and
transactions (NAT 72957).

• GST and property — creditable purpose adjustments. Explains when you may have an adjustment for
a change in use of property (NAT 73095).

• GST and commercial accommodation — completing your activity statement. Explains how to account
for commercial accommodation you provide (not residential accommodation) on your activity
statement (NAT 10813).

• GST and the margin scheme. This guide outlines how you can use the margin scheme, how to apply
it, the calculation methods, GST payable, eligibility, valuations, written agreements, record-keeping
and how to access more information (NAT 15145).

• GST and the margin scheme — completing your activity statement. Explains how to account for GST
on sales and purchases made under the margin scheme (NAT 10670).

• GST property settlement withholding notification.

• GST property settlement date confirmation.

• GST on property settlement — GST payments at settlement.

• GST on property settlement — request refund of amount withheld in error.

• Common GST errors and property. Covers common errors that may occur when for example, you
claim credits for purchasing property, use the margin scheme, sell new residential premises or
 receive settlement adjustments (NAT 73112).

• Reporting mistakes on GST and property transactions. If you are a property owner, developer or are
registered for GST and you use your property differently from the way you planned to, you may have
to report a GST adjustment. You can do this by completing a Voluntary Disclosure Statement.

Transport, travel and vehicles (Chapter 12) and LCT (Chapter 23)
• GST and international transport of passengers. Explains that providers and arrangers of international
transport of passengers need to identify which of their sales are GST-free (NAT 3459).

• GST — Travel agents and commissions. Outlines the GST implications of commissions received by
travel agents from suppliers of transport and land content (NAT 4518).

• GST and Australian travel packages. Explains the GST obligations of foreign tour operators who sell
or purchase Australian travel packages or components from 1 October 2005 (NAT 13904).

• GST and motor vehicles. Explains how GST applies to the purchase or disposal of a motor vehicle
(NAT 4629).

• GST and the sale of reconditioned car parts. This fact sheet explains the GST treatment of sales of
reconditioned parts where the invoice you issue separately itemises a deposit for a worn part the
customer sells to you in return (NAT 13259).

• Selling taxi licences and plates. This fact sheet explains when the sale of a taxi licence/plate can be
GST-free as a supply of a going concern (NAT 7427-07.2010).

• GST and motor vehicles trade-ins for charities. This fact sheet explains the GST treatment of motor
vehicles you trade-in to purchase other vehicles (NAT 12353).

• Application for medical assessment to obtain a car or car parts GST-free. Form to access car or car
parts GST-free (NAT 3417).

• Declaration for an exemption of GST on a car or car parts — disabled veterans. If you are an eligible
veteran with a disability, you can present this declaration to your motor vehicle supplier so they do
not have to charge you GST on your car or car parts.

• Declaration for an exemption of GST on a car or car parts — person with a disability who is gainfully
employed. If you are an eligible person with a disability who is gainfully employed, present this
declaration to your motor vehicle supplier so they do not have to charge you GST on a car or car
parts (NAT 3419).

LCT
• LCT. Explains how to meet your LCT obligations.

• LCT — how to complete your activity statement. Instructions for completing the LCT section of your
activity statement (NAT 7391).

• GST and LCT on cars you buy — people with disabilities. Helps you to work out if you are eligible to
buy or lease a car, or buy car parts GST-free.

• Application for LCT refund — entities not registered for GST. Use this form if you are not registered for
GST and are claiming a refund of LCT.

• Declaration for an exemption from LCT — cars used for transporting people with a disability in
wheelchairs. If you are an eligible person with a disability and you use a wheelchair, you can present
this declaration to your motor vehicle supplier so they do not have to charge you LCT on the car.
 • Application for LCT refund — for primary producers and tourism operators. If you are an eligible
primary producer or tourism operator, you can claim an LCT refund by completing this application
form (NAT 72601).

Food (Chapter 13)

• GST food guide. This guide explains the rules you use to work out the GST status of food items you
sell.

• GST and food — Sch 1 and 2. This fact sheet outlines what food for human consumption is GST-free
and what is taxable.

• GST on livestock and game sales. Sales of animals are subject to GST while sales of meat for human
consumption are GST-free (NAT 3508-08.2006).

• Simplified GST accounting methods for food retailers. Describes the simplified GST accounting
methods for small food retailers and explains when they can be used.

• Simpler GST accounting for the food and grocery industry. Information about the GS1 net food
classification system to find out which food and groceries have GST included in the price and which
products are GST-free. Refer to Practice Statement PS LA 2012/2 (GA) “GST classification of food
and beverage items”.

• GST — completing your activity statement — stock purchases method. Instructions for small food
retailers that use the stock purchases simplified GST accounting method.

• GST — completing your activity statement — snapshot method. Instructions for small food retailers
that use the snapshot simplified GST accounting method.

• GST — completing your activity statement — sales percentage method. For small food retailers using
a simplified GST accounting method (NAT 16016). Read together with Simplified GST accounting
methods (NAT 3185).

• GST — completing your activity statement — business norms method. Instructions for small food
retailers that use the business norms simplified GST accounting method.

• Business norms percentages No 1 — hot bread shops. Helps you to work out if you are eligible to use
the business norms simplified accounting method if you operate a hot bread shop.

• Business norms percentages No 2 — convenience stores that convert food. Helps you to work out if
you are eligible to use the business norms simplified accounting method if you operate a
convenience store that converts food.

• Business norms percentages No 3 — convenience stores that do not convert food. Helps you to work
out if you are eligible to use the business norms simplified accounting method if you operate a
convenience store that does not convert food.

• Business norms percentages No 4 — fresh fish retailers. Helps you to work out if you are eligible to
use the business norms simplified accounting method if you are a fresh fish retailer and you sell
some cooked fish.

• Business norms percentages No 5 — rural convenience stores. Helps you to work out if you are
eligible to use the business norms simplified accounting method if you operate a rural convenience
store that may include fuel or Australia Post agency sales (NAT 3268-10.2007).

• Business norms percentages No 6 — pharmacies. Helps you to work out if you are eligible to use the
business norms simplified GST accounting method if you operate a pharmacy that makes GST-free
and taxable food sales (NAT 3269-10.2007).
 • Business norms percentages No 7 — cake shops. Helps you to work out if you are eligible to use the
business norms simplified accounting if you operate a cake shop (NAT 3270).

• Business norms percentages No 8 — health food shops. Helps you to work out if you are eligible to
use the business norms simplified accounting method if you operate a health food shop and you do
not convert GST-free food into taxable food (NAT 3271-10.2007).

• Business norms percentages No 9 — continental delicatessens. Helps you to work out if you are
eligible to use the business norms simplified accounting method if you operate a continental
delicatessen and you do not sell hot food or prepared meals (NAT 3272).

• Notice to revoke an election to use a simplified GST accounting method.

Medical, education and child care (Chapter 14)

• GST and medical services. How GST applies to medical services (NAT 4650).

• GST and medical aids and appliances. This fact sheet explains when the sale of medical aids and
appliances are GST-free (NAT 4651).

• GST and other health services. This fact sheet explains what health services, apart from medical
services, are GST-free.

• GST and acupuncture, naturopathy and herbal medicine services. This fact sheet explains how GST
applies to acupuncture, naturopathy and herbal medicine services (NAT 8090).

• GST for preschool operators. This guide explains what you, as a preschool operator, need to do to
meet your GST obligations (NAT 12579).

• GST and personal aquatic survival skills. Describes the difference between supplying personal
aquatic survival skills and swimming lessons.

• Business norms percentages No 6 — pharmacies. Helps you to work out if you are eligible to use the
business norms simplified GST accounting method if you operate a pharmacy that makes GST-free
and taxable food sales (NAT 3269-10.2007).

Charities and fundraising (Chapter 15)

• Tax basics for non-profit organisations. A guide to tax issues affecting non-profit organisations
including charities, clubs, societies and associations (NAT 7966).

• Addendum to Tax basics for non-profit organisations Dec 2012. An addendum has been issued to
update the publication Tax basics for non-profit organisations (NAT 7966) with developments that
have occurred since the publication was released in June 2011.

• Endorsement to access charity tax concessions. This guide explains the tax concessions available for
endorsed charities and how to work out if your charity is eligible for endorsement for income tax,
fringe benefits tax and GST charity tax concessions.

• GST and non-commercial activity rules for fringe benefits. This fact sheet explains how the non-
commercial activity rules apply to a supply made by a charity which is a fringe benefit. This covers
fringe benefits and includes exempt benefits under the FBT Assessment Act (NAT 7633-07-2010).

• Fundraising. This guide explains the tax treatment of various fundraising activities and the
concessions available (NAT 13095).

• GST and fundraising dinners or similar functions. How to apply GST to fundraising events such as
gala events, “$1,000 a plate” dinners and charity auctions (NAT 7327).
 • Volunteers and tax. This guide is for volunteers and non-profit organisations that deal with volunteers.
It explains the tax treatment of transactions that commonly occur between non-profit organisations
and their volunteers (NAT 4612-04.2008).

• GST and motor vehicles trade-ins for charities. This fact sheet explains the GST treatment of motor
vehicles you trade-in to purchase other vehicles (NAT 12353).

Gambling and racing (Chapter 16)

• GST and gambling. How to work out if you are conducting gambling activities and how GST applies to
gambling sales you make (NAT 3018).

• Accounting for gambling supplies on your activity statement. How to account for and report GST on
cash and non-cash prizes you provide (NAT 10672-07.2006). This information supplements the
activity statement instructions (NAT 7392).

• GST for the racing industry. This guide explains what owners, lessees, jockeys, drivers, trainers and
breeders of racing animals need to do to meet their GST obligations (NAT 13425).

Groups, branches and agents (Chapter 17)

• GST groups. This fact sheet explains how to form a GST group and how it operates under GST law
(NAT 3089).

• GST group — notification of forming, changing or cancelling. Use this form to notify the ATO that you
have formed, changed or cancelled a GST group. You can also add or remove members and change
the group’s representative.

• GST joint venture — notification of forming, changing or cancelling. Use this form to notify the ATO
that you have formed or cancelled a GST joint venture, changed the GST joint venture’s operator,
added or removed participants from a GST joint venture.

• Consolidation of GST returns — notification by GST joint venture operator. Use this form to notify the
ATO that you have consolidated GST returns for all your GST joint ventures or cancelled your
election to consolidate GST returns for all your GST joint ventures.

• GST branches. Explains the requirements of a GST branch and will help you understand your GST
obligations if you register a GST branch.

• Application to register a GST or PAYG withholding branch. Use this application if you want to create a
GST branch or a PAYG withholding branch (NAT 14834).

• Application to cancel a GST or PAYG withholding branch. Use this application if you want to cancel a
GST and/or PAYG withholding branch (NAT 15299).

• GST and the treatment of supplies made through agents and other intermediaries. This fact sheet
explains the GST treatment of supplies of goods and services made through agents and other
intermediaries.

Transitional (Chapter 19)

• GST and long-term non-reviewable contracts. This fact sheet explains how GST applies to long-term
non-reviewable contracts from 1 July 2005.

• Accounting for long-term non-reviewable contracts on your activity statement. These instructions will
help you to account for the GST on long-term non-reviewable contracts (LTNRC) on your activity
statement (NAT 13591).

• GST and the arbitration process for long-term non-reviewable contracts. This fact sheet provides
questions and answers in relation to GST and the arbitration process for long-term non-reviewable
 contracts (NAT 14206-08.2005).

Special industries
• GST for small business. Provides information about GST and explains what you must do to meet your
GST obligations (NAT 3014).

• GST religious group — notification of forming, changing or cancelling. What is a GST religious group?

• Flowchart for the scrap metal industry code of compliance. A flowchart to assist in understanding the
process for the scrap metal industry code of compliance (NAT 10587-06.2012).

• Industry incentive payments for greeting card retailers. Explains the GST treatment of incentives you
receive from greeting card manufacturers and wholesalers.

Miscellaneous
• GST and vouchers — completing your activity statement. How to account for and report GST on
vouchers.

• GST and second-hand goods — completing your activity statement. How to calculate and report GST
on sales and purchases of second-hand goods (NAT 10817). This information supplements the
activity statement instructions (NAT 7392).

• GST and product recalls. Explains how GST applies to recalled products that cannot be used or
resold.

• Rebates and GST. How GST applies to rebates you pay and receive and other trade incentive
payments that are common in the manufacturing, wholesaling and retailing industries.

• GST and the environmental management charge. How GST applies to the environmental
management charge.

• Personal living expenses comprehensive worksheet. This worksheet can help you to review your
business record keeping, work out if your reported income is enough to support your actual lifestyle
and self-assess your risk of being selected for an audit (NAT 72959).

• Personal living expenses concise worksheet. This worksheet can help you to review your business
record keeping, work out if your reported income is enough to support your actual lifestyle and self-
assess your risk of being selected for an audit (NAT 72960).

WET (Chapter 22)

• WET — how to complete your activity statement. Instructions for completing the WET section of your
activity statement (NAT 7390).

• Application for refund of WET. Use this application to apply for a refund of WET (NAT 9241).

• Using invoices with a WEG label in the wine industry. Explains how to use invoices with regard to the
WEG label.

LCT (Chapter 23) — see Transport above

¶25-510 ATO contacts

The ATO’s general website is www.ato.gov.au.

Addresses and contacts for the national, state and regional taxation offices are listed below.
National office
Commissioner of Taxation: C Jordan
Second Commissioners of Taxation: A Mills, N Olesen and R Katf
2 Constitution Avenue, Canberra
PO Box 900, Civic Square, ACT 2608
ATO locations
ATO are at a number of locations around Australia. At most locations, taxpayers will be able to pick up a
range of publications and brochures, talk to ATO staff and access the ATO’s phone service for more
specialised tax information. The ATO cannot accept payments at these locations.
General inquiries to the ATO can be made on 13 28 61 and all offices can be contacted on this number.
Business tax enquiries can be made on 13 28 66, superannuation enquiries on 13 10 20 and registered
tax professional enquiries on 13 72 86.

New South Wales

Albury.................................... 430 Wilson St, Albury
Chatswood.................................... 56-64 Archer St, Chatswood
Corrimal.................................... Cnr Underwood St and Collins St, Corrimal
Newcastle.................................... 279 King Street, Newcastle
Parramatta.................................... 2-12 Macquarie Street, Parramatta
Penrith.................................... 598 High St, Penrith
Rockdale.................................... 75 Railway St, Rockdale
Sydney Shop 1, 32 Martin Place, Sydney
CBD....................................
Wollongong.................................... See Corrimal

ACT
Canberra.................................... Woden Service Centre, Penrhyn House, 6 Bowes St ACT

Victoria
Dandenong.................................... Level 1, 27-29 Robinson St, Dandenong
Footscray.................................... 75 Moore St, Footscray
Geelong.................................... 12-14 Little Ryrie St, Geelong
Melbourne 747 Collins St, Docklands
CBD....................................

Queensland
Biggera 95 Brisbane Rd, Biggera Waters
Waters....................................
Brisbane Suncorp Plaza, Brisbane
CBD....................................
Townsville.................................... 307-311 Ross River Rd Aitkenvale
South Australia
Adelaide.................................... 86 Grenfell St, Adelaide

Western Australia
Joondalup.................................... 68 Reid Promenade, Joondalup
Perth CBD.................................... Shop 15, Wesley Quarter, 770 Hay St, Perth

Tasmania
Hobart.................................... 30-38 Barrack Street, Hobart
Launceston.................................... 8 Boland St, Launceston

Northern Territory
Alice 5 Railway Terrace, Alice Springs
Springs....................................
Darwin.................................... 24 Knuckey Street, Darwin

ATO mailing addresses

Individual taxpayers using paper returns should use the pre-addressed envelope enclosed with the tax
return instructions. Alternatively, tax returns should be sent to:
Australian Taxation Office
GPO Box 9845
IN YOUR CAPITAL CITY
Note: Do not replace the words “in your capital city” with the name of a specific capital city.
For general correspondence, use the following postal address:
Australian Taxation Office
GPO Box 9990
(in the capital city of your state/territory).
GST TERMS
Summary of GST terms ¶26-000

¶26-000 Summary of GST terms

Here is a summary of the key terms used in GST. In most cases, you will find a cross-reference to the
main place in this book where the term is explained more fully. Words preceded by an asterisk (*) are
themselves defined.
ABN.
Shorthand for Australian Business Number. This is a business identifier which serves as a GST
registration number and is used for other purposes such as the *Pay As You Go system
....................................¶3-050
ACCC.
Shorthand for the Australian Competition and Consumer Commission ....................................¶21-010
ANTS.
Shorthand for A New Tax System. This was the government’s name for a package of tax measures,
including GST, wine equalisation tax, luxury car tax, personal tax cuts and the *Pay As You Go system,
that generally came into force on 1 July 2000
AOU.
Shorthand for “application for own use”, an expression borrowed from *sales tax law. Wine that is applied
to the seller’s own use — for example, by consumption or giving it away — may attract *wine equalisation
tax ....................................¶22-170
ATO.
Shorthand for the Australian Taxation Office. The GST system is administered by the Commissioner of
Taxation through the ATO ....................................¶18-000
Accounts method.
This shorthand method of completing the *BAS is available to businesses that have appropriate record-
keeping and accounting systems. It enables the business to identify its GST and *input tax credits directly
from the accounting records ....................................¶8-010
Accruals basis.
If you use the accruals basis, you work out your GST and *input tax credits for each *tax period on the
basis of your entitlement to be paid and your obligation to pay. This may be compared with the *cash
basis, which looks at the amounts actually received and paid out ....................................¶7-200
Acquisition.
This includes any form of acquisition. It is not restricted to purchases ....................................¶5-010
Adjustment notes.
For certain types of GST *adjustment that reduce GST or increase an *input tax credit, you cannot
attribute the adjustment to a *tax period unless you hold an adjustment note at the time you lodge your
*GST return for that period. Adjustment notes contain information similar to *tax invoices
....................................¶6-110
Adjustments.
Adjustments to previously declared GST or *input tax credits may be needed if supplies are later
cancelled, goods are returned, there is a part-refund, or a supply changes its GST status. These
*adjustment events are taken into account in the later tax period, provided that an *adjustment note is
held at the time of lodging the *GST return for that period. Other adjustments may be required if there is a
bad debt, a change in the intended business use, businesses are started, transferred or wound down, and
in various other situations ....................................¶6-000
Affiliate.
The income of affiliates is taken into account in determining an entity’s *aggregated turnover and
therefore whether the entity qualifies as a *small business entity. Affiliates can only be companies or
individuals ....................................¶1-275
Agent.
Normally, if you make a supply through an agent, you are the one liable for the GST, not the agent.
Similarly, if you acquire something through an agent, you are the one entitled to claim the *input tax
credit. However, if a non-resident acts through an agent resident in Australia, the agent is responsible for
the GST consequences of those actions. Principals and agents can also agree that the agent can act as a
principal in certain situations ....................................¶17-400
Aggregated turnover.
This means the ordinary income of an entity and of its affiliates and connected entities. Business entities
that have an aggregated turnover of less than $2m qualify as *small business entities and are eligible for
certain GST concessions ....................................¶1-265
Annual turnover.
See GST turnover.
Apportionment.
This is necessary in various situations, for example, where something has been acquired for a mixture of
business and private purposes. The *input tax credit will need to be apportioned to reflect only the
business purpose. This also applies where something is acquired and used in providing a mixture of
*taxable and *input taxed supplies ....................................¶5-020; ¶10-030
Associate.
Special rules apply if you make a supply to an associate at a price below market value or as a gift. The
effect is that the supply will be treated as if it had been for market value, unless the associate would have
been entitled to a full *input tax credit. An associate includes a relative, business partner, *entities in
trustee/beneficiary relationships, and companies and their controllers ....................................¶17-500
Attribution.
This is the process of working out what GST and *input tax credits belong to each *tax period. The way
that this is done will vary according to whether you have a *cash or *accruals basis of accounting
....................................¶7-200
Australia; indirect tax zone.
Australia does not include any external territories, but may include offshore oil rigs. The definition is
relevant in various contexts, such as the import and export rules (Chapter 9) and the requirement that
taxable supplies must be *connected with Australia. From 1 July 2015, this term has been formally
replaced by *Indirect tax zone ....................................¶4-100
Australian Business Number.
See ABN.
BAS.
See Business Activity Statement.
Branches.
Special rules allow you to register your business branches separately. This procedure is intended to avoid
the administrative and accounting costs of having to amalgamate branch accounts every *tax period
....................................¶17-300
Business Activity Statement (BAS).
This is a form which is used as the *return for GST and various other taxes, such as *wine equalisation
tax, *luxury car tax, FBT instalments, income tax withholding and instalments, and deferred company tax
instalments ....................................¶8-010
Business norms method.
This is one of the *simplified accounting methods available to food retailers. It enables them to choose to
use standard percentages, based on business norms, to estimate their *GST-free sales and purchases
....................................¶13-215
Car limit.
This indexed limit is relevant in calculating the *input tax credit on higher priced cars, and in calculating
the GST-free status of cars for disabled persons. For the amount of the car limit, see ¶25-040. (See also
Luxury car tax.)....................................¶12-110
Cash accounting turnover threshold.
This is the $2m threshold described under Cash basis ....................................¶7-300
Cash basis.
If you use the cash basis of accounting, you work out your GST and *input tax credits for each *tax period
on the basis of amounts actually received and paid out. You can use the cash basis if you are a *small
business entity, or if you are a non-business entity with a *GST turnover that is less than $2m, or if you
already account for income tax on a cash basis, or if you are a charity, or in certain other approved
situations ....................................¶7-300
Commercial residential premises.
These include hotels and caravan parks. The sale of these premises is subject to GST. Special rules
apply where they are rented out on a long-term basis ....................................¶11-030; ¶11-320
Connected entity.
The income of connected entities is taken into account in determining an entity’s *aggregated turnover
and therefore whether the entity qualifies as a *small business entity. Any two entities are connected with
each other if one controls the other, or both are controlled by the same third entity
....................................¶1-280
Connected with Australia.
Supplies are not subject to GST unless they are connected with Australia. The degree of connection
varies according to whether goods, real estate or services are involved ....................................¶4-100
Consideration.
This means anything of value that is provided in return for a supply of goods and services. It includes acts
of forbearance. A supply will not be subject to GST unless there is consideration
....................................¶4-020
Consumer.
For the purpose of the rules relating to offshore supplies of low value goods, a recipient is typically a
“consumer” of the supply where it is not GST-registered, or is GST-registered but does not acquire the
thing for use in an enterprise that it carries on in Australia....................................¶9-130
Creditable acquisition.
This is the type of acquisition on which you can claim a credit for the GST component (an *input tax
credit). For you to have a creditable acquisition, you must be *registered, GST must have been payable,
and you must have acquired it for a *creditable purpose ....................................¶5-010
Creditable importation.
This is the type of importation on which the importer can claim an *input tax credit for the GST
component. For you to have a creditable importation, you must be *registered, GST must have been
payable (normally by you) and you must have acquired it for a *creditable purpose
....................................¶9-010
Creditable purpose.
To obtain *input tax credits, your acquisition or importation must have been carried out for a creditable
purpose — this basically requires that it must be for business purposes that are not *input taxed
....................................¶5-010; ¶9-010
DA.
Shorthand for decreasing adjustment, ie an adjustment that has the effect of reducing the net GST
....................................¶6-000
EANnet.
Manufacturers and other suppliers can rely on “EANnet” GST classifications for food and grocery
products ....................................¶13-210
Enterprise.
If you are carrying on an enterprise, you can *register, account for GST on your supplies, and claim *input
tax credits on your acquisitions. An enterprise includes all types of business activities, but does not
include the activities of employees ....................................¶3-020
Entity.
GST can only apply to supplies or importations that are made by entities, and only entities can claim input
tax credits. An entity includes an individual, a company, a partnership, any other unincorporated
association, a trust and a superannuation fund ....................................¶3-015
Financial acquisitions threshold (FAT).
A maker of a *financial supply may claim *input tax credits on acquisitions related to making the supply if
the financial acquisitions threshold is not exceeded ....................................¶10-032
Financial supply.
Financial supplies are normally *input taxed. This covers most services that are provided by banks and
other financial institutions, including loans. They also cover certain services provided by brokers, life
insurance companies, investment managers and superannuation funds. Providing advice is not a financial
supply ....................................¶10-010
GAP or GAAP.
Shorthand for “general anti-avoidance provision”, ie Div 165 ....................................¶20-000
Gambling supply.
Special rules for calculating GST apply if you make gambling supplies. These include supplying tickets in
lotteries or raffles, or accepting bets on races, games, sporting events or any other events
....................................¶16-000
General interest charge (GIC).
This is a penalty imposed for late payment and associated matters ....................................¶18-300
Going concern.
The supply of a going concern is *GST-free, subject to various restrictions. A going concern means, in
effect, a continuing *enterprise. This means that the sale of a business, or the sale of a tenanted
commercial building, may be GST-free ....................................¶11-500
Group.
See GST group.
GST.
Shorthand for goods and services tax ....................................¶1-000
GST benefit.
The anti-avoidance provisions can only apply if the avoider gets a GST benefit from a *scheme. A GST
benefit means any reduction in the net tax payable and also includes timing advantages
....................................¶20-030
GST credit.
Shorthand for *input tax credit ....................................¶5-000
GST disadvantage.
Under the anti-avoidance rules, compensating adjustments may be made in favour of “losers” suffering a
GST disadvantage from the relevant *scheme. A disadvantage is the mirror image of a *GST benefit
....................................¶20-070
GST-exclusive market value.
This means 10/11th of the *GST-inclusive market value ....................................¶4-200
GST-exclusive value.
This means 10/11th of the *GST-inclusive price. For luxury cars, it means 10/11th of the GST-inclusive
price, excluding *luxury car tax. For importations, it means the value of the importation.
GST-free.
If a supply is GST-free, this means that no GST is payable on it. However, any GST that has been paid at
earlier stages can be claimed as an *input tax credit. The main GST-free supplies are exports, sales of
businesses, international travel, health, food, education, child care, certain farm subdivisions and certain
activities of charities and religions ....................................¶1-160
GST group.
Certain closely-associated entities can be treated as a single taxpayer for GST purposes. This means that
purely internal transactions within the group do not have any GST consequences. One member of the
group — the *representative member — is responsible for lodging returns ....................................¶17-010
GST-inclusive market value.
This means the market value without any reduction for GST or *luxury car tax ....................................¶4-
200
GST joint venture.
Entities engaged in an eligible joint venture can form a GST joint venture. This means that the operator of
the joint venture is responsible for the GST liabilities and entitlements arising from the operator’s dealings
on behalf of the venture participants. This provides an administrative shortcut on what are essentially
internal transactions ....................................¶17-200
GST turnover.
GST turnover is relevant in determining an entity’s liability to register (¶3-030), use monthly tax periods
(¶7-100) and lodge electronically (¶8-043). It is also relevant in determining the eligibility of entities that
are not carrying on a business for *cash basis accounting (¶7-300), annual *apportionment of *input tax
credits (¶5-020) and payment of GST by *instalments (¶8-037). GST turnover is calculated in the same
way as *annual turnover, which was the term used previously ....................................¶3-030
IA.
Shorthand for increasing adjustment, ie an adjustment that has the effect of increasing the net GST
....................................¶6-000
Indirect tax zone. See Australia.
This term replaced *Australia from 1 July 2015, without significant alteration in meaning. This was
considered necessary to differentiate the territorial scope of GST from the uniform definition of Australia
that applies generally for other tax purposes from that date ....................................¶4-100
Input tax credit (ITC).
This is a credit for the GST payable on your business inputs. To claim the credit, you should be
*registered and be carrying on an *enterprise. Input tax credits are offset against your GST liability each
*tax period ....................................¶5-000
Input taxed supply.
If a *supply is input taxed, this means that no GST is payable on it, but the supplier cannot claim *input
tax credits for business inputs associated with the supply. Input taxed supplies include financial services
and residential rental accommodation ....................................¶1-170
Instalment turnover threshold.
This is the $2m threshold described under Instalments ....................................¶8-037
Instalments.
Quarterly taxpayers that are *small business entities, or non-business entities with a GST turnover that is
less than $2m, may elect to pay GST by instalments. Under this option, GST returns are lodged annually
and instalments of estimated GST are paid quarterly, with an annual reconciliation being made
....................................¶8-037
ITSA (or ITXSA).
Shorthand for Indirect Tax Sharing Agreement, which *GST group members may enter into in order to
clarify and limit the extent of their indirect tax liabilities ....................................¶17-025
ITZ.
Shorthand for *indirect tax zone, the technical term that replaces *Australia for GST purposes
....................................¶4-100
Joint venture.
See GST joint venture.
Loser.
This is the term used in the GST Act to describe a person who suffers a *GST disadvantage from an
avoidance *scheme. Losers may be entitled to compensatory adjustments in their favour
....................................¶20-070
Low value goods (LVG).
For the purpose of the rules relating to offshore supplies to consumers, goods are “low value” if their
customs value would have been $1,000 or less if they had been exported at the time when the
consideration for the supply was first agreed ....................................¶9-130
Luxury car tax (LCT).
This is a special tax that applies in addition to GST where there is a *taxable supply or *taxable
importation of a car with a GST-inclusive value exceeding the *luxury car tax
threshold....................................¶23-000
Luxury car tax threshold.
This indexed threshold (¶25-040) is relevant in determining liability for *luxury car
tax....................................¶23-150
Margin scheme.
Dealers and developers of real estate can use a margin scheme that allows them to calculate their GST
liability as 1/11th of the difference between the tax-inclusive sale price and the original purchase price.
Special rules apply to real estate held at 1 July 2000 ....................................¶11-100
Net amount.
This is the net total of the GST, *input tax credits and *adjustments that are attributable to a *tax period. If
you have a net amount above zero, you must pay it to the ATO. If it is below zero, you may be entitled to
a refund ....................................¶8-100
Non-profit sub-entity.
Non-profit bodies have the option of splitting their operations into separate independent units for GST
purposes ....................................¶15-080
Opportunity to review.
The operation of the cross-border business transaction rules in relation to pre-existing contracts may
depend on whether the contract contains an opportunity to review the price to take account of GST
....................................¶19-250
Pay As You Go (PAYG).
This is the system for withholding tax that replaced PAYE, provisional tax, company tax instalments and
various other withholding systems from 1 July 2000. People subject to PAYG withholding will generally
not be subject to GST, except where they have entered into a voluntary agreement in an *input taxed
industry ....................................¶4-090
Precious metal.
This means gold, silver or platinum of prescribed levels of fineness. A supply of a precious metal is *GST-
free where it is the first supply to a regular dealer. Apart from this, supplies of precious metals are *input
taxed ....................................¶16-210
Price.
This means the amount of *consideration for a supply, including GST. If the consideration does not
consist of money, the price is the *GST-inclusive market value. In non-tax federal legislation, references
to prices, fees, charges or similar terms include the net GST payable (s 177-12)
....................................¶4-020
Purchases snapshot method.
This is one of the *simplified accounting methods, and is available to restaurants and cafes
....................................¶13-215
Quarter.
This is a period of three months, starting on 1 July, 1 October, 1 January or 1 April. Depending on
whether you are a *small business entity, you may account for GST on a quarterly basis or a monthly
basis. Alternatively, small business entities can elect to account on an annual basis, but pay instalments
on a quarterly basis ....................................¶7-100; ¶8-037
Recipient.
This means the *entity to which a *supply is made. In the case of a sale, for example, it would be the
purchaser ....................................¶1-100
Recipient created tax invoice (RCTI).
A *tax invoice is normally issued by the supplier. However, sometimes this will not be practicable, for
example, where the recipient determines the value of the goods or services, rather than the supplier. In
these situations, the tax invoice may be created by the recipient ....................................¶5-140
Reduced credit acquisition.
This is the type of acquisition that may give rise to a *reduced input tax credit ....................................¶10-
040
Reduced input tax credit (RITC).
Financial suppliers may be entitled to claim reduced (75%) *input tax credits on *reduced credit
acquisitions, ie certain types of services they use in their business ....................................¶10-040
Refunds.
You will be entitled to a refund if the *input tax credits exceed the GST for a *tax period, after taking
*adjustments into account (¶8-110). Visiting tourists may also be entitled to refunds of the GST paid on
purchases that they take home with them ....................................¶12-030
Registration.
You can only be registered if you are an *entity that is carrying on an *enterprise. Whether you are
required to register will depend on your GST turnover. Registration is relevant because, in general: (1)
GST is not payable on a supply unless the supplier is registered; (2) *input tax credits can only be claimed
if you are registered; and (3) GST *returns must be lodged if you are registered. Entities may voluntarily
register, even though not legally required to do so ....................................¶3-000
Registration turnover threshold.
Entities do not have to register if their *GST turnover is less than the registration turnover threshold
....................................….¶3-000
Representative member.
This is the member of a GST *group that has been nominated to carry out the administrative GST tasks,
such as lodging *returns, for the group as a whole ....................................¶17-020
Residential premises.
In general, the sale of residential premises is *input taxed. However, the sale of new or commercial
residential premises is subject to GST. Residential rent is not subject to GST but special rules apply to
long-term commercial residential accommodation ....................................¶11-000
Returns.
If you are *registered, you must provide a GST return to the ATO within a certain period after the end of
each *tax period (subject to exemptions for quarterly payers). The return is incorporated into your
*Business Activity Statement. The return may be lodged electronically (this is normally compulsory if your
*GST turnover is $20m or more) ....................................¶8-005; ¶8-043
Reverse charge.
Certain supplies of services or rights made outside *Australia may be caught by GST even though they
are not made through an Australian business or *enterprise of the supplier. In these cases, GST is
payable by the *recipient, not by the supplier. This “reverse charging” overcomes the fact that the supplier
will often not be within the Australian GST system. Non-resident suppliers and Australian recipients can
also agree to reverse charge in certain situations ....................................¶9-095; ¶9-100
Review opportunity.
See Opportunity to review.
Rounding.
Special rounding rules apply in calculating GST, or in tax invoices ....................................¶4-205; ¶5-110
Sales percentage method.
This is a simplified accounting method available to supermarkets and convenience stores
....................................¶13-215
Sales tax.
The wholesale sales tax (WST) was replaced by the GST with effect from 1 July 2000
....................................¶19-000
Scheme.
The anti-avoidance provisions can only operate if there is a *scheme with which a *GST benefit is
associated. A scheme is widely defined to include arrangements, agreements, understandings, promises
and undertakings. It does not matter whether these are express or implied, and they do not need to be
legally enforceable. A scheme also covers any scheme, plan, proposal, action, course of action or course
of conduct. These may be unilateral or not. The scheme does not have to be entered into or carried out in
*Australia ....................................¶20-020
Second-hand goods.
These are goods that have been previously owned, but do not include certain *precious metals or
animals. If you are not *registered, your supply of second-hand goods is not subject to GST. If you are
registered, GST will apply. In certain cases, dealers will be able to claim *input tax credits on second-
hand goods even though their supplier was not registered. Certain supplies of second-hand goods by
charities and gift-deductible bodies are *GST-free ....................................¶16-100
Simplified accounting methods (SAMs).
The ATO authorises the use of simplified ways of accounting for certain retailers who sell *GST-free food
or make GST-free charitable supplies as part of their business ....................................¶13-210; ¶15-060
Small business entity.
This means an entity that is carrying on a business and has an *aggregated turnover of less than $10m
($2m for income years before 2016/17). Small business entities are entitled to claim the GST concessions
for *cash basis accounting (¶7-300); annual *apportionment of *input tax credits (¶5-020); and payment of
GST by *instalments (¶8-037) ....................................¶1-250
Snapshot method.
This is one of the *simplified accounting methods available to food retailers. It enables them to use a
representative period of trading to estimate their total *GST-free sales and purchases
....................................¶13-215
Stock purchases method.
This is one of the *simplified accounting methods available to food retailers. It enables them to use their
percentage of GST-free purchases to estimate their percentage of *GST-free sales
....................................¶13-215
Supply.
This includes any type of supply. It is not restricted to sales ....................................¶4-010
Taxable importation.
GST is payable on taxable importations of goods as well as on *taxable supplies. However, the GST is
payable by the importer, not the overseas supplier. This applies whether or not the importer is *registered.
Importation generally takes place when the goods are entered for home consumption under customs law
....................................¶9-000
Taxable supply.
GST is potentially payable on taxable supplies. To be taxable, the supplier must be *registered and
carrying on an *enterprise, the *supply must be for *consideration, it must be sufficiently *connected to
Australia, and it must not be *GST-free or *input taxed ....................................¶4-000
Tax invoice.
This is a special type of invoice that contains specified items of information including the supplier’s
Australian Business Number (*ABN). Generally, you must hold a tax invoice for a purchase or acquisition
at the time you lodge your GST *return for the period in which the claim for an *input tax credit is made
....................................¶5-100
Tax period.
Your GST liability (or entitlement to a refund) is worked out for each *tax period. This may be monthly or
quarterly. Depending on your *GST turnover, it may be required to be monthly. Annual tax periods may
also apply in certain situations ....................................¶7-100
Tax period turnover threshold.
If your *GST turnover is $20m or more, you must use monthly *tax periods. If it is below that, you
generally have the option of monthly or quarterly tax periods ....................................¶7-110
Tourist Refund Scheme (TRS).
This scheme enables international travellers and Australians travelling overseas to claim a refund of GST
paid on certain goods bought in Australia ....................................¶12-030
VAT.
Shorthand for value-added tax. Taxes similar to GST are sometimes called VAT in other countries
....................................¶1-000
Voluntary registration.
See Registration.
VOTI.
Shorthand term for “value of the taxable importation”, used in calculating the GST on imports of goods
....................................¶9-005
WEG.
Shorthand term used in some software programs to mean a combined amount of GST plus *WET
....................................¶5-110
WST.
Shorthand for the wholesale sales tax which was replaced by GST from 1 July 2000
....................................¶19-000
Wine equalisation tax (WET).
This is a special tax designed to prevent the price of wine and similar drinks from falling as a result of the
replacement of sales tax by GST ....................................¶22-000
CASE TABLE
This Case Table lists alphabetically all cases cited in this Guide. References are to the paragraphs (¶) in
which the cases are cited.

