A Christmas Carol

A Christmas Carol

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  The changing landscapeGST & LCT Jon Graham, Partner Doug Tredinnick, Account Director Sydney, 10 July 2014
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  2 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd A Christmas Carol
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  3 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd A Christmas Carol •Ghost of Christmas past –Life before the KAP and AP Group decision •Ghost of Christmas present –Life post the KAP and AP Group decision •Ghost of Christmas yet to come –Is this the beginning of certainty?
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  4 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd Ghost of Christmas past
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  5 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd Ghost of Christmas past •From day one, the GST treatment of motor vehicle incentive payments was uncertain •They remained “under review” by the ATO for many years •Anecdotal evidence is that the ATO was not in any rush to resolve this because – if one looked at the overall outcome – the GST take to the Revenue was correct •The problem is GST doesn’t work this way •Taxpayers need certainty on every transaction •This position simply had to change...
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  6 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd Ghost of Christmas past •In 2008 the KAP Motors ‘holdback’ decision started the journey towards resolving these grey areas •Didn’t in itself touch on the GST liability of holdback but the momentum had begun •And the ATO was willing to refund overpaid GST to dealers •In compiling holdback claims the question was being asked about all these other incentive payments… Bah… humbug
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  7 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd Ghost of Christmas past •There began a long journey called ‘Son of Holdback’ •Many years of negotiation but agreement couldn’t be reached •The ATO agreed that test case litigation was the only solution •AP Group kindly volunteered to take forward this landmark action for the benefit of the whole industry •In 2012 the Son of Holdback decision was handed down by the Tribunal followed by confirmation from the Full Federal Court •First time in 12 years the GST liability of incentive payments were tested •Why was this test case so important for Australia’s motor industry?
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  8 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd Ghost of Christmas present
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  9 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd Ghost of Christmas present •We now have certainty on five categories of incentive payments 1. Fleet rebates 2. Run-out bonuses 3. Transit / interest protection 4. Retail sales target bonuses 5. Purchase target bonuses •ATO paying out refunds for above plus other incentives where the principles apply…
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  10 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd Ghost of Christmas present •3rd party consideration – what is this? DIST Finance Co Dealer Car Car Incentive Payment (A) Payment (B) Luxury Car Price for GST & LCT = A + B
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  11 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd Ghost of Christmas present •ATO has published GSTR 2014/D1 to state their views on the wider application of the principles to all incentives •Still in draft – submissions received •Is the ATO view correct..
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  12 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd Ghost of Christmas yet to come
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  13 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd Ghost of Christmas yet to come GST •It looks likely that there will be ongoing disagreements with the ATO on aspects of the Public Ruling •Hopefully capable now of being resolved without the need to go to court •Close to getting certainty on most incentives •The motor vehicle industry globally tends to collide with VAT and GST systems so more issues, and opportunities, is inevitable •GST systems in all industries provide a steady stream of disputes – the UK courts have just had to decide whether something was a biscuit or a cake, 40 years after VAT was introduced
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  14 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd Ghost of Christmas yet to come LCT •Bad tax •In current Budget environment unfortunately likely to be around for a few years •Generates its share of issues: –Quoting for service loan cars –Trade-ins
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  15 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd Ghost of Christmas yet to come 3rd party consideration •Tax invoice problem resolved – no change •LCT has the potential to create price point competitive disadvantage – taxes should never do this •Incentive programs have a long history of evolving and re- inventing themselves and it is likely that distributors will follow the AP Group decision to change how new incentive programs run •This will ensure LCT does not create an unlevel playing field
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  16 The changinglandscape GST & LCT © 2014 Deloitte Tax Services Pty Ltd The end…for now •ATO and taxpayers maybe not this happy •But we do have much more certainty, and in GST certainty for taxpayers is vital
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  General information only Thispresentation contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively the “Deloitte Network”) is, by means of this presentation , rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this presentation. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte's approximately 195,000 professionals are committed to becoming the standard of excellence. About Deloitte Australia In Australia, the member firm is the Australian partnership of Deloitte Touche Tohmatsu. As one of Australia’s leading professional services firms. Deloitte Touche Tohmatsu and its affiliates provide audit, tax, consulting, and financial advisory services through approximately 6,000 people across the country. Focused on the creation of value and growth, and known as an employer of choice for innovative human resources programs, we are dedicated to helping our clients and our people excel. For more information, please visit our web site at www.deloitte.com.au. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited © 2014 Deloitte Tax Services Pty Ltd