Self assessment of indirect tax revisited
The first ED to harmonise GST and other indirect taxes with the income tax assessment system was released on 18 January 2011. After a difficult consultation and a federal budget, the Government announced in the 2011-12 Budget that the start date for the measure would be deferred to allow for further consultations.
The Assistant Treasurer has today released revised exposure draft legislation for the assessment of indirect taxes measure and a revised draft explanatory memorandum.
Reading between the lines, we are headed for a 1 July 2012 start date.
In general, the proposed measures will:
• harmonise the self actuating system for GST, LCT, WET and fuel tax credits with the income tax system of self assessment through the establishment of a set of generic assessment provisions;
• allow for the four year period of review to be refreshed in respect to particulars that have been amended;
• allow the Commissioner to make a determination allowing a taxpayer to correct errors from a preceding business activity statement on their current business activity statement; and
• clarify that LCT and WET are included in the calculation of the net amount.
In doing so they aim to give effect to recommendations 19, 21 and 42 of the Board of Taxation’s Review of the Legal Framework for the Administration of the Goods and Services Tax.
Treasury have advised that a number of changes have been made to the exposure draft of 18 January 2011, including:
• grouping definitions into Division 2 of Schedule 1 of the draft bill;
• allowing taxpayers who have lodged a return but have not received a notice of assessment to request one, and deeming that a notice has been issued if the Commissioner does not issue one within a set time (item 1, section 155-19);
• requiring that the Commissioner has started examining a taxpayer’s affairs before being able request an extension of the period of review (item 1, subsection 155-20(5));
• clarifying that there is only one refreshed period of review in relation to a particular under section 155-45 in Schedule 1 to the TAA (item 1, section 155-45);
• restricting the Commissioner’s power to retain refunds under section 8AAZLGA of the TAA to apply only to self assessments under section 155-17 in Schedule 1 to the TAA (item 192);
• providing taxpayers with a right of review where the Commissioner has retained refunds under section 8AAZGLA of the TAA (item 192); and
• providing that the normal interest rules apply where the Commissioner retains refunds under section 8AAZLGA (old item 198 removed).
Treasury also advise that:
• The amendments seek to align the new assessment system with the income tax system as much as possible, with deviations only where it is considered necessary to accommodate the unique nature of the indirect tax system. For this reason, some of the changes proposed during consultation have not been made.
• As drafted, both subsection 155-20(5) (extension of period of review) and section 155-30 (amendments giving effect to private rulings) are consistent with the treatment under income tax. It is considered that imposing additional requirements on the Commissioner under subsection 155-20(5), granting taxpayers a right to seek an extension, and amending section 155-30 to apply only in the case of favourable rulings would go beyond what is available to taxpayers under the income tax assessment system.
• Similarly, changing the period of review to run from the due and payable date (for liabilities) and last day of the relevant tax period (for refunds) would not only be inconsistent with income tax, but could also give rise to administrative impracticalities. This is most evident in the case where a BAS is lodged after the period of review has ceased. In practical terms, where a taxpayer lodges his or her BAS on time, the period of review will effectively be the same.
Treasury state that further consideration will be given to these issues (and others) however at this stage a compelling policy reasons to deviate from the current income tax treatment for these provisions has not been identified.
Consultation on the revised draft materials closes Tuesday 20 September 2011.