Paragraph
ACCC v Signature Security Group Pty Ltd [2003] FCA 3 ¶21-010
ACCC v Stoddart [2011] HCA 47; (2011) AUELR ¶501-281 ¶18-140
ACN 154 520 199 Pty Ltd (in liq); FC of T v [2018] FCA 1140 ¶18-650; ¶20-110
AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985 ¶19-400
AGR Joint Venture v FC of T [2007] AATA 1870 ¶16-210
AJ Lucas Drilling Pty Ltd v McDonnell Dowell Constructors (Aust) Pty Ltd [2010] ¶19-400
VSCA 128
AJJJ’s Emporium Pty Ltd v FC of T [2013] AATA 501 ¶18-300
ANZ Banking Group v DFC of T 2001 ATC 4140 ¶18-110
ANZ Banking Group Ltd; FC of T & Ors v 79 ATC 4039 ¶18-110
ANZ Banking Group Ltd v Konza 2012 ATC ¶20-347 ¶18-110
ANZ Banking Group; Snow v Keating DFC of T (WA) 78 ATC 4125 ¶18-110
AP Group Ltd v FC of T [2013] FCAFC 105 ¶4-010
ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (1990) 97 ALR 513 ¶4-100
ATS Pacific Pty Ltd v FC of T [2014] ATC ¶20-449 ¶12-020
AXA Asia Pacific Holdings Pty Ltd v FC of T [2008] FCA 1834; 2008 ATC ¶20-074 ¶5-010; ¶5-020;
¶10-005; ¶10-010;
¶17-020
A & A Property Developers Pty Ltd v MCCA Asset Management Ltd [2016] VSC ¶19-400
643
Addoug v FC of T [2010] AATA 79 ¶18-300
Advent 7 Pty Ltd v FC of T [2014] AATA 365 ¶18-300
Aid/Watch Incorporated v FC of T [2010] HCA 42 ¶15-000
Ajami v FC of T [2007] AATA 1231; 2007 ATC 2143 ¶18-300
Allen Yacht Charters Ltd v C of IR (1994) 16 NZTC 11,270 ¶11-506
Ambiance (Arncliffe) Pty Ltd v Chief Commr of State Revenue (NSW) 2002 ATC ¶11-070
2257
American Express International Inc; FC of T v [2010] FCAFC 122; 2010 ATC ¶20- ¶10-005; ¶10-010;
212 ¶10-020; ¶10-030
Apple Computer Australia Pty Ltd v Mekrizis & Ors [2003] NSWSC 126 ¶6-200
Aquatic Air Pty Ltd v Siewert & Anor [2015] NSWSC 928 ¶13-320
Argos Distributors Ltd v Commrs of Customs & Excise [1997] BVC 64 ¶4-060
Arnold & Ors; FC of T v 2015 ATC ¶20-486 ¶20-130
Arnot, Re; Ex parte DFC of T & Anor 89 ATC 5314 ¶18-120
Ashton v Monteleone [2010] NSWC 258 ¶4-210
Aurora Developments Pty Ltd v FC of T [2011] FCA 232 ¶11-503
Aurora Developments Pty Ltd v FC of T (No 2) [2011] FCA 1090 ¶18-300
Australian Pasture Seeds Pty Ltd v FC of T [2008] AATA 520 ¶18-300
Australian Style Investments Unit Ltd v FC of T [2013] AATA 847; 2013 ATC ¶10- ¶10-010
341
Australian Trade Commission v Goodman Fielder Industries Ltd (1992) 36 FCR ¶9-210
517
Avon Products Pty Ltd v FC of T [2006] HCA 29 ¶8-115

Paragraph
BRK (Bris) Pty Ltd v FC of T 2001 ATC 4111 ¶18-300
Baini v FC of T 2012 ATC ¶10-259 ¶12-130
Baker v Campbell 83 ATC 4606 ¶18-140
Barakat & Ors v FC of T 2007 ATC 2363 ¶18-300
Barcia Pty Ltd v FC of T [2008] AATA 1073 ¶11-100
Barossa Vines Ltd & Ors; FC of T v 2014 ATC ¶20-436 ¶20-130
Belton v Commr of IR (NZ) (1997) 18 NZTC 13,403 ¶11-503
Bicycle Victoria Inc v FC of T [2011] AATA 444; 2011 ATC ¶10-188 ¶15-000
Binetter v DFC of T 2012 ATC ¶20-345 ¶18-110
Block & Ors v FC of T 2007 ATC 2735 ¶3-020
Body Corporate, Villa Edgewater Courts 23092 v FC of T 2004 ATC 2056 ¶3-020; ¶4-020;
¶11-200
Brady King Pty Ltd v FC of T 2008 ATC ¶20-034 ¶11-110
Bristol-Myers Company Pty Ltd v FC of T 90 ATC 4553 ¶13-180; ¶22-010
British Airways plc v Customs & Excise Commrs [1990] 5 BVC 97 ¶4-200
British Airways plc [2000] BVC 2207 ¶4-015
British Telecommunications PLC; Customs & Excise Commrs v [1999] 3 All ER ¶4-200; ¶12-150
961
Bromley; R v [2010] VSC 345 ¶18-300
Brookdale Investments Pty Ltd v FC of T 2013 ATC ¶10-301 ¶11-500
Bryxl Pty Ltd v FC of T [2015] AATA 89 ¶3-020
Byron Pty Ltd v FC of T 2019 [2019] AATA 2042 ¶5-010
C

Paragraph
CC (NSW) Pty Ltd (in liq) v FC of T 97 ATC 4123 ¶20-060
CSR Ltd v Hornsby Shire Council [2004] NSWSC 946; 2004 ATC 4966 ¶4-010; ¶5-100;
¶19-400
Capital Enterprises Ltd; C of IR v (2002) 20 NZTC 17,511 ¶11-510
Carborundum Realty Pty Ltd v RAIA Archicentre Pty Ltd & Anor 93 ATC 4418 ¶19-400
Card Protection Plan Ltd v Commrs of Customs & Excise [2001] UKHL 4 ¶4-200
Carter v FC of T 2013 ATC ¶10-303; [2013] AATA 141 ¶5-020; ¶18-300
Cartesian Capital Pty Ltd v FC of T [2014] AATA 49 ¶18-300
Cascade Brewery Company Pty Ltd v FC of T [2006] FCA 821 ¶13-180
Casimaty v FC of T 97 ATC 5135 ¶11-063
Central Bayside Division of General Practice Ltd v Commr of State Revenue (Vic) ¶15-000
2006 ATC 4610
Central Equity Ltd v FC of T [2011] FCA 908; 2011 ATC ¶20-274 ¶11-000; ¶19-100
Cermak & Anor v Ruth Consolidated Industries Pty Ltd & Anor (No 2) [2004] ¶19-400
NSWSC 882; 2004 ATC 4985
Chalmers & Anor v FC of T 2008 ATC ¶10-021 ¶18-305
Church of the New Faith (The) v Commr of Pay-roll Tax (Vic) 83 ATC 4652 ¶15-050
Citibank Ltd; FC of T & Ors v 89 ATC 4268 ¶18-110; ¶18-120;
¶18-140
Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52 ¶19-250
Clarke v DFC of T 89 ATC 4521 ¶18-110
Clayton v FC of T [2013] AATA 428 ¶3-020
Climo v FC of T 2012 ATC ¶10-252 ¶17-400
Clontarf Developments Pty Ltd v FC of T [2010] AATA 1065; 2010 ATC ¶10-168 ¶18-300
Clothing Importer v FC of T [2011] AATA 281 ¶9-005
Clough Engineering Ltd v FC of T 97 ATC 2023 ¶20-060
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24 ¶19-400
Companhia Votorantim de Cellulose e Papel v Anti-Dumping Authority & Ors ¶9-210
(1996) 42 ALD 7
Conservative and Unionist Central Office v Burrell (Inspector of Taxes) [1982] 2 All ¶3-015
ER 1
Consolidated Media Holdings; FC of T v [2012] HCA 55 ¶1-315
Consolidated Press Holdings Ltd & Anor; FC of T v 2001 ATC 4343 ¶20-050; ¶20-060
Coombes (No 2); FC of T v 99 ATC 4634 ¶18-140
Cooper Brookes (Wollongong) Pty Ltd v FC of T 81 ATC 4292 ¶1-315
Craddon v FC of T [2011] AATA 790 ¶18-305
Criterion Prestige Pty Ltd v C of T [2015] AATA 468; [2015] FCA 468 ¶3-020; ¶23-250
Cronan v FC of T [2014] AATA 745 ¶5-020

Crown Estates (Sales) Pty Ltd & Anor v FC of T [2016] FCA 335 ¶17-400
Cyonara Snowfox Pty Ltd v FC of T 2012 ATC ¶20-362 ¶3-020; ¶8-100

Paragraph
DB Reef Funds Management Ltd; FC of T v 2006 ATC 4282 ¶19-250
DG Empire (as trustee for DG Empire Trust) v FC of T 2007 ATC 2307 ¶18-305
DPP v Rowson [2007] VSCA 176 ¶18-300
Daihatsu Australia Pty Ltd v DFC of T 2000 ATC 4763 ¶18-110
Daniels (The) Corp International Pty Ltd v ACCC [2002] HCA 49; (2002) ATPR ¶18-140
¶41-896
D'Arcy v FC of T 2008 ATC ¶10-041 ¶3-020
Davsa Forty-Ninth Pty Ltd v FC of T [2014] AATA 337 ¶3-020
Debonne Holdings Pty Ltd v FC of T [2006] AATA 886 ¶11-500; ¶11-506
Decleah Investments Pty Ltd and Anor as Trustee for the PRS Unit Trust and FC ¶11-120
of T 2018 ATC ¶20-656
Department of Transport (Vic); FC of T v 2010 ATC ¶20-196 ¶5-010
Derring Lane Pty Ltd v Fitzgibbon (Civil Claims) [2006] VSC 46; 2006 ATC 4182 ¶11-110
Diva Beverages Holdings Ltd v FC of T [2018] FCA 576 ¶22-010
Dixon (Trustee for Dixon Holdsworth Superannuation Fund) v FC of T 2008 ATC ¶18-305
¶20-015
Donoghue; FC of T v [2015] FCAFC 183 ¶18-140
Doodeward v Spence (1908) 6 CLR 406 ¶4-100
Dotrac Pty Ltd & Anor v FC of T [2014] AATA 336 ¶3-020
Downs Distributing Company Pty Ltd v Associated Blue Star Stores Pty Ltd (in liq) ¶16-110
(1948) 76 CLR 463
Dreamtech International Pty Ltd v FC of T 2010 ATC ¶20-204 ¶23-100
Drysdale v FC of T 2008 ATC ¶10-027 ¶3-020
Dunkel v DFC of T 91 ATC 4142 ¶18-110
Duoedge Pty Ltd v Leong and OCMC Pty Ltd [2013] VSC 36 ¶19-400

Paragraph
ECC Southbank Pty Ltd & Anor v FC of T 2012 ATC ¶20-336 ¶11-030
ETO Pty Ltd v Idameneo (No 123) Pty Ltd [2004] NSWCA 368; 2004 ATC 5080 ¶19-400
Eastwin Trade Pty Ltd v C of T [2017] AATA 140 ¶18-300
Educational Pty Ltd v FC of T [2011] AATA 445 ¶3-020
Elliott v DFC of T 90 ATC 4937 ¶18-120
Empire Securities Pty Ltd v Miocevich & Anor [2004] WASC 118; 2004 ATC 4640 ¶19-400
Employee Investment Company Pty Ltd v FC of T 2009 ATC ¶10-089 ¶18-300
Esso Australia Resources Ltd v FC of T 2000 ATC 4042 ¶18-140
Exeter Golf and Country Club Ltd v Customs & Excise Commrs (1981) 1 BVC 385 ¶4-020

Paragraph
Fatac Ltd (in liq) v C of IR [2002] NZCA 269 ¶11-500
Fiduciary Ltd & Ors v Morningstar Research Pty Ltd & Ors [2004] NSWSC 381; ¶9-240
2004 ATC 4633
Finanzamt Freistadt Rohrbach Urfahr v Unabhängiger Finanzsenat Außenstelle ¶3-020
Linz (Case C-219/12)
FineGlow Pty Ltd v Anastasopoulos & Ors [2002] NSWSC 1181; 2002 ATC 5158 ¶19-400
Fletcher & Ors v FC of T 88 ATC 4834 ¶18-650
Floridienne SA & Berginvest SA v Belgian State [2001] BVC 76 ¶4-020
Food Supplier v FC of T 2007 ATC 157 ¶13-200

Paragraph
GE Crane Sales Pty Ltd v FC of T 71 ATC 4268 ¶6-210
GH1 Pty Ltd (in liq) v FC of T 2017 ATC ¶10-461 ¶5-100
GOL-HUT Pty Ltd v FC of T 2013 ATC ¶10-306 ¶6-304
Gagner Pty Ltd v Canturi Corp Pty Ltd [2009] NSWCA 413 ¶4-085
Gaumont-British Picture Corp Ltd, In re [1940] 1 Ch 506 ¶18-110
George v Repatriation Commission [2003] AATA 538 ¶12-150
Geosam Investments Pty Ltd v ANZ Banking Group Ltd 79 ATC 4418 ¶18-110
Glencore International AG v FC of T 2019 ATC ¶20-710; [2019] HCA 26 ¶18-140
Gloxinia Investments Ltd; FC of T v 2010 ATC ¶20-182 ¶11-020
Graham Docker & Associates Pty Ltd v FC of T [2005] AATA 1180; 2005 ATC ¶18-300
2404
Grant & Ors v DFC of T 2000 ATC 4649 ¶18-110
Guru 4 U Pty Ltd v FC of T [2014] AATA 740 ¶3-020

Paragraph
 HP Mercantile Pty Ltd v FC of T [2005] FCAFC 126; 2005 ATC 4571 ¶1-315; ¶5-010; ¶5-
020; ¶10-005; ¶10-
040
Halliday v The Commonwealth of Australia [2000] FCA 950 ¶1-300
Hance v FC of T 2008 ATC ¶20-085 ¶3-020
Harland v FC of T 2013 ATC ¶10-348 ¶4-010
Harrison v FC of T [2010] AATA 155 ¶4-010
Hart v DFC of T 2002 ATC 4445 ¶18-110
Hart & Anor; FC of T v [2004] HCA 26; 2004 ATC 4599 ¶20-020; ¶20-050
Hollis v Vabu Pty Ltd 2001 ATC 4508 ¶4-090
Hornsby Shire Council v FC of T 2008 ATC ¶10-061 ¶4-010
Hua-Aus Pty Ltd v FC of T [2010] FCA 341 ¶18-630
Hutson v FC of T 2009 ATC ¶10-099 ¶18-270
Huynh & Anor v FC of T 2008 ATC ¶10-020 ¶12-130; ¶18-300

Paragraph
Igloo Homes Pty Ltd v Sammut Constructions Pty Ltd [2005] NSWCA 280; 2005 ¶19-400
ATC 4986
Industrial Equity Ltd & Anor v DFC of T 90 ATC 5008 ¶18-110; ¶18-120
Interchase Corp Ltd v ACN 010 087 573 Pty Ltd & Ors 2000 ATC 4552 ¶4-085; ¶19-400
International All Sports v FC of T [2011] FCA 824; 2011 ATC ¶20-268 ¶16-000
International Importing Ltd; IRC (NZ) v 72 ATC 6033 ¶9-210

Paragraph
JG & JA Williamson Holdings Pty Ltd v FC of T [2007] AATA 1344; 2007 ATC 2551 ¶18-300
JMA Accounting Pty Ltd & Anor v Michael Carmody & Ors [2004] FCAFC 274; ¶18-120; ¶18-140
2004 ATC 4916
JMB Beverages Pty Ltd v FC of T [2010] FCAFC 68 ¶13-190
Jax Tyres Pty Ltd; FC of T v 85 ATC 4001 ¶16-110

Paragraph
KAP Motors Pty Ltd & Anor v FC of T 2008 ATC ¶20-007 ¶4-010
Karmel & Co Pty Ltd (as trustee for Urbanski Property Trust) v FC of T [2004] ¶11-030
AATA 481; 2004 ATC 2075
Keenhilt Pty Ltd v FC of T [2007] AATA 2095 ¶4-020
Keitac Pty Ltd ATF McNamara Property Development Trust v FC of T [2007] AATA ¶18-305
1206
Kellow v FC of T 2002 ATC 2179 ¶12-150
Keris Pty Ltd v FC of T [2017] FCAFC 164 ¶8-100
Kerrison v FC of T 86 ATC 4103 ¶18-120
Kizquart Pty Ltd v FC of T [2005] AATA 582; 2005 ATC 2198 ¶18-305
Krok v FC of T [2015] FCA 51 ¶18-140
Kuan v Tax Practitioners Board [2013] AATA 254 ¶8-042

Paragraph
LR McLean and Co Ltd & Ors v C of IR [1994] 3 NZLR 33 ¶16-100
Lancut (Aust) Pty Ltd v FC of T 2003 ATC 2204 ¶7-320
Lansell House Pty Ltd & Anor v FC of T [2011] FCAFC 6 ¶13-160
LeasePlan Australia Ltd v FC of T [2009] FCA 1309 ¶16-110
Lighthouse Financial Advisers (Townsville) Pty Ltd, Re [2014] AATA 301 ¶4-085
Living Choice Australia Ltd v FC of T [2014] AATA 168 ¶11-310
Loren (as trustee for the Family Discretionary Trust) v FC of T [2008] AATA 631 ¶18-300
Ludekens; FC of T v [2013] FCAFC 100 ¶20-110; ¶20-120;
¶20-130
Ludekens & Anor; FC of T v [2016] FCA 755 ¶20-130
Luxottica Retail Australia Pty Ltd; FC of T v [2011] FCAFC 20 ¶4-200

Paragraph
MBI Properties Pty Ltd; FC of T v [2014] HCA 49 ¶4-010; ¶11-335;
¶11-520
MSAUS Pty Ltd atf the Melissa Trust & Anor v FC of T 2017 ATC ¶10-463 ¶11-500
McCormack & Ors v DFC of T 2001 ATC 4740 ¶18-110
McKay v FC of T [2011] AATA 593; 2011 ATC ¶10-201 ¶9-210
McLaren v DFC of T 2001 ATC 4136 ¶18-110
McPhail; FC of T v (1968) 17 CLR 111 ¶4-030
Macquarie Finance Ltd v FC of T 2005 ATC 4829 ¶5-010
Maksimovic v Registrar of Australian Business Register [2008] AATA 108 ¶3-020
Malololailai Interval Holidays NZ Ltd v C of IR (1997) 18 NZTC 13,137 ¶9-240
Marana Holdings Pty Ltd & Anor v FC of T [2004] FCAFC 307; 2004 ATC 5068 ¶11-010; ¶11-020
Mathoura Property Pty Ltd v FC of T 2013 ATC ¶10-346 ¶18-300
Mavris v FC of T [2018] AATA 1825 ¶23-250
Melbourne Car Shop Pty Ltd v FC of T [2010] FCA 373 ¶23-250
Meridien Marinas Horizon Shores Pty Ltd v FC of T 2009 ATC ¶20-138 ¶11-320
Midford v DFC of T 2005 ATC 2189 ¶11-500
Millington v Waste Wise Environment Pty Ltd [2015] VSC 167 ¶4-085
Mines Rescue Board of NSW v FC of T 2000 ATC 4580 ¶15-000
Mold v FC of T [2011] AATA 823 ¶5-020
Multiflex Pty Ltd v FC of T [2011] FCAFC 142; [2011] FCA 789; 2011 ATC ¶20-292 ¶18-190

Paragraph
NF Williams; FC of T v 72 ATC 4188 ¶11-063
NZWINEIMPORTS Pty Ltd v FC of T 2016 ATC ¶10-438 ¶22-290
Naidoo & Anor v FC of T 2013 ATC ¶10-323 ¶3-020; ¶8-120
Nitram Consulting Pty Ltd v FC of T 2008 ATC ¶10-063 ¶18-305
No Worries Management Pty Ltd v Dolman [2004] QSC 153; 2004 ATC 4628 ¶19-400
Noac Consultants Pty Ltd v FC of T [2006] AATA 1035; 2006 ATC 2551 ¶18-300
The Norwestern Trust and C of T [2017] AATA 361 ¶18-305
Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635 ¶11-100

Paragraph
O'Meara v FC of T 2003 ATC 4406 ¶1-300
O'Reilly & Ors v Commrs of the State Bank of Victoria 83 ATC 4156 ¶18-110; ¶18-120
Orti-Tullo & Anor v Sadek & Anor [2001] NSWSC 855; 2001 ATC 4688 ¶19-400
Outbound Logistics Pty Ltd v FC of T [2012] AATA 899; 2012 ATC ¶10-289 ¶18-305

Paragraph
PFTF Stock Pty Ltd v FC of T [2010] FCA 557 ¶8-120; ¶18-600
P & N Beverages Australia Ltd v FC of T [2007] NSWSC 338 ¶13-180
Paul J Castan & Son Pty Ltd ATF Castan Investments Unit Trust v FC of T [2015] ¶11-320
AATA 298
Peabody v FC of T 93 ATC 4104 ¶20-060
Peabody; FC of T v 94 ATC 4663 ¶19-200; ¶20-020;
¶20-040; ¶20-060
Pebruk Nominees Pty Ltd v Woolworths (Victoria) Pty Ltd & Anor 2003 ATC 4932 ¶19-400
Peet Ltd v Richmond [2009] VSC 585 ¶4-085
Perron Investments Pty Ltd & Ors v DFC of T 89 ATC 5038 ¶18-110; ¶18-120
Pine v C of IR (1998) 18 NZTC 13,570 ¶11-500
Pinot Nominees Pty Ltd & Anor v FC of T 2009 ATC ¶10-096 ¶18-305
Pintarich v DFC of T, 2018 ATC ¶20-657 ¶18-305
Platypus Leasing Inc & Ors v FC of T [2005] NSWCA 399 ¶8-100; ¶18-600
Platypus Leasing Inc & Ors v FC of T [2005] NSWSC 376 ¶18-120
Point v FC of T 70 ATC 4021 ¶6-210
Pratt Holdings Pty Ltd; FC of T v [2005] FCA 1247; 2005 ATC 4903 ¶18-140
Pratten v Commonwealth DPP [2013] NSWSC 594 ¶18-110
Pridecraft Pty Ltd v FC of T 2005 ATC 4001 ¶20-110
Print Applied Technology Pty Ltd v FC of T 2011 ATC ¶10-196; [2011] AATA 555 ¶18-300
Professional Admin Service Centres Pty Ltd v FC of T 2013 ATC ¶20-424 ¶17-425
Provan v HCL Real Estate Ltd & Ors 92 ATC 4644 ¶19-400

Paragraph
Qantas Airways Ltd; FC of T v [2012] HCA 41; 2012 ATC ¶20-352 ¶4-020; ¶12-020
Queensland Harvesters Pty Ltd v FC of T 2009 ATC ¶10-088 ¶5-130

Paragraph
RV Investments (Aust) Pty Ltd, Re 2014 [AATA] 158 ¶18-300
R v Bromley [2010] VSC 345 ¶18-300
Raschta Coatings Pty Ltd as trustee for the Raschta Coatings Trust v FC of T ¶18-040
[2015] AATA 34
Redrow Group plc; Customs & Excise Commrs v [1999] BVC 96 ¶4-015
Reglon Pty Ltd v FC of T [2011] FCA 805; 2011 ATC ¶20-267 ¶4-085
Reliance Carpet Pty Ltd; FC of T v [2008] HCA 22; 2008 ATC ¶20-028 ¶4-070
Rendyl Properties Pty Ltd v FC of T 2009 ATC ¶10-082 ¶3-020
Rennie Produce (Aust) Pty Ltd & Ors; FC of T v 2018 ATC ¶20-650 ¶18-110
Research Scientist v FC of T [2014] AATA 242 ¶18-300
Richard Walter Pty Ltd; DFC of T v 95 ATC 4067 ¶8-100
Rio Tinto Services Ltd v FC of T 2015 ATC ¶20-525 ¶5-010
Rod Mathiesen Truck Hire Pty Ltd v FC of T [2013] AATA 496 ¶7-325
Royal & Sun Alliance Insurance Australia Ltd; Commr of State Revenue (Vic) v ¶11-070
[2003] VSCA 177; 2003 ATC 4998
Russell v FC of T [2008] FCA 342 ¶18-680
Russell v FC of T 2009 ATC ¶20-143 ¶3-015; ¶8-100
Russell v FC of T [2011] FCAFC 10 ¶3-020; ¶5-010
Ryan v FC of T [2014] AATA 818 ¶5-010

Paragraph
SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2016] NSWSC 362 ¶4-210
SDI Group Pty Ltd v FC of T [2012] AATA 763; 2012 ATC ¶10-282 ¶11-500
SGH Ltd v FC of T [2002] HCA 18; 2002 ATC 4366 ¶11-400
SJ Buller Pty Ltd v FC of T 2013 ATC ¶10-334 ¶22-560
SXGX v FC of T [2011] AATA 110 ¶4-010
Saga Holidays Ltd v FC of T [2006] FCAFC 191 ¶1-315; ¶4-104;
¶11-000; ¶12-020
Salser v FC of T [2018] AATA 1311 ¶18-300
Sanctuary Australasia Pty Ltd v FC of T [2013] AATA 371 ¶8-110
Saunders v FC of T 88 ATC 4349 ¶18-130
Sea Containers Ltd v Customs & Excise Commrs [2000] BVC 60 ¶4-200
Secret Hotels Ltd (Formerly Med Hotels Ltd) v The Commrs for Her Majesty's ¶17-400
Revenue and Customs [2011] UKUT 308
Sgardelis & Anor v FC of T 2007 ATC 2335 ¶18-300
Sharkey v FC of T [2007] AATA 1435 ¶18-305
Sharp v FC of T [2010] AATA 1023 ¶18-305
Sharratt v FC of T [2015] AATA 293 ¶18-300
Shaw v Director of Housing and State of Tasmania (No 2) 2001 ATC 4054 ¶4-010; ¶4-085
Shell NZ Holding Co Ltd v C of IR (1994) 16 NZTC 11,163 ¶7-205
Simionato Holdings Pty Ltd v FC of T (No 2) 95 ATC 4720 ¶18-120
Sinclair Collis Ltd; Customs & Excise Commrs v [1998] BVC 335 ¶11-000
Smale v Fletcher Homes Ltd (1996) 17 NZTC 12,662 ¶19-400
Smorgon v FC of T 76 ATC 4364 ¶18-110
Snow v Keating DFC of T (WA) 78 ATC 4125 ¶18-110
Snugfit Australia Pty Ltd v FC of T [2013] AATA 802; 2013 ATC ¶10-339 ¶13-350
Sogo Duty Free Pty Ltd v FC of T 2011 ATC ¶20-249 ¶12-030
South Steyne Hotel Pty Ltd v FC of T [2009] FCAFC 155; 2009 ATC ¶20-145 ¶11-010; ¶11-030;
¶11-320
Spotless Services Ltd & Anor; FC of T v 96 ATC 5201 ¶20-050
Stallion (NSW) Pty Ltd v FC of T 2019 ATC ¶20-707; [2019] FCA 1306 ¶5-010
Sterling Guardian Pty Ltd v FC of T 2005 ATC 4796 ¶1-315
Sterling Guardian Pty Ltd v FC of T [2006] FCAFC 12; 2006 ATC 4227 ¶11-110
Stevenson v FC of T 91 ATC 4476 ¶18-660
Stewart & Ors v Australian Crime Commission [2012] FCAFC 151 ¶18-140
Stewart & Anor; DFC of T v 84 ATC 4146 ¶9-240
Stewart & Ors v DFC of T [2011] FCA 336 ¶18-140
Subloo Investments Pty Ltd v FC of T [2012] AATA 703 ¶18-305
Sunchen Pty Ltd v FC of T [2010] FCAFC 138; 2010 ATC ¶20-229 ¶11-010
Sunlea Enterprises Pty Ltd as trustee for Drummond Cove Unit Trust v FC of T; ¶7-325
2018 ATC ¶10-480
Swanbat Pty Ltd v FC of T 2013 ATC ¶10-344 ¶8-120
Swansea Services Pty Ltd; FC of T v 2009 ATC ¶20-100 ¶3-020

Paragraph
TAB Ltd v FC of T [2005] NSWSC 552 ¶16-000
TG & A Martinazzo v FC of T 2009 ATC ¶10-074 ¶3-020
TSC 2000 Pty Ltd v FC of T 2007 ATC 2409 ¶16-000
TT-Line Company Pty Ltd v FC of T 2009 ATC ¶20-157 ¶4-020
Tam v Mannall & Anor [2010] NSWC 250 ¶4-210
Tavco Group Pty Ltd v FC of T 2008 ATC ¶10-049 ¶5-100; ¶7-205;
¶18-305
Taxology Pty Ltd v FC of T [2016] AATA 565 ¶7-435
Taxpayer v FC of T [2011] AATA 160 ¶6-300
Taxpayer v FC of T [2015] AATA 737 ¶3-020
Taxpayers (The) v FC of T [2011] AATA 33 ¶18-300
Tenvoc Properties Pty Ltd v FC of T [2006] AATA 529; 2006 ATC 2241 ¶18-300
Toby Constructions Products Pty Ltd v Computa Bar (Sales) Pty Ltd [1983] 2 ¶4-100
NSWLR 48
Touram Pty Ltd v FC of T 2008 ATC ¶10-070 ¶3-020
Toyama Pty Ltd v Landmark Building Developments Pty Ltd [2006] NSWSC 83; ¶3-020; ¶4-010
2006 ATC 4160
Travelex Ltd v FC of T [2010] HCA 33 ¶4-100; ¶9-240;
¶10-010
Travelex Ltd v FC of T [2018] FCA 1051; 2018 ATC ¶20-661 ¶8-110
Traviati; FC of T v [2012] FCA 546; 2012 ATC ¶20-321 ¶20-110
Trnka v FC of T 2012 ATC ¶10-262 ¶3-020
Trustee for Naidu Family Trust v FC of T [2011] AATA 910; 2011 ATC ¶10-227 ¶10-070; ¶11-000
Trustee for SBM Trust v FC of T 2015 ATC ¶10-389 ¶5-010
The Trustee for the Whitby Trust v FC of T 2017 ATC ¶10-450 ¶4-020; ¶11-110
U

Paragraph
Uber BV v FC of T 2017 ATC ¶20-608 ¶12-130; ¶23-100
Unit Trend Services Pty Ltd v FC of T [2012] FCAFC 112; 2012 ATC ¶20-342 ¶20-060
Unit Trend Services Pty Ltd; FC of T v 2013 ATC ¶20-389 ¶11-140; ¶20-040;
¶20-050; ¶20-060

Paragraph
VGGL and FC of T [2013] AATA 867; 2013 ATC ¶1-059 ¶17-425
Vadasz v FC of T [2006] AATA 682 ¶6-130
Vidler v FC of T [2010] FCAFC 59; 2010 ATC ¶20-186 ¶11-010

Paragraph
WA Dewhurst & Co Pty Ltd v Cawrse [1960] VR 278 ¶4-102
WD & HO Wills (Australia) Pty Ltd v FC of T 96 ATC 4223 ¶20-060
Walter Construction Group Ltd v Walker Corp Ltd & Ors [2001] NSWSC 283 ¶4-085
Warner; FC of T v [2015] FCA 659 ¶18-110
Watson v FC of T 99 ATC 5313 ¶18-110
Waverley Council v FC of T [2009] AATA 442 ¶4-080; ¶18-630
Westley Nominees Pty Ltd & Anor v Coles Supermarkets Australia Pty Ltd & Anor ¶19-250
2006 ATC 4363
Word Investments Pty Ltd; FC of T v [2008] HCA 55 ¶15-000
Wynnum Holdings (No 1) Pty Ltd v FC of T [2011] AATA 296 ¶8-100
Wynnum Holdings (No 1) Pty Ltd v FC of T 2012 ATC ¶10-274 ¶4-010; ¶11-030

Paragraph
Yacoub v FC of T 2012 ATC ¶20-328 ¶3-015
Yates v FC of T [2014] AATA 279 ¶18-300
Numbered Decisions of Boards of Review, AAT
and other Authorities
Paragraph
Case 2/2007 [2007] ATC 103 ¶3-020
Case 3/28 [2008] AATA 415 ¶18-300
Case 3/2010 [2010] ATC ¶1-022 ¶20-050; ¶20-060
Case 3/2013 [2013] ATC ¶1-052 ¶3-020
Case 4/2016 [2016] ATC ¶1-082 ¶11-515
Case 5/2008 [2008] ATC ¶1-004 ¶16-110; ¶18-300
Case 5/2010 [2010] ATC ¶1-024 ¶3-020
Case 6/2012 [2012] ATC ¶1-046 ¶16-110
Case 8/2009 [2009] ATC ¶1-012 ¶6-300
Case 12/2009 [2009] ATC ¶1-016 ¶11-500
Case 14/2005 [2005] AATA 1028; [2005] ATC 240 ¶18-300
Case 14/2006 [2006] ATC 187 ¶20-060; ¶20-070
Case 45/93 93 ATC 486 ¶6-210
Case 50/93 93 ATC 534 ¶18-660
Case J63 77 ATC 537 ¶23-100
Case M58 (1990) 12 NZTC 2,333 ¶19-250
Case S65 (1996) 17 NZTC 7408 ¶4-080
Case W58 89 ATC 524 ¶20-060
Case Z38 92 ATC 350 ¶20-060
LEGISLATION FINDING LISTS
This table lists relevant Acts and Regulations by section, showing the paragraphs (¶) in which they are
commented upon.
References to other legislation follow the principal legislation. References to rulings are in the Rulings
Finding Lists.

