Australia: High Court diverges on foreign currency transactions

Australian GST Update
Last Updated: 26 October 2010
Article by Jonathan Ackerman and Nicole Kassis

In Travelex Ltd v Commissioner of Taxation [2010] HCA 33, the High Court held, by a three to two majority, that the supply of foreign currency by Travelex Ltd (Travelex) on the departures side of the Customs barrier at Sydney International Airport was GST-free. In doing so, the court provided guidance on the interpretation of the GST-free exported services rules and their application to financial services.


The case involved the sale of Fijian bank notes by Travelex to a traveller on the departures side of the Customs barrier at Sydney International Airport. The evidence presented established that the traveller was to use the currency outside Australia.

It was common ground by the parties that the supply of foreign currency was a financial supply and therefore input taxed. The main issue for consideration was whether the supply of foreign currency by Travelex was GST-free under the export provisions. In either case, the currency was not subject to GST. Rather, if the sale of the currency was GST-free, Travelex would have a greater input tax credit entitlement on its expenses (since input tax credits can be claimed on expenses related to GST-free supplies, but generally not on input taxed supplies).

The issues

Generally, a supply that is both input taxed and GST-free is treated as GST-free (section 9-30(3)). To be GST-free under Item 4(a) of section 38-190(1), a supply must have the following attributes:

  • It must not be a supply of goods or real property;
  • It is a supply made in relation to rights; and
  • The rights are for use outside Australia.

The case centered principally on whether the supply of foreign currency is a supply made 'in relation to rights' and therefore GST-free under Item 4(a) of section 38- 190(1).

Full Federal Court decision

At first instance in the Federal Court, Emmett J held that the supply in question was a supply of the ownership of the physical notes and not a supply in relation to rights. His Honour considered the essential character of the supply was not one of rights, that is, the supply of rights was merely incidental to, or a consequence of, the supply of the bank notes. By majority, the Full Federal Court (Stone and Edmonds JJ, Mansfield J in dissent) dismissed the appeal (the majority judges generally agreed with Emmett J's reasoning).

The majority's decision

The majority of the High Court (French CJ, Hayne J and Heydon J) held that the supply of foreign currency by Travelex was a supply made 'in relation to rights' under section 38-190 and was therefore GST-free.

In particular, the majority identified the supply in issue as 'the financial supply constituted by the disposal to the traveller of an interest in (here, the ownership of) the currency of the foreign country'. The issue was whether this was a supply made in relation to rights for use outside Australia.

French CJ and Hayne J determined that the supply of foreign currency is a supply made 'in relation to rights' on the basis that 'currency has value only because of the rights that attach to it'. The rights that attach to it are constituted by the transfer of ownership and the subsequent ability of the new owner to use the currency, without which the property in the currency would be worthless. In their Honours' view, this was sufficient to constitute a supply in relation to rights.

Based on the evidence, it was clear that the currency was to be used by the traveller overseas and therefore the rights that attach to the currency were for use outside Australia. French CJ and Hayne J therefore found that the supply of foreign currency by Travelex was GST-free under Item 4(a) of section 38-190(1).

Taking a different approach but arriving at the same conclusion, Heydon J determined that the transaction, in substance, was the supply of rights. Heydon J agreed with the majority that the supply of the rights in respect of the foreign currency were not incidental to the ownership of the foreign currency. Heydon J stated 'the handing over of the pieces of paper constituted, evidenced, and was not capable of disaggregation from, the supply of rights. Apart from those rights, the pieces of paper had little value'. Heydon J hence reasoned that the supply of the currency was a supply 'in relation to the rights'. Since Mr Urquhart acquired the currency with the intention of spending it in Fiji and did spend it there, the rights were for use outside Australia.

Crennan and Bell JJ 's decision

The minority (Crennan and Bell JJ) held that the supply of the foreign currency was not a supply made in relation to rights and therefore was not GST-free. Their Honours equated the concept of rights in Item 4(a) with the narrower concept of rights in the definition of supply (section 9-10(2)(e)), which includes the creation, grant, transfer, assignment or surrender of any right. The minority accepted that the holder or owner of the foreign currency had certain rights in relation to the currency, however, to be a supply made in relation to 'rights' within Item 4 of section 38-190(1), the 'right' must be 'capable of transfer or assignment alone or in combination with other things'. Their Honours reasoned that the rights of the holder or owner of the foreign currency were incidental to the notes and were not separate rights capable of independent supply.

Implications of the decision

There are a number of implications of the decision, which are discussed below.

What are supplies made in relation to rights?

The crucial aspect of the decision was the characterisation of the sale of the currency for GST purposes. French CJ and Hayne J considered that the currency only has value because of the rights that attach to it and the sale was therefore characterised as a supply in relation to rights. Similarly, Heydon J considered that the currency was properly characterised by reference to the rights enjoyed by the holder of the currency as created by the statute law of Fiji, since this was the 'pith and substance' of the transaction.

Item 4 clearly applies to supplies of rights, such as intellectual property licences, insurance, and capacity in a telecommunications network. There is some uncertainty as to the other types of supplies that might be described as supplies in relation to rights. Examples might include cross border leases of goods and the sale of shares.

A further issue is whether services provided in relation to rights are covered by Item 4(a). The Court was not required to consider this issue and it remains contentious. For example, do brokerage services provided in relation to a share transaction constitute supplies in relation to rights?

Rights for use outside Australia

In the case, the currency was acquired by Mr Urquhart on the destination side of the customs barrier, who then travelled to Fiji and used all of the currency there. Accordingly, the parties agreed that the currency was for use outside Australia and this was not an issue in the case.

The Court appeared to accept that whether the currency was for use outside Australia was primarily determined by the subjective intention of the recipient of the supply.

There will be practical difficulties for financial institutions (suppliers) that need to identify the subjective intention of their customers in order to determine whether their supplies are GST-free.

Further, it may not always be clear as to whether supplies are for use outside Australia. For example, foreign currency transactions are often used for hedging purposes and it remains to be seen whether such uses could be described as being for use outside Australia.

GST refunds

Many financial institutions will be entitled to claim GST refunds as a result of the decision. Such institutions will need to consider the extent to which the decision extends to arrangements other than foreign currency transactions which constitute supplies in relation to rights and, further, whether such rights are for use outside Australia.

Such financial institutions should also consider the possibility that the government will amend the GST law to overcome the decision.

© DLA Phillips Fox

DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.