Federal Court forces Commissioner to pay GST refunds “forthwith”

The Federal Court has ordered that the Commissioner must “forthwith” pay refunds of a negative “net amount” to a taxpayer, notwithstanding that the Commissioner was conducting an investigation to establish whether the applicant relied on fraudulent tax invoices to claim input tax credits.

In Multiflex Pty Ltd v Commissioner of Taxation [2011] FCA 112, Jessup J ordered a writ of mandamus directing the Commissioner to comply with s 35-5 of the A New Tax System (Goods and Services Tax) Act 1999 and s 8AAZLF of the Taxation Administration Act 1953 by forthwith paying to the applicant the net amount notified in the GST return for each of the relevant tax periods.

In making the order, the Court rejected the Commissioner’s submission that the obligations to make refunds is subject to an implied proviso that those refunds need not be paid instantly, but must be complied with within a reasonable period.  In this case, the “reasonable period” would take into account the time to conduct an investigation into the tax affairs of the taxpayer, assuming that investigation was progressed with expedition.

The Court also rejected the Commissioner’s submission that the Court should not exercise the discretionary relief of mandamus because of his suspicions as to the fraudulent nature of the tax invoices and also the risks of having to seek to recover those payments from the company through the assessment process.

A more detailed analysis of this important case will follow shortly.

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