Legislative developments – 2013 – Refunds of overpaid GST

On 26 June 2013 the Tax Laws Amendment (2013 Measures No.4) Bill 2013 was introduced into the House of Representatives. The legislation proposes the introduction of Division 142 into the GST Act. The Division will replace s 105-65 of Schedule 1 to the Taxation Administration Act. The legislation is to take effect for tax periods starting on or after 17 August 2012.

The proposed legislation significantly changes the landscape for GST refunds. As noted at 3.1 of the Explanatory Memorandum, the amendments are intended to:

ensure that excess goods and services tax (GST) is only refundable in certain circumstances. The amendments apply to overpayments of GST as a result of a mischaracterisation of a supply or arrangement or miscalculation of the GST payable, or for any other reason, if the overpaid GST has been passed on.

The documents can be accessed below:

9 Submissions were received in response to the exposure draft and they can be accessed here. It appears that some of these submissions had an effect as there were a number of changes made to the exposure draft.

History 

Consultation Draft

On 26 February 2013 the Assistant Treasurer released new draft legislation dealing with refunds of overpaid GST for a second round of public consultation.  The previous draft legislation proposed to introduce Division 36 into the GST Act, whereas the current draft legislation proposes to introduce Division 142 into the GST Act. The amendments will apply to tax period commencing 17 August 2012.

The media release from Treasury acknowledged that the first round of consultation highlighted a number of concerns with the initial draft legislation, with the main issues being as follows:

  • the perceived inability to obtain a refund of overpaid GST would encourage taxpayers to shy away from adopting a conservative approach to their GST obligations;
  • a concern that rights to object to an assessment of GST would be removed as the relevant assessment would not be excessive as section 36-5 would deem the GST to have always been payable;
  • the restriction on refunds would override the operation of the adjustment provisions resulting in businesses not being able to get a refund in their dealings with other businesses;
  • the concept of passing-on was introduced without being adequately defined creating considerable uncertainty;
  • recipients that have excess GST passed on to them may not have an entitlement to an input tax credit on the excess GST as it may not be consideration for a taxable supply and therefore would not be a creditable acquisition for the purposes of Division 11; and
  • the Commissioner should be able to retain his discretion to pay refunds where appropriate e.g. where a taxpayer does not satisfy the requirements of Division 36 but there is no windfall gain to the taxpayer.

My page outlining the first tranche of legislation can be accessed here.

Documents

My initial analysis of the draft legislation can be found here.

 

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