• Service: Tax, Indirect Tax
  • Type: Business and industry issue, Regulatory update
  • Date: 16/07/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Michelle Bennett

Michelle Bennett
Partner, Tax

+61 3 9288 5910

Commissioner's hard line on GST refunds 

by Michelle Bennett, Indirect Tax Specialist

Taxpayers who have paid too much tax want it back. Customers overcharged also want a refund. And the popularity of The Checkout proves consumers can make a lot of noise if they think businesses don’t do and charge exactly what they should.

So when a retail business realises it paid goods and services tax (GST) on a product that is actually GST-free it can find itself in an uncomfortable position.  


The Commissioner has consistently rebuffed GST refund claims involving a perceived supplier “windfall”, and Treasury has been exceptionally responsive to concerns he may not have sufficient powers to deny refunds. Current law has been redrafted repeatedly, and an entirely new code was released as an Exposure Draft in August 2012 (proposed to commence from that time).


For now the ATO administers the law as currently written and Interpretative Decision ATO ID 2013/40 evidences its ongoing aversion to paying GST refunds unless completely satisfied an unregistered recipient obtains the full benefit. The ATO ID considers a proposal by a supplier of medical aids to recover an administration fee from GST refunds; presumably to defray the cost of identifying, recovering and passing on the refund to customers. It concludes that any administration fee effectively reduces the amount 'reimbursed' to the customer, and in turn reduces the supplier’s refund. 


The business is left to either bear the transaction costs of recovering funds for the customer (doubtless already having lost profit margin paying  the GST) or forgo the refund entirely and fail to refund tax incorrectly “borne” by the users of the medical aids.     


It appears that the baby can’t be split, and without that option it doesn’t take the wisdom of Solomon to predict the Commissioner will be the one left holding the prize. 



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