What Are the GST Attribution Rules
The attribution rules in the A New Tax System (Goods and Services Tax) Act 1999 (“The Act”) exist to determine when the GST becomes payable and collectable. In income tax law, the emergence of a tax liability or entitlement to a deduction is largely based on the common law interpretations or the core provisions of the Income Tax Assessment Act 1936. For the operation of the GST, however, Division 29 of The Act was intended to make it as clear as possible when a GST liability would be incurred, and presumably, to benefit the Governmental cash flow position.
The attribution rules in The Act determines when a taxable supply is made and when a creditable acquisition or importation occurs. The general rules regarding attribution are contained in Division 29, and under The Act, the Commissioner has some scope to specify the attribution rules of particular supplies or acquisitions.
Under The Act, GST payable on a taxable supply is attributable to “the tax period in which any of the consideration is received for the supply”, or if an invoice is issued for payment for the supply – whichever arises first.
However, for entities operating on a cash based accounting system, the invoice requirement is not applicable. The GST is payable by a cash based entity as, and to the extent that, payment is received for the taxable supply. The Commissioner has stated that for cash based accounting entities, “you attribute GST on a taxable supply to the tax period in which you receive consideration for the supply, but only to the extent that the consideration is received in the tax period.”
For entities that operate on an accruals based accounting system, an input tax credit is attributable to the period where any of the consideration is made for the acquisition, or when an invoice is issued for the acquisition – whichever occurs first. However, consistent with the attribution rules relating to taxable supplies, a creditable acquisition is only attributable by a cash based entity as, and to the extent that, the creditable acquisition has been paid for, or consideration given.
Cash and Cheques
Central to the operation of the attribution rules is the receiving and providing of consideration. A taxable supply or a creditable acquisition is made when consideration is made. The Commissioner has made a number of specific rulings in GSTR 2003/12 as to when consideration is deemed to be given or received.
The receiving or disbursing of cash represents consideration when it changes hand.
Consideration is given by a cheque when it is handed or posted to the supplier. Consideration is received when the cheque is received, or at the date on the cheque, whichever occurs first. A cheque need not be banked or cleared for consideration to have been made. If a cheque is dishonoured, and the recipient operates on a cash basis, the dishonoured cheque need not be included in the BAS. The recipient is entitled to lodge a revised BAS if the cheque has already been included.
However, if the recipient of a dishonoured cheque operates on an accruals basis, consideration is still deemed to have been given in the form of debt, and any recourse to reclaim the GST would be sought under the Division 21 – Bad Debts.
For traveller’s cheques, consideration is made and received when it is countersigned.
Credit Cards and e-Transactions
Consideration is given by credit cards when the authorisation is signed, or for phone purchases, when the number is given. For Debit Cards, consideration is provided and received when the system accepts the transaction.
For direct credit money transfers, consideration is given when the transferor authorises the transfer, and consideration received when the money is credited to the recipient’s account.
For direct Debit money transfers, consideration is provided and received at the time of the transfer.