Private ruling: Division 142
Date of advice: 26 August 2025
Published: 27 October 2025
Ruling period: XX XXX XX till XX XXX XX

Ruling: Q1: Was the excess goods and services tax (GST) in relation to the supplies of the Products, made by you in the relevant tax periods, 'passed on' within the meaning of section 142-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) ? | A1: No, you have not passed on the excess GST in relation to the supplies of the Products, made by you in the relevant tax periods.

Relevant facts and circumstances: You are registered for GST

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 142-5 | A New Tax System (Goods and Services Tax) Act 1999 section 142-10

Reasons for decision: Summary: Division 142 generally restricts refunds when you make an overpayment of GST to the Australian Taxation Office (ATO) where a refund may result in a windfall gain. Excess GST is defined in subsection 142-5(1) as an amount that has been taken into account in an assessed net amount but in fact is not payable. Under section 142-10, if the excess GST has been passed on to another entity, that excess GST is taken to have always been payable until the passed-on GST is reimbursed to the other entity. However, if the excess GST has not been passed on, section 142-10 does not apply, and the supplier may request an amendment to their assessment for the relevant tax period to reduce the amount of GST attributable to that tax period. Any resulting refunds are then to be paid or applied in accordance with Division 3 and 3A of Part IIB of the Taxation Administration Act 1953 (TAA). Goods and Services Tax Ruling 2015/1 Goods and services tax: meaning of the terms 'passed on' and 'reimburse' for the purposes of Division 142 of the A New Tax System (Goods and Services Tax) Act 1999 (GSTR 2015/1) notes that whether the excess GST has been passed on is a question of fact and must be determined on a case-by-case basis taking into account the particular circumstances of each case. Paragraphs 24-27 of GSTR 2015/1 state: 24. The Explanatory Memorandum to the Tax Laws Amendment (2014 Measures No 1) Bill 2014 states that the GST envisages that the supplier 'passes on' the GST to the recipient of the supply. This simply reflects the design of the GST as an indirect tax which is generally expected to be passed on to the customer when a supply is made as a taxable supply. 25. If excess GST is included on a tax invoice, this is prima facie evidence that the excess GST has been passed on. 26. However, while there is a general expectation that, in ordinary circumstances, excess GST has been passed on, particular facts and circumstances of an individual case may demonstrate that excess GST has not been passed on. 27. A supplier claiming a refund, because it considers that the excess GST has not been passed on, will need to clearly substantiate the grounds on which it claims the refund. In any dispute, the taxpayer would have the onus of proving that its circumstances are outside the ordinary and that it did not pass on the excess GST. As outlined in paragraph 24 of GSTR 2015/1, the GST Act envisages that the supplier 'passes on' the GST to the recipient. The Commissioner provides, in paragraph 28 of GSTR 2015/1 a list of factors that should be considered in determining whether the excess GST has been passed on to recipients. This includes: • the manner in which the excess GST arose • the supplier's pricing policy and practice • the documentary evidence surrounding the overpayment, and • any other relevant circumstances The question of passing on is one of fact and not of fairness - considerations of fairness may be relevant in deciding whether the Commissioner exercises the discretion under subsection 142-15(1) but are not relevant to whether excess GST has been passed on. | Detailed Reasoning - The manner in which the excess GST arose: The manner in which an amount of excess GST arises is relevant in considering whether or not the excess GST was passed on. GSTR 2015/1 at paragraph 31 considers four common circumstances: • incorrectly treating something which is not a supply as a taxable supply • miscalculating a GST liability under the GST law • incorrectly reporting an amount of GST on a GST return, and • incorrectly treating a GST-free or input taxed supply as a taxable supply (including incorrectly apportioning the taxable and non-taxable components of a mixed supply). Paragraphs 32 and 33 of GSTR 2015/1 state: 32. Where an error occurs after the transaction has taken place, for example through a simple transcription error, this may point towards a finding that excess GST has not been passed on. 33. On the other hand, where the excess GST arises as a result of an error made before setting the price (for example, where a supplier incorrectly treats a GST-free or input taxed supply as a taxable supply), this error will generally flow through to the sale price paid by the recipient and is likely to point towards a finding that excess GST has been passed on. In