The ATO on Wed 11.4.2012, released Draft Practice Statement PS LA 3521 – Treatment of input tax credits claimed by a recipient where the Commissioner does not give a refund to the supplier due to the operation of s 105-65 of Sch 1 to the Taxation Administration Act 1953.
It explains the circumstances in which the Commissioner will allow a recipient to retain an input tax credit it has claimed where a transaction was incorrectly treated, by a supplier, as giving rise to a taxable supply. The draft practice statement applies to circumstances where:
- a supply has incorrectly been treated as taxable to any extent;
- the supplier is registered for GST and has overpaid GST;
- the supplier has issued a tax invoice to the recipient;
- the recipient has over-claimed an input tax credit on the basis that a creditable acquisition was made and would have been entitled to claim a full or partial input tax credit if the supply had been a taxable supply;
- s 105-65 applies such that the Commissioner need not refund the supplier the overpaid GST; and
- the Commissioner has not given a refund of the overpaid GST to the supplier due to the operation of s 105-65.
In the above circumstances, the draft says the Commissioner generally does not require the recipient to repay the over-claimed input tax credit or pay any general interest charge related to the over-claimed input tax credit. The ATO says this preserving the status quo approach is only applied to historical transactions where the supply has been incorrectly treated as taxable.
The ATO says it expects the incorrect treatment of supplies as taxable to be rectified for future transactions.
Where uncertainty exists as to the correct GST treatment of the transaction, the ATO says it will consider, subject to its risk criteria, whether it needs to take action to confirm the treatment with both parties.
COMMENTS are due by 16 May 2012.
[LTN 68, 11/4]