The High Court has refused the Commissioner’s application for special leave to appeal the Full Federal Court decision in Geocon Land Holdings No 5 Pty Ltd v FCT [2025] FCAFC 172.
As a result, the Full Federal Court’s approach to determining whether GST has been “passed on” remains the leading authority, and the matter returns to the Administrative Review Tribunal (ART) for reconsideration.
The dispute arose after Geocon, adopting a conservative GST approach, overpaid GST in connection with margin scheme apartment sales. When Geocon later sought a refund of the overpaid GST, the central issue became whether that GST had effectively been borne by the purchasers – in other words, whether the GST cost was built into the prices purchasers paid.
This issue is important because the GST law contains “windfall gains rules designed to prevent a taxpayer from receiving a refund where the cost of the GST was in substance passed on to customers.
What are the “passed on” rules trying to do?
Broadly, the GST “passed on” rules are aimed at preventing windfall gains.
If a business has overpaid GST, but that GST cost was effectively built into the price paid by customers, a refund to the business can create an unfair outcome (because the customers, rather than the business, ultimately bore the cost).
Under Division 142 of the GST Act, an excess GST refund may therefore be restricted unless a business can demonstrate (based on evidence) that the GST cost was not borne by customers, or where it has, that customers have been reimbursed. The Commissioner also has a discretion in how these rules are applied, which is intended to ensure outcomes align with the underlying “no windfall gain” principle.
In the Geocon case, the Commissioner refused to exercise that discretion on the basis that the excess GST was said to have been passed on to apartment purchasers.
Tribunal decision at first instance
At first instance, the ART accepted the Commissioner’s position and concluded that the excess GST had been passed on. On that basis, the Tribunal considered that there was no justification to allow a refund.
Full Federal Court decision: assumptions aren’t enough
On appeal, the Full Federal Court allowed the taxpayer’s appeal, finding that the ART had taken the wrong approach to determining whether the excess GST had been “passed on”.
Critically, the Court held that the question cannot be answered by assuming GST is always borne by customers simply because prices were GST‑inclusive or because the seller made a profit. Instead, the inquiry must focus on the real‑world economics of the transaction and the available evidence.
The Court explained that it is necessary to examine whether, in substance, the GST error actually affected the prices paid by purchasers, taking into account commercial factors such as market conditions, pricing strategies and demand.
The Full Federal Court set aside the Tribunal’s decision and remitted the matter for reconsideration, allowing the parties to adduce further evidence on the “passed on” question.
High Court outcome
The High Court has now refused the Commissioner’s application for special leave to appeal the Full Federal Court’s decision.
This does not determine whether Geocon will ultimately be entitled to a refund. Rather, it confirms the legal framework established by the Full Federal Court for analysing whether GST has been “passed on”. The factual question will now be reconsidered by the ART applying that framework.
Why does this matter for businesses?
The decision provides a more rigorous and evidence‑based approach to GST refund claims involving historic overpayments.
For taxpayers, the key point is that refund outcomes should turn on what happened in practice. The critical question is whether the GST mistake actually changed the price customers paid, or whether prices were driven by other commercial considerations such as market demand and competition.
Where a GST error had no real effect on the customer price, the decision supports the view that a refund should not be denied merely on the basis of broad assumptions.
At the same time, the decision preserves the integrity of the GST system by ensuring refunds are not granted where they would result in a true windfall gain.
Key takeaways
- Whether GST has been “passed on” is a question of evidence and commercial reality, not assumptions based solely on GST‑inclusive pricing or profitability.
- The High Court’s refusal of special leave means the Full Federal Court’s approach stands, limiting the ATO’s ability to rely on broad propositions that GST is invariably borne by end purchasers.
- Property developers, particularly margin scheme users, should treat contemporaneous documentation as critical. Records showing how prices were set, the market conditions at the time, and the GST assumptions used, so they can demonstrate whether the GST error actually affected what customers paid.
We’re here to help
This decision is particularly relevant for property developers and construction groups, especially those using the margin scheme or dealing with legacy GST positions on residential projects.
If you would like to discuss how the Court’s approach to “passed on” GST may apply to your developments, pricing models or historical transactions, please contact your Grant Thornton adviser today.
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