Blog Layout

ATO backs down from controversial time limit ruling
Liz Gibbs • January 26, 2020

In 2018, the ATO issued a controversial draft ruling which took a very strict stance on the four-year time limit for claiming input tax credits and fuel tax credits. The ruling had been used by the ATO to deny input tax credits and fuel tax credits where the Commissioner makes a decision on an objection or amendment request outside the 4-year period. However, a recent observation by a judge ruling on a related matter has put the ATO's strict stance in doubt and as a result, the ruling has been withdrawn.

The ATO has recently withdrawn Draft Miscellaneous Taxation Ruling MT 2018/D1 on the time limit for claiming input tax credits and fuel tax credits. Generally, under s 93-5 of the GST Act, the right to claim an input tax credit expires after 4 years and commences on the day on which the entity was required to lodge a return for the tax period to which the input tax credit would be attributable. Section 47-5 of the Fuel Tax Act has a similar provision which limits claims to 4 years after the date which taxpayers were required to give the Commissioner a return.

The withdrawn draft ruling created much controversy for its strict stance on the four-year time limit rules for claiming the credits. It stated that a tax credit would not be taken into account in an assessment when the taxpayer lodges an objection or requests an amendment, even if the objection or amendment request is made within the 4-year entitlement period. Therefore, the effect of the draft ruling was that if the Commissioner's decision on an objection or amendment request is made outside the 4-year period (but the request by the taxpayer is lodged within the 4-year period), the taxpayer would not have been entitled to the tax credits even if the decision is favourable to the taxpayer.

After the draft was issued however, the Federal Court in   Coles Supermarkets Australia Pty Ltd v FCT   [2019] FCA 1582 did not quite agree with the ATO stance. It accepted Coles' submissions that s 47-5 is only intended to prevent an ongoing entitlement to claim credits in a later return where a return has not been lodged or credits not claimed.

The Court noted that once a return has been lodged and objected to, there is no scope for the operation of s 47-5 to disentitle a taxpayer to fuel tax credits as the right of the Commissioner and taxpayer are protected by various sections of the TAA

In a decision impact statement following the judgement in the Coles case, the ATO acknowledged that the Court's observations were contrary to its views. Subsequently, it withdrew the ruling conceding that the views expressed in MT 2018/D1 was no longer current. While the Coles decision only refers to fuel tax credits, given the similarity of the provisions between fuel tax credits and the GST Act, and the Court's observations regarding the right of the Commissioner and taxpayer being protected by TAA, it would stand to reason it would also apply to input tax credits. Thus, the ATO is planning to issue a new ruling that takes into account the Federal Court's observations in early 2020.

In the meantime, what it means for affected taxpayers is that, where the Commissioner makes a decision on an objection or requests for amendment in relation to input tax credits and/or fuel tax credits outside the 4-year period (with the initial objection or amendment request lodged within the time limit), taxpayers will no longer be automatically denied the credits in situations where the decision is favourable. As a result, any taxpayer that the draft ruling has affected (ie has had input tax credits or fuel tax credits denied because objections or amendment decisions by the Commissioner had been made outside the 4-year time limit) is encouraged to contact the ATO.

Have you been affected?

If your business has been affected by the denial of input tax credits or fuel tax credits due to this ruling, we can contact the ATO on your behalf to see what remedies can be offered. If you're not sure whether you have been affected, we can also help you figure that out, contact us today.

Email us at Robert Goodman Accountants at 
.  © Copyright 2020
 
Thomson Reuters. All rights reserved.
 
Brought to you by Robert Goodman Accountants.
Office open
By Liz Gibbs March 10, 2025
With thanks to all Energex and Emergency services Crew, our electricity has been reconnected and our office is open from today 11 March. We hope you and your loved ones are safe and well following cyclone Alfred. These past few days have been challenging for many, and our thoughts are with everyone affected.
By Liz Gibbs March 10, 2025
Due to a power outage affecting the entire Samford area, the RGA Practice will be operating remotely today, 10 March, until electricity is restored. Please be assured that our team remains available and can be reached at 07 3289 1700. We appreciate your understanding and support during this time. Stay safe, and we look forward to seeing you soon.
Cyclone Alfred
By Liz Gibbs March 5, 2025
As Tropical Cyclone Alfred approaches, we want to remind everyone to take necessary precautions and ensure their safety. We have received some important information that we believe is crucial to share with you to help you prepare for the severe weather conditions ahead.
Work Health and Safety (Sexual Harassment) Amendment Regulation 2024
By Liz Gibbs February 26, 2025
In a significant move to combat workplace sexual harassment, Amendments to the Work Health and Safety Regulation 2011 (as per the Work Health and Safety (Sexual Harassment) Amendment Regulation 2024) will soon commence on 1 March 2025.
By Liz Gibbs February 25, 2025
The amount of money that can be transferred to a tax-free retirement account will increase to $2m on 1 July 2025.
What happens to your super when you die?
By Liz Gibbs February 25, 2025
The Government has announced its intention to introduce mandatory standards for large superannuation funds to, amongst other things, deliver timely and compassionate handling of death benefits. Do we have a problem with paying out super when a member dies?
By Liz Gibbs February 25, 2025
If credit card surcharges are banned in other countries, why not Australia? We look at the surcharge debate and the payment system complexity that has brought us to this point. In the United Kingdom, consumer credit and debit card surcharges have been banned since 2018. In Europe, all except American Express and Diners Club consumer surcharges are banned. And in Australia, there is a push to follow suit. But, is the issue as simple as it seems?
Babyboomer wealth
By Liz Gibbs February 25, 2025
“Succession planning, and the tax risks associated with it, is our number one focus in 2025. In recent years we’ve observed an increase in reorganisations that appear to be connected to succession planning.” ATO Private Wealth Deputy Commissioner Louise Clarke.
Penalty for False R&D claims
By Liz Gibbs February 25, 2025
A joint investigation involving the ATO found that, between 2014 and 2017, a Sydney business coach promoted unlawful tax schemes encouraging clients to lodge over-inflated, inaccurate or unsubstantiated research and development ('R&D') tax incentive claims
SMSF lodgement due dates
By Liz Gibbs February 25, 2025
All trustees of SMSFs with assets (including super contributions or any other investments) as at 30 June 2024 need to lodge an SMSF annual return ('SAR') for the 2023/24 financial year.
More Posts
Share by: