A New Tax System (Goods and Services Tax) Act 1999

Chapter 4 - The special rules  

Part 4-4 - Special rules mainly about net amounts and adjustments  

Note:

The special rules in this Part mainly modify the operation of Part 2-4 , but they may affect other Parts of Chapter 2 in minor ways.

Division 131 - Annual apportionment of creditable purpose  

Subdivision 131-B - Consequences of electing to have annual apportionment  

131-55   Increasing adjustments relating to annually apportioned acquisitions and importations  

(1)    
You have an increasing adjustment if:

(a) an acquisition or importation that you made was *partly creditable; and

(b) the input tax credit on the acquisition or importation is attributable to a tax period ending in a particular *financial year; and

(c) the amount of the input tax credit is an amount worked out under this Division.

(2)    
The amount of the increasing adjustment is an amount equal to the difference between:

(a) the amount of the input tax credit worked out under this Division; and

(b) what would have been the amount of the input tax credit if this Division did not apply.

(3)    
In working out for the purposes of paragraph (2)(a) the amount of an input tax credit, take into account any change of circumstances that has given rise to:

(a) an adjustment for the acquisition under Division 19 ; or

(b) an adjustment for the acquisition under Division 21 ; or

(c) an adjustment for the acquisition under Division 134 .

Note:

Because of subsection 136-10(3) , the amount of the Division 21 adjustment will not be reduced under Division 136 .

(4)    
In working out for the purposes of paragraph (2)(b) what would have been the amount of an input tax credit, take into account any change of circumstances that has given rise to:

(a) an adjustment for the acquisition under Division 19 (worked out as if this Division had not applied to working out the amount of the input tax credit); or

(b) an adjustment for the acquisition under Division 21 ; or

(c) an adjustment for the acquisition under Division 134 .

Note:

If this Division did not apply, the amount of the Division 21 adjustment would have been worked out under Division 136 .

Example:

While an annual apportionment election has effect, you make a partly creditable acquisition for $1,100, for which you have an input tax credit of $100. The extent of your creditable purpose is 10%.

During later tax periods, the price increases by $110, for which you have a decreasing adjustment under Division 19 of $10, and the supplier writes off $660 as a bad debt, for which you have an increasing adjustment under Division 21 of $60 (subsection 136-10(3) prevents the amount from being reduced under Division 136 ).

The amount of your increasing adjustment under this section is $45. This is the difference between the amounts under paragraphs (2)(a) and (b).

The paragraph (2)(a) amount (which is effectively worked out on a fully creditable basis) is:

$100 + $10 − $60 = $50

The paragraph (2)(b) amount (which is based on a 10% creditable purpose) is:

$10 + $1 − $6 = $5