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The Full Court of the Federal Court (Edmonds, Jagot and Bromberg JJ) has dismissed the appeal of the taxpayer from the decision of the AAT in AP Group Limited and FCT [2012] AATA 409. The Commissioner's cross appeal was also dismissed.

The taxpayer carried on business through various car dealerships (wholesale and retail).

The appeal and cross-appeal concerned GST liability in respect of four classes of payments in the car industry, paid by the manufacturer to the taxpayer on sale of a car to a customer. The payments were described by the Full Court as:

  • The Toyota "fleet rebates";
  • The Toyota "run-out model support" payments;
  • The Ford "retail target incentive" payments; and
  • The Subaru "wholesale target incentive" payments.

The AAT held that the Toyota "fleet rebates" and Toyota "run-out model support" payments were consideration for the supply of cars to the taxpayer’s customers but not consideration for the supply of services by the taxpayer to Toyota; held that the Ford "retail target incentive" payments were not consideration for the supply of anything to either the taxpayer’s customers or Ford; and held that the Subaru "wholesale target incentive" payments were not consideration for the supply of anything to Subaru.

The Full Court agreed.

In relation to the "fleet rebates", Edmonds and Jagot JJ said at para 44:

"First, and contrary to the AP Group’s submission about the Tribunal treating the payments inconsistently, the supply in this case need not be characterised as the supply of a service by the dealer to Toyota, being the service of supplying a non-fleet car to a fleet customer. The supply is the supply of the car by the dealer to the customer. It is the consideration for that supply which involves two elements. Second, and consistently with s 9-15(2) of the GST Act it does not matter that the payment was by Toyota rather than by the recipient of the supply, in this case, the fleet customer. Third, the GST Act directs attention to the particular supply. For a fleet customer to purchase a non-fleet car two things have to happen. The customer must negotiate a price with the dealer (or Toyota) which will include the fleet discount. Toyota must pay to the dealer the fleet rebate. Fourth, the lack of knowledge of the fleet customer of the arrangements between Toyota and the dealer is one factor only but cannot be determinative on the facts overall. Fifth, the internal characterisation of the payment as a rebate for the wholesale transaction is also not determinative. Sixth (and in contrast to the 'run-out model support' payments) the amount of the fleet rebate had to be given by the dealer by way of discount to the fleet customer."

In relation to the "run-out model support" payments, Edmonds and Jagot JJ said at para 46:

"The same analysis applies to the Toyota 'run-out model support' payments. Again, for each car sold in accordance with one of the periodic 'run-out' programs Toyota conducted, Toyota would make a payment to the dealer. The appropriate level of assessment is thus the sale of the particular car which triggers the payment. As noted, there was no requirement that the dealer pass on any particular discount to the customer. In this sense, as the AP Group submitted, the 'run-out model support' payments functioned to give the dealer greater room to negotiate to shift old stock. But this function in the overall arrangements between the dealer and Toyota does not alter the fact that, in respect of the particular supply, the dealer would receive consideration from two sources, both the customer and Toyota."

In relation to the other two types of payment, Edmonds and Jagot JJ said at paras 48 and 53:

"In contrast to the 'fleet rebates' and 'run-out model support' payments none of these other payments are triggered by the sale of a particular car. The payments are part of wider programs in which dealers would have a strong incentive to participate but which do not depend on the sale of any particular car in any particular way...A dealer will always wish to sell as many cars as practicable and to move old stock to make way for new stock. So too a dealer will always wish its ordering arrangements to be the most efficient and economically beneficial to it. The manufacturer will have the same objectives. It is this context which underpins the Tribunal’s conclusion that the payments are not for the supply of anything by the dealer (at [86]). As the Tribunal said at [86] the dealer (which must be inferred to act in an economically rational manner in the ordinary course) will always want to run the business in this way. The fact that the dealer receives a payment as an incentive when certain thresholds associated with running the business in this way does not mean that the dealer is supplying a service to the manufacturer for consideration. If the incentive payment were not available there is no basis to infer that the dealer would not behave in the same way for free. For these reasons there cannot be said to be any supply for consideration in these arrangements."

AP Group Limited v FCT [2013] FCAFC 105 (Full Court, Federal Court; Edmonds, Jagot and Bromberg JJ; 18 September 2013).


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