Like many airlines, Qantas regularly overbooks flights on the assumption that not all passengers will turn up. Qantas remitted GST on fares received but wanted to get it back in cases where no refund was claimed by the purchaser or none was available. The Commissioner of Taxation took the position that the executory nature of the passenger contracts didn’t matter; GST was payable at the end of the tax period in which the ‘supply’ of services had occurred, not on performance of the contract to provide air services. The Australian federal court reasoned that what the passenger pays for is carriage by air, finding for Qantas.
The High Court of Australia has reversed that judgment in favour of the taxman: Commissioner of Taxation v Qantas Airways Ltd,  HCA 41. The majority of the court agreed with the tax commissioner that ‘supply’ includes rights, obligations and services in addition to the proposed flight. In any event the conditions attached to the passenger contract did not provide an unconditional promise that the passenger and his or her baggage would in fact be carried on a particular flight. Qantas ‘supplied something less than that’ – merely a promise to use best efforts to get person and baggage from A to B – but even that was a taxable supply for the purposes of GST legislation. Heydon J dissented, for the reasons stated by the court below. He did acknowledge the ‘superficially unattractive feature’ of the argument put forward by Qantas: it was essentially asking for money that passengers never intended it to have but instead assumed would go to the government. This was not a fatal flaw in the Qantas argument, in his view: to the extent that the tickets were not refundable or passengers failed to exercise rights to a refund, ticket purchasers had no cause for complaint.
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