InTouch: Australia

ATO’s future engagement under the Top 100 GST Program

The Australian Taxation Office (ATO) has published a document setting out how it will approach future engagement with taxpayers in its Top 100 Goods & Services Tax (GST) Program after the initial assurance review.

The document states that taxpayers that have received, in the ATO’s initial review, an overall high assurance rating that the taxpayer pays and reports the right amount of GST, will be subject to further review at least once every four years. Taxpayers in this category are expected to proactively engage with the ATO and make disclosures of material business changes, changes in GST positions taken, and any new or significant transactions. A list of the types of disclosures the ATO expects to be disclosed on a real time basis is set out at Appendix A of the document.

Taxpayers that received an overall medium assurance will be subject to a periodic assurance review at least once every four years, with possible targeted assurance activities during the intervening period on areas of concern. Where the initial review contained recommended next steps for the taxpayer, the ATO will review what action has been taken in relation to these steps during the next review.

The ATO states that overall low assurance taxpayers will be comprehensively and intensely reviewed through an annual justified trust assurance review using a whole-of-business approach.

Top 100 Annual Compliance Arrangement (ACA) taxpayers that achieve overall high or medium assurance will revert to an annual ACA review.

GST administration annual performance report 2020–21 

The ATO has released the 2020-21 GST administration annual performance report. According to the report, the net GST gap calculated for 2019-20 is estimated to be 7.8 per cent, resulting in the ATO receiving over 92 per cent of the GST revenue that was expected to be collected. In other highlights, as the economy recovered from COVID-19 in 2020-21, AUD 73.1billion was raised in GST cash collections. This included AUD 1.0billion in GST for supplies of digital products and services and low value imported goods, and AUD 2.3billion in liabilities through client engagement activities, including compliance and lodgement enforcement activities and high-risk refund case work.

ATO updates 

Landlord entitled to underpayment on rent on GST-exclusive basis

The New South Wales Supreme Court has held in Shimden Pty Ltd v Park Pty Ltd [2022] NSWSC 267 that a commercial landlord was entitled to recover underpaid rent on a Goods & Services Tax (GST) exclusive basis. The landlord had mistakenly issued invoices for rent on a GST inclusive basis, however the Supreme Court held that rent payable under the contract was properly GST exclusive based on its terms. The landlord was able to rely on the lease terms on the basis that the Supreme Court was not satisfied that the parties had adopted a mutual assumption in relation to GST and were bound by the terms of the lease as they had executed it.

No input tax credit for falsified transactions

The Administrative Appeals Tribunal (AAT) has held in Kais Jewellery (Syd) Pty Ltd v Feder Commissioner of Taxation [2022] AATA 425 that the taxpayer was not entitled to input tax credits on purported scrap gold acquisitions on the basis that it failed to substantiate that the acquisitions were actually made. The ATO had originally disallowed the input tax credits on the basis of evidence, including statements made by a supplier of the purported scrap gold, that invoices had been falsified. The AAT affirmed the ATO’s decision on the basis that it could not be satisfied that the transactions had actually occurred and that while tax invoices were a significant aspect of Australia’s GST system, they did not create a taxable supply.

For more information, please contact:
Michelle Tremain
National Indirect Tax Leader - PwC Australia