Edited version of your private ruling

Authorisation Number: 1012444100585

Ruling

Subject: Entitlement to refund of overpaid goods and services tax (GST)

Question 1

Are you entitled to a refund of GST in relation to the sale of relevant residential lots?

Answer

Yes.

Question 2

If you are entitled to a refund of overpaid GST, what is the correct method of claiming the refund?

Answer

You may claim a refund of the overpaid GST in accordance with the procedures outlined in the ATO publication 'Correcting GST mistakes' (available on our website).

Relevant facts and circumstances

· You developed and sold residential lots on the site of a former operation that you owned (the development).

· GST on the sale of the lots was calculated under the margin scheme (Division 75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)), and you obtained an independent valuation of the land for GST purposes as at the relevant time of commencing the development.

· You were advised of an ATO review of your development. The ATO held concerns about the valuation you had obtained.

· As a result of the audit you obtained a new valuation.

· We advised that we had reviewed the new valuation and found it to be acceptable, and therefore would not take any further action with regard to the audit.

· We also advised that we understood that the new valuation was higher than the original valuation that you applied under the margin scheme in respect of the development.

· We advised that you may be entitled to a GST refund, but that this may be subject to the provisions of section 105-65 of Schedule 1 to the Taxation Administration Act 1953 (TAA). We recommended seeking a private ruling, as you have now done.

· In applying the new valuation amount to your GST payable calculations under the margin scheme, you have calculated that you have overpaid GST.

· The amount you consider you have overpaid and wish to claim as a refund is 1/11^th of the increase in valuation.

· GST was reported in relation to the lots in your business activity statements (BASs) for the relevant period.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Division 75

Taxation Administration Act 1953

Section 105-65 of Schedule 1

Reasons for decision

Question 1

Summary

We accept that you have overpaid an amount of GST in relation to the sale of the relevant residential lots.

The overpayment is a result of a miscalculation under the margin scheme, and you are entitled to a refund of the overpaid GST.

Detailed reasoning

You have made a taxable supply and have remitted GST in connection with this supply, however you have remitted an amount in excess of what was legally payable on the supply. That is, you have overpaid an amount of GST.

Refunds of overpaid GST are subject to section 105-65 of Schedule 1 to the Taxation Administration Act 1953 (section 105-65), which places a restriction on GST refunds.

Section 105-65 applies such that the Commissioner need not give you a refund if you overpaid an amount because a supply was treated as a taxable supply when the supply was not a taxable supply and one of the following applies: either the recipients have not been reimbursed an amount corresponding to the overpaid GST, or the recipient of the supply was registered or required to be registered.

However, in Miscellaneous Tax Ruling MT 2010/1 (Miscellaneous Tax: restrictions on GST refunds under section 105-65 of Schedule 1 to the Taxation Administration Act 1953) the Commissioner takes the view that section 105-65 will not apply in cases where the supply is always correctly characterised and treated by the supplier as taxable, but an overpayment of GST arises from a mere miscalculation.

Examples of such cases include where:

· Supplies are treated as taxable under the margin scheme where there was an error in the calculation of the margin¹.

You have calculated the GST payable on your taxable supply of real property under the margin scheme (Division 75 of the GST Act). You have since obtained a more favourable valuation, and therefore the margin for the supply (and the GST payable) is less than the amount reflected in the activity statements that you have lodged.

You have therefore overpaid an amount of GST. However, in accordance with our view in MT 2010/1, section 105-65 will not apply to restrict the amount of refund payable to you in these circumstances.

You are therefore entitled to a refund of the overpaid GST.

Question 2

Summary

You may claim a refund of the overpaid GST in accordance with the procedures outlined in the ATO publication 'Correcting GST mistakes' (available on our website).

Detailed reasoning

The ATO publication above advises that you can only make corrections on your next activity statement if the total GST effect of all the errors is within the correction limits outlined in the publication.

The correction limits are such that a refund of the amount you have advised can only be claimed on your next activity statement if your annual turnover is $1 billion or over.

Otherwise you must claim the GST refund by revising each of your original activity statements that the mistakes occurred in.

Information on how to revise an earlier activity statement is also available in the 'Correcting GST mistakes' publication.

¹ Paragraph 25B of MT 2010/1

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