FEDERAL COURT OF AUSTRALIA
DATE OF ORDER:
THE COURT ORDERS THAT:
2. The appellant pay the respondent’s costs of the appeal, as agreed or assessed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1 I have had the considerable benefit of reading in draft the reasons for judgment of Derrington J and of Steward J. I agree with Steward J that, for the reasons given by him, the appeal should be dismissed with costs.
REASONS FOR JUDGMENT
2 This appeal concerns the manner in which several provisions in different pieces of taxation legislation operate together in relation to the unusual circumstances which have arisen. Of most significance are ss 12AA and 12AF of the Taxation (Interest on Overpayments and Early Payments) Act 1983 (Cth) (Overpayments Act), s 8AAZLG of the Taxation Administration Act 1953 (Cth) (TAA) and s 31-5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act).
3 In the period leading up to 2010, the respondent, Travelex Ltd (Travelex), had repeatedly lodged its monthly Business Activity Statement (BAS) with the Australian Taxation Office on the basis that currency exchange services provided to persons who had passed through to the departure side of customs barriers at Australian ports of exit were taxable supplies under the GST Act. For the month of November 2009, it lodged a BAS (the November 2009 BAS) reporting that the amount of $37,751 was payable pursuant to ss 17-5 and 33-5(1) of the GST Act, being the amount by which the GST which it was liable to pay on its taxable supplies exceeded the amount of its claimed input tax credits. On 29 September 2010, the High Court handed down its decision in Travelex Ltd v Federal Commissioner of Taxation (2010) 241 CLR 510 where it determined the supplies of foreign currency by Travelex on the departure side of a customs barrier were GST-free supplies. The High Court made declarations in relation to the particular circumstances in issue which, self-evidently, had been agitated in the context of a test case. Necessarily, that decision required there be a reassessment of the taxation rights and obligations as between Travelex and the Commissioner of Taxation under the taxation legislation, to the extent to which that was possible.
4 In this proceeding Travelex sought declarations that it was entitled to be paid interest on an amount of a refund due in respect of the November 2009 tax period from around the date on which it had lodged the November 2009 BAS to 6 July 2012. The Commissioner had apparently accepted that Travelex was entitled to a refund and had paid a sum representing it, $149,020, on that latter date. However, the Commissioner alleged that interest should only run from the date on which Travelex had provided sufficient details from which he could calculate the amount of the refund. In that way the debate before the learned primary judge concerned ascertaining the correct date from which interest commenced to run. Before this Court the Commissioner adopted a different position. He now submits that no interest is payable because Travelex’s entitlement to a refund has never crystallised and that submission is made even though he has paid Travelex a substantial amount representing the amount of the refund.
5 For the reasons which follow, it transpires that the Commissioner’s submission that Travelex’s right to a refund has not yet accrued is correct and, necessarily, the appeal must be allowed and the declaration of the learned primary judge must be set aside. However, it is necessary to emphasise that the appeal has only succeeded on a ground not fully agitated before the primary judge and on the basis of submissions not made to him. Indeed, the proceedings before the primary judge generally proceeded upon the assumption that Travelex’s entitlement to a refund had crystallised. It had also proceeded on the basis of an agreed statement of facts and whilst the appeal generally proceeded upon the same, it also involved an analysis of a substratum of one of the agreed facts which was not presented to the primary judge. Despite the different result, his Honour’s careful and thorough reasons provided correct answers to the questions asked of him on the basis of the assumptions inherent in the parties’ submissions. It is largely a result of the primary judge’s pellucid analysis of the admixture of myriad interconnecting provisions across several pieces of taxation legislation that the manner in which those provisions operated could be more clearly discerned on the appeal.
6 Before the primary judge the parties reached agreement as to the facts on which the matter ought to be decided and filed a statement of agreed facts (SOAF). It should be recognised that, to some extent, the SOAF contained some implicit agreements as to the legal effect or operation of various taxing statutes. Consistently with this being a test case in relation to the obligations of Travelex and the Commissioner inter se, the facts related only to the November 2009 tax period. It is apparent though that the result of this matter will impact on the resolution of disputes in relation to other tax periods.
The circumstances which Travelex asserts gave rise to a right to a refund
7 The following matters, taken mostly from the SOAF as clarified and expanded upon by the primary judge, are germane to this appeal. There was generally no dispute about them.
8 Travelex is incorporated in Australia and has been registered under Division 25 of the GST Act with effect from 1 July 2000. It is the representative member of a GST Group for the purposes of Subdivision 48A of the GST Act.
9 For the purposes of the GST Act, as it was at the relevant time, Travelex reported its GST liabilities on a monthly basis and had given the Commissioner a GST return in the form of a BAS for each month since 1 July 2000.
10 Commencing on 1 October 2002, Travelex operated with the Commissioner an “Integrated Client Account” (ICA), which is a Running Balance Account (RBA) for the purposes of Part IIB of the TAA.
11 The business of Travelex included the operation of an enterprise (as defined in s 9-20(1) of the GST Act) in the course of which it, for consideration, supplied foreign currency from, inter alia, business premises on the departure side of the customs barrier at international airports in Australia.
12 On 19 December 2008, the Federal Court refused to make a declaration sought by Travelex that its sale of foreign currency at Sydney Airport to a passenger who had passed to the departure side of the customs barrier was a GST-free supply by reason of item 4(a) of the table in s 38-190(1) of the GST Act: Travelex Ltd v Commissioner of Taxation  FCA 1961. An appeal to the Full Court was dismissed on 29 September 2009: Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434.
13 On 16 December 2009, Travelex lodged the November 2009 BAS which included a GST return for that period. The “net amount” was reported by Travelex as being $37,751 and was calculated as follows:
GST on sales or GST instalment
GST on purchases
Your payment amount
14 The GST payment amount was payable to the Commissioner on 21 December 2009 (pursuant to ss 17-5 and 33-5(1) of the GST Act).
15 Travelex prepared the November 2009 BAS in accordance with the Full Court’s decision that its relevant supplies of foreign currency were not GST-free.
16 By an entry made on 17 December 2009, “effective” on 21 December 2009, the Commissioner allocated to Travelex’s ICA a debit amount of $37,751 (the November 2009 BAS net amount). That amount was a “BAS amount” for the purposes of Part IIIAA of the Overpayments Act.
17 On 29 September 2010, the High Court allowed Travelex’s appeal from the Full Court’s decision: Travelex Ltd v Federal Commissioner of Taxation (2010) 241 CLR 510; and held that Travelex’s sale of foreign currency at Sydney Airport to passengers who had passed through to the departure side of the customs barrier were GST-free supplies by reason of item 4(a) of the table in s 38-190(1) of the GST Act. The High Court gave declaratory relief in relation to the test case before it and made no other determination in relation to any other circumstance including the veracity of the November 2009 BAS given by Travelex.
Travelex seeks a refund from the Commissioner
18 As a consequence of conclusions reached by the High Court, Travelex sought to reassess its GST liabilities in respect of the tax periods ending prior to the handing down of the decision. Necessarily, that took a considerable amount of time given the extended period during which Travelex had made returns on the mistaken basis that its supplies were not GST-free.
19 On 24 June 2011, KPMG on behalf of Travelex wrote to the Commissioner seeking “an extension in relation to finalising the entitlement to a GST refund of under-claimed input tax credits” under the GST Act. The letter also noted that “[d]ue to the difficulty in quantifying Travelex’s overall entitlement to claim GST credits” in respect of all the relevant tax periods, it was intended to “stagger the amendments” across two segments.
20 Travelex subsequently calculated that for the November 2009 tax period it had overstated its GST liability by $149,020. In other words, had it been aware of the true legal position, it would have calculated the November 2009 BAS on the basis that it had no GST liability on its supply of currency on the departure side of the customs barriers at international airports and it would not have set off the assumed GST liabilities against its actual input credits. That calculation would have resulted in a net amount less than zero in its BAS and it would have claimed a refund of $149,020 less $37,751.
21 Subsequently, on 8 June 2012, KPMG, again on behalf of Travelex, wrote to the Commissioner setting out the amount of the refund for, inter alia, the November 2009 tax period. It was received by the Commissioner on 12 June 2012. In it, Travelex stated that, consequent upon the High Court’s decision, it had undertaken a review of its previous returns and determined that it had entitlements to a “GST refund for under claimed input tax credits” in relation to the returns for the period 1 January 2008 to 31 December 2009. The details of its calculations in relation to the monthly returns were contained in an annexure to the letter and included an asserted refund of $149,020 for the November 2009 tax period. Travelex then stated in the letter “[w]e ask that you please amend the BAS returns for the periods 1 January 2008 to 31 December 2009 in accordance with appendix A.”
22 Although not a matter referred to in the SOAF, it was common ground before this Court that Travelex did not attempt to utilise its rights to unclaimed input credits for the November 2009 tax period in any tax period to 1 December 2013 (being four years after the end of the November 2009 tax period) and nor did it ask the Commissioner to undertake an assessment of its GST liabilities for the November 2009 tax period. It was also uncontroversial that the Commissioner did not, on his own initiative, undertake any such assessment.
23 On or before 21 June 2012, Travelex was required by s 31-10(1)(a) of the GST Act to give the Commissioner a GST return for the tax period ended 31 May 2012. Despite Travelex’s request, the Commissioner did not allow a further period for lodgement of that GST return under s 31-10(1)(b) of the GST Act.
24 On 28 June 2012, the Commissioner allocated the amount of $149,020 to Travelex’s ICA as a credit amount (the November 2009 Amount). The effective date given to the allocation of the November 2009 Amount was 16 December 2009. (One of the Commissioner’s business records which was admitted into evidence included the following notation in relation to that allocation: “Amended self assessed amount(s) for the period ended 30 Nov 09”.)
25 It was agreed in the SOAF that:
The November 2009 Amount constituted part of a RBA surplus for the purposes of Part IIB of the Administration Act and Part IIIAA of the Overpayments Act. That part of the RBA surplus constituted by the November 2009 Amount arose on 16 December 2009.
It should be observed that the foregoing statement is one of mixed law and fact and, although initially agreed upon by the parties, was departed from by the Commissioner when it was recognised that the allocation of the November 2009 Amount was of no effect.
26 No other part of the November 2009 Amount was allocated or applied under Division 3 of Part IIB of the TAA. Section 12AB of the Overpayments Act did not apply in respect of the November 2009 Amount.
27 On 28 June 2012, the Commissioner’s computer system recorded a note on Travelex’s client file with the subject “Auto ILN letter” in respect of the GST return for the May 2012 tax period. The notation “ILN” was a reference to an “Insufficient Lodgement Notice”. The text of the note read: “Auto ILN letter issued – potential refund held because of outstanding AS lodgement/s”.
28 On 3 July 2012, the Commissioner sent Travelex a document entitled “Confirmation of revised activity statement” for the period 1 November 2009 to 30 November 2009. The document stated that the total amount of the activity statement had been changed from a debit of $37,751 to a credit of $111,269 and that this had resulted from a credit adjustment of $149,020 for that period.
29 On 3 July 2012, the Commissioner allocated to Travelex’s ICA a debit amount equal to the November 2009 Amount.
30 Also on 3 July 2012, Travelex gave the Commissioner a GST return for the May 2012 tax period.
31 On 6 July 2012, the Commissioner paid Travelex an amount equal to the November 2009 Amount. That payment was made pursuant to s 8AAZLF(1) of the TAA.
32 On 19 September 2012, the Commissioner paid Travelex an amount of $2,791.82 as delayed refund interest pursuant to s 12AA of the Overpayments Act. That amount included interest in respect of the November 2009 Amount for the period 29 June 2012 to 6 July 2012.
