Keep Refund Time Limits in Mind

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If you overpaid GST, or another indirect tax, you have just four years from the date of the end of the tax period related to the overpayment to claim a refund from the Tax Office. To ensure you can claim a refund you must either lodge your claim in an activity statement or notify the Tax Office of your entitlement within the four-year period. Here are details of the rules as well as a case that illustrates how strictly this time limit is enforced.

Failing to make timely requests for refunds of overpaid GST and other indirect taxes can significantly affect business costs and cash flows. It is essential, then, that you keep in mind that there is a strict four-year limit for making claims for refunds.

Besides GST, indirect taxes include stamp duty, customs duty, the luxury car tax, wine equalisation tax, excise duties and land taxes.

Under Tax Office regulations, your entitlement to a refund of GST or other indirect tax for tax periods starting before 1 July 2012 generally will expire four years from the end of the tax period to which the refund relates unless:

  • you notify the Tax Office of your entitlement to the refund during the four-year period, or
  • the Tax Office notifies you of the entitlement during those four years.

To ensure you can claim a refund, you must either lodge your refund claim in an activity statement, or notify the Tax Office of your entitlement to the refund within four years of the end of the tax period.

Example: Cam from Cam’s Catering recently reviews his activity statement for the tax period ending 31 March 2007. He realises that due to a clerical error, he reported too much GST on his taxable sales. As a result, he overpaid $500 net GST. To ensure he can claim his $500 refund, Cam must, by 31 March 2011, either lodge his refund claim in an activity statement or tell the Tax Office he is entitled to the refund.

For tax periods starting on or after 1 July 2012, the time limit for claiming refunds is replaced by a period of review in which an assessment may be amended.

For refunds of overpaid indirect tax on importations, the four-year limit expires four years after the date of the importation. For example, if you overpaid GST on goods that you imported on 3 July 2009 then you have until 3 July 2013 to claim your refund.

For tax periods starting on or after 1 July 2012, the four-year limit for an indirect tax refund relating to an importation ends four years from the day after the notice of assessment was given to you.

The seriousness of the time constraints is illustrated by a case where the Tax Office refused to extend the time allowed to file for a refund despite the fact that the taxpayer’s argument that health and business problems prevented him from lodging tax returns and other documents in time.

The Administrative Appeals Tribunal (AAT) refused the taxpayer’s application for a review of the Tax Office decision that was made on 31 October 2011. At that time the Tax Office told the taxpayer he had 60 days to review the decision. The Commissioner refused to issue a GST refund in relation to the June 2004 quarter on the basis that the application was made after 28 July 2008.

The taxpayer argued his personal circumstances which included ill health and trouble with his business contributed to the late lodgement of his tax returns in 2011.

The issue for the Tribunal was whether it is reasonable in all the circumstances to extend the time for the taxpayer to apply to the Tribunal for a review of the Commissioner’s objection decision. The Tribunal refused to grant the extension.

The Commissioner opposed the application for the extension, despite acknowledging that the taxpayer was owed a refund. The Commissioner argued that as more than four years had lapsed, there is no discretion under the law to grant the taxpayer a refund. The Tax Administration Act specifically states that a taxpayer is not entitled to a refund, other payment or credit related to a tax period unless the request is made within the four year time frame.

The Tribunal found that the taxpayer was well outside the four year time frame so it was not reasonable in the circumstances to grant an extension (Re Hampson and FCT [2013] AATA 73).

Consult with your adviser if you overpay GST or any other indirect tax to help ensure you make all lodgings within the time limit.