A New Tax System (GST, Luxury Car Tax and Wine Tax) Directions 2025

Notional liability and entitlement. The central concept is “notional” treatment. Under sections 7, 9, and 10, the Commonwealth is treated as though it were liable to pay GST, luxury car tax, and wine tax respectively on transactions it makes, but only if a non‑Commonwealth person in the same circumstances would be liable. The amounts are worked out under the relevant Act as if the Commonwealth were a normal taxpayer. Similarly, sections 8 and 11 grant notional entitlements to input tax credits under the GST Act and wine tax credits under the WET Act. The concept is purely computational and accounting‑based; no actual tax debt arises.

Untaxable Commonwealth entity. The instrument does not define this term independently. Section 5(2) states that a reference to the Commonwealth includes a reference to an untaxable Commonwealth entity. The term draws its meaning from the GST Act, where it refers to Commonwealth entities that are not “taxable Commonwealth entities” (broadly, those not carrying on a business or not treated as separate taxable persons). Such entities are obliged to register under the GST Act (section 12).

Net amount. Section 14 prescribes a formula for each untaxable Commonwealth entity’s net amount for a tax period: GST + LCT + WT - (ITC + WTC). The components refer to amounts “notionally liable” or “notionally entitled” attributable to that period. Importantly, LCT on taxable importations and wine tax on customs dealings are excluded from this formula; they are handled separately under section 19.

Adjustments. Sections 15 and 16 create notional increasing or decreasing adjustments under the GST Act and LCT Act. These adjust the net amount for items like changes in use or cancellation of supply. They are worked out as if the entity were not an untaxable Commonwealth entity.

Transfer mechanism. The instrument does not involve actual payment of tax. Section 17 requires a positive net amount to be transferred from the entity’s bank account to an official administered receipts bank account chosen by the Commissioner. Section 18 deals with negative net amounts: the Commissioner may offset them against PAYG withholding notional debts or other notional tax debts, and must transfer any remainder from an official account to the entity. Section 19 separately governs transfers of importation amounts (GST on imports, LCT on car imports, wine tax on customs dealings). These transfers must occur within the period a non‑Commonwealth taxpayer would have to pay the equivalent assessed tax.

Override of other laws. Section 6 note 2, read with the empowering provisions, provides that this instrument must be complied with despite any other Commonwealth law. That gives it precedence over inconsistent legislation, which is unusual for a delegated instrument and underscores its role as a machinery provision for the Commonwealth’s internal accounting.

Untaxable Commonwealth entities. The primary duty‑bearers are untaxable Commonwealth entities - that is, departments, agencies, and offices within the Commonwealth that are not taxable entities under the GST Act. Examples might include the Department of Defence, Centrelink, or the Australian Federal Police. Each such entity must register for GST (section 12), calculate its notional net amount each tax period, and transfer positive amounts or receive transfers. The instrument does not apply to “taxable Commonwealth entities” such as government business enterprises that are already subject to actual tax.

The Commissioner of Taxation. Section 20 imposes a general duty on the Commissioner to collect and account for the notional taxes, and to administer the GST, LCT, and WET Acts in relation to the Commonwealth as though references to taxes, credits, and adjustments were references to the notional equivalents under this instrument. The Commissioner also has powers to offset negative net amounts under section 18 and to choose the official bank account for receipts.

Suppliers to the Commonwealth. Private businesses that supply goods or services to the Commonwealth are not directly affected by this instrument. They continue to charge actual GST and issue tax invoices to Commonwealth entities; the Commonwealth entity notionally claims input tax credits on those acquisitions. The instrument does not change the supplier’s tax obligations. However, the supplier may see the Commonwealth behaving more like a normal taxpayer in its record‑keeping and documentation requirements.

The Commonwealth’s budget and cash management system. The instrument affects how the Commonwealth accounts for its own consumption. By notionally imposing taxes on its activities, the system ensures that the cost of government consumption is measured on a comparable basis to private consumption. It avoids the need for separate appropriation or cost‑recovery mechanisms. The cash transfers under sections 17 and 19 represent internal movements between government bank accounts, not external revenue flows.