The legislative scheme and relevant provisions
The GST legislation
33 The issues in this matter arise in the context of the taxation laws as they existed at the time when the relevant conduct and transactions occurred. As such, the self-assessment regime under the GST Act, introduced by the Indirect Tax Laws Amendment (Assessment) Act 2012 (Cth), is not relevant. In general terms, it is the GST Act as it stood between November 2009 and 14 April 2012 which is applicable.
34 It was not in contention that, under the scheme of the GST Act at the relevant time, an entity liable to pay GST was required to be registered for GST and was obliged to give to the Commissioner a GST return for each tax period: s 31-5 of the GST Act. That was so regardless of whether the “net amount” for the return was zero or the entity was liable for the GST on any taxable supplies attributable to the tax period.
35 The “net amount” for a BAS was the amount worked out by subtracting from the GST liability the amount of input tax credits for the relevant tax period: s 17-5. The working out of the net amount could be undertaken in the way specified in the form approved for that purpose. This was provided for in s 17-15 of the GST Act which provided:
17-15 Working out net amounts using approved forms
(1) You may choose to work out your *net amount for a tax period in the way specified in an *approved form if you use the form to notify the Commissioner of that net amount. The amount so worked out is treated as your net amount for the tax period.
Note: Choosing to use section 17-5 to work out your net amount does not mean your GST return is not in the approved form: see subsection 31-15(3).
(2) This section has effect despite section 17-5.
36 In the present case Travelex lodged its return in the approved form, being a BAS, and, by reason of s 17-15(1), the amount worked out therein was its net amount.
37 The length of the relevant tax period could differ as between entities: Div 27 of the GST Act; and Travelex adopted a one month tax period. The BAS was to be lodged with the Commissioner within a specific period after the end of each tax period: ss 31-8 and 31-10 of the GST Act. Here, that was the 21st day of the month following the end of the tax period.
38 The BAS was required to specify certain details, amongst them the reporting entity’s net amount of GST liability. That liability was calculated by deducting, from the total GST for which the entity was liable in the tax period, the sum of all input credits arising in the tax period from creditable acquisitions: s 17-5 of the GST Act.
39 By s 93-5 of the GST Act, a time limit was imposed on the entitlement of an entity to use an input credit in a BAS. It provided:
93-5 Time limit on entitlements to input tax credits
(1) You cease to be entitled to an input tax credit for a *creditable acquisition to the extent that you have not taken it into account in working out your *net amount for:
(a) the tax period to which the input tax credit would be attributable under subsection 29-10(1) or (2); or
(b) any other tax period for which you give to the Commissioner a *GST return during the period of 4 years after the day on which you were required to give to the Commissioner a GST return for the tax period referred to in paragraph (a).
Note: Section 93-10 sets out circumstances in which your entitlement to the input tax credit does not cease under this section.
(2) This section has effect despite section 11-20 (which is about who is entitled to input tax credits for creditable acquisitions).
40 If the Commissioner was not satisfied with the information provided by an entity in a BAS he was entitled to direct it to provide a more detailed GST return: s 31-20(1) of the GST Act; in the approved form: s 31-20(2) of the GST Act.
41 Following the giving of the return, s 33-5 of the GST Act made provision for the payment of any net amount as follows:
33-5 When payments of net amounts must be made—other tax periods
(1) If the *net amount for a tax period (other than a*quarterly tax period) applying to you is greater than zero, you must pay the net amount to the Commissioner on or before the 21st day of the month following the end of that tax period.
(2) However, if the tax period ends during the first 7 days of a month, you must pay the *net amount to the Commissioner on or before the 21st day of that month.
42 If, on the other hand, the amount of the input tax credits exceeded the amount which the entity was liable to pay, the Commissioner was required to make a payment to the entity. Section 35-5 of the GST Act provided:
35-5 Entitlement to refund
(1) If the *net amount for a tax period is less than zero, the Commissioner must, on behalf of the Commonwealth, pay that amount (expressed as a positive amount) to you.
Note 1: See Division 3A of Part IIB of, and section 105-65 in Schedule 1 to, the Taxation Administration Act 1953 for the rules about how the Commissioner must pay you. Division 3 of Part IIB allows the Commissioner to apply the amount owing as a credit against tax debts that you owe to the Commonwealth.
Note 2: Interest is payable under the Taxation (Interest on Overpayments and Early Payments) Act 1983 if the Commissioner is late in refunding the amount.
(2) However, if the amount paid, or applied under the Taxation Administration Act 1953, exceeds the amount to which you are properly entitled under subsection (1), the excess is to be treated as if it were GST that became payable, and due for payment, by you at the time when the amount was paid or applied.
Note: The main effect of treating the amount as if it were GST is to apply the collection and recovery rules in Part 3-10 in Schedule 1 to the Taxation Administration Act 1953, such as a liability to pay the general interest charge under section 105-80 in that Schedule.
43 Pursuant to s 35-10 of the GST Act, the entitlement to be paid a refund arose when the taxpayer gave the Commissioner a GST return.
44 The TAA also made it clear that the timing of the crystallisation of the liability for indirect taxes (including GST) or the Commissioner’s obligation to pay a net amount which was less than zero was not dependent upon the making of an assessment. Section 105-15 of the TAA relevantly provided:
105-15 Indirect tax liabilities do not depend on assessment
(1) Your liability to pay *indirect tax or a *net fuel amount, and the time by which a *net amount, a net fuel amount or an amount of indirect tax must be paid, do not depend on, and are not in any way affected by, the making of an assessment under this Subdivision.
(2) The Commissioner’s obligation to pay:
(a) a *net amount under section 35-5 of the *GST Act; or
(b) a *net fuel amount under section 61-5 of the Fuel Tax Act 2006;
and the time by which it must be paid, do not depend on, and are not in any way affected by, the making of an assessment under this Subdivision.
45 It follows that the liability of the taxpayer to pay a net amount of GST to the Commissioner, or the Commissioner’s liability to pay an amount equal to the net amount less than zero, depended upon the operation of the GST Act provisions. The taxpayer’s liability to pay the net amount which was in excess of zero arose on or before the 21st day of the month following the tax period and the Commissioner’s obligation to pay or credit an amount less than zero arose when the return was lodged. Neither liability depended upon the making of an assessment by the Commissioner: Federal Commissioner of Taxation v Multiflex Pty Ltd (2011) 197 FCR 580, 589 .
Assessments of GST liability under Subdivision 105-A of the TAA
46 Despite the manner in which the GST liability or obligation to refund arose, the Commissioner was empowered to make an assessment at any time of an entity’s net amount of an indirect tax which included a GST liability: s 105-5 of the TAA. He was also entitled to make a further assessment at any time: s 105-5(3). A taxpayer could ask the Commissioner to make such an assessment and the Commissioner was bound to comply with that request if made within four years after the tax period or such further time as the Commissioner allowed: s 105-10 of the TAA. The Commissioner was obliged to give the taxpayer notice of any assessment made by him: s 105-20 of the TAA; but was also entitled to amend an assessment at any time: s 105-25 of the TAA.
47 As s 105-15 of the TAA discloses, these provisions concerning the making of assessments of indirect tax did not alter the liability of an entity to pay the indirect tax, or the liability of the Commissioner to pay a refund, at the time stipulated.
No express power to amend a BAS
48 It was not in contention that there was no provision in either the GST Act or the TAA which expressly permitted a taxpayer to give to the Commissioner an amended BAS incorporating a GST return for a tax period, once a BAS for the period had been given (cf s 17-20 of the GST Act in relation to the correction of errors made in the working out of amounts, although this provision is not relevant to the present discussion). Further, as the learned primary judge observed, Division 19 of the GST Act made provision for the making of adjustments which arose from the occurrence of “adjustment events”. Those provisions are not relevant in the present matter.
Entitlement to be paid a refund by the Commissioner
49 The effect of the GST Act was that the entitlement to be paid a refund under s 35-5 arose when the GST return was given to the Commissioner and the net amount for the relevant period was less than zero. That was a form of self-assessment of the GST liability by the registered entity and it is apparent from s 35-5(2) that the legislature was aware that an entity might over-state its entitlement in its GST return. If so, any such overpaid amount would be treated as an amount of GST payable from the date on which it had been paid to the entity. The identification of that amount will arise from the Commissioner making an assessment of the correct GST amount. See Multiflex at 589 :
The answer which the legislation provides to the Commissioner’s disquiet as to being obliged to make a refund based on a claimed net amount in a business activity statement which he knows to be wrong is straightforward. In such circumstances, he is entitled at any time to make an assessment of that net amount: s 105-5 of Sch 1 to the TAA. The net amount so assessed by the Commissioner necessarily supersedes whatever amount the entity earlier worked out on its approved form, if indeed it lodged such a form.
50 The observations in that passage show that the source of the entitlement to be paid the refund is the giving of the BAS to the Commissioner, even though it be incorrect. The amount of the refund had to be paid to the entity unless it was affected by reason of the operation of the RBA provisions. In Multiflex at 589  the Court said:
If, on the other hand, there is no assessment by the Commissioner for a period but the entity has worked out that it has an entitlement to a refund for that period, the only express qualification on the otherwise imperative language of the obligation to refund created by s 35-5 of the GST Act arises from the running balance account system for which Pt IIB of the TAA provides. Under that system, an amount otherwise refundable to an entity under a taxation law may, instead of being refunded, be applied against a liability of that entity arising under a taxation law. Only if there is what is known as an “RBA surplus” or a credit in the entity’s favour which has not been allocated or applied in the entity’s favour is the Commissioner obliged to make a refund: s 8AAZLF of the TAA. Even then, the Commissioner may retain that amount if he has not received from the entity a required notification that affects or may affect the amount refundable to that entity: s 8AAZLG of the TAA. It was common ground that there was no such notification outstanding from Multiflex.
51 Travelex did not expressly submit that the above did not accurately state the operation of the identified provisions.
Provisions relating to interest on overpayments
52 The provisions which were centrally relevant to the decision of the primary judge were those in the Overpayments Act as, before his Honour, both parties proceeded largely, although not entirely, on the assumption that an RBA surplus had legitimately arisen in Travelex’s RBA.
53 The Commissioner’s primary obligation to pay interest on overpayments by taxpayer is found in s 12AA of the Overpayments Act which relevantly provided:
12AA Entitlement to interest for RBA surpluses after notification of BAS amount
(a) the Commissioner has allocated a BAS amount to an RBA of an entity; and
(b) section 12AB does not apply (that section is about remission of penalties); and
(c) under subsection 8AAZLF(1) of the Taxation Administration Act 1953, the Commissioner is required to refund to the entity the whole or part of an RBA surplus for that RBA; and
(d) the refund takes place after the RBA interest day;
then interest is payable by the Commissioner to the entity on the amount refunded.
54 The expression “BAS amount” is said by s 12AF of the Overpayments Act to have the same meaning as in subsection 995-1(1) of the Income Tax Assessment Act 1997 (Cth) (Tax Act) which defines it as any debt or credit that arises directly under the “BAS provisions”. The “BAS provisions” were defined as including the “indirect tax law”: s 995-1(1) of the Tax Act; which relevantly included the “GST law” which, in turn, included the GST Act and the TAA: s 995-1(1) of the Tax Act and s 195-1 of the GST Act. In that way, a net amount of GST greater or less than zero under the GST Act was a BAS amount for the purposes of s 12AA.
55 The term “RBA” was defined to mean a running balance account established under s 8AAZC of the TAA. The ICA established for Travelex was an RBA for the purposes of s 12AA.
56 Section 12AA(b) is not relevant to the issues under consideration as s 12AB was not applicable in the present circumstances.
57 Section 12AA(c) refers to an “RBA surplus” which the Commissioner is required to refund under s 8AAZLF(1) of the TAA. Section 8AAZLF(1) provided:
8AAZLF Commissioner must refund RBA surpluses and credits
(1) The Commissioner must refund to an entity so much of:
(a) an RBA surplus of the entity; or
(b) a credit (including an excess non-RBA credit) in the entity’s favour;
as the Commissioner does not allocate or apply under Division 3.
58 The expression “RBA surplus” is defined by s 8AAZA of the TAA as:
RBA surplus, in relation to an RBA of an entity, means a balance in favour of the entity, based on:
(a) primary tax debts that have been allocated to the RBA; and
(b) payments made in respect of current or anticipated primary tax debts of the entity, and credits to which the entity is entitled under a taxation law, that have been allocated to the RBA.
59 The credits which may give rise a surplus are those which have two characteristics. First, that they are credits to which the entity is “entitled under a taxation law”. Secondly, they have been allocated to the RBA. It does not appear that the legislature intended that an entity is entitled to the payment of interest on an accounting surplus which has arisen by the accidental crediting to the RBA of amounts to which the entity was not entitled. The words used are pellucid in excluding from an RBA surplus a credit to the RBA to which the entity was not entitled under a taxation law. That construction is fortified by the definition of “credit” in s 8AAZA of the TAA which defines it as including “an amount that the Commissioner must pay to a taxpayer under a taxation law … whether or not described as a credit”. The words “must pay” characterises the credit as being one to which the entity is substantively and legitimately entitled. The terms of s 8AAZL further support that construction.
60 By s 12AF of the Overpayments Act “RBA interest day” was relevantly defined as:
RBA interest day for an RBA surplus means the 14th day after the latest of the following days:
(i) if section 12AA applies—the day on which the surplus arises; or
(b) if, by the day applicable under paragraph (a), the person has not given the Commissioner a notification that is required for the refund under section 8AAZLG of the Taxation Administration Act 1953 and that is accurate so far as it relates to the refund—the day on which that notification is given to the Commissioner;
61 As the learned primary judge observed, the terms of this definition were crucial in the resolution of the issues between the parties as they were argued before him. Under s 12AD of the Overpayments Act, the period during which interest is payable turns upon the identification of the “RBA interest day”. Section 12AD provided:
12AD Period of interest for RBA surpluses
Interest under this Part is payable for the period from the end of the RBA interest day until the end of the day on which the refund takes place.
62 Before the primary judge, the Commissioner’s central argument was that no interest was payable by him in circumstances where Travelex had not notified him of the amount of the GST refund which it asserted was owing. Apart from paragraph (b) of the definition of RBA interest day he relied upon s 8AAZLG of the TAA, which was in the following terms:
8AAZLG Retaining refunds until information or notification given
(1) The Commissioner may retain an amount that he or she otherwise would have to refund to an entity under section 8AAZLF, if the entity has not given the Commissioner a notification:
(a) that affects or may affect the amount that the Commissioner refunds to the entity; and
(b) that the entity is required to give the Commissioner under any of the BAS provisions (as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997).
(2) The Commissioner may retain the amount until the entity has given the Commissioner that notification or the Commissioner makes or amends an assessment of the amount, whichever happens first.
Note: Interest is payable under the Taxation (Interest on Overpayments and Early Payments) Act 1983 if the Commissioner is late in making the payment under subsection (2).
63 The Commissioner submitted that Travelex had not provided him with the necessary notification of the amount of the refund until it gave him the letter of 8 June 2012, and that without it he was not able to make an amendment of the November 2009 BAS. He argued that the RBA interest day did not commence until 14 days after he received the letter. Travelex denied that the letter was a notification required under any of the BAS provisions and claimed that interest ran from the “effective date” of the allocation of the refund to its RBA.
64 Reference should also be made to ss 8AAZI and 8AAZJ of the TAA. They make provision for an RBA statement or certificate about an RBA transaction to be prima facie evidence of the matters contained in them. They are merely evidentiary provisions of a facultative nature, and their existence points strongly against the suggestions that any liability of an entity arises merely because the Commissioner debits an amount to the RBA.
The decision of the primary judge
65 The primary judge determined that the RBA surplus in favour of Travelex arose from the date on which the November 2009 BAS was given, being 16 December 2009. That appeared to be the result of the Commissioner having allocated the refund to the RBA with that date being the “effective date”. His Honour held that no notification from the taxpayer to the Commissioner was required under s 8AAZLG of the TAA for the purposes of crystallising the Commissioner’s obligation to make the refund to Travelex and, consequently, the RBA interest day occurred 14 days after the day on which the surplus arose, being 30 December 2009.
66 At paragraphs 57 to 60 of the reasons for judgment, the primary judge recorded that there was no dispute between the parties in relation to the following matters:
57 First, the overpayment by Travelex of $149,020 in respect of the November 2009 tax period was a “BAS amount” because it was a debt or credit which arose under the GST Act.
58 Second, the Commissioner allocated that BAS amount to Travelex’s ICA, which was an RBA, on 16 December 2009.
59 Third, it follows that the conditions in s 12AA(a) of the Overpayments Act were satisfied in relation to the overpayment.
60 Fourth, the overpayment was part of an RBA surplus which arose on 16 December 2009 and which the Commissioner was required to refund to Travelex pursuant to s 8AAZLF(1) of the Administration Act. Accordingly the condition in s 12AA(c) was satisfied.
67 It is apparent that those matters were, at best, questions of mixed law and fact. That assumes some importance later in these reasons as, in the appeal, the Commissioner advanced a case somewhat inconsistent with them.
68 The primary judge identified the central issue in the proceedings as being:
… whether, for the purposes of paragraph (b) of the definition of “RBA interest day” in s 12AF of the Overpayments Act, a “notification … [was] required for the refund under section 8AAZLG” of the [TAA].
69 His Honour reasoned that if no notification was required then paragraph (b) of the definition of RBA interest day was inapplicable, such that the relevant day was to be determined by reference to sub-paragraph (a)(i) of the definition. If the surplus arose on 16 December 2009, being when Travelex gave its BAS to the Commissioner and the “effective date” of allocation, the RBA interest day would be 14 days later on 30 December 2009. That was, effectively, the case advanced by Travelex, which had submitted that no notification was required by any of the BAS provisions and that s 8AAZLG(1)(b) was not applicable. It had also submitted that, whilst its letter of 8 June 2012 advised the Commissioner of the actual amount of its GST liability for the tax period of November 2009 (being a net amount of $149,020 less than zero), it was not a notification required under the GST Act in order for the surplus to arise.
70 The alternative position (advanced by the Commissioner) was that, if a notification within the meaning of s 8AAZLG(1)(b) of the TAA was required, paragraph (b) of the definition of RBA interest day would have the effect that the RBA interest day would be 14 days after the day on which the notification was given. The Commissioner submitted that the giving of the letter of 8 June 2012, which notified him of the amount of the refund, was required under the GST Act (as then in force), to revise or amend the November 2009 BAS which had previously been given to the Commissioner. Without notification of the revised amount, so it was said, there would have been no overpayment, no RBA surplus, and no entitlement to a refund under s 8AAZLF. He further submitted that, in the absence of notification, the net amount would have remained as it had been stated by Travelex in the November 2009 BAS.
71 The learned primary judge observed (at ) that a fundamental plank of the Commissioner’s case was that “the terms of the GST Act effectively required an entity to revise or amend a BAS that had earlier been lodged by it in respect of a particular tax period if it turned out that the net amount reported in the BAS was incorrect”. On that basis the Commissioner had contended that Travelex was required to amend its BAS and that it did so by the letter of 8 June 2012, which the Commissioner had accepted.
72 The primary judge determined that s 8AAZLG(1)(b) was not applicable, such that sub-paragraph (b) of the definition of RBA interest day did not apply. That conclusion was reached on the basis that there was no provision in the GST Act (as it then existed) which required Travelex to amend or to request an amendment to its November 2009 BAS. His Honour also held that there was no implicit requirement in the GST Act that Travelex amend its BAS. Whilst the Commissioner had adopted an appropriately pragmatic practice of obtaining an amended BAS from a person who wished to alter their originally lodged BAS, there was no requirement for that process.
73 A further argument advanced by the Commissioner was that the RBA interest day was further deferred because, as at the date 14 days after the letter of 8 June 2012 was received, Travelex’s BAS for the May 2012 tax period was overdue. That BAS was a notification which was required to be lodged under the BAS provisions and which, so it was said, affected the amount that the Commissioner was required to refund to Travelex. In the latter respect the Commissioner submitted that if the May 2012 BAS was in a positive amount, he would allocate the refund to the payment of Travelex’s obligation. In that way, so the Commissioner submitted, the RBA interest day was further deferred. However, as the Commissioner had failed to establish that the letter of 8 June 2012 was a required notification, the RBA interest day had already occurred on 30 December 2009, and that submission was also rejected.
74 A number of the arguments advanced to this Court were similar to those made to the primary judge. There is no need to assay them here although their substance is identified in the consideration of the issues between the parties.
75 As mentioned previously, the Commissioner’s position in this matter has evolved since the decision of the primary judge. He still maintained the letter of 8 June 2012 was a “notification” which was required under s 8AAZLG, such that Travelex’s entitlement to a credit only arose when the letter was given and interest followed from that day as he amended the November 2009 BAS accordingly. In disputing that position, Travelex asserted that the Commissioner had no power to amend the November 2009 BAS. Before this Court the Commissioner replied with the proposition that, if he did not have the power to amend the BAS, the original BAS remained extant, Travelex was not entitled to the credit for the November 2009 tax period, and no BAS surplus arose. On that case it was irrelevant to ask when the RBA interest day arose.
The major grounds of appeal
76 At the hearing of the appeal the Commissioner advanced three main grounds on which he said the primary judge’s decision should be overturned:
(a) First, where s 8AAZLG of the TAA is read in the context provided by s 8AAZLF of the TAA and s 12AA of the Overpayments Act, a purposive construction makes it clear that a notification containing particulars of an amount of under-claimed GST credit is required before a duty to refund or an obligation to pay interest can arise.
(b) Secondly, if the primary judge was correct that there was no power in the Commissioner to amend a BAS upon request or to permit the amendment of the net amount reported by an entity in its GST return, the original November 2009 BAS stands, with the result that no refund was payable to Travelex for that tax period.
(c) Thirdly, s 105-55 of the TAA (to which the primary judge was not referred) required the provision of notification of an entitlement to a refund of the kind referred to in s 8AAZLG(1)(b) of the TAA and to be effective the notice must specify an amount which is accurate. He submitted that no such notice was provided.
77 Although the first and third grounds were addressed, Mr Williams SC for the Commissioner focused his oral address on the second, namely that Travelex was not entitled to the GST refund for the November 2009 tax period despite the decision of the High Court. In summary, it was submitted that, whilst Travelex was entitled to claim that its supplies were GST-free, in order to crystallise the value of its input tax credits flowing from its creditable acquisitions, some further step was required. In particular, at the relevant time, whilst an entity might have been entitled to an input tax credit for any creditable acquisition: s 11-20 of the GST Act: that did not mean that there was an immediate right to a “credit” to an RBA. It was submitted that there was an inchoate right in relation to input credits which an entity acquired and the entity was entitled to claim the benefit of those credits through the processes of the statutory scheme and would be entitled to a refund when a BAS was lodged: s 35-10 of the GST Act; showing a net amount of less than zero: s 35-5 of the GST Act. This, it was said, was consistent with s 93-5 of the GST Act, which has the effect that input tax credits can only be claimed if used in working out a net amount during the period of 4 years after the day on which a return was required for the tax period in which the credit accrued. In other words, it was said the benefit of an input tax credit could only crystallise through the making of a relevant return in which it was included. It was also said that s 105-55 of the TAA was consistent with that limitation, in the sense that it imposed a temporal qualification on the right to receive a refund from the Commissioner based upon, inter alia, a claimed input credit.
