Dec 2018 3 Minutes

Four Year Time Limit on GST Refunds

On 23 November 2018 the Commissioner issued Draft Miscellaneous Taxation Ruling MT 2018/D1 ‘Miscellaneous tax: time limits for claiming and input tax or fuel tax credit’.

This ruling seeks to clarify the Commissioner’s literal approach to the operation of the four year limitation period on claiming input tax credits (ITCs) in the GST Act and on claiming fuel tax credits (FTCs) under the Fuel Tax Act.  Under this approach, regardless of whether you have requested the Commissioner amend your assessment, applied for a private ruling or object to an assessment, your entitlement to claim ITCs expires if you have not actually claimed the ITCs or FTCs in your activity statement within four years.

The Commissioner’s somewhat controversial view of the words “taken into account in an assessment” is taken to mean that an entity must include the claim for ITCs or FTCs in the calculation of the net amount or fuel tax amount.  Thus under this view, unless an entity actually claims the ITC or FTC within four years, their entitlement expires.

This fundamentally differs from the pre-self assessment regime in place prior to 1 July 2012, where an entity could lodge a notification under s 105-55 of Schedule 1 to the TAA to protect its entitlement to claim ITCs without being exposed to penalties and interest.

Under the Commissioner’s literal approach, Taxpayers can only protect their entitlement to an unclaimed ITCs or FTCs by actually claiming those credits in an activity statement.  This will expose Taxpayers to penalties and interest if the claim is subsequently determined to be incorrect.

Thus, if this ruling is adopted, Taxpayers who determine that they may have an entitlement to recover ITCs/FTCs face the decision of whether to:

  • claim the credits in their activity statement (thereby exposing themselves to penalties and interest if the claim is incorrect); or
  • engage with the Commissioner to recover those credits by:
    • requesting an amendment to an assessment; or
    • apply for a private ruling; or
    • objecting to an assessment.

If Commissioner engagement is chosen, Taxpayers must expect that the process will be completed within the four year period.  If not – even if the delay is the fault of the Commissioner – or the delay is as the result of various appeal processes through the Courts (which turn out to be successful for the taxpayer), a Taxpayer’s entitlement to ITCs/FTCs expires.

The Commissioner has invited comments on the ruling by 25 January 2019, however clients that believe they are entitled to either ITCs or FTCs for prior years, need to seek advice as to how they can protect their rights in respect to making a claim for those prior credits.

If you would like to discuss this matter further, please contact Walker Wayland and speak to Jane.