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The ATO has released a Decision Impact Statement setting out its interim response to the decision of the Federal Court in ATS Pacific Pty Ltd v FCT [2013] FCA 341. The case concerned the characterisation, for GST purposes, of supplies made by an inbound tour operator (ITO) to its non-resident travel agent clients. On the primary issue, the Court found that the supply made by the taxpayer to the travel agents was properly characterised as supply of the components of a tour package or the right to that supply or the promise to provide it, as the Commissioner contended.

The Court also found that, in addition to supplying a promise to provide the products, the taxpayer made a separate supply of arranging services, which was GST-free under s 38-190 GST Act.

Finally, the Court found that s 105-65 (as it then was) of Sch 1 to the Taxation Administration Act 1953 gave the Commissioner a discretion in relation to the refunds sought by the taxpayer for periods ending on or before 30 June 2008.

An appeal and a cross-appeal have been lodged.

The Commissioner considers it appropriate to administer the law in the manner set out in the Decision Impact Statement between now and the time the appeal and cross-appeal are decided.

During this period, the Commissioner will not make any amended assessments in a manner that is inconsistent with the existing Federal Court decision. Accordingly, taxpayers may lodge returns on the basis of either this decision or the published ATO view, without the Commissioner making amended assessments. However, the Commissioner will make amended assessments where taxpayers lodge on the basis that their entire transaction (and not just the margin) is GST-free.

If the Commissioner is successful in his cross-appeal, he will (subject to further appeal processes being exhausted) amend assessments and seek to recover any unpaid GST on the margin. Similarly, if the Commissioner is not successful in his cross-appeal, but the Full Court’s reasoning suggests that only a class of ITOs would be affected by the decision, he will seek to recover any unpaid GST on the margin from ITOs that do not fit within the relevant class.

Claims for refunds of overpaid GST for previous tax periods will be subject to the operation of s 105-65. The Commissioner is currently seeking independent legal advice on the application of s 105-65. Following receipt and review of this advice, the Commissioner may update this Decision Impact Statement.

A taxpayer’s entitlement to a refund of overpaid GST relating to a tax period commencing before 1 July 2012 will generally expire unless, within four years from the end of that tax period, the taxpayer notifies the Commissioner of its entitlement to the refund. To preserve any entitlement to refunds for past transactions, taxpayers can notify the ATO (through one of the methods outlined in the Decision Impact Statement) of their intention to claim the refund at a later date (for example, as soon as practical after the appeal and cross-appeal have been decided and any further appeal processes are exhausted).

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