GST refunds to be paid immediately- high court says no to commissioners’ appeal –BAS takes precedence

December, 2011

The High Court of Australia on Friday 9th December 2011 has refused the Commissioner of Taxation’s application for special leave to appeal a decision of the full Federal Court of Australia. That finding, in favour of our client was that a taxpayer is entitled to be paid the GST refunds claimed in their Business Activity Statements immediately.  A registered Taxpayer who lodges a Business Activity Statements can now expect to receive refunds claimed on input tax credits within 14 days of lodging the document with the ATO.  The decision also means that such payment must be made regardless of any ongoing audit or investigation of the taxpayer.

Commissioner of Taxation v Multiflex Pty Ltd [2011] FCAFC 142.


The ATO has recently increased its audit/review activities dramatically.  It has been withholding refunds of GST while putting affected taxpayers through expensive accounting and document disclosure requirements over extended periods. In many cases, this has placed the affected businesses under extreme financial pressure.

Acting on behalf of Multiflex Pty Ltd (Multiflex), Mills Oakley Partners Jack Stuk and James Tobin say that the High Court’s refusal to hear an appeal from the decision of the Full Court of the Federal Court of Australia is a significant precedent a taxpayer can use. it rejected  the Commissioner’s argument that the GST Act permitted him a “reasonable time”(effectively of his choosing!), including the time taken to audit and investigate a taxpayer’s affairs, before paying GST refunds claimed in a taxpayer’s Business Activity Statement.

Decision at first instance

Multiflex, after much negotiation with the ATO, was forced to issue court proceedings against the Commissioner. It claimed that it was entitled to be paid almost $1 million in GST refunds claimed over a five month period.  The refunds had been withheld by the Commissioner whilst he conducted a fulsome audit into Multiflex’s entire history of trading. No time was set for the finalisation of the audit.

Justice Jessup held that the GST regime was a “practical business tax”.  Thus any implied reasonable time by which the Commissioner should have to pay a refund should only take into account the making of arrangements for payment “as a matter of administration” regardless of an audit being on foot. By reference to earlier repealed sections of the GST Act, a period of 14 days was said to be “reasonable”.

Decision on appeal

The Commissioner appealed that decision.

On 12 November 2011, The Full Court unanimously dismissed the Commissioner’s appeal for similar reasons.  The Court said that if this gives rise to a defect in the scheme of taxation, then its for Parliament to address it.

The High Court has now refused any right of appeal from the Full Court’s judgment, placing finality on the Court’s interpretation of the GST Act.

Practical implications

This decision is an important one for businesses which rely on the regular payment of GST refunds to support working capital and cash flow.  It also endorses the interpretation of the GST regime as one designed to avoid burdening businesses, particularly where the ATO decides to undertake protracted and intensive audits.

Some remedial legislation to assist the ATO has been proposed but is yet to pass through the parliament.  That would now be the only method by which the law would permit the commissioner to withhold the refunds (save for issuing GST assessments which in turn need to be issued for proper purposes).we will therefore be to monitoring that closely.

Contact Mills Oakley

If you or a client of yours is experiencing difficulties with the release of GST or other tax refunds or other tax issues please contact:

James Tobin | Partner
T: +61 3 9605 0851

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