PRINCIPAL LEGISLATION

A New Tax System (Goods and Services Tax) Act 1999

Section Paragraph
1-4 ¶1-300
7-1 ¶9-000
7-5 ¶7-000
7-15 ¶7-000
9-5 ¶1-160; ¶1-170; ¶4-000; ¶4-085; ¶4-090; ¶4-105; ¶4-110;
¶17-110
9-10 ¶4-010; ¶13-110
9-10(2)(e) ¶4-010
9-10(4) ¶4-010
9-15 ¶4-020; ¶22-280
9-15(2A) ¶4-085
9-15(3) (former) ¶4-060
9-15(3)(b) (former) ¶4-040
9-17 ¶4-020; ¶4-040; ¶4-060; ¶7-325
9-20 ¶3-020
9-20(2) ¶3-020; ¶4-090
9-20(2)(a) ¶3-020
9-20(3) ¶3-020
9-20(4) ¶3-020
9-25 ¶4-100; ¶4-103
9-25(3) ¶9-020
9-25(5) ¶4-040; ¶9-120
9-25(6) ¶9-010; ¶9-020
9-25(7) ¶9-120
9-26 ¶4-101
9-27 ¶4-102
9-30 ¶1-160; ¶1-170; ¶4-020; ¶4-065; ¶4-070; ¶4-110; ¶11-000;
 ¶11-068; ¶11-550; ¶13-340; ¶14-004; ¶16-200; ¶16-220
9-30(3) ¶1-170; ¶10-140
9-30(4) ¶1-170; ¶11-020
9-40 ¶4-000
9-70 ¶4-200
9-75 ¶4-020; ¶22-280; ¶23-150
9-75(1) ¶4-200
9-75(2) ¶4-200
9-75(3) ¶24-200
9-75(4) ¶9-020
9-80 ¶4-200
9-85 ¶4-200
9-85(2) ¶4-010
9-90 ¶4-205
11-5 ¶5-010; ¶17-110
11-10 ¶5-010
11-15 ¶1-160; ¶1-170; ¶5-010; ¶5-020; ¶10-050
11-15(4) ¶10-032
11-15(5) ¶10-035
11-20 ¶5-010
11-25 ¶5-020
11-30 ¶5-020; ¶10-030; ¶10-040
13-5 ¶9-000; ¶9-030
13-10 ¶9-030
13-15 ¶9-005
13-20(2) ¶9-005
13-25 ¶9-040
15-5 ¶9-010
15-10 ¶9-010
15-15 ¶9-010
15-20 ¶9-010
15-25 ¶9-010
17-5 ¶8-100
17-10 ¶8-100
17-20 ¶8-045
19-10 ¶6-100
19-40 ¶6-100; ¶7-430
19-50 ¶6-000
19-55 ¶6-000
19-70 ¶6-100
19-75 ¶6-000
19-80 ¶6-000
19-85 ¶6-000
21-5 ¶6-200; ¶16-010
21-10 ¶6-200
21-15 ¶6-200
21-20 ¶6-200
23-5 ¶3-000; ¶3-015; ¶3-020
23-10 ¶3-000; ¶3-015; ¶3-020
23-15 ¶3-000; ¶3-030
23-20 ¶3-040
25-1 ¶3-040
25-5 ¶3-040; ¶8-037
25-10 ¶3-040
25-10(2) ¶3-040
25-15 ¶3-040
25-50 ¶3-070
25-55 ¶3-070
25-57 ¶3-070
25-60 ¶3-070
27-5 ¶7-100
27-10 ¶7-100
27-15 ¶7-100; ¶7-110
27-20 ¶7-100
27-22 ¶7-100
27-25 ¶7-100
27-30 ¶7-105
27-35 ¶7-105
27-37 ¶7-105
27-38 ¶7-105
27-39 ¶7-100
27-40 ¶7-120
29-5 ¶5-100; ¶7-205; ¶7-320
29-10 ¶5-010; ¶5-100; ¶5-130; ¶7-205; ¶7-320; ¶7-420
29-10(3) ¶5-100
29-10(4) ¶5-125
29-15 ¶9-010
29-20 ¶6-000; ¶6-100; ¶6-110; ¶6-130; ¶7-430
29-25 ¶7-440
29-40 ¶7-300
29-45 ¶7-300
29-50 ¶7-300
29-70 ¶5-100; ¶5-110; ¶5-150
29-70(1A) ¶5-110
29-70(1B) ¶5-110; ¶5-130
29-70(3) ¶5-140
29-75 ¶6-110; ¶6-115; ¶6-130
29-80 ¶5-170; ¶6-135
31-5 ¶8-000; ¶8-002; ¶8-050
31-10 ¶8-005
31-15 ¶8-043
31-20 ¶8-050
31-25 ¶8-043
31-30 (former) ¶8-050
33-3 ¶8-100
33-5 ¶8-100
33-10 ¶8-100
33-15 ¶8-100; ¶9-005
35-5 ¶8-037; ¶8-110
35-10 ¶8-110
Div 36 Subdiv 136-B ¶23-260
38-2 ¶13-100
38-3 ¶13-100; ¶13-120; ¶13-130; ¶13-140; ¶13-150; ¶13-160; ¶13-
170; ¶13-180; ¶13-195
38-4 ¶13-110; ¶13-180
38-5 ¶13-120
38-6 ¶13-200
38-7 ¶13-310
38-10 ¶13-320
38-15 ¶13-320
38-20 ¶13-330
38-25 ¶13-340
38-30 ¶13-340
38-35 ¶13-340
38-38 ¶13-340
38-40 ¶13-340
38-45 ¶13-350
38-50 ¶13-360
38-55 ¶13-370
38-60 ¶10-140; ¶13-320
38-85 ¶14-002; ¶14-004; ¶14-012; ¶14-015; ¶14-020
38-90 ¶14-004
38-95 ¶14-004
38-97 ¶14-004
38-100 ¶14-004
38-105 ¶14-004
38-105(4) ¶14-004
38-110 ¶14-020
38-145 ¶14-100
38-150 ¶14-100
38-155 ¶14-100
38-185 ¶9-215; ¶9-220; ¶12-030
38-185, item 1 ¶9-210; ¶9-220
38-185, item 2 ¶9-210
38-185, item 3 ¶9-215
38-185, item 2A ¶9-210
38-185, item 4 ¶9-215
38-185, item 4A ¶9-215
38-185, item 5 ¶9-215; ¶9-220
38-185, item 6 ¶9-215; ¶9-220
38-185, item 7 ¶9-220; ¶12-030
38-185(3) ¶9-210
38-185(4) ¶9-210
38-187 ¶9-230
38-188 ¶9-235
38-190 ¶4-102; ¶9-120; ¶10-010; ¶10-050; ¶16-000
38-190, item 1–item 4 ¶10-050
38-190(1) ¶9-240
38-190(2) ¶9-240; ¶12-020
38-190(2A) ¶9-240
38-190(3) ¶9-240
38-190(4) ¶9-240
38-190(5) ¶9-240
38-191 ¶9-250
38-220 ¶15-050
38-250 ¶15-010
38-255 ¶14-004; ¶15-030
38-260 ¶15-015
38-270 ¶15-020
38-285 ¶16-200
38-290 ¶16-200
38-295 ¶16-200
38-300 ¶16-200
38-325 ¶11-500
38-325(2)(a) ¶11-506
38-325(2)(b) ¶11-503
38-355 ¶9-240; ¶12-000
38-355, item 1–item 4 ¶12-000
38-355, item 5 ¶12-010
38-355, item 6 ¶12-010; ¶12-020
38-355, item 7 ¶12-020
38-355(1), item 5A ¶12-010
38-355(2) ¶12-010
38-360 ¶12-020
38-385 ¶9-215; ¶16-210
38-385(5) ¶9-215
38-385(6) ¶9-215
38-415 ¶9-030; ¶12-020
38-445 ¶11-400
38-445(1A) ¶11-400
38-450 ¶11-400
38-475 ¶11-420
38-475(2) ¶11-410
38-480 ¶11-410; ¶11-520
38-505 ¶12-150
38-510 ¶12-150
38-540 ¶12-050
38-570 ¶9-240
38-590 ¶16-220
38-610 ¶9-120
Div 40 ¶1-170
40-5 ¶10-000; ¶10-005; ¶10-020
40-5(1) ¶4-010
40-35 ¶11-010; ¶11-310; ¶11-320
40-35(1A) ¶11-320
40-65 ¶11-010; ¶11-020; ¶11-050; ¶11-510
40-65(2) ¶11-030
40-70 ¶11-060
40-75 ¶11-020
40-75(2AA) ¶11-020
40-75(2A) ¶11-020
40-75(2B) ¶11-020
40-75(2C) ¶11-020
40-100 ¶16-210
40-130 ¶14-010
40-160 ¶15-055
40-165 ¶15-055
40-180 ¶9-120
42-5 ¶9-030
42-10 ¶9-030
42-15 ¶9-130
48-5 ¶17-010; ¶17-012; ¶17-020
48-7 ¶17-010
48-10 ¶17-010
48-10(1)(b) ¶17-012
48-10(2) ¶17-012
48-15 ¶17-012
48-40 ¶17-020
48-40(2) ¶17-020
48-45 ¶17-020
48-45(3) ¶17-020
48-50 ¶17-020; ¶17-030
48-51 ¶17-010
48-52 ¶17-010

48-53 ¶17-010
48-55 ¶17-020
48-57 ¶5-110
48-60 ¶17-020
48-70 ¶17-030
48-71 ¶17-010; ¶17-030
48-72 (former) ¶17-030
48-73 ¶17-030
48-75 ¶17-030
48-110 ¶17-030
48-115 ¶17-030
Div 49 ¶15-052
49-5 ¶15-052
49-10 ¶15-052
49-30 ¶15-052
49-35 ¶15-052
50-5 ¶15-053
Div 51 ¶17-200
51-5 ¶17-210; ¶17-212
51-7 ¶17-212
51-10 ¶17-210
51-30 ¶17-220
51-35 ¶17-220
51-40 ¶17-220
51-50 ¶17-220; ¶17-230
51-52 ¶17-220
51-55 ¶17-220
51-60 ¶17-220
51-70 ¶17-230
51-75 ¶17-212; ¶17-230
51-110 ¶17-230
51-115 ¶17-230
Div 54 ¶17-300
54-5 ¶17-300
54-40 ¶17-300
54-45 ¶17-300
54-50 ¶6-140; ¶17-300

54-55 ¶17-300
54-60 ¶17-300
54-70 ¶17-310
54-75 ¶17-310
54-90 ¶17-310
57-5–57-25 ¶17-410
57-5 ¶17-410
57-7 ¶17-410
57-30 ¶17-410
57-35 ¶7-100; ¶17-410
57-40 ¶17-410
57-45 ¶17-410
57-50 ¶17-410
Div 58 ¶18-250
58-5 ¶18-250
58-10 ¶18-250
58-15 ¶18-250
58-20 ¶3-080
58-25 ¶3-080
58-30 ¶3-080
58-35 ¶3-080; ¶7-100
58-40 ¶18-250
58-45 ¶8-050
58-50 ¶8-050
58-55 ¶8-050
58-60 ¶8-050
58-65 ¶18-250
58-70 ¶18-250
58-95 ¶18-250
60-5 ¶5-030
60-15 ¶5-030
60-20 ¶5-030
60-25 ¶5-030
Div 63 ¶15-080
63-5 ¶15-080
63-10 ¶15-090
63-15 ¶15-080

63-15(2) ¶15-090
63-20 ¶15-080
63-25 ¶15-080
63-27 ¶15-080
63-30 ¶15-090
63-35 ¶15-090
63-40 ¶15-090
63-45 ¶15-090
63-50 ¶15-080
66-5 ¶16-110
66-10 ¶16-110
66-15 ¶16-110
66-15(2) ¶16-110
66-17 ¶16-110
66-40(1) ¶16-120
66-40(2) ¶16-120
66-45 ¶16-120
66-50 ¶16-120
66-55 ¶16-120
66-60 ¶16-120
66-65 ¶16-120
66-70 ¶16-120
Div 69 Subdiv 69-B ¶24-210
69-5 ¶5-010
69-10 ¶12-110
70-5 ¶10-040
70-10 ¶10-040
70-15 ¶10-040
70-20 ¶10-040
71-5 ¶10-045; ¶24-210
71-10 ¶24-210
Div 72 ¶17-500
72-5 ¶17-500
72-10 ¶17-500
72-15 ¶17-500
72-20 ¶17-500
72-25 ¶17-500

72-40 ¶17-500
72-45 ¶17-500
72-50 ¶17-500
72-70 ¶17-500
72-90 ¶17-500
72-92 ¶17-500
72-95 ¶17-500
72-100 ¶17-500
Div 75 ¶11-100
75-5 ¶11-100; ¶11-140
75-5(1B) ¶11-140
75-10 ¶11-110
75-11 ¶11-140
75-12 ¶11-110
75-13 ¶11-140
75-14 ¶11-110
75-15 ¶11-100; ¶11-110
75-16 ¶11-140
75-20 ¶11-100
75-22 ¶11-140
75-25 ¶11-130
75-27 ¶11-110
75-30 ¶11-100
75-35 ¶11-120
78-5 ¶10-150
78-10 ¶10-120; ¶10-140
78-15 ¶10-120
78-18 ¶10-120
78-20 ¶10-120
78-25 ¶10-120
78-30 ¶10-120
78-35 ¶10-120
78-42 ¶10-120
78-45 ¶10-120
78-50 ¶10-120
78-55 ¶10-120
78-60 ¶10-120

78-65 ¶10-120
78-70 ¶10-120
78-75 ¶10-120
78-80 ¶10-120
78-85 ¶10-120
78-90 ¶10-120
78-95 ¶10-150
78-100 ¶10-130
78-100(2) ¶10-130
78-110 ¶4-085; ¶10-150
78-115 ¶10-130
78-118 ¶10-120
Div 79 ¶10-120
Div 80 ¶10-120
81-5 ¶4-080; ¶9-005
81-10 ¶4-080; ¶4-100
Div 82 ¶11-062
82-5 ¶4-080
82-10 ¶4-080
83-5 ¶9-095
83-10 ¶9-095
83-15 ¶9-095
83-20 ¶9-095
83-25 ¶9-095
83-30 ¶9-095
83-35 ¶9-095
Div 84 ¶4-102
84-5 ¶9-100; ¶9-120; ¶9-130; ¶10-042
84-5, item 1–item 3 ¶9-100
84-5, item 4 ¶9-130
84-5, item 5 ¶9-130
84-10 ¶9-100
84-12 ¶9-100
84-13 ¶9-100
84-14 ¶9-100
84-15 ¶9-100
84-30 ¶9-100

Subdiv 84-B ¶9-100

84-50 ¶9-120
84-55 ¶9-120
84-60 ¶9-120
84-65 ¶9-120
84-70 ¶9-120
84-75 ¶9-130
Subdiv 84-C ¶9-130
84-77 ¶9-130
84-79 ¶9-130
84-81 ¶9-130
84-83 ¶9-130
84-85 ¶9-130
84-87 ¶9-130
84-89 ¶9-130
84-91 ¶9-130
84-93 ¶9-130
84-100 ¶9-120
84-105 ¶9-130
Subdiv 84-D ¶3-075
85-5 ¶4-103
85-5(2) ¶4-103
85-10 ¶4-103
Div 86 ¶16-210
Div 87 ¶11-320
87-5 ¶11-320
87-10 ¶11-320
87-15 ¶11-320
87-20 ¶11-320
87-25 ¶11-320
Div 90 ¶17-100
90-5 ¶17-110
90-10 ¶17-110
90-15 ¶17-110
90-20 ¶17-120
90-25 ¶17-120
90-30 ¶17-120

90-35 ¶17-120
93-5 ¶5-010
93-10 ¶5-010
96-5 ¶4-104
96-5(4) ¶4-104
96-10 ¶4-104
Div 99 ¶4-070
99-5 ¶4-070
99-10 ¶4-070
100-5 ¶4-060
100-5(1) ¶4-060
100-5(2) ¶4-060
100-10 ¶4-060
100-12 ¶4-060
100-15 ¶4-060
100-18 ¶4-060
100-20 ¶4-060
100-25 ¶4-060
102-5 ¶7-430
102-10 ¶7-430
105-5 ¶10-070
105-15 ¶10-070
105-20 ¶10-070
108-5 ¶9-060
110-5 ¶24-070
110-10 (former) ¶24-070
110-15 ¶24-070
110-30 ¶24-070
110-60 ¶17-025
110-65 ¶17-025
111-5 ¶5-040
111-10 ¶5-040
111-15 ¶5-040
111-18 ¶5-040
111-20 ¶5-040
111-25 ¶5-040
111-30 ¶5-040

113-5 ¶4-090
114-5 ¶9-000
114-10 ¶9-000
114-15 ¶9-005
114-20 ¶9-005
114-25 ¶9-000
Div 117 ¶9-050
117-5 ¶9-050
117-10 ¶9-055
117-15 ¶9-055
123-5 ¶7-000; ¶13-215; ¶15-060
123-7 ¶7-000
123-10 ¶13-215; ¶15-060
Div 126 ¶16-000
126-5 ¶16-000
126-10 ¶16-000
126-10(3) ¶16-000
126-15 ¶16-000
126-20 ¶16-010
126-27 ¶16-000
126-30 ¶16-000
126-33 ¶16-000
126-35 ¶16-000
Div 129 ¶24-070
129-5 ¶6-300
129-10 ¶6-300
129-15 ¶6-320
129-20 ¶6-304
129-25 ¶6-304; ¶6-310
129-40 ¶6-300; ¶6-410
129-40(3) ¶6-300
129-45 ¶6-300; ¶15-040
129-50 ¶6-300
129-55 ¶6-300
129-80 ¶6-306
Div 130 ¶4-010; ¶17-500
130-5 ¶6-320

130-5(3) ¶6-320
131-5 ¶5-020
131-10 ¶5-020
131-15 ¶5-020
131-20 ¶5-020
131-40 ¶5-020
131-45 ¶5-020
131-50 ¶5-020
131-55 ¶5-020
131-60 ¶5-020
Div 132 ¶12-125; ¶24-050; ¶24-070
132-5 ¶6-310
132-10 ¶6-310
Div 133 ¶19-400
Div 134 ¶6-100
134-5 ¶6-100
134-10 ¶6-100
134-15 ¶6-100
134-20 ¶6-100
135-5 ¶11-520
135-10 ¶11-520
136-5 ¶6-200
136-10 ¶6-200
Div 136 Subdiv 136-B ¶6-200; ¶23-260
136-30 ¶6-200
136-35 ¶6-200
136-40 ¶6-200
136-45 ¶6-200
137-5 ¶6-400
138-5 ¶6-410
138-5(2) ¶6-410
138-5(3) ¶6-410
138-10 ¶6-410
138-15 ¶3-070; ¶6-410; ¶7-120
138-17 ¶6-415
Div 141 ¶9-030
Div 142 ¶8-115

142-5 ¶8-115
142-10 ¶8-115
142-15 ¶8-115; ¶8-120
142-16 ¶9-130
142-20 ¶8-115
142-25 ¶8-115
144-5 ¶3-080; ¶12-130
Div 146 ¶3-075
146-5–146-25 ¶3-075
149-5 ¶3-080
149-10 ¶3-080
149-25 ¶17-016
151-5 ¶8-040
151-10 ¶8-040
151-15 ¶8-040
151-20 ¶8-040
151-25 ¶8-040
151-40 ¶8-040
151-45 ¶8-040
151-50 ¶8-040
151-55 ¶8-040
151-60 ¶8-040
153-5 ¶5-190
153-10 ¶5-190
153-15 ¶5-190
153-20 ¶5-190
153-25 ¶5-190; ¶10-150
153-50 ¶5-190; ¶17-420
153-55 ¶17-420
153-60 ¶17-420
153-65 ¶17-420
Div 156 ¶7-420
156-5 ¶7-420
156-10 ¶7-420
156-15 ¶7-420
156-17 ¶7-420
156-20 ¶7-420

156-22 ¶7-420
156-23 ¶7-420
156-25 ¶7-420
157-5 ¶7-300
157-10 ¶7-300
158-5 ¶7-438; ¶12-110
159-5 ¶7-400
159-10 ¶7-400
159-15 ¶7-400
159-20 ¶7-400
159-25 ¶7-400
Div 162 ¶18-300
162-5 ¶8-037
162-10 ¶8-037
162-15 ¶8-037
162-20 ¶8-037
162-25 ¶8-037
162-30 ¶8-037
162-50 ¶8-037
162-55 ¶8-037
162-60 ¶8-037
162-70 ¶8-037
162-80 ¶8-037
162-85 ¶8-037
162-90 ¶8-037
162-95 ¶8-037
162-100 ¶8-037
162-105 ¶8-037
162-110 ¶8-037
162-135 ¶8-037
162-140 ¶8-037
162-175 ¶8-037
162-180 ¶8-037
162-185 ¶8-037
162-190 ¶8-037
162-200 ¶8-037
Div 165 ¶1-300; ¶11-100; ¶20-000; ¶20-010; ¶20-020; ¶20-030; ¶20-
040; ¶20-050; ¶20-060; ¶20-070; ¶20-110

165-1 ¶20-000; ¶20-060

165-5 ¶20-010; ¶20-020; ¶20-040; ¶20-050
165-5(3) ¶20-040
165-10 ¶20-020; ¶20-030; ¶20-040
165-10(3) ¶20-040
165-15 ¶20-060
165-40 ¶20-070
165-45 ¶20-070
165-50 ¶20-070
165-55 ¶20-070
165-60 ¶20-070
165-65 ¶20-070
Div 168 ¶12-030
168-5 ¶12-030
171-5 ¶9-005
Div 176 ¶15-000
177-1 ¶1-300
177-3 ¶5-010
182-10 ¶1-300; ¶20-000
184-1 ¶3-015; ¶18-230
184-1(1) ¶3-015
184-1(2) ¶3-015; ¶18-270
184-5 ¶4-010; ¶5-010; ¶5-040
188-10 ¶3-030; ¶7-110; ¶8-037; ¶8-043
188-15 ¶3-030; ¶17-020
188-20 ¶3-030; ¶17-020
188-22 ¶3-030
188-23 ¶9-095; ¶16-210
188-24 ¶17-420
188-25 ¶3-030
188-32 ¶16-030
188-35 ¶3-030
188-40 ¶3-030
189-5 ¶10-032
189-10 ¶10-032
189-15 ¶10-032
190-1 ¶17-012
190-5 ¶17-012
195-1 ¶3-020; ¶3-080; ¶4-010; ¶4-100; ¶4-102; ¶7-205; ¶9-215;
¶10-035; ¶11-000; ¶11-010; ¶11-020; ¶11-022; ¶11-030; ¶11-
060; ¶12-010; ¶12-130; ¶12-150; ¶13-310; ¶13-320; ¶13-330;
¶13-340; ¶14-012; ¶14-015; ¶14-020; ¶15-000; ¶15-015; ¶16-
100; ¶17-500; ¶18-000; ¶18-110
195-1 “company” ¶17-012
195-1 “government related entity” ¶17-016
195-1 “overdue” ¶6-200
195-1 “place of consignment” ¶9-005
195-1 “premises” ¶13-120
195-1 “real property” ¶19-100
Sch 1 ¶13-140; ¶13-150; ¶13-160; ¶13-170
Sch 2 ¶13-180

A New Tax System (Goods and Services Tax) Regulations 1999

Regulation Paragraph
29-80.01 ¶5-170
29-80.02 ¶6-135
Div 33 ¶9-005
38-3.01 ¶13-180
38-3.02 ¶13-195
38-45.01 ¶13-350
38-185.01 ¶9-220; ¶12-030
40-5.02 ¶10-005
40-5.03 ¶10-005
40-5.04 ¶10-005
40-5.05 ¶10-005
40-5.06 ¶10-005
40-5.07 ¶10-005
40-5.08 ¶10-010
40-5.09 ¶7-435; ¶10-005; ¶10-010
40-5.09(3) ¶9-120
40-5.09(4A) ¶10-010
40-5.10 ¶10-010
40-5.12 ¶10-020
40-5.12, item 6 ¶10-010
48-10.01 ¶17-014
48-10.01A ¶17-014
48-10.02 ¶17-014
48-10.03 ¶17-014
48-10.03A ¶17-014
48-10.04 ¶17-014
51-5.01 ¶17-210
70-5.01A ¶10-042
70-5.02 ¶10-040
70-5.02(2), item 32 ¶10-040
70-5.02A ¶10-042
70-5.02B ¶10-042
70-5.02C ¶10-042
70-5.03 ¶10-040
78-105.01 ¶10-130
Div 81 ¶4-080
Div 168 ¶12-030
195-1.02 ¶14-002
Sch 3 ¶13-350
Sch 5 ¶9-220; ¶12-030
Sch 10 ¶10-130
Sch 12 ¶14-002

A New Tax System (Goods and Services Tax Imposition — Customs) Act 1999

Section Paragraph
Generally ¶1-300

A New Tax System (Goods and Services Tax Imposition — Excise) Act 1999

Section Paragraph
Generally ¶1-300

A New Tax System (Goods and Services Tax Imposition — General) Act 1999
Section Paragraph
Generally ¶1-300

A New Tax System (Goods and Services Tax Transition) Act 1999

Section Paragraph
6 ¶19-100; ¶19-240
6(3) ¶19-230
7 ¶19-000; ¶19-240
8 (former) ¶19-000
10 ¶19-000; ¶19-230
11 ¶19-000; ¶19-200
12 ¶19-210
13 ¶19-000; ¶19-230; ¶19-
250
14 ¶19-220
15 ¶13-380
Pt 4 ¶16-130
16 (former) ¶16-130; ¶19-000
16A (former) ¶19-000
16AB (former) ¶19-000
16B (former) ¶19-000
16C (former) ¶19-000
18 ¶16-130
19 ¶19-230
24A ¶19-000
Generally ¶1-300

A New Tax System (Australian Business Number) Act 1999

Section Paragraph
23 ¶9-120; ¶18-300
Generally ¶1-300

A New Tax System (Commonwealth-State Financial Arrangements) Act 1999

Section Paragraph
Generally ¶1-300

A New Tax System (Luxury Car Tax) Act 1999

Section Paragraph
5-5 ¶23-050
5-10 ¶23-050; ¶23-
 250
5-15 ¶23-200
5-15(2) ¶23-200
5-15(3) ¶23-200
5-20 ¶23-150
7-5 ¶23-050
7-10 ¶23-050; ¶23-
250
7-15 ¶23-150; ¶23-
200
7-20 ¶23-050
9-5 ¶23-250
9-10–9-30 ¶23-250
9-15 ¶23-250
Div 13 ¶23-260
13-15(1A) ¶23-260
Div 15 ¶23-260
15-30 ¶23-250
Div 16 ¶23-260
Div 17 ¶23-260
Div 18 ¶23-210
18-5 ¶23-210
18-10 ¶23-210
18-15 ¶23-210
21-1 ¶23-050
25-1 ¶23-100; ¶23-
150
27-1 ¶23-100; ¶23-
150
Generally ¶1-300; ¶23-000

A New Tax System (Luxury Car Tax) Regulations 2000

Section Paragraph
25-1.01 ¶23-100
Generally ¶23-000

A New Tax System (Luxury Car Tax) Regulations 2019

Regulation Paragraph
Generally ¶1-300
A New Tax System (Luxury Car Tax Imposition — Customs) Act 1999

Section Paragraph
Generally ¶23-000

A New Tax System (Luxury Car Tax Imposition — Excise) Act 1999

Section Paragraph
Generally ¶23-000

A New Tax System (Luxury Car Tax Imposition — General) Act 1999

Section Paragraph
Generally ¶23-000

A New Tax System (Wine Equalisation Tax) Act 1999

Section Paragraph
5-5 ¶22-150; ¶22-160; ¶22-165; ¶22-170; ¶22-180; ¶22-185; ¶22-
280
5-15 ¶22-165
5-20 ¶22-165
5-25 ¶22-165
5-30 ¶22-180
7-5 ¶22-400
7-10 ¶22-420
7-15 ¶22-400
7-20 ¶22-400
7-25 ¶22-400
9-25 ¶22-290
9-25(3) ¶22-290
9-30 ¶22-290
9-35 ¶22-290
9-40 ¶22-290
9-45 ¶22-290
9-65 ¶22-280
13-5 ¶22-420
13-10 ¶22-420
13-15 ¶22-430
13-20 ¶22-430
13-25 ¶22-430
13-30 ¶22-430
13-35 ¶22-430
Div 17 ¶22-530
17-5 ¶22-550
17-10 ¶22-530
17-15 ¶22-530
17-30–17-37 ¶22-550
17-40 ¶22-550
17-45 ¶22-550
Div 19 ¶22-560
19-5 ¶22-560
19-7–19-9 ¶22-560
19-10 ¶22-560
19-15 ¶22-560
19-20 ¶22-560
19-30 ¶22-430
21-5 ¶22-300
21-10 ¶22-300
21-15 ¶22-530
21-40 ¶22-300
21-45 ¶22-530
21-70 ¶22-300
21-75 ¶22-530
23-5 ¶22-180; ¶22-185
25-5 ¶12-030
27-5 ¶22-160
27-10 ¶22-280
27-15 ¶22-280
27-20 ¶22-400
31-1–31-7 ¶22-010
31-1 ¶22-010
31-2 ¶22-010
31-3 ¶22-010
31-4 ¶22-010
31-5 ¶22-010
31-6 ¶22-010
31-7 ¶22-010
33-1 ¶22-160; ¶22-170; ¶22-560
Generally ¶1-300; ¶22-000
A New Tax System (Wine Equalisation Tax) Regulations 2000

Section Paragraph
Div 25 ¶12-030
31-2.01 ¶22-010
31-3.01 ¶22-010
31-4.01 ¶22-010
31-6.01 ¶22-010

A New Tax System (Wine Equalisation Tax) Regulations 2019

Regulation Paragraph
Generally ¶1-300

OTHER LEGISLATION

Acts Interpretation Act 1901

Section Paragraph
15AA ¶1-315
15AB ¶1-315
15B ¶4-102

Administrative Appeals Tribunal Act 1975

Section Paragraph
Generally ¶18-650

Administrative Decisions (Judicial Review) Act 1977

Section Paragraph
Generally ¶5-130; ¶18-305; ¶18-600

Aged Care Act 1997

Section Paragraph
Generally ¶13-340

Charities Act 2013

Section Paragraph
Generally ¶15-000

Competition and Consumer Act 2010

Section Paragraph
Sch 2 ¶21-010
Sch 2, s 18 ¶21-010
Sch 2, s 29 ¶21-010
Sch 2, s 29(1)(i) ¶21-010
Sch 2, s 48 ¶21-010

Constitution

Section Paragraph
55 ¶1-300
114 ¶1-300

Corporations Act 2001

Section Paragraph
486 ¶18-110
891A ¶10-020

Crimes Act 1914

Section Paragraph
10 (former) ¶18-140

Criminal Code Act 1995

Section Paragraph
134.2 ¶18-300
135.2 ¶18-300
149.1 ¶18-120

Customs Act 1901

Section Paragraph
Generally ¶20-060; ¶22-
180

Customs Tariff Act 1995

Section Paragraph
Sch 4, item 26 ¶9-030
Generally ¶22-400

Excise Tariff Act 1921 (Cth)

