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Tax Laws Amendment (Small Business Measures) Bill 2004
Schedule 2 Annual apportionment of creditable purpose

   

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

1  Section 11-99 (after table item 1A)

Insert:

 

1B

Annual apportionment of creditable purpose

Division 131

2  Section 15-99 (before table item 1A)

Insert:

 

1AA

Annual apportionment of creditable purpose

Division 131

3  Section 17-99 (before table item 1)

Insert:

 

1A

Annual apportionment of creditable purpose

Division 131

4  Paragraph 19-70(c)

Omit all the words from and including “, taking into account”.

5  At the end of section 19-70

Add:

             (2)  In working out the * corrected input tax credit amount for the acquisition:

                     (a)  take into account any change of circumstances that has given rise to an adjustment for the acquisition under this Subdivision or Division 21 or 129; and

                     (b)  if an adjustment relating to the acquisition under Division 131 was attributable to an earlier tax period:

                              (i)  do not take into account that adjustment; and

                             (ii)  treat the acquisition as one in relation to which Division 131 had not applied.

6  Paragraph 19-75(b)

Omit “or 129”, substitute “, 129 or 131”.

7  Section 29-99 (after table item 1)

Insert:

 

1A

Annual apportionment of creditable purpose

Division 131

8  Section 37-1 (after table item 1)

Insert:

 

1A

Annual apportionment of creditable purpose

Division 131

9  After subsection 72-45(1)

Insert:

          (1A)  However, if:

                     (a)  an * annual apportionment election that you have made has effect at the end of the tax period to which the input tax credit is attributable; and

                     (b)  the acquisition is not an acquisition of a kind specified in the regulations made for the purposes of paragraph 131-40(1)(b);

the amount of the input tax credit on the acquisition is worked out under section 131-40 as if you had provided, or had been liable to provide, all of the * consideration for the acquisition.

10  After subsection 78-10(2)

Insert:

          (2A)  In working out the amount of an input tax credit for the purposes of subparagraph (2)(b)(ii), disregard sections 131-40 and 131-50 (which are about amounts of input tax credits under the annual apportionment rules).

11  After subsection 78-50(2)

Insert:

          (2A)  In working out, for the purposes of subparagraph (1)(c)(ii) or subsection (2), whether an entitlement to an input tax credit has been understated, or the extent of the understatement, disregard sections 131-40 and 131-50 (which are about amounts of input tax credits under the annual apportionment rules).

12  After subsection 84-13(1)

Insert:

          (1A)  However, if:

                     (a)  an * annual apportionment election that you have made has effect at the end of the tax period to which the input tax credit is attributable; and

                     (b)  the acquisition is not an acquisition of a kind specified in the regulations made for the purposes of paragraph 131-40(1)(b);

the amount of the input tax credit on the acquisition is worked out under section 131-40 as if full input tax credit had the same meaning in subsection 131-40(2) as it has in subsection (1) of this section.

13  After subsection 111-5(3)

Insert:

       (3AA)  In working out the extent to which a person is entitled to an input tax credit for the purposes of paragraph (3)(a), disregard sections 131-40 and 131-50 (which are about amounts of input tax credits under the annual apportionment rules).

14  After Division 130

Insert:

Division 131 Annual apportionment of creditable purpose

Table of Subdivisions

131-A   Electing to have annual apportionment

131-B    Consequences of electing to have annual apportionment

131-1   What this Division is about

In some cases, you may be able to claim a full input tax credit for acquisitions that are only partly for a creditable purpose. You will then have an increasing adjustment for a later tax period (that better matches your obligation to lodge an income tax return).

Subdivision 131-A Electing to have annual apportionment

131-5   Eligibility to make an annual apportionment election

             (1)  You are eligible to make an * annual apportionment election if:

                     (a)  your * annual turnover does not exceed the * annual apportionment turnover threshold; and

                     (b)  you have not made any election under section 162-15 to pay GST by instalments (other than such an election that is no longer in effect); and

                     (c)  you have not made any * annual tax period election (other than such an election that is no longer in effect).

