Multiflex Pty Ltd v Commissioner of Taxation [2011] FCA 1112
At Interactive Accounting we love it when commonsense prevails in tax case law.
Multiflex, a company that buys telecommunication products such as mobile phones and iPads and exports them overseas. They lodged a number of Business Activity Statements which in total had close to a million dollars in GST refunds. The ATO withheld the refunds pending a GST review and the investigation of a possible large scale fraud involving many different suppliers of mobile phones and other electronic products. But nine months later and the ATO was still investigating and withholding the refunds which was causing serious cash flow and solvency issues. Multiflex took the ATO to court siting that the decision to withhold the refund was ‘an improper exercise of power, without a proper basis, ultra vires and contrary to law’. The Full Federal Court agreed and ordered the ATO to refund the GST immediately and ruled that it is their duty to do so within a reasonable period from the tax payers lodgement.
The ATO has released a decision impact statement stating that tax payers that have GST Refunds being held pending the completion of a GST Audit review will have their refunds release as soon as administratively possible.
This is a win for businesses as we have been involved in a number of GST Review audits where start-ups are investing heavily in infrastructure or stock which produces large GST refunds in the first year of operation. We think the ATO will still withhold the refunds pending an audit review but they will restrict the number of days in which they have to conduct the audit review.