Section Paragraph
Generally ¶22-010

Extension of Charitable Purpose Act 2004

Section Paragraph
Generally ¶15-000

Freedom of Information Act 1982

Section Paragraph
Generally ¶18-165
Fringe Benefits Tax Assessment Act 1986

Section Paragraph
5B ¶24-210
149A ¶24-210

Great Barrier Reef Marine Park Act 1975

Section Paragraph
Sch 1 ¶4-080

Income Tax Assessment Act 1936

Section Paragraph
51AEA ¶5-010
51AEB ¶5-010
51AEC ¶5-010
51AK ¶5-010
82KZL ¶24-070
177A ¶20-020
177C ¶20-040
177D ¶20-050
252 ¶18-260
260 ¶20-050
263 (former) ¶18-120
264 ¶18-110
Pt III, Div 4A ¶5-010
Pt IVA ¶20-000; ¶20-050; ¶20-
060

Income Tax Assessment Act 1997

Section Paragraph
8-1 ¶24-100
17-5 ¶24-010; ¶24-030
17-10 ¶24-050
17-20 ¶17-020; ¶17-220; ¶24-
070
26-5 ¶5-010
26-30 ¶5-010
26-40 ¶5-010
26-45 ¶5-010
26-50 ¶5-010
27-5 ¶24-030
27-10 ¶24-050
27-15 ¶24-040
27-25 ¶17-020; ¶17-220; ¶24-
070
27-80 ¶24-070
27-85 ¶24-070
27-87 ¶24-070
27-90 ¶24-070
27-92 ¶24-070
27-95 ¶24-070
Div 32 ¶5-010
Div 34 ¶5-010
40-230 ¶12-110; ¶23-150
50-5 ¶15-080
50-10 ¶15-080
50-15 ¶15-080
50-40 ¶15-080
50-45 ¶15-080
70-45 ¶24-070
103-30 ¶24-060
110-45 ¶24-060
110-50 ¶24-060
116-20 ¶24-060
118-10 ¶24-060
Subdiv 328-C ¶1-250
328-110 ¶1-255; ¶1-260
328-115 ¶1-265
328-120 ¶1-265
328-125 ¶1-280
328-130 ¶1-275
960-405 ¶24-070
995-1 ¶18-110

International Tax Agreements Act 1953

Section Paragraph
23 ¶18-135

Military Rehabilitation and Compensation Act 2004

Section Paragraph
Generally ¶12-150; ¶13-
360

Privacy Act 1988

Section Paragraph
Generally ¶18-165

Tax Agent Services Act 2009

Section Paragraph
20-5 ¶8-042
30-10 ¶8-042
30-15–30-30 ¶8-042

Tax Agent Services Regulations 2009

Regulation Paragraph
7 ¶8-042
Sch 2 ¶8-042

Tax and Superannuation Laws Amendment (2016 Measures No 1) Act 2016

Section Paragraph
Sch 2, item 27 ¶19-250

Tax Laws Amendment (2010 GST Administration Measures No 2) Act 2010

Section Paragraph
Sch 1, s 43 ¶17-010; ¶17-
030
Sch 1, s 44 ¶17-212; ¶17-
230

Tax Laws Amendment (2014 Measures No 1) Act 2014

Section Paragraph
17–24 ¶8-120

Taxation Administration Act 1953

Section Paragraph
8AAG ¶18-305
8AAZA–8AAZLH ¶8-100
8AAZL–8AAZLB ¶8-110
8AAZL ¶8-110
8AAZLA ¶17-020
8AAZLB ¶17-020
8AAZLG ¶8-110
8AAZLGA ¶8-110
8AAZLH ¶8-110
8AAZMB ¶25-055
Pt III ¶18-300
8C ¶18-110
8D ¶18-110
8G ¶18-110
8J ¶18-110
8K ¶18-110
8L ¶18-040
8N ¶18-110
8Q ¶18-040
8T ¶18-040
8U ¶9-120
8WAA–8WAE ¶21-045
8Y ¶18-260
14U ¶8-100
14ZU ¶18-610
14ZW ¶8-110; ¶8-120; ¶18-610
14ZY ¶18-630
14ZYA ¶18-630
14ZZK ¶18-630
14ZZM ¶18-640
14ZZR ¶18-640
Sch 1, s 12-190 ¶3-050
Sch 1, s 14-250 ¶11-022
Sch 1, s 14-255 ¶11-022
Sch 1, s 16-30 ¶11-022
Sch 1, s 18-60 ¶11-022
Sch 1, s 18-85 ¶11-022
Sch 1, Div 45 ¶8-040
Sch 1, Subdiv 45-L ¶8-037
Sch 1, s 105-40 ¶18-600
Sch 1, s 105-50 (former) ¶8-100
Sch 1, s 105-55 (former) ¶5-010
Sch 1, s 105-65 ¶8-115; ¶8-120
Sch 1, s 105-80 ¶18-300
Sch 1, s 105-85 ¶18-305
Sch 1, s 105-100 (former) ¶8-100; ¶18-600
Sch 1, s 110-50 ¶18-600
Sch 1, s 111-50 ¶22-550
Sch 1, s 111-60 ¶19-400
Sch 1, Div 155 ¶8-080
Sch 1, s 155-5 ¶8-080
Sch 1, s 155-10 ¶8-080
Sch 1, s 155-15 ¶8-080
Sch 1, s 155-20 ¶9-005
Sch 1, s 155-25 ¶8-080
Sch 1, s 155-30 ¶8-080; ¶18-600
Sch 1, s 155-35 ¶8-090
Sch 1, s 155-40 ¶8-090
Sch 1, s 155-45 ¶8-090
Sch 1, s 155-50 ¶8-090
Sch 1, s 155-55 ¶8-090
Sch 1, s 155-60 ¶8-090
Sch 1, s 155-65 ¶8-090
Sch 1, s 155-70 ¶8-090
Sch 1, s 155-75 ¶8-110; ¶8-115
Sch 1, s 155-80 ¶8-090
Sch 1, s 155-90 ¶8-080; ¶8-090; ¶18-600
Sch 1, s 255-20 ¶8-100
Sch 1, s 255-100 ¶8-100
Sch 1, s 260-45–260-90 ¶18-250
Sch 1, Subdiv 284-C ¶20-070
Sch 1, Subdiv 284-D ¶20-070
Sch 1, s 284-75 ¶18-300
Sch 1, s 284-75(3) ¶18-305
Sch 1, s 284-90 ¶18-300
Sch 1, s 284-150 ¶20-110
Sch 1, s 284-220 ¶18-300
Sch 1, s 284-225 ¶18-300
Sch 1, Div 286 ¶18-300
Sch 1, s 286-75 ¶18-300
Sch 1, s 288-25 ¶18-040; ¶18-300
Sch 1, s 288-35 ¶18-120
Sch 1, s 288-40 ¶18-300
Sch 1, s 288-45 ¶18-300
Sch 1, s 288-46 ¶18-300
Sch 1, s 288-50 ¶18-300
Sch 1, s 288-125–288-135 ¶21-045
Sch 1, Div 290 ¶20-100
Sch 1, s 290-10 ¶20-110
Sch 1, s 290-50 ¶20-110; ¶20-120; ¶20-130
Sch 1, s 290-55 ¶20-130
Sch 1, s 290-60 ¶20-110
Sch 1, s 290-65 ¶20-110
Sch 1, s 290-120 ¶20-140
Sch 1, s 290-200 ¶20-140
Sch 1, s 298-20 ¶18-040; ¶18-305
Sch 1, s 350-10 ¶8-050; ¶8-100
Sch 1, s 353-10 ¶18-110
Sch 1, s 353-10(1)(a) ¶18-110
Sch 1, s 353-10(1)(b) ¶18-110
Sch 1, s 353-10(1)(c) ¶18-110
Sch 1, s 353-15 ¶18-120
Sch 1, s 353-15(1)(c) ¶18-120
Sch 1, s 353-15(1)(d) ¶18-120
Sch 1, s 353-15(3) ¶18-120
Sch 1, Div 355 ¶18-130
Sch 1, s 355-15 ¶18-130
Sch 1, s 355-25 ¶18-130
Sch 1, s 355-30 ¶18-130
Sch 1, s 355-35 ¶18-130
Sch 1, s 355-45–355-70 ¶18-130
Sch 1, s 355-75 ¶18-130
Sch 1, s 355-155 ¶18-130
Sch 1, s 355-160 ¶18-130
Sch 1, s 355-170–355-200 ¶18-130
Sch 1, s 355-205 ¶18-130
Sch 1, s 355-265–355-280 ¶18-130
Sch 1, s 356-5 ¶18-000
Sch 1, Div 357–359 ¶18-030
Sch 1, s 357-60 ¶18-030
Sch 1, s 357-75 ¶18-030
Sch 1, s 359-25 ¶18-030
Sch 1, s 359-60 ¶18-030
Sch 1, s 360-5 ¶18-030
Sch 1, Div 370 ¶18-030
Sch 1, s 382-5 ¶5-125; ¶15-055; ¶17-420; ¶18-040
Sch 1, s 388-50 ¶18-610
Sch 1, s 388-52 ¶25-055
Sch 1, s 388-55 ¶8-037
Sch 1, Subdiv 396-B ¶18-110
Sch 1, s 396-55 ¶24-045
Sch 1, Div 400 ¶18-175
Sch 1, s 444-5 ¶18-230
Sch 1, s 444-10 ¶18-260
Sch 1, s 444-15 ¶18-260
Sch 1, s 444-30 ¶18-210
Sch 1, s 444-70 ¶18-250
Sch 1, s 444-80 ¶17-220; ¶18-220
Sch 1, s 444-85 ¶18-235
Sch 1, s 444-90 ¶17-020; ¶17-025; ¶18-240
Generally ¶20-070; ¶18-000

Taxation Administration Regulations 1976 (former)

Regulation Paragraph
21A–21E ¶8-120

Taxation Administration Regulations 2017

Regulation Paragraph
58–61 ¶8-120

Taxation (Interest on Overpayments and Early Payments) Act 1983

Section Paragraph
12AA ¶8-110

Taxation Laws (Clearing and Settlement Facility Support) Act 2004

Section Paragraph
Generally ¶10-020
Trade Practices Act 1974 (former)

Section Paragraph
Generally ¶18-140

Transition Act

Section Paragraph
16 ¶9-070
22 ¶19-000

Treasury Laws Amendment (2017 Measures No 4) Act 2017

Section Paragraph
Generally ¶22-570

Treasury Laws Amendment (2018 Measures No 1) Act 2018

Section Paragraph
Generally ¶11-022

Veterans Entitlements Act 1986

Section Paragraph
Generally ¶12-150

Water Charge (Termination Fees) Amendment Rules 2011

Rule Paragraph
Generally ¶16-200

Legislative Determinations made under the GST Act

Determination Paragraph
A New Tax System (GST) Act 1999 ¶13-216
Simplified GST Accounting Methods
Determination (No 29) 2015
A New Tax System (GST) Adjustment ¶6-115
Note Information Requirements
Determination 2012, 2013
A New Tax System (GST) (Adult and ¶14-015
Community Education Courses)
Determination 2000 and 2016
A New Tax System (GST) Application of ¶17-420
Agency Arrangements to the Multi-
Media Industry Determination (No 33)
2015
A New Tax System (GST) (Exempt ¶4-080
Taxes, Fees and Charges)
Determination
A New Tax System (GST) Frequency of ¶15-055
Fund-raising Events Determination (No
31) 2016
A New Tax System (GST) (Incidental ¶16-100
Valuable Metal Goods) Determination
2017 (No 1)
A New Tax System (GST) (Language ¶14-002
Other Than English — LOTE — Courses
Offered by Ethnic Schools)
Determination 2017
A New Tax System (GST) (Particular ¶4-020
Attribution Rules Where Supply or
Acquisition Made Under a Contract
Subject to Preconditions) Determination
2012
A New Tax System (GST) Recipient ¶4-070
Created Tax Invoice Determination
A New Tax System (GST) Rules for ¶16-120
Applying Subdivision 66-B
Determination (No 31) 2015
A New Tax System (GST) (Tertiary ¶14-002
Courses) Determination 2014; 2017
A New Tax System (GST) Third Party ¶6-100
Adjustment Note Information
Requirements Determination (No 1)
2010
Correcting GST Errors Amendment ¶8-045
Determination 2017 (No 1)
Diplomatic Privileges and Immunities ¶16-230
(Indirect Tax Concession Scheme)
Determination 2000
GST: Accounting on a cash basis ¶7-300
Determination 2017 — Industrial Trade
Unions
GST Application of Agency ¶17-420
Arrangements to the Multi-Media
Industry Determination (No 33) 2015
GST: Application of Particular Attribution ¶7-440
Rules Determinations (Determination)
2017
GST Choosing to Account on a Cash ¶7-300
Basis Determination (No 39) 2015
GST: Correcting GST Errors ¶8-045
Determination 2013
GST Extension of Time to Issue an ¶6-110
Adjustment Note Determinations (Nos
35, 36 and 37) 2015
GST Foreign Currency Conversion ¶4-200; ¶9-120
Determination (No 1) 2017
GST: Foreign Currency (Customs Value ¶9-130
of Low Value Goods) Determination
2018
GST-free Supply (Care) Determination ¶13-340
2000
GST-free Supply (Child Care) ¶14-100
Determination 2017
GST-free Supply (Drugs and Medicinal ¶13-360
Preparations) Determinations
GST-free Supply (Health Services) ¶13-320
Determination 2000
GST-free Supply (Long Day Care and ¶14-100
In-home Care) Determination 2017
GST-free Supply (National Disability ¶13-340
Insurance Scheme Supports)
Determinations 2013; 2017
GST-free Supply (Residential Care — ¶13-340
Government-Funded Supplier)
Determination 2000, 2015
GST-free Supply (Residential Care — ¶13-340
Non-Government-Funded Supplier)
Determination 2000, 2015
GST: (Particular Attribution Rule for ¶7-440
Supplies of Gas or Electricity made by
Public Utility Providers) Determination
2017
GST: Particular Attribution Rules for ¶7-440
Banknote and Coin-operated Machines
and Similar Devices Determination 2017
GST: (Particular Attribution Rules for ¶7-440
Cooling off Periods) Determination 2017
GST: Particular Attribution Rules for Lay- ¶7-440
By Sales Determination 2017
GST: (Particular Attribution Rules for ¶7-440
Retention Payments) Determination
2017
GST: (Particular Attribution Rules for ¶7-440
Supplies and Acquisitions made through
Agents) Determination 2017
GST Particular Attribution Rules for ¶7-440
Supplies and Acquisitions Relating to
the Operation of a Collecting Society
under the Copyright Act Determination
(No 34) 2015
GST: Particular Attribution Rules Where ¶7-440
Total Consideration Not Known
Determination 2017
GST Valuable Metals Market Valuation ¶16-210
Determination 2018

Wine Equalisation Tax: Correcting WET ¶22-300

Errors Determination 2015
Wine Equalisation Tax New Zealand ¶22-560
Producer Rebate Claim Lodgment
Determination (No 34) 2016
Wine Equalisation Tax New Zealand ¶22-560
Producer Rebate Foreign Exchange
Conversion Determination (No 57) 2016
RULINGS FINDING LISTS
This list shows details of the paragraphs where you will find specific rulings, determinations and other
ATO statements in the text. The list is arranged into four categories:
• GST Rulings and Determinations, covering both draft and final rulings in the GSTR and GSTD
series;

• GST Bulletins, Taxpayer Alerts, Advices and Practice Statements;

• Interpretative Decisions;

• Other Rulings and Determinations, incorporating rulings on Taxation and Sales Tax.

GST RULINGS AND DETERMINATIONS

GST Rulings (GSTR Series)

Order Paragraph
GSTR 2000/2 ¶6-205; ¶6-210
GSTR 2000/2A ¶6-205
GSTR 2000/6 ¶19-250
GSTR 2000/7 ¶19-200; ¶19-210
GSTR 2000/8 ¶16-100; ¶16-110
GSTR 2000/9 ¶23-250
GSTR 2000/10 ¶5-140
GSTR 2000/12 ¶7-430
GSTR 2000/13 ¶7-300
GSTR 2000/14 ¶19-230; ¶20-000
GSTR 2000/17 ¶5-130
GSTR 2000/18 ¶19-210; ¶19-240
GSTR 2000/19 ¶4-010; ¶6-100; ¶7-325
GSTR 2000/24 ¶6-300
GSTR 2000/25 ¶16-200
GSTR 2000/26 ¶5-130
GSTR 2000/27 ¶14-015
GSTR 2000/28 ¶4-070; ¶7-205; ¶11-065
GSTR 2000/29 ¶6-100; ¶7-420; ¶7-440; ¶12-110
GSTR 2000/30 ¶14-002; ¶14-004
GSTR 2000/31 (former) ¶4-100; ¶4-102
GSTR 2000/32 ¶7-440
GSTR 2000/33 ¶12-020
GSTR 2000/34 ¶7-205
GSTR 2000/35 ¶7-420
GSTR 2000/37 ¶4-080; ¶5-190; ¶17-410; ¶17-420; ¶17-425
GSTR 2001/1 ¶14-002; ¶14-004
GSTR 2001/2 ¶4-200; ¶5-110
GSTR 2001/3 ¶24-200; ¶24-210
GSTR 2001/4 ¶4-010; ¶4-085
GSTR 2001/6 ¶4-010; ¶4-020; ¶4-030; ¶4-035; ¶6-200
GSTR 2001/7 ¶3-020; ¶3-030
GSTR 2001/8 ¶4-200; ¶12-010; ¶12-150; ¶13-170; ¶14-002
GSTR 2002/1 ¶14-012
GSTR 2002/2 ¶4-080; ¶5-020; ¶9-240; ¶10-010; ¶10-020; ¶10-040; ¶10-050
GSTR 2002/3 ¶4-035; ¶16-000
GSTR 2002/4 ¶5-140
GSTR 2002/5 ¶3-020; ¶10-070; ¶11-500; ¶11-503; ¶11-506; ¶11-540; ¶11-
550
GSTR 2002/6 ¶9-210; ¶9-215
GSTR 2003/1 ¶14-020
GSTR 2003/3 ¶11-020
GSTR 2003/4 ¶9-220
GSTR 2003/5 ¶4-060
GSTR 2003/6 ¶4-090; ¶6-300; ¶6-320
GSTR 2003/7 ¶9-240; ¶11-000
GSTR 2003/8 ¶4-100; ¶4-200; ¶9-240
GSTR 2003/9 ¶10-032; ¶10-035
GSTR 2003/10 ¶16-210
GSTR 2003/11 ¶4-020
GSTR 2003/12 ¶7-325; ¶7-435
GSTR 2003/13 ¶3-015; ¶3-020; ¶4-010; ¶5-010; ¶10-010; ¶11-500; ¶17-500
GSTR 2003/14 ¶7-435
GSTR 2003/15 ¶4-100; ¶9-000; ¶9-005; ¶9-010
GSTR 2003/16 ¶10-010; ¶11-330
GSTR 2004/1 ¶10-040
GSTR 2004/2 ¶17-200
GSTR 2004/3 ¶17-210; ¶17-220; ¶20-040
GSTR 2004/4 ¶10-010
GSTR 2004/6 ¶3-015; ¶3-020; ¶10-010; ¶11-500; ¶17-500
GSTR 2004/7 ¶9-240
GSTR 2004/8 ¶6-310
GSTR 2004/9 ¶4-010; ¶11-515
GSTR 2005/1 ¶10-010
GSTR 2005/2 ¶9-220
GSTR 2005/3 ¶16-110
GSTR 2005/5 (withdrawn) ¶11-506
GSTR 2005/6 ¶4-102; ¶9-240
GSTR 2006/1 ¶3-015; ¶10-010; ¶10-110
GSTR 2006/2 ¶4-070
GSTR 2006/3 ¶10-030; ¶10-040; ¶20-000
GSTR 2006/4 ¶5-010; ¶5-020
GSTR 2006/5 ¶3-020; ¶11-400
GSTR 2006/6 ¶11-110; ¶11-400
GSTR 2006/7 ¶11-000; ¶11-060; ¶11-120
GSTR 2006/8 ¶11-100; ¶11-120; ¶11-140
GSTR 2006/9 ¶4-010; ¶4-015; ¶4-020; ¶13-320; ¶14-012
GSTR 2006/10 ¶4-015; ¶10-120; ¶10-130
GSTR 2007/1 ¶3-030; ¶15-015
GSTR 2007/2 ¶9-240
GSTR 2008/1 ¶5-010
GSTR 2008/3 ¶4-010; ¶11-100; ¶11-500
GSTR 2009/1 ¶11-140
GSTR 2009/2 ¶11-064; ¶11-140
GSTR 2009/3 ¶4-065; ¶6-100; ¶12-020; ¶14-004
GSTR 2009/4 ¶6-300
GSTR 2010/1 ¶5-010; ¶11-300; ¶20-000; ¶20-060
GSTR 2011/1 ¶11-515
GSTR 2012/1 ¶4-062
GSTR 2012/2 ¶3-030; ¶4-040
GSTR 2012/3 ¶13-340
GSTR 2012/4 ¶15-015
GSTR 2012/5 ¶11-010
GSTR 2012/6 ¶11-010; ¶11-030; ¶11-310; ¶11-320
GSTR 2012/7 ¶11-320
GSTR 2013/1 ¶5-040; ¶5-110; ¶5-130; ¶5-140; ¶5-170; ¶5-190; ¶7-420; ¶7-
440; ¶17-020
GSTR 2013/2 ¶6-115; ¶6-130
GSTR 2014/1 ¶4-010; ¶6-100
GSTR 2014/2 ¶4-080; ¶10-010
GSTR 2015/1 ¶8-115
GSTR 2015/2 ¶11-062
GSTR 2017/1 ¶9-120
GSTR 2018/1 ¶4-100
GSTR 2018/2 ¶4-100; ¶4-101

Draft GST Rulings

Draft Ruling Paragraph

GSTR 2008/D1 ¶3-020
GSTR 2017/D1 ¶4-100; ¶4-101
GSTR 2017/D2 ¶4-100; ¶12-020
GSTR 2019/D1 ¶10-030
GSTR 2019/D2 ¶4-102

GST Determinations (GSTD Series)

Determination Paragraph
GSTD 2000/2 ¶16-100
GSTD 2000/3 ¶4-020; ¶19-100; ¶19-210
GSTD 2000/4 ¶13-120
GSTD 2000/5 ¶13-130
GSTD 2000/6 ¶13-200
GSTD 2000/7 ¶4-090
GSTD 2000/9 ¶3-030
GSTD 2000/10 ¶11-330
GSTD 2000/11 ¶14-020
GSTD 2000/12 ¶4-090
GSTD 2001/1 ¶14-100
GSTD 2001/2 ¶12-145
GSTD 2002/2 ¶13-180
GSTD 2002/3 ¶4-200
GSTD 2002/5 ¶4-030
GSTD 2003/1 ¶4-085
GSTD 2003/3 ¶3-020
GSTD 2004/1 ¶5-130; ¶6-130
GSTD 2004/2 ¶17-220
GSTD 2004/3 ¶12-020
GSTD 2004/4 ¶7-325
GSTD 2005/1 ¶5-140; ¶7-205
GSTD 2005/2 ¶7-205
GSTD 2005/3 ¶10-010
GSTD 2005/4 ¶4-010; ¶12-170
GSTD 2005/5 ¶7-435
GSTD 2005/6 ¶4-080
GSTD 2006/1 ¶9-250
GSTD 2006/2 (withdrawn) ¶9-250
GSTD 2006/3 ¶11-070; ¶11-110
GSTD 2006/4 ¶11-110
GSTD 2006/5 ¶7-435
GSTD 2006/6 ¶3-020; ¶10-080
GSTD 2007/1 ¶10-040
GSTD 2007/2 ¶15-010
GSTD 2007/3 ¶9-240
GSTD 2008/2 ¶13-160
GSTD 2009/1 ¶4-090
GSTD 2009/2 ¶4-010; ¶6-320; ¶17-500
GSTD 2011/1 ¶10-120
GSTD 2011/2 ¶11-410
GSTD 2011/3 ¶10-040
GSTD 2011/4 ¶13-340
GSTD 2012/1 ¶11-335
GSTD 2012/2 ¶11-335
GSTD 2012/3 ¶6-300
GSTD 2012/4 ¶13-330
GSTD 2012/5 ¶10-010; ¶10-030
GSTD 2012/6 ¶16-110
GSTD 2012/7 ¶9-240
GSTD 2012/8 ¶9-240
GSTD 2012/9 ¶9-240
GSTD 2012/10 ¶9-240
GSTD 2012/11 ¶11-020
GSTD 2013/1 ¶4-080
GSTD 2013/2 ¶16-110
GSTD 2013/3 ¶10-040
GSTD 2013/4 ¶15-010
GSTD 2014/1 ¶8-120
GSTD 2014/2 ¶11-110
GSTD 2014/3 ¶6-100
GSTD 2015/1 ¶9-240; ¶10-050
GSTD 2015/2 ¶12-000
GSTD 2016/1 ¶8-115; ¶10-080
GSTD 2017/1 ¶9-240

GST BULLETINS, TAXPAYER ALERTS, ADVICES AND PRACTICE STATEMENTS

GST Bulletins

Bulletin Paragraph
GSTB 2000/4 ¶19-210
GSTB 2001/1 ¶13-110
GSTB 2001/2 ¶11-320
GSTB 2001/3 ¶11-320
GSTB 2006/1 ¶5-020

GST Advices TPPs

Order Paragraph
GSTA TPP 013 ¶11-000
GSTA TPP 014 ¶11-506
GSTA TPP 015 ¶4-030
GSTA TPP 017 ¶6-100
GSTA TPP 056 ¶7-420
GSTA TPP 064 ¶17-425
GSTA TPP 067 ¶6-300
GSTA TPP 070 ¶4-000
GSTA TPP 072 ¶11-010
GSTA TPP 074 ¶12-110
GSTA TPP 077 ¶23-100
GSTA TPP 092 ¶11-520
GSTA TPP 094 ¶6-410
GSTA TPP 095 ¶6-410

GST Practice Statements

Statement Paragraph
PS LA 2001/8 ¶18-030
PS LA 2004/7 ¶8-110
PS LA 2004/11 ¶5-130; ¶6-130
PS LA 2004/14 ¶18-140
PS LA 2005/2 ¶18-040
PS LA 2005/3 ¶18-165
PS LA 2005/5 ¶18-165
PS LA 2005/6 ¶18-165
PS LA 2005/15 ¶11-100
PS LA 2005/16 ¶11-120
PS LA 2005/24 ¶20-030; ¶20-040; ¶20-060
PS LA 2006/7 ¶8-100; ¶20-070
PS LA 2006/8 ¶18-305
PS LA 2006/16 ¶9-210
PS LA 2007/3 ¶5-130; ¶18-305
PS LA 2007/4 ¶18-305
PS LA 2008/3 ¶18-030
PS LA 2008/7 ¶20-100
PS LA 2008/8 ¶20-100
PS LA 2008/9 ¶18-305
PS LA 2008/11 ¶18-300
PS LA 2008/18 ¶20-070
PS LA 2009/3 ¶8-100
PS LA 2009/9 ¶4-085
PS LA 2011/12 ¶18-305
PS LA 2011/25 ¶18-040
PS LA 2011/26 ¶1-300
PS LA 2012/1 (GA) ¶5-020; ¶6-200
PS LA 2012/2 ¶18-270
PS LA 2012/2 (GA) ¶13-210; ¶25-500
PS LA 2012/4 ¶18-300; ¶18-305
PS LA 2012/5 ¶18-305
PS LA 2012/6 ¶8-110
PS LA 2013/1 ¶22-300
PS LA 2013/2 (GA) ¶4-080
PS LA 2013/3 ¶18-750
PS LA 2013/6 ¶17-020; ¶17-025
PS LA 2014/4 ¶18-300; ¶18-305
PS LA 2016/6 ¶18-135

Taxpayer Alerts

TA Paragraph
TA 2004/1 ¶21-070
TA 2005/4 ¶7-435
TA 2007/1 ¶15-010
TA 2009/4 ¶5-010; ¶11-110; ¶17-500; ¶20-000
TA 2009/5 ¶5-010; ¶11-300; ¶20-000
TA 2009/7 ¶22-560
TA 2010/1 ¶10-040
TA 2010/7 ¶11-310
TA 2012/5 ¶5-010; ¶20-000
TA 2013/2 ¶22-560
TA 2016/8 ¶20-000
TA 2018/3 ¶11-062

INTERPRETATIVE DECISIONS

Interpretative Decisions (ID Series)

Decision Paragraph
ID 2001/133 ¶4-080
ID 2001/215 ¶12-130
ID 2001/280 ¶13-350
ID 2001/386 ¶13-350
ID 2001/390 ¶13-320
ID 2001/472 ¶13-350
ID 2001/503–ID 2001/505 ¶17-500
ID 2001/577 ¶4-102
ID 2001/635 ¶11-060
ID 2001/661 ¶13-320
ID 2001/663 ¶13-320
ID 2001/779 ¶11-410
ID 2002/1 ¶14-040
ID 2002/3 ¶13-350
ID 2002/11 ¶5-010
ID 2002/12 ¶13-350
ID 2002/16 ¶17-300
ID 2002/22 ¶4-090
ID 2002/23 ¶12-130
ID 2002/24 ¶12-130
ID 2002/38 ¶13-350
ID 2002/78 ¶10-080
ID 2002/83 ¶13-350
ID 2002/111 ¶17-425
ID 2002/113 ¶17-425
ID 2002/237 ¶11-506
ID 2002/296 ¶5-020
ID 2002/486 ¶12-130
ID 2002/492 ¶17-012
ID 2002/522 ¶13-320
ID 2002/523 ¶11-000
ID 2002/524 ¶17-012
ID 2002/530 ¶7-325
ID 2002/531 ¶7-205
ID 2002/877 ¶4-080
ID 2002/908 ¶13-150
ID 2002/912 ¶13-110
ID 2002/972 ¶14-004
ID 2002/991 ¶13-350
ID 2002/1046 ¶13-160
ID 2002/1075 ¶14-004
ID 2003/4 ¶4-020
ID 2003/422 ¶7-325
ID 2003/423 ¶7-325
ID 2003/698 ¶6-200
ID 2003/701 ¶4-090
ID 2003/953 ¶13-350
ID 2003/957 ¶4-060
ID 2003/976 ¶11-320
ID 2003/977 ¶11-320
ID 2003/980 ¶14-004
ID 2003/992 ¶22-300
ID 2003/993 ¶13-340
ID 2003/997 ¶14-100
ID 2003/1013 ¶14-015
ID 2003/1061 ¶10-010
ID 2003/1097 ¶14-015
ID 2003/1156 ¶13-310
ID 2003/1159 ¶13-350
ID 2003/1185 ¶14-020
ID 2004/2 ¶14-015
ID 2004/37 ¶13-110
ID 2004/38 ¶13-110
ID 2004/45 ¶14-020
ID 2004/51 ¶13-310
ID 2004/76 ¶10-010
ID 2004/117 ¶9-095
ID 2004/118 ¶14-020
ID 2004/119 ¶14-020
ID 2004/135 ¶12-130
ID 2004/144 ¶14-020
ID 2004/153 ¶4-100
ID 2004/155 ¶14-002; ¶14-004
ID 2004/186 ¶17-400
ID 2004/201 ¶17-012
ID 2004/217 ¶14-002
ID 2004/218 ¶13-350
ID 2004/232 ¶6-100
ID 2004/289 ¶13-160; ¶13-190
ID 2004/303 ¶11-010
ID 2004/315 ¶10-070
ID 2004/359 ¶10-010
ID 2004/372 ¶13-110
ID 2004/373 ¶13-110
ID 2004/398 ¶24-070
ID 2004/401 ¶11-000
ID 2004/402 ¶11-000
ID 2004/434 ¶13-160
ID 2004/438 ¶15-050
ID 2004/440 ¶13-350
ID 2004/443 ¶13-320
ID 2004/444 ¶13-195
ID 2004/447–ID 2004/449 ¶8-037
ID 2004/450 ¶13-350
ID 2004/451 ¶13-350
ID 2004/467 ¶13-350
ID 2004/478 ¶12-130
ID 2004/485 ¶10-070
ID 2004/491 ¶9-240
ID 2004/492 ¶13-350
ID 2004/501 ¶13-320
ID 2004/519 ¶17-420
ID 2004/523 ¶12-130
ID 2004/608 ¶16-200
ID 2004/631 ¶11-410
ID 2004/632 ¶11-410
ID 2004/645 ¶13-160
ID 2004/673 ¶4-030
ID 2004/674 ¶11-410
ID 2004/730 ¶11-410
ID 2004/765 ¶15-053
ID 2004/766 ¶15-053
ID 2004/804 ¶13-350
ID 2004/805 ¶13-350
ID 2004/820 ¶10-010
ID 2004/902 ¶10-035
ID 2004/977 ¶14-004
ID 2005/4 ¶13-350
ID 2005/25 (withdrawn) ¶4-080
ID 2005/41 ¶13-340
ID 2005/70 ¶10-080
ID 2005/78–ID 2005/80 ¶13-350
ID 2005/88–ID 2005/91 ¶13-350
ID 2005/92 ¶11-410
ID 2005/103 ¶11-410
ID 2005/121 ¶4-030
ID 2005/122 ¶5-010
ID 2005/182–ID 2005/184 ¶11-068
ID 2005/186 ¶12-110; ¶23-250
ID 2005/189 ¶14-004
ID 2005/194 ¶11-070
ID 2005/201 ¶6-200
ID 2005/206 ¶10-120
ID 2005/243 ¶14-010; ¶15-055
ID 2005/248 ¶14-002
ID 2005/272 ¶13-195
ID 2005/295 ¶13-350
ID 2005/306 ¶7-430
ID 2005/337 ¶17-500
ID 2005/354 ¶4-102
ID 2005/361 ¶13-195
ID 2006/32 ¶10-010
ID 2006/33 ¶10-010
ID 2006/37 ¶13-350
ID 2006/101 ¶9-240
ID 2006/112 ¶15-050
ID 2006/113 ¶11-060
ID 2006/202 ¶4-100; ¶10-020
ID 2006/203 ¶9-240; ¶10-010
ID 2006/245 ¶10-010
ID 2006/246 ¶10-010
ID 2006/255 ¶11-110
ID 2006/340 ¶11-060
ID 2007/7 ¶3-015
ID 2007/15 ¶4-010
ID 2007/16 ¶4-010
ID 2007/17 ¶4-010
ID 2007/18 ¶4-010
ID 2007/29 ¶10-010
ID 2007/31 ¶7-435
ID 2007/32 ¶10-010
ID 2007/33 ¶10-010
ID 2007/72 ¶6-000; ¶11-520
ID 2007/146 ¶10-010
ID 2007/158 ¶10-010
ID 2007/159 ¶10-010
ID 2007/169 ¶4-102
ID 2007/180 ¶11-520
ID 2007/185 ¶9-240
ID 2007/192 ¶22-010
ID 2007/221 ¶22-280
ID 2008/16 ¶5-020
ID 2008/37 ¶11-020
ID 2008/41 ¶13-380
ID 2008/49 ¶7-325
ID 2008/69 ¶9-240
ID 2008/75 ¶10-030
ID 2008/76 ¶10-030
ID 2008/81 ¶11-200
ID 2008/82 ¶11-200
ID 2008/102 ¶9-095
ID 2008/123 ¶10-032
ID 2008/124 ¶4-100; ¶13-380
ID 2008/132 ¶13-140
ID 2008/136 ¶11-020
ID 2008/144 ¶13-180
ID 2009/11 ¶4-010
ID 2009/18 ¶11-020
ID 2009/19 ¶11-020
ID 2009/40 ¶11-020
ID 2009/49 ¶1-265
ID 2009/98 ¶22-560
ID 2009/103 ¶15-015
ID 2009/104 ¶15-015
ID 2009/131 ¶11-420
ID 2010/6 ¶6-100
ID 2010/10 ¶7-325
ID 2010/11 ¶7-325
ID 2010/18 ¶10-010
ID 2010/19 ¶10-010; ¶11-030
ID 2010/20 ¶10-010; ¶11-000
ID 2010/22 ¶11-060
ID 2010/23 ¶10-010
ID 2010/83 ¶11-100
ID 2010/89 ¶24-070
ID 2010/125 ¶10-010
ID 2010/129 ¶10-010
ID 2010/144 ¶5-110
ID 2010/145 ¶13-170
ID 2010/146 ¶5-110
ID 2010/152 ¶22-160
ID 2010/197 ¶3-020
ID 2010/198 ¶3-020
ID 2010/199 ¶3-020
ID 2010/215 ¶15-010
ID 2010/224 ¶18-250
ID 2010/225 ¶10-010
ID 2011/5 ¶22-010
ID 2011/10 ¶12-010
ID 2011/20 ¶10-010
ID 2011/76 ¶5-125
ID 2011/92 ¶22-010
ID 2011/105 ¶10-040
ID 2011/106 ¶10-040
ID 2012/6 ¶18-250
ID 2012/7 ¶18-250
ID 2012/34 ¶17-020
ID 2012/54 ¶11-506
ID 2012/55 ¶4-080
ID 2012/66 ¶10-010
ID 2012/87 ¶4-080
ID 2013/1 ¶4-062
ID 2013/9 ¶3-080
ID 2013/13 ¶5-040
ID 2013/18 ¶17-500
ID 2013/20 ¶4-200; ¶12-010
ID 2013/24 ¶4-060
ID 2013/25 ¶16-220
ID 2013/26 ¶16-220
ID 2013/31 ¶10-020
ID 2013/32 ¶10-020
ID 2013/37 ¶9-220
ID 2013/38 ¶4-080
ID 2013/51 ¶4-020; ¶6-100
ID 2013/52 ¶4-020
ID 2013/54 ¶4-040
ID 2013/55 ¶9-005
ID 2014/19 ¶11-020
ID 2014/21 ¶13-350
ID 2014/36 ¶8-100
ID 2015/26 ¶12-010
ID 2016/1 ¶11-200

