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GST changes

Adjustments for goods and services acquired before 1 April 2011

(Clause 148)

Summary of proposed amendment

The Goods and Services Tax Act 1985 is to be amended to clarify the treatment of goods and services acquired before 1 April 2011 but which have not been subject to either the change-in-use rules or apportionment rules until after 1 April 2011.

Application date

The amendment will apply from 1 April 2011.

Key features

Section 21H is a transitional provision that specifies which rules – the former change-in-use adjustment rules or the new apportionment rules – should be used for goods and services acquired before the date of introduction of the new apportionment rules (1 April 2011).

To clarify the treatment of goods and services acquired before 1 April 2011 but which have not been subject to either the change-in-use rules or the apportionment rules until after 1 April 2011, section 21H is being amended so that:

  • if the taxpayer has already claimed an input tax deduction for the goods or services, they should apply the old change-in-use adjustment rules; or
  • if the person has not deducted any input tax for the goods or services, they should apply the new apportionment rules. For the purpose of the new apportionment rules, the first adjustment period is treated as starting on the date of acquisition of the goods or services and ending on the date that is the later of the first balance date falling after the date on which they were first used for making taxable supplies, or the date on which the person becomes a registered person.

A “savings” provision will also be introduced to allow taxpayers who have already applied either the old change-in-use adjustment rules or the new apportionment rules before the amendment is introduced to continue with their chosen treatment.

Background

The new apportionment rules apply to supplies made on or after 1 April 2011. In accordance with the transitional provision (section 21H) as currently drafted, goods and services acquired before 1 April 2011 which are used for both taxable and non-taxable purposes remain subject to the old change-in-use adjustment rules.

Section 21H leaves some uncertainty around the treatment of goods and services acquired before 1 April 2011 but which have not been subject to either the change-in-use rules or apportionment rules until after 1 April 2011. This may occur, for example, if the goods or services were exclusively used for either taxable or non-taxable purposes or because the person was not registered for GST before 1 April 2011.