Annotated GST Act – Chapter 4 – Part 4-4 – Special rules about net amounts and adjustments – Divisions 123 – 142

Division 123 – Simplified accounting methods for retailers and small enterprise entities 123.1   What this Division is about 123.5   Commissioner may determine simplified accounting methods 123.7   Meaning of small enterprise entity 123.10 Choosing to apply a simplified accounting method 123.15 Net amounts Division 126 – Gambling 126.1   What this Division is about

Cases

TAB Ltd v Commissioner of Taxation [2005] NSWSC 552 – at [53] per Gzell J – “there is a lot to be said for the view that…Div 126 forms an exclusive code for determining the margin with respect to the provision of gambling supplies” and at [61] “The better view, in my judgment, is that…Div 126 constitutes an exclusive code for the determination of net profits from gambling and the reference to the adjustments in s 126-5(2) is limited to adjustments with respect to activities other than gambling supplies.”

126.5   Global accounting system for gambling supplies 126.10 Global GST amounts

Cases

Commissioner of Taxation v Burswood Nominees Limited as trustee for the Burswood Property Trust [2021] FCAFC 151 – goods and services tax – gambling supplies – junkets – agreements between casino and junket tour operators – where commissions and rebates were payable by the casino to the junket tour operator or by the junket tour operator to the casino – where, at the conclusion of the junket, a total amount would be payable by the junket tour operator to the casino or by the casino to the junket tour operator – whether the commissions and rebates, or the total amount payable, were subject to the special rules for gambling supplies in Div 126

International All Sports v Commissioner of Taxation [2011] FCA 824 – the expression “total monetary prizes” refers to all monetary prizes the entity was liable to pay in the tax period – monetary prizes paid to gamblers outside Australia are not excluded

126.15 Losses carried forward 126.20 Bad debts 126.25 Application of Subdivision 9-C 126.27 When gambling supplies are connected with the indirect tax zone 126.30 Gambling supplies do not give rise to creditable acquisitions 126.32 Repayments of gambling losses are not consideration 126.33 Tax invoices not required for gambling supplies 126.35 Meaning of gambling supply and gambling event

Cases

TSC 2000 Pty Ltd and Commissioner of Taxation [2007] AATA 1629 – amounts paid by members of lottery scheme consideration for a taxable “gambling supply” by applicant – amounts paid as consideration to applicant and not received as agent for members – at [77]-[80]: discussion of meaning of “bet” and “lottery”

TAB Ltd v Commissioner of Taxation [2005] NSWSC 552 – whether the definition of “gambling event” requires an outcome and therefore does not apply if there is no outcome, e.g. because a race is abandoned or declared a no-race – whether bets placed on races, games, sporting events or other events where there was a refund constitutes consideration for a “gambling supply”

International Cases

Revenue and Customs v K E Entertainments Ltd [2020] UKSC 28 – Taxable amount – Taxpayer charging fee for participation in bingo sessions – Tax payer recalculating liability to tax in accordance with business brief and Notice published by HMRC – Taxpayer giving effect to recalculation by issuing an internal credit note – Taxpayer making retrospective claim for over payment of tax – whether recalculation resulted in a ‘decrease in consideration for a supply which includes an amount of VAT’ within the meaning of Regulation 38 – Appeal dismissed

Revenue and Customs v The Rank Group PLC [2020] UKUT 117exemption – betting and gaming – gambling supplies through fixed odds betting terminals and certain slot machines – whether other gambling supplies with different VAT treatment were similar – the EU principle of fiscal neutrality considered – whether FTT erred in applying that principle – appeals dismissed

Done Brothers (Cash Betting) Ltd & Ors v Revenue & Customs [2018] UKFTT 406 – betting and gaming – whether exclusion from exemption of supplies of gambling made through fixed odds betting terminals contrary to EU principle of fiscal neutrality- whether games played on FOBTs were similar to comparator games – appeals allowed

Rank Group v Revenue & Customs  [2018] UKFTT 405 – betting and gaming – whether taxation of supplies of gambling made through certain slot machines when supplies throughfixed odds betting terminalswere exempt breach of EU principle of fiscal neutrality- whether other slot machines andfixed odds betting terminalswere similar – appeal allowed

Revenue and Customs v K E Entertainments Ltd [2017] UKUT 328 – Taxable amount – Taxpayer charging fee for participation in bingo sessions – Tax payer recalculating liability to tax in accordance with business brief and Notice published by HMRC – Taxpayer giving effect to recalculation by issuing an internal credit note – Taxpayer making retrospective claim for over payment of tax – whether recalculation resulted in a ‘decrease in consideration for a supply which includes an amount of VAT’ within the meaning of Regulation 38 – yes – – Appeal refused

