GST: Stolen Takings

Can the entity's 'net amount' be decreased under subsection 17-5(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when all of its takings are stolen?

No, the entity's 'net amount' cannot be decreased under subsection 17-5(2) of the GST Act when all of its takings are stolen. The 'net amount' remains unaltered.

The entity is a social club operator and is registered for goods and services tax (GST).

The entity conducts a social event and receives proceeds from gate takings, souvenir and bar sales. All the supplies, for which these proceeds are consideration, are taxable supplies under section 9-5 of the GST Act. The entity does not make any other taxable supplies in the tax period.

All the proceeds from the social event were stolen in a burglary.

The entity lodges a claim under its insurance policy to recover some of the amount that was stolen.

The amount that is payable by an entity to the Commissioner (or payable to the entity) for a particular tax period is the entity's 'net amount' for that tax period.

The entity's net amount for a tax period is worked out under section 17-5 of the GST Act by using the following formula:

GST - Input tax credits

where:

'GST' is the sum of all the GST (that is attributable to the tax period) for which the entity is liable on the taxable supplies that it makes; and

'Input tax credits' is the sum of all the input tax credits (that is attributable to the tax period) to which the entity is entitled for the creditable acquisitions and importations that it makes.

Under section 9-40 of the GST Act, the entity must pay the GST payable on any taxable supply that it makes. The amount of GST on a taxable supply is 10% of the value of the supply (section 9-70 of the GST Act). The value of a taxable supply is defined in subsection 9-75(1) of the GST Act and is equal to 10/11th of the price of the supply (or, as the consideration for the supply is expressed as an amount of money, 10/11th of the consideration for the supply).

As all the supplies that the entity makes are taxable supplies under section 9-5 of the GST Act, the sum of all the GST for which the entity is liable in the tax period is 10% of 10/11th of the consideration or proceeds it receives from the social event (or expressed another way, 1/11th of the total consideration received). This amount will form part of the net amount under section 17-5 of the GST Act.

Subsection 17-5(2) of the GST Act provides that the net amount for the tax period may be increased or decreased by any adjustments for the period. Under section 17-10 of the GST Act, the entity may decrease its net amount by subtracting the sum of any decreasing adjustments (if any) that are attributable to the tax period from the net amount.

A decreasing adjustment is defined under section 195-1 of the GST Act to mean an amount arising under one of the provisions listed in that definition. Stolen takings do not give rise to a decreasing adjustment under any of these provisions. Therefore, the entity's net amount under Division 17 of the GST Act remains unaltered despite the fact that all of the takings are stolen. [NOTE: Under section 78-50 of the GST Act, any insurance settlement regarding the stolen takings is not subject to GST, provided the entity notifies the insurer of its entitlement to claim input tax credits of the insurance premium paid. This notification must be made either at the time of the claim or before the claim is made.] NOTE: From 1 July 2012 Section 7-15 of the GST Act was amended in line with the self assessment regime. Section 7-15 of the GST Act now reads "The amount assessed as being the net amount for a tax period is the amount that the entity must pay to the Commonwealth, or the Commonwealth must refund to the entity, in respect of the period."

Date of amendment Part Comment 02/04/2013 Note Added Amended for self assessment legislation effective from 1 July 2012.

Date of amendment | Part | Comment

02/04/2013 | Note Added | Amended for self assessment legislation effective from 1 July 2012.