A New Tax System (Goods and Services Tax) Act 1999 ss 7-5, 9-5, 11-5, 11-25, 17-5, 29-10, 93-5

Tax Laws Amendment (2009 GST Administration Measures) Act 2010

Clontarf Development Pty Ltd and Commissioner of Taxation [2010] AATA 1065

Australian Leisure Marine Pty Ltd and Commissioner of Taxation [2010] AATA 620

Swanbat Pty Ltd and Commissioner of Taxation [2013] AATA 891

Tax Laws Amendment (2009 GST Administration Measures) Bill 2009 - Explanatory Memorandum

1. This case raises a question about a taxpayer's entitlement to input tax credits (ITCs).
2. The question arises because of amendments to the GST law announced in 2009 and ultimately enacted in 2010. Those amendments restrict a taxpayer's ITC entitlements by imposing a four-year time limit on the making of ITC claims.
3. The question is this - if a taxpayer claims ITCs after the commencement date of the amendments, but in circumstances where the ITCs claimed are more than four years old, is the taxpayer denied the credits even if they relate to creditable acquisitions that were made before the commencement date?
4. The Commissioner says the ITCs are no longer available. The taxpayer in this case says it is still entitled to the ITCs.
5. I will explain why I have concluded why the Commissioner is right, and the taxpayer is wrong.

1. The facts of this case are straightforward, and not in dispute.
2. The taxpayer was registered for GST effective from 7 February 2005. It had quarterly tax periods and accounted for GST on a cash basis. The taxpayer has subsequently had its GST registration backdated with effect from 1 January 2005.
3. The taxpayer lodged its Business Activity Statement (BAS) for the tax periods ended 31 March 2005, 30 June 2005 and 30 June 2006 on 29 April 2005, 28 July 2005 and 26 July 2006 respectively. Each of the relevant BASs reported an amount at the Pay As You Go (PAYG) label but had nil amounts at labels 1A (GST payable) and 1B (ITCs).
4. On 15 October 2012 the taxpayer purported to "revise" its BAS for the June 2005 quarter by (a) reporting GST on taxable supplies that had not previously been reported, and (b) claiming ITCs it had not previously claimed. The ITCs were greater than the GST, leaving the taxpayer with a net amount of $1,903 credit. On 3 November 2012 the Commissioner deposited $1,903 into the taxpayer's bank account.
5. This so-called "revision" of the earlier BAS (at least as far as the ITCs are concerned) is not the proper course for a taxpayer to take. Once the BAS for the June 2005 quarter was lodged without any claim for ITCs, any ITCs that might have been capable of being included in that BAS were no longer attributable to that tax period: s 29-10(4) of the GST Act[1]; see also [38] of these reasons.
6. On 8 and 10 November 2012 the taxpayer also "revised" its BASs for the June 2006 and March 2005 quarters respectively. The revised BAS for June 2006, like the one for June 2005, reported both GST and ITCs, leaving the taxpayer with a negative net amount. The revised March 2005 BAS only claimed ITCs.
7. All of the figures included in the revised BASs related to taxable supplies and creditable acquisitions that occurred in those earlier tax periods in 2005 and 2006. There is no dispute that the taxpayer could have legitimately included the figures in the original BASs it lodged in 2005 and 2006.
8. The Commissioner did not refund to the taxpayer either of the negative net amounts resulting from the revised BASs for March 2005 and June 2006. Instead, the Commissioner wrote to the taxpayer, explaining that it was not entitled to any of the refunds (including the one already paid, for the June 2005 quarter) because the taxpayer's BAS revisions were out of time. The Commissioner made nil assessments for each of the three quarters, placing the taxpayer back into the position it was in after lodging the original BASs in 2005 and 2006.
9. The taxpayer objected against the assessments but the Commissioner disallowed the objections. The Tribunal is now reviewing the objection decisions.

1. The GST Act provides that an entity carrying on an enterprise will generally be liable to GST on "taxable supplies" (within the meaning of s 9-5 of the GST Act) that it makes, but it will be entitled to offset, against the GST liability, any ITCs to which it is entitled (ss 7-5, 17-5 and 11-25 of the GST Act). These ITCs are available in respect of "creditable acquisitions" (within the meaning of s 11-5 of the GST Act), which are generally acquisitions made in carrying on the entity's enterprise.
2. GST and ITCs are "attributed" to taxpayers' tax periods in accordance with Division 29 of the GST Act. Within Division 29, s 29-10 deals with ITCs. The general attribution rules are in s 29-10(1) and (2).
3. Subsection (1) provides that an ITC is attributable to the tax period in which you provide any consideration for the acquisition, or any earlier tax period in which an invoice is issued relating to the acquisition. Subsection (2) provides, however, that if you account for GST on a cash basis, your ITC is attributable to a tax period only to the extent to which you provide the consideration for the acquisition during that tax period.
4. Subsection (4) specifies a rule that affects the general operation of subsections (1) and (2). It provides:

If the GST return for a tax period does not take into account an input tax credit attributable to that tax period:

(a) the input tax credit is not attributable to that tax period; and

(b) the input tax credit is attributable to the first tax period for which you give the Commissioner a GST return that does take it into account.

