Tax Advisory

Time Limits on Claiming Australian Input Tax Credits

6 min read

9 October 2025

Takeaways:

The Australian Taxation Office (ATO) has released Miscellaneous Taxation Ruling, MT 2024/1 – Miscellaneous tax: time limits for claiming an input tax or fuel tax credit (the Ruling). This Ruling sets out the Commissioner’s interpretation of Division 93 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act), which imposes time limits on taxpayers claiming input tax credits for their purchases (ITCs). The Commissioner’s views can result in punitive outcomes for taxpayers.
A common example is where a taxpayer remains liable for GST on supplies made in their GST returns (Business Activity Statements or BASs) which were payable more than four years ago, but may no longer be entitled to claim the ITCs in respect of those same BASs due to the operation of Division 93.

Background

Since Australian GST commenced on 1 July 2000, amending BASs has always been subject to a four-year time limit. The rules effectively allow BASs to be amended only during the four-year ‘period of review’, which starts when a BAS is lodged and ends four years later (BAS review period), noting various exceptions exist.

Since 2009, a separate four-year time limit has also applied to claiming ITCs. As a matter of policy, matching a four-year time limit on claiming ITCs to the limit on paying GST liabilities is entirely appropriate. However, as explained below, Division 93 was poorly implemented in 2009 with adverse consequences for taxpayers.

While a similar four-year time limit applies to claiming fuel tax credits (in section 47 of the Fuel Tax Act 2006 (Cth)), this article focuses on ITCs and Division 93.

Division 93 and MT 2024/1

A taxpayer ceases to be entitled to an ITC to the extent the credit has not been taken into account in a BAS within four years of the lodgment due date of the BAS for the tax period (i.e. month or quarter) in which the taxpayer could have first claimed the GST credit (setting aside any requirement to hold a tax invoice). This period is referred to as the ‘four-year ITC period’ in contrast to the BAS review period.

Where a taxpayer accounts for GST on a cash basis, the four-year ITC period generally starts in the month or quarter in which the taxpayer makes the payment for the relevant acquisition. Where a taxpayer accounts for GST on an accruals basis, this is generally the month or quarter in which an invoice is issued for the relevant acquisition or the taxpayer makes any payment for the acquisition (whichever occurs first). There are some limited exceptions to the four-year ITC period which are not relevant to this article.

Exceptions aside, once the period of four years after the lodgement due date has passed, the taxpayer is no longer entitled to claim the ITC in respect of the acquisition. The ATO website provides the following example of the operation of Division 93:

Example: Time Limit for GST Credit (Cash Accounting)

Mia paid for office equipment in March 2020. Mia reports quarterly and on a cash basis.

The first tax period in which Mia could have claimed GST credits for the purchase of office equipment is her March 2020 quarterly tax period. Mia’s BAS for this quarter is due on 28 April 2020. The 4-year credit time limit ends at the end of the day on 28 April 2024.

If Mia has not claimed the GST credit by including it in a BAS lodged on or before 28 April 2024 (including by amending a BAS on or before this date), she is not entitled to claim the credit. This is regardless of whether the four-year BAS review period has expired.

The Commissioner issued MT 2024/1 on 4 December 2024. The Ruling adopts a very strict interpretation of Division 93 and some aspects of the Ruling are worth noting:

The four-year ITC period is altered only if, prior to the end of this period, the Commissioner grants a formal extension to the due date for the relevant BAS.

A taxpayer’s entitlement to an ITC does not cease where the taxpayer lodges a valid and correct objection in respect of the credits within the four-year ITC period, but not where the objection is lodged after this period expires.
The four-year ITC period cannot be extended by requesting an amendment to a BAS, applying for a private ruling or making a voluntary disclosure.
The four-year ITC period is distinct from the BAS review period. This means that the BAS review period for an ITC attributable to a BAS will often differ from the four-year ITC period for that credit, sometimes by months or even years. The four-year ITC period for an ITC may therefore expire before the relevant BAS review period ends.

Unfair Outcomes for Taxpayers

Set out below are two scenarios involving Division 93 that result in unfair or even punitive outcomes for taxpayers.

Requests for BAS amendments

It is not uncommon for taxpayers to identify and seek to claim ITCs that they had not previously claimed. The procedure for taxpayers claiming such credits is to request an amendment to their relevant BAS. Provided the amendment request is made by the taxpayer within the BAS review period, the Commissioner can amend the BAS at any time (see section 155-45 of Schedule 1 to the TAA).

Despite this, the Ruling makes it clear that, even if the taxpayer requests the amendment within the BAS review period and within the four-year ITC period, the taxpayer’s entitlement to the credit ceases if the Commissioner has not amended the BAS before the end of the four-year ITC period. This can arise where the request is lodged near the end of the four-year ITC period or where the ATO takes too long to consider the amendment.

Examples arise where a taxpayer has sought to claim a previously unclaimed ITC (or an increase in its previously claimed ITC) by lodging a BAS amendment request well within the four-year ITC period. Yet the ATO took so long to consider the position that the four-year ITC period expired with the consequence that the taxpayer could no longer claim the ITC.

The only way a taxpayer can preserve their ITC refund entitlement is to lodge a formal objection to the BAS within the four-year ITC period. Importantly, if the taxpayer or their adviser is unaware of the requirement to lodge an objection, the taxpayer’s entitlement to the credit ceases.

BASs lodged after more than four years

Many accountants have been involved in a situation where they take over a client’s tax affairs from another accountant and discover that the client has not lodged tax returns or BASs for many years. They of course then prepare and lodge the outstanding returns and BASs.

If the client has been registered for GST and has merely failed to lodge the BASs, no time limit applies to lodging the BASs. The BAS review period does not commence until the BAS is lodged.

These BASs invariably contain GST liabilities and ITCs. If the due date for any of the BASs is more than four years ago, the ATO includes the GST liabilities on such BASs, but due to the operation of Division 93, amends the BASs to remove any ITCs claimed. Accordingly, many clients in these cases are faced with much larger tax liabilities than they expected. Penalties and interest charges are then imposed on this higher BAS liability.

Kelly Partners has been involved in numerous cases where this has occurred. Such an outcome results from the lack of symmetry between the time limits on GST liabilities and those applicable to ITCs. This is extremely unfair to taxpayers, if not punitive. It is entirely contrary to the policy underpinning the GST system where businesses are allowed to offset their GST credits against their GST liabilities.

If the four-year ITC period has passed, the accountant cannot protect the client. The client’s only recourse may be to sue their previous accountant. The current accountant may also need to act quickly after being appointed to lodge objections to protect ITCs for any BASs that are still within the four-year ITC period.

Separately, the current accountant may need to consider their breach reporting obligations in respect of the previous accountant under the Tax Agent Services Act 2009 (Cth).

Closing comments

These and other scenarios clearly illustrate how Division 93 can operate unfairly for taxpayers. It is noteworthy that the courts and tribunals have largely agreed with the Commissioner’s interpretation. While some of these issues could potentially be avoided if the Commissioner adopted a more concessionary interpretation, the fundamental problem is the lack of alignment between the four-year ITC period and the four-year BAS review period. Legislative amendments are required to align the time limits for claiming ITCs with the BAS review period. Until then, tax practitioners should be vigilant to the issue and ensure they lodge objections as required to protect their clients’ entitlements.