78 Because of the change in focus of the Commissioner’s argument on appeal and the result reached, it is necessary to consider the grounds advanced in a different order to that in which they were addressed.
The second ground: is the Commissioner empowered to amend the BAS upon request?
79 As he framed his case initially, the Commissioner submitted that, under the GST Act as it then stood, he had an implied power to amend a BAS and he did so, with the result that it generated Travelex’s entitlement to a refund. However, when that power was challenged by Travelex, the Commissioner’s responsive argument was that if he had no such power, there was no amendment, and Travelex had no entitlement to a refund in relation to the November 2009 tax period. This became the Commissioner’s main argument on appeal.
The manner in which liability for the November 2009 tax period arose and might be adjusted
80 As appears from the discussion of Part IIB of the TAA above, an RBA surplus is a substantive entitlement. It arises when payments and credits to which the entity is actually entitled under a taxation law are recorded in its RBA and exceed its recorded liabilities to the Commissioner. There is nothing to suggest that a surplus arises from a mere allocation – which creates a balance in an RBA in an entity’s favour – if the allocation was wrongly made. Although no party expressly submitted that a surplus could arise in that manner, it was ultimately implicit in the arguments advanced by Travelex.
81 As the agreed facts outlined above reveal, on 28 June 2012, the Commissioner allocated the amount of $149,020 to Travelex’s ICA (also an RBA) as a credit and identified the “effective date” of the allocation as being 16 December 2009. The Commissioner’s records show that the amendment was treated as being the result of an amended self assessed amount. There is no reference to the concept of “effective date” in Part IIB and none in the Tax Act. It can be taken as meaning “the date the account entry of posting is taken to have been allocated to the RBA”: cf Commissioner of Taxation (Cth) v 4 Doonan Street Collinsville Pty Ltd (in liq) (2016) 332 ALR 349, 355 . In effect, the Commissioner treated the liability to exist as at a particular date. However, that is a mere matter of accounting and the actual liability or entitlement of Travelex depended upon its obligations or entitlements as they arose under a taxation law. The mere fact of allocation to an RBA says nothing about the actual liability of the entity for whom the RBA has been established.
82 Here, Travelex’s rights and entitlements initially arose from its lodgement of the November 2009 BAS. In that return it did not claim that the value of its input tax credits from its creditable acquisitions exceeded its GST liability. Therefore, it did not work out a net amount of less than zero. The BAS was given on the presumption that its relevant supplies on the departure side of the customs barrier were subject to GST, which it had collected from its customers. The net amount payable by it was reported as being $37,751. By operation of s 33-5 of the GST Act, the identified net amount became payable to the Commissioner before the 21st day of the month following the end of the tax period being, in this case, 21 December 2009. The engagement by Travelex of the statutory processes of the GST Act rendered it liable to the Commissioner.
83 Had Travelex identified in its November 2009 BAS that it was not liable to pay GST on the supplies, as the High Court subsequently held, the stated net amount would have been less than zero. On the figures which have been used in these proceedings it is likely that the net amount would have been in the order of -$111,269 (being $37,751 less $149,020). If Travelex had given a BAS to that effect to the Commissioner, the amount in question would have become immediately payable to it: ss 35-5(1) and 35-10 of the GST Act.
84 Alternatively, if Travelex had become aware shortly after the giving of the November 2009 BAS that its relevant supplies were GST-free, it could have sought to claim the GST credits from the November 2009 tax period (which it had not effectively done) in any subsequent tax period: s 29-10(4) of the GST Act; within the next four years: s 93-5 of the GST Act. It is not in doubt in these proceedings that Travelex did not seek to do this, although it is clear that it could have done so.
85 It is also not in doubt that Travelex did not, pursuant to s 105-10 of the TAA, ask the Commissioner to make an assessment of the net amount owed by or due to it for the November 2009 tax period. Nor do any of the parties suggest that the Commissioner, of his own volition, made an assessment under s 105-5 of the net amount payable by Travelex for the November 2009 tax period.
86 The result of the above is that, unless the BAS has been validly amended, the November 2009 BAS remains the effective document which, by operation of s 33-5 of the GST Act, establishes that for that tax period Travelex had a net amount of $37,751 and was obliged to pay that amount to the Commissioner. Travelex mounted no serious submission to the contrary.
87 That conclusion does not sit comfortably with some of the statements in the SOAF and, in particular, with paragraphs 16 and 17, which read:
16. On 28 June 2012 the Commissioner allocated the amount of $149,020 to the Applicant’s ICA as a credit amount (the November 2009 Amount). The effective date of the allocation of the November 2009 Amount was 16 December 2009.
17. The November 2009 Amount constituted part of a RBA surplus for the purposes of Part IIB of the Administration Act and Part IIIAA of the Overpayments Act. That part of the RBA surplus constituted by the November 2009 Amount arose on 16 December 2009.
88 As is discussed above, to the extent to which those agreed statements of fact and law suggest that Travelex was entitled to be paid an amount constituting an RBA surplus, they are in error. No RBA surplus arose merely because the Commissioner made an unauthorised allocation to the RBA in June 2012. On appeal this Court is not bound to act upon mistakenly agreed statements of law or law and fact or, indeed, of fact. In Damberg v Damberg (2001) 52 NSWLR 492 at 522 , Heydon JA (with whom Spigelman CJ and Sheller JA agreed) said in relation to this issue:
In short, the courts are averse to pronouncing judgments on hypotheses which are not correct. To do so is tantamount to giving advisory opinions and to encouraging collusive litigation. On the other hand, the courts will act on admissions of or agreements about matters of fact where there is no reason to doubt their correctness. But they are reluctant to do so where there is reason to question the correctness of the facts admitted or agreed.
89 Here the parties apparently agreed that, as a result of the Commissioner’s purported amendment of the November 2009 BAS or the allocations to the RBA (or both), Travelex became entitled to a credit and a consequential RBA surplus for the November 2009 tax period. That was an error as to the legal operation of the GST Act. No criticism can be made of the primary judge for proceeding on the basis of the SOAF.
The ability of the Commissioner to amend the November 2009 BAS
90 There were two related questions which were considered at length by the primary judge. One was whether the Commissioner was entitled to amend the November 2009 BAS and the other was whether the entity was required to give a notification to the Commissioner for the purposes of obtaining a refund. Those issues were closely related as, if there were no power to amend, there could be no requirement to provide any notification.
The Commissioner’s submissions
91 The Commissioner’s submissions on this ground were somewhat generalised and the focus of Mr Williams QC’s address on his behalf was to the effect that, if he had no power to amend, the November 2009 BAS was the only source of rights and liabilities between the parties and that document afforded Travelex no right to a credit. However, he also submitted that he has always administered the GST Act on the basis that he has power to amend the net amount in a BAS (Transcript p 15 L30). This, it was said, was also the assumption of Travelex which, by its letter of 8 June 2012, requested that he amend the BAS in accordance with the amounts which it had worked out were owed to it as a result of the High Court’s decision. That letter also purported to notify the Commissioner of Travelex’s entitlement to a refund for the November 2009 tax period. It was submitted that this was the first occasion on which Travelex had given the Commissioner any quantification of the amount of the claimed refund and that such a notification was required so as to enable him to amend the BAS and was a required notification within s 8AAZLG(1).
92 Whilst the primary judge concluded that practical or administrative difficulties in the management of BASs cannot compel a particular construction of a statute that is not otherwise open, the Commissioner submitted before this Court that the inability to amend a BAS did not merely impose administrative problems, it imposed substantive impediments to the operation of the Acts. It was submitted that in the absence of some notification to the Commissioner of the amount of the required refund, no enforceable duty could exist under s 8AAZLF by which the Commissioner could be compelled to repay an amount due (Transcript p 21 L35-40). It was also said that s 8AAZLG permitted the retention of an amount until a relevant notification is provided. Therefore, if there was an obligation on the Commissioner under s 8AAZLF to refund an RBA surplus arising from an indirect tax, it necessarily followed that the provision of information sufficient to permit quantification of an under-reported amount was required and the Commissioner must then necessarily have the power to amend the BAS.
The respondent’s submissions
93 Travelex’s submission in relation to this issue was relatively simple. It was that as there existed a method by which the Commissioner could make a refund of unclaimed input credits, being by making an allocation to the RBA as occurred in this case, there was no need to imply a power to amend a BAS into the GST Act. That submission proceeded on the assumption that the power of the Commissioner to make an allocation to the RBA had the effect of creating substantive rights and liabilities. As has been indicated above, that is incorrect. The source of the rights and liabilities between Travelex and the Commissioner arose from the giving of the November BAS.
94 In opposing the implication of a power to amend, Travelex also relied upon the decision in Multiflex (at 581-582 ) where the Court cautioned against the making of implications in the GST Act. To similar effect are the comments of Leeming JA in Simon v Condran (2013) 85 NSWLR 768 at 775  where it was said that there was little occasion for the process of implication in legislation which provided a detailed articulation of sections imposing and qualifying the imposition of liability.
Consideration of ground 2
95 Travelex’s submission that the Commissioner had no implied power, or indeed any power, to amend a BAS ought to be accepted. But that conclusion is not based on the submission that the Commissioner was otherwise entitled to alter the rights and liabilities of an entity by the mere allocation of debits or credits to a RBA. The GST Act at the relevant time imposed a considered and specific regime for the manner in which the liability for and recovery of GST was to occur. The ameliorating provisions which permitted an entity to claim input credits in any tax period for four years after the end of the tax period in which they accrued (s 93-5 of the GST Act) or, within that time, to seek an assessment (s 105-10 of the TAA), leave no room for the implication of some other method of varying the BAS. Similarly, the entitlement of the Commissioner to, at any time, make, remake or amend an assessment also negates the suggestion that the implication of a power to amend a BAS was necessary for the proper functioning of the GST regime. The conclusion is fortified by the existence of s 105-55 of the TAA, which permitted an entity to extend the time for claiming the benefit of input tax credits by giving notice to the Commissioner.
96 The learned primary judge accepted Travelex’s submissions in this respect and at  of his reasons he said:
First, for the reasons already given, at the relevant time neither the GST Act, nor the Administration Act, allowed for, let alone required, an entity to give the Commissioner an amended BAS. An entity was required to give the Commissioner a GST return, in the approved form, for each tax period, at a specified time after the end of the tax period. The prescribed form, the BAS, included the entity’s net amount for the tax period. The reported net amount, and, in particular, whether it was positive or negative, determined whether the entity was required to pay an amount to the Commissioner, or whether the Commissioner was required to pay a refund to the entity. The respective liabilities of the entity and the Commissioner did not depend on an assessment. Once a GST return had been given in respect of a tax period, neither the GST Act nor the Administration Act made provision for, or required, the entity to give the Commissioner another BAS for that tax period, which included a different net amount, even if the BAS that had been lodged for that tax period contained an error or omission.
97 His Honour’s conclusion that, at the relevant time, the Commissioner had no power to receive an amended BAS is correct.
