Explanatory Memorandum
(Circulated by authority of the T reasurer, the Hon Ralph Willis, MP)Chapter 4 - Sales tax refunds
Overview
4.1 Schedule 9 of the Taxation Laws Amendment (Budget Measures) Bill 1995 (the Bill) will amend the sales tax laws to ensure that the procedures prescribed by the sales tax refund provisions are the only method by which refunds of sales tax can be obtained.
Summary of the amendment
4.2 The old and the new sales tax laws provide for refunds to be paid if certain conditions are satisfied. These amendments will ensure that claimants who do not satisfy those conditions will not be entitled to refunds.
4.3 The amendments will apply to:
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- liabilities to pay refunds arising after 7.30 pm. eastern standard time on 9 May 1995; and
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- liabilities to pay refunds arising at or before 7.30 pm eastern standard time on 9 May 1995, if legal proceedings to enforce payment of the refunds were commenced after that time. [Item 3]
Background to the legislation
4.4 Both the Sales Tax Assessment Act 1992 , and the various Sales Tax Assessment Acts and associated regulations and legislation which it replaced (referred to as the old sales tax law), allow refunds of sales tax or amounts that have been paid as sales tax, on certain specified grounds. The Sales Tax Assessment Act 1992 applies to dealings with goods after 1 January 1993, and the old sales tax applies to transactions before that date.
4.5 Under both the old sales tax law, and the current law, the statutory right to a refund is subject to conditions. Firstly, there is a 3 year limitation on claims. There is no entitlement to a credit, unless the claim is lodged within 3 years of the transaction which gave rise to the claim.
4.6 Another condition is designed to prevent windfall gains, and to ensure, as far as is practical, that the person who bore the tax actually receives the refund. In many cases, a taxpayer will not be entitled to a refund, if the taxpayer has recouped the amount of the tax from another person in the price charged for the goods, and not returned the amount to that person.
4.7 The sales tax laws do not expressly exclude rights to refunds under the general law or other legislation; however, the refund provisions of the sales tax law are intended to be the only basis on which a refund can be claimed. The conditions relating to the payment of refunds provide a degree of certainty with regard to administration, and limit the extent to which sales tax refunds can give rise to windfall gains. Claims or rights to refunds under either the general law, or legislation other than the sales tax law, would not be subject to those same conditions. The Commonwealth is by no means certain that such rights exist, or that such claims would succeed, but wishes to place the matter beyond doubt. These amendments will ensure that the only access to refunds of sales tax is through the refund provisions of the sales tax law. [Item 4]
Explanation of the amendments
4.8 These amendments are in two parts - an amendment to the current sales tax law, and an amendment affecting the old sales tax law.
Amendment to the Assessment Act
4.9 Schedule 9 of the Bill will insert a new section 130A into the Sales Tax Assessment Act 1992 (the Assessment Act). The new section will ensure that the Commonwealth is not liable to pay refunds, if the liability to the refund does not arise under the provisions of the Assessment Act. [Item 1 - new subsection 130A(2)]
4.10 The section refers to two different grounds for payment of refunds:
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- refunds of sales tax that was legally payable (for example, sales tax paid on goods which were the subject of a later exempt dealing); and
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- refunds of amounts paid as sales tax which was not legally payable (a similar concept to that found in CR1 in Table 3 in Schedule 1 to the Assessment Act).
Together, these two grounds actually cover all possible situations in which an entitlement to a refund might arise. [Item 1 - new paragraph 130A(1)(a)]
4.11 The Commonwealth will be relieved of liability to refund a payment if the liability does not arise under the Assessment Act, but arises by virtue of the operation of the common law or for any other reason. This could include the common law of restitution for unjust enrichment, any other common law principle or an implication from any other statutory provision. [Item 1 - new paragraph 130A(1)(b)]
Amendment in relation to the old sales tax law
4.12 Part 2 of Schedule 9 of the Bill will insert a new section 4A into the Sales Tax Amendment (Transitional) Act 1992 (the Transitional Act). The Transitional Act provides that the old sales tax law continues to apply to in respect of transactions which occurred before the Assessment Act came into effect.
4.13 The new section will ensure that the Commonwealth will not be liable to refund sales tax that was paid or overpaid under the old law, if the liability to the refund does not arise under the provisions of the old sales tax law. [Item 2 - new subsection 4A(2)]
4.14 New section 4A will operate in the same way as the amendment to the Assessment Act described above. Sales tax "overpaid" includes an amount that was not legally payable. [Item 2 - new subsection 4A(1)]
4.15 These amendments do not affect the liability of the Commonwealth to refund sales tax, or amounts paid as sales tax, if the refund is claimed in accordance with the provisions of the sales tax laws.