The Australian Taxation Office (ATO) is working closely with dealership accounting groups to manage a number of complex administrative issues surrounding LCT and GST.

The implications from the Full Federal Court decision in AP Group Ltd v Commissioner of Taxation (2013) FCAFC 105 (AP Group) has been a major focus of the ATO as well as manufacturers, Dealers, and dealership accounting advisors such as BDO and others.

These groups have been dedicating a lot of resources to develop a framework that will help clarify the taxation, GST and LCT treatment of manufacturer incentives.

AADA acknowledges and appreciates the manner in which the ATO is working closely with dealership accounting groups to manage the administrative complexity surrounding incentive payments by manufacturers.

Some of the practical difficulties surrounding the nature and timing of payments include:

• Identification and classification of which manufacturer incentives are considered to be part of the ‘price’ for GST purposes. And which are required to be added to the consideration paid by the customer in order to calculate the GST and LCT amounts. It is expected to apply to run-out bonuses, demonstrator bonuses, and fleet rebates. Many other manufacturer incentives and the manner in which they are paid need to be carefully considered
• Calculation of the sale price for customers to determine the correct GST and LCT in accounting systems and disclosure for tax invoices
• Calculation of the correct GST input tax credit
• Flow and timing of any payment between manufacturer, financier and Dealer

AADA recommends that Dealers seek advice from their professional advisors to determine the correct treatment of payments received/outstanding under current arrangements and any proposed restructure of those arrangements by manufacturers.