Australia: Taxpayer entitled to refund of overpaid GST that was not “passed on” to purchasers (Federal Circuit and Family Court decision)
Court found that there was no “windfall” gain to the taxpayer.
The Federal Circuit and Family Court (FCAFC) on March 12, 2026, held in Geocon Land Holdings No. 5 Pty Ltd v Commissioner of Taxation [2025] FCAFC 172 that the taxpayer was entitled to a refund of overpaid goods and services tax (GST) because the taxpayer had not “passed on” the GST to purchasers.
Summary
The taxpayer acquired a Crown lease of land in exchange for cash and a commitment to development the land into residential apartments. Upon the eventual sale of the apartments to purchasers, the taxpayer calculated GST based on the GST margin scheme in Division 75 of the GST Act, which allowed the taxpayer to charge GST only on the “margin for supply” (i.e., the difference between the consideration for the sale of the apartments and the consideration for the acquisition of the Crown lease). However, the taxpayer incorrectly failed to take the non-monetary consideration (i.e., the development services) into account when calculating the margin for the sale of the apartments, resulting in an overpayment of GST. The taxpayer’s invoices to the purchasers of the apartments did not show the amount of GST payable, and the purchasers would not have known the amount of GST as they would not have known the margin for the supply.
The taxpayer sought a refund of the overpaid GST on the grounds that the GST was not “passed on” within the meaning of section 142-10 of the GST Act and that a refund of the GST would not result in the taxpayer receiving a “windfall gain” within the meaning of Division 142 of the GST Act. Relying on the High Court decision of Avon Products Pty Ltd v Commissioner of Taxation [2006] HCA 29, the lower court adopted the following presumptions:
- A taxpayer likely will not succeed in proving, on the balance of probabilities, that excess GST was not passed on.
- Profitable businesses usually recover all of their costs, which includes amounts paid as GST, in the prices charged to their customers.
The FCAFC found, however, that the lower court misapplied the Avon Products decision and that whether excess GST is “passed on” for purposes of Division 142 is dependent on actual pricing conduct, rather than assumptions based on profitability or general business practice. In addition, the court determined that a refund of excess GST would result in the taxpayer receiving back that which it should never have paid, and thus there was no “windfall gain.”
For more information, contact a KPMG tax professional in Australia:
Kristie Schubert | kschubert3@kpmg.com.au
Rebecca Lawrence | rlawrence5@kpmg.com.au
Marko Trifunovski | mtrifunovski@kpmg.com.au