98 There also much force in Travelex’s submission that any implication of a power to amend a BAS would be complex. As with the power to make and amend assessments, it would be necessary for there to be a time limit on the entitlement of the entity to request an amendment, some time limit in which the Commissioner must consider making an amendment, and some indication of whether he could amend the BAS on his own initiative and, if so, some specification of the time in which he might do so. The need for all of these matters, which are necessarily ancillary to any implication of a power to amend, tends to negate the submission that the power might be implied.
99 It follows that the Commissioner’s submission, that the RBA interest day was deferred by Travelex’s failure to provide him with a notification mentioned in the definition of RBA interest day or s 8AAZLG so that he might undertake the task of amending the BAS, must be rejected.
The consequences of a determination that the Commissioner had no power to amend a BAS
100 In his reasons, the primary judge identified that the absence of any express power to amend a BAS had led to the adoption of administrative practices which had the assumed effect of allowing such amendments:
86 It would appear that the Commissioner had a long-standing administrative practice of allowing entities to lodge documents purporting to be amended or revised GST returns or BAS, and an equally long-standing administrative practice of “processing” such documents as if they amended the net amounts reported in the GST returns lodged pursuant to s 31-5 of the GST Act. It was common ground that that is what occurred here. It is reflected in the Commissioner’s business records in respect of the relevant refund sought by, and ultimately allocated to, Travelex, which notated the credit entry to Travelex’s ICA on 28 June 2012 as an “[a]mended self assessed amount(s)”, and which included a “[c]onfirmation of revised activity statement”.
87 The difficulty for the Commissioner, however, at least in this case, is that the administrative practice lacked any proper legal or statutory basis.
101 Despite his Honour’s comments in the last-mentioned paragraph, Mr Hmelnitsky SC submitted there was no determination by the primary judge that the Commissioner was unable to alter the effect of the November 2009 BAS. He said that was not surprising because the parties had agreed upon the terms of paragraph 16 of the SOAF which read:
16. On 28 June 2012 the Commissioner allocated the amount of $149,020 to the Applicant’s ICA as a credit amount (the November 2009 Amount). The effective date of the allocation of the November 2009 Amount was 16 December 2009.
102 The obvious purpose of this submission was to fend off the submission that, if Travelex was correct that the Commissioner had no power to amend a BAS, it necessarily followed the allocation to the RBA on 28 June 2012 was devoid of legal consequence. In essence, Travelex sought to adopt the inconsistent positions of denying the Commissioner had the power to amend a BAS, whilst at the same time asserting that the allocation of $149,020 to its RBA was valid. The precise manner in which the Commissioner was lawfully able to allocate the amount to the RBA was not explained. It was simply submitted by Travelex that it was entitled to the credit by reason of the High Court’s decision (although it did not explain how) and, therefore, the allocation to the RBA was valid. The effect of Travelex’s submission was that, regardless of the legality of the entitlement to the amount of allocation, the fact of allocation created the liability. That, of course, is not correct. As previously explained, the RBA is, as is said in s 8AAZC of the TAA, a system of accounting for primary tax debts. There is not the slightest suggestion in Part IIB that an RBA, of itself, gives rise to substantive rights and liabilities.
103 Mr Hmelnitsky SC referred the Court to a number of provisions in Part IIB concerning RBAs, including those requiring the Commissioner to allocate credits and debits. Relevantly, s 8AAZA defined the word “credit” in the following terms:
credit includes … an amount that the Commissioner must pay to a taxpayer under a taxation law … whether or not described as a credit.
104 He also referred to the definition of RBA surplus which was:
RBA surplus, in relation to an RBA of an entity, means a balance in favour of the entity, based on:
(a) primary tax debts that have been allocated to the RBA; and
(b) payments made in respect of current or anticipated primary tax debts of the entity, and credits to which the entity is entitled under a taxation law, that have been allocated to the RBA.
105 In relation to these, Mr Hmelnitsky SC avoided identifying how the alleged credits arose under a taxation law. Instead he submitted:
Now, the reference there to credits is important because, as I showed your Honours earlier, what the taxpayer actually asked the Commissioner to do here was to allow credits. The 8 June 2012 letter asked exactly that. There is no question that Travelex was entitled to these credits. They are the input tax credits that were incurred by it in conducting – in making GST-free supplies as the High Court held.
He later said:
Now, entitlement here is, of course, a substantive question: as a matter of substance, was Travelex entitled to the credits? There’s no suggestion that we weren’t. They were allocated to the RBA and that gave rise to an RBA surplus.
106 Those submissions tended to conflate “input tax credit” with “credits to which an entity was entitled under a taxation law”. The “input tax credit for a creditable acquisition” is an entitlement created by the GST Act which can be claimed and utilised when working out a net amount and which, if not claimed in a four year period, ceases to exist: s 93-5(1), subject to some exceptions in s 93-10. The other reference to “credits” is a reference to monetary credits which arise under a taxation law including, for the purposes of the present case, as a result of a BAS showing a net amount less than zero. The High Court did not decide that Travelex was entitled to a credit in the amount of $149,020 or otherwise. It decided that the relevant supplies were GST-free supplies. Whether for any particular tax period a credit arose depended upon the giving of a BAS to the Commissioner which worked out a net amount less than zero. That did not occur.
107 When asked, Mr Hmelnitsky SC was not able to identify the source of the obligation to credit the RBA save to say that it fell into the same category as the obligation to refund. That response overlooked the source of liability of the Commissioner to pay an amount of refund, which arose by operation of s 35-5 of the GST Act where the net amount reported in a BAS is less than zero.
108 Mr Hmelnitsky SC subsequently asserted that the amount of the refund was payable because it was allocated to the RBA, but he did not identify any provision which suggested the mere balance appearing in an RBA created the obligation. Indeed, the definition of RBA surplus specifically refers to a balance based on, inter alia, “credits to which the entity is entitled under a taxation law”. The surplus is not an amount which appears merely by allocations having been made to the RBA. In order for there to be a valid allocation, a provision of a taxation law must exist which gives rise to the credit or debt.
109 Subsequently, Mr Hmelnitsky SC sought to shore up Travelex’s somewhat fragile submissions in this respect by submitting that, even if the Commissioner had no power to allocate amounts to the RBA in the absence of some authorising provision, under the general power of administration of the tax legislation, he was entitled to make voluntary payments and that would allow him to credit an amount if he believed that he was entitled to do so (Transcript p 58). That submission, which, unsurprisingly, was not supported by the Commissioner, is also somewhat fragile and, given its enormous gravity, it is startling that no authority was cited in support of it. It does not sit comfortably with the principle that funds are not to be withdrawn from consolidated revenue in the absence of a legislative warrant provided by a valid law authorising the appropriation: Brown v West (1990) 169 CLR 195, 205; Attorney-General (Vic); ex rel Dale v Commonwealth (1945) 71 CLR 237 at 271. If the Parliament intended to authorise the Commissioner to make payments of the nature claimed, it would be incumbent upon it to make provision for it and in clear terms. Given the systems in this country regulating appropriations from consolidated revenue, save in the most exceptional circumstance, if any, it is not possible to imply a power into legislation that the Executive is entitled to withdraw funds to make voluntary payments. Were it otherwise, any agency of the Crown or Minister administering legislation under the Administrative Arrangements Order might be equally entitled to make similar payments based simply on the belief that they were entitled to do so. Mr Hmelnitsky SC’s submission that the Commissioner is entitled to make voluntary payments to entities regardless of a legislative entitlement to do so must be rejected.
110 The Commissioner submitted that the letter of 8 June 2012 did not constitute an amended return and the circumstances did not engage s 17-15 (working out net amounts using approved form) or s 35-5 (entitlement to refund) of the GST Act. That submission should be accepted. The letter did not purport to be and was not a BAS for the November 2009 tax period. Travelex had given the November 2009 BAS on 16 December 2009 and there was no entitlement to give an amended statement. It did not submit to the contrary. In the result, the net amount was identified by the November 2009 BAS, and it remained unaltered until varied in accordance with the scheme of the provisions of the GST Act. Unless and until one of the mechanical provisions which gave rise to a right to receive a refund was engaged, the liabilities remained as determined by the operation of the Act.
111 The Commissioner accepted that there were methods by which the inchoate rights, being input credits arising from credible acquisitions which arose during the November 2009 tax period, could have been crystallised into a right to a refund. That might have occurred by the making of an assessment by the Commissioner on his own initiative or at the request of Travelex, or by Travelex claiming the input credits in a latter tax period pursuant to s 29-10(4) of the GST Act. None of these happened. If, so the Commissioner submitted, he had no implied power to amend the BAS such that his attempts to do so were inutile, the rights and liabilities arising from the net amount stated in the November 2009 BAS remained unaffected.
Conclusion with respect to the second ground
112 From the foregoing it is apparent that, under the GST Act as it was at the relevant time, the Commissioner had no power, express or implied, to amend the November 2009 BAS. That had the consequence that the rights and liabilities between him and Travelex in relation to the November 2009 tax period remained as they were crystallised by the November 2009 BAS. There was no credit arising from the November 2009 BAS to be allocated to the RBA. There was also no RBA surplus for the November 2009 tax period on which interest might accrue. The Overpayments Act was therefore irrelevant and no question of notification under the definition of “RBA interest day” or under s 8AAZLG of the TAA arose.
The first ground: was the letter of 8 June 2012 a required notification?
113 In the light of the above conclusion, this first ground has been rendered obsolete. However, given that it was argued at length, it is not inappropriate to accord it consideration. That said, the primary arguments of the Commissioner were premised on the foundation that the surplus had arisen because he had allowed an amendment of the November 2009 BAS and, similarly, the primary arguments advanced by Travelex were premised on the assumption that the allocation to the RBA was sufficient to generate a RBA surplus in its favour. Neither of those premises were correct. No surplus for the November 2009 tax period existed.
114 It was concluded by the learned primary judge that the letter dated 8 June 2012 was not a notification which Travelex was required to give the Commissioner under the BAS provisions. It was, therefore, not needed to overcome the operation of s 8AAZLG of the TAA and nor would its non-delivery defer the occurrence of the “RBA interest day”. The letter was not required to be given because the Commissioner had no power to amend the BAS. The primary judge held that mere practical or administrative difficulties arising from the Commissioner becoming liable for interest, although not knowing the amount of the claimed surplus, did not overcome the absence of any statutory requirement for notification. Nor was it absurd that the Commissioner might be liable to pay interest on a RBA surplus, despite not knowing the extent of his indebtedness. In any event, as his Honour found, the requirement of notification alleged by the Commissioner was not one under any of the BAS provisions and so not within the scope of s 8AAZLG. It was also held that the letter of 8 June 2012 was not a request for an assessment, that no assessment was made of the GST liability of Travelex, and that there was no notification requirement relating to an assessment which was enlivened.
115 The necessary consequence of his Honour’s conclusion that no notification requirement existed was that, to the extent there existed an RBA surplus, the RBA interest day was the 14th day after the date on which the surplus arose. In his written submissions the Commissioner accepted that, if the primary judge was correct on the notification point, the surplus arose on 16 December 2009. However, during the course of the hearing before this Court, the Commissioner sought to resile from that by adopting the inconsistent position discussed above. Putting that change of position aside, if the surplus did arise on that day, the RBA interest day was 30 December 2009 and interest was payable from that day to 6 July 2012.
