Issue
Can the entity, a financial supply provider, change its apportionment method which is fair and reasonable and revise an earlier net amount, by applying a new apportionment method which is also fair and reasonable?
Decision
Yes, the entity can change its apportionment method, and revise an earlier net amount, by applying a new apportionment method which is also fair and reasonable.
Facts
The entity is a financial supply provider which is registered for goods and services tax (GST).
The entity carries on an enterprise and makes financial supplies and taxable supplies in Australia. The entity makes acquisitions for the purpose of making financial supplies and taxable supplies. The entity accounts on a non-cash basis.
The entity exceeds the financial acquisitions threshold and is not entitled to claim input tax credits to the extent that the acquisitions relate to making financial supplies but may be entitled to claim reduced input tax credits on reduced credit acquisitions.
The entity in making an input tax credit claim in a GST return for the relevant tax period estimated the planned use of its acquisitions by applying a fair and reasonable apportionment method as set out in Goods and Services Tax Ruling GSTR 2006/3 (the first apportionment method). The entity held the relevant tax invoices in this tax period.
Then, at a later time, the entity determined that by applying another apportionment method, which is also fair and reasonable and in accordance with GSTR 2006/3 (the second apportionment method), its entitlement to an input tax credit in the GST return for the earlier period could increase. The entity revised its GST return for that period to make this claim.
Reasons for Decision
The entity lodged a GST return under Division 31 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). In this return, the entity provided the net amount for the original tax period.
The net amount, as required under subsection 17-5(1) of the GST Act, is the GST less any input tax credits. The input tax credits for the purposes of section 17-5 of the GST Act is the sum of all of the input tax credits to which an entity is entitled for the creditable acquisitions and creditable importations that are attributable to the tax period.
An entity makes a creditable acquisition , under section 11-5 of the GST Act, when that entity: (a) acquires anything solely or partly for a *creditable purpose; and (b) the supply of the thing to you is a *taxable supply; and (c) the entity provides, or is liable to provide, *consideration for the supply; and (d) the entity is *registered or *required to be registered.
The entity made creditable acquisitions which were only partly for a creditable purpose, as defined in subsections 11-15(1) and (2) of the GST Act. These subsections provide that: (1) You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise. (2) However, you do not acquire the thing for a creditable purpose to the extent that: (a) the acquisition relates to making supplies that would be *input taxed; or (b) the acquisition is of a private or domestic nature.
The entity made an input tax credit claim in the original tax period, to the extent that the acquisitions are partly creditable by applying the formula in subsection 11-30(3) of the GST Act, which is: Full input tax credit * Extent of creditable purpose * Extent of consideration
In order to calculate the extent of creditable purpose, the entity applied a fair and reasonable apportionment method, as prescribed in GSTR 2006/3, to the acquisitions made (the first apportionment method).
Then, at a later point in time, the entity determined that another apportionment method (the second apportionment method) could be applied, which is also fair and reasonable and in accordance with GSTR 2006/3, to increase the input tax credit entitlement lodged in the GST return for the original tax period.
The entity is entitled to revise the original net amount lodged in the GST return for the original tax period by amending its input tax credit claim.
The revised net amount reflects a correct input tax credit entitlement when the new method (the second apportionment method) is also fair and reasonable and in accordance with GSTR 2006/3 given the facts and circumstances which existed at that time. Note 1 - for tax periods starting on or after 1 July 2012, if the entity's additional input tax credit using the second apportionment method 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) Note 2 - for tax periods starting before 1 July 2012, the entity's entitlement to an additional input tax credit using the second apportionment method ceases if the credit is not included in working out the net amount for a tax period within four years of the due date for lodgement of the activity statement to which the input tax credit would be attributable under subsection 29-10(1) or (2) of the GST Act (see section 93-5 of the GST Act). Also, an entitlement to a refund ceases unless the entity has notified the Commissioner of the entitlement within four years after the end of the tax period in which the original claim was made (see section 105-55 of Schedule 1 to the TAA). Note 3 - the entity is not making an increased input tax credit claim as a result of a change in the extent to which an acquisition is applied for a creditable purpose under Division 129 of the GST Act. Note 4 - the entity may, if the conditions for correcting an error as set out in the Correcting GST Errors Determination GSTE 2013/1 are satisfied, take into account the additional input tax credit in working out its net amount for a later tax period provided its entitlement to the additional input tax credit has not ceased under section 93-5 of the GST Act.
Amendment History
Date of Amendment Part Comment 23 November 2018 Amended previous Notes 2 and 4; rearranged the order of Notes 1 and 2 Updated to refer to the time limit for claiming an input tax credit 13 February 2015 Decisions & Reason for Decision Deleted second paragraph under 'Decision', and Notes 1 and 2 amended. Updated for the introduction of self assessment from 1 July 2012. 23 August 2013 New note 2 added and previous note 2 renumbered as note 3 Updated for the amendment to section 105-55 effective 1 July 2012 Note 4 added Inserted information about the Correcting GST Errors Determination GSTE 2013/1
Date of Amendment | Part | Comment
23 November 2018 | Amended previous Notes 2 and 4; rearranged the order of Notes 1 and 2 | Updated to refer to the time limit for claiming an input tax credit
13 February 2015 | Decisions & Reason for Decision | Deleted second paragraph under 'Decision', and Notes 1 and 2 amended. Updated for the introduction of self assessment from 1 July 2012.
23 August 2013 | New note 2 added and previous note 2 renumbered as note 3 | Updated for the amendment to section 105-55 effective 1 July 2012
Note 4 added | Inserted information about the Correcting GST Errors Determination GSTE 2013/1