Commissioner of Taxation v Multiflex Pty Ltd
Document type: Decision Impact Statement
Venue: Federal Court of Australia (VID 1082 of 2011 (FC); M159 of 2011 (HC))
Judgment date: 11 November 2011
Date published: 12 March 2013

Summary of decision:
Outlines the ATO's response to this case, which concerned whether the Commissioner has an implied reasonable time to refund amounts payable to an entity under section 35-5 of the A New Tax System (Goods and Services Tax) Act 1999 and, if so, the extent of that reasonable time.

Overview of facts:
Multiflex's business consisted of purchasing mobile phones and similar goods from suppliers in Australia and exporting them to an associated Singapore resident company. In its GST returns for the periods January to May 2011, Multiflex claimed negative net amounts totalling $931,821. | The Commissioner decided not to refund the claimed amounts to Multiflex while he conducted an audit of Multiflex's entitlement to the refunds. The Commissioner had reasonable grounds to suspect that the input tax credits claimed in Multiflex's GST returns are not legitimate claims and could be fraudulent. | Multiflex sought remedies in the Federal Court under s.39B of the Judiciary Act 1903 and relief in debt and damages. The matter was expedited on the basis that Multiflex faced cash flow issues if the matter was not heard and determined and the GST refunds paid to it as a matter of urgency. | The matter was heard by Jessup J at first instance who gave judgment on 30 September 2011. The Court ordered mandamus directing the Commissioner to pay the GST refunds to Multiflex 'forthwith'. | The Commissioner appealed to the Full Federal Court. | Issues decided by the Full Court | - The Court held that the reasonable time in which the Commissioner must perform the duty under section 35-5 of the GST Act was a period not longer than required for administrative processing of a GST return. - The Court indicated that if the Commissioner knows the amount stated in the GST return is wrong, he can raise an assessment which would supersede the net amount stated in the return. - The Court took the view that an analogous provision in the United Kingdom VAT legislation (s.14(5) of the Value Added tax Act 1983 (UK)) is in a different statutory context to that of s.35-5 of the GST Act and therefore the United Kingdom line of authorities beginning with the decision in R v Commissioners of Customs and Excise; ex parte Strangewood Ltd (1987) 3 BVC 60; [1987] STC 502 was not followed. - The Court drew attention to s.46 of the Goods and Services Tax Act 1985 (NZ) as an approach which our Parliament could have taken to retention of GST refunds. The Court also said that the GST legislation must operate in a business environment and that the 'importance of a prompt refund' was consistent with 'cascading' of tax being avoided. - The Court recognised that the Commissioner may retain an amount if he has not received from the entity a required notification that affects or may affect the amount refundable to that entity (under s.8AAZLG of the Taxation Administration Act 1953 ). - The Court held that the Commissioner must perform the duty under section 35-5 of the GST Act by refunding the amounts in Multiflex's business activity statement. The Court refused to exercise its discretion to decline the order of mandamus stating that to do so would be antagonistic to the terms, object or purposes of section 35-5 of the GST Act. The Commissioner's appeal was dismissed and the trial judge's order that the Commissioner pay Multiflex the GST refunds forthwith was upheld. - After the Full Federal Court dismissed the appeal, the Commissioner sought special leave to appeal to the High Court, which refused to grant special leave on 9 December 2011. | - The Court held that the reasonable time in which the Commissioner must perform the duty under section 35-5 of the GST Act was a period not longer than required for administrative processing of a GST return. - The Court indicated that if the Commissioner knows the amount stated in the GST return is wrong, he can raise an assessment which would supersede the net amount stated in the return. - The Court took the view that an analogous provision in the United Kingdom VAT legislation (s.14(5) of the Value Added tax Act 1983 (UK)) is in a different statutory context to that of s.35-5 of the GST Act and therefore the United Kingdom line of authorities beginning with the decision in R v Commissioners of Customs and Excise; ex parte Strangewood Ltd (1987) 3 BVC 60; [1987] STC 502 was not followed. - The Court drew attention to s.46 of the Goods and Services Tax Act 1985 (NZ) as an approach which our Parliament could have taken to retention of GST refunds. The Court also said that the GST legislation must operate in a business environment and that the 'importance of a prompt refund' was consistent with 'cascading' of tax being avoided. - The Court recognised that the Commissioner may retain an amount if he has not received from the entity a required notification that affects or may affect the amount refundable to that entity (under s.8AAZLG of the Taxation Administration Act 1953 ). - The Court held that the Commissioner must perform the duty under section 35-5 of the GST Act by refunding the amounts in Multiflex's business activity statement. The Court refused to exercise its discretion to decline the order of mandamus stating that to do so would be antagonistic to the terms, object or purposes of section 35-5 of the GST Act. The Commissioner's appeal was dismissed and the trial judge's order that the Commissioner pay Multiflex the GST refunds forthwith was upheld. - After the Full Federal Court dismissed the appeal, the Commissioner sought special leave to appeal to the High Court, which refused to grant special leave on 9 December 2011.

