In July the Administrative Appeals Tribunal (AAT) handed down its decision in AP Group Limited v Commissioner of Taxation, involving the GST treatment of certain “incentive” payments by car manufacturers to dealers.

The decision followed from the 2008 decision of the Federal Court in KAP Motors Pty Ltd v Commissioner of Taxation where car dealers successfully obtained refunds of GST paid on “holdback” payments.

The AAT has now finalised its decision, in line with the July decision partially in favour of the dealers.

Reminder of the issue

The AAT had to decide whether the incentive payments were properly treated as consideration for supplies made by the dealer. If they were not, the dealer may be entitled to a refund of overpaid GST.

What do dealers do now?

The AAT essentially gave instructions to dealers to review their arrangements for potential overpayments of GST. Practically, this means that dealers need to:

  1. Preserve the maximum potential refund by reviewing the “stop the clock” notifications lodged with the ATO – if the notifications have not been lodged it will be very difficult to obtain a refund.
  2. Map the incentive payments received through a detailed review of contract terms against the comments made in this and the KAP Motors cases.
  3. Once reviewed, prepare a matrix or schedule highlighting the individual characteristics of holdbacks across the incentive types.
  4. Approach the ATO and request refunds where appropriate.