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.
Overview
The A New Tax System (Goods and Services Tax) Amendment Regulations 2009 (No. 2) were enacted to amend the threshold for requiring adjustment notes in goods and services tax (GST) adjustments, as specified in the A New Tax System (Goods and Services Tax) Act 1999. This amendment was introduced to alleviate the administrative burden on businesses by increasing the threshold from $50 to $75 for which adjustment notes are not required. The purpose of this change is to simplify the tax reporting process for businesses, particularly small businesses, by reducing the need to issue adjustment notes for minor GST adjustments. The regulations were issued under the authority of the Assistant Treasurer and were based on recommendations from the Board of Taxation, following consultations with various stakeholders across multiple cities. Public consultation was conducted in two phases, with a draft version of the regulations and explanatory statement posted on the Treasury website for comment. Despite the opportunity for feedback, no submissions were received, suggesting broad acceptance or unawareness of the proposed changes.
Scope and Application
The A New Tax System (Goods and Services Tax) Amendment Regulations 2009 (No. 2) primarily apply to businesses registered for goods and services tax (GST) under the A New Tax System (Goods and Services Tax) Act 1999. The regulations specifically address the issuance of adjustment notes for decreasing GST adjustments, which are adjustments that reduce a taxpayer’s GST liability or increase their GST refund. The threshold amount below which an adjustment note is not necessary has been increased from $50 to $75, meaning that for decreasing adjustments of $75 or less, businesses are no longer required to issue an adjustment note. This change was implemented in response to recommendations from the Board of Taxation and aims to reduce compliance costs for small businesses. The regulations apply nationally across Australia and came into effect on 1 July 2010. While the regulations themselves provide the specific threshold for adjustment notes, the Act allows for further details and specifications to be made through subordinate instruments.
Key Provisions
The A New Tax System (Goods and Services Tax) Amendment Regulations 2009 (No. 2) focus on the adjustment notes required for decreasing Goods and Services Tax (GST) adjustments under Section 29-80(2) of the A New Tax System (Goods and Services Tax) Act 1999. These Regulations specify that an adjustment note is not necessary for decreasing adjustments of $75 or less, increasing the threshold from the previous $50 (Section 29-80(2)). An adjustment note is typically issued by the supplier to the recipient within 28 days of becoming aware of an adjustment event or upon request by the recipient (Section 29-75). However, this requirement is waived for smaller adjustments under the new threshold.
These Regulations impose specific obligations on businesses registered for GST. They must account for adjustment events by making necessary adjustments to their GST liabilities in their Business Activity Statements (BAS) (Section 29-20). However, for decreasing adjustments amounting to $75 or less, businesses are exempt from issuing an adjustment note. This simplification aims to reduce administrative burdens, especially for small businesses, by eliminating the need for adjustment notes for minor discrepancies.
Violation of the provisions in the amending Regulations could result in non-compliance with GST obligations. While specific penalties for non-compliance with these Regulations are not outlined in the provided text, general GST non-compliance could lead to civil or criminal penalties under the primary Act. Under the A New Tax System (Goods and Services Tax) Act 1999, penalties can include fines up to the greater of $22,200 or three times the amount of GST avoided, and in criminal cases, imprisonment for up to five years (Sections 177-10 and 177-35). The exact penalties would depend on the nature and extent of the non-compliance.