Commissioner of Taxation v Qantas Airways Ltd  HCATrans
131 and 132
On 5 and 6 June 2012, the High Court heard the Commissioner of
Taxation's appeal against the Full Federal Court decision in
Qantas Airways Limited v Commissioner of Taxation 
FCAFC 113. The appeal related to whether there is a 'taxable
supply' for the purposes of goods and services tax
(GST), in circumstances where a passenger has
reserved and paid for a domestic flight but subsequently failed to
take the flight and no refund is available or claimed.
On appeal from the Administrative Appeals Tribunal
(AAT), the Full Federal Court unanimously held
that GST is not payable by Qantas in circumstances where a customer
has reserved and paid for an airfare, but subsequently fails to
take the flight and no refund is available or claimed
(unused fares). The Full Court reasoned that the
'essence and sole purpose of the transaction' for which the
customer has paid for is 'carriage by air'. Therefore, the
'relevant supply' is the actual travel and where this does
not occur, there has been no 'taxable supply' to attract
payment of GST.2
In the appeal to the High Court, the Commissioner argued that
under the statutory scheme for payment of GST in the A New Tax
System (Goods and Services Tax) Act 1999
(Act), Qantas made a supply in connection with the
unused fare and that the fare was properly included in the
calculation of GST for that assessable tax period. The correct
issue for determination is 'whether a taxable supply was
made', not 'what sort of supply was made'; the issue
that was arguably considered in error by the Full Court. The
Commissioner argued that the Full Court had erred in its reasoning
by imposing words of limitation which are not contemplated by the
Act, leading to misplaced applications of case authorities, in
particular, that of the decision in FC of T v Reliance Carpet
Co Pty Ltd.3
The Commissioner argued that the contract between Qantas and the
customer formed at the time of the reservation, conferring rights
on the passenger and imposing obligations on Qantas. The fare paid
was the consideration and the reservation, the withdrawal of a seat
from the inventory and the promise by Qantas of a seat on a flight,
comprised of the services supplied for to that consideration.
Qantas asserted that the reasoning of the Full Court was correct
and that without 'supply for consideration', there was no
'taxable supply' within the meaning of section 9-5 of the
Act. Qantas argued that the contemplated supply, being the actual
flight, did not occur in the circumstances in dispute, and that
there is no other identifiable supply for which the fare was
The High Court's decision is currently reserved.
2Qantas Airways Limited v Commissioner of
Taxation  FCAFC 113 at . 3(2008) 236 CLR 342.
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