Transport companies need to ensure they are correctly paying GST
when they receive any form of government rebate. Not all government
payments will attract GST.
The Tax Office recently published a Decision Impact Statement on
the GST implications of the Federal Court decision in TT-Line
Company v Commissioner of Taxation.
TT-Line operated a ferry service over Bass Strait. The
Commonwealth Government provided rebates to eligible passengers to
encourage people to use the ferry service. The rebate was
calculated so that passengers using the ferry service paid about
the same price as if they were driving on a highway.
Mr Egan, (an eligible passenger) booked a ticket on the ferry
and was entitled to a rebate. TT-Line automatically calculated the
rebate that Mr Egan was entitled to and charged him the net amount
(that is, the full value of the ticket price less the rebate). The
total ticket price was $910. TT-Line received a rebate of $336 from
the Government. The remaining $574 was paid by Mr Egan
TT-Line was a government related entity, which was relevant to
an issue raised in the appeal.
Issues argued in the appeal
The question was whether TT-Line had to account for GST on the
price paid by Mr Egan ($574) or the total amount received by
TT-Line ($910). This raised two issues:
Did the rebate form part of the price?
As TT-Line was a government related entity, was the rebate
specifically covered by an appropriation and therefore not part of
Decision of the Full Court
The Full Court found that GST was to be calculated on the total
payments received by TT-Line - $910, even though the amount paid by
Mr Egan, the recipient of the ferry services, was $574
The Full Court held that it was irrelevant whether the rebate
was paid directly to TT-Line – it was still part of the
total consideration for the ferry services provided to Mr Egan.
On the appropriation issue, the Full Court found that the
payments were not specifically covered by an appropriation.
This analysis was influenced by the fact that while TT-Line was
a government related entity, it was operating in competition with
private transport operators. If the rebate was covered by an
appropriation, this would have meant that private transport
operators paid GST on the total amount (including the rebate) while
government related entities would have paid GST only on the amount
paid by the passenger. The policy of including government entities
in the scope of GST was to ensure that this kind of discrimination
did not take place.
Tax Office view of the decision
The decision was favourable to the Tax Office. However, the
decision on the appropriation issue is also favourable to private
operators competing with government entities.
What should you do?
The decision is a timely reminder for transport operators to
review whether they are correctly accounting for GST on
With the recent TT-Line decision clarifying the law, the Tax
Office may increase its compliance activities in this area.
The TT-Line case shows that in some cases the rebate will form
part of the base on which GST is calculated. However, in other
cases, such as where the rebate is in the form of compensation, it
will not be included in calculating your GST liability.
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guide to the subject matter. Specialist advice should be sought
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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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