ATO warns on exploitative GST arrangements
The Australian Taxation Office (ATO) has warned taxpayers to be careful about claiming large input tax credits when acquiring intangible items at grossly inflated values.
The warning specifically pertains to non-commercial arrangements featuring vendor finance agreements where payments are contingent on future events, and relates to intangible items such as rights, according to the ATO.
Payment or the existence of a presently existing obligation to pay GST is required for an input tax credit entitlement under the GST Act, the ATO stated.
The use of vendor finance agreements where payments to the supplier are dependent on an implausible future outcome do not create an obligation to pay, in the opinion of the ATO. Agreements are seemingly being structured so that the corresponding GST payment by the supplier is unlikely to occur, the ATO added.
"We are concerned about arrangements which included uncommercial features and which therefore may be ineffective under Australian tax laws. Under this arrangement, the purchaser may not be entitled to input tax credits," Tax Commissioner Michael D'Ascenzo said.
"The ATO is investigating whether valuations used are appropriate, whether the participants have a presently existing liability against which a GST credit can be claimed, whether the GST anti-avoidance provisions apply and whether the arrangement is a sham at general law," he said.
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