Good News for Taxpayers Claiming GST Refunds in New Zealand

In the recently decided high court case of Contract Pacific Limited the Court ruled that the Inland Revenue Department (IRD) cannot indefinitely prolong its investigation into a taxpayers GST refund claim.

Taxpayers are entitled to receive a GST refund if a return is filed and the input tax exceeds the output tax. Under section 46, the Commissioner may investigate and/or request further information if he is not satisfied with the return. Any request for information concerning a return must be made within 15 days from:

• The date on which the return is received for the initial request or
• The date of receipt of any information previously requested for subsequent requests

The Commissioner took the position that it had two choices under section 46. He could request further information from the taxpayer, in which case the section 46 timelines would apply, or he could investigate a return. The Commissioner argued that once a notified investigation was under way a request for further information from the taxpayer would not be subject to the time limits of section 46.

The Court rejected the Commissioner’s argument on the basis that it would effectively undermine Parliament’s intent to impose strict limits on the Commissioner’s authority to withhold a refund. The Commissioner could always choose to investigate rather than request further information to avoid the time limits of section 46. If the Commissioner were not subject to the timeframe in section 46 he would lose his authority to withhold the refund while he carries out the investigation.

The ruling means that subsequent information requests must be made within 15 working days of receipt of information previously requested and will ensure that the resolution of disputed refunds is not delayed by protracted enquiries.