The Commissioner’s submissions
116 The thrust of the Commissioner’s submissions on this point was that the obligation of the Commissioner in s 8AAZLF to refund an RBA surplus of an entity was dependent upon there being some form of quantification of the surplus amount. In this way it was argued that the obligation to refund was subject to the operation of s 8AAZLG(1), where the Commissioner was entitled to retain the surplus if the entity had not given the Commissioner a notification which affected its amount and which notification the entity was required to give to the Commissioner under a BAS provision. It was submitted that the duty on the Commissioner to make a refund of an RBA surplus was conditioned upon him being provided with a quantification of the amount. Therefore, so the argument went, the word “required” in the definition of “RBA interest day” meant a notification which was “required” or “necessary” or “needed” as a matter of practicality to enable the Commissioner to know the amount of the BAS surplus which he was obliged to refund. By that submission the Commissioner sought to differentiate the position under consideration from that where a particular section of the “BAS provisions” specifically obliged the provision of a notice.
117 The Commissioner also submitted there can be no duty, such as that arising under s 12AA of the Overpayments Act, to pay interest, unless the obligation can be defined. In the absence of any definition of the obligation there could be no correlative remedy for the taxpayer. In this way it was submitted that s 8AAZLG focused upon notifications that may affect the amount which the Commissioner refunds and, in context, they are notifications which were required to allow the Commissioner to quantify the refund. He submitted that an order for the remedy of mandamus at the suit of an entity could not be made by a Court until the amount of the required refund was ascertainable. It was said that the Court could not make an order requiring the Commissioner to pay an indeterminate sum and, until it was capable of being ascertained, Travelex could have no remedy.
118 The Commissioner further submitted that there existed a notification requirement in relation to the obligation to provide the refund, and that was the giving of the November 2009 BAS. He submitted that it was inaccurate when given and only made accurate by the letter of 8 June 2012. To the extent the BAS was not accurate, so he said, it did not comply with paragraph (b) of the definition of RBA interest day. It was only after it was made accurate that the definition was satisfied, and interest commenced to run 14 days later. In response to this Travelex submitted that the BAS was correct at the time it was submitted because it accorded with the decision of the Full Court in its litigation with the Commissioner: Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434. It can immediately be said that analysis is misguided. The BAS may have been in accordance with the law as pronounced by this Court but, as the High Court subsequently held, this Court’s interpretation of the GST Act was erroneous.
119 In summary, the submissions of Travelex were that ss 8AAZLF and 8AAZLG operate when an RBA surplus arises, and impose on the Commissioner an obligation to pay a refund to an entity, but that the obligation is deferred and he may retain the surplus if the entity has not given him a notification that affects or may affect the refund amount and which the entity is required to give the Commissioner under any of the BAS provisions. It was then said that, under the relevant statutory regime at the time, there was no obligation in any BAS provision which required it to give to the Commissioner any notification. In particular, there was no obligation to submit an amended BAS and there was no obligation to give the Commissioner any notification of the quantification of the refund.
120 Travelex further submitted that the provisions of s 12AA and following of the Overpayments Act had the purpose of serving as a means by which entities who have been kept out of their funds will earn interest, and one of the functions of the provisions is to fix on a date from which it is to accrue. It was submitted that it was irrelevant that interest ran from a point in time prior to the Commissioner becoming aware of the amount of the refund. The existence of a liability to pay interest on a yet to be defined amount is not uncommon. It is also to be kept in mind that the Commissioner has had the use of the funds for the whole of the period during which the exact amount of the liability is unknown.
121 Travelex also submitted that there can be no implicit requirement to provide a notification of the quantification of a refund because the obligation to provide the refund may have arisen from something done by the Commissioner or a third party rather than the entity in question. In that way the entity may not be aware of the matters of which the Commissioner needs to be informed.
122 As to the proposition that in order for a notification to be effective under paragraph (b) of the definition of RBA interest day in s 12AF it had to be accurate, Travelex submitted that the Commissioner’s submission had the effect of imposing on the entity an additional obligation which did not exist in s 8AAZLG of the TAA and that such a construction would render s 8AAZLG(1)(a) otiose. It submitted that paragraph (b) of the definition of RBA interest day merely provides that interest is not payable whilst the Commissioner lawfully retains an amount under s 8AAZLG.
Consideration of whether the letter of 8 June 2012 was a required notification
123 As mentioned, the arguments advanced in relation to this issue were predicated upon the incorrect assumption that Travelex’s entitlement to a refund was extant and put into effect by the allocations made by the Commissioner to the RBA. If that foundation were accepted, Travelex’s submissions should also be accepted. If the RBA surplus arose merely by the allocations made by the Commissioner regardless of whether any credit was one to which Travelex was entitled, there was obviously no notification under the BAS provisions which it was required to give in order to quantify the refund. The November 2009 BAS had been given, no assessment was sought, and no attempt was made to use unclaimed input credits in later tax periods. If it had been claimed that the surplus arose because Travelex had claimed the credits in a later tax period, a notification under the BAS provisions would have been required, namely, a subsequent BAS, but that was not this case.
124 On the basis on which the matter was argued before the learned primary judge, his Honour’s reasons for rejecting the Commissioner’s submissions in relation to this first ground were correct. The essential requirement of s 8AAZLG(1)(a) was that the notification was required to be given “under any of the BAS provisions” as defined. As the primary judge found, the absence of a power in the Commissioner to amend the BAS meant that there was no implied obligation in the BAS provisions for some notification. In any event, the letter of 8 June 2012 was not a request for an amendment of the BAS nor a replacement BAS.
125 The Commissioner’s argument that there was a practical necessity for notification of the quantum of the claimed credit before he was able to recognise an RBA surplus fails because it was a submission based on the incorrect assumption that he had power to amend the BAS. Additionally, as the entity might claim the input credits in any tax period or seek an assessment in the following four years, there was no necessity for the giving of any notification in the manner suggested. The notification would be provided, in effect, in the lodgement of a subsequent BAS. Similarly, as the primary judge found, any perceived practical difficulty in ascertaining the amount of any credits in favour of Travelex could have been overcome by undertaking an assessment under s 105-5 of the TAA. That process would not have required a notification to be made by Travelex for the purposes of the definition of RBA interest day or for s 8AAZLG of the TAA.
126 The Commissioner relied upon paragraphs 7.35 and 7.42 of the explanatory memorandum to the Bill which inserted Part IIIAA into the Overpayments Act (Explanatory Memorandum, A New Tax System (Tax Administration) Bill 1999 (Cth)), which were as follows:
7.35 These amendments in Schedule 13 to this Bill will create an entitlement to interest where a refund of an RBA surplus or voluntary payment is not made within 14 days from the lodgement of a correct BAS, a request for refund of the voluntary payment or the remission of a penalty.
7.42 However, if there is an outstanding BAS or inaccurate information which may affect the amount of the refund, the RBA interest day does not commence until the BAS or the correct information is given to the Commissioner…
127 As the primary judge observed, these comments provide little assistance in construing the terms of the Overpayments Act even if it can be said they are ambiguous or obscure. It is well established from cases such as Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27 at  and Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503 at  that the task of statutory construction must begin and end with a consideration of the text itself. The loose terms of explanatory memoranda cannot be used to replace the precise words of the Act which have been agreed upon in Parliament. In this case, under the GST Act as it stood, the Commissioner had no power to amend a BAS and there is nothing in the explanatory memorandum which suggests to the contrary. The words in the memorandum that there was to be “a request for refund” did not relate to an RBA surplus arising from input tax credits. They related to the voluntary payment to which reference is made. In any event they did not create a whole new regime for the amendment of a BAS, including provisions for notification. As the primary judge observed, the explanatory memorandum could not affect the interpretation of an earlier enactment.
128 There is merit in the Commissioner’s submission that it is, perhaps, unusual that the legislature intended to impose upon him an obligation to pay interest on an amount which he is not able to ascertain while the taxpayer spends time accumulating the data which establishes that they have an entitlement to a surplus. That is true regardless of whether the Commissioner or the Commonwealth is in possession of and has the use of the amount which needs to be refunded. However, when it is accepted that the Commissioner has no power to amend the BAS, the force of that submission dissipates. The liability to make a refund will not arise until a valid RBA surplus arises and that can only happen where one of the statutory processes identified above has occurred, and it is during the course of one of those that the Commissioner will be informed of the amount of the claimed surplus or credit.
129 Acceptance of the above necessarily means the Commissioner’s argument that an accurate BAS had to be provided by the entity before a surplus could arise was correct to some extent. However, that was only so where one of the statutory mechanisms for altering the liability arising from the giving of an erroneous BAS had not been adopted. On the other hand, as the GST Act stood at the time, once an erroneous BAS had been given, it was not possible to amend it.
Conclusion on notification requirement
130 For the above reasons, which were largely those relied upon by the primary judge, the letter of 8 June 2012 was not a notification required by any of the BAS provisions. The lapsed time before the letter was given did not have the effect of deferring the occurrence of the RBA interest day and nor did that failure entitle the Commissioner to retain any amount he would otherwise have been required to refund. However, in the present case, there was no amount which the Commissioner was required to refund.
The third ground: the effect of s 105-55
131 The Commissioner submitted that s 105-55 of the TAA also required notification of an entitlement to a refund of the kind referred to in s 8AAZLG(1)(b) of the TAA and that, in order to effectively crystallise the date from which interest ran, the notification was required to specify an amount which was accurate. As with the second ground and, for the reasons identified when discussing it, this ground has lost significance in relation to the outcome of the appeal. Nevertheless, it is appropriate to consider it to some degree even though submissions on this section were not advanced to the primary judge in support of the Commissioner’s position.
132 As appears below, Travelex’s submissions in relation to the substance of this issue should be accepted. The notice under s 105-55 was not required under s 8AAZLG or the definition of RBA interest day. The giving of it was not relevant to the crystallisation of any refund in respect of which interest was payable. Its only relevance was that its fulfilment was a necessary pre-condition to obtaining a refund after four years from the end of a relevant tax period. Once it was given, the time in which Travelex might secure a refund in relation to the November 2009 tax period was extended. Here the parties apparently accepted that a notice conforming to the requirements of s 105-55 had been given.
The relevant provisions
133 Section 105-55 of the TAA imposed time limits on the ability of a taxpayer to recover refunds from the Commissioner. Its correlative is s 105-50, which provides that the Commissioner is unable to recover any unpaid net amount or amount of indirect tax after four years from the date it became payable. Indeed, subs 105-50(2) provides that, if amounts were paid to the taxpayer or applied to their RBA as refunds in relation to a net amount or amount of indirect tax, or were otherwise an amount of indirect tax that was overpaid, and the amounts exceeded the amount that the taxpayer was entitled to be paid or have applied to their RBA, the amount ceased to be repayable by the taxpayer after four years.
134 It is in this context that s 105-55 provided:
105-55 Time limit on refunds etc from the Commissioner
(1) You are not entitled to a refund, other payment or credit to which this subsection applies in respect of a *tax period or importation unless:
(a) within 4 years after:
(i) the end of the tax period; or
(ii) the importation;
as the case requires, you notify the Commissioner (in a *GST return or otherwise) that you are entitled to the refund, other payment or credit; or
(b) within that period the Commissioner notifies you (in a notice of assessment or otherwise) that you are entitled to the refund, other payment or credit; or
(c) in the case of a credit—the credit is taken into account in working out:
(i) a *net amount or *net fuel amount that the Commissioner may recover from you only because of subparagraph 105-50(3)(b)(i); or
(ii) an amount of excess referred to in subsection 105-50(2) that the Commissioner may recover from you only because of subparagraph 105-50(3)(b)(ii).
