As part of its 2017 work program, the office of the Inspector-General of Taxation (IGT) has announced that it is going to examine the ATO’s administration of an existing provision that allows it to hold on to GST refunds if it believes additional verification is required.

The ability for the ATO to retain a GST refund if it believes further verification is necessary does however come with certain conditions. It must of course notify the entity involved, but must also have regard to certain factors, such as:

  • the impact on the taxpayer’s financial position
  • the impact on its revenue
  • the likelihood there is fraud or evasion, intentional disregard or recklessness with regard to tax law.

Timeframes written into the law as it stands provides that the ATO can only retain a refund until the time it would no longer seem to be reasonable to ask for verification of information. It also cannot hold on to a refund (beyond the notification period) if it fails to actually notify the taxpayer that this is a possibility, nor if the relevant tax assessment has been amended (an amendment ends the retention period allowed).

In announcing its work program for this year, the IGT says that complaints data as well as submissions made for the 2017 program had indicated that the ATO’s administration of the relevant provision in the tax act (section 8AAZLGA) may, in some instances, “result in inappropriate and unfair delays in GST refunds being issued”.

The IGT says its review will examine the ATO’s approaches in using this provision, the impact it has in taxpayers, and the need for any administrative or policy improvements.

“The combination of public consultation and complaints handling data has led to a work program which reflects the issues of greatest community concern or significance in achieving a fairer, more efficient and transparent tax administration system,” the IGT says.

As well as examining the withholding of GST refunds, it has also flagged that it will review the pay-as-you-go instalments system. This has been initiated in the face of complaints that the system is generating confusion and misunderstanding for certain taxpayers who are required to make payments.

The Tax Commissioner has also requested that the IGT examine the state of the ATO’s services and support for tax practitioners. “This review will be forward-looking and will examine the future role of tax professionals in the tax system particularly in light of increased use of digital technology and ATO service delivery initiatives.”

In doing so, the IGT will also examine concerns raised by tax practitioners on issues affecting their industry. “The IGT will consult extensively with the tax profession, the ATO and the TPB to identify opportunities to improve the tax system as a whole.”