This Draft GST Ruling, issued on Wed 24.9.2014, explains the Commissioner’s view on the meaning of the terms “passed on” and “reimburse” for the purposes of determining whether s 142-10 of the GST Act applies to an amount of excess GST. It says generally, Div 142 operates so that an entity would not be entitled to a refund of an amount of excess GST where the entity has passed on GST to another entity, and has not reimbursed the other entity (ie a recipient) for the passed-on GST.
Broadly, the Draft states whether the excess GST has been passed on is a question of fact and must be determined on a case-by-case basis taking into account the particular circumstances of each case including: the manner in which the excess GST arose; the entity’s pricing policy and practice; documentary evidence surrounding the transaction; and other relevant circumstances. It also states the Commissioner considers that, for the purposes of s 142-10, an amount of excess GST that has been passed on to the recipient is appropriately reimbursed when the recipient has been compensated an equivalent amount by the entity for the amount of excess GST passed on to the recipient.
DATE OF EFFECT: When the final Ruling is issued, it is proposed to apply both before and after its date of issue.
COMMENTS are due by 7 November 2014. ATO Contact: Patrick Giovannelli and Rebekah Coote – Tel: (07) 3213 8724 and (07) 3213 8278; Fax: (07) 3213 8858; Email: patrick.giovannelli@ato.gov.au and rebekah.coote@ato.gov.au.
[LTN 185, 24/9]
Extract from GST Act
SECT 142.10 – Refunding the excess GST
For the purposes of each * taxation law, so much of the excess from subsection 142-5(1) (the excess GST ) as you have * passed on to another entity is taken to have always been:
(a) payable; and
(b) on a * taxable supply;
until you reimburse the other entity for the passed-on GST.
Note 1: If you reimburse the passed-on GST so that this section ceases to apply there will be an adjustment event under paragraph 19-10(1)(b) or (c). You will have a decreasing adjustment (see section 19- 55) and the other entity may have an increasing adjustment (see section 19-80).
Note 2: Any excess GST you have not passed on will be refunded as described in section 155– 75 in Schedule 1 to the Taxation Administration Act 1953 .
Note 3: While this section applies, paragraph 11-5(b) (about taxable supplies) is satisfied for the corresponding acquisition by the other entity.