Note: Division 93 of the GST Act puts a time limit on your entitlement to an input tax credit …
(2) Subsection (1) applies to:
(a) A refund in relation to a *net amount or *net fuel amount in respect of a particular *tax period; or …
135 It is important that s 105-55(1)(b) and (c) provide alternative methods of satisfying the entitlement referred to in the chapeau, being that the Commissioner notifies the taxpayer of the entitlement or a credit is taken into account in working out a net amount or an amount which the Commissioner is required to recover from the taxpayer in certain respects. The inclusion of these methods of extending the time in which a refund may be recovered tends against the conclusion that notification by the entity was “required” within the meaning of s 12AF of the Overpayments Act and s 8AAZLG of the TAA Act.
136 For completeness it is appropriate to refer to s 105-65, which limited an entity’s right to recover in circumstances where it had overpaid the amount which it ought to have in respect of GST.
105-65 Restriction on GST refunds
(1) The Commissioner need not give you a refund of an amount to which this section applies, or apply (under Division 3 or 3A of Part IIB) an amount to which this section applies, if:
(a) you overpaid the amount, or the amount was not refunded to you, because a *supply was treated as a *taxable supply, or an *arrangement was treated as giving rise to a taxable supply, to any extent; and
(b) the supply is not a taxable supply, or the arrangement does not give rise to a taxable supply, to that extent (for example, because it is *GST-free); and
(c) one of the following applies:
(i) the Commissioner is not satisfied that you have reimbursed a corresponding amount to the recipient of the supply or (in the case of an arrangement treated as giving rise to a taxable supply) to an entity treated as the recipient;
(ii) the recipient of the supply, or (in the case of an arrangement treated as giving rise to a taxable supply) the entity treated as the recipient, is *registered or *required to be registered.
Note: Divisions 3 and 3A of Part IIB deal with payments, credits and RBA surpluses.
(2) This section applies to the following amounts:
(a) in the case of a *supply:
(i) so much of any *net amount or amount of *GST as you have overpaid (as mentioned in paragraph (1)(a)); or
(ii) so much of any net amount that is payable to you under section 35-5 of the *GST Act as the Commissioner has not refunded to you (as mentioned in paragraph (1)(a)), either by paying it to you or by applying it under Division 3 of Part IIB of this Act; …
137 That section seems to be applicable to the circumstances of the refunds claimed by Travelex, although no party suggested that it impacted upon the construction of s 105-55. That omission may have been apt as s 105-65 imposes a restriction which is additional to and separate from the others in Div 105. It would seem to be a limitation which applies regardless of whether the refund is sought within four years or after a notice under s 105-55 has been given. Given the initial agreement by the Commissioner that an RBA surplus existed, it is assumed that he had been satisfied of the matter in subs (1)(c)(i), although it must be acknowledged that, as s 105-55 had not been raised before the primary judge, there is no evidence either way.
138 In reliance on the obiter of Gordon J in Central Equity Ltd v Federal Commissioner of Taxation (2011) 214 FCR 255 at 270-271 (Central Equity), it was accepted by the Commissioner that no specific form of notification was required for the purposes of s 105-55 and that it can be constituted by a letter or completed form. In that case her Honour held that the notification was sufficient if it achieved the objects required by the statute. In the matter before her Honour the notification satisfied s 105-55 because it identified the period of the claim (even if it also identified other periods), and the details of the refund claim had been specified as well as the circumstances under which the claimed refund arose.
139 In his written submissions, the Commissioner accepted the 8 June 2012 letter was sufficient compliance with s 105-55, but said that it also constituted a request to amend the November 2009 BAS, and that he accepted the request with the result that he processed it and identified the amount of $149,020 as an “Amended self assessed amount” for the tax period ending 30 November 2009, and allocated an amount to the RBA accordingly. The Commissioner claimed that the RBA interest day was deferred until the required notification had been given, pursuant to paragraph (b) of the definition.
140 Travelex submitted that the construction of s 105-55 proposed by the Commissioner brought it into conflict with s 8AAZLF. It was said that section proceeded on the basis that there is an entitlement where there has been compliance with s 8AAZLG, and it cannot be that the entitlement exists even though there has been no compliance with s 105-55. It submitted that s 105-55 assumed the existence of the entitlement to a refund and compliance with it is not a requirement of the entitlement as is a notification required in s 8AAZLG. It further said that all s 105-55 required is that the Commissioner be notified as to the entitlement to the refund. In other words, the notice was not required for the entitlement to the refund to exist, but merely to provide notification to the Commissioner of its existence.
141 Travelex further submitted that notification under s 105-55 is not required in the sense in which that word is used in s 8AAZLG, because the giving of the notice is not a precondition to the entitlement to the refund, but merely to the right to recover it. It was submitted that s 8AAZLF only applied where there is an entitlement and the entity is within time in accordance with s 105-55. The latter section imposed time limits where there is otherwise an entitlement to the refund. Subsequently, it was said that the section modifies the entitlement to the refund.
Section 105-55 is a pre-condition to the right to recover
142 As Travelex did not seek to ameliorate the effect of it having given the Commissioner the November 2009 BAS in any of the ways which were open to it within four years following the November 2009 tax period, s 93-5 of the GST Act would suggest that it is now unable to claim the benefit of the input tax credits which accrued at that time. However, s 93-10 creates exceptions to that time limit, specifically where the Commissioner has given notice (in a notice of assessment or otherwise) of the entitlement to a refund. Here, the making of the allocation would, of itself, seem to be sufficient notice of the entitlement although, as this point was not argued, there is no need to reach any definitive conclusion with respect to it.
143 There is much force in Travelex’s submission that the notification under s 105-55 is not “required” in the sense that word is used in s 8AAZLG. The terms of s 105-55 presume the existence of the entitlement to a refund which has arisen. It does not impose a condition on the crystallisation of a refund as the Commissioner suggested. It has similarities to a limitation period which require the taking of a step to enforce an existing right. In that sense it is not of the type of notification which would to cause an inchoate right to crystallise. All the section required was that the taxpayer give notice to the Commissioner that they “are entitled to the refund”.
144 In the context of s 105-50, being the power of the Commissioner to extend the four year limit on which he might recover amounts paid to taxpayers in excess of their entitlement, s 105-55 appears to have the same purpose. It is not a section which relates to the quantification of the amount which the entity claims is an RBA surplus which has arisen in their favour, it is a section which removes the limitation which would otherwise exist on making a claim that a surplus did arise or, if the accounting for taxation had been completed properly, would have applied.
145 In other words, ss 105-50 and 105-55 are concerned with the imposition of a four year time limit on the Commissioner or taxpayer recovering amounts which ought to have been paid to them and the granting of an ability to extend the time by giving a notice of the entitlement. In the absence of a notice after four years, no amount which might contribute to a surplus in the taxpayer’s RBA could arise through the making of an assessment or otherwise. In this sense it is irrelevant to attempt to apply the notice requirement to the definition of “RBA interest day” or s 8AAZLG. If the giving of the notice by a taxpayer under s 105-55 is necessary, it is axiomatic that the amount which they assert should be refunded has not been claimed and no process has been put in place to ascertain its amount or establish it as a liability of the Commissioner. Had that step been taken, there would be no need for the s 105-55 notice, as the Commissioner would have been made aware of the claim for a refund. On the other hand, the absence of a notice will have the consequence that any amount which may have become a refund will not be recoverable after the expiration of four years from the relevant tax period.
146 On one view it might be said, as it was by the Commissioner, that the s 105-55 notice may have affected the amount that the Commissioner refunds the entity within the meaning of s 8AAZLG(1)(a) because, without it, no amount would be refundable. However, it is apparent that the concern of that latter section is that the required notification is one which contains information that affects the quantification of the amount of the refund, rather than the overall entitlement to it.
147 Travelex claimed that the Commissioner did not advance before the primary judge any argument that no notice under s 105-55 had been given and, because of that, it should not be raised on appeal. It submitted that, had it been raised, it could have been met with evidence, namely that it had provided notice to the Commissioner of the entitlement to the refund. The Commissioner, however, acknowledged that prior to the letter of 8 June 2012 Travelex had provided a notification meeting the requirements of s 105-55, and that such was the case could be detected from the terms of the letter of 8 June. It was accepted by the Commissioner, in line with the obiter of Gordon J in Central Equity at 271 -, that the notification did not need to quantify the refund to which the taxpayer was entitled, but only inform the Commissioner of the entitlement.
148 On that basis there is no unfairness in considering the applicability of s 105-55 on this appeal. It has not been suggested that the time in which a refund might be claimed by Travelex had expired with no notice effecting an extension of time having been delivered. The contrary is true. The Commissioner accepts that Travelex was entitled to advance its claims for a refund despite, in this case, the tax period ending on 30 November 2009. It appears that the point being advanced by the Commissioner was that s 105-55 made provision for a notice which was “required” to be given, but only to the extent to which it preserved Travelex’s entitlement to quantify its claimed refund, and that what was required subsequently for the refund (and the satisfaction of s 8AAZLG and the definition of RBA interest day) was crystallisation in a notification or a return or an assessment which quantified the amount of the refund. However, for the reasons given previously, the submission that notification was required must fail.
149 It should be added that it is difficult to reach a conclusion that a notice under s 105-55 is required for the purposes of s 8AAZLG or the definition of RBA interest day where, if the Commissioner himself gives notification under s 105-55(1)(b), the period in which the refund can be claimed is extended in any event. In those circumstances such a notice could not be “required”.
150 It follows that notification under s 105-55 was not required under s 8AAZLG or the definition of RBA interest day. It was necessary only for preserving the right of the entity to recover the refund after the expiration of four years, even though it would then need to be quantified and become payable through the processes of the taxation legislation.
Was the RBA interest day deferred by reason of the overdue May 2012 BAS?
151 As has been mentioned previously, the Commissioner relied upon the failure of Travelex to lodge its May 2012 BAS as a ground for asserting that, by reason of s 8AAZLG, the Commissioner was entitled to retain the amount of the refund. Travelex submitted that the May 2012 BAS was not required “for the refund” within the meaning of paragraph (b) of the definition of RBA interest day in s 12AF of the Overpayments Act. That would appear to be correct. The refund is in respect of the November 2009 tax period, not the May 2012 tax period. Whilst it may be that the manner in which the refund is paid to Travelex, being either by set off or cash, might depend on the May 2012 BAS, it was not needed “for the refund” or for calculating its amount. Similarly, Travelex’s submission that the May 2012 BAS could not have affected the amount of the refund which was to be paid (even if it might affect the amount which would appear in the RBA when an amount for existing debts was deducted from it) should be accepted.
152 In those circumstances, had the amount of refund arising in relation to the November 2009 tax period become payable as a result of an assessment, the fact that the May 2012 BAS was outstanding would not have impaired the occurrence of the RBA interest day. However, as a result of the conclusion previously reached, the RBA interest day in respect of that tax period has not yet occurred.
Result of the appeal
153 The result is that the appeal should be allowed albeit only on a basis which was only tangentially and tentatively advanced before the learned primary judge. It was not identified as an independent ground and no submissions were adequately directed to it. As appears from the foregoing discussion, it is apparent that his Honour’s conclusions were correct on the basis on which the matter was substantively argued before him. This necessarily has ramifications in relation to the costs of the appeal.
Declarations, orders and costs
154 The declarations and order for the payment of $17,265.15 to the respondent made by the primary judge must necessarily be set aside.
155 A declaration should be made giving effect to the above reasons in the following terms:
It is declared that in the circumstances no RBA surplus has arisen in relation to the tax period (within the meaning of A New Tax System (Goods and Services Tax) Act 1999 (Cth)) of the respondent for the month of November 2009 and no interest is presently payable by the applicant to the respondent under the provisions of the Taxation (Interest on Overpayments and Early Payments) Act 1983 (Cth) in respect of that tax period.
