The Multi-Million Dollar Abattoir GST Round Robin

There currently exists an anomalous ‘round robin’ involving collection and redisbursement of GST from the sale of livestock for slaughter. This process provides no revenue for the Government but results in unnecessary administrative costs and a negative multi-million dollar cash flow burden for meat processors and the Government.

Under current legislation, the sale of animals to an abattoir constitutes a Taxable Supply and GST is added to the sale price and paid to the ATO by the livestock producer when they submit their quarterly BAS Statement.

Food is GST exempt, so the abattoir applies for a refund of the GST paid by them to the livestock producer when it lodges its monthly BAS statement and the abattoirs receive the GST refund approximately 10 to 14 days later ie. the abattoir receives the GST refund approximately one month after it has paid the GST to the livestock producer.

The negative cash flow burden on the meat processing sector as a whole is in the order of $90M-$100M at any given time. 

There is also a negative cash flow effect for the Government because most producers submit quarterly BAS Statements which means an average six week delay from the date that the producer receives the GST component from the abattoir and the date of their GST remittance to the Government, whilst the abattoirs generally submit monthly BAS Statements and obtain a GST refund ten to fourteen days later, which means that on average there is a months delay from the time the abattoir makes the payment to the producer until the abattoir receives the refund from the Government.  Consequently, in many cases, the Government pays the GST refund to the abattoir a fortnight before it has received the GST remittance from the producer.

The cash flow burden of this anomalous round robin GST burden from the sale of livestock destined for slaughter could be remedied by a simple amendment to the New Tax System (Goods and Services) Act 1999 to ensure that the supply of livestock slaughtered within 14 days of the date of sale are GST free.

To read the Hunt Partners Submission to the AFTS Secretariat Australia’s Furture Tax System Review follow the link to the right.

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