A New Tax System (Goods and Services Tax) Third Party Adjustment Note Information Requirements Determination
(No. 1) 2010
Explanatory Statement
General Outline of Instrument
- This instrument is made under subsection 134-20(1)(d) of the A New Tax System (Goods and Services Tax) Act 1999:
- This instrument describes the information that must be included in a Third Party Adjustment Note.
- The instrument is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Date of effect
4. The instrument commences on 1 July 2010
What is this instrument about?
5. The purpose of this instrument is to inform taxpayers of the information they need to include in a third party adjustment note. This allows taxpayers to generate and make use of third party adjustment notes in order to properly account for their third party payment adjustments.
The effect of the instrument:
6. The instrument sets out the information that the Commissioner requires for a third party adjustment note. The requirements provide for appropriate documentation to be created, which will be held by payers and payees to substantiate their third party adjustments.
Background:
7. Division 134 of the A New Tax System (Goods and Services Tax) Act 1999 ensures that the appropriate amount of goods and services tax (GST) is collected and the appropriate amount of input tax credits claimed in situations where there are payments between parties in a supply chain which indirectly alter the price paid or received by the parties for the things supplied.
8. This is achieved by creating an adjustment in situations where an entity (the payer), who supplies a thing for re-sale, makes a monetary payment to a third party (the payee) in connection with the payee’s acquisition of that thing. This adjustment occurs when the payer does not supply the thing directly to the payee but rather through a supply chain.
9. Division 134 requires a new form of adjustment note for decreasing adjustments above $75 (the adjustment note threshold).
10. Decreasing adjustments that exceed the adjustment note threshold cannot be attributed until the tax period in which the payer holds a third party adjustment note.
11. The payer is required to give the payee a copy of the third party adjustment note within 28 days of the earlier of a request by the payee or becoming aware of the adjustment. This requirement does not apply to decreasing adjustments less than the adjustment notes threshold.
13. This instrument has been developed to allow taxpayers to substantiate and properly account for adjustments for their third party payments. It describes what should be included in a third party adjustment note. This allows taxpayers to generate suitable adjustment notes and provide them to recipients of third party payments when they are required to do so.
Consultation:
14. The ATO has consulted with Treasury representatives and with Australian industry representatives, including the Federated Chamber of Automotive Industries, and several Australian car manufacturers. In addition, the ATO consulted with the National Tax Liaison Group GST Subcommittee, including representatives of the major peak accounting bodies in Australia.
15. The ATO Revenue Analysis Branch costing concluded that the Legislative Instrument will have a low compliance cost impact, a low implementation impact, and will result in no change in ongoing compliance costs.
Shane Reardon
Deputy Commissioner of Taxation
9 June 2010
Legislative references:
A New Tax System (Goods and Services Tax) Act 1999
Legislative Instruments Act 2003
Overview
The A New Tax System (Goods and Services Tax) Third Party Adjustment Note Information Requirements Determination (No. 1) 2010 was enacted to address the need for clear and specific information requirements for third party adjustment notes under the A New Tax System (Goods and Services Tax) Act 1999. This legislative instrument, made under the authority of the Legislative Instruments Act 2003, aims to ensure that taxpayers properly account for their third party payment adjustments by detailing the necessary information to be included in such notes. The primary objective is to facilitate appropriate documentation that substantiates third party adjustments within the supply chain, thereby maintaining the integrity of GST collection and input tax credit claims. The instrument was developed following consultations with relevant industry representatives and tax authorities to ensure that the compliance costs and implementation impact would be minimal.
Scope and Application
The A New Tax System (Goods and Services Tax) Third Party Adjustment Note Information Requirements Determination (No. 1) 2010 applies to entities and individuals who are involved in transactions where goods and services tax (GST) adjustments are required under Division 134 of the A New Tax System (Goods and Services Tax) Act 1999. Specifically, it applies to payers who make monetary payments to third parties in connection with the acquisition of goods or services, necessitating an adjustment to the GST amount. This applies nationally across Australia, as it is a Commonwealth instrument. The Act does not apply to decreasing adjustments below the $75 threshold, which is specified in the parent Act. The instrument extends the application of the legislation by detailing the specific information required in a third party adjustment note, thereby ensuring that taxpayers can properly account for their adjustments and comply with the GST legislation. The instrument is supported by subordinate legislation under the Legislative Instruments Act 2003 and took effect on 1 July 2010.
Key Provisions
The New Tax System (Goods and Services Tax) Third Party Adjustment Note Information Requirements Determination (No. 1) 2010 (the Determination) provides detailed specifications for what information must be included in a Third Party Adjustment Note (TPA Note) (s. 2). Specifically, section 3 of the Determination outlines that a TPA Note must include the name and Australian Business Number (ABN) of the payer, the name and ABN of the payee, the date of the original supply, the amount of the adjustment, the reason for the adjustment, and the date the adjustment was made. These requirements ensure that all necessary details are documented to substantiate any third party payment adjustments related to goods and services tax (GST).
Entities involved in third party payments under the A New Tax System (Goods and Services Tax) Act 1999 are required to comply with the information requirements stipulated in the Determination. This means that if an entity (the payer) makes a payment to a third party (the payee) in connection with the acquisition of a supplied item, they must create a TPA Note containing all the specified information. Additionally, the payer must provide a copy of this note to the payee within 28 days of either receiving a request from the payee or becoming aware of the adjustment, unless the adjustment is below the prescribed threshold (s. 4). This obligation is crucial for maintaining proper records and ensuring that GST is accurately accounted for in all transactions.
Failure to comply with the requirements of the Determination can result in significant consequences. For instance, if an entity does not provide a TPA Note that includes all the required information, it may face penalties under the A New Tax System (Goods and Services Tax) Act 1999. Although the Determination itself does not explicitly state penalties, non-compliance with the broader Act can lead to civil penalties, which may include fines up to 200% of the unpaid tax or a fixed penalty, depending on the circumstances (s. 182-10 and s. 182-15 of the Act). Additionally, ongoing failure to comply may result in criminal charges, with potential fines and imprisonment for serious or repeated breaches. These potential penalties underscore the importance of adhering to the Determination's requirements to avoid legal repercussions.