Goods and Services Tax: Choosing to Account on a Cash Basis Determination (No 39) 2015 - representatives of incapacitated entities

Overview

The Goods and Services Tax: Choosing to Account on a Cash Basis Determination (No 39) 2015, enacted under the authority of the A New Tax System (Goods and Services Tax) Act 1999, addresses a specific gap in tax administration concerning incapacitated entities. This legislative instrument allows representatives of such entities to account for GST on a cash basis without the need for individual determinations. This change is intended to simplify the process for these representatives, who may already be required to account on a cash basis for other regulatory purposes, such as reporting to the Australian Securities and Investment Commission or to creditors under the Bankruptcy Act. The policy objective is to provide a streamlined and consistent approach for these representatives, reducing the administrative burden associated with seeking separate determinations. The determination was enacted by the Australian Parliament and is considered a minor legislative instrument, not requiring further consultation as it does not substantially alter existing law. It supersedes the previous Goods and Services Tax: Choosing to Account on a Cash Basis Determination (No 1) 2000 for representatives of incapacitated entities. According to the Human Rights (Parliamentary Scrutiny) Act 2011, this instrument is compatible with human rights, as it does not engage any of the applicable rights or freedoms and is deemed minor or machinery in nature.

Scope and Application

The Goods and Services Tax: Choosing to Account on a Cash Basis Determination (No 39) 2015 applies to representatives of incapacitated entities who are responsible for accounting for goods and services tax (GST) on behalf of entities that have lost the capacity to manage their own affairs. This includes situations where an entity is under administration, liquidation, bankruptcy, or similar conditions rendering it unable to manage its own financial and tax obligations. The determination enables these representatives to account for GST on a cash basis without requiring them to seek a specific determination under the A New Tax System (Goods and Services Tax) Act 1999. This provision is particularly relevant for insolvency practitioners and others who may need to align GST accounting methods with other regulatory or commercial reporting requirements, such as those mandated by the Australian Securities and Investment Commission (ASIC) or the Bankruptcy Act. The instrument does not apply retrospectively and is not subject to consultation as it is considered minor or machinery in nature, with no substantial changes to the existing law. The instrument’s scope is limited to facilitating the accounting practices of representatives of incapacitated entities, ensuring they can operate under a cash basis of accounting for GST without additional bureaucratic hurdles.

Key Provisions

The Goods and Services Tax: Choosing to Account on a Cash Basis Determination (No 39) 2015 (the Determination) is made under paragraph 29-40(1)(c) of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act). It specifies that representatives of incapacitated entities, who previously carried on an enterprise, are permitted to account for GST on a cash basis without needing to seek a separate determination (section 9). The Determination allows such representatives to switch to a cash basis of accounting regardless of the method originally used by the incapacitated entity before it became incapacitated. This simplifies the process for these representatives who may have commercial or regulatory reasons for choosing a cash basis, such as complying with reporting requirements to the Australian Securities and Investment Commission or to creditors under the Bankruptcy Act. The Determination imposes specific obligations on representatives of incapacitated entities, allowing them to choose to account for GST on a cash basis. This is a significant change from the previous legal requirement where these representatives had to seek a determination to be able to account on a cash basis. By removing this need, the Determination simplifies compliance for these representatives, who now have the flexibility to adopt a cash basis without additional bureaucratic steps. The Determination also ensures that the incapacitated entity's previous accounting method does not restrict the representative's choice, thereby providing flexibility and reducing administrative burdens. The Determination does not explicitly outline specific offences, penalties, or consequences for breaches within its text. However, the GST Act generally provides for penalties for non-compliance with GST laws, which could include fines and legal actions. The exact penalties would depend on the nature and severity of the non-compliance, as outlined in the GST Act. Given the Determination’s focus on simplifying compliance and its characterisation as a minor legislative instrument, it is unlikely that it introduces new penalties beyond what is already stipulated in the GST Act. The minor nature of the Determination suggests that it aims to streamline processes rather than impose new punitive measures.