156 In light of the Commissioner’s success he should have the costs of this appeal. However, that success has occurred as a result of a shift in position by him as to whether an RBA surplus had arisen. He had advanced his argument before the primary judge largely on the basis that such was the case and only tangentially suggested that no surplus could have arisen. The reasoning of the primary judge was largely correct given the premises on which the case was argued before him. The submissions advanced by Travelex on the issues ventilated before his Honour were appropriate and accepted. That being so, the orders for costs made by the primary judge should stand.
I certify that the preceding one hundred and fifty-five (155) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Derrington.
Dated: 14 February 2020
REASONS FOR JUDGMENT
157 I have had the great privilege of reading the draft reasons of Derrington J. I am grateful to his Honour for the thoroughness of his analysis. Save in what follows, I respectfully agree with his Honour and where necessary have adopted his Honour’s terminology. In particular, I agree that the scheme of the GST Act is that a claim for a refund is activated by either the giving of a return or the making of an assessment. This will trigger the allocation of amounts to an RBA of an entity for the purposes of Div 3 of Pt IIB of the TAA. That is because the obligation to pay refunds is created by Div 35 of the GST Act, and then implemented by the TAA.
158 However, the resolution of this matter has been complicated by reason of the unique position presented by the taxpayer and the Commissioner before us. Here, the following were agreed facts (as set out in the SOAF):
16. On 28 June 2012 the Commissioner allocated the amount of $149,020 to the Applicant’s ICA as a credit amount (the November 2009 Amount). The effective date of the allocation of the November 2009 Amount was 16 December 2009.
17. The November 2009 Amount constituted part of a RBA surplus for the purposes of Part IIB of the Administration Act and Part IIIAA of the Overpayments Act. That part of the RBA surplus constituted by the November 2009 Amount arose on 16 December 2009.
18. Other than the allocation referred to at paragraph 16 above, no part of the November 2009 Amount was otherwise allocated or applied under Division 3 of Part IIB of the Administration Act. Section 12AB of the Overpayments Act did not apply in respect of the November 2009 Amount.
159 In his Defence, the Commissioner also pleaded as facts the matters set out above. Paragraph 21 of that Defence is in the following terms:
The Respondent ... says further that:
(a) on 28 June 2012 the Respondent allocated the amount of $149,020.00 to the ICA of the Applicant and this amount constituted part of a “RBA surplus” for the purposes of Part IIB of the Taxation Administration Act 1953 (“Administration Act”) and Part IIIAA of the Taxation (Interest on Overpayments and Early Payments) Act 1983 (“Overpayments Act”); and
(b) the RBA surplus arose on 16 December 2009, being the date on which the Applicant gave the Respondent the GST return referred to at paragraph 14(a) of the Statement of Claim.
160 What occurred here was that without the receipt of a return or the issuance of an assessment, the Commissioner made actual allocations to the taxpayer’s RBA. He has thus correctly admitted, and expressly pleaded, the historical fact of the existence of an RBA surplus in favour of the taxpayer.
161 On appeal, the Commissioner attempted to resile from the existence of the RBA surplus. Unsurprisingly, the taxpayer demurred. Senior counsel for the taxpayer submitted that before the primary judge the Commissioner had not applied for leave under s 191(1) of the Evidence Act 1995 (Cth) to adduce evidence to contradict or qualify the aforementioned agreed facts, nor had he applied to amend his Defence. It followed, it was said, that it was “not possible” for the taxpayer “to know what forensic and evidentiary decisions would have been taken at trial had the Commissioner taken any of those steps”. Before us, the Commissioner did not expressly seek leave to withdraw the relevant admission as to the existence of the RBA surplus in the SOAF; cf Warner-Lambert Company LLC v Apotex Pty Ltd (No 2) (2018) 355 ALR 44 at -. Nor did he seek to amend his Defence. Having not sought leave, the Commissioner attempted to avoid what he had agreed had occurred, by contending for the first time before us, that what he had done was legally misconceived. In amplification, he orally submitted that the facts at  of the SOAF were agreed upon a false legal assumption and thus the Court ought not be bound by them. What then, in these highly unusual circumstances, is the effect of s 8AAZLF of the TAA (as set out in the reasons of Derrington J)?
162 I should commence with an observation about the applicable provisions. Colloquially speaking, following the decision of the High Court in Travelex, it was clear that the taxpayer had paid too much tax; a refund with interest, one might have thought, should have been the correct outcome. That has not occurred in large part because the applicable provisions are extremely difficult to follow, located as they are across three distinct Acts of Parliament. In my view, it should not be difficult to express clear rules concerning when the Commissioner owes a refund and when he should pay interest on it. No such rules may presently be found in the GST Act, the TAA or the Overpayments Act. What may be found is what the learned primary judge, with respect, correctly described as a “labyrinth of obscure provisions” through which the taxpayer must undertake a “tortuous journey”. Applying those provisions should not be like being in a dark wood where the straight way is lost. The rules need clarity. The area needs reform.
163 In my view, the existence of the agreed RBA surplus triggered an obligation to pay a refund on the facts of this case. That is because each integer of s 8AAZLF was satisfied and because of the words in that section: “[t]he Commissioner must refund to an entity”. It is true that there has been no return filed or assessment issued to support the existence of the RBA surplus. But that is of no moment. Section 8AAZLF may assume that such events may have transpired, but its application is not expressed to be conditioned in that way.
164 It follows that I reluctantly and respectfully disagree with Derrington J’s view that an RBA surplus did not exist here (notwithstanding the agreement of the parties) because, to use the language of the definition of that term, the credit was not one “to which the [taxpayer] was entitled under a taxation law”. I prefer to read that language as descriptive of those credits which have in fact been allocated by the Commissioner.
165 In that respect, it is not the case that an RBA surplus can only exist and be legally efficacious if the credit in fact allocated was one to which the taxpayer was entitled under a taxation law. In other words, what triggers the existence of an RBA surplus is the historical fact of the allocation of amounts, whether correctly or not, as debits and credits to an RBA by the Commissioner. That is because the scheme established under Div 3 of Pt IIB gives the balance recorded in an RBA legal efficacy, even though the balance may be mistaken. Any other conclusion would seriously undermine the effectiveness of the RBA system. If a mistaken entry is made to an RBA it will then be a matter for either the taxpayer or the Commissioner to correct that balance by the filing of a GST return, or by the issue of an assessment. That errors or mistaken allocations should be corrected in that way is supported by the presence of s 35-5(2) of the GST Act, which in 2012 was in the following terms:
However, if the amount paid, or applied under the Taxation Administration Act 1953, exceeds the amount to which you are properly entitled under subsection (1), the excess is to be treated as if it were GST that became payable, and due for payment, by you at the time when the amount was paid or applied.
Section 35-5(2) expressly contemplates that an RBA may contain errors and provides the Commissioner with a further means of correction.
166 The legal efficacy of amounts which have in fact been debited and credited to a taxpayer’s RBA may be seen in ss 8AAZH, 8AAZI and 8AAZJ of the TAA. Section 8AAZH of the TAA provides that if there is an RBA deficit debt at the end of a given day, the taxpayer is liable to the Commissioner to the extent of that debt. It relevantly provides as follows:
Liability for RBA deficit debt
(1) If there is an RBA deficit debt on an RBA at the end of a day, the tax debtor is liable to pay to the Commissioner the amount of the debt. The amount is due and payable at the end of that day.
167 The term “RBA deficit debt” is defined in s 8AAZA of the TAA as a balance “in favour of the Commissioner” based on debts allocated to the RBA and on credits to which a taxpayer is entitled. The purpose of s 8AAZH was explained in the Explanatory Memorandum to the Taxation Laws Amendment Bill (No.5) 1998 (Cth), which introduced Pt IIB to the TAA, at paras 1.116 and 1.117 as follows:
1.116 The Commissioner’s existing recovery powers in respect of primary tax debts will continue to operate as they do now. The Commissioner will be able to continue to sue for individual primary tax debts where it is considered appropriate to do so.
1.117 However, the establishment of an RBA will enable the Commissioner, as an alternative, to recover outstanding tax debts as reflected in the RBA deficit. Hence, where the RBA is in deficit, that deficit will be a debt due and payable to the Commonwealth and may be recovered by the Commissioner. [New subsection 8AAZH(1)]
168 In my view, s 8AAZH turns upon the fact of a deficit appearing in an RBA. The fact that the deficit has legal consequences, namely the creation of a liability in favour of the Commonwealth, supports the view I have reached about the legal efficacy of the RBA debits and credits.
169 Sections 8AAZI and 8AAZJ of the TAA provide as follows:
8AAZI RBA statement to be evidence
(1) The production of an RBA statement:
(a) is prima facie evidence that the RBA was duly kept; and
(b) is prima facie evidence that the amounts and particulars in the statement are correct.
(2) In this section:
RBA statement includes a document that purports to be a copy of an RBA statement and is signed by the Commissioner or a delegate of the Commissioner or by a Second Commissioner or Deputy Commissioner.
8AAZJ Evidentiary certificate about RBA transactions etc.
(1) In proceedings for recovery of an RBA deficit debt, a Commissioner’s certificate stating any of the following matters in respect of a specified RBA is prima facie evidence of those matters:
(a) that no tax debts (other than general interest charge on the RBA deficit debt) were allocated to the RBA after the balance date shown on a specified RBA statement for the RBA;
(b) that general interest charge is payable on the RBA deficit debt, as specified in the certificate;
(c) that payments and credits were allocated to the RBA, as specified in the certificate;
(d) that a specified amount was the RBA deficit debt on the date of the certificate.
(2) In this section:
Commissioner’s certificate means a certificate signed by the Commissioner or a delegate of the Commissioner, or by a Second Commissioner or Deputy Commissioner.
170 The foregoing provisions do not, of course, make production of the “Commissioner’s certificate” conclusive evidence of the correctness of the amounts recorded. But they again support the existence of a system whereby obligations to pay and to refund amounts are recorded in a taxpayer’s RBA. Until corrected, the Commissioner is entitled to rely upon its contents. In my view, so can an affected taxpayer. In that respect, there was no evidence before the Court that the Commissioner had here amended the taxpayer’s RBA to exclude the credit allocated in 2012.
171 There being here an RBA surplus which created an obligation to pay a refund, one next then turns to the Overpayments Act and its definition of an “RBA interest day” in s 12AF. It is unnecessary for me to set out that provision. I respectfully agree with Derrington J that subpara (b) of that definition is not satisfied. There was no requirement to give any notification to the Commissioner, although notifications in the form of a return which might be given for the purposes of s 8AAZLG of the TAA or other notice which satisfied s 105-55 of the TAA were able to be made by a taxpayer. One is then left with the words of subpara (a)(i) of the definition, that interest is payable from the end of “the day on which the surplus arises”.
172 Here, it was an agreed fact that the part “of the RBA surplus constituted by the November 2009 Amount arose on 16 December 2009” being the “effective date of allocation” as nominated by the Commissioner. But for that nomination, in my view, the day on which the surplus arose was 28 June 2012 when the Commissioner allocated the amount of $149,020. However, Pt IIB gives to the Commissioner a considerable discretion or power as to how to allocate credits and debits to an RBA. In the case of both “Method 1” (s 8AAZLA) and “Method 2” (s 8AAZLB), the power of allocation given to the Commissioner is one that may be exercised “in the manner he or she determines”. In my view, that permits the Commissioner to determine the “effective date” of an allocated amount. He did this here, and nominated 16 December 2009. That nomination is legally effective. In my view, it follows that the RBA interest day is the 14th day after that date for the purpose of s 12AF of the Overpayments Act.
173 The appeal should be dismissed with costs.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Steward.
Dated: 14 February 2020