This week the Treasurer and Assistant Treasurer announced the Government’s process to clear the bottleneck of announced but unlegislated tax and superannuation measures.

The appeals were against the 2012 decision of the Administrative Appeals Tribunal (AAT) involving the GST treatment of certain “incentive” payments made by car manufactures to dealers, in the “son of holdback” case. 

In the initial AAT decision, of the five payments examined, three were determined not to be a taxable supply and GST was therefore incorrectly remitted. This entitled AP Group to a GST refund.  Summarising the AAT decision:

  • Fleet Rebates - Taxable - No Refund 
  • Run-Out Model Bonus  - Taxable - No Refund 
  • Transit/Interest Protection - Not Taxable - Refund Available 
  • Target Incentives - Not Taxable - Refund Available 
  • Wholesale Target Incentives - Not Taxable - Refund Available 

The basis of the appeal

Both the taxpayer and the Commissioner appealed on the basis that the AAT had incorrectly applied the section 9-5 statutory test of the GST Act.  In appealing, the taxpayer was ultimately attempting to have both the Fleet Rebate and the Run-Out Model Bonus characterised as not taxable and therefore to make a GST refund available on these payments.

What was the decision?

The majority of the Full Court decided that the AAT had applied the statutory test correctly and therefore an error of law was not raised, resulting in the dismissal of the appeal.  Therefore, the Full Court did not believe refunds were available to Fleet Rebates and Run-Out Model Bonus payments.

No new impact on dealers - refunds still available

Given that the Full Court dismissed both the taxpayer’s appeal and the Commissioner’s cross appeal, we consider that the current GST refunds continue to be available for Transit/Interest Protection, Target incentives and Wholesale Target incentives. 

Those dealers with live “stop the clock” arrangements that held off on making claims for such refunds should now revisit their contractual terms to ensure they are on foot with the decision.