GST-free exports - the Commissioner's discretion to extend the time to export

Section 38-185 of the A New Tax System (Goods and Services Tax Act) 1999 provides for goods to be supplied GST-free if they are exported within 60 days or such further period as the Commissioner of Taxation allows.

All legislative references in this Practice Statement are to the A New Tax System (Goods and Services Tax Act) 1999, unless otherwise indicated.

From 1 July 2015, the term 'Australia' was replaced in nearly all instances within the GST, luxury car tax and wine equalisation tax legislation with the term 'indirect tax zone'. The scope of the new term, however, remains the same as the now repealed definition of 'Australia' used in those Acts. This change was made for consistency of terminology across the tax legislation, with no change in policy or legal effect. In this Practice Statement, the 'indirect tax zone' is referred to as 'Australia'.

Supplies of new recreational boats [1] may be GST-free where they are exported within 12 months after the receipt day or such further period as we allow. All requests for an extension of time to export goods (including requests for further extensions) are to be referred to Technical Advice and Leadership – GST (TLA-GST). Any decision to exercise the discretion must be approved by a TLA-GST Executive Level 2 or Senior Executive Service officer.

The following is an outline of advice to be provided to suppliers on the application of the GST-free export provisions where the supplier exports goods (other than new recreational boats) from Australia outside the 60-day period allowed [2] : • Where goods will not be exported within the 60-day period allowed for in the legislation, an application for extension of time to export is required if the supplier wants the export to have a GST-free status. • Exceptions to this general rule, where an extension of time is automatically granted, are outlined in Goods and Services Tax Ruling GSTR 2002/6 Goods and Services Tax: Exports of goods, items 1 to 4A of the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999. [3] • Applications for extensions of time to export can be made before the 60-day period has expired, after the 60-day period has expired or after the goods have been exported. [4] Applications should be made as soon as the supplier realises that the time period will not be or has not been met. • Extensions of time to export will usually be granted where there are physical, practical or commercial circumstances that reasonably explain the delay. [5] • The period of the extension will depend on the circumstances in each case. • Further extensions will not normally be granted unless there are exceptional circumstances. • Where industry arrangements give assurance that there is an effective compliance trail we may consider implementing broader approvals for classes of transactions. • Evidence of export, as outlined in GSTR 2002/6, is required. [6] • An adjustment [7] will be required where there is insufficient evidence of export or if export was outside the period allowed (60 days or such further period as we allow). • Instalment contracts, which conform to industry practice or reasonable commercial terms, can be used by suppliers where the goods are not to be exported within 60 days. For instalment contracts, the 60-day period begins when the final payment is made or invoice is given. [8]

In providing advice to suppliers who are making supplies to unregistered recipients for export and relying on subsection 38-185(3), it should be advised that: • It is the supplier's choice to supply goods GST-free to recipients for export and the supplier bears the risk of the goods not being exported. If the goods are not exported, the supplier will be liable for GST. • There are specific provisions for aircraft and ships (excluding new recreational boats) exported by the recipient. [9] • The supplier is liable for GST unless it has documentary evidence from the recipient, who is not registered or required to be registered, that the goods have - been exported by the recipient - not been used or altered prior to export, and - been entered for export. • Evidence of export [10] , as outlined in GSTR 2002/6, is required. [11] An indication of intent to export by the recipient or a photocopy of the recipient's airline ticket or passport is not sufficient evidence. • Applications for extensions of time to export can be made before the 60-day period has expired, after the 60-day period has expired or after the goods have been exported. Applications should be made as soon as it is realised that the time period will not be or has not been met. • We can only give a determination on an extension of time to export to the supplier. The recipient and supplier can jointly apply for an extension of time to export so that the recipient is kept informed. The recipient can request advice on whether it is likely that an extension of time to export would be granted if applied for by the supplier. • The goods can be supplied GST-inclusive to a recipient, who is not registered or required to be registered, and the GST component reimbursed by the supplier when the supplier is provided with evidence that the goods have been exported and that the goods have not been used or altered prior to export, except to the extent necessary to prepare them for export. Where export is outside the 60-day period, an application for extension of time to export should be made and will need to be granted before such reimbursement can be given. We are not required to grant extensions. Suppliers remain liable for GST if an extension is not granted regardless of whether they reimbursed an amount of GST. We cannot require the supplier to process an adjustment to GST or apply for an extension of time to export.

