On 13 July 2023, the ATO issued the draft legislative instrument: A New Tax System (Goods and Services Tax) (Correcting GST Errors) Determination 2023 (LI 2023/D13), which is set to replace the Goods and Services Tax: Correcting GST Errors Determination 2013 (GSTE 2013/1).
GST Errors
Generally, GST errors may be corrected in a current BAS if it meets certain requirements. Whether these requirements will be met will depend on what type of error it is, when the error occurred and the quantum of the error.
There are two types of GST errors: a credit error and a debit error. A credit error is an error where you have paid too much GST and debit error is where you have not paid enough GST.
Currently a credit error may be corrected in the current BAS as long as it is within the ‘credit error time limit’ of four years. Alternatively, a debit error may only be corrected in the current BAS if it is within the ‘debit error time limit’ and the ‘debit error value limit’.
GST Turnover
|
Debit Error Time Limit
|
Debit Error Value Limit
|
| Less than $20 million |
Must be corrected in a BAS that is lodged within 18 months of the due date of the BAS in which the error was made. |
Less than $10,000 |
| $20 million to less than $100 million |
Must be corrected in a BAS that is lodged within 12 months of the due date of the BAS in which the error was made. |
Less than $20,000 |
| $100 million to less than $500 million |
Must be corrected in a BAS that is lodged within 12 months of the due date of the BAS in which the error was made. |
Less than $40,000 |
| $500 million to less than $1 billion |
Must be corrected in a BAS that is lodged within 12 months of the due date of the BAS in which the error was made. |
Less than $80,000 |
| $1 billion and over |
Must be corrected in a BAS that is lodged within 12 months of the due date of the BAS in which the error was made. |
Less than $450,000 |
If the ‘debit error time limit’ or the ‘debit error value limit’ is not met, the GST error cannot be corrected in the current BAS. Instead, the GST error will need to be corrected by amending the BAS in which the error was made.
Where a previous BAS is amended, the ATO may impose a general interest charge (GIC) for late payment. GIC is calculated on a daily basis and the amount charged can increase quickly depending on when the underpaid liability was initially due.
What will change?
No changes are being proposed in respect of credit errors. Further, no changes are being proposed in respect of the ‘debit error time limit’. Instead, the Commissioner is proposing to increase the ‘debit error value limits’ as detailed in the table below.
GST Turnover
|
Debit Error Time Limit
|
Current Debit Error Value Limit
|
Proposed Debit Error Value Limit
|
| Less than $20 million |
Must be corrected in a BAS that is lodged within 18 months of the due date of the BAS in which the error was made. |
Less than $10,000 |
Less than $12,500 |
| $20 million to less than $100 million |
Must be corrected in a BAS that is lodged within 12 months of the due date of the BAS in which the error was made. |
Less than $20,000 |
Less than $25,000 |
| $100 million to less than $500 million |
Must be corrected in a BAS that is lodged within 12 months of the due date of the BAS in which the error was made. |
Less than $40,000 |
Less than $50,000 |
| $500 million to less than $1 billion |
Must be corrected in a BAS that is lodged within 12 months of the due date of the BAS in which the error was made. |
Less than $80,000 |
Less than $100,000 |
| $1 billion and over |
Must be corrected in a BAS that is lodged within 12 months of the due date of the BAS in which the error was made. |
Less than $450,000 |
Less than $560,000 |
What does this mean for taxpayers?
The increase in the debit error value limits will be a positive change for taxpayers. It will provide further scope for GST errors to be amended in a current BAS and thus reduce administrative burden and compliance costs.
The Commissioner has been undertaking a consultation process in respect of the draft determination, however, we expect that taxpayers will welcome the proposed changes so we are not anticipating any changes to LI 2023/D13.
Remaining up to date with GST legislative updates and the relevant implications for you can be challenging without the right guidance. If you require assistance with identifying or correcting any GST errors from previous tax periods, please get in touch with Grant Thornton’s indirect tax experts.
