Time Limits on Claiming Australian Input Tax Credits

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:

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. 

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.