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Time limits on claiming GST refunds
In certain circumstances taxpayers may be entitled to claim an outstanding GST refund for an activity statement they have previously lodged.
Generally, they must claim a GST refund or notify the Tax Office of their entitlement within four (4) years of the end of the tax period to which the entitlement relates.
Examples of where a taxpayer could have an entitlement to an outstanding GST refund include where:
- They made a mistake such as a clerical or accounting error in an earlier activity statement; or
- They incorrectly treated a sale as taxable when it should have been GST free.
Where a taxpayer incorrectly treats a sale as taxable when it should have been GST free, the ATO will only make a refund to a taxpayer when they are satisfied that the overpaid GST has been reimbursed to the customer. The taxpayer is not legally required to reimburse the customer, but the Tax office will not make any refund unless they do.
What if the taxpayer does not make the claim within the four-year period?
If a taxpayer does not claim their refund of GST that they overpaid on their supplies, or notify the ATO of their entitlement to claim back overpaid GST, within the four year limit, the maximum refund they can claim will be limited to an amount equal to what they paid for the relevant tax period.
However, if a taxpayer has a tax invoice and has not claimed any of the input tax (GST) credit for that purchase, they may still claim it in the current or any later tax period – the four year time limit does not apply.
Nonetheless, a taxpayer generally cannot claim a GST credit by revising an earlier activity statement for a tax period that ended more than four years ago.
When does the time limit take effect?
The time limit takes effect four years from the end of the tax period of the activity statement. Therefore, the exact time limit will depend upon the taxpayer’s own statement periods – e.g. monthly, quarterly or annually.
The following table shows some examples:
|Tax period||4 year rule effective|
|1 July – 31 July 2008||31 July 2012|
|1 Aug – 31 Aug 2008||31 Aug 2012|
|1 July – 30 Sept 2008||30 Sept 2012|
|1 Oct – 31 Dec 2008||31 Dec 2012|
Claiming a refund in the next activity statement
Provided the refund is within the correction limits, taxpayers can claim the refund on their next activity statement.
The following table shows the correction limits which correspond to the size of a business.
|Annual turnover||Correction limits|
|Less than $20 million||Less than $10,000|
|$20 million to less than $100 million||Less than $20,000|
|$100 million to less than $500 million||Less than $40,000|
|$500 million to less than $1 billion||Less than $80,000|
|$1 billion and over||Less than $450,000|
Ray from Ray’s Cycles found a tax invoice in his files dated 20 July 2000. The invoice entitled Ray to claim a GST credit.
The four year time limit does not apply in this case because Ray has not made a claim using this invoice before, although eight years has passed since the invoice date. Ray can correctly claim the full GST credit in his current activity statement.
Jim’s Cleaning paid a tax liability of $3,000 for his January 2001 activity statement. Jim has recently reviewed this activity statement and realised he made an error in his calculations.
He reported $500 too much GST on his taxable supplies. The four year time limit does not apply as the GST refund claim for $500 is less than the $3,000 he originally paid.
Con’s Fruit World paid a $3,000 tax liability for his July 2008 return. Con checked his July 2008 activity statement and realised he had made a mistake.
He made $4,000 in GST-free supplies that he incorrectly reported in his activity statement as taxable supplies.
Therefore, he should have received $1,000 back instead of paying $3,000. Con did not overcharge GST to any of his customers.
If he claims the GST refund by 31 July 2012, Con’s Fruit World is entitled to receive the $4,000 difference. After this date, the four year time limit takes effect and Con is only entitled to receive a GST refund of the $3,000 he paid.
Our dedicated team can assist you with all your accounting and GST related matters. Complete and submit the Express Enquiry form on the top right hand side of this page and we will contact you to discuss your enquiry or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange an appointment.
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The Quinn Group operates Quinn Consultants, Quinn Lawyers, Quinn Financial Planning and Quinn Financial Solutions. The Quinn Group provides related information in regard to legal, accounting and financial planning issues. Liability limited by a scheme approved under Professional Standards Legislation* *other than for the acts or omissions of financial services licensees.