1. The subsection is followed by a "Note" in the following terms:

Section 93-5 or 93-15 may provide a time limit on your entitlement to an input tax credit.

1. Division 93 was inserted into the GST Act by the Tax Laws Amendment (2009 GST Administration Measures) Act 2010 (Act No. 20 of 2010, the "2010 amending Act"). Only s 93-5 is relevant here. As introduced by the 2010 amending Act, s 93-5 provided:
   • (1) You cease to be entitled to an input tax credit for a creditable acquisition to the extent that you have not taken it into account in working out your net amount for:
     • (a) the tax period to which the input tax credit would be attributable under subsection 29-10(1) or (2); or

(b) any other tax period for which you give to the Commissioner a GST return during the period of 4 years after the day on which you were required to give to the Commissioner a GST return for the tax period referred to in paragraph (a).

Note: Section 93-10 sets out circumstances in which your entitlement to the input tax credit does not cease under this section.

(2) This section has effect despite section 11-20 (which is about who is entitled to input tax credits for creditable acquisitions).

1. That is the form of s 93-5 that applies here. Amendments made in 2012 to Division 93 by the Indirect Tax Laws Amendment (Assessment) Act 2012 (Act No. 39 of 2012, the "2012 amending Act") do not apply to the circumstances of this case. Those amendments only apply "in relation to payments and refunds that relate to tax periods, and fuel tax return periods, starting on or after 1 July 2012": Division 5 in Part 1 of Schedule 1 to the 2012 amending Act. This case, on the other hand, concerns payments or refunds that relate to tax periods starting before 1 July 2012 - namely, tax periods starting on 1 January 2005, 1 April 2005 and 1 April 2006.
2. Clause 19 in Schedule 1 to the 2010 amending Act is headed "Application of amendments relating to input tax credits", and is in the following terms:

The amendments made by Part 1 of this Schedule[2] apply, and are taken to have applied, in relation to acquisitions and adjustments that are taken into account in:

(a) GST returns given to the Commissioner under the A New Tax System (Goods and Services Tax) Act 1999 after 7.30 pm Australian Eastern Standard Time on 12 May 2009; or

(b) assessments made by the Commissioner under Subdivision 105-A in Schedule 1 to the Taxation Administration Act 1953 after that time; or

(c) amendments of:

(i) GST returns referred to in paragraph (a); or

(ii) assessments referred to in paragraph (b).

1. The final provision I need to refer to is s 105-55 in Schedule 1 to the Taxation Administration Act 1953 (the TAA). It provides relevantly as follows:

(1) You are not entitled to a refund, other payment or credit to which this subsection applies in respect of a tax period or importation unless:

(a) within 4 years after:

(i) the end of the tax period; or

(ii) the importation;

as the case requires, you notify the Commissioner (in a GST return or otherwise) that you are entitled to the refund, other payment or credit; or

(b) within that period the Commissioner notifies you (in a notice of assessment or otherwise) that you are entitled to the refund, other payment or credit; or

(c) in the case of a credit - the credit is taken into account in working out:

(i) a net amount or net fuel amount that the Commissioner may recover from you only because of subparagraph 105-50(3)(b)(i); or

(ii) an amount of excess referred to in subsection 105-50(2) that the Commissioner may recover from you only because of subparagraph 105-50(3)(b)(ii).

Note: Division 93 of the GST Act puts a time limit on your entitlement to an input tax credit. Division 47 of the Fuel Tax Act 2006 puts a time limit on your entitlement to a fuel tax credit.

(2) Subsection (1) applies to:

(a) a refund in relation to a net amount or net fuel amount in respect of a particular tax period; or

(aa) another payment that represents some or all of an amount:

(i) that you paid as an amount of indirect tax payable by you in respect of a particular tax period; and

(ii) that exceeded the amount (if any) of such tax that you were liable to pay in respect of that tax period; or

(b) an input tax credit or fuel tax credit that is attributable to a particular tax period; or

...

