EXPLANATORY STATEMENT

 

Select Legislative Instrument 2009 No. 385

 

 

Issued by authority of the Assistant Treasurer

 

A New Tax System (Goods and Services Tax) Act 1999

 

A New Tax System (Goods and Services Tax) Amendment Regulations 2009 (No. 2)

Section 177-15 of the A New Tax System (Goods and Services Tax) Act 1999 (the Act) provides that the Governor-General may make regulations prescribing matters that are required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

 

The purpose of the amending Regulations is to specify $75 as the amount referred to in subsection 29-80(2) of the Act. The amending Regulations, inserted in Part 2-6 of the A New Tax System (Goods and Services Tax) Regulations 1999 (the Regulations), remove the need to issue or hold an adjustment note for decreasing goods and services tax (GST) adjustments of $75 or less. Previously, the amount was $50.

 

The increase in the adjustment note threshold was part of the Government’s response to the Board of Taxation’s recommendations following its Review of the Legal Framework for the Administration of the Goods and Services Tax. The change was announced in the 2009-10 Budget.

Sometimes after a business’s GST affairs for a period are finalised, events will occur making the amount of GST paid or refunded incorrect. Such events are termed adjustment events. For example, a change to the original price of a good or service that occurs in a subsequent tax period is an adjustment event. Registered businesses must account for such events by making an adjustment to their GST liabilities when reporting their activities in a Business Activity Statement (BAS). An adjustment that decreases a taxpayer’s GST liability or increases its GST refund is called a decreasing adjustment.

Section 29-75 of the Act provides that the supplier of a taxable supply must issue an adjustment note to the recipient of the supply within 28 days after becoming aware of an adjustment or after being requested by the recipient to issue a note for the adjustment. Section 29-20 provides that a registered business cannot claim a decreasing adjustment arising from an adjustment event until it holds an adjustment note for the adjustment.

However, subsection 29-80(2) of the Act provides that an adjustment note is not necessary to claim and need not be issued for a decreasing adjustment that does not exceed $50 or such higher amount as may be specified in the GST regulations.

The amending Regulations increased to $75 the threshold below which an adjustment note need not be issued for a decreasing GST adjustment and where an adjustment note is not necessary for attribution purposes.

To provide an example, an adjustment event that discounts the consideration for the original supply by $660 will result in a decreasing adjustment (GST liability) of $60. As $60 is below the $75 threshold there will be no need to issue an adjustment note, nor will one be required for attribution purposes. Prior to the threshold change from $50 to $75, an adjustment note would have been required in this example.

The Regulations commenced on 1 July 2010.

 

Public consultation on the Regulations was undertaken in two phases.

In developing its recommendations, the Board of Taxation considered feedback received from stakeholders during extensive consultation in August 2008 in Sydney, Brisbane, Melbourne, Darwin and Perth. The Board also received written submissions and met with representatives of small business, the Tax Office, Treasury and a panel of GST technical experts.

 

The draft Regulations and draft Explanatory Statement were posted on the Treasury website on 6 October 2009 and were open for public comment for a period of three weeks. No submissions were received in relation to this material.

 

A preliminary assessment of the compliance costs of the amending Regulations found the expected compliance costs for taxpayers to be low. Accordingly, a Regulation Impact Statement was not required and has not been prepared.