Part II - Goods And Services Tax Amendment Act (No 2) 1988

This commentary item was published in Public Information Bulletin Volume 174, May 1988

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Section 1 - Short Title

This section provides for this Act to be referred to as the Goods and Services Tax Amendment Act (No 2) 1988 and to be read together with and deemed part of the Goods and Services Tax Act 1985.

The Act is deemed to have come into force on the 17th of March 1988.

Section 2 - Taxable Periods

This section repeals the current section 15 and substitutes a new section 15 and section 15A. Currently, section 15 allows the Commissioner:

1. To allocate taxable periods upon the registration of a person; and
2. Change the taxable periods allocated upon the request of a registered person or where the circumstances warrant a change in taxable periods.

Section 15 has been redrafted to introduce the Government's 17th of December Economic Statement announcement that a registered person with a turnover of more than $24 million will be required to submit a monthly GST return with effect from 1 April 1988.

The change will first apply to registered traders whose taxable supplies in the 12 months ending 31 March 1988 exceed million, or whose taxable supplies in the 12 months period commencing on the 1st of April 1988 are likely to exceed that amount. For those companies which have elected to be treated as a group of companies in terms of section 55 of the GST Act, the legislation deems all supplies by companies in the group (other than intra-group supplies) to be supplied by the representative member. Accordingly, if the value of supplies of the group exceeds $24 million then the group is required to furnish monthly returns.

The calculation of the amount of taxable supply deemed to be made by the representative member is made using criteria contained in subsection 55(7).

If a registered person's present two month taxable period ends on the 31st of March 1988, the one month period will commence either on the 1st of April 1988 or the 1st of June 1988.

The commencement date of the one month taxable period is dependent upon when the Department advises the registered person of the change in taxable periods. If the Department is able to advise a registered person of the change to the one monthly period before 31 March 1988, the one month taxable period will commence on the 1st of April 1988.

If, however, the change is advised by the Department after the 1st of April 1988 but before the 31st of May 1988, the one month taxable period commences on the 1st of June 1988.

Where a registered person's present two month taxable period ends on the 30th of April 1988, then the one month taxable period will commence on the 1st of May 1988.

Head Office will be sending a letter to registered persons to whom the new furnishing dates could apply. They will be asked to confirm that they will be subject to the new monthly return requirements. When this has been done we will be in a position to inform traders of the new requirements.

The Legislation giving effect to these changes is now discussed in detail.

Section 2(1) - Taxable Periods

This section repeals section 15 and substitutes sections 15 and 15A. The following is a commentary on these new sections.

Section 15(1) - provides mat every registered person shall be placed by the Commissioner in any one of the following categories to determine that person's taxable period:

Category A being two monthly periods ending with the last day of January, March, May, July, September, and November.

Category B being two monthly periods ending with the last day of February, April, June, August, October, and December.

Category C being six monthly periods ending with the last day of any month as determined by the Commissioner.

Category D being one monthly periods ending with the last day of any month as determined by the Commissioner.

Section 15(2) - provides that where a registered person has not been placed in either category C or category D, the Commissioner will place that person in either category A or B to achieve an approximately even number of persons in those two categories.

Section 15(3) - sets out the criteria that enables a registered person to adopt a six monthly taxable period. The criteria are:

• An application has to be made in writing; and
• The taxable supplies of the registered person have not exceeded $250,000 in a period of 12 months ending on the last day of any month or are likely to exceed that amount in a period of 12 months beginning on the first day of any month.

Section 15(4) - provides that the Commissioner must place in category D:

1. Any registered person who has made written application to be so placed; and
2. Any registered person whose taxable supplies have in the period of 12 months ending with the last day of any month exceeded $24 million or are likely to exceed that amount in a period of 12 months beginning on the first day of any month.

As these provisions came into force on the 17th of March 1988, a registered person will be required to be placed in category D where the value of taxable supplies for the 12 month period (31 March 1987 to 31 March 1988) have exceeded $24,000,000 or are likely to exceed this amount in the next 12 months beginning on 1 April 1988. The provisions providing for a change of the taxable period allocated are dealt with in section 15A.

Section 15(5) - provides that where the Commissioner has not placed a registered person in a taxable period category, that person is to be placed in category A.

Section 15(6) - provides that the total value of a registered person's taxable supplies will not exceed the amounts specified in subsection (3) and subsection (4) of this section solely as a result of:

1. The sale of assets of a taxable activity for the purposes the replacement of those assets; or
2. The permanent reduction in the size or scale of the taxable activity.

This ensures that a registered person will not cease to satisfy the conditions of category C or satisfy the conditions of category D because of unusual trading circumstances. This provision also applies for the purposes of section 15A in relation to a change of the taxable period allocated.

Section 15(7) - allows a registered person to apply in writing to the Commissioner to have the taxable period end on a day other than the last day of a month. This substitute day cannot be earlier or later than seven days from the last day of a month. In addition this substitute day is disregarded for the purposes of section 16(1) of the GST Act which refers to the date on which a return is required to be furnished.

