Last year, the tax office released Draft Miscellaneous Taxation Ruling MT 2018/D1 which sets its view on time limits for entitlement to claim input tax or fuel tax credit.
The draft ruling sets the time limit for clients to claim these credits to four years from the due date of the first business activity statement in which they could have claimed the credit and cannot be extended by requesting an amendment, lodging an objection or applying for a private ruling.
Entitlement to a tax credit ceases if it has not been taken into account in an assessment.
In its submission, the Tax Institute has argued that the draft ruling sends a message to taxpayers that if they are uncertain about an input tax credit claim, then that they should claim upfront to avoid the risk of not having taken it into account.
“Such an approach may encourage taxpayers to make claims for input tax credits for which they may not be certain they are entitled,” the Tax Institute said.
“This is likely to lead to more aggressive taxpayer behaviour in some instances where some taxpayers may make claims for all possible/potential input tax credits to ensure they have been claimed ‘within time’ on the assumption they will confirm their entitlement to them at a later stage and subsequently omit to do this.
“This could lead to excessive overclaiming and thus have a detrimental effect on the revenue.”
Instead, it suggested the alternative view provided by the ATO, that entitlements to credits will not cease for matters that are in progress before the four-year entitlement period expires, should be adopted instead.
The alternative view provides that while an amount of tax credits has not been included in an assessment made within the four-year entitlement period, the commissioner may still decide that the taxpayer is entitled to the tax credits and amend an assessment to give effect to that decision at any time.