Issues decided:
- The Court held that the reasonable time in which the Commissioner must perform the duty under section 35-5 of the GST Act was a period not longer than required for administrative processing of a GST return. - The Court indicated that if the Commissioner knows the amount stated in the GST return is wrong, he can raise an assessment which would supersede the net amount stated in the return. - The Court took the view that an analogous provision in the United Kingdom VAT legislation (s.14(5) of the Value Added tax Act 1983 (UK)) is in a different statutory context to that of s.35-5 of the GST Act and therefore the United Kingdom line of authorities beginning with the decision in R v Commissioners of Customs and Excise; ex parte Strangewood Ltd (1987) 3 BVC 60; [1987] STC 502 was not followed. - The Court drew attention to s.46 of the Goods and Services Tax Act 1985 (NZ) as an approach which our Parliament could have taken to retention of GST refunds. The Court also said that the GST legislation must operate in a business environment and that the 'importance of a prompt refund' was consistent with 'cascading' of tax being avoided. - The Court recognised that the Commissioner may retain an amount if he has not received from the entity a required notification that affects or may affect the amount refundable to that entity (under s.8AAZLG of the Taxation Administration Act 1953 ). - The Court held that the Commissioner must perform the duty under section 35-5 of the GST Act by refunding the amounts in Multiflex's business activity statement. The Court refused to exercise its discretion to decline the order of mandamus stating that to do so would be antagonistic to the terms, object or purposes of section 35-5 of the GST Act. The Commissioner's appeal was dismissed and the trial judge's order that the Commissioner pay Multiflex the GST refunds forthwith was upheld. - After the Full Federal Court dismissed the appeal, the Commissioner sought special leave to appeal to the High Court, which refused to grant special leave on 9 December 2011. - The Court held that the reasonable time in which the Commissioner must perform the duty under section 35-5 of the GST Act was a period not longer than required for administrative processing of a GST return. - The Court indicated that if the Commissioner knows the amount stated in the GST return is wrong, he can raise an assessment which would supersede the net amount stated in the return. - The Court took the view that an analogous provision in the United Kingdom VAT legislation (s.14(5) of the Value Added tax Act 1983 (UK)) is in a different statutory context to that of s.35-5 of the GST Act and therefore the United Kingdom line of authorities beginning with the decision in R v Commissioners of Customs and Excise; ex parte Strangewood Ltd (1987) 3 BVC 60; [1987] STC 502 was not followed. - The Court drew attention to s.46 of the Goods and Services Tax Act 1985 (NZ) as an approach which our Parliament could have taken to retention of GST refunds. The Court also said that the GST legislation must operate in a business environment and that the 'importance of a prompt refund' was consistent with 'cascading' of tax being avoided. - The Court recognised that the Commissioner may retain an amount if he has not received from the entity a required notification that affects or may affect the amount refundable to that entity (under s.8AAZLG of the Taxation Administration Act 1953 ). - The Court held that the Commissioner must perform the duty under section 35-5 of the GST Act by refunding the amounts in Multiflex's business activity statement. The Court refused to exercise its discretion to decline the order of mandamus stating that to do so would be antagonistic to the terms, object or purposes of section 35-5 of the GST Act. The Commissioner's appeal was dismissed and the trial judge's order that the Commissioner pay Multiflex the GST refunds forthwith was upheld. - After the Full Federal Court dismissed the appeal, the Commissioner sought special leave to appeal to the High Court, which refused to grant special leave on 9 December 2011.

ATO view of decision:
It follows from the Full Court's decision that the Commissioner must perform duties under section 35-5 of the GST Act within the reasonable time for administrative processing of a refund or credit. The Commissioner accepts the finding that, if he considers that an amount stated in a GST return is not correct, he can raise an assessment to which conclusive evidence provisions would then apply. | Further, the Commissioner accepts the finding that the duties under section 35-5 of the GST Act do not need to be performed if the Commissioner has not received from the taxpayer a required notification that affects or may affect the amount refundable to that taxpayer (under s.8AAZLG of the Taxation Administration Act 1953 (TAA)) or s.105-65 of Schedule 1 to the TAA otherwise applies. | The Commissioner will continue to apply Law Administration Practice Statement PS LA 2008/11 to situations coming within its terms. | The ATO will continue to conduct analysis, profiling, reviews and audits of GST and Business Activity Statements to ensure entities are compliant with their tax obligations. | The ATO is strongly committed to deterring, detecting and dealing with serious tax evasion and fraud. Firm action will be taken against taxpayers, intermediaries or others who engage in evasion or fraud, including applying penalties and prosecution.

Administrative treatment:
The ATO has considered what administrative practices may require to be reviewed as a result of the decision. | Implications for ATO precedential documents (Public Rulings & Determinations etc) | No. | Implications for Law Administration Practice Statements | No.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 (Cth) 2-5 2-30 5-5 7-1 7-5 7-10 7-15 9-20 17-5 17-15 23-15 31-15 35-5 182-10 Div 195 Taxation Administration Act 1953 (Cth) 8AAZLF 8AAZLG 105-15 of Sch1 Goods and Services Tax Act 1985 (NZ) 46 Value Added Tax Act 1983 (UK) 14, 16
Case references: Commissioner of Inland Revenue v Sea Hunter Fishing Ltd (2002) 20 NZTC 17-478 Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51 94 ATC 4960 29 ATR 173 Contract Pacific Ltd v Commissioner of Inland Revenue [2011] 1 NZLR 302 HP Mercantile Pty Ltd v Federal Commissioner of Taxation (2005) 143 FCR 553 2005 ATC 4571 60 ATR 106 Multiflex Pty Ltd v Commissioner of Taxation [2011] FCA 1112 2011 ATC 20-284 R v Commissioners of Customs and Excise; Ex parte Strangewood Ltd [1987] STC 502 Re Refugee Review Tribunal; Ex Parte Aala (2000) 204 CLR 82 [2000] HCA 57 Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434 2009 ATC 20-133 73 ATR 463
Subject references: Goods and Services Tax Administration Negative Net Amount Obligation to Pay Refund Entitlement to a Refund Mandamus