your circumstances, due to a error when setting up certain systems for the Products they were mischaracterised as "taxable" instead of "GST-free". | Detailed Reasoning - The suppliers pricing policy: Paragraph 40 of GSTR 2015/1 states the supplier's pricing policy and practice involves considering your conduct and knowledge at the relevant time of setting the price of a supply and whether there have been any changes in the price to account for GST. Paragraphs 41-42 and 45-46 of GSTR 2015/1 states: 41. Where a supplier sets a price with the knowledge or belief that the transaction is subject to GST, including a belief that the GST which later proves to be an overpayment is a real cost of doing business, that will point towards a finding that the excess GST has been passed on. 42. This may be demonstrated where the price charged is calculated so as to exceed costs (including GST) by a profit margin. Even if there is very little or no profit margin, this will not necessarily mean that the GST was not taken into account as a cost. 45. A supplier may seek to demonstrate that GST was not considered when setting the price, it charged its customers. This is not, of itself, sufficient to establish that the excess GST has not been passed on. For example, where a supplier is a 'price taker' in a market that primarily makes taxable supplies, this usually indicates that the supplier has passed on the excess GST. The fact that the supplier may not have been aware of the GST cost when setting its prices is not enough by itself to demonstrate that GST has not been passed on. 46. On the other hand, where a supplier sets its prices to a market that primarily makes non-taxable supplies, this may tend to support a conclusion that the supplier has not passes on the excess GST. In your case, the excess GST arose because of a coding error in certain systems, where the GST-free Products sold to customers during the Relevant Period were incorrectly treated as a taxable supply. You reported the GST payable on lodged activity statements and remitted GST to the ATO in relation to those supplies. In regard to setting the price you have advised the price has remained the same despite the recent GST classification change (from taxable to GST-free) in the systems with the misclassification error. | Detailed Reasoning - The documentary evidence: You have advised, tax invoices were not specifically issued to customers as customers were predominantly individuals not registered for GST. That said, where a customer requested for a tax invoice to be issued, one could be arranged and provided by you. Paragraph 129 of GSTR 2015/1 follows with examples to illustrate how consideration of these matters is relevant in determining whether excess GST was passed on. Example 11 of GSTR 2015/11 provides the following: Example 11: computer coding error - excess GST not passed on 134. Marky Market sells a GST-free product and sets its price to match those of its competitors. Other retailers are also selling the same product on a GST-free basis for the same price. The computer system in Marky Market erroneously coded the product as taxable which was shown on the tax invoice that issued to customers. The price the customer paid remained the same and the product was treated as taxable in Marky Market's GST return. 135. A few months later, Marky Market altered its computer coding system to correctly code the product as GST-free, without changing its price. 136. In this situation, the excess GST arose as a result of an error in Marky Market's computer coding system despite Marky Market considering that the product was GST-free and setting its prices accordingly. Marky Market did not change the price of its product after it discovered the error. Taken together, these circumstances show that Marky Market effectively bore the cost of the excess GST. That is, the excess GST was not passed on. Accordingly, your scenario is similar to example 11 and the documentary evidence for the transactions carries little weight in this case in determining whether the excess GST has been passed on. | Detailed Reasoning - Conclusion: As outlined above, there is a general expectation that excess GST will have been passed on and a supplier will need to clearly substantiate the grounds on which it claims a refund of excess GST and that their circumstances are outside the ordinary. Overall, based on the circumstances provided, the Commissioner is satisfied that you have not passed on the excess GST in respect of your supply of the GST-free Products in certain systems during the Relevant Period and you have substantiated the excess GST arose out of circumstances that are outside the ordinary. Therefore, section 142-10 does not apply, and you may request an amendment to your assessment for the relevant tax periods to reduce the amount of GST attributable to those tax periods. Any resulting refunds are then to be paid or applied in accordance with Division 3 and 3A of Part IIB of the Taxation Administration Act 1953 (TAA).