The following is an outline of advice to be provided to suppliers or recipients on the application of the GST-free export provisions where a new recreational boat [12] is exported from Australia outside the 12-month period allowed: • Table item 4A of subsection 38-185(1) applies to supplies of new recreational boats [13] that are exported by the supplier or the recipient within 12 months after the receipt day [14] or such further period that we allow. • Where the boat is exported by the recipient, the supplier is required to obtain documentary evidence of the export from the recipient. The proof of export requirements for new recreational boats are the same as for goods under the 60-day export rules as outlined in GSTR 2002/6. [15] If the boat is not exported, then this gives rise to an adjustment event. [16] • For the supply of the boat to be GST-free, the boat must not be used for certain disqualifying activities prior to being exported. [17] The supplier should be satisfied that this condition is met in order to continue to treat the supply as GST-free. • Applications for extensions of time to export can be made before the 12-month period has expired, after the 12-month period has expired or after the boat has been exported. Applications should be made as soon as it is realised that the time period will not be, or has not been, met. • If a new recreational boat cannot be exported within the 12-month export period, the supplier or recipient (or the supplier and recipient jointly) may apply to us seeking an extension of time for the export to occur. [18] • The boat can be supplied GST-inclusive to a recipient and the GST component reimbursed by the supplier when the supplier is provided with evidence that the boat has been exported and that the boat has not been used for a disqualifying activity prior to export. Where export is outside the 12-month period, an application for extension of time to export should be made and will need to be granted before such reimbursement can be given. We are not required to grant extensions. Suppliers remain liable for GST if an extension is not granted regardless of whether they reimbursed an amount of GST. We cannot require the supplier to process an adjustment to GST or apply for an extension of time to export.

If you identify instances where goods or new recreational boats have not been exported within the allowed period by the supplier or recipient, in circumstances where an extension of time may be granted, you can request advice from TLA-GST that will form the basis for the audit decision. TLA-GST will endeavour to provide a decision within the audit timeframe. To assist in this process, you should provide all relevant information to TLA-GST, including a report on the available evidence of export and other requirements under the provisions.

Section 38-185 provides for the GST-free export of goods and new recreational boats. This provision provides, in relation to table items 1 to 4 of subsection 38-185(1), that goods be exported from Australia within 60 days (or such further period as the Commissioner allows). Table item 4A of subsection 38-185(1) provides that new recreational boats be exported from Australia within 12 months (or such further period as the Commissioner allows).

GSTR 2002/6 sets out our views on: • the meaning of 'the supplier exports' • when the export of goods occurs • when an exporter satisfies the condition that the export of goods must occur within specified time limits, and • the types of documents that a supplier needs to keep as evidence of satisfying the requirements for an export of goods to be GST-free.

GSTR 2002/6 addresses the operation of subsection 38-185(3) that applies where the recipient exports the goods and how that subsection expands the scope of table items 1 and 2 of subsection 38-185(1) in certain circumstances. [19]

GSTR 2002/6 also discusses subsections 38-185(5) and (6), which are relevant to the export of new recreational boats in table item 4A of subsection 38-185(1). [20]

This Practice Statement provides additional guidance on the practical application of the Commissioner's discretion to extend the specified time periods to export goods or new recreational boats.

The 60-day rule is intended to provide suppliers with adequate time to arrange and export goods. The Commissioner's discretion overcomes any unintended consequences (such as goods in transit) of the strict application of the 60-day rule.

In addition to the 60-day rule, a 12-month export period is allowed for new recreational boats. This Practice Statement also provides guidance on the practical application of the Commissioner's discretion to extend the 12-month export period.

Beyond the situations outlined in GSTR 2002/6 where the Commissioner's discretion would normally operate, it is also noted that the discretion would be granted where there are physical, practical or commercial circumstances that reasonably explain the delay in meeting the specified time period to export. This assessment will generally be made on a case-by-case basis. Relevant case law indicates that each case should be decided on its own merits after having proper regard to all relevant facts. The decision to exercise the discretion should not be tied to a prescriptive formula. Some industries may have arrangements that will provide reasonable assurance that goods are exported. In this situation, broader approvals for classes of transactions may be approved by us.

TLA-GST is responsible for considering and approving requests for extension of time to export to ensure that a consistent approach is taken.

Applications for extension of time to export can be made before the relevant period has expired, after the period has expired or after the goods or new recreational boat have been exported. [21] There is no restriction in the legislation that requires an application to be made prior to the end of the 60 days or 12 months. However, applications should be made as soon as it is realised that the time period will not be or has not been met. A factor that may be taken into account in the consideration of a retrospective application is where the supplier has indicated that it was not aware of the 60-day requirement. This factor will not apply to the 12-month period for new recreational boats.

