GST Apportionment
Current GST apportionment rules are complex and require numerous GST adjustments in relation to assets used for taxable and non-taxable purposes. The proposals in the Bill are designed to simplify the compliance burden. Some welcome proposals include:
Allowing GST registered persons to elect to treat certain assets that have mainly private or exempt use as if they only had private or exempt use. This would cover minor use of personal assets or dwellings (such as home office in a dwelling). Whilst GST registered persons would be able to claim GST inputs in relation to operating costs (such as rates, insurance, etc), they will not be required to account for GST output at the time the asset is sold, provided that GST input tax was not claimed. Those who claimed GST input tax in relation to the business use of the asset will have time, under transitional rules, to return the GST input tax so that the ultimate disposal of the asset will qualify as an exempt supply.
Introduce (or bring back) the principal purpose test for assets acquired for $ 10,000 or less. If these are principally acquired for business (use more than 50%) purposes the GST registered person will be able to claim 100% GST input tax credit as opposed to applying the GST apportionment rules.
Number of GST adjustments in relation to mixed use assets, mainly land, will be capped at 10 as opposed to unlimited adjustments under current rules. The threshold for two (2) and five (5) GST adjustments will also increase to 10,001-20,000 and 20,001 to $ 500,000 respectively.
Currently if there is a 100% change of use the final wash up GST adjustment in 21FB can be made in 2nd GST adjustment period. It is proposed that for 100% change of use or any permanent change of use, that GST adjustment can be made in 1stGST adjustment period. GST registered persons will no longer have to wait for the 2nd GST adjustment period to perform the wash up calculation pursuant to s 21FB.
Rules should apply to adjustment periods on or after 01 Apr 2023.
October 2022
