Decision impact statement

International All Sports v Commissioner of Taxation
Sportsbet Pty Ltd v Commissioner of Taxation

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Court Citation(s):
[2011] FCA 824
2011 ATC 20-268
81 ATR 607
(2011) 195 FCR 383

Venue: Federal Court of Australia
Venue Reference No: 962 of 2010, 963 of 2010, 185 of 2011
Judge Name: Jessup J
Judgment date: 26 July 2011
Appeals on foot:
No.

Impacted Advice

Relevant Rulings/Determinations:

• MT 2010/1
• GSTR 2002/3

Subject References:
GST
Calculation of Global GST Amount
Non-resident gamblers
GST-free
Prizes paid to non-residents
Restriction on refunds
Section 105-65 of Schedule 1 to the Taxation Administration Act 1953
Division 126 of A New Tax System (Goods and Services Tax) Act 1999 (the GST Act)

Précis

Outlines the ATO's response to this case which concerns how gambling operators calculate wagers by non-residents, the global GST amount under Division 126 of the GST Act and whether the restriction in section 105-65 of the TAA applied to the overpaid GST.

Brief summary of facts

The taxpayers operate bookmaking services, providing wagering opportunities to customers situated both in Australia and overseas.

Where customers are non-residents who are not in Australia at the time the wagers are placed, the gambling supplies to those customers are GST-free.

The issue which arose concerned how the taxpayers ought to calculate their global GST amount for the purposes of Division 126 of the GST Act. Section 126-10 contains a formula for determining the global GST amount (total amounts wagered - total monetary prizes (x 1/11)).

The taxpayers and the Commissioner agreed that the amount of wagers placed by non-resident customers is to be excluded from total amounts wagered because those wagers are in respect of supplies that are GST-free under section 38-190 of the GST Act.

The taxpayers submitted that they had originally incorrectly calculated their global GST amount and overpaid GST because their calculation of the total monetary prizes did not include monetary prizes paid to non-residents.

Also at issue was whether section 105-65 of Schedule 1 to the TAA would apply such that the Commissioner 'need not' make a refund of any overpaid amounts.

Issues decided by the court

1. How gambling operators ought to calculate, with respect to wagers by non-residents, their global GST amount for the purposes of Division 126.

The Court held that, when calculating the global GST amount under section 126-10 of the GST Act, 'total monetary prizes' includes monetary prizes paid to non-resident customers.

2. Whether the Commissioner is entitled to deny refunds pursuant to section 105-65 of Schedule 1 to the TAA on the basis that the taxpayers have not reimbursed any corresponding amount to their gambling customers.

The Court held that section 105-65 did not apply because it could not be said that the overpayments made by the taxpayers arose because supplies were treated as taxable supplies, or arrangements were treated as giving rise to taxable supplies, to any extent.

Tax Office view of Decision

The Commissioner has not appealed either aspect of the decision.

Construction of section 126-10

For tax periods commencing before 24 March 2010, the decision means that 'total monetary prizes' in section 126-10 includes prizes paid to non-resident customers.

Legislative amendments which took effect from that date make it clear that, for tax periods commencing on or after 24 March 2010, both wagers made by, and monetary prizes paid to, non-residents are excluded from the calculation of the global GST amount.

Construction of section 105-65

In accordance with the decision, the ATO will administer section 105-65 on the basis that the restriction on refunds does not apply where, in tax periods which commenced prior to 24 March 2010, gambling operators have miscalculated their global GST amount under Division 126 by failing to include the value of monetary prizes paid to non-resident customers.

Although not before the Court in this case, the ATO has also reviewed the view in MT 2010/1 that the section 105-65 restriction on refunds may apply where a taxpayer overpays GST as a result of failing to apply, or miscalculating their liability under, the margin scheme. The ATO will now administer section 105-65 on the basis that the section does not apply in these circumstances.

The ATO will continue to administer section 105-65 on the basis that the restriction on refunds applies where the overpayment arises from a supply or arrangement being wrongly treated as a taxable supply, such as in mixed supply cases, where the taxpayer overpays GST by treating a supply as taxable to a greater extent than required by the law.

The ATO maintains the view that section 105-65 may apply where an entity overpays GST by mistakenly treating a taxable supply made by another entity as a supply that is a taxable supply made by the taxpayer.

Administrative Treatment

If you believe you have overpaid GST and wish to seek a refund, a GST refund claim must be made within the four-year time limit for GST refunds (section 105-55 of Schedule 1 to the TAA). Taxpayers may preserve their entitlement to a possible refund by lodging a Notification of Entitlement to GST refund (NAT 11719) form within the time limits for seeking refunds.

Notifications should be sent to the ATO via the email address - GSTmail@ato.gov.au or to the address or fax number shown on the notification form.

Implications for ATO precedential documents (Public Rulings & Determinations etc)

An addendum to MT 2010/1 was published on 19 September 2012 reflecting the views expressed in this decision impact statement. The addendum also provides a number of other examples which illustrate the Commissioner's broader view that section105-65 does not apply where a supply is always correctly characterised and treated by the supplier, but an overpayment of GST arises from a mere miscalculation.

An addendum to GSTR 2002/3 was published on 8 May 2013 to correctly reflect what amounts should be taken into account in calculating total monetary prizes for tax periods commencing prior to 24 March 2010 and tax periods commencing on or after 24 March 2010.

Implications for Law Administration Practice Statements

The Tax Office has not identified any implications for current practice statements.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999 (Cth)
Division 7
Division 9
Division 11
Division 17
Division 105
Division 126
Division 48

Acts Interpretation Act 1901 (Cth)
15AA
15AB


Tax Laws Amendment Act (2009 GST Administration Measures) Act 2010 (Cth)

Taxation Administration Act 1953
105-10
105-65

Case References:
Commissioner of Taxation v Energy Resources Australia Ltd
(2003) 135 FCR 346
[2003] FCAFC 314
2003 ATC 5179
54 ATR 608

Saga Holidays Ltd v Commissioner of Taxation
(2006) 156 FCR 256
2006 ATC 4001
61 ATR 384

HP Mercantile Pty Ltd v Commissioner of Taxation
(2005) 143 FCR 553
2005 ATC 4571
60 ATR 106

Grain Elevators Board (Vic) v Shire of Dunmunkle
(1946) 73 CLR 70

HJ Glawe Spiel- und Unterhaltungsgerate Aufstellungsgsellschaft mbH & Co KG v Finanzamt Hamburg-Barmbek-Uhlenhorst
[1995] 1 CMLR 70

Hooker v Gilling
(2007) 48 MVR 136

IRC v Wolfson
[1949] 1 ALL ER 865