Further clarity needed on GST, reinstatement process with ABN changes

The draft bill amends the ABN Act to provide that the registrar may cancel a person’s registration in the Australian Business Register where they fail to lodge returns for two or more income years and the returns remain outstanding.

Registration can also be cancelled under the proposed measures where a person fails to confirm the accuracy of their details held by the registrar in a 12-month period together with confirmation that their ABN is still required.

However, the amendments also allow for an ABN to be reinstated if the taxpayer has made arrangements with the Commissioner of Taxation to lodge the relevant tax returns.

Paragraph 1.19 of the Draft EM explains that this may include instances where “the registrar may be satisfied that a person has made arrangements to lodge the relevant returns where the person has communicated an intention to lodge to the Commissioner of Taxation and has undertaken to provide their lodgements by a certain date”.

In its submission on the draft bill, the Tax Institute said this requirement should be explained further to ensure that taxpayers and tax practitioners better understand the steps necessary to have the ABN reinstated.

“In particular, clarity should be provided regarding evidence the taxpayer is required to produce to demonstrate that they have provided the Commissioner with an intention to lodge and the format of, or any legally effective wording to be included in the intention to lodge to ensure it is effective,” the submission stated.

Further clarity should also be provided on whether any forms or other procedural steps need to be completed by the taxpayer in conjunction with sending the Commissioner an intention to lodge and whether the taxpayer needs to provide updated information in instances where the agreed lodgment is deferred or subsequently changed after the initial notice is provided, the submission said.

The submission also stressed that any steps that require the ATO to respond or act upon the taxpayer’s notice of intention need to occur on a timely basis.

“Processing delays are likely to result in significant consequences for taxpayers,” it said.

The Tax Institute also highlighted in its submission that the cancellation of an ABN might have unintended consequences in relation to goods and services tax registration.

“Feedback from our members indicates that ABNs are fundamentally linked with a taxpayer’s GST registration and obligations,” the submission said.

“For the avoidance of doubt, we consider that the Draft EM should clarify the interaction between the Draft Bill and a taxpayer’s GST obligations. In particular, it is important to ensure that a taxpayer who has their ABN cancelled under this measure will still be registered for GST purposes and required to meet their GST obligations, such as the lodgment of BAS returns.”

Without this clarification, the Tax Institute warned that taxpayers might misunderstand the practical impacts of an ABN cancellation.