Wine producers and car dealers. Because the Commonwealth is notionally liable for wine tax and luxury car tax on its own transactions (e.g., a department purchasing a luxury vehicle or importing wine for official functions), the instrument ensures that those transactions are tracked. The dealer or importer still deals with actual tax for the Commonwealth’s supplies; the notional rules are only for the Commonwealth as acquirer or importer.

Duty to register. Section 12 requires every untaxable Commonwealth entity to be registered under the GST Act. The form of registration and procedures must follow guidelines made by the Finance Minister. This is an affirmative obligation; unregistered entities cannot operate under the notional system.

Duty to sign returns. Section 13 applies to paper GST returns. They must be signed by a person with authority to sign on behalf of the entity. Electronic lodgement is not subject to this signature requirement, but presumably the electronic process still requires authorisation.

Duty to calculate and transfer positive net amounts. Section 17: if the net amount for a tax period is greater than zero, the entity must transfer that amount from its bank account(s) to an official administered receipts bank account chosen by the Commissioner. The transfer must occur by the time the entity would have been required to pay an assessed net amount if it were a normal taxpayer - typically 21 days after the end of the tax period for monthly lodgers. Section 19 imposes a similar duty for importation amounts: the entity must transfer the notional GST, LCT, or wine tax on imports by the standard payment time for assessed import taxes.

Duty to make adjustments. Under sections 15 and 16, entities must identify notional increasing or decreasing adjustments and apply them to the net amount for the relevant tax period.

Right to receive transfers when net amount is negative. Section 18(1)(b) requires the Commissioner to transfer an amount corresponding to a negative net amount (or the remainder after offsetting other notional debts) to a bank account of the untaxable Commonwealth entity. This is the counterpart of a refund under the actual tax system.

Right to offset under section 18. The Commissioner may offset a negative net amount against any PAYG withholding notional debts or other notional tax debts of the entity. This provides a mechanism for clearing internal cross‑debts without multiple transfers.

Commissioner’s administrative duty. Section 20 imposes a general direction on the Commissioner to collect and account for notional taxes and to administer the three Acts as if they referred to notional amounts. This is not discretionary; it is a binding direction under the empowering provisions.

No private rights of action. The instrument creates duties only between the Commonwealth and its entities. It does not confer rights on private persons. Suppliers cannot sue the Commonwealth for failing to notionally claim input tax credits.

This instrument does not itself create monetary penalties or criminal offences. However, compliance is mandatory: section 6 note 2 states that the instrument must be complied with despite any other Commonwealth law. Enforceability likely rests on internal administrative mechanisms rather than ATO penalty provisions. The Commissioner is not authorised to impose the general interest charge or administrative penalties under the Taxation Administration Act 1953 for late transfers under this instrument because those provisions apply to actual tax debts, not notional amounts. Nevertheless, failure by an untaxable Commonwealth entity to register, calculate net amounts, or transfer funds could have consequences under the Public Governance, Performance and Accountability Act 2013 (PGPA Act), including potential breaches of the duties of accountable authorities or officials. The instrument's override of other Commonwealth laws means that any statutory provision that might purport to excuse compliance is overridden. The Commissioner has a practical enforcement tool in section 18: the ability to offset negative net amounts against other notional debts. If an entity fails to transfer a positive net amount, the Commissioner might have no direct power to compel payment, but could raise the issue with the Finance Minister. The instrument does not provide for interest on late transfers. The absence of express penalties suggests that the system relies on the entity’s own compliance and internal audit. Given the notional nature, failure to transfer may simply result in accounting discrepancies within the whole-of-government accounts, which could trigger corrective action through budget processes. The Commissioner’s general direction under section 20 includes a duty to collect and account for notional taxes, which imposes an obligation to monitor compliance, but the enforcement toolkit is limited compared to actual tax collection.