OTHER RULINGS AND DETERMINATIONS

Australian Accounting Standard

Standard Paragraph
AAS 6 ¶7-300

Australian Customs Notices

Paragraph
ACN 2000/30 ¶9-005

Draft GST Digital Currency Conversion Determination 2018

Draft Determination Paragraph

DCC 2018/D1 ¶4-200

Law Companion Rulings

Order Paragraph
LCR 2015/1 ¶18-030
LCR 2016/1 ¶4-102
LCR 2018/1 ¶9-130
LCR 2018/2 ¶9-120
LCR 2018/3 ¶9-130
LCR 2018/4 ¶11-022

Draft Practical Compliance Guideline

Draft Determination Paragraph

PCG 2018/D7 ¶17-400
PCG 2019/D4 ¶20-000

Practical Compliance Guidelines

Paragraph
PCG 2016/1 ¶18-030
PCG 2016/7 ¶17-200
PCG 2016/18 ¶4-020; ¶7-435
PCG 2017/15 ¶10-030
PCG 2018/6 ¶12-020

Draft Miscellaneous Taxation Ruling

Draft Determination Paragraph

MT 2018/D1 ¶5-010

Miscellaneous Taxation Rulings (MT Series)

Order Paragraph
MT 2006/1 ¶3-015; ¶3-020; ¶11-063; ¶11-
200
MT 2008/1 ¶18-300
MT 2008/2 ¶20-110
MT 2011/1 ¶1-300
MT 2012/1 ¶4-020
MT 2012/2 ¶4-020
MT 2012/3 ¶18-300

Product Rulings

Order Paragraph
PR 2013/13 ¶11-010

Taxation Rulings (TR Series)

Order Paragraph
TR 92/17 ¶15-050
TR 92/18 ¶6-210
TR 93/12 ¶4-100
TR 96/7 ¶18-040
TR 97/11 ¶3-020
TR 97/22 ¶3-030
TR 98/1 ¶7-300
TR 98/17 ¶9-240
TR 98/21 ¶9-095
TR 98/22 ¶20-060
TR 1999/12 ¶24-100
TR 1999/16 ¶11-500
TR 2001/2 ¶24-210
TR 2001/4 ¶4-085
TR 2002/5 ¶4-102
TR 2003/5 ¶15-000
TR 2005/9 ¶18-120
TR 2005/13 ¶4-030
TR 2005/16 ¶4-090
TR 2006/10 ¶18-030
TR 2007/11 ¶4-102
TR 2008/2 ¶3-020; ¶18-040
TR 2011/4 ¶15-000

Taxation Rulings (IT Series)

Order Paragraph
IT 2082 ¶18-110
IT 2675 ¶5-010

Taxation Determinations (TD Series)

Determination Paragraph
TD 93/195 ¶5-010
TD 2005/2 ¶4-102
TD 2005/35 ¶24-030
TD 2006/5 ¶4-200
TD 2006/40 ¶12-110

A New Tax System (Goods and Services Tax) Act 1999 Simplified GST Accounting Methods
Determinations

Determination Paragraph
SAM 2006/1 ¶13-216
SAM 2016/38 ¶13-216

A New Tax System (Goods and Services Tax) Recipient Created Tax Invoice Determinations

Determination Paragraph
RCTI 2005/1 ¶4-070

A New Tax System (Goods and Services Tax) Waiver of Tax Invoice Requirement Determinations (No 2)
2000

Determination Paragraph
WTI 2000/2 ¶9-100
WTI 2004/1 ¶5-130
WTI 2006/1 ¶5-130
WTI 2013/1 ¶5-190
WTI 2013/2 ¶5-130
WTI 2013/3 ¶5-130
WTI 2013/4 ¶7-440
WTI 2013/5 ¶5-130
WTI 2013/6 ¶5-130
WTI 2013/7 ¶5-130
WTI 2013/8 ¶5-130; ¶12-130
WTI 2013/9 ¶5-130; ¶11-335
WTI 2013/10 ¶5-130
WTI 2014/1 ¶5-130
WTI 2015/30 ¶5-130

Correcting GST Errors Determination

Determination Paragraph
GSTE 2017/1 ¶8-045

LCT Determinations

Determination Paragraph
LCTD 2014/1 ¶23-150

Wine Equalisation Tax Determinations (WETD Series)

Determination Paragraph
WETD 2010/1 ¶20-000
WETD 2011/1 ¶22-560

Wine Equalisation Taxation Rulings (WETR Series)

Order Paragraph
WETR 2006/1 ¶22-560
WETR 2009/1 ¶22-000; ¶22-010; ¶22-160; ¶22-165; ¶22-170; ¶22-280; ¶22-
430; ¶22-550
WETR 2009/2 ¶22-430; ¶22-560

Draft Wine Equalisation Taxation Rulings (WETR Series)

Draft Ruling Paragraph

WETR 2006/D1 ¶22-560
WETR 2009/D2 ¶22-560
Margin Scheme Valuation Requirements Determinations

Determination Paragraph
MSV 2005/3 ¶11-120
MSV 2009/1 ¶11-120
MSV 2015/53 ¶11-120

Class Rulings

Order Paragraph
CR 2011/58 ¶13-320; ¶13-350
CR 2012/19 ¶14-004
CR 2012/37 ¶23-100
CR 2012/81 ¶23-100
CR 2013/1 ¶4-080
CR 2013/13 ¶4-080
CR 2013/14 ¶13-320; ¶13-350
CR 2013/19 ¶4-080
CR 2013/32 ¶4-080
CR 2013/39 ¶4-080; ¶16-200
CR 2013/41 ¶4-080
CR 2014/15 ¶5-110
CR 2017/43 ¶12-130
INDEX

A New Tax System (ANTS)

GST terms ¶26-000

A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 ¶1-300

A New Tax System (Goods and Services Tax) Act 1999 ¶1-300

A New Tax System (Goods and Services Tax Imposition — Customs) Act 1999 ¶1-300

A New Tax System (Goods and Services Tax Imposition — Excise) Act 1999 ¶1-300

A New Tax System (Goods and Services Tax Imposition — General) Act 1999 ¶1-300

A New Tax System (Goods and Services Tax) Regulations 1999 ¶1-300

A New Tax System (Goods and Services Tax Transition) Act 1999 ¶1-300

A New Tax System (Wine Equalisation Tax) Act 1999 ¶1-300

ABN ¶1-300; ¶3-050; ¶8-043; ¶26-000

approved importer requirement ¶9-005
late applications
— safety net arrangements ¶3-040
luxury car tax ¶23-250
non-quotation ¶21-070
PAYG system ¶3-050
penalties for abuse ¶18-300
registration ¶3-010
registration procedure ¶3-040
tax invoices ¶5-110
unexpected registrations ¶3-050
wine equalisation tax
— form of quoting ¶22-430
— quoting on a dealing ¶22-420

Academic dress hire ¶14-004

ACCC ¶26-000

Access to premises ¶18-120

Accommodation
camp-style ¶11-010
checklist ¶25-100
residential care, community care and disability services ¶13-340
school staff ¶11-320
staff and other accommodation ¶14-004
students ¶14-004
tertiary students ¶14-004

Accountants
privileges or concessions ¶18-140

Accounting basis — tax periods ¶1-130

concluding tax periods ¶7-120
determining the tax period ¶7-100
non-standard tax periods ¶7-105
offsetting credits against GST ¶7-000
$20m turnover test ¶7-110

Accounting for LCT

adjustments for bad debts ¶23-260
input tax credits ¶23-260

Accounting methods
attribution rules ¶7-400
bad debts ¶6-220
— adjustments ¶23-260
choice ¶2-010
effect on cashflow ¶21-060
GST
— offsetting credits ¶7-000
purchase snapshot method
— restaurants, cafes and caterers ¶13-215
simplified
— charities ¶7-000; ¶15-060
— food retailers ¶13-210
— small businesses ¶7-000

Accounting systems ¶2-010

GST start up costs ¶24-100
Accounts
financial supply ¶10-010

Accounts method ¶8-010; ¶26-000

Accruals and cash basis

accruals basis ¶7-205
cash basis ¶7-300
how the cash basis operates ¶7-320
when consideration is received or provided ¶7-325
where GST or credits are adjusted ¶7-330
working out the GST and credits attributable to a tax period ¶7-200

Accruals basis accounting ¶1-130; ¶7-200; ¶7-205

bad debts
— adjustments ¶6-200
second-hand goods purchase ¶16-110
terms ¶7-205
transactions through agents ¶7-440

Accruals to cash basis, change ¶7-400

Acquisitions ¶5-010; ¶26-000

— see also Creditable acquisitions
amalgamated companies ¶17-110
goods and services ¶1-100
in relation to transaction accounts ¶10-030

Acting through an agent or broker

tax invoices ¶5-190

Activity Statement Payment Card ¶12-130

Actual application ¶6-300

Actuarial advice ¶10-020

Additives, fruit or vegetable juices ¶13-180

Adjustment events ¶1-150; ¶6-100

change of consideration ¶6-100
product recalls ¶6-100; ¶25-170

Adjustment notes ¶6-110; ¶26-000

amount payable less than $1,000 ¶6-115
amount payable $1,000 or more ¶6-115
ATO guidelines
— special situations ¶6-115
branches ¶6-140
combined documents ¶6-115
Commissioner’s discretion
— 28 day rule ¶6-110
contents ¶6-115
exemption for minor adjustments ¶6-135
GST groups ¶6-140
requirement modifications ¶6-130
special rules ¶6-130; ¶6-140

Adjustment periods
financial limits ¶6-300

Adjustments ¶6-000; ¶26-000

adjustment thresholds
— planned use changes ¶6-300
bad debts or overdue debts ¶6-200; ¶11-130
— adjustment notes ¶6-200
— partial adjustments ¶6-200
bankruptcy and liquidation ¶6-417
business acquisition ¶6-420
entertainment expenses
— method change determination ¶6-510
exemption for minor adjustments ¶6-135
GST
— group members ¶6-510
— groups ¶17-020
— joint venture ¶6-510
insurance companies ¶6-510
interaction with other adjustment rules ¶6-306
marriage breakdown ¶6-300
newly-registered businesses ¶6-400
registration cessation ¶6-410
— death of business owner ¶6-415
sale of business ¶4-020
supply through agent ¶6-510
unattributed ¶6-410
use of items
— tracking changes ¶2-010

Adjustments for third party payments ¶6-100

Administration, audit, review — see also Administration of GST; Administrative

Appeals Tribunal; Audits and compliance; Objections and appeals
audits and compliance
— ATO compliance program ¶18-180
— ATO data collection techniques ¶18-175
— ATO powers and taxpayer rights ¶18-165
— common GST errors ¶18-170
— conduct and management of an audit ¶18-190
— preparing for an audit ¶18-185
— role of GST audits ¶18-160
general administration of the GST law
— Commissioner’s rulings ¶18-030
— general administration ¶18-000
— obligation to keep records ¶18-040
information-gathering and access powers
— access to premises, documents and other property ¶18-120
— Commissioner’s powers ¶18-100
— confidentiality of information ¶18-130
— exchanging GST information with foreign countries ¶18-135
— information-gathering powers ¶18-110
— legal professional privilege ¶18-140
objections and appeals
— alternative dispute resolution ¶18-750
— appeals from AAT decisions ¶18-670
— appeals from Federal Court decisions ¶18-700
— appeals to Federal Court ¶18-680
— choosing between AAT and Federal Court ¶18-640
— decision of AAT ¶18-660
— decision on objection ¶18-630
— grounds of objection ¶18-620
— objections to Commissioner’s decisions ¶18-600
— review of Commissioner’s decision ¶8-110
— review of Commissioner’s discretion ¶18-305;
¶18-690
— review of objection decisions by AAT ¶18-650
— time limit for lodging an objection ¶18-610
other GST-related penalties ¶18-300
— discretionary remission of penalties and GIC ¶18-305
— other provisions relating to penalties ¶18-310
— overview ¶18-300
special liabilities and obligations ¶18-200
— company officers ¶18-260
— GST joint venture partners ¶18-220
— members of a GST group ¶18-240
— members of unincorporated associations ¶18-230
— non-profit sub-entities ¶18-235
— partners ¶18-210
— representatives of incapacitated entities ¶18-250
— trustees ¶18-270

Administration of GST ¶18-000

Commissioner’s rulings
— public rulings ¶18-030
failure to lodge documents, remission of penalties ¶18-305
records, obligation to keep ¶18-040
Taxation Administration Act 1953 ¶1-300

Administration services
educational supplies ¶14-004

Administrative Appeals Tribunal

AAT/Federal Court, choice ¶18-640
decision ¶18-660
— appeals from AAT decisions ¶18-670
objection decisions
— review ¶18-650
proceedings, conduct ¶18-650

Adult and community education (ACE) courses ¶14-002; ¶14-015

Adult services
data matching ¶18-175
Advance payment of GST ¶12-130

Advertising allowance ¶6-100

Advertising material
GST preparation ¶2-010

Advice and information

export exemption ¶9-240
provision ¶4-010

Advisers
tax exploitation scheme ¶20-110

Affiliates, small business entities ¶1-275; ¶26-000

Agency
appropriations ¶3-030; ¶4-040

Agents ¶1-180; ¶3-030; ¶17-400; ¶26-000

agreements to act as principal ¶17-420
attribution situations ¶7-440
goods sold on consignment or sale or return ¶17-422
GST liability ¶17-400
importations ¶9-080
indigenous artworks ¶17-400
input tax credits
— reimbursement ¶5-040; ¶17-440
legal fees and disbursements ¶17-425
non-residents — table ¶17-410
— proposed government changes ¶17-410
reimbursement ¶5-040
sharefarming agreements ¶17-430
special attribution rules ¶7-450
special rules ¶17-440
supplies
— turnover determination ¶3-030
tax invoices ¶5-190; ¶17-400

Agents for non-residents ¶17-410

Aggregated turnover, small business entities ¶26-000

calculating annual turnover ¶1-265
test ¶1-260

Agricultural managed investment schemes

GST implications
— provisional guidelines ¶10-010

Agricultural pooling arrangements ¶21-070

Agricultural products
recipient created tax invoices (RCTIs) ¶5-140

Air and sea transport

overseas and domestic travel ¶12-000

Air fares ¶12-000

Air waybills ¶9-210

Aircraft
GST-free export ¶9-220

Alcohol ¶13-100; ¶13-190

promotions ¶13-220

Allied health professionals’ services ¶13-320

Allowances
reimbursement ¶5-040

Alteration of rights
export exemption ¶9-240

Alternative dispute resolution ¶18-750

Amalgamated companies
outstanding GST and credits ¶17-120
supplies and acquisitions ¶17-110
where companies amalgamate ¶17-100

Amalgamated property
margin scheme
— special situations ¶11-140

Ambulance services ¶13-320

Amending an assessment
period of review ¶8-090
Anaesthesia ¶13-310

Analgesics ¶13-360

Animal protection bodies ¶15-000

Annual practising certificates

renewal ¶14-020; ¶25-150

Annual reporting ¶7-100

Annual return and reconciliation ¶8-037

Annual subscriptions
paid monthly ¶7-420

Annual tax periods ¶1-120

election ¶8-040
GST groups ¶8-040

Annual turnover ¶1-265; ¶26-000

thresholds
— GST groups ¶17-020

Annual turnover not exceeding $1 million

cash basis ¶7-300
— cashflow ¶21-060

Annual turnover not exceeding $2 million

GST instalments
— option to pay ¶8-037
snapshot method of accounting ¶13-215
stock purchases method of accounting ¶13-215

Annual turnover $20 million or more

compulsory monthly tax periods ¶7-100
electronic GST return lodgment ¶8-043
first electronic monthly return exemption ¶8-043
monthly tax period ¶7-110
recipient created tax invoices (RCTIs) ¶5-140
test ¶7-110; ¶8-043

Annuities
financial supply ¶10-010
Antenatal or postnatal exercise classes ¶13-320

Anti-avoidance rules
factors that attract the rules ¶20-010
— first requirement — a scheme must exist ¶20-020
— fourth requirement — reasonable conclusion ¶20-050
— relevant factors ¶20-060
— second requirement — a GST benefit must arise ¶20-030
— third requirement — benefit must be from scheme ¶20-040
general anti-avoidance provision ¶20-000
powers of the Commissioner ¶20-070
scheme promoters
— imposition of penalty ¶20-130
— injunctions and voluntary undertakings ¶20-140
— non-conforming implementation of scheme ¶20-120
— promotion of tax exploitation scheme ¶20-110
— summary of scheme promoter rules ¶20-100

Apiculture
recipient created tax invoices (RCTIs) ¶5-140

Appeals
AAT/Federal Court, choice ¶18-640
— appeals from AAT decisions ¶18-670
appeals from Federal Court decision ¶18-700
appeals to Federal Court ¶18-620; ¶18-680
— partnerships ¶18-680

Applications to own use (AOU) ¶26-000

wine ¶22-170

Apportionment ¶5-020; ¶10-030; ¶26-000

client usage method ¶19-200
consideration ¶4-200
de minimis rule ¶10-032
input tax credits ¶5-020; ¶10-030

Apprentices and trainees

group training scheme and secondments ¶4-090

Approved joint venture — see Joint ventures

Arm’s length transactions
calculating WET and taxable value ¶22-280

Art collection and investment

carrying on an enterprise ¶3-020

Artificial claims
creditable acquisitions ¶5-010

Aspirin ¶13-360

Assessable dealings
taxable value in wine
— calculation ¶22-280

Asset transfer
GST groups ¶17-040
marriage breakdown ¶4-090

Assistance available for GST

ATO and other Government departments ¶2-110
Government assistance ¶2-110
small business startups ¶2-110

Associates ¶1-180; ¶17-500; ¶26-000

gifts ¶17-500
non-profit sub-entities ¶17-500
property acquired from or supplied to
— margin scheme ¶11-140
small business entities
— calculating aggregated turnover ¶1-265
special attribution rules ¶7-450
supplies
— special rules ¶17-500
supplies by partnerships to partners ¶17-500
supplies to ¶4-020; ¶17-500

Associations
payments ¶4-020

ATM transactions ¶10-010; ¶10-040

ATO ¶11-062; ¶18-000; ¶26-000

adult and community education (ACE) courses ¶14-015
agricultural managed investment schemes
— GST implications — provisional guidelines ¶10-010
artificial claims
— investigations ¶5-010
attribution situations
— powers to override ¶7-440
audits and compliance
— compliance program ¶18-180
— compliance targets ¶18-180
— data collection techniques ¶18-175
— powers and taxpayer rights ¶18-165
BAS preparation tips ¶8-010
bodies corporate ¶11-200
Business Activity Statement Instructions ¶8-010
Business Portal ¶8-005; ¶8-043
buying and selling at auction ¶4-210
change in consideration
— events not considered change in consideration ¶6-100
charities
— ATO endorsement ¶15-000
company floats
— GST issues guidelines ¶10-032
compliance program ¶18-180
— capital assets, disposal ¶4-090
— Cooperative Assurance Agreements ¶18-180
Computer Assisted Verification (CAV) ¶18-120
contacts ¶25-510
Court orders
— guidelines ¶4-085
diplomats
— vehicle sales fact sheet ¶12-160
discretion
— registration cancellation before 12 months expiry ¶3-070
fraudulent property developer ¶18-300
forms and fact sheets ¶25-500
GST administration management
— practice guide ¶2-020

GST advisory visits ¶2-110

GST group formation
— approval ¶17-010
GST refunds
— offsetting ¶8-110
— payment ¶8-110
— power to retain ¶8-110
imposition of GST from 1 July 2018 ¶9-130
industry partnerships ¶2-110
information and contacts ¶2-110
insurance
— distinguishing features ¶10-110
internet supplies ¶9-240
invoices
— when issued ¶7-200
joint venture criteria ¶17-200
large business compliance ¶18-180
live animals
— inspected and passed fit for human consumption ¶13-110
manner of payment ¶8-110
mixed business retailers
— eligible businesses ¶13-210
— types of businesses ¶13-210
natural disasters
— lodgment concessions ¶8-005
net GST payment
— power to extend ¶8-100
outliers methodology ¶18-175
random sampling ¶18-175
refunds
— interest ¶8-100
schemes involving associates
— investigations ¶11-110; ¶11-300
simplified accounting
— guidelines ¶15-060
tax period nomination ¶7-100
Taxpayers’ Charter ¶18-000

Attribution ¶26-000

Attribution rules ¶7-200

accounting basis change ¶7-400
ATO powers to override ¶7-440
barter transactions
— trade exchanges ¶7-435
consideration received or provided ¶7-325
lay-by sales ¶7-430
normal attribution rules inappropriate ¶7-440
progressive or periodic supplies ¶7-420
sale of real estate ¶11-065
special attribution rules ¶7-450

Auctions ¶4-210; ¶21-100

buying and selling ¶4-210

Audiology and audiometry ¶13-320

Audits and compliance

ATO
— compliance program ¶18-180
— data collection techniques ¶18-175
— powers and taxpayer rights ¶18-165
auditors
— checklist ¶18-165
audits
— conduct and management ¶18-190
— preparation ¶18-185
common GST errors ¶18-170
GST audits
— role ¶18-160

Australia, inclusions ¶4-100

Australian businesses ¶4-102

Australian Business Number — see ABN

Australian Charities ¶15-000

Australian connection requirement ¶4-100
financial supplies ¶10-010
permanent establishment ¶4-102; ¶9-095

Australian Customs Service

exports
— record keeping ¶9-210

Australian Taxation Office — see ATO

Authorised BAS preparers

ATO’s BAS agent portal
— web-site address ¶8-042

Authorised Deposit Institution

provision of deposit accounts
— borrowing ¶10-035

Averaging professionals
GST payment by instalments ¶8-037
— cash flow ¶21-070

Avoidance ¶1-180
application
— GST benefit ¶20-010
— part of a scheme, application ¶20-030
— purpose or effect of scheme, matters considered ¶20-060
— structure and object of division ¶20-000
benefits attributable to choices ¶20-040
Commissioner
— powers ¶20-070
GST grouping provisions ¶17-040
non-application examples ¶20-000
relevant factors in drawing conclusion ¶20-060
scheme
— GST benefit ¶20-030
— reasonable conclusion ¶20-050
sham transactions ¶20-000

B
Baby sitters ¶14-100

Bad or overdue debts ¶6-200; ¶6-210

adjustments
— attributing to tax periods ¶6-205
GST adjustments ¶6-000; ¶6-200
margin scheme ¶11-130
partial adjustments ¶6-200

Baggage
export of accompanied ¶9-220

Bakery products ¶13-100; ¶13-150

Bankruptcy, liquidation or receivership ¶18-250

adjustments ¶6-417
concluding tax period ¶7-120
registration
— special rules ¶3-080

Bare trustees
GST-free supplies
— going concerns ¶11-500
margin scheme ¶11-100

Bare trusts
GST liabilities and entitlements ¶4-010
trustees ¶4-010

Barristers’ fees ¶17-425

Barter and non-monetary considerations ¶4-020; ¶7-435

consideration received or provided
— attribution rules ¶7-435

BAS ¶8-010; ¶26-000

ATO Business Portal ¶8-043
authorised preparation persons ¶8-042
correction and revision of earlier BAS ¶8-045
— draft guidelines ¶8-045
— time limits ¶8-045
electronic lodgment ¶8-043
error correction ¶6-100
extensions for lodgment ¶8-005
GST registration ¶3-040
GST return ¶8-000; ¶8-010
instructions ¶8-010
loss of form ¶8-010
mistakes ¶5-125
— correcting ¶8-045
outliers methodology ¶18-175
preparation costs ¶10-040
preparing ¶8-010
— ATO tips ¶8-010
quarterly tax periods ¶1-140
quarterly taxpayers, simplified methods
— streamlined quarterly remittance form, option ¶8-036
running balance account ¶8-100
simpler BAS for newly-registered businesses ¶8-000
time for lodgment
— standard method ¶8-005

Batch repair process ¶9-050

Beer and spirits

home-brew kits ¶13-190
— brewers’ yeast and sugar ¶13-190

Benchmarking and analysis of BAS returns ¶18-175

Beverages — see also Wine, beer and spirits

ATO checklist ¶13-230

Bills of exchange
consideration received or provided
— attribution rules ¶7-325

Bills of lading
export records ¶9-210
imported goods
— transporting, handling and insuring ¶12-010

Births, deaths and marriage certificates ¶4-080

Bitcoin and digital currency transactions ¶4-010; ¶10-010

Black economy — see Cash economy

Blood products
processing and storing ¶13-310

Boarding houses ¶11-030

Boarding schools ¶11-030

teachers and non-students ¶11-320; ¶14-004

Boats ¶5-010
— see also Marinas

Bodies corporate ¶11-200

entity ¶3-015
strata title body corporate ¶3-015

Body politic
entity ¶3-015

Book entries
consideration received or provided
— attribution rules ¶7-325

Book keepers
ATO portal ¶8-042

Books
retail ¶1-160
second-hand ¶16-120

Borrowing expenses
input tax credits ¶10-035

Branches — see also GST branches

adjustment notes ¶6-140
non-profit entities
— independent branches ¶15-080
registration ¶17-300
— cancellation ¶17-310
unregistered ¶4-010

Bread ¶13-150
bread pretzels ¶13-160
Breeding stock
re-importation ¶9-055; ¶25-140

Brewers’ yeast and sugar ¶13-190

Broad-based tax
definition ¶1-000

Brokers ¶10-020
tax invoices ¶5-190

Brothels
taxable supplies ¶4-010

Building and construction

building applications ¶4-080
building inspections ¶4-080
contracts ¶7-420
— payment retention ¶7-440; ¶11-070
— transitional rules ¶19-230
materials ¶19-230
services
— apportionment, pre- and post-GST components ¶19-240
— contracts ¶19-230
— inclusions ¶19-240
— subcontracts, renovations, building services ¶19-240

Bullion ¶16-210

Burden of proof
objection review ¶18-630

Burden on end consumer ¶1-010

Bus passes ¶4-060

Bus services
students ¶14-002

Business
definition ¶3-020

Business acquisition
adjustments ¶6-420
Business Activity Statement — see BAS

Business branches
separate GST registration ¶1-180

Business feasibility study ¶5-020

Business norms method accounting ¶13-215

ATO setting ¶13-215

Business owner, death

adjustments
— registration cessation ¶6-415
time for lodgment extension ¶8-005

Business practice review ¶2-010

Business size
cash basis accounting ¶7-300
large business, compliance ¶18-180

Business usage
changes in planned use ¶6-300; ¶24-050

Buying and selling a business

assumption of liabilities by purchaser ¶11-515
enterprise carried on until supply date ¶11-506
exemption not applicable ¶11-510
franchise sale ¶11-540
going concerns
— carried on until supply date ¶11-503
— GST-free sales ¶11-500; ¶12-130
— if going concern exemption does not apply ¶11-510
input taxed supplies
— subsequent GST adjustment ¶11-520
option to purchase ¶11-550
sale by selling shares ¶11-530
sale of franchise ¶11-540
subsequent GST adjustment if recipient makes input taxed or private supplies ¶11-520
supply of all things necessary ¶11-503; ¶11-506

C
Cadets, flying school training courses ¶14-002

Cafes
checklist ¶25-160

Cafes, caterers and restaurants

SAMS, special methods ¶13-215

Calculation of GST
accruals basis ¶7-205
cash basis ¶7-300

Calculation of input tax credit ¶5-020

Campervans ¶11-010; ¶12-110; ¶23-100

Camping grounds ¶11-030

Cancellation fees ¶4-065

Cane growers
Sugar Industry Assistance Package ¶4-040

Capital allowances — see Depreciation

Capital assets
disposal ¶4-090

Capital gains tax

GST effect ¶24-060

Car expenses
input tax credits
— calculation ¶5-020

Car limit ¶25-040; ¶26-000

Car manufacturing
luxury cars
— research and development ¶12-110

Car parking
self-employed persons, partnerships and trusts ¶5-010

Car rentals ¶12-170

Car washes ¶7-440

Caravan parks ¶11-030; ¶11-320

“home parks” ¶11-030
site fees ¶11-320

Caravans ¶11-010

Carbon pricing scheme ¶16-220

Care services
exempt services, clarification ¶13-340
supply of rights ¶13-340

Carrying on enterprise ¶3-020; ¶4-090; ¶4-102

bodies that only supply members ¶3-020
ceasing
— concluding tax period ¶7-120
change in entity
— registration cancellation ¶3-070
entities included ¶3-020
excluded activities ¶3-020
factors involved ¶5-010
financial supplies ¶10-010
game fishing charter activities
— not an enterprise ¶3-020
horse-breeding activities ¶3-020
land sold as part of sale of business
— margin scheme ¶11-100
less than three months
— compulsory monthly tax periods ¶7-100

Cars — see Vehicles

Cash
consideration received or provided
— attribution rules ¶7-325

Cash based purchaser

transactions through agents ¶7-440

Cash basis accounting ¶1-130; ¶26-000

ceasing to account ¶7-300
choice ¶7-300
Commissioner’s guidelines ¶7-300
credit card payment ¶7-320
credits attributable to a tax period ¶7-300
labour major component of business ¶7-300
operation ¶7-320
payment ¶7-320
small business entities ¶7-300

Cash collection ¶10-010

Cash economy ¶21-045

grants and sponsorships ¶4-040
GST payable by instalments ¶21-070

Cash to accruals basis, change ¶7-400

Cashflow ¶2-010
ABN
— non-quotation ¶21-070
accounting basis
— effect ¶21-060
compliance costs
— effect ¶21-070
deferred settlements ¶21-070
GST
— impact ¶21-050
— recovery ¶21-070
input taxed supplies ¶4-090; ¶21-070
instalment purchases ¶21-070
instalment transactions ¶7-320
monthly tax periods ¶21-070
sales patterns ¶21-070

Casino operators ¶16-000

tax invoices
— modifications to requirements ¶5-130

Caterers
checklist ¶25-160
use in private home ¶13-120

Ceasing to be sub-entity
independent branch of a charity ¶15-090

Change in intended use

GST adjustment ¶6-000

Change of consideration
adjustment event ¶6-100

Charges
inclusion in price ¶4-080

Charitable institutions
GST-free activities ¶15-000
— gifts in general ¶15-040
— over-55s retirement village accommodation and services ¶15-015
— raffles and bingo ¶15-020
— religious services ¶15-050
— sales for nominal value ¶15-010
— sales of donated second-hand goods ¶15-030

Charitable volunteers’ expenses

reimbursement ¶5-040

Charities ¶1-180

Charities, religious and non-profit bodies — see also Charitable institutions

ceasing to be a sub-entity ¶15-090
donated second-hand goods ¶15-030
fundraising activities ¶15-055
gifts in general ¶15-040
GST religious groups ¶15-052
independent branches of non-profit bodies ¶15-080
over-55s retirement village accommodation and services ¶15-015
raffles and bingo ¶15-020
religious practitioners ¶15-053
religious services ¶15-050
simplified accounting methods ¶15-060
special rules for charities and not-for-profits ¶15-000
supplies for nominal value ¶15-010