             (2)  The annual apportionment turnover threshold is:

                     (a)  $2 million; or

                     (b)  such higher amount as the regulations specify.

131-10   Making an annual apportionment election

             (1)  You may make an * annual apportionment election if you are eligible under section 131-5.

             (2)  Your election takes effect from:

                     (a)  the start of the earliest tax period for which, on the day on which you make your election, your * GST return is not yet due (taking into account any further period the Commissioner allows under paragraph 31-8(1)(b) or 31-10(1)(b)); or

                     (b)  the start of such other tax period as the Commissioner allows, in accordance with a request you make in the * approved form.

Note:          Refusing a request to allow your election to take effect from the start of another tax period is a reviewable GST decision (see Division 7 of Part VI of the Taxation Administration Act 1953 ).

131-15   Annual apportionment elections by representative members of GST groups

             (1)  A * representative member of a * GST group cannot make an * annual apportionment election unless each * member of the GST group is eligible under section 131-5.

             (2)  If the * representative member makes such an election, or revokes such an election, each * member of the * GST group is taken to have made, or revoked, the election.

131-20   Duration of an annual apportionment election

General rule

             (1)  Your election ceases to have effect if:

                     (a)  you revoke it; or

                     (b)  the Commissioner disallows it under subsection (3); or

                     (c)  on 31 July in a * financial year, your * annual turnover exceeds the * annual apportionment turnover threshold.

Revocation

             (2)  A revocation of your election is taken to have had, or has, effect at the start of the earliest tax period for which, on the day of the revocation, your * GST return is not yet due.

Disallowance

             (3)  The Commissioner may disallow your election if, and only if, the Commissioner is satisfied that you have failed to comply with one or more of your obligations under a * taxation law.

Note:          Disallowing your election is a reviewable GST decision (see Division 7 of Part VI of the Taxation Administration Act 1953 ).

             (4)  A disallowance of your election is taken to have had effect from the start of the tax period in which the Commissioner notifies you of the disallowance.

Exceeding the annual apportionment turnover threshold

             (5)  If paragraph (1)(c) applies, your election is taken to have ceased to have effect from the start of the tax period in which 31 July in the * financial year referred to in that paragraph falls.

Subdivision 131-B Consequences of electing to have annual apportionment

131-40   Input tax credits for acquisitions that are partly creditable

             (1)  The amount of the input tax credit on an acquisition that you make that is * partly creditable is an amount equal to the GST payable on the supply of the thing acquired if:

                     (a)  an * annual apportionment election that you have made has effect at the end of the tax period to which the input tax credit is attributable; and

                     (b)  the acquisition is not an acquisition of a kind specified in the regulations.

             (2)  However, if one or both of the following apply to the acquisition:

                     (a)  the acquisition relates to making supplies that would be * input taxed;

                     (b)  you provide, or are liable to provide, only part of the * consideration for the acquisition;

the amount of the input tax credit on the acquisition is as follows:

where:

extent of consideration is the extent to which you provide, or are liable to provide, the * consideration for the acquisition, expressed as a percentage of the total consideration for the acquisition.

extent of non-input-taxed purpose is the extent to which the acquisition does not relate to making supplies that would be * input taxed, expressed as a percentage of the total purpose of the acquisition.

full input tax credit is what would have been the amount of the input tax credit for the acquisition if it had been made solely for a * creditable purpose and you had provided, or had been liable to provide, all of the consideration for the acquisition.

             (3)  In determining for the purposes of subsection (2) whether, or the extent to which, an acquisition relates to making supplies that would be * input taxed, subsections 11-15(3) to (5) apply in the same way that they apply for the purposes of paragraph 11-15(2)(a).

             (4)  Determinations made by the Commissioner under subsection 11-30(5) apply (so far as they are capable of applying) to working out the extent to which a * partly creditable acquisition does not relate to making supplies that would be * input taxed.

             (5)  This section does not apply to an input tax credit on an acquisition if the acquisition is, to any extent, a * reduced credit acquisition.

