On Friday the Tribunal handed down its decision in Hampson and Commissioner of Taxation [2013] AATA 731 where it denied the applicant’s application for an extension of time to lodge an application to review the Commissioner’s objection decision to deny a refund of input tax credits on the basis that the application was made more than four years after the tax period in which the refund related.
The decision illustrates that the four-year limitation rule in s 105-55(1) of Schedule 1 to the TAA operates in a mandatory way with potentially harsh results. The Commissioner acknowledged that the applicant was entitled to the refund, but because of the expiry of the limitation period there was no discretion which could be exercised in his favour. The Tribunal agreed and referred to the following observation of the Tribunal in Re Australian Leisure Marine Pty Ltd and Commissioner of Taxation (2010) 76 ATR 390; [2010] AATA 620 at [17]:
In my view, s 105-55 of Sch 1 to the Act has substantive effect in that the expiry of the 4-year time-limit extinguishes the right of a taxpayer to notify the Commissioner of an entitlement to the input tax credit. As such the provision certainly denies the entitlement of an entity to an input tax credit. The High Court of Australia has also recognised that taxation legislation which imposes time-limits on amending an income tax assessment to have substantive rather than procedural operation: see McAndrew v FCT [1956] HCA 62; (1956) 98 CLR 263; [1956] ALR 1008.
I also note that early last week the Tribunal handed down its decision in Lakatos and Commissioner of Taxation [2013] AATA 712 where it affirmed the Commissioner’s decision that the applicant (who operated a used-car business) had not substantiated his entitlement to input tax credits and had a shortfall of GST given his failure to report GST on sales of vehicles. The Tribunal did not accept the applicant’s contention that as the sales were consignment sales, GST was only applicable to the 10% commission he charged on each sale and that any GST on the sale price should be paid by the vendor.
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I have difficulty following the thinking of the Tribunal, and also that of the Member in Re Australian Leisure Marine Pty Ltd and Commissioner of Taxation (2010) 76 ATR 390, that relies upon s 105-55(1) of Schedule 1 to the TAA to enforce the four year time limit to claim ITCs. The link below from the website of the ATO clearly indicates that prior to the Tax Laws Amendment (2009 GST Administration Measures) Act 2010, there was effectively no time limit to claim ITCs. Therefore, any restriction on taxpayers to limit the time to claim ITCs to 4 years, has come from s 93 in the GST Act which was introduced by the Tax Laws Amendment (2009 GST Administration Measures) Act 2010. Perhaps the explanation is that it was s 29-10 (4) of the GST Act that effectively over-ruled s 105-55 (1) of Schedule 1 to the TAA, until s 93 of the GST Act was introduced in March 2010 by the Tax Laws Amendment (2009 GST Administration Measures) Act 2010 , effectively re-instating the authority of s 105-55? Your comment?
http://www.ato.gov.au/Business/GST/In-detail/Managing-GST-in-your-business/Reporting,-paying-and-activity-statements/Time-limits-on-GST-refunds/?default=&page=5#The_four-year_time_limit_for_claiming_GST_credits_for_purchases
Thanks Jeff. You may well be onto something there. Division 93 and S 105-55 do appear to overlap somewhat. I think the essence from the provisions is that unless you notify the Commissioner of your entitlement to a credit within 4 years (s 105-55(1)(a)) your entitlement falls away. Whether that occurs by reason of s 93 or s 105-55(1) is an interesting question.