Sunsetting provision

(6) This section applies in relation to payments and refunds that:

(a) relate to tax periods, and fuel tax return periods, that start before 1 July 2012; or

(b) do not relate to any tax periods, or fuel tax return periods, but relate to liabilities or entitlements that arose before 1 July 2012.

Note: This section will be repealed on 1 January 2017: see Part 2 of Schedule 1 to the Indirect Tax Laws Amendment (Assessment) Act 2012.

1. The Commissioner's position, put simply, is that s 93-5 applies to the taxpayer's circumstances. According to the Commissioner, the taxpayer "cease[d] to be entitled" to the ITCs for the creditable acquisitions as soon as Division 93 became law. That is because, by reference to the language of s 93-5, the taxpayer had not taken the creditable acquisitions into account in working out its net amount for:
   • (a) the tax periods to which the ITCs would be attributable under s 29-10(1) or (2) - that is, the quarterly tax periods that ended on 31 March 2005, 30 June 2005 and 30 June 2006; or
   • (b) any other tax period for which it gave the Commissioner a GST return during the period of four years after the due date for those tax periods - 28 April 2005, 28 July 2005 and 28 July 2006.
2. Furthermore, the "application" clause of the 2010 amending Act, clause 19 in Schedule 1, means that s 93-5 is engaged because the amendment is expressed to apply "in relation to acquisitions ... that are taken into account in:"
   • GST returns given to the Commissioner under the GST Act after 7.30 pm AEST on 12 May 2009 (paragraph (a)); and
   • assessments made by the Commissioner after that time (paragraph (b)).
3. The Commissioner says both paragraphs apply.
4. In relation to paragraph (a), the "revised" GST returns were given to the Commissioner after the relevant time - in fact, three and a half years after that time. It does not matter that those "revised" returns relate to acquisitions that were made prior to 7.30 pm on 12 May 2009 because that is not the test. The question is, when is the return lodged, not when was the acquisition made.
5. Also, in relation to paragraph (b), the assessments were made in November 2012, and the same argument applies.
6. In addition to that, s 105-55 in Schedule 1 to the TAA provides that the taxpayer is not entitled to the credits because it did not notify the Commissioner of its entitlement within four years of the end of each relevant tax period.
7. The taxpayer sees things differently. It submits that the Commissioner's interpretation of the application of the 2010 amending Act is in conflict with other existing GST legislation, specifically s 29-10(4). In amplification of that argument the taxpayer submits at [38] of its written submissions:

The current policy of the Commissioner, as outlined above in paragraph 34, does not rely on any statement in the TLA Act 2010 itself. This policy relies on paragraph 1.64 (page 25) in the Explanatory Memorandum (EM) issued by Treasury to assist our members of parliament in considering the proposed legislation:

"As the amendments apply to returns and assessments lodged after Budget night, it will affect taxpayers based on when they lodge a return not the tax period to which the return relates. Taxpayers will also be subject to the four-year restriction when claiming input tax credits in tax periods that ended before 12 May 2009 but for which they had not previously lodged returns or been assessed or by seeking to amend earlier returns or assessments after 12 May 2009".

This paragraph is followed by an example which illustrates it. Apart from paragraph 1.64 in the EM, there is no explanation in the EM that defends an interpretation of the TLA Act 2010 that refers to tax periods before 12 May 2009. Eg Section 1.13 p 15:

"This four-year period commences from the day on which the taxpayer was required to give the Commissioner a return for the tax period to which the credit would be attributable under the basic attribution rules in subsections 29-10(1) and (2) of the GST Act. (Section 1.13 p15.)"

is a statement in the EM about the commencement date for the four year time period that can be equally interpreted as applying to tax periods after 12 May 2009. The Trust argues that this is an interpretation that is more consistent with the TLA Act 2010 itself. More importantly, it is paramount to note that the EM is not the law. It is not legislation. It's (sic) use in interpreting the TLA Act 2010 itself is limited. We contend that it is not acceptable to base ATO policy on any secondary source where that source either contradicts the TLA Act 2010 itself or establishes policies that contradict other existing GST legislation.

