GST instalments and concessions – SMEs take note

GST is not all about BASs and lodging them on time. That can be a difficult enough task as it is, but there’s more to GST than that.

Below I flag a couple of recent developments on GST issues that SMEs might like to note.

Paying GST instalments

Back in the 2011-12 federal budget in May 2011, the Federal Government announced that it would extend the current GST instalment system to allow access for small businesses that are in a net refund position. A discussion paper was released for public consultation on June 6, 2011. As a result of submissions to that paper, the proposal was altered to allow only those businesses already using the instalment system to continue to use it if they move into a net refund position.

Treasury has now released draft legislation for consultation to allow small businesses (i.e. annual GST turnover less than $2 million) in a net refund position to continue to use the GST instalment system. Currently, the GST legislation excludes a taxpayer from paying GST by instalments if that taxpayer is in a net refund position.

The proposal is to amend the GST Act to enable those small business taxpayers who are paying their GST by instalments, and who subsequently move into a net refund position, to continue to use the GST instalments option if they wish to do so.

The proposed amendments would also provide that taxpayers who move into a net refund position and who wish to continue to pay GST by instalments receive an instalment amount each quarter of zero. Business entities that are currently not paying GST by instalments and are already in a net refund position would remain ineligible to use the instalment option.

The changes would apply to GST instalment quarters starting on or after the first July 1 that is on or after the commencement of the amendments.

The legislation will not be introduced in Parliament until sometime next year, but it is worth keeping an eye on.

Going concern concession regarding property

A provision in the GST law provides a concession and entitles the supplier and the recipient to treat a transaction (for example, the sale of property) as GST-free if certain conditions are met. One of those conditions is that the supplier and the recipient agree in writing that the going concern concession applies in relation to the transaction.

This is an important and useful mechanism, although it seems to regularly come before the courts and tribunals.

Recently, the AAT held that a transaction in relation to the sale of a commercial property met the requirements of the going concern concession under the rules in the GST Act. Accordingly, it set aside the Tax Commissioner’s decision and held there was no tax shortfall.

The company in question was the owner of a commercial property which it leased and in 2009 entered into a contract to sell the property. Settlement subsequently occurred in December 2010 and the property was sold for just over $2.2 million. The particulars of sale did not include the words “plus GST”.

In May 2010, the purchaser’s solicitors sought to withdraw from the sale on the basis that, contrary to previous representations, there was no lease in existence, adding that “as your client cannot provide us with a Lease, there will now be GST liability which our client is not prepared to accept”. The parties continued to dispute whether a month-to-month over-holding provision in an expired lease implied a going concern with respect to the sale of a commercial property.

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