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Client Update: GST – 6 August 2008

Review of the administration of GST

In brief: The Board of Taxation has begun a review of the legal framework for the administration of GST after announcements by the Federal Government on 11 June 2008. The review will seek ways to reduce compliance costs and to streamline and improve the operation of GST in Australia. Partner Ross Stitt (view CV) and Lawyer Pouyan Afshar report on the Board of Taxation's issues paper on this issue.

Purpose

The purpose of the Board of Taxation's (the Board) review is to investigate and make recommendations on ways in which a more streamlined method of administering GST could be developed. To that end, the Board aims to identify ways to reduce compliance costs and remove any anomalies from the administration of GST.

However, the Board has been directed not to review the rate of GST or the scope and extent of the goods and services that are subject to GST. It has been asked, moreover, to make recommendations that are revenue neutral and do not otherwise undermine the integrity of the GST system.

The issues

The issues paper is separated into four chapters. The first chapter deals with basic administrative matters such as registration for GST, recordkeeping and accounting for GST. Other rules relating to entities, joint ventures and small businesses are dealt with in chapter two. The issues that can arise from adjustments and subsequent events are discussed in chapter three, followed by an overview of recent changes in the GST administrative environment and rulings in chapter four.

While the Board is not charged with reviewing the rate and scope of GST, the matters it will review are not insignificant to taxpayers. For example, the Board has sought responses on the position of foreign entities with respect to registration for GST, especially in circumstances where a foreign entity operates through an Australian resident agent. Moreover, the Board has sought submissions on the current rules for grouping GST entities and has raised some questions on the procedures relating to small businesses complying with their GST obligations.

Adjustments, correcting mistakes and refunds certainly affect the amount of a taxpayer's liability for GST. The Board has noted commentators' observations that the adjustment mechanisms may give rise to unintended outcomes in some circumstances because of problems with the interaction of the adjustment mechanisms with other areas of GST law. The Board has sought suggestions on how to make the use of these provisions as easy as possible.

Conclusion

Since 2000, GST has been an important part of Australia's tax system. It affects a wide variety of suppliers both large and small. The streamlining of the administration of GST is integral to its success, considering the concerns expressed about the costs to business of compliance. The Board's review gives stakeholders the opportunity to contribute to the reform and development of the legal framework for the operation of GST. The Board's recommendations are likely to form the basis for a number of changes to the administration of GST.

The deadline for submissions on these issues is 15 September 2008. In the meantime, the Board will consult with various stakeholders to formulate its recommendations. These recommendations will inform the direction of future developments in the administration of GST. We will update you on the recommendations once they are released.

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