The purpose of the statement is to assist representatives of incapacitated entities in calculating input tax credits and bad debt adjustments when a dividend is paid to creditors. The statement does not deal with the GST consequences for creditors who receive dividends.
Broadly, the statement deals with the following calculations:
- a bad debt increasing adjustment arising from a final dividend payment;
- a bad debt decreasing adjustment arising from an additional dividend payment; and
- an input tax credit entitlement arising from the payment of a first and final dividend.
The formulas in the statement were previously contained in GSTB 2003/1, which referred to Division 147 (which was repealed and replaced by Division 58). The formulas in this practice statement remain unchanged, but they have been revised to reflect the provisions of Division 58.