Addendum issued to MT 2010/1 on s 105-65 and GST refunds

Yesterday the Commissioner issued Addendum MT 2010/1A1 to MT 2010/1 Miscellaneous tax: restrictions on GST refunds under s 105-65 of Schedule 1 to the TAA.

The Addendum amends the Ruling to reflect the decision of the Federal Court in International All Sports v Commissioner of Taxation [2011] FCA 824.  In that case the Court found that the restriction on GST refunds in s 105-65 did not apply where there was an overpayment of GST because of a miscalculation of GST using Division 126 of the GST Act (dealing with gambling supplies).

Importantly, as envisaged in the Decision Impact Statement to the decision, the Addendum acknowledges that s 105-65 does not apply in cases where the supply is always correctly characterised and treated by the supplier as taxable, but an overpayment of GST arises from a mere miscalculation.  Examples include:

  • a supplier correctly characterises a supply as taxable but merely miscalculates the GST for that supply in the calculation of their net amount;
  • supplies are treated as taxable under the margin scheme where there was an error in the calculation of the margin;
  • GST on supplies of real property has been calculated under the ordinary provisions, when in fact the margin scheme applied;
  • Division 72 of the GST Act applies but an overpayment of GST arises from an error in the calculation of market value;
  • a supplier chooses to apply Division 87 of the GST Act to a supply of long term accommodation in commercial residential premises, but the supplier then fails to apply the concessional rate when calculating the value of the supply
  • GST is overpaid due to a miscalculation of GST which arises when a taxpayer fails to pay LCT on a luxury car; or
  • GST on a taxable supply of an insurance policy is overpaid as a result of an error when working out the value of the taxable supply pursuant to s 78 of the GST Act

The Addendum is welcome, but there may be no victory for taxpayers because on 17 August 2012 the Assistant Treasurer released draft legislation to repeal s 105-65 and replace it with Division 36 of the GST Act, which would remove the Commissioner’s discretion and taxpayers’ entitlement to a refund in each of the cases outlined above. The amendments are to apply from monthly tax periods starting 1 September 2012 and quarterly tax periods starting 1 October 2012, so the effectiveness of this Addendum is questionable (on the assumption that the amendments proceed, of course).

My analysis of the proposed new refund provisions can be accessed here.

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