Commissioner’s discretion to delay paying refunds pending verification checks – exposure draft released

On 15 February 2012, Assistant Treasurer, Senator Mark Arbib, released for public consultation draft legislation to provide the Commissioner with a legislative discretion to hold and verify refunds prior to payment.

The proposed amendment follows the decision of the Full Federal Court in Commissioner of Taxation v Multiflex Pty Ltd [2011] FCAFC 142, and the High Court’s refusal to grant special leave to the Commissioner to appeal the decision. The Full court held that the GST law could not be construed as implicitly allowing a reasonable time to investigate and determine whether a net amount was truly payable - such is ‘the importance of a prompt refund’ in the scheme of the law. The court noted that if that is a defect in the GST scheme, then it is one for Parliament to address.

The exposure draft (ED) legislation seeks to provide the Commissioner with a discretion to retain refunds for the period required to undertake checks to verify the correctness of the amount claimed. Certain threshold tests must be met before this discretion can be exercised. Notably, the discretion would apply in relation to refunds and payments arising under all taxation laws that the Commissioner administers.

The changes are to have effect from Royal Assent.

Consultation on the exposure draft legislation and draft explanatory memorandum closes on Tuesday 21 February 2012. Due to the short consultation period, a consultation meeting was also held in Sydney at short notice last Friday 17 February 2012 to enable stakeholders to comment on the draft legislation. The Institute attended the consultation meeting, and was represented by Michael Evans and Donna Bagnall. We are now preparing a written submission in response to the ED, and members wishing to provide input into the submission should provide their comments to the tax group by COB, Monday 20 February 2012.

 

Article last Updated 23 April 2012