Car dealers GST refund tax bonanza

Car dealers will be celebrating this morning with the news that a landmark tax case means that the taxman has to honour a GST refund on “holdback” payments from manufacturers.

Judge Arthur Emmett’s decision in the Federal Court to award $300,000 to KAP Motors means that all car dealers across Australia now have an opportunity to request similar GST refunds.

The decision could lead to retrospective payments by the tax office worth $300 million, says Deloitte indirect tax leader Jon Graham.

“The refunds are worth, on average, about $100 for every new car sold in Australia dating back to the introduction of the new tax system on 1 July 2000.” he says.

He expects that the tax office will appeal the decision, and the Government may even consider changing the law if the decision stands – although it will be reluctant to do so retrospectively.

Graham says that the decision could have even wider implications. “Any taxpayer who has been refused a GST refund claim should review their position in light of the case.”

He says it will affect any situation where “something was incorrectly classified as a supply for GST purposes but then later considered to be a non-supply. However, the way the law was written there are not many non-supplies out there.”