The general rule for taxation amendments is that the Tax Commissioner and taxpayers have fixed periods of time during which tax affairs can be reviewed.
There are good policy reasons for these rules as they give the Tax Commissioner plenty of time to review taxpayer's tax affairs, and taxpayers can get on with their lives without worrying about the Commissioner wanting to raise some new legal argument about something that happened many years ago.
Generally, amendments cannot be made after 4 years, however the Commissioner does have unlimited power of amendment where he concludes there has been fraud or evasion.
There has been some controversy about GST time limits for claiming new amounts or issuing refunds. Recent amendments to the Taxation Administration Act 1953 were intended to level the playing field so that in most cases there would be no new debits or refunds outside the 4 year time limits.
From our dealings with the ATO it now seems that, notwithstanding a clear policy intention that the parties move on after 4 years, the Commissioner wants to argue that he can raise new GST debits without time limit, provided only that the new debits don't exceed the net amount previously claimed by the ATO.
What he seems to mean is that if you lodge a BAS statement showing a net amount of $1,000.00, and this amount is subsequently reduced, for example because of further input tax credit claims, or because the GST payable was overstated, the Commissioner can raise new GST debits outside the 4 year time limit (and seemingly forever) provided the original net amount of $1,000.00 is not exceeded.
This is a very convoluted position for the Commissioner to be taking, and seems to us to be totally at odds with the policy behind the legislation.
While we expect that the Commissioner's view will not prevail in the long run, (and it is currently being disputed) any GST audit or dispute dealings should be carefully undertaken and clients and advisors need to remain alert to the ATO trying to push the boundaries set in the legislation.
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