Primary empowering Acts. The instrument is made under subsection 177-1(2) of the GST Act, subsection 21-1(2) of the LCT Act, and subsection 27-20(2) of the WET Act. Those subsections each provide that the Minister may, by legislative instrument, give directions for the purpose of giving effect to the Parliament’s intention that the Commonwealth should be notionally liable and entitled. Those Acts also state (in subsections 177-1(3), 21-1(3), and 27-20(3)) that the directions must be complied with despite any other Commonwealth law. This override provision is repeated in section 6 note 2 of the instrument.

GST Act and GST Transition Act. Section 5(3) of the instrument provides that a reference to the GST Act includes a reference to the A New Tax System (Goods and Services Tax Transition) Act 1999. That ensures the notional system applies to transitional rules.

Taxation Administration Act 1953. Section 18 of the instrument cross‑references Part 2-5 in Schedule 1 to the Taxation Administration Act 1953, which deals with PAYG withholding. This allows the Commissioner to offset a negative net amount against a notional PAYG withholding debt of the entity. That linkage is important: it means the notional system is not isolated from the broader tax administration framework, at least for offset purposes.

Luxury Car Tax Act and Wine Equalisation Tax Act. The instrument mirrors the notional liability provisions for each tax, and references those Acts for calculation of amounts and adjustments.

Public Governance, Performance and Accountability Act 2013. The PGPA Act governs Commonwealth entities’ financial management and accountability. The transfers under sections 17-19 will likely be classified as internal government movements, but the instrument does not mention the PGPA Act. However, the instrument must be complied with despite other Commonwealth laws, which would include the PGPA Act if there were a conflict. In practice, the two regimes should be compatible, as both aim to ensure proper accounting.

Appropriation Acts. The notional transfers under this instrument do not require appropriation because they are internal movements between official accounts. However, the original acquisition of goods or services by an entity is funded by appropriation; the notional tax and credits affect the entity’s cost base but not the total Commonwealth expenditure.

Commonwealth Procurement Rules. The instrument does not directly affect procurement, but the notional input tax credits may influence the cost estimation for procurement decisions. Entities may need to ensure that their procurement systems capture notional tax amounts.

Customs legislation. Section 19 deals with taxable importations. The “standard payment time” for assessed import taxes is determined under customs legislation (e.g., the Customs Act 1901). The instrument imports that timeframe for transfer of the notional import amount.

The instrument repeals and replaces the A New Tax System (GST, Luxury Car Tax and Wine Tax) Direction 2015 in its entirety (Schedule 1). The 2015 Direction commenced on 1 July 2015 (or earlier if registered later). The new Direction commences on the later of 1 October 2025 and the day after registration, so effectively 1 October 2025. Part 3 (Application provisions) handles the transition. For net amounts for tax periods starting on or after 1 October 2025, the new instrument applies (section 31(1)). For net amounts for earlier periods, the 2015 Direction continues in force despite its repeal (section 31(2)). Similarly for importation amounts: the new instrument applies if the standard payment time is on or after 1 October 2025; otherwise the old instrument continues to apply (section 32). This ensures continuity. The repeal of the 2015 Direction is prospective only. The instrument does not include an explanatory memorandum or outline of differences from the 2015 version, so users cannot readily identify what changed. It is possible the new instrument is a re‑makings exercise to update dates and references, or to align with any amendments to the underlying Acts. The structure is identical to the 2015 Direction, with the same sections. The only substantive change appears to be the commencement date and the transitional provisions. Users should consult the old instrument if dealing with periods before October 2025.

No litigation is referenced in the source instrument. Because this is an internal machinery direction, disputes would likely be rare and handled within government rather than in court. Any challenge to the validity of the instrument would be on administrative law grounds, such as whether the Minister exceeded the delegated power under the three Acts. Given that the direction is expressly authorised by subsections 177-1(2), 21-1(2), and 27-20(2), a successful challenge would be unlikely unless the direction departed from the Parliament’s stated intention. There are no known cases involving the 2015 Direction. The “notional” nature means that no taxpayer outside the Commonwealth is affected, reducing the incentive to litigate. Possibly a dispute could arise over whether an entity qualifies as “untaxable” - for instance, if a government business enterprise claimed it was untaxable when it was not, leading to underpayment of actual tax. But that would be a dispute under the underlying Acts, not under this direction. Similarly, a disagreement over the calculation of notional net amounts would be an internal accounting matter. The absence of litigation history should not be read as implying the instrument is unimportant; it reflects the closed nature of the system it creates. Practitioners should be aware that the instrument is not open to external challenge by private parties.

