Tax experts still concerned GST refund reforms will hurt small business

Tax experts are still concerned over a piece of pending legislation that will make it harder for businesses to claim GST refunds, saying it will make conditions even harder for SMEs.

This comes as part of a Federal Government crackdown on GST, as the government continues to plug holes in the budget to deliver its promise of a surplus in 2012-13.

The government’s draft legislation on GST refunds seeks to “clarify the circumstances” in which businesses can apply for refunds with regard to overpayment.

The draft legislation has been released, but is expected to retrospectively apply from August 17 – and tax experts say the wait is putting more pressure on business.

“The new law will effectively make it impossible for businesses which have overpaid GST to seek refunds from the Australian Tax Office,” Institute of Chartered Accountants tax counsel Paul Stacey told SmartCompany this morning.

“It’s simply another turning of the screws.”

Assistant treasurer David Bradbury flagged the draft legislation last month, saying it will “protect the integrity of the tax system by ensuring that taxpayers who have passed on an amount of GST to their customers are not able to obtain a windfall gain irrespective of how that overpayment occurs”.

“These amendments will remove the uncertainty associated with the scope and operation of the current law, as well as the uncertainty about when the Commissioner will exercise his discretion.”

It comes as the government continues to plug holes in GST revenue, with states and territories scrambling to fill their coffers.

Recently, state leaders have called for massive GST reform, including New South Wales Premier Barry O’Farrell, who said the Federal Government needs to implement changes.

NSW Treasurer Mike Baird also joined retailers in calling for reforms to the low-value threshold.

But Stacey says the crackdown on GST refunds is a move that will make doing business even harder for SMEs.

“This new law is going to make things significantly harder for businesses,” he says.

GST expert Michael Evans, who runs the consulting firm Taxsifu, told SmartCompany this morning there are some elements of the bill that are clearly “unsavoury” and put a bigger burden on small businesses.

“There are a number of objectionable things about the way in which the bill has been done,” he says.

“This is the problem with indirect taxes. When the person paying the tax is not meant to bear the cost of it, you have these problems with paying it back, when it’s not supposed to be borne by the company.”