Goods and Services Tax: Waiver of Tax Invoice Requirement – Government Undercover Agents Determination (No 1) 2006
Explanatory Statement
General Outline of instrument
This instrument sets out the circumstances where a tax invoice is not required for a particular entity to claim input tax credits under Division 29 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
The proposed instrument is a legislative instrument for the purposes of the Legislative Instruments Act 2003. It is made by, and is legally binding upon, the Commissioner of Taxation.
Date of effect
This instrument applies from 1 October 2006.
What is this instrument about?
Under Division 29 of the GST Act, a tax invoice is required in order to claim input tax credits for any creditable acquisitions that an entity makes (unless the value of the taxable supply is $50 or less).
This determination will waive the tax invoice requirement for government law enforcement agencies who reimburse work expenses incurred by their employees or agents working as undercover officers under assumed names where, due to the nature of the officers' duties, they are unable to obtain a tax invoice.
For the purposes of the determination, a government law enforcement agency means a government related entity whose responsibilities include law enforcement services for preventing criminal behaviour.
What is the effect of this instrument?
The effect of this instrument is that government law enforcement agencies that employ undercover officers who perform duties under assumed names for the purposes of law enforcement will have a clear understanding of the requirements to claim any legally entitled input tax credits for creditable acquisitions made on their behalf.
Background
Undercover officers as employees or agents of government law enforcement agencies using assumed identities often incur expenses as part of their duties that are reimbursed by their employer. However, due to the nature of the undercover officer’s work, they may not always be able to obtain a tax invoice.
This determination recognises the special difficulties government law enforcement agencies face in complying with GST tax invoice requirements. This determination avoids the need to make a GST administrative determination exercising the Commissioner’s discretion for each creditable acquisition that an undercover officer makes.
Consultation
This determination arose from representations made by state government treasury officials. Those officials outlined the difficulties faced by law enforcement agencies in complying with tax invoice requirements. They were extremely supportive of the determination. In subsequent discussions, state government treasury officials reiterated their support.
Extensive consultation was undertaken with all the business and service lines of the Tax Office. None of them could foresee any adverse consequences for their operations from the issue of the determination.
Deputy Commissioner of Taxation
[28 September 2006]
Legislative references:
A New Tax System (Goods and Services Tax) Act 1999
Overview
The Goods and Services Tax: Waiver of Tax Invoice Requirement – Government Undercover Agents Determination (No 1) 2006 was enacted to address the specific challenges faced by government law enforcement agencies when their undercover officers, operating under assumed identities, are unable to obtain a tax invoice for creditable acquisitions. This legislative instrument, made under the authority of the Legislative Instruments Act 2003, binds the Commissioner of Taxation and applies from 1 October 2006. The problem it seeks to resolve is the practical difficulty for undercover officers in obtaining tax invoices due to the secretive nature of their work, which hinders their ability to claim input tax credits under the A New Tax System (Goods and Services Tax) Act 1999. The policy objective is to provide a clear framework that acknowledges the unique circumstances of these agencies and allows them to legally claim input tax credits without the administrative burden of obtaining a tax invoice for each creditable acquisition.
Scope and Application
The Goods and Services Tax: Waiver of Tax Invoice Requirement – Government Undercover Agents Determination (No 1) 2006 applies to government law enforcement agencies that employ undercover officers who perform duties under assumed names for the purposes of law enforcement. These agencies will not be required to obtain a tax invoice for creditable acquisitions made by their undercover officers if, due to the nature of their duties, the officers are unable to obtain a tax invoice themselves. The instrument, which came into effect on 1 October 2006, aims to provide clarity to these agencies on the requirements for claiming input tax credits under Division 29 of the A New Tax System (Goods and Services Tax) Act 1999. The waiver applies nationally, as the instrument is a legislative instrument for the purposes of the Legislative Instruments Act 2003, made by the Commissioner of Taxation and binding upon them. This determination does not apply to any entities other than government law enforcement agencies, nor does it exempt any transactions from the need for a tax invoice outside of the specified circumstances. Subordinate instruments may extend or further specify the application of this determination.
Key Provisions
The main operative sections of the Goods and Services Tax: Waiver of Tax Invoice Requirement – Government Undercover Agents Determination (No 1) 2006 (the Determination) are found in Division 29 of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act). Under section 29-5 of the GST Act, a tax invoice is required for a person to claim input tax credits, unless the value of the taxable supply is $50 or less. The Determination provides an exception to this requirement for government law enforcement agencies (s.1). It specifies that these agencies may claim input tax credits without a tax invoice for creditable acquisitions made by their employees or agents who work as undercover officers under assumed names (s.2). The nature of the undercover duties often makes it impossible for these officers to obtain a tax invoice (s.3).
The Determination imposes certain obligations on the parties it governs. Government law enforcement agencies must ensure that their employees or agents who work as undercover officers under assumed names can claim input tax credits for creditable acquisitions made on their behalf (s.2). This involves understanding the special circumstances under which a tax invoice is not required and ensuring that the creditable acquisitions are properly documented in other ways. The agencies must also ensure that the undercover officers’ work expenses are reimbursed in accordance with the Determination (s.4). By doing so, they comply with the GST Act and avoid administrative complications.
Breaching the provisions of the Determination can lead to various consequences. Although the Determination itself does not specify particular offences, any failure to comply with the GST Act, including not adhering to the requirements for input tax credits, can lead to civil or criminal penalties. Under the GST Act, penalties for providing false or misleading statements can result in civil penalties of up to $22,200 for individuals and $111,000 for entities, with additional penalties for each day the offence continues (s.160-1 and s.160-2). Criminal penalties can also apply, with imprisonment for up to five years for individuals and fines of up to $222,000 for entities (s.160-5). These penalties underscore the importance of adhering to the Determination and the broader requirements of the GST Act.