GST and claiming input tax credits where GST ceases to be payable

Is the entity, a recipient of a taxable supply, entitled to any amount of an input tax credit under Division 11 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it acquires a taxable supply from a supplier who: • treated the supply as non-taxable • did not charge GST • either did not issue a tax invoice or issued an invoice showing that no GST was payable on the supply, and • is now not required to pay GST on the supply due to the application of section 105-50 of Schedule 1 to the Taxation Administration Act 1953 (TAA)?

No, the entity is not entitled to any amount of an input tax credit under Division 11 of the GST Act, when it acquires a taxable supply from a supplier who treated the supply as non-taxable, did not charge GST, either did not issue a tax invoice or issued an invoice showing that no GST was payable on the supply, and is now not required to pay GST on that supply due to the application of section 105-50 of Schedule 1 to the TAA.

While the entity may have been entitled to an input tax credit, the amount of the input tax credit is now zero due to the operation of section 11-25 of the GST Act.

The entity is registered for goods and services tax (GST).

The entity is a recipient of a taxable supply from a supplier, though at the time of the transaction the supplier treated the transaction as non-taxable.

The acquisition was a creditable acquisition by the entity in that it was for a creditable purpose and the entity provided consideration for the supply.

The price charged by the supplier to the entity did not include an amount of GST. The supplier either did not issue a tax invoice to the entity or only ever issued a tax invoice indicating that no GST was payable on the supply.

The Commissioner has not required payment of the additional net amount in respect of the relevant tax period in which the particular transaction occurred to reflect the increased GST payable on the transaction treated as non-taxable by the supplier.

More than four years has elapsed since the transaction occurred and since the net amount became payable for the tax period in which the particular transaction occurred.

Although the transaction is a taxable supply, the supplier in this circumstance is not required to pay the unpaid GST to the Tax Office because the GST has ceased to be payable due to the operation of section 105-50 of Schedule 1 to the TAA.

Under section 11-20 of the GST Act, you are entitled to the input tax credit for any creditable acquisition that you make.

Section 11-5 of the GST Act provides that you make a creditable acquisition if: (a) you acquire anything solely or partly for a creditable purpose; and (b) the supply of the thing to you is a taxable supply; and (c) you provide, or are liable to provide, consideration for the supply; and (d) you are registered, or required to be registered.

The acquisition was a creditable acquisition by the entity in that it was for a creditable purpose and the entity provided consideration for the supply.

Section 11-25 of the GST Act provides that the amount of the input tax credit for a creditable acquisition is equal to the GST payable on the supply.

Section 105-50 of Schedule 1 to the TAA provides that any unpaid net amount or amount of indirect tax ceases to be payable four years after it became payable, unless the Commissioner: • has notified the entity of the unpaid amount within four years of the date it was payable, or • is satisfied that the payment of the amount was avoided due to fraud or evasion.

As section 105-50 of Schedule 1 to the TAA applies to the supplier, any GST that was payable on the supply has now ceased to be payable.

As there is now no GST payable on the supply due to the operation of section 105-50 of Schedule 1 to the TAA, and the amount of the input tax credit must be equal to the GST payable on the supply under section 11-25 of the GST Act, the amount of input tax credit the entity is entitled to claim is now zero. Note 1: Under section 29-10 of the GST Act, you cannot attribute input tax credits unless you hold a valid tax invoice. The entity has not and cannot attribute any input tax credit because the supplier has either not provided a tax invoice or provided a tax invoice on the basis that no GST was payable on the supply. If the entity, under subsection 29-70(2) of the GST Act, now asked the supplier for a tax invoice, the amount of GST that must be shown on the tax invoice issued is zero, as the supplier has charged no GST and the GST has now ceased to be payable because of the operation of section 105-50 of Schedule 1 to the TAA. Note 2: Section 105-50 of Schedule 1 to the TAA only applies to payments and refunds that (a) relate to tax periods that start before 1 July 2012 or (b) liabilities or entitlements that arose before 1 July 2012. Note 3: For tax periods starting on or after 1 July 2012, if an entitys input tax credit is not included in an assessment of a net amount within four years after the due date for lodgement of the activity statement to which the input tax credit is attributable under subsection 29-10(1) or (2) of the GST Act, entitlement to the credit ceases. (See section 93-5 of the GST Act.)

Date of amendment Part Comment 21 December 2018 Notes are numbered; Note 3 updated Note 3 updated to specify the date from which 4 year period starts 4 April 2013 Note Added Changes made in line with Bot 20 being changes to section 105.50 post 1 July 2008 and pre 1 July 2012. Note Added Amended for self assessment legislation effective from 1 July 2012.

Date of amendment | Part | Comment

21 December 2018 | Notes are numbered; Note 3 updated | Note 3 updated to specify the date from which 4 year period starts

4 April 2013 | Note Added | Changes made in line with Bot 20 being changes to section 105.50 post 1 July 2008 and pre 1 July 2012.

Note Added | Amended for self assessment legislation effective from 1 July 2012.