Australia: Have you overpaid GST?

The Bottom Line
Last Updated: 5 April 2011
Article by Stever Visser
This article is part of a series: Click Division 7A - another sting in the tail for the previous article.

Article Series

This article is part of a 7 part series. Other articles in this series are shown below:

  1. A Word from the Chairman
  2. Personal property securities regime
  3. Employment law changes that will impact your business in 2011
  4. Markhams - meet our newest member firms.
  5. Funding business expansion
  6. Division 7A - another sting in the tail
  7. Have you overpaid GST?

How sure are you that your enterprise has not provided the Commissioner of Taxation ("the Commissioner") with a windfall gain of overpaid GST over the last four years?

The Commissioner has released the eagerly anticipated Miscellaneous Taxation Ruling MT 2010/1 ("MT 2010/1") on 15 December 2010 and importantly provides guidelines on the refund of GST amounts. It has significant application to transactions that have inadvertently been classified as subject to GST.

MT 2010/1 primarily deals with the Commissioner views on the amended section 105-65 of Schedule 1 to the Taxation Administration Act 1953. This section was amended (with effect from 1 July 2008) as a result of the KAP Motors1 decision, which forced the Commissioner to refund overpaid GST on situations where no supply occurred.

Most importantly for all GST registered entities, there has been a significant "softening" of the Commissioner's position within MT 2010/1, when compared to that taken in the earlier draft version. It is now possible to obtain a refund if a taxpayer can evidence that the overpaid GST was absorbed, rather than passed on to its clients. The draft ruling imposed significant hurdles in front of the entity that overpaid the GST, the most cumbersome being that the overpaid GST must have been firstly refunded to the recipient of the misclassified supply (your clients).

In circumstances where the error has been made by the supplier, the notion of refunding GST to the clients before having at least confirmation that the Commissioner would pay the requested refund compounds the issue you are facing. The alleged "windfall gain" would then need to be extracted from the Commissioner's coffers, otherwise you are out of pocket not once, but twice. Nothing like placing all bets on "red"!

Of course, before seeking a refund, an overpayment must be identified and the amount must be quantified, usually through the undertaking of a review process. Once the overpaid GST has been confirmed, a number of alternatives exist in order to notify the Commissioner that a refund is due and payable.

The GST Consulting team operating from the Gold Coast office has been involved in a number of similar processes and is well equipped to handle the review process and the lodgement of the refund notification with the Commissioner.

If you would like to discuss the issues raised within MT 2010/1, or require any further details, please feel free to contact either Jacques Vorster (GST Director) or Steve Visser (GST Manager) of the Gold Coast office on (07) 5519 1000.

*1 KAP Motors Pty Ltd v FCT [2008] FCA 159

This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2009 Moore Stephens Australia Pty Limited. All rights reserved.

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This article is part of a series: Click Division 7A - another sting in the tail for the previous article.
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