Senate

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 1 - GST returns and payments

Outline of chapter

1.1 Part 1 of Schedule 1 to this Bill explains the amendments to the GST Act and the TAA 1953 to simplify the GST return and lodgement systems. The amendments:

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extend the due date for payment for net amounts and lodgement of GST returns for entities that account for GST on a quarterly basis;

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remove the requirement for the net amount to be provided on the GST return; and

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ensure that the annual GST information report that an entity may need to lodge can require entities to provide details for more than one tax period.

Detailed explanation of new law

Overview

1.2 On 22 February 2001, the Government announced changes to simplify the way businesses will report and pay GST and extend the due dates for payment and lodgement of quarterly GST returns. These changes have been designed to help businesses by making it easier, especially for small businesses, to report their GST obligations.

1.3 The changes allow entities to continue their current way of reporting and paying GST or, if eligible, choose one of the other options from the quarter ending 31 March 2001. All entities report on the current BAS for the quarter ending 31 March 2001, but a new simplified BAS will be introduced from the quarter ending 30 June 2001.

1.4 Entities accounting for GST on a quarterly basis may have 3 choices in the way they report and pay GST. These choices are:

1.

All quarterly entities can continue to report and pay/claim actual GST amounts quarterly.

2.

All quarterly entities can pay/claim GST amounts quarterly and lodge an annual GST information report.

3.

Eligible entities can pay a GST instalment quarterly and lodge an annual GST return.

1. All quarterly entities can continue to report and pay/claim actual GST amounts quarterly

1.5 If the way an entity has been paying and reporting GST up until now suits the business, there is no need for them to change. The only difference the entity will notice is a new streamlined quarterly reporting form sent to them from the quarter ending 30 June 2001.

2. All quarterly entities can pay/claim GST amounts quarterly and lodge an annual GST information report

1.6 Entities will continue to pay/claim actual GST amounts and report only GST collected, GST paid and total sales each quarter (BAS boxes 1A, 1B and G1).

1.7 Entities making this choice must also complete a separate annual GST information report to provide annual amounts for any exports, other GST-free sales, and capital and non-capital purchases (BAS boxes G2, G3, G10 and G11). The GST information report for this financial year must be lodged by either when the entitys income tax return is due or 28 February 2002, whichever is the earlier.

1.8 Item 5 (discussed in paragraphs 1.19 and 1.20) ensures that the Commissioner is able to compel entities to provide annual figures for their exports, other GST-free sales and capital and non-capital purchases on the GST information report.

3. Eligible entities can pay a GST instalment quarterly and lodge an annual GST return

1.9 There is now a third choice for reporting and paying GST if an entity meets certain eligibility requirements discussed in Chapter 2. This choice involves:

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paying a quarterly GST instalment worked out by the ATO on a quarterly form; and

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accounting for any difference between actual GST liability and total GST instalments for the year on an annual GST return covering the financial year.

Extending the due date of GST return and payment for quarterly entities

1.10 Items 1 and 6 amend Divisions 31 and 33 to extend the lodgement date of GST returns and payments of net amounts for entities with a quarterly tax period.

1.11 A tax period will be a quarterly tax period if it is a period of 3 months, or would be a period of 3 months but for the 7-day rule in section 27-35 of the GST Act, or because the entity has registered for GST part way through the tax period [Schedule 1, Part 1, items 1 and 20, subsection 31-8(2)] . The 7-day rule enables an entity to extend or reduce their tax period by a maximum of 7 days so that it is consistent with the commercial accounting period of the entity.

1.12 The new quarterly lodgement and payment dates mean that entities on a quarterly tax period will have more time to prepare and lodge their quarterly GST return and make any payment. Table 1.1 outlines the new quarterly lodgement and payment dates as provided in sections 31-8and 33-3.

1.13 Due to the above amendments, items 2, 3, 7 to 10, 12 and 15 make minor consequential amendments to various provisions of the GST Act. Item 20 inserts the definition of quarterly tax period in the GST Dictionary in section 195-1 of the GST Act.

1.14 Further details of this, and other amendments relating to extending the lodgement and payment dates of quarterly BAS obligations are contained in Chapter 6.

Removal of requirement to state the net amount in GST returns

1.15 Under the existing law, there is an obligation for a GST return to include an entitys net amount on it. A form that does not include this information will not meet the form and contents requirements of a GST return. As part of the overall simplification of GST reporting requirements, the requirement for the GST return to state the entitys net amount will be removed.

1.16 Item 4 repeals subsection 31-15(1) and replaces it with a requirement that a GST return for a period must only be in an approved form, rather than the additional tests that were imposed under the existing law. [Schedule 1, Part 1, item 4, subsection 31-15(1)]

1.17 As a result of the amendment contained within item 4, it is necessary to repeal subsection 31-20(2) as it provides that the Commissioner may direct that a GST return does not need to state a net amount. As the statement of a net amount will no longer be required this subsection is redundant.

1.18 Due to the above amendments, items 11, 13, 14 and 16 to 19 make minor consequential amendments to various provisions of the GST Act to remove redundant references to the net amount being stated in a GST return. Item 21 makes a minor consequential amendment to the TAA 1953 to remove a redundant reference to the net amount being stated in a GST return in section 70 of that Act.

Simplifications to the form and contents of GST returns

1.19 An entity that accounts for GST using quarterly tax periods will have the choice of reporting less information each quarter and lodging an annual GST information sheet at the end of the financial year with details of annual amounts for exports, other GST-free sales, and capital and non-capital purchases (BAS boxes G2, G3, G10 and G11).

1.20 The Commissioner is able to compel entities to provide additional returns at any time. Item 5 inserts subsection 31-20(2) to clarify that the additional returns that the Commissioner can request may cover more than one tax period. This amendment clarifies that the Commissioner can request annual amounts for G2, G3, G10 and G11 in the annual GST information sheet for entities choosing to report less information each quarter.

Application and transitional provisions

1.21 The amendments in this chapter apply, and are taken to have applied, in relation to GST returns, and net amounts, for tax periods ending on or after 22 February 2001. [Schedule 1, Part 1, item 22]