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 [2011] 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 paid.

The High Court’s decision is currently reserved.