Division 142 passing on clarified by the Full Court - win for the taxpayer

3 Minute read 03.12.2025 Rimma Miller, Silvino Gomes and Saxon Ward

MinterEllison are pleased to have acted for the taxpayer, Geocon whose appeal was allowed by the Full Court, providing guidance on the question of passing on under Division 142.

Key takeouts

The Full Court found that the Tribunal incorrectly presumed that Geocon had passed on overpaid GST because it was profitable.

The decision provides comfort to taxpayers who take conservative lodgement positions protecting from penalties and interest in the event they are wrong.

The Tribunal incorrectly applied factual considerations in the High Court decision of Avon Products Pty Ltd v Commissioner of Taxation [2006] HCA 29; 230 CLR 356 which was dealing with a different statutory context (sales tax).

On 1 December 2025, the Full Court delivered judgment in Geocon Land Holdings No. 5 Pty Ltd v Commissioner of Taxation [2025] FCAFC 172. MinterEllison represented the applicant / taxpayer at first instance before the Administrative Review Tribunal and on appeal to the Full Court.

Background to the dispute

The GST dispute primarily concerned a residential property development in the ACT, being situated on land acquired from the ACT Government. The taxpayer obtained a private ruling from the ATO which confirmed that it could take into account the cost of the development in working out under the margin scheme the GST payable on supply of the individual units to purchasers.

After the taxpayer amended its business activity statements which reduced the GST payable by the cost stipulated in the private ruling, the ATO sought to deny a refund under Division 142 of the GST Act. This was on the basis that the GST had been passed on to another entity, being the purchasers, and that a refund would result in the taxpayer having a windfall gain.

Whilst previous cases involving Division 142 have been decided by the Administrative Appeals Tribunal (see for example, GST's margin scheme continues to be muddied by the barter – or why the blancmange is an inferior dessert - Insight - MinterEllison), this case is the first time a court has considered Division 142 of the GST Act, providing judicial guidance on the key provisions which allow the ATO to deny a refund of excess GST.

The Full Court has given guidance to matters in the evidence the Tribunal should have regard to in determining whether GST has been passed on. In this case, the factual matters pointed towards GST not being passed on and included:

director evidence being that he thought it highly likely that GST was not payable;
Geocon's marketing price list not being set by reference to GST cost;
price lists determined by what Geocon considered the market would bear;
off the plan units being sold at market prices;
Geocon not adjusting its price downwards after receiving a GST private ruling;
the third party purchasers were no worse off whether or not GST was overpaid by the taxpayer. It follows that a reimbursement under s 142-10 would result in the purchasers receiving a windfall gain;
although developers' costs inform market price these costs typically are actual costs rather than amounts thought not to be payable (i.e. the overpaid GST).

Implications of the decision

Whilst taxpayers should of course be aware of the Commissioner's ability to deny a refund of GST under Division 142, this case provides useful guidance, potentially easing the burden on those who take conservative lodgment positions to protect against penalties and interest.

The judgment will have broad application to the business community in relation to the operation of Division 142. In this case the taxpayer was involved in property developments, but this decision has a wide application to other businesses making taxable supplies more generally.

Contact our team to discuss how the Full Court’s Geocon decision may impact your organisation’s GST position.