The High Court recently had to consider whether a sale of foreign currency on the departures side of the Customs barrier at Sydney International Airport to a traveller who intends to use the currency overseas, is GST- free. The taxpayer had failed at each instance in the Courts below. The decision was important to the taxpayer who was the currency supplier because if the supply was GST-free rather than input taxed, the taxpayer could claim any associated input tax credits.
The High Court held that while a supply of foreign currency is a financial supply for the purposes of GST, this does not quarantine that supply from other provisions of the GST legislation and in particular does not prevent the supply also being a supply of the rights that attend upon ownership of that foreign currency. This means that where it is evident that the currency is to be used overseas, the rights that attach to the currency are for use outside Australia. This means that the supply of the foreign currency in those circumstances in addition to being a financial supply is also a GST-free supply.
There is a tie breaker provision in the GST legislation where a supply is both an input taxed supply and a GST-free supply. In certain circumstances the tie breaker works to that the supply is GST-free rather than input taxed.