Taxman’s case a load of bullion

Picture: Jung Yeon-je / AFP FILES / AFP)

The Australian Taxation Office has suffered one of its biggest court case losses: the long-running “gold case”, where it sought $500m in GST from an insolvent former gold refining company.

The complex case centred on a 2016 dispute over tax law which requires refiners to pay GST when they buy gold that is not investment grade.

After closing a loophole in that law, the ATO had sought to enforce retrospective tax assessments.

But the full bench of the Federal Court has now ruled in favour of the refiners, unanimously overturning an earlier decision of the Administrative Appeals Tribunal released in January this year.

In the case known as ACN 154 520 199 Pty Ltd (in Liquidation) v Commissioner of Taxation, the ATO was seeking to enforce $500m in GST assessments. The ACN company involved separated from the ABC Refining group before the tax assessment.

The “gold case” arose because of a loophole in the GST Act, when applied to gold refining which enabled criminal syndicates to sell gold to refiners at market price plus GST. The crooks then disappeared and did not refund the GST money to the ATO, as required.

A portion of the $1bn in GST lost via the loophole is believed to have been used to fund Islamic State.

The ATO, instead of chasing the crooks, then demanded the refiners pay, which would bankrupt almost the entire industry.

In the Administrative Appeals Tribunal the ATO had declared that there was no criminal activity by the refiners in this case.

Now the full Federal Court, in upholding the refiner appeal, appears to have ruled that the ATO was not acting within the law in making those GST assessments.

However, the reasons for the judgment are subject to a confidentiality regime imposed by the full Federal Court.

The ATO must now explain that the $500m the states had been expecting will not be forthcoming but, in any event, the company they were chasing never had any money, so the assessment was always a fiction.

Yet the ATO is estimated to have spent around $40m on legal fees.