             (6)  This section has effect despite sections 11-25 and 11-30 (which are about amounts of input tax credits).

131-45   Input tax credits for importations that are partly creditable

             (1)  The amount of the input tax credit on an importation that you make that is * partly creditable is an amount equal to the GST payable on the importation if:

                     (a)  an * annual apportionment election that you have made has effect at the end of the tax period to which the input tax credit is attributable; and

                     (b)  the importation is not an importation of a kind specified in the regulations.

             (2)  However, if the importation relates to making supplies that would be * input taxed, the amount of the input tax credit on the importation is as follows:

where:

extent of non-input-taxed purpose is the extent to which the importation does not relate to making supplies that would be * input taxed, expressed as a percentage of the total purpose of the importation.

full input tax credit is what would have been the amount of the input tax credit for the importation if it had been made solely for a * creditable purpose.

             (3)  In determining for the purposes of subsection (2) whether, or the extent to which, an importation relates to making supplies that would be * input taxed, subsections 15-10(3) to (5) apply in the same way that they apply for the purposes of paragraph 15-10(2)(a).

             (4)  Determinations made by the Commissioner under subsection 15-25(4) apply (so far as they are capable of applying) to working out the extent to which a * partly creditable importation does not relate to making supplies that would be * input taxed.

             (5)  This section has effect despite sections 15-20 and 15-25 (which are about amounts of input tax credits).

131-50   Amounts of input tax credits for creditable acquisitions or creditable importations of certain cars

             (1)  If:

                     (a)  this Division applies to working out the amount of a * creditable acquisition or * creditable importation that you made; and

                     (b)  the acquisition or importation is an acquisition or importation of a * car;

the amount of the input tax credit on the acquisition or importation under this Division must not exceed the amount (if any) of the input tax credit worked out under section 69-10.

             (2)  However, if subsection 131-40(2) or 131-45(2) applies to the acquisition or importation:

                     (a)  take into account the operation of section 69-10 in working out the full input tax credit for the purposes of that subsection; but

                     (b)  disregard subsection 69-10(3).

131-55   Increasing adjustments relating to annually apportioned acquisitions and importations

             (1)  You have an increasing adjustment if:

                     (a)  an acquisition or importation that you made was * partly creditable; and

                     (b)  the input tax credit on the acquisition or importation is attributable to a tax period ending in a particular * financial year; and

                     (c)  the amount of the input tax credit is an amount worked out under this Division.

             (2)  The amount of the increasing adjustment is an amount equal to the difference between:

                     (a)  the amount of the input tax credit worked out under this Division; and

                     (b)  what would have been the amount of the input tax credit if this Division did not apply.

             (3)  In working out for the purposes of paragraph (2)(a) the amount of an input tax credit, take into account any change of circumstances that has given rise to:

                     (a)  an adjustment for the acquisition under Division 19; or

                     (b)  an adjustment for the acquisition under Division 21.

Note:       Because of subsection 136-10(3), the amount of the Division 21 adjustment will not be reduced under Division 136.

             (4)  In working out for the purposes of paragraph (2)(b) what would have been the amount of an input tax credit, take into account any change of circumstances that has given rise to:

                     (a)  an adjustment for the acquisition under Division 19 (worked out as if this Division had not applied to working out the amount of the input tax credit); or

                     (b)  an adjustment for the acquisition under Division 21.

Note:       If this Division did not apply, the amount of the Division 21 adjustment would have been worked out under Division 136.

Example:    While an annual apportionment election has effect, you make a partly creditable acquisition for $1,100, for which you have an input tax credit of $100. The extent of your creditable purpose is 10%.

During later tax periods, the price increases by $110, for which you have a decreasing adjustment under Division 19 of $10, and the supplier writes off $660 as a bad debt, for which you have an increasing adjustment under Division 21 of $60 (subsection 136-10(3) prevents the amount from being reduced under Division 136).

The amount of your increasing adjustment under this section is $45. This is the difference between the amounts under paragraphs (2)(a) and (b).