Overriding other Commonwealth laws. Section 6 note 2, reinforced by the empowering provisions, provides that this instrument must be complied with despite any other Commonwealth law. That means if another Act or instrument attempts to exempt an entity from registration or transfer duties, this direction prevails. This is a strong provision that may surprise officials who assume other laws take precedence.

Two separate transfer streams. The net amount formula in section 14 excludes import LCT and wine tax on customs dealings; those amounts are handled separately under section 19. This means an entity must manage two distinct transfer obligations for the same tax period. Missing one stream could cause accounting discrepancies.

No automatic reversal for input tax credits on imports. When an entity imports goods, it is notionally liable for GST on the importation under section 7, but it may also be entitled to an input tax credit for that importation. Under the net amount formula, the input tax credit is included in ITC and offsets the import GST in the ordinary net amount? Actually section 14’s definition of GST includes amounts on taxable importations, and ITC includes credits on creditable importations. So import GST and import ITC are both in the net amount formula. However, section 19 requires separate transfer of the import GST amount. But the net amount also includes that import GST, leading to potential double counting? Section 14(c) says LCT is “other than amounts notionally payable on taxable importations of luxury cars” and section 14(d) says WT is “other than amounts notionally payable on customs dealings”. So for wine tax and LCT on imports, the exclusion is explicit. For GST on imports, there is no exclusion; both the GST liability and the input tax credit appear in the net amount formula. But section 19 still requires transfer of the GST on importation. That appears to create a duplicate transfer: the entity would transfer the import GST under s19, and also include it in the net amount calculation under s14. However, note that s19 applies to “amounts that an untaxable Commonwealth entity is notionally liable to pay” on importation. The net amount already accounts for those amounts. The instrument does not explicitly say the net amount excludes import GST - it doesn’t. But s19(1) says “this section applies in relation to any of the following amounts” including GST on a taxable importation. Then s19(2) requires transfer. So the entity must transfer the import GST amount separately, but that same amount is also part of the GST component in s14. That could cause the same amount to be paid twice. Practitioners should examine whether the net amount formula is intended to exclude import GST? The language of s14: “GST is the sum of all the amounts of GST on taxable supplies for which the entity is notionally liable that are attributable to the tax period.” Wait, s14 definition says: “GST is the sum of all the amounts of GST on taxable supplies for which the entity is notionally liable that are attributable to the tax period.” That limits GST to “taxable supplies”, not importations. But s7 notional liability extends to both taxable supplies and taxable importations. The definition in s14 says “amounts of GST on taxable supplies”. It does not include import GST. So import GST is not in the net amount formula. That resolves the double counting. The separate section 19 handles import GST. That is the correct reading: GST on supplies only in net amount; GST on imports handled separately. Practitioners must be careful to distinguish supply GST from import GST for the net amount calculation.

Registration required. Some Commonwealth entities may not have previously registered for GST under the notional system. Section 12 mandates registration. Failure to register breaches the instrument and may also conflict with ATO expectations under the Commissioner’s general direction.

Commissioner’s offset power. Section 18 allows the Commissioner to offset a negative net amount against other notional debts, including PAYG withholding notional debts. An entity that expects a refund may instead have the amount redirected to cover other liabilities without prior notice, affecting its cash flow planning.

No interest or late payment penalties. While the instrument requires timely transfers, it does not impose interest for late payment. This may reduce the incentive for entities to prioritise notional transfers over other obligations. Conversely, the Commissioner has no express power to waive or defer transfers.