1. The taxpayer then proceeds to argue that, prior to the enactment of the 2010 amending Act, there was no time limit of the kind that the Commissioner now says applies. Therefore, for acquisitions that were made prior to 12 May 2009, a taxpayer had an unrestricted entitlement to claim ITCs because of the terms of s 29-10(4). It cannot be the case that an amendment introduced on 12 May 2009 can have the effect that entitlements that were held with respect to an acquisition that was made more than four years prior to 12 May 2009 were removed by an amending Act that makes no specific reference to having an impact on acquisitions made in tax periods both before and after the introduction of the amendment. The taxpayer submits at [40] of its written submissions:

There is no mention in the legislation at all of the phrase "in relation to tax periods before and after" or the phrase "Taxpayers will also be subject to the four-year restriction when claiming input tax credits in tax periods that ended before 12 May 2009" which is taken from section 1.64 in the EM. The TLA Act 2010 states that it is to apply to acquisitions and adjustments in GST returns after 12 May 2009. The Act itself is silent on the actual date of those acquisitions and adjustments in GST returns lodged after 12 May 2009. We argue that the date of those acquisitions and adjustments must be 12 May 2009 onwards. Although the Commissioner nowhere explains his view, the Commissioner's current policy, as described in paragraph 34, is consistent with the view that dates of acquisitions and adjustments prior to 12 May 2009 are intended by the legislation. (Emphasis in the original)

1. In supplementary written submissions filed, with leave, after the hearing, the taxpayer also submits as follows (at page 2):

The position of the Respondent does not require of the TLA Act 2010 any mention at all of 12 May 2009 as a commencement date. The current position of the ATO requires only that it is effective from the day of assent of the TLA Act and applies to all prior tax periods. It is important to ask the Respondent "If the TLA Act 2010 introduces retrospectivity from the day of assent back to the commencement of the GST Act, why is it important for the Act to mention 12 May 2009?" and listen to the answer. This is a very significant point that was not raised at the hearing. The position of the Applicant is that this inconsistency in the Respondent's position disappears when the acquisitions mentioned in Part 3, Paragraph 19 of the TLA Act 2010 are all post 12 May 2009.

The Respondent maintains that there is no doubt about the retrospectivity intended by the TLA Act; that this retrospectivity is directed back to the beginning of the GST Act and that its position is the only possible interpretation of Part 3, Paragraph 19. However, the Respondent's position is not a necessary interpretation of the TLA Act 2010. Paragraph 19 can also be interpreted as applying only to acquisitions post 12 May 2009. In order for retrospectivity back to the beginning of the GST Act to being non-objectionable, it must be clear in the TLA Act 2010 that this is what is intended. It is not clear. (Emphasis added)

1. The taxpayer's submissions cannot be sustained. In particular, the submission that clause 19 in Schedule 1 to the 2010 amending Act "can also be interpreted as applying only to acquisitions post 12 May 2009" is without merit. There is no justification for restricting the clear words of the clause in that way.
2. The simple fact is that clause 19 (which specifies the circumstances to which Division 93 applies) is unambiguous, rendering resort to the Explanatory Memorandum unnecessary. In any event, what is said in the Explanatory Memorandum is a faithful rendition of the precise terms of the law.
3. The amendments apply "in relation to acquisitions ... that are taken into account in GST returns given to the Commissioner under the GST Act after 7.30 pm AEST on 12 May 2009" (paragraph (a) of clause 19). There is no need to specify whether the acquisitions need to have been made before, or after, 12 May 2009 because the provision is fixing not upon the timing of the acquisition but upon the timing of the lodgment of the return, or the timing of the making of an assessment.
4. In the taxpayer's case, acquisitions were taken into account in GST returns (the revised BASs) that were given to the Commissioner in October and November 2012 - in other words, after 7.30 pm on 12 May 2009. That means that the terms of s 93-5 apply. The taxpayer ceased to be entitled to the ITCs because, before 7.30 pm on 12 May 2009, the ITCs had not been included in the BASs for the March 2005, June 2005 or June 2006 quarters or in any of the BASs lodged by the taxpayer during the following four year period.
5. As for the taxpayer's submission that this interpretation is "in conflict" with s 29-10(4), the Commissioner points out, correctly, that this supposed "conflict" is not a conflict at all, because s 29-10(4) is dealing with attribution, while s 93-5 is dealing with entitlement. There can be no attribution where there is no entitlement. Furthermore, to the extent that it is necessary, the "Note" at the end of s 29-10(4) resolves any possible tension by acknowledging that s 93-5 "may provide a time limit on your entitlement to an input tax credit".
6. In any event, as s 29-10(4) makes clear, once the original BASs were lodged without taking into account the creditable acquisitions that could have been included in them, the ITCs were no longer attributable to those tax periods. As a result, the "revisions" of the BASs in late 2012, in an attempt to claim ITCs not included in the original BASs, would not have been effective, even putting s 93-5 to one side.
7. The taxpayer thinks the effect of s 29-10(4) is quite different from that. It outlines its understanding in its supplementary written submissions at page 3:

