Guidance on Supporting Reduced Input Tax Credit Claims

The ATO has released guidance to assist taxpayers in supporting reduced input tax credit (RITC) claims, particularly concerning complex IT outsourcing agreements used in making input taxed supplies.

Under the ATO's GST Financial Services and Insurance strategy, it's crucial for taxpayers to accurately identify reduced credit acquisitions and differentiate between mixed and composite acquisitions when claiming RITCs.

One area of focus is the application of table item 2 of s 70-5.02(1) of the A New Tax System (Goods and Services Tax) Regulations 2019 to acquisitions under complex IT outsourcing agreements.

The guidance outlines the questions the ATO will ask when reviewing RITC claims for these acquisitions, ensuring compliance with Goods and Services Tax Ruling GSTR 2004/1.

Entitlement to RITCs for IT outsourcing agreements hinges on specific circumstances, so taxpayers are urged to review their arrangements in preparation for a review.

This guidance aims to offer practical assistance in conducting such reviews and determining entitlements by relevant GST rulings.

Source: ATO expectations on how you support your reduced input tax credit claims on complex information technology outsourcing agreements

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