ATO Warns Taxpayers About GST Windfall Gains

by Mary Swire, Tax-News.com, Hong Kong

27 August 2008

Tax Commissioner for the Australian Taxation Office (ATO), Michael D’Ascenzo, issued on Wednesday a taxpayer alert warning people that he intends to closely scrutinise GST refund requests that could result in windfall gains not intended by the law.

The Commissioner is concerned about situations where a taxpayer seeks to obtain a GST refund four years after the end of a tax period on the basis they had originally incorrectly classified the supply of goods or services as taxable, and now contend it should have been GST-free.

However, after four years the Commissioner may be unable to recover previously claimed GST input tax credits the Tax Office has paid out on that same supply. This could lead to a windfall gain if a refund was paid.

Taxpayers should be aware that although the Commissioner has a discretion to pay a refund for overpaid GST in exceptional circumstances, in business to business transactions the law does not require the Tax Office to pay a refund.

“The law is designed to prevent windfall gains for those who did not bear the economic burden of the GST,” Mr D’Ascenzo commented.

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