If ITCs in any tax period are not claimed in the GST return for the tax period in which they occurred, then those ITCs are not attributed to that tax period immediately at the expiry of that tax period. They are in limbo, so to speak, until the tax payer chooses to attribute them to a tax period. Also the tax period chosen by the tax payer in which to attribute these unclaimed ITCs will be chosen at a later date but does not have to be attributed to a later tax period but the 'first' tax period in which they are included. The word 'first' has its natural meaning in this context as the first occasion on which in (sic) the unclaimed ITCs are included in a GST return. However, there is nothing in this legislation preventing the tax payer at a later date to attribute the unclaimed ITCs to the tax period in which they originally occurred. This is what happened in the current case before the Tribunal. (Emphasis added)

1. There is no merit in the highlighted second last sentence of that extract. The very words of paragraph (a) of s 29-10(4) - "the input tax credit is not attributable to that tax period" - prevent a taxpayer from doing that. What is done is done, and cannot be undone.

1. Cases referred to by the Commissioner in the reasons for the objection decisions are Clontarf Development Pty Ltd and Commissioner of Taxation [2010] AATA 1065 and Australian Leisure Marine Pty Ltd and Commissioner of Taxation [2010] AATA 620. Both cases concerned s 105-55 in Schedule 1 to the TAA. They do not deal with s 93-5 and so they are of limited relevance here.
2. The taxpayer then sought to draw some parallels between this case and Swanbat Pty Ltd and Commissioner of Taxation [2013] AATA 891. However, that case did not involve ITCs at all; it was about the Commissioner's attempt to assess the taxpayer to an amount of gross GST payable that the Commissioner knew was wrong. Swanbat does not assist the taxpayer.

1. For completeness, I should add two points.
2. The first concerns the law as it existed prior to the 2010 amending Act, and builds on the taxpayer's submission as set out in [31] of these reasons. There was some inconsistency between s 29-10(4) and the apparent intent of s 105-55 in Schedule 1 to the TAA to impose a four-year limitation period on ITCs. As Senior Member McCabe noted in Clontarf Development at [31]:

The Commissioner acknowledged that s 29-10(4) of the GST Act effectively permitted a taxpayer to hold off making a claim in respect of a period and attribute an ITC to a later period if it had a tax invoice - provided of course there was no "double dipping" in the sense that the same claim was attributed to more than one period.

1. Accepting that was so, a taxpayer might, in some circumstances, not be limited by s 105-55 at all. It could, for example, upon becoming aware in 2008 that it had failed to claim ITCs in respect of an acquisition made in 2001, simply include the claim in a 2008 BAS in reliance on s 29-10(4). Paragraph (a) would have made the ITCs no longer attributable to the 2001 tax period and paragraph (b) would make the ITCs attributable to the 2008 tax period. Section 105-55 would arguably not be engaged since the claim is now being made "in respect of" the current tax period, not one that occurred seven years ago.
2. It is the removal of this possible anomaly that seems to have aggrieved the taxpayer here. The taxpayer's representative, Mr Borg, said during the hearing:[3]

And so for those taxpayers who had unclaimed ITCs before 12 May 2005 their four years in which to give notice of their unclaimed ITCs to the Commissioner that was eroded to zero overnight. Boom, gone, and the ITCs hadn't even been allocated to a tax period. And so I'm saying that this is a reason this is a conflict between the application of the TLA Act retrospectively and the entitlement given to taxpayers under 29-10(4) is a clash that disappears when the TLA Act 2010 is taken to refer to acquisitions which were paid, credible acquisitions that had been actually paid for that have occurred after 12 May 2009. So that clash, that inconsistent clash, disappears.

1. The short answer is that the possible anomaly has been removed. The provisions now work in perfect harmony: because of the introduction of Division 93, s 105-55 now achieves what it was probably always meant to achieve.
2. The second point concerns the Commissioner's submission with respect to clause 19 in Schedule 1 to the 2010 amending Act. I do not agree with that part of the Commissioner's submission that relies on paragraph (b) of clause 19. It seems to me that the taxpayer's 2005 and 2006 acquisitions were not "taken into account in" the assessments that the Commissioner made in November 2012; quite the contrary, they were specifically excluded. Ultimately it does not matter, since the Commissioner's reliance on paragraph (a) is sufficient to support his position.

1. The objection decisions under review are affirmed.

I certify that the preceding 49 (forty -nine) paragraphs are a true copy of the reasons for the decision herein of Deputy President S E Frost

...........................[sgd].............................................

[1] A New Tax System (Goods and Services Tax) Act 1999

[2] Including clause 7, which introduced Division 93