News flash! – Treasury introduces Bill to replace s 105-65 of Schedule 1 to the TAA with Division 142 of the GST Act

Today the Tax Laws Amendment (2014 Measures No.1) Bill 2014 was introduced into the House of Representatives. The Bill proposes to repeal the current regime dealing with refunds of GST found in s 105-65 of Schedule 1 to the TAA and replace it with a totally new regime in Division 142 in the GST Act.

Division 142 effectively creates a deeming regime, whereby overpaid GST that has been passed on to another entity is taken to have always been payable until that other entity is reimbursed for the passed on GST. Taxpayers can self assess their entitlement to GST refunds, where the GST has not been passed on or the GST has been reimbursed. The Commissioner retains a discretion to pay refunds, but it is expected to have a narrow operation.

The Bill can be accessed here.  The Explanatory Memorandum can be accessed here.

The legislation was published as an exposure draft in February 2014. My post discussing the exposure draft can be accessed here.

Legislation was previously introduced into the House of Representatives on 26 June 2013 but the bill lapsed upon the calling of the election. At around that time I prepared a a paper entitled “Refunds of overpaid GST: from s 105-65 to Division 142 – where did we come from, how did we get here and where are we going?” which takes a detailed look at the troubled history of s 105-65 and also provides an analysis of the proposed provisions in Division 142. The aim of the paper was to outline the historical context in which Division 142 has been introduced as well as my views on the provisions themselves. My paper can be accessed here.

A more detailed analysis of the new provisions will be posted shortly. In the meantime, the key changes to the legislation introduced before the election appear to be as follows:

  • The amendments will apply to tax periods starting on or after the day the legislation receives royal assent. This is a significant change as the legislation introduced before the election was to apply retrospectively, with application to tax periods commencing on or after 17 August 2012 (the date of the original announcement of the measures). This means that the current regime under s 105-65 of Schedule 1 to the TAA continues to apply. This is good news for those taxpayers who may have claims where GST was overpaid by reason of a miscalculation of GST (as opposed to a misclassification of GST) – for example under the margin scheme.
  • The amendments clarify that taxpayers have objection rights under Part IVC of the TAA with respect to decisions by the Commissioner in respect of s 105-65. This addresses the decision of the Tribunal in Naidoo that there were no rights of objection for such decisions. The amendments also validate objections purportedly made by taxpayers in respect of s 105-65, and also any decisions of the Tribunal or a Court purportedly made under the jurisdiction given by Part IVC of the TAA. A example is the decision of the Tribunal in the Luxottica case to exercise the discretion in s 105-65 to pay refunds of overpaid GST to the taxpayer. The amendments also give taxpayers affected by the Naidoo decision an extension of time to lodge an objection. That extension would appear to be effectively 60 days after the commencement of the provisions (i.e., 60 days after royal assent).


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