Cash flow boost coming as courts say ATO must refund GST faster

coat_of_armsCash flow management may just have become a little easier after a Federal Court ruling that will mean the ATO has to pay GST refunds promptly.

Businesses can now expect faster payments of GTS refunds from the Australian Taxation Office (ATO), thanks to a recent court ruling.

The case in question, Commissioner of Taxation v Multiflex Pty Ltd, saw the ATO argue that it was reasonable to pay GST refunds after it had conducted an investigation into the accuracy of Multiflex’s claims. Multiflex, like many businesses, wanted to get its hands on its refund as soon as possible to help with cash flow.

The Federal Court decided the ATO can delay payment of GST refunds for a reasonable amount of time needed to administer the claim, but cannot withhold payments until after the conclusion of an investigation.

The ATG did not like that ruling and asked for special leave to appeal to the High Court, but that was not granted. The Federal Court’s “refund before you investigate” rule therefore stands for now.

Andrew Conway, CEO of the Institute of Public Accountants, said the decision means small business can now expect faster GST refunds.

“The slow processing of GST refunds as a result of ATO verification processes can have severe consequences on small businesses and restrict important cash flow. Small business does not have the same financial resources as larger organisations to cushion themselves against delayed refunds,” he wrote to My Business.

“Practitioners have long complained about trying to recoup money owing from the ATO on behalf of clients. This case is a welcome relief for businesses waiting on refunds to maintain their working capital requirements.

Conway also told My Business that the ATO expected the decision and was already working on improving its response time on processing GST refunds.

The decision does not mean you’ll get off scot free if your GST claim is wrong – the ATO can still issue an amended notice if it finds your numbers are wrong. But at least you’ll get refunds faster from now on.

The decision will not, however, make it easy to predict exactly when you’ll get paid as there is no law mandating a deadline for payments. The Institute of Chartered Accountants points out in this article that New Zealand’s GST laws mandate payments in 15 days. Perhaps that’s something for our new Small Business Minister to look at?

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