A taxpayer has been successful before the Federal Court when it argued that interest on overpaid GST accrued from the day on which the GST ‘surplus arose’ under the relevant definition: ‘RBA interest day’ s12AA, s12AD & s12AF of the Taxation (Interest on Overpayments and Early Payments) Act 1983 (Overpayments Act).

This sounds boring, but it in fact gave the taxpayer a large amount of interest:

  • That is, interest over 2 years and 7 Months, from December 2009 (when, retrospectively, it was found to be entitled to a refund) to July 2012, when the Commissioner did, in fact, pay the refund.
  • The Commissioner was arguing it ought only be 1 month, being the time it took him to pay the refund, after the taxpayer gave notice of the amount it thought should be refunded.

This continues a stunning series of wins, for Travelex – first on the substantive GST issue and then on the amount of interest.

This is how the interest matter came before the Court.

In 2010, the taxpayer obtained a favourable decision (TravelexLtd v FCT [2010] HCA 33) when the High Court held that the taxpayer’s supply of foreign currency on the departure side of the Customs barrier was GST-free as an export under the s38-190(1), item 4(a) of the GST Act: “a supply [of] rights if: (a) the rights are for use outside Australia” (holding that the supply of foreign bank notes, was, in substance, the supply of the rights they gave, in the foreign country, to buy things – the notes having little intrinsic value as just a piece of paper).

As a result, the Taxpayer was entitled to a refund for the relevant periods (because it had paid the GST, and did not owe other amounts on it’s ‘Integrated Client Account’, so that it had an “RBA surplus”, in that account, that the Commissioner was obliged to pay, to the Taxpayer, under under s8AAZLF(1) of the TAA).

The Taxpayer had notified the ATO, by letter dated 8 June 2012, of the amount of the refund, which the ATO pay subsequently (on 6 July 2012).

The taxpayer was entitled to interest on the refunded amount under  The Overpayments Act was amended to provide for refunds of RBA surpluses by inserting Part IIIAA (of which s12AA is the first section).

  • s12AA provides that the Commissioner must pay interest, if the actual refund was after the “RBA interest day”.
  • s12AD provides that the Commissioner must pay interest “from the end of the ‘RBA Interest day’ until the end of the day on which the refund takes place”.
  • s12AF provides ‘definitions’ for the various terms used for RBA surplus refunds (Part IIIAA), including the pivotal ‘RBA interest day’. For these purposes it means 14 days after the later to occur of (a) the “day the surplus arises” or, if applicable (b) the day on which the Taxpayer gave the Commissioner any notice required under s8AAZLG or s8AAZLGA of the TAA (which entitles the Commissioner to defer refunds whilst awaiting and verifying any information).
  • Section 8AAZLG only allowed the Commissioner to defer refunds, whilst awaiting any ‘notification’ the Taxpayer ‘is required to give’ under ‘any of the BAS provisions’.  that the Taxpayer must give the Commissioner, under any of the ‘BAS provisions’ that would affect the amount of the refund.
  • So, the case turned on whether the Taxpayer was required to give the ATO a notification for the refund under s 8AAZLG, which, in turn, hinged on whether the Taxpayer was required to notify the Commissioner of the amount of tax to be refunded.

The point had not been tested, before: whether a taxpayer has to give the Commissioner a notice, under s8AAZLG, as to the amount of the refund, and, as a result, deferring the point of time from which interest was payable (from 14 days after the time when the ‘surplus arises’ to 14 days after the Taxpayer gives a s8AAZLG notice).

The ATO and the taxpayer agreed to examine the November 2009 period as a “test case” to determine the approach that should be taken to other relevant tax periods.

The Parties contentions were as follows.

  1. Travelex contended that it was not required by any provision in either the Overpayments Act or the TAA, to notify the Commissioner of its entitlement to the refund. [para 3]
  2. The Commissioner contended that the ‘RBA interest day’ was 26 June 2012 (being 14 business days after the Taxpayer gave the Commissioner notice of the amount of the overpayment of GST – on 8 June 2012). The Commissioner’s case was that, Travelex did not amend its GST returns, until then, and there was no entitlement to a refund, until that had happened (under s8AAZLG and the other RBA provisions of the TAA) [paras 63-65]. The Commissioner had another contention, which was that the relevant ‘interest day’ was the later date of 17 July 2012 (being 14 days after 3 July 2012, which was the date on which Travelex lodged its May 2012 BAS, showing that it was in a net refund position – for the periods, in respect of which, the 8 June 2012 letter advised it was entitled to a particular amount, as a refund) [para 66].

