14 Jan 09 Sale of foreign currency not GST-free - TravelexThe Federal Court (Emmett J) has held that the sale by the taxpayer of foreign currency (Fijian dollars) at Sydney Airport to a passenger who had passed through the departure side of the Customs barrier was not a GST-free supply by reason of Item 4(a) in the table in s 38-190(1) of the GST Act.
The taxpayer argued that the sale of the foreign currency was a "supply that is made in relation to rights", being the rights the holder of the foreign currency had against the issuer of the foreign currency. In contrast, the Commissioner argued that that phrase should be construed as a shorthand expression meaning a "supply" of rights by the means identified in the definition of "supply" in s 9-10 and, in particular, s 9-10(2)(e), which refers to the "creation, grant, transfer, assignment or surrender of any right". The Court agreed with the Commissioner's interpretation, and held that the sale of the foreign currency did not involve the creation, grant, transfer, assignment or surrender of a right within the meaning of s 9-10(2)(e).
The Court said, at para 49:
"Item 4 only applies to a supply if the essential character or substance of the supply, or of a separately identifiable part of the supply, is one of rights. Item 4 does not apply where the supply of rights is merely integral, ancillary or incidental to another dominant part of the supply, the supply being characterised by the dominant part. Before a supply can be said to be made in relation to a right within Item 4, the right must bind the parties in some way. The word right has a very broad meaning under the general law and might fairly be described as a benefit or claim entitling a person to be treated in a certain way. A supply that does not bind the parties in some way is not a supply that is made in relation to rights. A supply that is made in relation to rights in Item 4 in the table in s 38-190(1) means a supply of the rights by way of the creation, grant, transfer or assignment of the rights or a supply by way of the surrender of the rights."
Travelex Limited v FCT  FCA 1961 (Federal Court, Emmett J, 19 December 2008).
For a copy of the decision, go here.