The Assistant Treasurer on Wed 15.2.2012, released draft legislation and an EM for public consultation on the proposal to amend the tax law to allow the Commissioner of Taxation to hold refunds for verification prior to payment.
Mr Arbib said the draft legislation was a result of the Full Federal Court’s decision in FCT v Multiflex v FCT [2011] FCAFC 142. In that decision, the Full Federal Court had dismissed the Commissioner’s appeal against paying a GST refund and upheld the Federal Court’s earlier order that a writ of mandamus issue directing the Commissioner to comply with s 35-5 of the GST Act and s 8AAZLF of the TAA by immediately paying the taxpayer the net amount notified in its GST return. The High Court subsequently refused to grant the Commissioner special leave to appeal against the decision.
The proposed changes seek to provide the Commissioner with discretion to retain refunds for the period required to undertake checks to verify the correctness of the amount claimed. Further, it will apply to all refunds and payments arising under taxation laws that the Commissioner administers.
COMMENTS are due by 21 February 2012
Source: Assistant Treasurer Media Release No 008, 15 February 2012
[LTN 30, 15/2]
Extract from draft legislation (Taxation Administration Act 1953)
8AAZLGA Retaining refunds while Commissioner verifies information
Commissioner may retain an amount
(1) The Commissioner may retain an amount that he or she otherwise would have to refund to an entity under section 8AAZLF, if:
(a) the entity has given the Commissioner a notification that affects or may affect the amount that the Commissioner refunds to the entity; and
(b) the Commissioner is satisfied that it would be reasonable to require verification of information that:
(i) is contained in the notification; and
(ii) relates to the amount that the Commissioner would have to refund.
(2) The Commissioner must inform the entity that he or she has retained the amount under subsection (1). He or she must do so before:
(a) in a case to which paragraph 8AAZLF(1)(a) applies—the RBA interest day (within the meaning of section 12AF of the Taxation (Interest on Overpayments and Early Payments) Act 1983) for the RBA surplus of the entity; or
(b) in any other case—the 30th day after the entity gives to the Commissioner the notification mentioned in paragraph (1)(a) of this section.
(3) The Commissioner may retain the amount under subsection (1) until:
(a) the Commissioner becomes satisfied that it would no longer be reasonable to require verification of the information; or
(b) there is a change to how much the Commissioner is required to refund, as a result of:
(i) the Commissioner amending an assessment relating to the amount; or
(ii) the Commissioner making or amending an assessment, under Division 105 in Schedule 1, relating to the amount; or
(c) the 60‑day period starting on the day mentioned in subsection (2) of this section ends;
whichever happens first.
(4) The period mentioned in paragraph (3)(c) (including the period as extended by a previous application of this subsection) is extended by the number of days during that period in relation to which the following paragraphs apply:
(a) on or before the day, but during the period, the Commissioner requests information for the purposes of verifying the information mentioned in paragraph (1)(b);
(b) the Commissioner does not receive the requested information before the day.
Commissioner may retain amount beyond 60 days
(5) If paragraph (3)(c) applies, the Commissioner may retain the amount after the end of the period applicable under that paragraph, if the Commissioner is satisfied that it would be reasonable to require verification (or further verification) of the information mentioned in paragraph (1)(b).
(6) The Commissioner must inform the entity that he or she has retained the amount under subsection (5). He or she must do so within 14 days after the end of the period.
(7) The Commissioner may retain the amount under subsection (5) until:
(a) the Commissioner becomes satisfied that it would no longer be reasonable to require verification (or further verification) of the information; or
(b) there is a change to how much the Commissioner is required to refund, as a result of:
(i) the Commissioner amending an assessment relating to the amount; or
(ii) the Commissioner making or amending an assessment, under Division 105 in Schedule 1, relating to the amount;
whichever happens first.
(8) In deciding whether to retain the amount under subsection (5), the Commissioner must have regard to the following:
(a) the likelihood that the information contained in the notification is inaccurate, and the likely extent of that inaccuracy;
(b) the likelihood that the information was affected by:
(i) fraud or evasion; or
(ii) intentional disregard of a taxation law; or
(iii) recklessness as to the operation of a taxation law;
(c) whether retaining the amount is necessary for the protection of the revenue, including the likelihood that the Commissioner could recover any of the amount if the information were found to be incorrect after the amount had been refunded;
(d) any complexity that would be involved in verifying the information;
(e) the impact of retaining the amount on the entity’s financial position;
(f) any other matter the Commissioner considers relevant.
(9) The entity may object to a decision of the Commissioner to retain the amount under subsection (5) in the manner set out in Part IVC, if the entity is dissatisfied with the decision.
Note: Interest on the amount may be payable under the Taxation (Interest on Overpayments and Early Payments) Act 1983.