Taxation Ruling TR 2012/5
This ruling is about the taxation of dividends paid in compliance with s 254T of the Corporations Act 2001 from 28 June 2010. This includes the definition of a dividend for tax purposes, the assessment of dividends unders 44 of the Income Tax Assessment Act 1936 (ITAA 1936), the franking of dividends and the circumstances in which a dividend will be paid out of profits for tax purposes.
The Corporations Amendment (Corporate Reporting Reform) Act 2010 changed the prohibitions in s 254T of the Corporations Act governing the circumstances in which a company can pay a dividend from a ‘profits test’ to a three-part ‘balance sheet test’, with effect from 28 June 2010.
TR 2012/5 observes that ruling on the taxation and franking of dividends paid in compliance with the new s 254T of the Corporations Act requires reconciling concepts arising under the Taxation Acts, the Corporations Act, previously decided case law and present accounting standards.
The ruling states that para 202-45(e) of the Income Tax Assessment Act 1997 (ITAA 1997) does not prevent a company from franking a dividend paid to its shareholders out of:
- profits recognised in the company’s accounts and available for distribution, and paid in accordance with the company’s constitution and without breaching s 254T or Pt 2J.1 of the Corporations Act, merely because the company has unrecouped accounting losses accumulated in prior years or has lost part of its share capital
- an unrealised capital profit of a permanent character recognised in its accounts and available for distribution, provided the company’s net assets exceed its share capital by at least the amount of the dividend and the dividend is paid in accordance with the company’s constitution and without breaching s 254T or Pt 2J.1 of the Corporations Act.
In both these cases, the dividends will be assessable income of the company’s resident shareholders under s 44(1)(a).However, the ATO says para 202-45(e) does prevent the franking of a distribution paid by a company to its shareholders where that distribution is a reduction or return of share capital, including an unauthorised reduction or return of share capital that does not comply with s 254T or Pt 2J.1 of the Corporations Act, even if it is labelled as a dividend.
The ATO says that distribution will be taxed as a Capital Gains Tax (CGT) event under the CGT provisions or will be taxed as an assessable unfranked dividend, depending on the particular facts and circumstances of the payment.
Requirements for a tax invoice for GST purposes
Draft GST Ruling GSTR 2012/D3
This draft ruling sets out the minimum information requirements for a tax invoice under s 29-70(1) of A New Tax System (Goods and Services Tax) Act 1999 (GST Act). It was initially released in May 2011 as a first draft.
In the approved form
The ATO says a document is in the approved form for a tax invoice if it includes all the information required by s 29-70(1) and otherwise meets the requirements of that section.
It says that, if a document includes references to multiple supplies and does not meet the requirements for a particular supply or supplies, the document can remain a tax invoice in the approved form for all other supplies on the document for which the requirements are met.
In circumstances where a recipient issues a document that is both a recipient created invoice and a tax invoice issued as a supplier, the draft indicates that each entity must account for the full amount of GST payable on the supply that it makes.
It says a GST liability arises on the full price of each supply, not the amount calculated by offsetting the price of one supply against another. In addition, tax invoices can be in electronic form.
Information can be clearly ascertained
The ATO says that enough information must be present on the document and it must be clear what the information represents. It says that if the information (required by s 29-70(1)(c)(i) to (viii)) can only be determined by reference to another external source, such as the Australian Business Register (ABR) or another document, then the information cannot be clearly ascertained.
As part of the requirements for information on tax invoices to be clearly ascertainable, the draft also specifically outlines the requirements of the following:
- Identity of the supplier or recipient. Information includes, but is not limited to, the legal name of the entity, the registered business name or registered trading name. For invoices issued by the trustee of a trust, the trustee’s identity must be clearly ascertainable. For GST groups, a tax invoice may contain the identity and ABN of other members of the group, provided the group member that makes the supply can be clearly ascertained from the document. For incapacitated entities, a tax invoice may contain the legal name, registered business name or registered trading name of the incapacitated entity.
- What is supplied and the price of what is supplied. The description of the thing(s) supplied, the amount supplied and the price must contain enough information for clear ascertainment. In the case of retention payments, the ATO says the tax invoice can show the net amount payable but also must separately show the price of what is supplied and the retention amount. Where a tax invoice shows multiple categories of items supplied, the ATO says only the price for each category of taxable supplies need be shown. Alternatively, the tax invoice can show the quantity and unit price from which the price of each taxable supply can be determined.
- Extent to which each supply is a taxable supply. The ATO says this requirement is satisfied where the tax invoice includes:
- the amount of GST payable for each taxable supply
- a statement of the extent to which the supply is a taxable supply
- a reference mark that denotes each taxable supply with a corresponding statement of the extent to which the supply is a taxable supply.
Mixed supplies
Where a transaction consists of a combination of fully taxable supplies and mixed supplies, the ATO says a document will meet the tax invoice requirements where it:
- denotes the supplies that are fully taxable with a reference mark
- denotes the supplies that are mixed supplies with a reference mark and the extent to which those supplies are taxable can be found or determined from information within the document
- shows the price of each supply
- shows the total amount of GST payable.
The extent to which each supply is a taxable supply could also be ascertained where the document shows the other supplies and the part of the mixed supply separately.
Recipient created tax invoice
For a tax invoice to be a recipient created tax invoice, it must be clear that the document was intended to be so. The ATO says this requirement may be satisfied by including ‘Tax Invoice’; ‘GST Invoice’; ‘Recipient Created Tax Invoice’; ‘Tax Invoice Issued by the Recipient’ or ‘Recipient Created GST Invoice’ in the heading of the document. A statement in the body of the document could also make the intention clear.
Where it is unclear that the document was intended to be a tax invoice, the ATO says the recipient may be able to treat the document as a tax invoice under s 29-70(1A) by using other documents as evidence of that intention (eg a supplier’s products list, a business card or an earlier tax invoice).
GST: leasing of second-hand goods and input tax credits
GST Determination GSTD 2012/6
This determination states that when an entity acquires second-hand goods and makes a taxable supply of those goods by way of a lease before making a taxable supply of the goods by way of sale (or exchange), both taxable supplies are taken into account in quantifying and attributing input tax credits under ss 66-10(1) and 66-15(1) of the GST Act.
In these circumstances, the ATO says that, generally, the amount of input tax credits under s 66-10(1) will be an amount equal to one-eleventh of the consideration the entity provided. Under s 66-15(1), the input tax credit is attributed to the tax period in which any consideration is received for the supply.