Charter vessels and cruise ships ¶11-030

Chattels included in sale ¶11-000

Cheque, debit, card deposit and savings accounts ¶10-010

Cheques
consideration received or provided
— attribution rules ¶7-325

Childcare
GST-free services ¶14-100

Childcare provider
related goods and services ¶14-100

Children with disabilities

special education courses ¶14-012

Chiropractic services ¶13-320

Cider or perry
wine equalisation tax (WET)
— application ¶22-010

Circulating capital
cash basis accounting ¶7-300

Civil celebrants ¶15-050

Civil engineering contracts

transitional rules ¶19-230

Claiming input tax credits — tax invoices — see also Input tax credits (ITC); Tax invoices
input tax credits
— calculation ¶5-020
— creditable acquisitions ¶5-010
tax invoices
— acting through an agent or broker ¶5-190
— contents ¶5-110
— contents of recipient created tax invoices ¶5-150
— low-value acquisitions ¶5-170
— modifications to tax invoice requirements ¶5-130
— postponing credit claim to later BAS ¶5-125
— recipient created tax invoices ¶5-140
— role ¶5-100
— samples ¶5-120
Clearly ascertainable information ¶5-110

Clergy
accommodation ¶15-010

Client usage method

apportionment
— rights exercisable after 30 June 2000 ¶19-200

Clients’ meals ¶4-030

Club and leisure facilities ¶5-010

Club memberships
transitional rules ¶19-210

Coastal sea areas

Australia, inclusions ¶4-100

Collect-a-Cap type promotions ¶4-030

Combined eat-in and take-away facilities ¶13-130

Combined tax invoice and adjustment note ¶6-115

Commercial buildings
sale ¶11-050; ¶11-500

Commercial contracts
fines and penalties ¶4-080

Commercial pilot training courses ¶14-020

Commercial residential accommodation, long-term ¶11-320

commercial accommodation
— definition ¶11-320
50% reduction calculation ¶11-320
70% test ¶11-320

Commercial residential premises ¶1-180; ¶11-030; ¶11-320; ¶26-000

caravan parks, camping grounds or similar premises ¶11-030
charter vessels and cruise ships ¶11-030
checklist ¶11-030
hotels, motels, inns, hostels, boarding houses or “similar” premises ¶11-030
inclusions ¶11-030
marinas ¶11-030
new sale
— used for residential accommodation ¶11-020
school accommodation or similar premises ¶11-030
similar residential premises
— characteristics ¶11-030

Commission or fees
travel agent ¶12-020

Commissioner — see also ATO

adjustment notes ¶6-130; ¶6-200
bad debt adjustment ¶6-210
competition organisers and entrants ¶4-035
debt
— non-monetary consideration ¶6-200
decisions
— objections to ¶18-600
discretion — see Commissioner’s discretion
entity engaging in prohibited conduct
— injunctions ¶20-140
financial supplies
— apportioning input tax credits ¶10-030
gifts for voluntary services ¶4-030
GST groups
— membership change ¶17-030
information-gathering and access powers ¶18-110
— access to premises ¶18-120
— Commissioner’s powers ¶18-100
— legal professional privilege ¶18-140
permission to use cash basis ¶7-300
— benefit negation ¶20-070
— loser, compensation ¶20-070
retrospective registration
— cancellation ¶3-070
rulings ¶18-030
— public rulings ¶18-030
rulings, legislation ¶1-540
second-hand goods
— determination ¶16-120
special attribution rules
— power to determine application ¶7-440
supplier as exporter
— 60 day delivery period ¶9-210
supply
— parts not separately identifiable ¶4-200
tax invoices
— recipient created tax invoices — application ¶5-140
voluntary registration
— cancellation within 12 months ¶3-070

Commissioner’s discretion
adjustment notes
— 28 day rule ¶6-110
discretion to treat document as adjustment note ¶6-130
documents, treat as tax invoices ¶5-130
remission of penalties ¶18-305
review ¶18-690

Commissioner’s Rulings ¶18-030

“remedial” power ¶18-030

Commodity trader ¶10-010

Common commercial transactions

checklist ¶25-030

Commonwealth government
GST status ¶1-160; ¶5-010

Commonwealth grain levy ¶4-080

Community care
meals on wheels services ¶13-100; ¶13-340

Companies and associations

GST group ¶17-010
— ownership requirements ¶17-012

Company amalgamations ¶7-450

Company floats ¶10-032

Company officers ¶18-260
reimbursement ¶5-040

Compensation
Court order ¶10-150

Competitions and prizes ¶4-035

Completed premises or land subdivisional projects

valuations ¶11-120

Compliance activities
GST audits ¶18-160
— BAS review ¶18-160
— cancellation of registration review ¶18-160
— compliance verification centre check ¶18-160
— comprehensive audit ¶18-160
— failure to register review ¶18-160
— non-lodgment review ¶18-160
— penalties ¶18-160
— registration integrity check including walk-ins ¶18-160
— review of total supplies ¶18-160
— serious evasion audit ¶18-160

Compliance costs
cashflow effect ¶21-070

Compliance targets, ATO ¶18-180

Complimentary or promotional vouchers ¶4-060

Complying superannuation funds ¶3-020

Composite supplies ¶4-200

Compulsory monthly tax period ¶7-100

Compulsory resumptions
land ¶4-010

Compulsory third party motor vehicle insurance ¶10-120

Computer and Internet expenses — see also E-commerce

input tax credits
— calculation ¶5-020
Computer Assisted Verification (CAV) ¶18-120

Computer software
free downloads over Internet ¶4-030

Concessional goods ¶9-030

Concessional transactions
checklist ¶25-000

Concluding tax periods ¶7-120

Condoms ¶13-360

Confectionery, savoury snacks, ice-cream and biscuits ¶13-100; ¶13-160

Confidentiality of information ¶18-130

Connected entities ¶1-280; ¶26-000

direct control tests ¶1-280
indirect control ¶1-280

Connection with Australia

taxable supply ¶4-100; ¶26-000

Consideration ¶26-000
attribution rules ¶7-325
redeemable vouchers ¶4-060
taxable supply ¶4-020; ¶10-010

Consignment
goods sold on ¶17-422

Constitutional validity ¶1-300

Construction contracts ¶1-200

subcontracts, renovations and building services ¶19-230; ¶19-240
transitional rules ¶19-230
valuation methods ¶19-230

Construction projects ¶4-100

Consumer ¶9-130; ¶26-000

Consumption tax
definition ¶1-000

Contact lenses ¶13-320

Contingent payments ¶7-440

Continuing professional education ¶14-020; ¶25-150

Contra sponsorship ¶4-040

Contractors
definition ¶4-090

Contracts — transitional rules ¶19-000

GST clauses — recovering GST
— covering GST in the contract ¶19-400
other special transitional rules for contracts
— construction contracts ¶19-230
— cross-border business transactions ¶19-250
— life memberships or rights ¶19-220
— progressive or periodical supplies ¶19-210
— subcontracts, renovations and other building services ¶19-240
timing rules
— rights exercisable after 30 June 2000 ¶19-200
— timing of supply and acquisition ¶19-100

Contracts generally
anti-avoidance provisions
— implications ¶20-070
compliance, WET and LCT
— change in law ¶19-400
covering GST ¶19-400
expiry date for supplies ¶19-210
export contract
— instalment payments ¶9-210
funeral contract before 1 December 1999 ¶13-380
GST liability
— settlement ¶11-020
status check ¶2-010
subject to cooling-off ¶7-440; ¶21-070
transitional rules
— progressive or periodical supplies ¶19-210

Contracts spanning 1 July 2000

progressive or periodic supplies ¶7-420
Copyright
supply and acquisition
— timing ¶19-100

Corporate credit or charge cards ¶5-130

Cost of completion
valuation method ¶11-120

Course materials
inclusions ¶14-004

Course providers
commercial operations ¶14-020

Court awards
GST indemnities ¶19-400

Court fees ¶4-080

Court ordered compensation ¶4-085

compensation
— insurance claim ¶10-150

Credit arrangements
financial supply ¶10-010

Credit cards
consideration received and provided
— attribution rules ¶7-325
payment
— cash basis accounting ¶7-320
surcharges ¶4-080

Credit claims
mistakes ¶5-020

Credit policy and debt recovery

cash basis accounting ¶7-300

Credit unions ¶10-040

Credit unions, building societies and member-owned banks ¶10-030

Creditable acquisitions ¶26-000

consideration ¶5-010
definition ¶5-010
inclusions ¶5-010
proposed time limit on claiming credit ¶5-010

Creditable importation ¶9-010; ¶26-000

Creditable purpose ¶26-000

definition ¶5-010; ¶9-010

Credits
amalgamated companies ¶17-120

Crop gathering
recipient created tax invoices (RCTIs) ¶5-140

Cross-border business transactions

special transitional rule ¶19-250

“Crowdfunding” arrangements ¶4-030

Crown lands
grants ¶11-400

Crustaceans and molluscs ¶13-110

CTP insurers — see also Third party insurance

settlements ¶10-120
tax invoices
— modifications to requirements ¶5-130

Cultural performances
provision by non-profit bodies ¶15-010

Culture
checklist ¶25-120

Currency
bitcoin ¶10-010
exchange ¶4-020; ¶12-020
financial supply ¶10-010
lodgment record
— small business (GST instalments) ¶8-037

Curriculum related activities

GST-free educational supplies ¶14-002
Customer debts
insurance policy ¶6-200

Customer-owned banking institutions (COBIs) ¶10-030

Customers and suppliers

liaison ¶2-010

Customs
cost apportionment ¶9-040
GST payment by importers ¶9-005
taxable importations of goods
— GST payment ¶9-000

Customs broker’s fees ¶9-005

D
Dairy farming
recipient created tax invoices (RCTIs) ¶5-140

Damages ¶4-085

Data matching programs ¶18-175

barter transactions ¶7-435
horse racing industry ¶4-035

Dates and deadlines

contingent GST dates ¶25-055

Day of supply
going concerns
— buying and selling ¶11-503

De minimis rule
credits not exceeding threshold ¶10-032; ¶17-020

Dead animals ¶4-100

Dealers and developers

margin scheme ¶11-100

Death
concluding tax period ¶7-120
debtor ¶6-210
time for lodgment
— extension ¶8-005

Debit cards ¶10-010

consideration received or provided
— attribution rules ¶7-325

Debt collection services ¶10-000; ¶10-020

Debts
gambling, not paid ¶16-010
GST adjustment ¶6-000
statute barred ¶6-210

Deceased estate
trustees
— registration ¶3-010

Decision Impact Statements

Incapacitated Entities and GST Liability ¶18-250
Word Investments case ¶15-000

Decreasing adjustment (DA) ¶6-000; ¶26-000

Deferred GST Scheme

importers ¶9-005

Definitions
acquisition ¶5-010
Australia ¶4-100
beverage ¶22-010
broad-based tax ¶1-000
business ¶3-020
cider or perry ¶22-010
commercial accommodation ¶11-320
consideration ¶4-020
consumption tax ¶1-000
creditable acquisition ¶5-010
creditable purpose ¶5-010
enterprise ¶4-090
fruit or vegetable wine ¶22-010
goods ¶4-100
grape wine ¶22-010
grape wine products ¶22-010
GST ¶1-000
inbound intangible consumer supplies ¶9-120
incapacitated entities ¶18-250
indirect ¶1-000
limited registration ¶3-075
limousine ¶23-100
luxury car ¶23-100
mead ¶22-010
permanent establishment ¶4-102
phoenixing ¶11-022
place of consignment ¶9-005
precious metal ¶16-210
real property ¶11-000
reckless ¶18-300
residential premises ¶11-010
sake ¶22-010
second-hand ¶16-100
self-assessment system ¶8-080
supply ¶4-010
supply in relation to rights ¶9-240
taxable supply ¶4-000; ¶5-010
wine ¶22-010

Delayed refund interest ¶8-110

Delivery docket ¶7-205

Demountable houses ¶11-010

Dental services ¶13-320

Deposits (security for performance) ¶1-180

Deposits versus penalties ¶4-070

Depreciation
income tax ¶24-070

Derivatives
financial supply ¶10-010
Developer contribution fees
exempt taxes
— fees and charges ¶4-080; ¶11-070

Development costs
inclusions ¶11-120

Development leases ¶11-020; ¶11-062

Dietary services ¶13-320

Digital cash
consideration received or provided
— attribution rules ¶7-325

Digital currency
GST calculation ¶4-200

Digital imports ¶4-100

Diplomatic staff ¶16-230

Diplomats
car purchase
— GST and luxury car tax refunds ¶12-160
concessions ¶16-230

Direct barter ¶7-435

Direct credit (B-pay)

consideration received or provided
— attribution rules ¶7-325

Direct debit
consideration received or provided
— attribution rules ¶7-325

Direct marketing
gift to host ¶4-030

Directors — see also Company officers

carrying on an enterprise ¶3-020

Disability certificate
obtaining ¶12-150

Disability services ¶13-340

Disabled persons
cars and other vehicles ¶12-150; ¶13-350; ¶16-110
cars used by people confined to wheelchairs ¶23-100
motor bikes ¶12-150
students
— special education courses ¶14-012

Discontinuance undertakings ¶4-085

Discontinued businesses
registration cancellation ¶3-070

Discounted food supplied by charities ¶13-100

Discounted mixed supplies

GST calculation ¶4-200

Discounting and rebates

black economy ¶21-045
change of consideration
— adjustment event ¶6-100

Dishonoured cheques ¶6-210

adjustment event ¶6-100

Display homes ¶11-310

Displaying prices — failure to disclose GST

ACCC guidelines ¶21-010

Dissolution of GST group ¶17-030

Distributions by liquidators, trustees ¶4-020

Dividends paid to parent company ¶4-020

Division 165 — see Avoidance

Documents
access ¶18-120
Commissioner’s discretion to treat as tax invoice ¶5-130
failure to lodge, remission of penalties ¶18-305
requirement to produce ¶18-110

Domestic tourism ¶1-160

Domestic travel ¶12-000

Domestic waste removal ¶4-080

Dominant purpose test ¶20-050

Donating to charity ¶6-300

donated second-hand goods ¶15-030

Done in Australia ¶4-100

Double tax treaties

GST refunds ¶8-120

Dried pulses ¶13-110

Drinks ¶13-180
ATO checklist ¶13-230
wine, beer and spirits — see Wine, beer and spirits

Drivers’ licences ¶4-080

renewals ¶12-170

Driving infringements
penalties ¶4-080; ¶12-170

Driving tests ¶12-170

Drugs, medicines and health goods ¶13-360

Dual occupancy rental dwelling ¶11-030

Due dates
extensions of time ¶8-005

Duty-free purchases ¶9-030

E
E-commerce
checklist ¶25-125

E-mail ¶4-100

EANnet ¶26-000
food and grocery products classification ¶13-210

Easements ¶11-068
Eat-in food ¶13-100; ¶13-120

eBay Australian auction site ¶21-010

Edible plants under cultivation ¶13-110

Education and child care

administration services ¶14-004
canteens ¶14-010
checklist ¶14-030
courses ¶14-002
good sold ¶14-004
GST-free educational supplies ¶14-000
lease or hire of curriculum related goods ¶14-004
mixed and composite courses ¶14-002
placement confirmation and waiting list fees ¶14-004
professional courses ¶14-020
registration options ¶14-040
services
— inclusions ¶14-000
special education courses ¶14-012
staff and other accommodation ¶11-320; ¶14-004
trade qualification courses ¶14-020
tuckshops ¶14-010

Education, religious and non-profit bodies ¶1-180; ¶15-000

accommodation provision ¶11-320
cash basis accounting ¶7-300
charities ¶15-000
checklist ¶25-110
child care bodies
— not-for-profit ¶14-100
competitions and prizes ¶4-035
discounted food supply ¶13-100
donated second-hand goods ¶15-030
fringe benefits to employees ¶15-010
fundraising activities of charities ¶1-170; ¶4-030
— sale of small items ¶15-055
gift-deductible institutions ¶15-000
gifts generally ¶15-040
government schools ¶15-000
GST concessions ¶15-000; ¶15-005
GST-free activities ¶15-000
inclusions ¶15-000
incorrectly charged GST
— refunds ¶15-010
independent branches
— ceasing to be sub-entity ¶15-090
nominal value supplies ¶15-010
non-profit entities
— independent branches ¶15-080
raffles and bingo ¶15-020
registration
— special rules ¶3-080
religious services ¶15-050
simplified accounting ¶15-060
special rules ¶15-000
supplies for nominal value ¶15-010
— concession exploitation scheme ¶15-010

Educational Lending Right scheme ¶4-040

EFTPOS transactions ¶10-010

Electricity and gas supplies ¶7-440

Electrocardiograms ¶13-310

Electronic data interchange ¶6-115

Electronic distribution platforms ¶9-120

Electronic distribution services ¶9-100

Electronic form
adjustment notes ¶6-115

Electronic lodgment ¶8-043

approved importer requirement ¶9-005

Electronic records ¶18-120

Electronic tax invoices ¶5-110

Emergency vehicles ¶12-110; ¶23-100

Emissions units ¶16-220

Employee services
supply by overseas body ¶3-030

Employee share schemes

supplied by overseas enterprise ¶9-100

Employees
accommodation ¶11-310
corporate credit or charge cards ¶5-130
enterprise ¶4-090
fringe benefits ¶4-090
— provided by charities ¶15-010
grants ¶4-040
independent contractors ¶4-090
reimbursement ¶5-040
religious practitioners
— acting as employees of religious institutions ¶15-053; ¶25-110
tax exploitation scheme ¶20-110

Employers
fringe benefits for employees ¶24-210
input tax credits, claim
— former and future employees ¶5-040
— reimbursement of employees and agents ¶5-040
— uniforms, tools and equipment ¶5-040

Employment-related skills
adult and community education (ACE) courses ¶14-015

English language
record-keeping ¶18-040

English language classes ¶14-002

Enterprises ¶26-000
enterprise requirement ¶4-090
entities included ¶3-020
existence after supply has ceased ¶3-020
horse-breeding activities ¶3-020
investor in agricultural managed investment scheme ¶3-020
registration ¶3-020
subdivision and sale of real estate ¶11-063

Entertainment ¶4-090; ¶5-010

checklist ¶25-120
expenses, adjustments
— determination method change ¶6-510

Entities ¶26-000
registration ¶3-015
trusts and trustees ¶3-015

Entry for home consumption ¶9-000

Environmental Management Charge ¶4-080

Estate agent’s fees ¶11-070

Estimated payments ¶7-440

Evening classes ¶14-002

Evidence
direction to attend and give ¶18-110

Exchange rates
recipient created tax invoices ¶5-140

Excisable goods held “in bond” ¶9-060

Excursions ¶14-004; ¶14-100

Exempt imports
list ¶9-030

Exempt taxes, fees and charges ¶4-080

developer contribution fees ¶4-080
financial institutions duty (FID) ¶4-080
licences, registrations and permits ¶4-080

Exempt transactions
checklist ¶25-000

Exemptions
types ¶1-160
Expatriate employees ¶9-100

Exporters
supplier as exporter ¶9-210

Exports ¶9-200
accidental destruction before export ¶9-005
aircraft or ship
— recreational boats ¶9-215
Australian transport
— loading and handling ¶9-220
direct connection ¶9-240
documents preparation ¶9-210
exports of goods ¶9-210
exports of services and other things ¶9-240
financial services ¶10-050
GST-free exports ¶9-220
insurance policies ¶10-140
internet supplies ¶9-240
lease of goods used overseas ¶9-230
repair or treatment of goods under warranty ¶9-250
services and other things ¶9-240
— effective use and enjoyment outside Australia ¶9-240
services and rights ¶9-240
tooling supplies used by non-residents ¶9-235
treatment ¶9-200
— goods ¶9-210
— services ¶9-240
wine ¶22-010

Extensions
BAS lodgment ¶8-005
election to pay instalments
— application ¶8-037

F
Face value vouchers ¶4-060

False or misleading statements ¶18-305

False statements ¶18-305

Family Day Care Centres ¶14-100

Family maintenance ¶5-010

Family members
GST groups ¶17-014

Farm land ¶11-063

business carried on for five years requirement ¶11-410
going concern, buying and selling ¶11-506
— residence included ¶11-520
GST-free acquisitions
— margin scheme ¶11-140
GST-free sales ¶11-410
subdivision ¶11-420

Farm sales ¶11-410; ¶11-420

Farm stay ¶11-030

Fats and oils marketed for culinary purposes ¶13-110

Federal Court of Australia

AAT/Federal Court
— choice ¶18-640
appeals ¶18-620; ¶18-680

Fees for attendance by officers at events ¶4-080

Female contraceptive devices ¶13-360

Field trips ¶14-004

Financial acquisitions threshold (FAT) ¶10-032; ¶26-000

Financial institutions duty ¶4-080

Financial suppliers ¶1-180; ¶10-000; ¶10-010; ¶10-040; ¶26-000

cashflow ¶4-090; ¶21-070
fringe benefits provision ¶10-045
reduced credits ¶6-300

Financial supplies ¶4-010; ¶10-000; ¶26-000

borrowing expenses
— input tax credits ¶10-035
constitution requirements ¶10-010
creditable acquisition ¶5-010
disposal of things acquired to make supplies ¶6-310
export exemption ¶9-240
financial supplies ¶10-010
— exported ¶10-050
— non-financial supplies ¶10-020
general requirements ¶10-005
imported ¶9-100
input tax credits
— apportionment ¶10-030
— reduction ¶10-040
input tax credits, apportionment
— under $50,000 ¶10-030
list of items ¶10-010
practical impacts ¶10-090
sales of things acquired to make supplies ¶10-060
sales to satisfy debts ¶10-070
specific items ¶10-010
superannuation funds ¶10-080
supplies through overseas branch ¶10-050
treatment rationale ¶10-000

Fines, penalties, taxes and charges ¶4-080

First aid and life saving courses ¶14-002

Fish bait ¶13-110

Fixtures ¶11-000

Flats
conversion to strata title after sale ¶11-020

Flexible care ¶13-340

Floating homes and ships ¶11-010

Floor plan arrangements ¶7-440

Food — see Food, health and medical

Food additives and ingredients ¶13-195

Food and grocery classifications ¶13-210

Food for consumption by animals ¶13-110

Food, health and medical ¶13-000

food
— ATO food and beverage checklist ¶13-230
— bakery products ¶13-150
— confectionery, snacks, ice-cream and biscuits ¶13-160
— drinks ¶13-180
— food additives ¶13-195
— food combinations and hampers ¶13-170
— food packaging ¶13-200
— giveaways and promotions ¶13-220
— GST-free supplies of food ¶13-100
— hot takeaway food ¶13-130
— other optional methods ¶13-216
— other simplified methods for food retailers ¶13-215
— prepared meals and food ¶13-140
— restaurant, catered or eat-in food ¶13-120
— simplified GST accounting for food suppliers ¶13-210
— wine, beer and spirits ¶13-190
health and medical
— allied health professionals’ services ¶13-320
— drugs, medicines and health goods ¶13-360
— funerals ¶13-380
— GST-free health services ¶13-300
— hospital services ¶13-330
— medical aids and appliances ¶13-350
— medical practitioners’ services ¶13-310
— private health insurance ¶13-370
— residential care, community care and disability services ¶13-340

Food packaging ¶13-200

de minimis test satisfaction ¶13-200

Food premises
leisure, sport or entertainment venues ¶13-120
surrounding grounds ¶13-120
Food retailers
simplified accounting methods ¶13-210
— choice of three ¶13-215

Foreign bank accounts

financial supply ¶10-010

Foreign currency
financial supply ¶10-010
gain or loss on set price contract ¶6-100
GST calculation ¶4-200
recipient created tax invoices ¶5-140
tax invoices ¶5-110

Foreign real estate ¶4-100; ¶11-000

Forfeited deposits ¶4-070

Fortified wine ¶22-010

Forward contracts, foreign currency purchase

financial supply ¶10-010

Four-wheel drive vehicles

luxury car tax ¶23-100

Franchise agreements
purchaser
— GST recovery onus ¶19-400
sale ¶11-540

Free into store transactions ¶9-005

“Free” software ¶4-030

Free tickets ¶12-020

Freedom of information charges ¶4-080

Frequent flyer programs ¶4-062; ¶12-020

Fringe benefits
acquisitions used to provide ¶24-210
employees ¶24-200
— provided by charities ¶15-010
financial suppliers ¶10-045
GST relationship ¶24-200
reimbursement of agent and employee ¶5-040
tax ¶4-080

Fruit and vegetable wines

wine equalisation tax (WET)
— application ¶22-010

Fruit shops
stock purchases method of accounting ¶13-215

Fundraising activities
charities, religious and non-profit bodies ¶15-055
dinners, auctions and functions ¶4-030

Funds transfer systems

non-financial supplies ¶10-020

Funerals
funeral services ¶13-380
prepaid ¶13-380

Future use of property ¶11-010

G
Gainful employment test ¶12-150

Gamblers
GST position ¶16-000

Gambling ¶3-030; ¶16-000

bad debts ¶6-220
calculating GST ¶1-180
competitions and prizes ¶4-035
debts not paid ¶16-010
non-monetary prizes ¶16-000
overseas bets ¶16-000
racing prizes ¶4-035
special accounting ¶16-000
suppliers
— GST thresholds ¶16-030
— lotto syndicates ¶16-000
tax invoices ¶16-000

Gambling supply ¶26-000

Game fishing
charter activities
— not an enterprise ¶3-020

Games ¶13-110

Gaming machines ¶16-000

GAP ¶20-000; ¶26-000

Garnishee of accounts ¶10-010

Gas and electricity supplies ¶7-440

General insurance policies

issue ¶10-110

General interest charge (GIC) ¶8-037; ¶8-110; ¶26-000

discretionary remission of penalties ¶18-305
rates per quarter ¶18-300
General law partnerships ¶3-015
in kind distribution to partner
— supply for consideration ¶4-010

Getting started with GST

a 20-point plan for managing GST ¶2-010
administration management
— checklist ¶2-020
assistance from ATO and other government departments ¶2-110
dealing with GST ¶2-000

Gift-deductible charities, organisations and institutions ¶15-000

cash basis ¶7-300

Gifts ¶4-030; ¶15-040

to associates ¶17-500
to members of school community ¶14-040

Global accounting methods

eligible second-hand goods ¶16-120
gambling ¶16-000
second-hand goods ¶16-100; ¶16-120

Global product safety recall ¶9-030

Going concerns — see also Buying and selling a business

farm land, including residence ¶11-520
GST-free acquisitions
— margin scheme ¶11-140
GST-free supply
— margin scheme proposed special rules ¶11-500
GST terms ¶26-000

Gold ¶16-210

Goods
change in quantity supplied
— adjustment event ¶6-100
connection with Australia
— circumstances ¶4-100
consumed on international flights or voyages ¶9-220
creditable acquisition ¶5-010
definition ¶4-100
from outside Australia
— destination outside Australia ¶9-220
— repair ¶9-220
importation ¶1-100
inherited from overseas ¶9-030
lost, destroyed or stolen ¶6-300
made available ¶19-100
on approval ¶19-100
previously exported for repair ¶9-050; ¶9-220
private or domestic use ¶6-320
returned overseas for repair ¶9-030
sold “on approval” ¶7-440
sold on consignment ¶17-422
supplied as part of treatment ¶13-320
supplied to students ¶14-004
supply and acquisition, timing
— transitional rules ¶19-100
transporting, handling and insuring
— imported goods ¶12-010
used overseas, lease ¶9-230
value not more than $50
— adjustment notes ¶6-130

Goods imported into Australia — see Imports

Goods “in bond” ¶9-000; ¶9-060

Goods or services supplied ¶10-120

adjustment periods ¶6-304
adjustments ¶6-510
cancellation ¶6-100
Div 132 application ¶6-310
GST adjustments ¶6-000
— attribution to tax periods ¶6-000
— GST status, change ¶6-000; ¶6-100
— increasing or decreasing ¶6-000
— price changes ¶6-000; ¶6-100
— sales of things acquired without full credits ¶6-310
GST exclusive value $10,000 or more
— adjustment periods ¶6-304
GST exclusive value $50,000 but less than $500,000
— adjustment periods ¶6-304
GST exclusive value $500,000 or more
— adjustment periods ¶6-304
GST joint venture
— adjustments ¶6-510
GST status change
— adjustment event ¶6-100

Goods returned unaltered

non-taxable importations ¶9-030

Goodwill ¶11-500

Government appropriations ¶4-040

Government assistance
ATO and other government departments ¶2-110

Government bodies
registration ¶3-080
statutory obligation performance ¶15-000

Government charges ¶4-020; ¶4-080

Government departments
GST group ¶17-016
recipient created tax invoices (RCTIs) ¶5-140
registration
— special rules ¶3-080

Government employers
accrued long service leave entitlements ¶4-010

Government land, unimproved

margin calculation ¶11-110; ¶11-400

Government leases ¶11-410; ¶11-420

Government prisons ¶13-216

Government schools ¶14-040; ¶15-000; ¶15-080

cash basis accounting ¶7-300
Graduation dinners ¶14-004

Grants and sponsorships

ATO approach, examples ¶4-040
grant a financial supply ¶4-040
grantor, position ¶4-040
grossing up payments ¶4-040
services provided outside Australia ¶4-040

Grape wine
wine equalisation tax (WET)
— application ¶22-010
— grape wine products — tax rates ¶22-010

Grapes, rotten ¶13-110

Group Training Scheme and secondments ¶4-090

Grouping provisions ¶21-070

Groups and branches — see GST branches; GST groups

GST
assessment, payment and refunds ¶8-080
assistance from ATO and other government departments ¶2-110
ATO forms and fact sheets ¶25-500
basis of accounting ¶1-130
dealing with ¶2-000
definition ¶1-000
errors ¶18-170
general reviews ¶1-000
GST liability and input tax credits ¶1-100
GST returns, payments and refunds ¶1-140
guide ¶1-010
imposition of GST from 1 July 2018 ¶9-130
input taxed supplies ¶1-170
legislation
— Commissioner’s rulings ¶1-540
— complexity ¶1-310
— interpretation ¶1-315
— sources ¶1-300
management of GST administration
— checklist ¶2-020
— 20-point plan ¶2-010
non-taxable and GST-free supplies ¶1-160
overpaid
— refunds by suppliers ¶8-110
registration ¶1-110
special rules and concessions ¶1-180
tax invoices and adjustments ¶1-150
tax periods ¶1-120
taxable supplies ¶1-100
transitional rules ¶1-200
“wash” sales and revenue neutral transactions ¶18-305

GST administration management

checklist ¶2-020
20-point plan ¶2-010

GST advisory visits ¶2-110

GST benefit ¶26-000

GST branches ¶1-180

associates ¶17-500
cancellation ¶17-310
GST
— payment ¶17-300
— return requirement ¶8-050
non-profit entities
— independent branches ¶15-080
registration ¶17-300

GST calculation
builder’s GST liability calculation ¶11-120
credits for GST paid
— Business Activity Statement (BAS) ¶8-010
digital currency conversion ¶4-200
discounted mixed supplies ¶4-200
foreign currency conversion ¶4-200
luxury cars ¶4-200
mixed supplies ¶4-200
progressive or periodic supplies ¶19-210

GST checklists
common commercial transactions ¶25-030
confidentiality of information ¶18-130
e-commerce ¶25-125
education ¶14-030
exemptions
— health and medical services ¶13-320
— medical aids and appliances ¶13-350
GST administration management
— exempt or concessional transactions ¶25-000
— GST-free supplies ¶25-010
— input taxed supplies ¶25-020
industry checklists
— accommodation and residence ¶25-100
— charities and non-profit organisations ¶25-110
— e-commerce ¶25-125
— entertainment and culture ¶25-120
— health and care ¶25-130
— motor vehicles ¶25-200
— primary producers ¶25-140
— professions ¶25-150
— restaurants, cafes and caterers ¶25-160
— retailers ¶25-170
— schools and higher education ¶25-180
— small business ¶25-190
rates and thresholds ¶25-040
records
— obligation to keep ¶18-040

GST credit ¶5-000; ¶26-000

GST dates and deadlines

contingent GST dates ¶25-055

GST disadvantage ¶20-070; ¶26-000

GST-exclusive market value ¶4-200; ¶26-000

GST-exclusive value ¶26-000

GST-free ¶1-160; ¶26-000

GST-free acquisition
farm land ¶11-140
going concern ¶11-140

GST-free childcare services ¶14-100

GST-free educational supplies ¶14-100

administration services ¶14-004
course materials ¶14-004
curriculum related activities ¶14-002
curriculum related goods
— lease or hire ¶14-004
education courses ¶14-000
excursions and field trips ¶14-004
student accommodation ¶14-004

GST-free health services ¶13-300

GST-free insurance ¶10-140

GST-free supplies
checklist ¶25-010
childcare services ¶14-100
educational supplies ¶14-100
exports ¶9-220
food ¶13-100
going concerns
— bare trustees ¶11-500
goods ¶9-240
health insurance ¶10-140
health services ¶13-300
inclusions ¶1-160
input taxed supplies ¶25-020
overview ¶13-000

GST groups ¶1-180; ¶17-000; ¶17-010; ¶26-000

adjustment notes ¶6-140
de minimis test
— credits not exceeding threshold ¶17-020
dissolution ¶17-030
effect of having group ¶17-020
— annual tax periods ¶17-020
— GST adjustments ¶17-020
— GST instalments ¶17-020
— GST payable by representative member ¶17-020
— GST turnover thresholds ¶17-020
— importations ¶17-020
— income tax ¶17-020
— input tax credits ¶17-020
— joint venture property ¶17-020
— refunds ¶17-020
— reverse charge ¶17-020
— single body ¶17-020
government departments
— requirements ¶17-016
grouping provisions
— opportunities presented ¶17-040
— transfer of tax losses ¶17-040
GST payable by instalments ¶17-020
GST religious groups
— forming ¶17-010
income tax ¶24-070
indirect tax sharing agreements ¶17-025
joint and several liability rule ¶17-020
losses and credits
— transfer ¶24-070
margin scheme ¶11-140
members
— registered GST branch prohibition ¶17-010
membership change or dissolution ¶17-030
membership requirements ¶17-010
— refunds ¶17-020
90% owned group ¶17-012
non-profit bodies
— proposed GST concessions ¶15-080
option to report and pay annually ¶8-037

ownership requirements
— groups of companies and other entities ¶17-012
— individuals ¶17-014
partnerships and trusts
— ownership requirements ¶17-014
registration
— special rules ¶3-080
special rules, need ¶17-000
trusts
— ownership test ¶17-014
valuation, consolidation ¶3-020

