GSTR 2011/D1 – the draft ruling for tax invoices.
The Commissioner released a draft ruling (GSTR 2011/D1) on tax invoices on 29 May 2011 to replace the original ruling (GSTR 2000/17) which was 29 pages in length. The draft ruling is 55 pages, almost twice the size of the original and addresses changes to the GST law that took effect from 1 July 2010 and were intended to simplify the tax invoicing rules following recommendations made by the Board of Taxation.
The draft:
- sets out the minimum information requirements for tax invoice under subsection 29-70(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). It also explains when a document is in the approved form for a tax invoice.
- explains the circumstances under subsection 29-70(1A) when a recipient of a supply can treat a document as a tax invoice even though it does not meet all of the tax invoice requirements.
- explains when a document is taken to be a tax invoice under section 48-57 for the purposes of a GST group even though the group member that is the recipient of the supply is not identified in the document.
- describes the general principles that the Commissioner will have regard to in making a decision whether to treat a document yet to be issued as a tax invoice under this provision.
- explains how the threshold for low value transactions under subsection 29-80(1) will apply such that a tax invoice is not required.
- includes a summary of the circumstances where the Commissioner has determined under subsection 29-10(3) that you can claim an input tax credit without a tax invoice.
Responses to the draft are due by 8 July 2011.
The particular matters that are relevant as a result of the changes to the content of tax invoices are that the law allows a document to qualify as a tax invoice if it “contains enough information to enable” specified details “to be clearly ascertained”.
The amendments to the law were intended to make tax invoices less prescriptive but the draft ruling states that the specified details have to be ascertained form the document itself and not by reference to other documents. So it is not sufficient for:
- customer number – the document must clearly identify the customer or ABN
- reference to product numbers or an engagement letter as a description of the thing supplied
The tax invoice must identify the supplier’s name and ABN – so a supply made through an agent for an unnamed principal cannot comply.
Putting aside the difficulty with undisclosed principals (for both supplies and acquisitions), subsection 29-70(1A) states that:
A document issued by an entity to another entity may be treated by the other entity as a *tax invoice for the purposes of this Act if:
- it would comply with the requirements for a tax invoice but for the fact that it does not contain certain information; and
- all of that information can be clearly ascertained from other documents given by the entity to the other entity.
This seems to overcome many of the limitations that the ruling places on the “clearly ascertained” elements of subsection (1) except:
- subsection (1A) is only available for tax invoices issued by the supplier; and
- the missing information must be in another document issued by the supplier
The draft ruling is illustrative of a situation of where there was Government recognition that the law was too prescriptive to allow for flexible and easy operation and the legislature sought to simplify and “back off” on the overly prescriptive substantiation requirements.
This would have, one would have thought, been ideal for principles based drafting if the principle of simplicity and substance were allowed to operate.
But the amendment and the ATO administration of it has missed the mark. Before embarking on this process, Treasury and the ATO should ask if it is realistic to expect the 2 million GST registrants to read a 55 page ruling to be able to comply with the tax invoicing rules.
The draft ruling can be found at: