Tax Office to appeal decision on security deposits

Media release 2007/39

(distributed to industry media and tax professionals)

The Tax Office is seeking special leave to appeal to the High Court against a recent decision of the Full Federal Court finding that no GST was payable on the forfeiture of a security deposit.

The Full Federal Court's decision is in contrast to the views expressed by the Tax Office in Goods and Services Tax Ruling GSTR 2006/2 entitled Deposits held as security for the performance of an obligation.

"Both the scope of the definition of supply and the GST treatment of forfeited security deposits are important issues for the community," Tax Commissioner Michael D'Ascenzo said.

"On this basis we feel it is appropriate to seek to test the views of the Full Court before the High Court."

Anyone seeking a refund for GST paid on a forfeited security deposit should notify the Commissioner in writing of their intention to do so, to ensure that they are not prejudiced by time limits on refunds. Such notification is required within four years of the end of the tax period to which the amount relates.

"Any requests for refunds received will be held pending the outcome of the High Court proceedings," Mr D'Ascenzo said.

There will also be a requirement that any refunds of GST be passed on to customers where that is required by the law.

For further information and for access to an online form to notify the Commissioner, visit the Tax Office website at www.ato.gov.au.