GST impacts ¶2-010

GST-inclusive market value ¶4-200; ¶26-000

GST instalments
small business
— option to pay ¶8-037

GST joint ventures ¶17-200; ¶26-000

special liabilities and obligations of partners ¶18-220

GST law
associate provisions ¶17-500
ATO taxpayers’ charter ¶18-000
Commissioner’s rulings ¶18-030
general administration ¶18-000
obligation to keep GST records ¶18-040
penalty units
— value ¶18-000

GST legislation
sources ¶1-300

GST liabilities
nature of industry ¶21-070
taxable supplies ¶1-100

GST operation
accounting basis ¶1-130
GST liability and input tax ¶1-100
input taxed supplies
— inclusions ¶1-170
non-taxable and GST-free supplies ¶1-160
registration ¶1-110
returns, payments and refunds ¶1-140
special rules and concessions ¶1-180
tax invoices and adjustments ¶1-150
tax periods ¶1-120
transitional rules ¶1-200

GST payment by instalments ¶8-037

amount and timing ¶8-037
annual return and reconciliation ¶8-037
averaging professionals ¶8-037
cash flow ¶21-070
extension of time
— application ¶8-037
GST groups ¶17-020
making election to pay ¶8-037
option to pay ¶8-037
primary producers ¶8-037
variation of instalments ¶8-037

GST rates ¶1-100

locking in
A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 ¶1-300
rates and thresholds ¶25-040

GST refunds ¶26-000

claim time limit ¶8-110
Commissioner’s discretion ¶8-115
delayed refund interest ¶8-110
double tax treaties ¶8-120
GST groups ¶17-020
GST incorrectly charged by charities ¶15-010
manner of payment ¶8-110
offsetting ¶8-110
overpaid refunds ¶8-120
registration cancelled retrospectively ¶8-120
review and special rules ¶8-120
Tourist Refund Scheme (TRS) ¶12-030
windfalls ¶8-115

GST-registered charities
Government grants
— grossing up ¶4-040

GST registration — see also Registration

Australian Business Number (ABN) ¶3-050
cancellation ¶3-070
carrying on an enterprise ¶3-020
entities
— definition ¶3-015
GST turnover test ¶3-030
importance ¶3-000
procedure ¶3-040
pros and cons ¶3-010
simplified registration for certain non-residents ¶3-075
special rules ¶3-080

GST-related penalties
discretionary remission of penalties and GIC ¶18-305
other provisions relating to penalties ¶18-310
overview ¶18-300

GST religious groups ¶15-052

GST returns — see also BAS

electronic lodgment ¶8-043
other reporting options
— report and pay annually ¶8-040
— small business option to pay GST instalments ¶8-037
— streamlined quarterly remittance form ¶8-036
other special rules for GST returns ¶8-050
standard method ¶8-002
— completion of return ¶8-010
— time for lodgement ¶8-005

GST risks ¶10-000

GST start-up costs ¶24-100

GST status checklists

exempt or concessional transactions ¶25-000

GST terms ¶26-000

GST turnover ¶3-030; ¶5-020; ¶7-100; ¶7-300; ¶8-043; ¶26-000

non-business taxpayers ¶8-037
offshore supplies of hotel accommodation ¶3-030; ¶11-320

GST wash sales

GST-free supplies ¶25-010

Guarantees and indemnities

financial supply ¶10-010

H
Hampers ¶13-170
wine packaged with other goods ¶22-280

Health and care checklist ¶25-130

Health and medical — see also Food, health and medical

allied health professionals’ services ¶13-320
drugs, medicines and health goods ¶13-360
funerals ¶13-380
GST-free health services ¶13-300
hospital services ¶13-330
medical aids and appliances ¶13-350
medical practitioners’ services ¶13-310
private health insurance ¶13-370
residential care, community care and disability services ¶13-340

Health goods and services ¶13-360

Health industry ¶13-300

Health insurance ¶10-120

GST-free ¶10-140

Health professionals — services

goods supplied as part of treatment ¶13-320
Health Services Australia
disability certificates
— cars and other vehicles for the disabled ¶12-150

Hearses ¶23-100

Herbal teas ¶13-180

Higher education
checklist ¶25-180

Hire period extension ¶6-100

Hire purchase agreements

early termination ¶4-020
financial supply ¶10-010
repossession of goods ¶10-070
transactions ¶7-438

Hiring
GST start up costs ¶24-100

Hiring arrangements ¶7-420

transitional rules ¶19-210

Hobbies ¶3-020

Hobby farming ¶3-020

Holdback payments
car industry
— not consideration for supply ¶4-010

Home alterations ¶11-070

Home care ¶13-340

Home loans and fees ¶11-070

Home offices
input tax credits
— calculation ¶5-020

“Home parks” ¶11-030

Home units — see also Strata units

internal sales ¶20-000
Honorariums ¶4-030

Horse breeder, part-time

not carrying on an enterprise ¶3-020

Horse racing industry

data matching program ¶4-035
prizes ¶4-035

Horses
60-day export period extension ¶9-210

Horticulture
recipient created tax invoices (RCTIs) ¶5-140

Hospital-in-the-home services ¶13-330

Hospital outreach services ¶13-330

Hospital treatment ¶13-330

Hostels ¶11-030
care ¶13-340

Hot take-aways ¶13-100; ¶13-130

Hotels ¶11-030

Housing fringe benefits ¶24-200

I
Ibuprofen ¶13-360

Ice supplies ¶16-200

Identity takeover ¶18-300

Illegal acquisition ¶5-010

Imported vehicles
luxury car tax (LCT)
— calculation of amount ¶23-200

Importers
approved
— requirements ¶9-005
Deferred GST Scheme ¶9-005
GST payment ¶9-005
monthly tax periods ¶21-070

Imports ¶9-000
Australian consumers ¶9-120
claiming input tax credits ¶9-010
concessional goods ¶9-030
excisable goods “in bond” ¶9-060
financial services ¶9-100; ¶10-005
free into store transactions ¶9-005
goods previously exported for repair ¶9-050
GST-free or input taxed goods ¶9-030
GST groups ¶17-020
GST payable by importer ¶9-005
importations through agent ¶9-080
installation or assembly of goods brought to Australia ¶9-020
non-resident business supplies: optional reverse charge ¶9-095
non-taxable ¶9-030
offshore business supplies of services and rights ¶9-100
offshore management and support services ¶10-042
offshore supplies of digital products and other intangibles to consumers ¶9-120
offshore supplies of “low-value” goods to consumers ¶9-130
partly taxable ¶9-040
re-importation of breeding livestock ¶9-055
reverse charge rule ¶9-095; ¶9-100
secondhand goods ¶9-070
taxable importations of goods ¶9-000
transfers between branches ¶9-100
transitional rules for transactions spanning 1 July 2017 ¶9-120
transporting, handling and insuring goods ¶12-010
warehoused goods imported by others ¶9-000

Imposition of taxes
A New Tax System (Goods and Services Tax Imposition — Customs) Act 1999 ¶1-300
A New Tax System (Goods and Services Tax Imposition — Excise) Act 1999 ¶1-300
A New Tax System (Goods and Services Tax Imposition — General) Act 1999 ¶1-300

Improved land
definition ¶11-400
In kind capital contribution ¶4-010

Incapacitated entities ¶7-100

definition ¶18-250
representatives
— corrective legislation proposed ¶18-250

Incidental financial supplies ¶10-010

Incidental supplies of credit ¶5-020; ¶21-100

Income tax
advance payments ¶24-070
capital gains tax
— GST effect ¶24-060
concessions, small business
— turnover ceiling ¶24-070
deductibility
— acquisition partly deductible ¶24-030
— creditable acquisition, relationship ¶5-010
depreciation ¶24-070
fringe benefits and GST
— relationship ¶24-000
group and joint ventures ¶24-070
GST and income tax
— relationship ¶24-000
GST groups ¶17-020
GST-related tax concessions
— businesses GST charge ¶24-010
— GST component of price ¶24-030
— GST start-up costs ¶24-100
— net GST payments in returns ¶24-040
joint ventures ¶17-220
market value of assets ¶24-070
planned business usage, change ¶24-050
receipts basis accounting ¶7-300
trading stock ¶24-070

Incorrectly charged GST

charities
— refunds ¶15-010

Increasing adjustment (IA) ¶6-000; ¶26-000

Independent contractors ¶4-090

Indigenous artworks
agents ¶17-400

Indirect apportionment ¶5-020

Indirect Tax Sharing Agreements (ITSA) ¶17-025; ¶26-000

Indirect tax zone (ITZ) ¶4-100; ¶26-000

Indirect taxes ¶1-000

Individual or natural person

entity ¶3-015
GST groups
— ownership requirements ¶17-014
professional practitioners ¶7-300

Inducements ¶11-330

Industry benchmarking
ATO ratios ¶18-175

Industry checklists
accommodation and residence ¶25-100
charities and non-profit organisations ¶25-110
entertainment and culture ¶25-120
health and care ¶25-130
primary producers ¶25-140
professions ¶25-150
restaurants, cafes and caterers ¶25-160
retailers ¶25-170
schools and higher education ¶25-180

Industry groups or associations ¶7-300

Industry partnerships ¶2-110

Infant formulas ¶13-180

Information and contacts ¶2-110

Information-gathering and access powers ¶18-110
access to premises, documents and other property ¶18-120
Commissioner’s powers ¶18-100
confidentiality of information ¶18-130
documents
— requirement to produce ¶18-110
enforcement and penalties ¶18-110
evidence
— direction to attend and give ¶18-110
exchanging GST information with foreign countries ¶18-135
information-gathering powers ¶18-110
legal professional privilege ¶18-140

Inherited property
margin scheme ¶11-140

InnClub Invoice/Statements ¶5-130

Input tax credits (ITC) ¶1-010; ¶5-000; ¶5-010; ¶26-000

adjustment ¶7-330
agents
— reimbursement ¶5-040
apportionment ¶10-030
— annual election ¶5-020
bodies corporate ¶11-200
borrowing expenses ¶10-035
calculation ¶5-020
— car expenses ¶5-020
— computer and internet expenses ¶5-020
— fair and reasonable method ¶5-020
— home offices ¶5-020
— telephone expenses ¶5-020
cash to accruals basis, change ¶7-400
claim postponement to later BAS ¶5-125
claimable in later tax period ¶5-125
claiming
— tax invoice ¶7-205
company not yet set up ¶5-030
creditable acquisitions ¶5-010
disclosed hire purchase agreements
— supplies ¶5-020
entertaining ¶4-090
financial supplies
— apportionment — Commissioner’s guidelines ¶10-030
— input tax credit — calculation ¶5-020
— 75% reduced ¶10-040
GST groups ¶17-020
GST not included by supplier ¶5-020
imports ¶9-010
payment partly by third party ¶5-020
pre-establishment rule ¶5-030
reimbursement ¶5-040; ¶5-130
reimbursement of non-deductible expenses ¶5-040
schemes — complex real property transactions
— claims by associates ¶5-010; ¶11-110; ¶11-300; ¶17-500; ¶20-000
second-hand goods ¶16-110
— tax period for claiming ¶16-110
supplies to associates ¶17-500

Input taxed supplies ¶1-170; ¶26-000

checklist ¶25-020
examples ¶5-010

Inspection and testing fees ¶4-080

Instalment payers
annual tax periods ¶7-100
special rules ¶8-037

Instalment payments
export contract ¶9-210

Instalment purchase arrangements

purchases ¶21-070

Instalment turnover threshold ¶26-000

Instalments ¶26-000
GST payment ¶8-037
— shortfall ¶8-100
Instalments method
GST return ¶8-000

Institutions
goods donated or bequeathed by non-residents ¶9-030

Insurance ¶1-180; ¶10-100

brokers
— special attribution rules ¶7-450
claim settlements ¶10-120
— events before 1 July 2000 ¶4-020
— insurance excesses ¶10-120
— position of third parties ¶10-120
— premiums not creditable — decreasing adjustment ¶10-120
— statutory compensation schemes ¶10-130
companies
— adjustments ¶6-510
— goods and services supplied, claim settlement ¶10-120
— subrogation rights ¶10-120
CTP settlements ¶10-120
customer bad debts policy ¶6-200
general insurance policies
— issue ¶10-110
GST-free insurance ¶10-140
insured’s duty to notify entitlement ¶10-120
international transport of goods ¶10-140
life insurance policies
— issue ¶10-100
overseas travel ¶12-020
pay-by-the-month insurance ¶7-420
portfolio transfers ¶10-120
premiums
— not creditable — decreasing adjustments ¶10-120
— registration application form, inclusion ¶3-040
— stamp duty ¶10-150
— tax invoices ¶10-150
private health insurance ¶10-140; ¶13-370
settlements ¶10-120
special rules ¶10-150
statutory compensation schemes ¶10-130
transporting and handling of imported goods ¶12-010
vehicle insurance ¶12-170

Intentional disregard ¶18-300

Interbank transfers
consideration received or provided
— attribution rules ¶7-325

Interest, provision, acquisition or disposal

financial supply requirement ¶10-005
— connection with Australia ¶10-005
— consideration ¶10-005
— financial supply provider ¶10-005
— in course of an enterprise ¶10-005

Interim managers ¶3-080

Internal data matching ¶4-090; ¶18-175

International data exchange ¶4-100

International flights
crew members ¶12-020

International mail ¶12-050

International organisations ¶16-230

International transport of goods ¶12-010

international travel
— Australian domestic leg ¶12-000
— domestic component ¶12-020
— goods consumed ¶9-220
— insurance ¶10-140; ¶12-020

International travel
Australian domestic leg ¶12-000
domestic component ¶12-020
goods consumed ¶9-220
insurance ¶12-020
Tourist Refund Scheme (TRS) ¶12-030
Internet access ¶4-100

Internet domain name ¶4-100

Internet kiosks ¶7-440

Internet supplies ¶9-240

Interpretative Decisions ¶18-030

Invalid beverages ¶13-180

Invoices — see also Tax invoices

electronic or written form ¶7-205
invoices and tax invoices
— difference ¶5-100

Inwards duty-free purchases ¶12-020

J
Jewellery ¶16-210

Joint recipients
tax invoices ¶5-110

Joint ventures ¶1-180; ¶17-200; ¶26-000

changes ¶17-200
dissolution ¶17-230
energy or resource industry ¶17-200
formation ¶17-210
— consequences ¶17-220
general insurance provision entities ¶10-150
income tax ¶24-070
margin scheme ¶11-140
membership change ¶17-230
operator
— GST refunds ¶17-220
— GST return requirement ¶8-050
procedure for formation ¶17-212
property
— GST groups ¶17-020
sale ¶11-500
Judgment interest ¶4-085

Judicial review ¶18-600

Juices ¶13-180

K
Key personnel
buying and selling going concerns ¶11-506

L
Labelling and stationery ¶2-010; ¶24-100

Labour hire ¶4-090

Labour major component of business

cash basis accounting ¶7-300

Land
compulsory resumption ¶4-010

Land developer contributions, taxes and charges ¶4-080

Land sold as part of selling a business

margin scheme ¶11-100; ¶11-120

Land tax ¶4-080; ¶11-070

Landed into store transactions ¶9-005

Laptop computers ¶24-200

Large business
compliance ¶18-180

Laser vision correction ¶13-310

Late fees ¶4-080

Late payment charge imposition

change of consideration
— adjustment event ¶6-100

Laundry services ¶7-440

Law Companion Rulings ¶18-030

Lay-by sales ¶7-430; ¶21-070
cancellation ¶7-430

Lease incentives
premiums and payouts ¶11-330

Lease or hire of curriculum-related goods ¶14-004

Lease or hire of goods

connection with Australia ¶4-100
early termination ¶4-020

Lease or hire of vehicles ¶12-110

luxury car tax
— calculation ¶23-200
sale on lease termination ¶12-145

Leases ¶7-420
commercial premises ¶11-330
development leases ¶11-020
goods, early termination of lease ¶4-020
goods used overseas ¶9-230
premises used as display home ¶11-310
sale of real property ¶11-335
summary of GST position on leases ¶11-300
vehicle leases ¶7-420

Leasing, licensing or granting interests in property ¶3-020

Legal advice
to non-residents ¶9-240

Legal costs, successful litigant

recovery
— GST component included ¶25-150

Legal fees ¶17-425

Legal practitioners
barristers’ fees ¶17-425
Business Activity Statement (BAS)
— preparation ¶8-010
legal professional privilege
— information-gathering powers ¶18-140
other GST aspects of legal services ¶17-425
pro bono services ¶4-020
solicitors’ costs
— leased commercial premises ¶11-330
solicitors’ fees and disbursements ¶11-070; ¶17-425; ¶25-150

Legal professional privilege

“accountants concession” ¶18-140
“spousal privilege” ¶18-140

Legislative background
legislation sources
— constitutional validity ¶1-300
— distribution of revenue ¶1-300
— government bodies ¶1-300
— “locking in” the GST rate ¶1-300
— price exploitation ¶1-300
— revenue ¶1-300
— transitional rules ¶1-300
— wine equalisation tax and luxury car tax ¶1-300

Leisure, sport or entertainment venues

food premises ¶13-120

Levies
body corporate ¶11-200

Liabilities and obligations, special

company officers ¶18-260
GST
— group members ¶18-240
— joint venture partners ¶18-220
incapacitated entities
— representatives ¶18-250
non-profit sub entities ¶18-235
partners ¶18-210
personal liabilities ¶18-200
trustees ¶18-270
unincorporated associations
— members ¶18-230

Liabilities for GST

assessment, payment and refunds ¶8-080
assumption by purchaser of business ¶11-515
taxable supplies ¶4-000
ten-point guide to GST ¶1-010

Liability for GST — taxable supplies — see also Taxable supplies

calculating GST on supplies
— buying and selling at auction ¶4-210
— how GST is worked out ¶4-200
— rounding off rules for GST ¶4-205
taxable supplies
— cancellation fees ¶4-065
— competitions and prizes ¶4-035
— court orders and out-of-court settlements ¶4-085
— definition ¶4-000
— fines, penalties, taxes and charges ¶4-080
— frequent flyer, shopper and loyalty programs ¶4-062
— gifts, tips, promotions and stolen property ¶4-030
— grants and sponsorships ¶4-040
— multi-party transactions ¶4-015
— redeemable vouchers ¶4-060
— requirement 1 — supply must be made ¶4-010
— requirement 2 — supply is mad for consideration ¶4-020
— requirement 3 — enterprise ¶4-090
— requirement 4 — connection with Australia ¶4-100
— requirement 5 — registration ¶4-105
— requirement 6 — supplies not GST-free or input ¶4-110
— security deposits ¶4-070
— telecommunications supplies ¶4-103

Licences, registrations and permits ¶4-080

Life insurance
financial supply ¶10-010
policies, issue ¶10-100

Life memberships or rights ¶1-200; ¶19-220

transitional rules ¶19-220

Light trucks ¶23-100

Limousine ¶12-130
definition ¶23-100

Line of credit and overdraft

consideration received or provided
— attribution rules ¶7-325

Lions Clubs ¶15-000

Liquidation ¶3-080; ¶18-250

adjustments ¶6-417
bad debt ¶6-210
concluding tax period ¶7-120
effect ¶17-030

Liquidators, receivers and trustees

cash basis accounting ¶7-300
distributions ¶4-020
tax periods ¶7-100

Liquor ¶22-010

Livestock ¶13-110
auction sales ¶4-210
breeding livestock
— re-importation into Australia ¶9-055; ¶25-140
computer aided livestock marketing (CALM) sales ¶4-210
impounded ¶10-070

Loans
financial supply ¶10-010

Local entry of imported wine ¶22-180

Local government rates ¶4-080; ¶11-070

Lodgment of GST returns ¶8-000

electronic lodgment ¶8-043
other special rules for GST returns ¶8-050
standard method ¶8-002
— completion of return ¶8-010
— time for lodgement ¶8-005

Long day care centres ¶14-100

Long-term accommodation ¶11-320

Long-term leases ¶11-060

margin scheme ¶11-100

Loser ¶20-070; ¶26-000

Lost, destroyed or stolen goods ¶6-300

Lotteries ¶15-020; ¶16-000

lotto syndicates ¶16-000

Low-value acquisitions
tax invoices ¶5-170

Low value goods (LVG) ¶25-040; ¶26-000

Low value supplies

coin-operated vending machines ¶25-120

Loyalty programs ¶4-062

Lucky membership draws ¶16-000

Luxury car tax (LCT) ¶26-000

accounting ¶23-260
adjustments for bad debts ¶23-260
application ¶23-100
calculating ¶23-200
calculation of amount
— imported vehicles ¶23-200
car limit ¶12-110; ¶25-040
contract compliance ¶19-400
exemption ¶9-050
fuel-efficient cars ¶23-150
government bodies ¶23-050
GST clauses
— recovering GST ¶19-400
input tax credits ¶23-250; ¶23-260
liability ¶23-050
public museums and at galleries ¶23-050
quoting an ABN ¶23-250
refund for primary producers and tourist operators ¶23-210
refunds
— primary producers and tourist operators ¶23-200
returns ¶8-010
rules governing
— legislation implementing ¶23-000
taxable importations ¶23-050
taxable supplies ¶23-050; ¶23-150
threshold ¶25-040
— fuel-efficient cars ¶23-100
value and threshold ¶23-150
value for importations ¶23-150
vehicles that attract tax ¶23-100

Luxury car tax threshold ¶26-000

Luxury cars ¶12-110

definition ¶23-100
GST calculation ¶4-200
taxable supplies ¶23-150

M
Mail, international ¶12-050

Maintenance contracts
transitional rules ¶19-210

Malt extract ¶13-180

Managed investment schemes ¶10-010

investors ¶22-560

Management contracts ¶7-420

Margin scheme ¶26-000

application
— subdivision and sale ¶11-063
— time of choice ¶11-100
bad debts ¶11-130
bare trustees ¶11-100
calculation ¶11-110
going concern exemption not applicable ¶11-510
proposed changes affecting subdivisions ¶11-100
rules ¶11-100
special situations
— amalgamated property ¶11-140
— farm land or going concerns ¶11-140
— GST groups and joint ventures ¶11-140
— inherited property ¶11-140
— property acquired from or supplied to associate ¶11-140
— subdivisions ¶11-140
valuations ¶11-120

Marinas ¶11-030
berths
— guidelines ¶11-320

Market value
lease renewal clause ¶19-400
supplies for nominal value
— percentage ¶15-010
transitional rules
— associates ¶17-500

Marketing incentives ¶4-030

Marriage breakdown settlements

GST adjustments ¶6-300
taxable supplies ¶4-090

Masters and Doctoral courses ¶14-002

Mead
wine equalisation tax (WET)
— application ¶22-010

Meal entertainment ¶24-210

Meals on Wheels services ¶13-100; ¶13-340

Medical aids and appliances ¶12-150; ¶13-350

spare parts ¶13-350
Medical alert device
monitoring ¶13-320

Medical care ¶13-310

Medical consultations ¶13-310

Medical practitioners
alternative medical practitioners
— accreditation ¶13-320
alternative medicine
— recognised professional — requirement ¶13-320
assistant ¶13-310; ¶13-320
services
— Medicare benefit payable ¶13-310

Medical reports
driver’s licence extension ¶13-310
social security entitlements ¶13-310

Medicare benefits, payable

medical practitioner
— services ¶13-310

Medicines ¶13-360

Membership fees
paid to charitable organisation ¶15-040

Membership requirements, GST groups ¶17-010

Micro-enterprises
ATO compliance program ¶18-180

Military rehabilitation and compensation

statutory compensation schemes ¶10-130

Mining “farm out” arrangements ¶4-020

Mistakes in credit claims ¶5-020

Mixed and composite courses ¶14-002

Mixed supplies
GST calculation ¶4-200

Mobile telephone roaming ¶9-240

Money held on trust pending distribution
consideration received or provided
— attribution rules ¶7-325

Money, inclusions ¶4-010

Money transfer for accounts ¶10-010

Monthly returns
adjusted periods ¶8-005

Monthly tax periods

anti-avoidance rules ¶7-100
cash flow ¶21-070
importers ¶21-070

Mortgagee
sale of business ¶11-506

Mortgages and charges

financial supply ¶10-010

Motels ¶11-020; ¶11-030

Motor homes ¶11-010; ¶12-110; ¶23-100

Motor vehicle insurance

statutory compensation schemes ¶10-130

Motor vehicles
associated transport costs
— “retail holdback” ¶12-170
— “wholesale holdback” ¶12-170
bad debts ¶6-220
car supply
— GST ¶12-080
claimed acquisition ¶5-010
luxury cars ¶12-110
registration fees ¶12-170
sale on lease termination ¶12-145
special rules ¶5-020

Movie tickets ¶4-060

Multiple supplies or items ¶4-205

Multiple ventures
consolidated returns ¶17-220

N
National Disability Insurance Scheme ¶13-340

National Guarantee Fund payments ¶10-020

National Privacy Principles ¶9-240

Naturopathy
goods supplied to patient ¶13-320
recognised professional
— requirement ¶13-320

Negligent mis-statement
damages ¶4-085

Net amount ¶26-000

Net GST
payment ¶8-100
— special rules ¶8-100

Net GST or refund ¶8-010

New Apprenticeship Access Programme ¶14-002

New goods incorporated into second-hand goods ¶16-100

New residential premises ¶25-100

inclusions ¶11-020
long-term leases ¶11-060
new sale
— used for residential accommodation ¶11-020
purchaser of new premises to remit GST from 1 July 2018 ¶11-022

New South Wales vendor duty ¶11-070

New Tax System ¶1-000

New Zealand
wine producer rebate ¶22-560

Newly-registered businesses
adjustments ¶6-400

Nicotine patches ¶13-360

Night-soil or sullage collection ¶16-200

Non-calendar monthly tax periods ¶7-105

Non-cash business benefits used for private purposes ¶5-010

Non-charitable public ancillary and prescribed public funds ¶3-015

Non-commercial newsletters, magazines and journals ¶15-010

Non-commercial premises, pre-existing

sale
— no GST payable ¶11-010

Non-entity joint ventures ¶3-015

Non-food promotional items ¶13-200

Non-monetary gambling prizes ¶16-000

Non-profit bodies and charities

grants ¶4-040
GST group ¶17-010
turnover test ¶3-030

Non-profit branches
registration ¶15-080; ¶17-300

Non-profit clubs or associations ¶3-020

Non-profit sub entities ¶15-080; ¶17-500; ¶18-235; ¶26-000

Non-recognised childcare services ¶14-100

Non-residential premises
sale ¶11-050

Non-residents
ATO compliance program ¶12-020; ¶18-180
Australian tour packages ¶12-020
definition ¶9-240
GST return requirement ¶8-050
life insurance policies ¶10-140
registration ¶3-000
— limited registration option ¶9-120
— special rules ¶3-080
reverse charges ¶9-095; ¶9-120
supply ¶9-240
— connection with Australia ¶4-100; ¶4-102; ¶4-103
— not connected with Australia ¶4-101
tax invoices
— modifications to requirements ¶5-130
tooling supplies
— use ¶9-235
tour operators ¶4-100

Non-sewered residential premises ¶16-200

Non-standard tax periods ¶7-105

Non-tax agents
ATO portal ¶8-042

Non-taxable importations
goods imported into Australia ¶9-030

Not-for-profit childcare bodies ¶14-100

Not-for-Profits Commission ¶15-000

Notional wholesale sales price ¶22-290

Nursing homes ¶13-340

Nursing services ¶13-320

O
Objections and appeals
AAT decisions ¶18-660
— appeals ¶18-670
— review ¶18-650
AAT or Federal Court, choice ¶18-640
alternative dispute resolution ¶18-750
Commissioner’s decisions
— objections to ¶18-600
Commissioner’s discretion
— review ¶18-690
decision on objection ¶18-630
Federal Court appeals ¶18-680
Federal Court decisions
— appeals from ¶18-700
grounds of objection ¶18-620
GST assessments ¶18-600
time limit for lodging ¶18-610
pro forma objection forms ¶18-610

Obstetrics ¶13-310

Occasional care services ¶14-100

Occupational therapy ¶13-320

Officers — see Company officers

Official foreign government goods ¶9-030

Offsetting credits against GST ¶7-000

Offsetting GST refunds ¶8-110

Offshore management and support services

reduced credit ¶10-042

Offshore oil rigs

relevant connection with Australia ¶4-100

Offshore owners of Australian real estate ¶9-240; ¶11-070

Offshore suppliers
commercial residential premises ¶11-320
transport, travel and vehicles 12-020

Offshore supplies
business supplies of services and rights ¶9-100
electronic distributions ¶9-100
“low-value” goods to consumers ¶9-130

Olives ¶13-110

On-charging ¶4-090

Oncology ¶13-310
One-off ventures ¶3-020

Opportunity to review ¶19-250; ¶26-000

Optician’s services ¶13-320

Option to report and pay annually ¶8-037

Optional annual apportionments

small business ¶5-020

Optional monthly tax periods ¶7-100

Options — see also Rights and options

option to acquire ¶4-020
option to purchase going concern ¶11-550
real estate ¶11-068

Orders, return
adjustment event ¶6-100

Organ transplants ¶13-310

Orthodontics ¶13-320

Osteopathy services ¶13-320

Out-of-court settlements ¶4-085

Outliers methodology ¶18-175

Outside-school-hours care services ¶14-100

Outsourcing
financial service providers ¶10-090
services supplied by registered person ¶4-090; ¶21-100

Overdraft facilities ¶10-010

Overdue debts
adjustment notes ¶6-200
attributing to tax periods ¶6-205

Overpaid refunds ¶8-120

Overseas bets
gambling supplies ¶16-000

Overseas branch
pre-establishment rule ¶5-030

Overseas travel — see International travel

Ownership requirements
GST group ¶17-012
— individuals ¶17-014
partnerships ¶17-014
trusts ¶17-014

P
Pap smears ¶13-310

Paramedical services ¶13-320

Parent companies
dividends paid to ¶4-020

Parents and Citizens Associations

fund-raising activities ¶14-004
school tuckshops ¶14-010

Parking ¶7-440
fees ¶12-170
fines ¶12-170
taxable charges ¶4-080

Part business, part private

input tax credit calculation ¶5-020
vehicle trade-ins ¶12-125

Partial exemptions ¶9-240

Partial residences ¶11-010

Partial supplies
supply and acquisition
— timing ¶19-100

Partitions of co-owned land ¶11-064

Partnerships
acquisitions ¶5-010
car parking ¶5-010
carrying on an enterprise
— individual partner ¶3-020
entity ¶3-015
goods held as trading stock
— partner takes for private or domestic use ¶4-010
GST group ¶17-010
ownership requirements ¶17-014
registration
— special rules ¶3-080
reimbursement of partners ¶5-040
sale ¶11-500
sale of assets ¶3-020
transactions ¶4-010
types ¶3-015

Pasturage
recipient created tax invoices (RCTIs) ¶5-140

Pathology ¶13-310

Pay As You Go — see PAYG

Pay-by-the-month insurance ¶7-420

Pay-roll tax ¶4-080

voluntary withholding agreement ¶4-090

PAYG ¶8-037; ¶26-000

ABN quote ¶3-050
labour hire arrangements ¶4-090
registration and PAYG ¶3-010

Payment of GST ¶8-100

due date ¶8-100
— weekend or public holiday ¶8-100
importer ¶9-000
recovery
— time limit ¶8-100
running balance accounts ¶8-100
sales to satisfy debts ¶10-070
special rules ¶8-100; ¶8-120
Payment retention ¶7-440
building contracts ¶7-440; ¶11-070

Penalties ¶4-080; ¶5-010

anti-avoidance schemes ¶20-130
checklist ¶18-300
false statements ¶18-300
general interest charge, rates per quarter ¶18-300
GST payment by instalments
— variation ¶8-037
notification ¶18-310
other provisions ¶18-310
overview ¶18-300
penalty units
— value ¶18-000
remission ¶18-305; ¶18-310

Performance of obligation
security deposits ¶4-070

Permanent establishments ¶9-095

definition ¶4-102
inclusions ¶4-100

Perry
wine equalisation tax (WET) ¶22-010

Personal lubricants ¶13-360

Pharmacies
food selling ¶13-360

Phoenix activities ¶20-000

Photocopying ¶7-440

Physiotherapy ¶13-320

Pilot training course ¶14-020

Place of consignment ¶9-005

Planned use adjustments ¶6-300

adjustment periods ¶6-304
private or domestic use application goods ¶6-320
Planning and zoning fees ¶4-080

Planning issues ¶21-100

Platinum ¶16-210

Podiatry services ¶13-320

Portfolio transfers ¶10-120

Post-mortem examinations ¶13-380

Postage stamps ¶4-060; ¶12-050

Poultry industry
recipient created tax invoices (RCTIs) ¶5-140

Power bills
transitional rules ¶19-210

Practical Compliance Guidelines ¶18-030

Pre-establishment costs ¶1-180; ¶5-030

adjustment notes ¶6-130
overseas branch ¶5-030
special attribution rules ¶7-450

Pre-existing residential premises

predominantly residential accommodation
— sale ¶11-010

Pre-1 July 2000 invoice or payment ¶7-450

Pre-paid funerals ¶1-200; ¶13-380

Pre-paid phone cards ¶4-060

Pre-school curricula ¶14-002

Pre-vocational courses ¶14-002

Precious metals ¶16-210; ¶26-000

options ¶10-010
reverse charge rule from 1 April 2017 ¶16-210
second-hand goods ¶16-100

Prepared meals and food ¶13-100; ¶13-140

Pricing ¶26-000
ACCC
— failure to disclose GST ¶21-010
black economy ¶21-045
displaying
— failure to disclose GST ¶21-010
GST effect
— new housing ¶11-020
marketing ¶2-010

Primary producers
checklist ¶25-140
GST payment by instalments ¶8-037
— cashflow ¶21-070

Principal effect test

schemes ¶20-050

Printing costs and stationery

GST start up costs ¶24-100

Prisons ¶13-216

Private expenses
corporate credit or charge cards ¶5-130
goods applied ¶6-320
private recreational pursuits ¶3-020
sales of things acquired without full credits ¶6-310

