At this year’s Convention, Deloitte’s Jon Graham and Doug Tredinnick chose the theme ‘A Christmas Carol by Charles Dickens’ to explain the three significant events that led to The Changing Landscape in GST and LCT.
Ghost of Christmas Past – Life before the KAP and AP Group decision
Ghost of Christmas Present – Life post the KAP and AP Group decision and the
Ghost of Christmas Yet to Come – Is this the beginning of certainty?
Graham started by telling delegates that in order to understand today’s GST situation, they needed to go back to the Ghost of Christmas Past.
Historically, said Graham, the GST treatment of motor vehicle incentive payments was uncertain – a fact the ATO acknowledged. Notwithstanding this, the responsibility for complying with the legislation still rested with the Dealer.
The 2008 KAP Motors decision resulted in the Commissioner accepting that dealers had refund entitlements in respect of ‘holdback’ payments and started the process of resolving the confusing GST situation. As a result, more than $350 million was refunded to Dealers, the biggest refund since the GST was introduced.
Unfortunately, this decision didn’t resolve the issue of the GST treatment of non-holdback motor industry incentives and thus the Son of Holdback project was born.
After many years of negotiation, the ATO agreed that a test case was the only credible course of action to resolve the GST treatment of non-holdback incentives. This required a test case litigant and the whole industry is grateful that the AP Group agreed to take this on.
In 2013 the Full Federal Court confirmed the 2012 Administrative Appeals Tribunal decision that certain incentives were not subject to GST. Consequently, the Ghost of Christmas Present meant that for the first time in 13 years the GST treatment of five sample non-holdback incentive payments had been tested and resolved:
- Fleet rebates – GST
- Run-out bonuses – GST
- Transit/interest protection – no GST
- Retail sales target bonuses – no GST
- Purchase target bonuses – no GST
While there was not a perfect outcome for Dealers, the decision did provide certainty on these incentives and established clear principles that could be applied to other non-holdback incentives.
Graham concluded his informative presentation by suggesting that even though the Commissioner is open to resolution of issues without having to go to court, including through accepting submissions, seeking input from the industry and considering applications for rulings, Dealers still need to act cautiously.
Doug Tredinnick took up where Graham left off by introducing the Ghost of Christmas Yet to Come and described the Luxury Car Tax as a bad tax which, given the current Budget deficit, is unlikely to be abolished anytime in the foreseeable future.
Like the GST, the LCT generates its share of issues such as quoting for service loan vehicles and the practice of under-allowances on trade-ins.
Both of these issues can have a big impact on Dealers because the ATO has the ability to retrospectively assess for four years. For example, increasing adjustments could be made on every deal in that period that has an under allowance component.
To avoid any future conflict with the ATO and to reduce the possibility of assessments of additional LCT that will be unrecoverable from customers, Tredinnick advised Dealers to consider having a GST/LCT review sooner than later, saying that they should get it right now to avoid being assessed later.
Finishing on a positive note Tredinnick said: “We do have more certainty on GST than we’ve had for 14 years.”