Where a supplier of goods finds that it has exceeded the 60-day export period, TLA-GST can provide a decision on an extension of time to export. Requests for the discretion to be exercised should be made in writing to us by or on behalf of the supplier, or the supplier and recipient jointly.

If a new recreational boat cannot be exported within the 12-month export period, TLA-GST can provide a decision on an extension of time to export. Requests for the discretion to be exercised should be made in writing to us by or on behalf of the supplier, the recipient or the supplier and recipient jointly. If an extension of time is granted at the recipient's request, the recipient must inform the supplier of the extension.

We will advise the party that made the request, in writing, whether the discretion has been exercised. If the discretion is not exercised, we will include reasons in the response.

The information required to be submitted to request an extension of the 60-day period to export is: • description of goods, quantity, recipient and destination • date of supply, invoice and consideration • length of time needed for extension • date exported or proposed date of export • carrier or mode of export • where the goods have already been exported – evidence of export, and • the explanation for the delay and reason an extension of time to export should be granted.

If you identify instances where goods have not been exported within the 60-day period by the supplier or recipient, you will need to consider whether there are physical, practical or commercial circumstances that reasonably explain the delay. If the supplier wishes to apply for an extension of time to export and it is considered that the Commissioner's discretion may be exercised, the issue should be referred to TLA-GST for a decision. A report setting out the details of the transaction, whether the goods have been exported or are likely to be exported and a recommendation based on the factors outlined will assist the decision.

Where goods are paid for in instalments, the GST law [22] provides that the 60-day period commences on the date that the supplier receives any of the final instalment or the date that the supplier gives the invoice for the final instalment (whichever is earlier). In the case of an aircraft or ship sold by instalments [23] under a contract that requires the recipient to export it, the earliest date will also include the date of delivery to the recipient or another person. Where suppliers have forward orders of goods, they can structure their arrangements to utilise table item 2 of subsection 38-185(1), provided that the contracts conform to industry practice or reasonable commercial terms. Extensions of time to export can also be applied for where goods sold under an instalment arrangement cannot be exported within 60 days of the final payment or invoice.

The following factors will be considered in determining whether an extension to the 60-day period will be granted: • the facts and circumstances of each application • the overall situation - why an extension is required - whether alternatives were available - whether there was a choice to structure the arrangement in this way - whether the arrangement was entered into despite the 60-day restriction - any extenuating circumstances • the supplier's compliance history, noting in particular - a good compliance record is required - whether requests for extension are common and the circumstances of those requests • commercial circumstances in the industry – that is, the commercial practices within an industry that may lead to extensions being required, such as subscriptions to publications • the risk of the goods not being exported or going into use in Australia - whether the goods are to be separately stored or will go into common stock - risk of the goods not being exported within the period allowed by us • circumstances outside the control of the supplier or exporter, such as - strikes - breakdowns - transport company delays or hold-ups - illness (animals) - vaccinations or quarantine, or - delays in preparation for export • for goods to be exported by the recipient, whether - the recipient is not registered or required to be registered - the goods have or will not be used or altered in any way, and - if the goods have already been exported – the goods have been entered for export and there is sufficient documentary evidence of export by the recipient.

The Attachment to this Practice Statement provides some examples of requests for extension to the 60-day period.

The information required to be submitted to request an extension of time to export a new recreational boat is: • details of the supplier • details of the recipient • date of supply, invoice and consideration • length of time needed for extension • date exported or proposed date of export • mode of export • where the boat has already been exported – evidence of export • the explanation for the delay; that is, the circumstances explaining why an extension of the 12-month export period is required, and • reasons why an extension of time to export should be granted.

It may be appropriate to exercise the discretion to extend the 12-month export period for a new recreational boat where the delay is due to circumstances beyond the exporter's control. Circumstances could include: • breakdown or accidental damage to the boat which is sufficiently serious to require repair before departure • serious illness to a crew member, or • delayed departure due to unseasonal bad weather making it too dangerous to sail.

Unseasonal weather could be: • cyclones outside the specified season of 1 November to 30 April, or • cyclone occurrences outside the regions associated with most tropical cyclone activity – that is, outside the region between Exmouth and Broome in northwest Western Australia and the northeast Queensland region between Port Douglas and Maryborough.

A decision on the exercise of this discretion is not a reviewable GST decision under section 110-50 of Schedule 1 to the Taxation Administration Act 1953. Therefore, if the supplier or recipient is dissatisfied with the decision, they may request a review under the Administrative Decisions (Judicial Review) Act 1977.