Revenue and Customs v The Rank Group Plc [2015] UKSC 48 – whether the revenue from electronic slot machines used for gaming resulting from the provision of a “gaming machine” as defined and more particularly whether for the purposes of that definition the element of chance in the game was “provided by means of the machine” or by an outside agency of some kind – if not, the takings were exempt – the machines were terminals connected to a central network but the element of chance was provided “by means of” the action of the player pressing the button and generating the winning or losing combination – the terminal was therefore the active means by which the element of chance was created

Division 129 – Changes in extent of creditable purpose 129.1   What this Division is about Subdivision 129A – General 129.5  Adjustments arising under this Division 129.10 Adjustments do not arise under this Division for acquisitions and importations below a certain value 129.15 Adjustments do not arise under this Division where there are adjustments under Division 130 Subdivision 129B – Adjustment periods 129.20 Adjustment periods 129.25 Effect on adjustment periods of things being disposed of etc Subdivision 129C – When adjustments for acquisitions and importations arise 129.40 Working out whether you have an adjustment

Cases

A Taxpayer and Commissioner of Taxation [2011] AATA 160 – calculating an increasing adjustment in respect of a property development on the basis of effective life method was not fair and reasonable – at [27]: the Tribunal accepted that GST 2009/4 contains a cogent explanation as to why an apportionment method based on the effective life of the premises is not considered fair and reasonable

GXCX and Commissioner of Taxation [2009] AATA 569 – entity which owned property with concurrent intention of renting residential apartments in the short term and selling the apartments in the medium to long term did not hold the apartments for a “dual purpose”, being a creditable and a non-creditable purpose – during the period in question the apartments were not applied for the creditable purpose of selling merely because the holding company had an intention to sell at some time in the future. The application during this period was entirely for a non-creditable purpose – at [32]: there is nothing inconsistent or illogical about two different but contemporaneous purposes

International cases

Commissioner of Inland Revenue v Lundy Family Trust [2005] NZCA 269 – adjustments for change of purpose

Rulings and Determinations

GST Determination GSTD 2012/3 “Goods and Services tax: does an adjustment for a change in extent of creditable purpose necessarily arise for services acquired in relation to a proposed merger and acquisition transaction that does not eventuate, or that does not proceed in the manner contemplated at the time the services were acquired?”

GSTR 2009/4 – Austlii – Goods and services tax: new residential premises and adjustments for changes in extent of creditable purpose

GSTD 2009/2 – Austlii – Goods and services tax: are there GST consequences when a partner in a partnership takes goods held as trading stock for private or domestic use

GSTR 2006/4 – Austlii – Goods and services tax: determining the extent of creditable purpose for claiming input tax credits and for making adjustments for changes in creditable purpose

GSTR 2006/3 – Austlii – Goods and services tax: determining the extent of creditable purpose for providers of financial supplies

GSTR 2000/24 – Austlii – Goods and services tax: Division 129 – making adjustments for changes in extent of creditable purpose

129.45 Gifts to gift-deductible entities 129.50 Creditable purpose 129.55 Meaning of apply Subdivision 129D – Amounts of adjustments for acquisitions and importations 129.70 The amount of an increasing adjustment 129.75 The amount of a decreasing adjustment 129.80 Effect of adjustment under certain Divisions. Subdivision 129E – Attributing adjustments under this Division 129.90 Attributing your adjustments for changes in extent of creditable purpose Division 130 – Goods applied solely to private or domestic use 130.1   What this Division is about 130.5   Goods applied solely to private or domestic use Division 131 – Annual apportionment of creditable purpose 131.1   What this Division is about Subdivision 131A – Electing to have annual apportionment 131.5   Eligibility to make an annual apportionment election 131.10 Making an annual apportionment election 131.15 Annual apportionment elections by representative members of GST groups 131.20 Duration of an annual apportionment election Subdivision 131B – Consequences of electing to have annual apportionment 131.40 Input tax credits for acquisitions that are partly creditable 131.45 Input tax credits for importations that are partly creditable 131.50 Amounts of input tax credits for creditable acquisitions or creditable importations of certain cars 131.55 Increasing adjustments relating to annually apportioned acquisitions and importations 131.60 Attributing adjustments under section 131.55 Division 132 – Supplies of things acquired etc 132.1   What this Division is about

Rulings and Determinations

GSTR 2004/8 – Austlii – Goods and services tax: when does an increasing adjustment under Division 132

132.5   Decreasing adjustments for supplies of things acquired, imported or applied for a purpose that is not fully creditable 132.10 Attribution of adjustments under this Division Division 133 – Providing additional consideration under gross-up clauses 133.1   What this Division is about 133.5   Decreasing adjustments for payments made to third parties 133.10 Increasing adjustments for payments received by third parties Division 134 – Third party payments 134.1   What this Division is about 134.5   Decreasing adjustments for payments made to third parties 134.10 Increasing adjustments for payments received by third parties 134.15 Attribution of decreasing adjustments 134.20 Third party adjustment notes

