Assistant Treasurer Mark Arbib today announced that following consultation the Government will introduce legislation into Parliament to allow the Commissioner of Taxation to hold refunds for verification prior to payment.
Senator Arbib said the legislation followed a decision of the Full Federal Court on 11 November 2011, in Commissioner of Taxation v Multiflex Pty Ltd [2011] FCAFC 142, that the Commissioner had no legislative basis for holding on to a refund while verifying that the amount claimed is correct, even in the case of potential fraud.
"Fraud associated with refunds is a compliance risk with the potential to undermine community confidence in the integrity of the tax system," Senator Arbib said.
"The legislation would provide the Commissioner with legislative discretion to delay refunding certain amounts to taxpayers pending necessary verification of their claims.
"Refunds play an important role for many businesses and in particular small business. The proposed legislation has been drafted to strike an appropriate balance between a taxpayer's right to a prompt refund and the Commissioner's responsibilities."
Senator Arbib said that the Commissioner had advised that the Australian Taxation Office (ATO) would continue to audit taxpayers who falsely claimed GST refunds and would apply significant penalties to those who claimed incorrect refunds. The ATO will also continue to bring before the courts those who commit fraud.
The exposure draft legislation and draft explanatory memorandum are available on the Treasury website. Consultation closes on Tuesday 21 February 2012.