The Court noted that, as a practical matter, the Taxpayer could not expect a refund, until it advised the Commissioner that it was entitled to one (and probably provided its calculation of the quantum). But this is not the same thing as analysing, as the Court had to, whether such notification was ‘required’ by a relevant provision of the law (viz: the ‘BAS provisions’) [para 69]. The Commissioner treated the 8 June 2012 letter as an amended BAS [para 71] but there had to be a relevant statutory basis, requiring this notification, and the Commissioner struggled to point to one [paras 72-73].

The court approached this analysis, as follows:

  1. At the time in question (prior to the 2012 introduction of the ‘self-assessment’ regime in Div 155 of the TAA) the GST system relied on the GST liability just automatically arising from the transactions. The Commissioner could issue an ‘assessment’ (and a taxpayer could request the Commissioner to do issue one) under Div 105 of the TAA. But there was no requirement on either to do so. [para 74]
  2. None of the Commissioner’s submissions about the concept of ‘amended returns’ have any merit. [para 77]
  3. Neither did the Court accept that the taxpayer was ‘required’ to notify a refund by s31-5 of the GST Act, which requires a taxpayer to lodge ‘GST returns’ for each tax period. There was nothing that required a taxpayer to lodge another GST return, if it transpired that an earlier one was wrong (even if, as a matter of practice, the Commissioner administered the system on that basis). Further, the 8 June 2012 letter didn’t purport to be an amended return and it couldn’t have been, as it was not in the ‘approved form’. [paras 88-95]
  4. The Commissioner could have sorted out any practical difficulties, in giving effect to the High Court’s decision, by issuing an assessment, for the correct amount, under the provisions, then in force, under s105-5 of the TAA1. Again, this is something the Commissioner could do, and the taxpayer could request. But at no stage was the taxpayer ‘required’ to do this. [para 98]

As a result, the Court held that:

  • The period of time, from which interest accrued (under s12AD of the Overpayments Act) was not deferred, past the date on which the RBA ‘surplus arose’ as there was no ‘notification’ required from the taxpayer, under any relevant provision (viz: which are ‘BAS provisions’), for the purposes of s8AALG of the TAA, and, in particular, the 8 June 2012 letter was NOT, in any relevant sense, ‘required’.
  • Interest was payable, under s12AD of the Overpayments Act, from 31 December 2009, which was 14 days after the date on which on which the RBA ‘surplus arose’, in respect of the November 2009 period, namely: 16 December 2009.
  • The orders sought by the Taxpayer, should be made.

(Travelex Limited v FCT [2018] FCA 1051, Federal Court, Wigney J, 12 July 2018).

FJM 18.7.18

[LTN 133, 13/7/18; KPMG Daily Tax News, 16/7/18; Tax Month – July 2018]


Comprehension questions (answers available)

  1. Was the taxpayer entitled to a refund of overpaid GST, as a result of its earlier victory in the High Court in 2010?
  2. Was there a statutory basis for the Commissioner having to pay interest?
  3. Was that interest payable, on the belatedly paid refund, from the ‘RBA interest day’?
  4. Was that 14 days after the later of, the day on which the RBA ‘surplus arose’, and the day on which Commissioner received (if applicable) any ‘notification’ that the taxpayer was required to give, under the RBA provisions?
  5. Did the Taxpayer, advise the Commissioner, of the amount of the refund, according to its calculations, on 8 June 2012?
  6. Did the Commissioner contend that he only had to pay interest from this 8 June date (viz: less than a month)?
  7. Did the Court find that the Taxpayer did have to notify the Commissioner of any amount relating to the refund, under any of the relevant BAS provisions (and in particular, the 8 June 2012 letter, around which the Commissioner’s case was built)?
  8. Was interest payable, therefore, from the date on which the ‘surplus arose’: 16 December 2009?
  9. Did the Taxpayer, therefore get interest on the refunded sum, for approx 2.5 years?
  10. Was this the only interest at stake from the High Court victory?




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