Challenge on delayed tax refund interest succeeds

What might the Travelex decision mean for taxpayers who have received delayed tax refunds from the ATO? Read about this potential opportunity below.
What is the opportunity?

Deloitte Australia’s Indirect Tax team has successfully challenged the ATO’s approach to calculating interest on delayed tax refunds, with the Federal Court recently ruling in favour of the taxpayer in Travelex Limited v Commissioner of Taxation (decision).

Subject to the outcome of any appeal, the decision may provide grounds for other taxpayers to seek payment of additional interest in respect of delayed GST refunds from the ATO.

We are considering the implications of the decision for other federal indirect taxes.

What did the Federal Court decide?

The main issue decided by the Federal Court was the point in time from which the interest payable by the ATO on a delayed GST refund is to be calculated from. Broadly speaking, the Court determined that interest was payable from the lodgement date of the GST return for the affected tax period, as opposed to the ATO’s treatment which has been to calculate interest, if any, based on the date that the taxpayer notified the ATO of the outstanding tax refund entitlement. The decision concerns a refund related to the pre self-assessment era (i.e. before 1 July 2012).

What to do now?

The Commissioner has until 2 August 2018 to initiate any appeal. In the interim and beyond, taxpayers should be identifying any instances where a delayed GST refund was received from the ATO and checking the period for which any associated delayed refund interest was calculated.

We invite affected taxpayers to contact one of the Indirect Tax specialists below, both of whom have played a key role in Deloitte’s challenge to the ATO’s approach to delayed refund interest, to discuss whether the decision may provide an opportunity to seek outstanding delayed refund interest.

For more information, contact Jon Graham or John Koutsogiannis.

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