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Qantas loses GST battle with ATO

On 2 October 2012, a landmark decision was handed down by the High Court of Australia in favour of the Commissioner of the Taxation.

 

The majority held that that Qantas must pay GST to the Commissioner of Taxation on tickets sold for flights that were never taken, and where customers never sought a refund.
 
Qantas argued that it was entitled to keep $34 million in GST on non-refundable and refundable but unclaimed tickets as it had not made a supply.
 
On the other hand, the Commissioner of Taxation argued that Qantas had made a supply by keeping its fares for its customers.
 
However, after examining the terms and conditions of Qantas’ contracts with its passengers, the majority held that Qantas does not provide an unconditional promise to carry passengers or their baggage on a particular flight. 
 
Instead the majority held that, “[Qantas] supplied something less than that. This was at least a promise to use the best endeavours to carry the passenger and baggage having regard to the circumstances of the business operations on the airline. This was a ‘taxable supply’ for which the consideration, being the fare was received.”
 
This case makes it clear that taxable supply is made incurring GST liability even if a passenger does not show up for their flight. This decision could therefore implicate other businesses that charge GST on non-refundable tickets, such as tour companies, ticket operators and other transport operators.
 

Posted in: Tax & ATO News Australia at 05 October 12

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Tax & ATO News Australia

Author: David Hughes

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