GST adjustments and windfall gains

Consultation has concluded

Technical discussion paper: application of Division 142 to Division 19 adjustments.

Division 142 of the GST Act was introduced in May 2014 and to date has not received any judicial consideration.

Sometimes a supplier might overpay GST to the ATO because, for example, they incorrectly treated something they supplied to a customer as being subject to GST.

Under Division 142, the supplier is generally not entitled to a refund of the overpaid GST until they have reimbursed the customer for any GST that has been passed on to that customer. This ensures that the supplier does not get a windfall gain where the cost of the GST has been borne by the customer.

On its terms, the provision clearly applies where GST has been overpaid in relation to supplies. However, an interesting question has arisen as to whether the same rules apply where GST has been overpaid as a result of a GST adjustment. For example, where a customer pays a supplier an additional GST-inclusive amount for something they acquired, giving rise to an increasing adjustment for the supplier under Division 19 but later GST is found not to be payable.

We are now exploring whether Division 142 can apply in circumstances involving GST adjustments. Our preliminary views are set out in a technical discussion paper.

Feedback and comments

If you have any thoughts on the issues in the paper, we’re interested in hearing from you.

You can either use the discussion board to post comments and ask questions, or complete the feedback form below.

The discussion is open until 12 June 2015.

Technical discussion paper: application of Division 142 to Division 19 adjustments.

Division 142 of the GST Act was introduced in May 2014 and to date has not received any judicial consideration.

Sometimes a supplier might overpay GST to the ATO because, for example, they incorrectly treated something they supplied to a customer as being subject to GST.

Under Division 142, the supplier is generally not entitled to a refund of the overpaid GST until they have reimbursed the customer for any GST that has been passed on to that customer. This ensures that the supplier does not get a windfall gain where the cost of the GST has been borne by the customer.

On its terms, the provision clearly applies where GST has been overpaid in relation to supplies. However, an interesting question has arisen as to whether the same rules apply where GST has been overpaid as a result of a GST adjustment. For example, where a customer pays a supplier an additional GST-inclusive amount for something they acquired, giving rise to an increasing adjustment for the supplier under Division 19 but later GST is found not to be payable.

We are now exploring whether Division 142 can apply in circumstances involving GST adjustments. Our preliminary views are set out in a technical discussion paper.

Feedback and comments

If you have any thoughts on the issues in the paper, we’re interested in hearing from you.

You can either use the discussion board to post comments and ask questions, or complete the feedback form below.

The discussion is open until 12 June 2015.

Discussion

CLOSED: This discussion has concluded.
Discussions: All (2) Open (1)
  • CLOSED: This discussion has concluded (both questions). Thank you to all the Let’s Talk participants who contributed to our recent consultation on GST adjustments and windfall gains. The ATO appreciates you taking the time to share your views. The next steps in the process involve developing a Taxation Determination setting out the ATO view on this issue, taking into account the feedback we received from you. There will be further opportunities to comment on the TD, in line with the ATO’s consultation processes for Public Rulings.
    If not, can you let us know why? 

    What practical problems or additional costs of compliance could arise if the ATO adopted the preliminary view?

    Do you have specific examples we should consider when reaching a final view?

    If not, can you let us know why? 

    What practical problems or additional costs of compliance could arise if the ATO adopted the preliminary view?

    Do you have specific examples we should consider when reaching a final view?

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  •  For example, public rulings, fact sheets etc.


     For example, public rulings, fact sheets etc.


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