The paragraph (2)(a) amount (which is effectively worked out on a fully creditable basis) is:

The paragraph (2)(b) amount (which is based on a 10% creditable purpose) is:

131-60   Attributing adjustments under section 131-55

             (1)  An * increasing adjustment under section 131-55 is attributable to:

                     (a)  the tax period worked out using the method statement; or

                     (b)  such earlier tax period as you choose.

Method statement

Step 1 .   Work out the tax period (the ITC tax period ) to which the input tax credit for the acquisition or importation to which the adjustment relates is attributable.

Step 2 .   Work out in which year of income that tax period starts.

Step 3 .   If you are required under section 161 of the * ITAA 1936 to lodge a return in relation to that year of income, work out the last day of the period, specified in the notice published in the Gazette under that section, for you to lodge as required under that section.

Step 4 .   The * increasing adjustment is attributable to the tax period in which that last day occurs.

Step 5 .   If step 3 does not apply, the increasing adjustment is attributable to the tax period in which occurs 31 December in the next * financial year to start after the end of the ITC tax period.

Note:          Section 388-55 in Schedule 1 to the Taxation Administration Act 1953 allows the Commissioner to defer the time for giving the GST return.

             (2)  Despite subsection (1), if, during (but not from the start of) the * financial year in which the ITC tax period ended, your * annual apportionment election ceases to have effect because:

                     (a)  you revoke your annual apportionment election, or the Commissioner disallows your election, during that financial year; and

                     (b)  the revocation or disallowance takes effect before the end of that financial year;

the * increasing adjustment is attributable to the tax period in which the cessation takes effect, or to such earlier tax period as you choose.

             (3)  However, the * increasing adjustment is attributable to a tax period provided under section 27-40 if that tax period ends earlier than the end of the tax period to which the increasing adjustment would, but for this subsection, be attributable under subsections (1) and (2).

             (4)  This section has effect despite section 29-20 (which is about attributing your adjustments).

15  Subsection 132-5(2) (paragraph (b) of the definition of adjusted input tax credit )

Repeal the paragraph, substitute:

                     (b)  the sum of:

                              (i)  any * increasing adjustments, under Subdivision 19-C or Division 129, that were previously attributable to a tax period in respect of the acquisition or importation; and

                             (ii)  any increasing adjustment under Division 131 that has been previously, is or will be attributable to a tax period in respect of the acquisition or importation; plus

16  At the end of section 136-10

Add:

             (3)  However, this section does not apply to an * adjustment that you have in relation to a * creditable acquisition if:

                     (a)  the amount of the input tax credit for the acquisition is worked out under Division 131; and

                     (b)  the adjustment is attributable to a tax period that is not later than the tax period to which an adjustment under section 131-55 relating to the acquisition is attributable.

17  Section 188-5 (after table item 4)

Insert:

 

4A

Annual apportionment turnover threshold

whether you can make an annual apportionment election (see subsection 131-5(2))

18  Before paragraph 188-10(3)(aa)

Insert:

                  (aaa)  the * annual apportionment turnover threshold;

19  Section 195-1

Insert:

annual apportionment election means an election made under section 131-10.

20  Section 195-1

Insert:

annual apportionment turnover threshold has the meaning given by subsection 131-5(2).

21  Section 195-1 (after table item 5A in the definition of increasing adjustment )

Insert:

 

5B

Section 131-55

Annually apportioned acquisitions and importations

Taxation Administration Act 1953

22  Subsection 62(2) (after table item 37A)

Insert:

 

37AB

refusing a request to allow an annual apportionment election to take effect from the start of another tax period

paragraph 131-10(2)(b)

37AC

disallowing an annual apportionment election

subsection 131-20(3)

23  Application

The amendments made by this Schedule apply, and are taken to have applied, in relation to net amounts for tax periods starting, or that started, on or after:

                     (a)  for entities that, on 1 October 2004, had quarterly tax periods applying to them—1 October 2004; or

                     (b)  for other entities—1 November 2004.