Section 15A - Change in registered person's taxable period

Section 15A(1) - provides that the Commissioner may direct that a registered person change their taxable period category to any other appropriate category in the following circumstances:

1. On written application by the registered person, or
2. Where the registered person has notified the Commissioner of a change of status in terms of section 53 of the GST Act. Section 53 requires the registered person to notify the Commissioner of any change in status such as when a registered person's taxable supplies exceeds the $24,000,000 threshold; or
3. Where the Commissioner is otherwise satisfied that a registered person satisfies or ceases to satisfy the conditions of section 15(3) or 15(4). This allows the Commissioner to instigate a change in the taxable period where the Commissioner is satisfied that the taxable period should be changed, or
4. In respect of change between category A and category B where the Commissioner so directs.

Section 15A(2) - prevents the Commissioner from directing a registered person to change, unless requested to do so in writing, -

• To category C from any other category as adoption of the category C taxable period is solely at the registered persons discretion, provided the conditions are met.
• From category D to any other category as all registered person are entitled to be placed in this category at their request.

Section 15A(3) - allows the Commissioner to direct an appropriate change in relation to a registered person's taxable period category where:

1. That person applies to be changed to category D; or
2. The Commissioner is satisfied that that registered person should be placed in category D because the taxable supplies exceed $24,000,000; or
3. The Commissioner is satisfied that that registered person should be removed from category C as their taxable supplies exceed $250,000.

Section 15A(4) - determines the date that the new taxable period category will commence from. Generally, the new category will commence from the day following the end of the taxable period in which the Commissioner directs the change in categories. However, there is provision to allow the change to apply from an earlier date where the Commissioner and the registered person agree to an earlier date.

Section 15A(5) - was enacted to ensure that those registered persons who did not advise the Commissioner that their taxable supplies at the end of any 12 month period had exceeded $24,000,000 did not gain any benefit over persons who have complied with their obligations.

This subsection deems a registered person to be placed in category D where:

• That person's taxable supplies have exceeded $24,000,000 in the 12 month period ending with the last day of any taxable period; and
• That person has not advised the Commissioner of the change in status by the end of the next taxable period.

The effective date of this deemed placement in category D is from the day following the end of the taxable period immediately following the taxable period in which that person exceeded the $24 million threshold. This will allow the Commissioner, in terms of section 27 of the GST Act, to issue assessments on a monthly basis where the Commissioner is not satisfied because the returns have been filed on a two monthly basis. This provision only applies in relation to taxable periods that end on or after the commencement date of this Act.

Section 15A(6) - prevents the registered person from including in the first return after a change in categories any period for which a return has been furnished.

CONSEQUENTIAL AMENDMENTS

Section 2(2) - amends the definition of the term "taxable period" in section 2 of the principal Act to include the reference to the new section 15A.

Section 2(3) - amends section 32 of the principal Act which allows registered persons to object to certain decisions made by the Commissioner. The amendment repeals paragraph (b) of section 32(1) and substitutes new paragraphs (b) and (ba).

The substituted paragraphs allow a registered person to object to the following decisions of the Commissioner:

1. The non placement of a registered person in category C (section 15(3) refers).
2. The placement of a registered person in category D (section 15(4) refers).
3. The determination of a date other than the last day of the month as the last day of a taxable period (section 15(7) refers).
4. A direction that a registered person change their taxable period (sections 15A(1) and 15A(3) refers).

It is considered that a placement constitutes a decision by the Commissioner for the purposes of section 32.

Section 2(4) - amends section 53 of the principal Act which requires a registered person to notify the Commissioner of any change in status. This amendment repeals paragraph (c) of section 53 and substitutes new paragraphs (c), (ca), and (cb).

The substituted paragraphs require a registered person to notify the Commissioner within 21 days of the following changes in status:

• A change whereby a registered person who has been placed in category C ceases to satisfy the conditions of section 15(3). Section 53(c) refers.
• A change whereby a registered person is required to be placed in category D as that person now satisfies the conditions of section 15(4). Section 53(ca) refers.
• A change whereby a registered person, who has been directed to adopt the payments basis of accounting, ceases to satisfy the conditions of section 19(2). Section 53(cb) refers.

Section 2(5) - amends the proviso to section 53 to ensure that the above amendments to section 53 do not apply in relation to any change in the ownership of a company.

Section 2(6) - amends section 55(7)(b) of the principal Act to ensure the reference to section 15 also includes reference to section 15A.

Section 2(7) - amends section 56(6) of the principal Act to ensure the reference to section 15 also includes reference to section 15A. Also the term "determination" in section 56(6) has been replaced with the term "placement" because of the redrafting of sections 15 and 15A.

Section 2(8) - amends section 76(3) of the principal Act to ensure that this section is aligned with the new sections 15 and 15A.

Section 2(9) - repeals section 13 of the Goods and Services Amendment Act 1986, which inserted the previous section 15, and section 14 in the Goods and Services Tax Amendment Act 1988 which amended it.

Section 2(10) - provides that a taxable period category allocated under the previous section 15 continues to apply until there is a change of that taxable period category. Also this subsection introduces a provision to limit section 15A(5) from applying in respect of taxable periods ending before the commencement of this Act.