Tax Alert:  Proposed changes to self assessment of indirect taxes

Treasury recently released draft legislation aimed at harmonising the self actuating system for GST, wine equalisation tax (WET), luxury car tax (LCT) and fuel tax credits with the income tax system of self assessment.

At this stage, the legislation is open to public comment but it is unlikely that significant changes will be made before it is finalised.

The proposed measures are in response to recommendations arising from the December 2008  Board of Taxation’s Review of the Legal Framework for the Administration of the Goods and Services Tax (BOT GST review).

What are the changes?
Under the proposed measures, a self assessment system (similar to that for income tax), will be established for GST, WET, LCT and fuel tax credits.  This system will align the assessment and review processes for indirect taxes with those of the income tax system so that a taxpayer’s indirect tax liabilities and entitlements are determined by an assessment, with a four year window available for amendment.  This amendment period will be ‘refreshed’ where an assessment is amended.

This differs to the current system where taxpayers are automatically liable for the ‘correct’ or ‘true’ amounts of indirect taxes for the period, regardless of the amounts stated in their returns.

These changes also establish a generic framework which may be applied across a range of other taxes in the future, thus providing greater harmonisation across the tax system.

Further changes are also proposed to clarify the term ‘net amount’ in the GST Act.

When do they apply from?
The proposed amendments will apply to assessments for tax periods or fuel tax return periods commencing on or after 1 July 2011. They will also apply to payments and refunds that arise on or after that date even though they relate to tax periods before 1 July 2011.

These amendments therefore apply, for instance, if you re-open your 2007 June quarter BAS in July 2011, to rectify an error. According to the proposed amendments this will effectively re-open another four year review period on this BAS, but only in relation to the particular amount amended. Under the current GST administration rules, the four year review period is not reset if a BAS is amended.

Are there any transitional provisions?
The Government has also proposed transitional arrangements to ensure the current rules will apply to payments and refunds for tax periods and fuel tax return periods commencing prior to 1 July 2011. It is also proposed that the current rules will apply to payments and refunds that do not relate to tax periods, provided the relevant liability or entitlement occurs before 1 July 2011.

If you would like to discuss these changes or any other indirect tax matters, please contact your usual Grant Thornton advisor or:

Krish Patel 
Partner - Tax
T  +61 2 8297 2400
E  krish.patel@au.gt.com