The Property Council welcomes the opportunity to comment on the exposure draft regulations on GST Financial Supply Provisions.
The industry welcomes the Treasury expanding input tax credits on financial supplies to include legal services.
However, the industry requires more time to implement the Regulations because they change the way that input tax credits are calculated on financial supplies. The input tax credits are increased for some supplies, such as legal services. For other supplies, such as investment bank services relating to capital raising or M&A activities, input tax credits are decreased.
To give the industry time to implement the changes, we request that the start date of the new Regulations is deferred.
There should also be an opt-in for taxpayers who have the systems in place to implement the changes earlier.
We have been given the opportunity to read the Financial Services Council’s letter dated 26 April (attached) requesting deferral of the changes. We support the letter.
The New Regulations
The Regulations are due to commence on 1 July this year but have not yet been finalised. The final Regulations are likely to be substantially different to the exposure draft. This means that after seeing the final Regulations, the industry will have a very short time to implement these changes.
It is impractical for the industry to implement the final Regulations by 1 July 2012.
The new Regulations will require the industry to change its systems and processes, including IT systems and product disclosures.
If the industry cannot implement the changes before their commencement, the consequences include being in technical breach of their tax law requirements and therefore their fiduciary duties.
This is easily avoided by allowing the industry more time to implement the changes.
We therefore request that the start date of the new Regulations is deferred to give the industry time to implement the changes.