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On 27 August 2008, the ATO issued Taxpayer Alert TA 2008/17 entitled "Claims for GST refunds beyond four years arising from the reclassification of a previously taxable supply as GST free."

The Taxpayer Alert describes a situation where a taxpayer seeks to claim a refund four years or more after the end of a tax period on the basis that they incorrectly classified a supply as a taxable supply and they now contend it is GST free. In this situation the Commissioner may not be able to recover the input tax credits previously claimed on what are contended to be incorrectly classified supplies. This could lead to a situation where either the supplier or the recipient of the supply obtains a windfall gain.

In a media release issued on the same day, the Commissioner, Michael D’Ascenzo, warned taxpayers that he intends to closely scrutinise GST refund requests that could result in windfall gains not intended by the law. 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 ATO 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 said.

For a copy of TA 2008/17, go here

For a copy of the ATO media release, No 2008/43, 27 August 2008, go here

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