Businesses to receive GST refunds faster after ATO denied appeal to High Court

Small businesses will receive goods and service tax refunds faster now the Tax Office has been refused special leave by the High Court in a case that saw a supplier of consumer products argue that it should be entitled to refunds immediately.

Tax experts say the refusal of special leave sets a precedent that the Australian Taxation Office can’t hang on to GST funds for longer than a reasonable time – giving a boost to small businesses and their cashflow.

Tony Greco, senior advisor at the Institute of Public Accountants, told SmartCompany this morning businesses can now expect a quicker turnaround.

“Previously, businesses might be waiting months to receive a GST refund, but now, they’ll simply be waiting days or just weeks.”

“The ATO has to do all this type of verification work, but the Federal Court is now saying they can’t do that and they have to process the return in a legitimate timeframe.”

The ATO argued that some part of the claim was actually a fraud, which meant it couldn’t give the funds back. But in its ruling, the Federal Court found this wasn’t argued exactly in a way that would have an effect on the ruling.

Greco says while there is always a tension between businesses that need funds and the ATO’s need to qualify returns, the case means that if a business has put forward a legitimate return they will get funds quicker.

“If you put the form in correctly, and it’s all filled out, it won’t be blocked or held back while the ATO does all their checks and balances.”

CPA Australia senior tax counsel Mark Morris says businesses will receive a significant cashflow benefit, but also says businesses need to recognise that GST returns are a significant risk area for the ATO.

“The ATO now has to submit the return within a reasonable timeframe, which does mean using these normal processing protocols.”

“But we also recognise this is a difficult area. You need to process returns as quickly as you can, but at the same time, this is a risk area, and some people are fraudulent, so there’s always a tension there.”

The ruling says the ATO can no longer hold back a refund for verification, but can issue an amendment assessment later on.

“It’s a good thing for SMEs,” Greco says. “Instead of waiting for months on end, you may just have to wait weeks for a return.”