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Edited version of your written advice
Authorisation Number: 1012752394582
Ruling
Subject: Request for a refund of overpaid GST
Question 1
Will the Commissioner exercise the discretion under section 105-65 of Schedule 1 to the Taxation Administration Act 1953 (TAA) to allow you a refund of the goods and services tax (GST) you incorrectly remitted in the relevant period?
Answer
Yes
Relevant facts and circumstances
• You are a gift deductible and not for profit entity.
• You monitor your production costs to ensure that ticketing sales continue to represent less than 75% of the costs of production.
• You establish your prices based on what the market is willing to pay and this is significantly below the costs of production.
• The budgets prepared by you reflect sales of the tickets being GST-free and do not contemplate GST being remitted.
• You engage a venue manager for the venues at which you hold your events. They provide you with recipient created tax invoices showing ticket sales less expenses to arrive at a net payment to be made to you.
• In early 20XX a new accountant became responsible for preparation of the activity statements.
• The venue manager did not reference any GST attributable to ticket sales prior to later 20XX but subsequently changed the format of its invoice and stated ticket sales as 'including GST'.
• There was not change to your eligibility for the GST concession that allows you to treat ticket sales as GST-free.
• The accounting system relies on the user manually entering the tax code.
• The new accountant inadvertently reflected ticket sales as taxable supplies.
• You have not increased your ticket prices as a result of inadvertently remitting GST.
• The remission of GST on those sales was not contemplated when establishing the price nor was it budgeted for.
Relevant legislative provisions
Taxation Administration Act 1953
Section 105-65 to Schedule 1
Reasons for decision
Summary
Based on your submission we consider it appropriate that 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 of tickets as taxable when they were GST-free and not reimbursed the recipients the section applies to restrict your refund.
Under section 105-65 of the TAA the Commissioner has discretion to refund in appropriate circumstances. Guidance on the exercise of this discretion is provided by Miscellaneous Tax Ruling MT 2010/1. 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 the error has taken place after the establishment of the price and arisen as a result of the incorrect entry into the accounting system both indicate that you have not passed on the GST. Further to this your established practice shows the intent that the supply you are making is to be treated as GST-free.
Based on the facts and information provided the Commissioner is satisfied that you bore the cost of the GST rather than the customer. 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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