The Full Federal Court has dismissed the Commissioner’s appeal in Multiflex. William Morris Lawry would be pleased to note that both counsel for the taxpayer were Victorians (although South Australian’s like to claim Batrouney SC as one of their own)
The decision has not yet been published on Austlii. You are able access it at this link.
The case concerned a application for writ of mandamus to direct the Commissioner to pay a refund of GST in accordance with the BAS lodged. The Commissioner argued that there was an implied authority that he could retain a refund for a reasonable period pending investigation as to whether the refund was properly payable.
As originally enacted, the GST Act gave the Commissioner 14 days to refund amounts to taxpayers but this provision was repealed when the administration provisions in the GST Act were moved, with effect from 1 July 2000, to the generic RBA provisions of the Taxation Administration Act 1953.
The Court observed that the NZ provisions (upon which the original provisions in the GST Act were based) give the Commissioner a period within which to make enquiries.
The Court upheld the decision of Jessup J at first instance to direct that a refund be paid see Refunds of GST just keep hanging on
The joint judgment also reflects the frustration of the Court and taxpayers at Government’s reluctance to change the GST law where there are problems in how it is written.
Very happily, from my point of view, the court also confirms the significance of the inherent feature of a value-added tax that the input tax relief be given to avoid a cascade of embedded tax.
One hopes that the DIS that issues for Multiflex will foreshadow an amendment to GSTR 2008/1 to remove the interpretation of 11-15(2)(a) that leads to the contrary outcome.
It appears that the inclusion of section 17-15 in the GST Act led the courts to the view that there was a positive obligation on the Commissioner to refund negative net amounts shown on “GST returns”. This provision states that:
“you may choose to work out your *net amount … in a way specified in an *approved form if you use the form to notify the Commissioner of that net amount. The amount so worked out is treated as your net amount for the tax period.”
Absent this strange provision, the net amount for a tax period which must be refunded is the difference between the GST and the input tax credits for a period (section 17-5). These amounts may not correspond to the amounts shown on a BAS, so section 35-5 which providers that the Commissioner must pay you a negative net amount for a period, does not impose an obligation to pay a refund of the amount disclosed on the BAS.
But 17-15 changes this so that the amount on the BAS IS the net amount. How strange!
In 1999, the ATO released its “BAS” containing 20 boxes to calculate the “net amount” of GST payable for a tax period – this was the “approved form”. Many complained that:
- Software systems designed along a classical VAT could not populate the 20 boxes
- The calculation of the net amount in the manner required by the “20 boxes” was inconsistent with the terms of the Act which required that “input tax credits” be subtracted from “GST payable”.
It was quite an effort to persuade the Commissioner to depart from his “calculation form” and allow the calculation and reporting of net amounts, in accordance with section 17-5, using what is now termed the ‘derived from accounts” method.
In a desperate attempt to maintain the correctness of the approved form, section 17-15 was introduced into the GST law by Act No 92 of 2000, to state that, notwithstanding the law stipulating the a net amount is calculated by subtracting ITCs form GST payable, if you use the approved form to notify the Commissioner of that net amount, the amount so worked out is treated as your net amount for the tax period.
Nearly 13 years later, with the 20 boxes consigned to oblivion, the Commissioner is now confronted with the outcome of what was an extraordinary amendment to the original law. Section 17-15 states that if the Commissioner issues a form that calculates GST payable for a tax period, the amount so calculated in the amount payable – forget the other 1000 pages of law and regulations – the calculation form is good enough!