Transition pitfalls. The application provisions (sections 31-32) mean that for tax periods starting before 1 October 2025, the 2015 Direction continues to apply. Entities must maintain familiarity with both instruments during the transition. A net amount for a June 2025 tax period (with a 21‑day lodgement period in July) would still be under the old rules, even if the transfer occurs after 1 October. The instrument does not address mixed periods.

Compliance under this instrument is a matter of internal process for each untaxable Commonwealth entity. The key steps are set out below, based on the instrument.

1. Register for GST. Under section 12, the entity must be registered under the GST Act. The registration form and procedures follow guidelines made by the Finance Minister. Ensure that the registration is in place before the first tax period to which the instrument applies. The registration is notional; it allows the entity to administer the notional system and to receive an ABN if required.

2. Determine tax periods. The instrument does not specify the length of tax periods. The default under the GST Act is monthly for entities with a turnover above the threshold, but the Commissioner may allow quarterly or annual periods. The entity should adopt the same period for its notional calculations. The notional net amount is calculated for each tax period.

3. Calculate notional amounts. For each supply, acquisition, import, luxury car transaction, and wine dealing, the entity must determine whether it would be liable or entitled under the relevant Act if it were a normal taxpayer. The amounts are worked out under the Acts as if the entity were not the Commonwealth (sections 7(2), 8(2), 9(2), 10(2), 11(2)). This requires familiarity with the GST Act, LCT Act, and WET Act provisions. Key events: taxable supplies (GST), creditable acquisitions (ITC), taxable supplies of luxury cars (LCT), taxable dealings in wine (WET), wine tax credits.

4. Calculate the net amount. Use the formula in section 14: GST + LCT (on supplies only, not imports) + WT (on dealings other than customs) - (ITC + WTC). Attribute amounts to the tax period as they would be under the substantive Acts (section 14(2)). Note that import GST, import LCT, and wine tax on customs dealings are not part of the net amount; they are handled separately.

5. Identify adjustments. Under section 15, the entity has notional adjustments arising under the GST Act and LCT Act. For example, adjustments for change in use of goods or services (GST) or luxury car tax adjustments. Work these out as if the entity were not untaxable. Add increasing adjustments and subtract decreasing adjustments from the net amount (section 16).

6. Lodge a GST return. Section 13 requires that if the return is not lodged electronically, it must be signed by an authorised person. The ATO will likely require a return to report the notional net amount and other details, even though no actual payment is made. The instrument does not prescribe the form of return, but the Commissioner will issue administrative arrangements.

7. Transfer positive net amounts. If the net amount is greater than zero, transfer that amount from the entity’s bank account to an official administered receipts bank account chosen by the Commissioner. The transfer must occur by the time the entity would have been required to pay an assessed net amount under the GST Act (section 17). For a monthly tax period, that is typically 21 days after the end of the period.

8. Transfer importation amounts. For import GST, import LCT, and wine tax on customs dealings, calculate the amount notionally liable under the relevant Act. Transfer that amount to the Commissioner’s chosen account by the standard payment time for assessed import taxes (section 19). This is a separate transfer, not part of the net amount.

9. Handle negative net amounts. If the net amount is less than zero, the Commissioner will deal with it under section 18. The entity should report the negative amount in its return and wait for offset or transfer. The Commissioner may offset against PAYG withholding notional debts or other notional tax debts. If there is a remainder, the Commissioner must transfer it to the entity’s bank account. The entity should ensure its bank account details are provided to the Commissioner.

10. Maintain records. While the instrument does not impose record‑keeping obligations directly, the underlying Acts require records to substantiate tax positions. Entities should keep documentation for all transactions that give rise to notional liabilities, credits, and adjustments. This is essential for internal audit and for the Commissioner’s compliance monitoring under section 20.

11. Review transition rules. For tax periods starting before 1 October 2025, continue to apply the 2015 Direction. For periods starting on or after that date, apply the 2025 Direction. For importations, use the standard payment time to determine which direction applies (section 32). Ensure that the entity’s systems are updated to reflect the new rules from the applicable date.