Time Limits for claiming GST credits

The GST rules contain what is referred to as the ‘four-year rule’. That is, the ATO generally has a four-year time period in which to review a taxpayers Business Activity Statements (BAS). Similarly, a taxpayer generally has a four-year time period in which to amend a BAS. Also, a taxpayer has a four-year time period in which to claim a GST credit. It is this latter rule that will be addressed in this article, prompted by the ATO releasing MT 2024/D1.

Curiously, it has been four years since the last GST ruling was issued by the ATO (surely, just a coincidence).

Background

In late 2018 the ATO released MT 2018/D1 titled ‘time limits for claiming input tax credits and fuel tax credits’. Both the GST law and Fuel Tax Credit (FTC) law contain similarly worded provisions that limit the claiming of credits, and so both matters were dealt with together in a Miscellaneous Tax Ruling (MT) instead of in a GST ruling (GSTR) or FTC ruling (FTR). We have limited our comments in this article to GST credits.

In MT 2018/D1 the ATO took a strict view of how the four-year time limit is applied in the context of claiming credits. Namely, that the entitlement to the credit ceases to the extent that the credit has not been ‘taken into account’ in an assessment within the four-year entitlement period. The four-year period generally starts from the date the BAS is due to be lodged.

Also, at the time of releasing MT 2018/D1, the ATO view was that a taxpayer does not include a tax credit in an assessment by lodging an objection, requesting an amendment, or applying for a private ruling even if the objection, amendment request or ruling application was made within the four-year period. The strict application stated that:

’12. At the time of making a decision or providing a private ruling, if the tax credits you are seeking have not been taken into account in an assessment and the four year entitlement period has expired, the decision or ruling must be that you are not entitled to the tax credits sought. This is the case even though the Commissioner may have the power to otherwise amend an assessment at any time to give effect to decisions on objections, amendment requests or private ruling applications.’

However, in late 2019 and referring to recent Federal Court decisions, the ATO withdrew MT 2018/D1 on the basis that it ‘… no longer reflected the Commissioner’s view’, and that a new public ruling would be issued in early 2020. The Federal Court decisions were those in the Linfox and Coles Supermarkets cases, both handed down in 2019.

On 21 February 2024, the ATO finally released MT 2024/D1. There was no comment as to why there was a four-year delay (coincidental?), and we do not expect a further four-year delay before MT 2024/D1 is finalised.

Drawing heavily from the Linfox and Coles Supermarkets decisions, MT 2024/D1 updates the Commissioner’s view of the following three matters:

• when a credit is ‘taken into account’ in an assessment;
• whether that occurs within the four-year entitlement period; and
• how the rules relate to GST credits subject to an objection, amendment request and private ruling application.

The Draft Ruling

Regarding ‘taken into account’, the draft ruling states:

• A tax credit is ‘taken into account’ in an assessment to the extent the credit has formed part of the calculation of the amount that became the assessed ‘net amount’ for the relevant tax period.
• A tax credit will ‘form part of the calculation’ to the extent that the amount of the credit forms part of the amount of total tax credits used in calculating the assessed amount – that is, the amount which the taxpayer determined it was entitled to in that tax period.
• If the amount of credit that formed part of the calculation is less than the amount of the taxpayer’s entitlement under the GST law, the tax credit is only taken into account to the extent of the amount actually included in the calculation.
• If no amount of a tax credit included as part of the calculation of the assessed amount, the tax credit has not been taken into account in the assessment.

Regarding the four-year entitlement period, the draft ruling states:

• The four-year entitlement period is the period of 4 years commencing after the day on which the taxpayer was required to give the Commissioner a return for the tax period to which the credit would be attributable (under the GST attribution rules).
• The four-year period is only altered if, prior to the end of the four-year entitlement period, there is a formal extension granted by the Commissioner to the due date for that return.
• The entitlement to the credits ceases immediately on the expiry of the four-year entitlement period (and actions after this time cannot revive the entitlement).

Regarding objections, amendments and private ruling applications, the draft ruling states:

• A taxpayer does not take a tax credit into account in an assessment by lodging an objection, requesting an amendment, or applying for a private ruling.
• However, the limiting provisions do not apply to disentitle a taxpayer to a tax credit for a tax period to the extent that entitlement is specified in the grounds of a valid objection lodged within the 4-year entitlement period. To the extent that the objection decision or any subsequent review or appeal process finds that the taxpayer was entitled to the tax credit and it is attributable to the period in dispute, the taxpayer’s entitlement will not cease.

It is the above comments regarding objections, where MT 2024/D1 has been substantially updated to reflect the recent court decisions, with the above two bullet points referring specifically to comments in the Coles Supermarkets hg.

Importantly, the ATO states in MT 2024/D1 that it is only a valid objection lodged within the four-year entitlement period that preserves a taxpayer’s entitlement. At paragraph 69 the ATO states: ‘Other processes such as requesting an amendment to an assessment or applying for a private ruling do not provide the protections that exist for the objection process.‘ Refer to Example 7 of MT 2024/D1 which highlights this view.

Comments

We note the ruling includes a number of examples, and these refer to a taxpayer identifying an unclaimed credit just outside the four-year entitlement period (and this is done on purpose to illustrate when the entitlement ceases to exist). As is often the case with ATO rulings, the examples are helpful and are worth referring to as they assist taxpayers in understanding how the rules apply. For instance, Example 5 highlights the four-year entitlement period is linked to the tax period where attribution would have been made and that delayed attribution – for example, by not holding a tax invoice at that time – does not extend the four-year entitlement period.

However, this also prompts a recommendation that taxpayers regularly review their credit claims with a view to identifying unclaimed credits so that these can be accounted for well within the four-year entitlement period. While such reviews may identify credits that fall outside the entitlement period they should also identify amounts within that period.

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