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Edited version of your written advice
Authorisation Number: 1012734000816
Ruling
Subject: Refund of GST
Question 1
In light of the new facts and information provided, will the Commissioner exercise his discretion under section 105-65 of Schedule 1 to the Taxation Administration Act 1953 (TAA) (section 105-65) to allow you a refund of the goods and services tax (GST) you incorrectly included in the price of your supplies in the relevant period?
Answer
Yes
Relevant facts and circumstances
• In 2013 we received your notification of entitlement to claim a GST refund.
• We confirmed that your entitlement was received within time to preserve any refund that you are entitled to under the normal GST rules for the relevant period.
• In 2014 we received your request for a private ruling.
• You asked if the supply was a GST-free supply and if so whether you were entitled to a refund.
• We issued a ruling confirming that your supplies were GST-free however; it advised that the Commissioner would not exercise the discretion to allow you a refund.
• You have provided further materially different information regarding your arrangements.
• You are a not for profit local government entity that owns and operate the facility.
• You provide the service for a fee.
• You have operated at a loss since inception due to your community focussed objectives, statutory obligations and not for profit motivations.
• You cover a significant portion of your costs from other sources of revenue rather than in the prices charged for goods and services.
• The price of the supply has not been reduced since you learnt the supply was not taxable.
• You contend that you have borne the GST and have not passed the GST on to your customers.
• The management of the facility recommended pricing each year to you and those recommendations were determined according to a market that primarily makes GST-free supplies.
• Only counter transactions received a receipt for payment which showed GST in the price as the receipting system mistakenly treated all the receipts as including an amount of GST.
• The recipients are neither registered nor required to be registered and are the end consumer.
• You do not intend to refund the recipients of the misclassified supply.
• The pricing information available to all customers does not show any GST in the charges.
Relevant legislative provisions
Taxation Administration Act 1953
Section 105-65 to Schedule 1
Reasons for decision
Summary
Based on your new submission we consider it appropriate to the Commissioner exercises the discretion to allow a refund of overpaid GST for the relevant period.
Detailed reasoning
Section 105-65 of the TAA restricts the refund entitlement of a supplier. It applies in circumstances where you have overpaid amounts of GST because a supply was treated as taxable when the supply was not taxable and the recipients have not been reimbursed an amount corresponding to the overpaid GST.
As you have treated your supplies as taxable when they were GST-free and not reimbursed the recipients the section applies to restrict your refund.
Under section 105-65 the Commissioner has discretion to refund in appropriate circumstances. Guidance on the exercise of this discretion is provided by Miscellaneous Tax Ruling MT2010/1. Importantly the Commissioner must consider the intent of the provision to prevent a windfall gain to suppliers. Any refund must compensate the person that ultimately bore the cost of the GST.
That you have price matched yourself against GST-free prices and not reduced the prices since determining that your supply was GST-free both indicate that you have not passed on the GST. This is supported further by your assertion that you provided these supplies at an economic loss. Whilst the receipts issued did show GST being charged this is not conclusive evidence and these were not provided to all recipients. Further to this other documents do not indicate any GST being included in the prices.
Based on the facts and information provided the Commissioner is satisfied that you bore the cost of the GST rather than the customer. The customer paid market price and would not be able to demonstrate that they are out of pocket because you thought you had to (and did) remit GST. We therefore accept that it is appropriate to exercise our discretion to allow the refunds of overpaid GST to issue to you.
How to claim your refund
You have made a GST error in working out your net amount for the relevant reporting periods that has resulted in you paying too much GST in the relevant periods. As we agree to refund the overpaid GST, this can be treated as a GST error (a credit error). The credit error is within the credit error time limit as you have notified us of your entitlement to the refund during the four year period. Therefore you can correct this error in a later activity statement.
Please refer to information on credit errors within 'Correcting GST errors' that is available on our website www.ato.gov.au for further information, or contact us if necessary.
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