The natural construction of the GST Act would have considered that the supply of foreign currency is a supply of money and therefore a financial supply which is input taxed.

However a company which converted Australian currency into foreign currency on the departure side at the airport sought to argue that the supply of the foreign currency was a supply of a right for use outside Australia and therefore was a GST free supply.

One would think that it would not matter whether a supply is input taxed or is GST free in that there is no GST applicable. However the importance of the difference is the input tax credits. A person who makes input taxed supplies is only entitled to input tax credits on creditable acquisitions to the extent that it does not make input taxed supplies whereas there is no such limitation on a person making GST free supplies.

One would think that the issue is fairly clear. However there were differing opinions among the judges of the Full Bench of the Federal Court in a recent case. One judge quite properly ruled that what had taken place was a supply of foreign currency which is a financial supply that is an input taxed supply and therefore quarantined from GST both on the supply and creditable acquisition sides of the transaction. It could not be artificially split into also being a supply of a right. A supply of money is not a supply of rights under the GST legislation.

Although he came to the same conclusion as the judge at first instance and one of his fellow judges, he said this was a simpler explanation than the statutory construction approach taken by the latter two judges. The statutory construction approach taken by the other two judges on the Full Court resulted in two different conclusions, one of the judges ruling that it was a supply of rights and the other that it was not.

Therefore there can be difficulties of interpretation of the GST legislation. Nevertheless the logical approach was that what was taking place was a financial supply and therefore input taxed. There was no need to look further to see if there was some other supply taking place.