Private health insurance ¶10-140; ¶13-370

Private transactions ¶3-020; ¶25-000

Private tutoring ¶14-002

Prizes ¶4-035

Pro bono legal services ¶4-020

Pro forma objection forms ¶18-610

Process server ¶17-425

Product launches ¶12-128

Product recalls ¶6-100; ¶25-170

Professional advice costs

GST start up costs ¶24-100

Professional gambler
GST position ¶16-000

Professional or trade courses ¶14-002; ¶14-020

Professional practitioners
cash basis ¶7-300

Professional services ¶10-020

Professions
checklist ¶25-150

Progressive or periodic supplies ¶1-200; ¶7-420

GST calculation ¶19-210
part not connected with Australia ¶7-420
supply and acquisition
— timing ¶19-100; ¶19-210
tax invoice ¶5-130
transitional rules ¶19-210

Projected turnover
calculation ¶3-030

Promoter
definition ¶20-110

Promotion assessments ¶14-020

Promotions ¶4-030; ¶13-220; ¶15-030; ¶15-080

Property
real estate — see Real estate

Property dealers and developers

real estate held at 1 July 2000
— special rules ¶11-100
use of margin scheme ¶1-180

Psychoanalysis ¶13-310

Psychology ¶13-320

Psychotherapy ¶13-310
Public benevolent institutions
charity ¶15-000

Public health goods ¶13-360

Public holidays and weekends

GST payment
— due date ¶8-100; ¶25-055

Public land
swimming pool and leisure centre
— fees for use ¶4-080

Public Lending Right scheme ¶4-040

Public rulings ¶18-030

Public transport ¶1-160

fares ¶12-170

Publications
given away ¶15-010

Purchaser
refusal to pay GST component of price ¶19-400

Purchases snapshot method ¶13-215; ¶26-000

Purchasing from Government ¶5-010

Q
Qualifications
recognition of prior ¶14-020

Quality of Care Principles ¶13-340

Quantity discounts ¶21-100

Quarter ¶7-100; ¶8-037; ¶26-000

Quarterly payers
GST returns and the BAS ¶1-140
quarterly remittance method ¶8-000
standard method ¶8-002

Quarterly remittance method

GST return ¶8-000

Quarterly tax periods ¶7-100

extensions of time ¶8-005
simplified methods
— streamlined quarterly remittance form ¶8-036

R
Racing cars ¶23-100

Racing industry
GST ¶3-020

Racing prizes ¶4-035

Racing syndicates ¶4-035

Radiology services ¶13-310

Raffles and bingo ¶15-020; ¶16-000

Rail, bus or car transport within Australia

GST effect ¶12-000

Rates and land taxes

assumption of liabilities by purchaser ¶11-515

Re-registration
adjustments ¶6-400

Ready-mixed alcoholic drinks ¶22-010

Real estate
attribution of GST ¶11-065
bad debts ¶6-220
bodies corporate ¶11-200
buying and selling a business — see Buying and selling a business
costs associated with property ¶11-070
creditable acquisition ¶5-010
credits on taxable sales ¶11-065
Crown land, grants ¶11-400
easements, restrictive covenants and options ¶11-068
farm land
— GST-free sales ¶11-410
— subdivision ¶11-420
granting, assigning or surrendering ¶4-010
long-term leases ¶11-060
offshore owners ¶9-240; ¶11-070
outside Australia
— export exemption ¶9-240
rented or leased premises
— accommodation in commercial residential premises ¶11-320
— accommodation in residential premises ¶11-310
— leased commercial premises ¶11-330
— leases entered into before 1 July 2000 ¶11-340
— sale of a real property subject to lease ¶11-335
— summary of GST position on leases ¶11-300
sale
— commercial residential premises ¶11-030
— floating homes ¶11-010
— GST position, summary ¶11-000
— new residential premises ¶11-020
— non-residential premises ¶11-050
— pre-existing residential premises ¶11-010
— ships ¶11-030
sale of real property
— attribution of GST and credits on taxable sales ¶11-065
— easements, restrictive covenants and options ¶11-068
— long-term leases ¶11-060
— other matters associated with property ¶11-070
— sale of commercial residential premises ¶11-030
— sale of new residential premises ¶11-020
— sale of non-residential premises ¶11-050
— sale of pre-existing non-commercial residential premises ¶11-010
— subdivision and sale ¶11-063
— summary of GST position on sales ¶11-000
special attribution rules ¶7-450
special margin rules
— bad debts under the margin scheme ¶11-130
— how the margin scheme works ¶11-100
— how to calculate the margin ¶11-110
— special situations ¶11-140
subdivision and sale ¶11-063
supplies under margin scheme
— tax invoices ¶5-130
supply and acquisition
— timing ¶19-100

Real property
chattels included in sale ¶11-000
definition ¶11-000
emissions units ¶11-000
fixtures ¶11-000
foreign property ¶11-000
sale subject to lease ¶11-335
time of supply ¶11-000
time-sharing schemes ¶11-000

Reasonable care ¶18-300

Reasonable expectation rules

exclusions ¶19-200
periodical supply rules
— overlap ¶19-200

Receivership ¶3-080; ¶18-250

bad debt ¶6-210
concluding tax period ¶7-120

Recipient ¶26-000

Recipient created tax invoices (RCTIs) ¶5-140; ¶26-000

contents ¶5-150
registration status check ¶5-140
types ¶5-140

Recklessness ¶18-300

Recognition of prior qualifications ¶14-020

Reconditioned vehicle parts

core deposits ¶4-070

Records
exports ¶9-210
mixed business retailers ¶13-215
obligation to keep ¶18-040
— checklist ¶18-040

Recovery of GST
cashflow ¶21-070
contracts ¶19-400

Recreational, leisure or personal enrichment courses ¶14-002

Recycled containers ¶16-100

Redeemable vouchers ¶1-180; ¶1-200; ¶4-060

GST on redemption ¶4-060
proposed government review of vouchers rules ¶4-060
vouchers issued at discount ¶4-060

Reduced credit acquisitions ¶10-040; ¶26-000

Reduced credits
acquisitions ¶10-030
financial suppliers ¶6-300
financial supplies ¶10-040

Reduced input tax credit (RITC) ¶10-040; ¶26-000

Refresher courses ¶14-020

Refunds — see GST refunds

Registration ¶1-110; ¶21-100; ¶26-000

attention to requirements ¶2-010
Australian Business Number (ABN) ¶3-050
bodies corporate ¶11-200
branches ¶17-300
cancellation ¶3-070
— before 12 months have expired ¶3-070
— concluding tax period ¶7-120
— voluntary registration ¶3-070
carrying on an enterprise ¶3-020
cessation
— adjustments ¶6-410
— business owner’s death ¶6-415
— special attribution rules ¶7-450
charities ¶15-080
— Australian Charities ¶15-000
— Not-for-Profits Commission ¶15-000
educational institutions
— options ¶14-040
entities ¶3-015
failure to register, remission of penalties ¶18-305
financial supplier ¶10-010
GST audit ¶18-160
importance ¶3-000
luxury car tax purposes ¶23-000
non-profit branches ¶15-080; ¶17-300
non-residents
— proof of identity and carrying on an enterprise ¶3-040
procedure ¶3-040
pros and cons of registration ¶3-010
registration check
— recipient created invoices ¶5-140
reverse charges ¶9-095
simplified registration for certain non-residents ¶3-075
special rules ¶3-080
turnover test ¶3-030

Registration turnover threshold ¶3-000; ¶26-000

Reimbursements ¶1-180; ¶5-040; ¶5-130

adjustment notes ¶6-130
allowances ¶5-040
employees, agents, officers and partners ¶5-040
non-deductible expenses
— input tax credits ¶5-040
volunteers ¶5-040

Relatives’ travel ¶5-010

Religious bodies and organisations

GST religious groups ¶15-052
main characteristics ¶15-050

Religious practitioners
acting as employees of religious institutions ¶15-053; ¶25-110
pastoral and related duties ¶15-050; ¶15-053

Religious services ¶15-050

Remedial education ¶14-002

Remote area accommodation ¶11-310

Removal of goods ¶19-100

Renovations ¶11-020; ¶19-240

Rent ¶11-515

Rental bonds ¶11-310

Rented or leased premises

accommodation
— commercial residential premises ¶11-320
— residential premises ¶11-310
leases before 1 July 2000 ¶11-340
summary of GST position ¶11-300

Repatriation of deceased body or cremated remains ¶13-380

Repatriation Pharmaceutical Benefits Scheme ¶13-360

Replacement goods from overseas ¶9-030

Representative
registration ¶3-080

Representative member ¶26-000

GST group
— GST payment ¶17-020
— GST refund ¶17-020

Resident agents ¶1-180; ¶17-400

GST return requirement ¶8-050
non-residents’ agents
— registration, special rules ¶3-080

Residential accommodation supplies

measuring turnover ¶3-030; ¶11-310

Residential building
relocation ¶11-020

Residential care ¶13-340

Residential premises ¶11-000; ¶26-000

definition ¶11-010
floating homes ¶11-010
residential building
— relocation ¶11-020

Residential properties, sales

commercial residential premises ¶11-030
new residential premises ¶11-020
— purchaser of new premises to remit GST from 1 July 2018 ¶11-022
pre-existing residential premises ¶11-010

Residential property developments

mixed purpose ¶6-300

Residential rents
private ¶11-300

Residential ships ¶11-030

Resonance imaging ¶13-310

Respiratory function tests ¶13-310

Restaurant and catered or eat-in food ¶13-100; ¶13-120

Restaurants, cafes and caterers

checklist ¶25-160
purchase snapshot method of accounting ¶13-215; ¶13-216
SAMS, special methods ¶13-215
staff
— tips ¶4-030

Restrictive covenants
real estate ¶11-068

Resuscitation courses ¶14-002

Retailers
checklist ¶25-170
simplified accounting methods ¶13-215

Retirement hostels ¶13-340

Retirement village arrangements

assumption of liabilities by purchaser of business ¶11-515

Retirement villages ¶11-310; ¶13-340

over-55s accommodation and services ¶15-015
serviced apartments ¶13-340

Retrospective registration
cancellation ¶3-070

Returnable containers ¶13-200

Returns — see BAS

Reverse charges ¶1-180; ¶9-020; ¶26-000

GST groups ¶17-020
imports of digital and other intangible supplies to consumers from 1 July 2017 ¶9-100
non-resident business supplies optional reverse charge ¶9-095
offshore business supplies of services and rights ¶9-100
offshore management and support services
— reduced credit ¶10-042

Reviewable decisions
inclusions ¶18-600

Right, release
supply and acquisition
— timing ¶19-100

Rights and options ¶4-020

acquisition of something connected with Australia ¶9-240
granting, assigning or surrendering ¶4-010
— creditable acquisition ¶5-010

Rights exercisable after 30 June 2000

supply and acquisition
— apportionment ¶19-200
— reasonable expectation ¶19-200

Rights granted under an agreement

connection with Australia ¶4-100

Room in house ¶11-030

Rotary ¶15-000

Rounding ¶5-110; ¶26-000

rules ¶4-205

Rulings ¶18-030

Running Balance Accounts (RBA) ¶8-090; ¶8-100

Rural and remote test

student accommodation ¶14-004
S
“Safe harbour” defences
GST-related penalties ¶18-300

Sake
wine equalisation tax (WET)
— application ¶22-010

Salary sacrifice
fringe benefits for employees ¶24-200

Sale of a business
buying and selling a business
— assumption of liabilities by purchaser of business ¶11-515
— enterprise must be carried on until day of supply ¶11-503
— GST-free supplies of going concerns ¶11-500
— if going concern exemption does not apply ¶11-510
— option to purchase business ¶11-550
— sale of business by selling shares ¶11-530
— sale of franchise ¶11-540
— subsequent GST adjustment if recipient makes input taxed or private supplies ¶11-520
— supply must be of all things necessary ¶11-506

Sale of going concerns ¶11-500; ¶25-000

franchise ¶11-540
tenanted commercial building ¶11-050

Sale of land
standard contract
— deposit paid ¶4-070
— GST attribution ¶11-065

Sale on credit
consideration received or provided
— attribution rules ¶7-325

Sale or return basis

goods ¶7-440; ¶17-422

Sales, mainly cash

cash basis accounting ¶7-300; ¶25-160; ¶25-170
Sales patterns
cashflow effect ¶21-070

Sales percentage method ¶13-215; ¶26-000

Sales tax ¶19-000; ¶26-000

cars and other vehicles for the disabled
— gainful employment ¶12-150
luxury cars ¶12-110
replacement by GST ¶1-000

Sales to satisfy a debt ¶10-070

tax invoices
— modifications to requirements ¶5-130

SAP
compulsory monthly tax periods ¶7-100

Satellite transmissions ¶4-100

Scheme promoters
injunctions and voluntary undertakings ¶20-140
non-conforming implementation of scheme ¶20-120
penalty imposition ¶20-130
scheme promoter rules
— summary ¶20-100
tax exploitation scheme promotion ¶20-110

Schemes ¶26-000
complex real property transactions
— claims for input tax credits using associates ¶11-110; ¶11-300; ¶17-500; ¶20-000
definition ¶20-020
Div 165, application ¶20-010
— GST benefit ¶20-030; ¶20-040
— reasonable conclusion ¶20-050
form and substance ¶20-060
identification ¶20-010
relevant factors ¶20-060
timing ¶20-060

School facilities ¶14-002

School placement, waiting list and withdrawal fees ¶14-004

School tuckshops and canteens ¶13-100; ¶14-010

input tax on food
— choice ¶14-010

School uniforms ¶14-004

Schools
checklist ¶25-180

Scrap metal business ¶18-170; ¶18-175; ¶18-180

Sea voyages
Australian domestic leg ¶12-000

Second-hand books ¶16-120

Second-hand dealers
global accounting ¶16-120

Second-hand goods ¶1-180; ¶15-030; ¶16-100; ¶26-000

charities and gift-deductible bodies
— donated goods ¶16-140
global method accounting ¶1-180; ¶16-110
— application ¶16-120
— eligible goods ¶16-120
goods held 1 July 2000 ¶1-200; ¶16-130
imported ¶9-070
recycled containers ¶16-100
special attribution rules ¶7-450
special input tax credit ¶16-110
supplies by charities and gift-deductible bodies ¶16-140

Second-hand vehicles ¶12-120

Secondary and tertiary education courses ¶14-002

Securities
financial supply ¶10-010

Security deposits ¶4-070; ¶7-450; ¶8-100

rental bonds ¶11-310

Self-employed persons
car parking ¶5-010

Self managed superannuation funds

commercial property contribution ¶10-080

Separately-titled garages ¶11-010

Septic tanks ¶16-200

Service trusts
fee payable
— taxable supply for consideration ¶4-020

Services and rights

offshore supplies
— reverse charge rule ¶9-100

Services provided outside Australia

grants ¶4-040

Services, supply
creditable acquisition ¶5-010
relevant connection with Australia ¶4-100
supply and acquisition
— timing ¶19-100
transitional rules ¶19-210

Services to non-account holders

financial supplies ¶10-010

Set-offs
sale of business ¶4-020

Set price contract

foreign currency gain or loss ¶6-100

Settlements and compromises

audits ¶18-190

Sewerage, waste removal and septic tanks ¶16-200

Sham transactions ¶20-000

Share trading ¶10-000

Sharefarming agreements ¶17-430

Shares
sale of business by selling shares ¶11-530

Ships
GST-free export ¶9-220

Silver ¶16-210

Simplified accounting methods (SAMs) ¶13-210; ¶13-215; ¶15-060; ¶26-000

Single, unitemised supply ¶4-205

Single units of tertiary courses ¶14-002

Sixty days rule ¶9-210

Small business
GST instalments
— current lodgment record ¶8-037
— GST turnover of non-business taxpayers ¶8-037
— making election to pay ¶8-037
— net refund position ¶8-037
— option to pay ¶8-037
— tax periods ¶7-100; ¶8-000
optional annual apportionments ¶5-020
turnover ceiling ¶24-070

Small business entities ¶1-250; ¶8-037; ¶26-000

affiliates
— definition ¶1-275
aggregated turnover
— calculation ¶1-265
— test ¶1-260
carrying on a business ¶1-255
cash basis accounting ¶7-300
cash flow ¶21-060
concessions ¶1-180
— GST ¶24-070
— income tax ¶24-070
connected entities ¶1-280
dealings with associates ¶1-265
input tax credit calculation ¶5-020
rates and thresholds ¶25-040
simplified accounting ¶7-000

Small–medium enterprises
ATO compliance program ¶18-180

Smart cards ¶10-010

Smoking cessation aids ¶13-360

Snapshot method ¶13-215; ¶26-000

restaurants, cafes and caterers ¶13-215

Social work ¶13-320

Soft drinks ¶13-100; ¶13-180

Software licences
supply and acquisition
— timing ¶19-100

Sole corporations
entity ¶3-015

Sole traders
joint ventures ¶17-200

Solicitors
fees and disbursements ¶11-070; ¶17-425; ¶25-150
leased commercial premises ¶11-330
other GST aspects of legal services ¶17-425
trust account
— payments as security future services ¶17-425

Special Access Scheme ¶13-360

Special attribution rules

barter transactions and trade exchanges ¶7-435
change in accounting basis ¶7-400
lay-by sales ¶7-430
other special attribution rules ¶7-450
progressive or periodic supplies ¶7-420
where normal attribution rules do not apply ¶7-440

Special education courses ¶14-002; ¶14-012

Specialist disability services and NDIS ¶13-340

Speech pathology ¶13-320

Speech therapy ¶13-320

Spirits ¶22-010

Sponsorships ¶4-040
prizes ¶4-035

Sporting injuries insurance

statutory compensation schemes ¶10-130

Stamp duty ¶4-080; ¶11-070

insurance premiums ¶10-150

Station wagons ¶23-100

Statute barred debt ¶6-210

Statutory compensation schemes ¶10-130

insurance settlements ¶10-130

Statutory defences
liabilities and obligations, special ¶18-200
— GST group partners ¶18-240
— unincorporated associations ¶18-200

Steam supplies ¶16-200

Stock purchases method ¶13-215; ¶26-000

Stocktakes
differentiate stock and services ¶2-010

Stolen property ¶4-030

Stored value cards

consideration received or provided
— attribution rules ¶7-325

Storm water drainage ¶16-200

Strata title
not issued at valuation ¶11-110

Strata units ¶11-010

margin scheme ¶11-100
registered managed investment scheme ¶11-020
single unit ¶11-030

Student accommodation
provision by charity ¶14-004

Student organisations
membership fees ¶14-004

Students with disabilities

special education courses ¶14-012

Study tours
GST start up costs ¶24-100

Subdivision and sale of real estate ¶11-063

margin scheme ¶11-140

Subrogation
insurance company ¶10-120

Subscriptions, joining fees and levies

transitional rules ¶19-210

Subsequent supply
adjustment ¶5-020; ¶6-310

Sugar Industry Assistance Package ¶4-020

Sunscreen preparations ¶13-360

Superannuation
financial supply ¶10-010

Superannuation contributions surcharge ¶4-080

Superannuation funds ¶10-080

entity ¶3-015
entry and exit fees ¶10-080
sponsoring employer ¶10-080

Supplier on accruals basis

transactions through agents ¶7-440

Supplier on cash basis

transactions through agents ¶7-440
Suppliers
agents ¶3-030
as exporters ¶9-210
associates
— below market value ¶17-500
contracts ¶19-400
definition ¶4-010
employee services enterprise ¶9-100
for nominal value ¶15-010
— concession exploitation scheme ¶15-010
GST calculation ¶4-200
illegal ¶4-010
money ¶4-010
partly connected with Australia ¶4-100
parts not separately identifiable ¶4-200
— apportionment methods ¶4-200
refusal to issue adjustment note ¶6-130
sales of things acquired to make supplies ¶10-060
sales of things acquired without full credits ¶6-310
— special attribution rules ¶7-450
satisfaction of debts
— GST return requirement ¶8-050
to third parties
— agents, agreements to act as principal ¶17-420
value and volume
— cash basis accounting ¶7-300

Supplies ¶4-010; ¶26-000

Supplies outside GST system ¶1-160

Supply and acquisition

amalgamated companies ¶17-110
real property
— made available ¶19-100
rights exercisable after 30 June 2000 ¶19-200
services ¶19-100
timing ¶19-100
transitional rules ¶19-100
Supply chains ¶4-060

Supply in relation to rights

definition ¶9-240

Supply of a right ¶1-170

Supply of goods
relevant connection with Australia ¶4-100

Supply of money
not a supply of goods ¶4-100

Supply of services
Australian connection ¶4-100
fee payable
— taxable supply for consideration ¶4-020
funeral services ¶13-380
funerals
— prepaid ¶13-380

Supply through agent

adjustments ¶6-510

Surgery ¶13-310

Swimming lessons ¶14-002; ¶14-004

Swimming pool and leisure centre fees ¶4-080

T
Tampons ¶13-360

Tattoos
removal ¶13-310

Tax agents
Business Activity Statement (BAS)
— authorised preparation persons ¶8-010
— time for lodgment ¶8-005
GST returns and the BAS ¶8-010

Tax exploitation scheme

definition ¶20-110
non-conforming implementation ¶20-120

Tax invoices ¶1-150; ¶5-010; ¶26-000

acting through agent or broker ¶5-190
— modifications to requirements ¶5-130
adjustment event ¶6-100
agents ¶17-400
amount payable less than $1,000
— sample invoice ¶5-120
amount payable $1,000 or more
— sample invoice ¶5-120
Commissioner, permission not to issue ¶5-130
competition holder ¶4-035
contents ¶5-110; ¶5-150
corporate credit or charge cards ¶5-130
— private or domestic expenses ¶5-130
dispute ¶5-100
dual purpose ¶5-140
electronic ¶5-110
failure to issue
— penalties ¶5-100
— remission of penalties ¶18-305
gambling supplies ¶16-000
incorrect ABN ¶5-130
insurance premiums ¶10-150
issued by trustees ¶5-110
lost ¶5-110
low-value acquisitions ¶5-170
margin scheme
— real property supplies ¶5-130
modifications to requirements ¶5-130
postponing credit claim where to later BAS ¶5-125
procedures ¶2-010
progressive or periodic supplies
— requirements ¶7-420
recipient created ¶5-140
— application to Commissioner ¶5-140
— registration check ¶5-140
role ¶5-100
sample tax invoices ¶5-120
second-hand goods purchase ¶16-110
services import ¶9-100
taxi trips
— business traveller ¶12-130
types ¶5-140

Tax law partnership ¶3-015; ¶3-020; ¶11-500

Tax laws
advice on ¶18-030

Tax losses
transfer ¶17-040

Tax Office ¶9-130

guidelines on compliance, records and governance ¶10-000

Tax period turnover threshold ¶7-110; ¶26-000

Tax periods ¶1-120; ¶26-000

aligning ¶7-105
choice ¶2-010
concluding ¶7-120
determination ¶7-100
ending first seven days of month ¶8-005
GST adjustments
— attribution ¶6-000
liquidators, receivers and trustees ¶7-100
monthly
— adjusted ¶8-005
— compulsory ¶7-100
— non-calendar ¶7-105
— optional ¶7-100
non-standard ¶7-105
offsetting credits against GST ¶7-000
quarterly tax periods ¶7-100

Taxable government charges

cemetery, burial and cremation fees ¶4-080
inspection and testing fees ¶4-080
parking fees ¶4-080
public land use fees ¶4-080
swimming pool and leisure centre fees ¶4-080

Taxable importation ¶9-000; ¶26-000

Taxable supplies ¶4-000; ¶26-000

ATO forms and fact sheets ¶25-500
cancellation fees ¶4-065
competitions and prizes ¶4-035
connection with Australia requirement ¶4-100
fines, penalties, taxes and charges ¶4-080
frequent flyer, shopper and loyalty programs ¶4-062
gifts ¶4-030
grants and sponsorships ¶4-040
luxury cars ¶23-150
made by non-residents, reverse charge ¶9-095
marriage breakdown ¶4-090
multi-party transactions ¶4-015
requirement 1
— supply ¶4-010
requirement 2
— for consideration ¶4-020
requirement 3
— enterprise ¶4-090
requirement 4
— Australian connection requirement ¶4-100
requirement 5
— registration ¶4-105
requirement 6
— agreement to treat supply as taxable ¶4-110
— supplies not GST-free or input taxed ¶4-110
requirements to be satisfied
— connection with Australia ¶4-000
security deposits ¶4-070
stolen property ¶4-030
supplies partly connected with Australia ¶4-104
telecommunication supplies ¶4-103
tips ¶4-030
vouchers, redeemable ¶4-060

Taxable value
assessable dealing in wine ¶22-280
wholesale sale ¶22-280

Taxation advice ¶10-020

Taxis
advance payment of GST ¶12-130
ATO
— guidelines ¶18-190
licence ¶4-080; ¶12-130
operators ¶3-080; ¶12-130
services ¶12-170
taxi plate owner ¶12-130
tips ¶4-030

Taxpayers’ Charter ¶18-000

Telecommunications
relevant connection with Australia ¶4-102
supplies ¶4-103

Telephone expenses
input tax credits
— calculation ¶5-020

Telephones
GST returns
— lodgment ¶8-043

Tenants
leased commercial premises ¶11-330
— outgoings ¶11-330
partnerships
— tenants in common ¶3-020

Termination payments
GST start up costs ¶24-100
Terms and abbreviations ¶26-000

Tertiary residential college courses ¶14-002

Textbooks — see Books

Third parties
advice given
— legal professional privilege ¶18-140
agents
— agreements to act as principal ¶17-420
allied health professionals
— contracts ¶13-320
goods or services supplied
— insurance settlements ¶10-120
insurance settlement ¶10-120
offshore management and support services ¶10-042
supply must be for consideration ¶4-020

Third party data matching ¶18-175

Third party insurance ¶12-170

Third party rebate ¶6-100; ¶6-130

Time limits
anti-avoidance scheme penalties ¶20-130
BAS
— correction and revision ¶8-045
lodging objections to decisions ¶18-610

Time of supply ¶11-000

new residential premises ¶11-020

Time periods
GST returns and the BAS ¶8-005
net GST payment ¶8-100
recovery, time limit ¶8-100
tax invoice issue ¶5-100

Time-sharing schemes ¶10-010; ¶11-000

Timing rules
rights exercisable after 30 June 2000 ¶19-200
supply and acquisition ¶19-100

Tips, staff ¶4-030

Tokens of appreciation
consideration of supply ¶4-030

Toll-ways ¶7-440

Tooling
inclusions ¶9-235
used by non-residents ¶9-235

Tools and equipment

employer
— input tax credit claim ¶5-040

Tourist Refund Schemes (TRS) ¶9-220; ¶26-000

application to external territories ¶12-030
sealed bag system ¶12-030
tourist refunds ¶1-180; ¶12-030

TPI war veterans

motor cycles ¶12-150

Trade courses ¶14-020

Trade exchanges ¶7-435

Trade-ins ¶12-125

Tradex scheme goods ¶9-030

Trading stock
income tax ¶24-070
luxury cars ¶12-110

Training
GST start up costs ¶24-100

Training courses for small business and community groups ¶8-010

Training for GST ¶2-010

Transactions falling under more than one rule ¶7-440

Transfers between branches

reverse charge ¶9-100
Transition act ¶1-300

Transitional rounding determinations ¶4-205

Transitional rules ¶19-000

construction contracts ¶1-200; ¶19-230
life memberships ¶1-200; ¶19-220
luxury vehicles ¶1-200; ¶12-110
power bills ¶19-210
prepaid funerals ¶1-200; ¶13-380
progressive or periodic supplies ¶1-200; ¶19-210
redeemable vouchers ¶1-200; ¶4-060
registration ¶1-200
rights exercisable after 30 June 2000 ¶1-200; ¶19-200
second-hand goods on hand 1 July 2000 ¶1-200; ¶16-130
supply and acquisition, timing ¶19-100

Transitional tax periods ¶7-105

Transport and insurance costs

foreign currency conversion ¶9-005; ¶9-050

Transport, loading and handling of exported goods ¶9-220

Transport, travel and vehicles — see also International travel; Motor vehicles; Vehicles
motor vehicles
— associated transport costs ¶12-170
— cars and other vehicles for the disabled ¶12-150
— evaluation and product launches ¶12-128
— GST on supply of cars ¶12-080
— luxury cars ¶12-110
— refunds for diplomats ¶12-160
— sale of car on termination of lease ¶12-145
— second-hand vehicles ¶12-120
— taxis, limousines and ride-sourcing ¶12-130
— trade-ins ¶12-125
transport and travel
— international mail ¶12-050
— offshore suppliers of hotel accommodation ¶12-020
— overseas and domestic travel ¶12-000
— Tourist Refund Scheme (TRS) ¶12-030
— transporting, handling and insuring goods ¶12-010
— travel insurance, agents and related matters ¶12-020

Travel agents
commission ¶12-020
fees for overseas supplies arrangements ¶12-020
local accommodation sold by non-resident agent ¶12-020

Travel expenses and incidental costs

contractor’s services ¶4-090

Travel insurance
international travel
— domestic component ¶12-020
medical component ¶12-020

Travellers’ cheques ¶10-010; ¶12-020

consideration received or provided
— attribution rules ¶7-325

Travelling to and from school ¶14-004

Trophies, medallions and prizes won overseas ¶9-030

Trust accounts, solicitors ¶17-425

Trustees ¶18-270
transactions ¶4-010

Trusts ¶4-010; ¶5-010

bare trusts ¶4-010
car parking ¶5-010
entities ¶3-015
GST group ¶17-014
ownership test ¶17-014
trustees
— distribution to unregistered beneficiary ¶17-500
— entities ¶3-015
— supplies ¶4-010

Turnover — see also Annual turnover

calculation, current and projected ¶3-030
earlier BAS, correction and revision ¶8-045
— time limits ¶8-045
measuring ¶3-030
— reverse charge agreements ¶3-030
non-residents ¶3-030
relevance for other GST purposes ¶3-030
test ¶1-260; ¶3-030

Turnover clauses
planning issues ¶21-100

Turnover thresholds
agents
— agreements to act as principal ¶17-420
— instalments ¶8-037
— registration ¶3-000
— tax period ¶7-110

Two-for-one offers ¶4-060

U
Ultrasound services ¶13-310

Uniforms ¶5-040
non-compulsory ¶5-010

Unincorporated associations or bodies

entity ¶3-015
members
— liabilities and obligations, special ¶18-230

University residential college accommodation

staff or others ¶14-004

Unlawful supplies ¶5-010

Unprocessed cow’s milk ¶13-110

Unprocessed grain, cereal and sugar cane ¶13-110

V
Vacant land ¶11-010

Valuation
builder’s GST liability calculation ¶11-120
consolidation ¶3-020
construction contracts
— options ¶19-230
land acquired before or after 30 June 2000 ¶11-120
margin schemes ¶11-120

Value-added Tax (VAT) ¶1-000; ¶26-000

Value of the taxable importation (VOTI) ¶9-005; ¶26-000

Variation of instalment rates

GST payment by instalments ¶8-037

Vehicle leasing and hire ¶7-420

Vehicles
artificially used for input tax credits ¶20-000
car rental ¶12-170
car sales ¶12-080
car supply ¶12-080
cars and other vehicles for the disabled ¶12-150; ¶13-350; ¶16-110
— gainful employment test ¶12-150
cars used by people confined to wheelchairs ¶23-100
GST and luxury car tax refunds
— diplomats ¶12-160
GST on supply ¶12-080
insurance ¶12-170
partly used for business ¶12-125
petrol and diesel fuel ¶12-170
public transport fares ¶12-170
reconditioned parts, core deposits ¶4-070
repairs ¶12-170
taxi services ¶12-170
trade-ins ¶12-125

Vending machines
coin-operated vending machines ¶25-120
drinks ¶13-180

Ventolin ¶13-360
Veterans, disabled
cars and other vehicles ¶12-150; ¶13-350; ¶16-110

Viticulture
recipient created tax invoices (RCTIs) ¶5-140

Volume purchases
change of consideration
— adjustment event ¶6-100

Volume rebates
adjustment notes ¶6-130

Voluntary disclosures ¶18-160; ¶18-305

Voluntary registration ¶26-000

cancellation ¶3-070

Voluntary registrees ¶8-000

Voluntary undertakings
anti-avoidance schemes ¶20-140

Voluntary withholding agreement ¶4-090

Volunteer expenses
reimbursement ¶5-040

VOTI — see Value of the taxable importation

Vouchers, redeemable ¶1-180; ¶1-200; ¶4-060

consideration received or provided
— attribution rules ¶7-325
face value vouchers ¶4-060
insurance settlements, third parties ¶10-120
issued before 1 July 2000 ¶4-060
received as consideration ¶4-060

W
Wages and salaries ¶4-090

“Wash” sales and revenue neutral transactions ¶18-305

Water access rights

termination ¶4-020
Water, sewerage and drainage
supplies ¶11-070; ¶16-200

Website invoices ¶7-205

Weekends and public holidays

GST payment
— due date ¶25-055

WET ¶26-000
assessable dealings
— application to own use ¶22-170
— local entry of imported wine ¶22-180
— removal from customs clearance area ¶22-185
— retail sales ¶22-165
— summary ¶22-150
— wholesale sales ¶22-160
calculating and paying WET
— calculating WET and taxable value ¶22-280
— notional wholesale selling price ¶22-290
— paying WET ¶22-300
exemptions from WET
— form of quoting ¶22-430
— quoting on a dealing ¶22-420
— summary ¶22-400
outline of WET
— application to ¶22-010
— ATO flowchart ¶22-000
— outline ¶22-000
WET credits
— calculating the rebate ¶22-560
— changes to rebate to apply in 2018 ¶22-570
— definition ¶22-530
— eligibility for rebate ¶22-560
— grounds for claiming WET credits ¶22-550
— New Zealand producers ¶22-560
— Tax Office’s compliance focus ¶22-560
— wine producer rebate ¶22-560
Wholesale sale of wine ¶22-160
taxable value ¶22-280

Wholesale sales tax — see also Sales tax

GST term ¶26-000
replacement by GST ¶1-000

Wine, beer and spirits ¶13-190

beer ¶13-190
de-alcoholised wine not GST-free ¶13-190
exemptions ¶22-400
home-brew kits ¶13-190
— brewers’ yeast and sugar ¶13-190
notional wholesale sales price ¶22-290
packaged with other goods ¶22-280
spirits ¶13-190
spirits added to wine ¶22-010
taxable value of wine
— value of containers ¶22-280
wine, definition ¶22-010

Wine equalisation GST (WEG) ¶5-110; ¶26-000

Wine equalisation tax — see WET

Withholding rule ¶3-050

Words and phrases

actual application ¶6-300
intended application ¶6-300
reasonable care ¶18-300

Work in progress ¶19-100

Workers’ compensation
statutory compensation schemes ¶10-130

Writing off
debt ¶6-210