• Service: Tax, Indirect Tax
  • Type: Regulatory update
  • Date: 6/03/2014

Tax Insights

KPMG's analysis of tax issues and developments.

Keith Polkinghorne

Keith Polkinghorne
Partner, Tax

+61 7 3233 3157

If in doubt, tax it, right? 

by Keith Polkinghorne, Indirect Tax Specialist

Taxpayers are often faced with transactions where the goods and services tax (GST) treatment is not clear-cut. Where the supplier thinks the customer won’t mind, the supplier will generally take the approach of adding GST to the invoice.

However, the Government has recently re-released draft legislation that may throw a spanner in the works of this commercial practice. The draft legislation proposes to introduce a new Division 142 to the GST Act which will significantly restrict the supplier’s already limited ability to obtain a refund of overpaid GST. Where a supplier has added GST to a transaction that is ultimately determined to be not taxable, there’s no automatic ability for the supplier to recover the 'excess GST'. Excess GST can arise where the supplier:


  • incorrectly treats a GST-free or input taxed supply as a taxable supply
  • incorrectly treats something which is not a supply as a taxable supply
  • miscalculates the margin on a margin scheme supply


Instead, where the supplier has reported excess GST on its business activity statement (BAS) and the amount has been 'passed on' to the customer, the excess GST is treated as always having been payable and, thus, no refund will arise. The proposed law will place the onus on the supplier to disprove that GST has not been passed on, even where no invoice has been issued to the customer. This restriction on a refund remains unless and until the supplier reimburses the customer for the excess GST.


Whether by design or by accident, the proposed law puts a greater onus on suppliers to correctly determine the GST treatment up-front. So perhaps the new practice should be - if in doubt, find out!


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