Key Documents
The Assistant Treasurer, the Hon David Bradbury MP, has released draft legislation regarding the circumstances where the Commissioner of Taxation will refund an overpayment of GST for a second round of public consultation.
The draft legislation clarifies the circumstances in which the restriction on GST refunds applies to overpayments of GST and allows taxpayers to self-assess their entitlement to a GST refund by reference to ascertainable criteria. It also addresses a gap in the existing law relating to refunds associated with miscalculations of GST payable on a supply.
As previously announced in the first consultation on this subject the amendments will apply in relation to working out net amounts for tax periods commencing on or after 17 August 2012.
That first consultation highlighted a number of concerns with the draft legislation. The main issues raised in the first consultation round included the following:
- 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.
Copies of these submissions can be found on the Treasury website.
This exposure draft and explanatory material seeks to address the concerns raised. As a result of the substantive changes from the first draft it was decided to hold a further round of consultation on the revised draft.