Legislative Determinations

TPANI 2010/1 – Third Party Adjustment Note Information Requirements Determination (No.1) 2010

134.25 Adjustment events do not arise 134.30 Application of sections 48-55 and 49-5 Division 135 – Supplies of going concerns 135.1   What this Division is about 135.5   Initial adjustments for supplies of going concerns

Cases

Commissioner of Taxation v MBI Properties Pty Ltd [2014] HCA 49 – the purchaser of reversionary interest in land makes a supply to the lessee – the purchaser of the reversion has an increasing adjustment under Division 135 where the property was acquired as a going concern- appeal – [2013] FCAFC 112 (Case analysis) – first instance [2013] FCA 5 (Case analysis)

The Hotel Apartment Purchaser and Commissioner of Taxation [2013] AATA 567 – the purchaser of a residential apartment in a hotel complex as a going concern was subject to an increasing adjustment under s 135-5 because the apartment was to be used to make input taxed supplies of residential premises – (Case analysis)

135.10 Later adjustments for supplies of going concerns Division 136 – Bad debts relating to transactions that are not taxable or creditable to the fullest extent 136.1   What this Division is about Subdivision 136A – Bad debts relating to partly taxable or creditable transactions 136.5   Adjustments relating to partly taxable supplies 136.10 Adjustments in relation to partly creditable acquisitions Subdivision 136B – Bad debts relating to transactions that are taxable or creditable at less than 1 136.30 Writing off bad debts (taxable supplies) 136.35 Recovering amounts previously written off (taxable supplies) 136.40 Bad debts written off (creditable acquisitions) 136.45 Recovering amounts previously written off (creditable acquisitions) 135.50 Meanings of taxable at less than 1/11 of the price and creditable at less than 1/11 of the consideration Division 137 – Stock on hand on becoming registered etc 137.1   What this Division is about 137.5   Adjustments for stock on hand on becoming registered etc Division 138 – Cessation of registration 138.1   What this Division is about 138.5   Adjustments for cessation of registration 138.10 Attributing adjustments for cessation of registration 138.15 Ceasing to be registered – amounts not previously attributed 138.17 Situations to which this Division does not apply 138.20 Application of Division 129 Division 139 – Distributions from deceased estates 139.1   What this Division is about 139.5   Adjustments for distributions from deceased estates 139.10 Attributing adjustments for distributions from deceased estates 139.15 Application of Division 129 Division 141 – Tradex scheme goods 141.1   What this Division is about 141.5   Adjustments for applying goods contrary to the Tradex Scheme 141.10 Meaning of tradex goods etc 141.15 Attribution of adjustments under this Division 141.20 Application of Division 129 Division 142 – Excess GST 142.1   What this Division is about

Rulings and Determinations

GSTR 2015/1 ‘Goods and services tax: the meaning of the terms ‘passed on’ and ‘reimburse’ for the purposes of Division 142 of the A New Tax System (Goods and Services Tax) Act 1999

Subdivision 142A – Excess GST unrelated to adjustments 142.5   When this Subdivision applies 142.10 Refunding the excess GST 142.15 When section 142-10 does not apply 142.16 No refund of excess GST relating to supplies treated as non-taxable importations Subdivision 142B – GST related to cancelled supplies 142.20 Refunding GST relating to cancelled supplies Subdivision 142C – Passed on GST 142.25 Working out if GST has been passed on

WYPF and Commissioner of Taxation [2021] AATA 3050  –margin scheme – whether construction of apartments is non-monetary consideration for acquisition of 99-year leases from Australian Capital Territory development authority – whether excess GST passed on – held building works not consideration for acquisition of leases – held excess GST not passed on

International Cases – Courts

Investment Trust Companies v Revenue and Customs [2013] EWHC 665 – whether ultimate consumers entitled to recover overpaid VAT from the revenue on they basis that they bore the economic burden of the overpaid VAT – continuation of earlier decision of the High Court in Investment Trust Companies v HM Revenue and Customs [2012] EWHC 458

Marks and Spencer plc v Customs and Excise [2009] UKHL 8; [2009] STC 452; [2009] 1 All ER 939 – food, whether teacakes were biscuits, claim for refund of VAT, limitation of refunds where claimant unjustly enriched, effect of passing on VAT to customers, retrospective legislation, effect of community law – judgment of House of Lords referring to ECJ – [2005] UKHL 53 – request for preliminary ruling by ECJ – [2006] UKHL 69 – judgment of European Court of Justice – [2008] EUECJ C-309/06; [2008] STC 1408

Fleming v Her Majesty’s Revenue and Customs [2008] UKHL 2 – refunds of VAT, effectiveness of legislation to limit refund claims

Monro v Revenue and Customs [2008] EWCA Civ 306; [2008] STC 1815; [2008] 3 WLR 734 – entitlement at common law to refund of VAT; whether claim inconsistent with statutory refund scheme

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