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01 Nov 11 GST refund refused - National Jet Systems

The AAT has held that the taxpayer was not entitled, pursuant to s 13 of the A New Tax System (Goods and Services Tax Transition) Act 1999, to a refund of GST (totalling $48,314,320.35 ) paid to the Commissioner in respect of payments received from Airlink Pty Ltd, a subsidiary of Qantas Airways Ltd, for the provision of aircraft and services under a lease agreement entered into in 1999, that is, prior to the date of Royal Assent to the A New Tax System (Goods and Services Tax) Act 1999.

The AAT so held because after entry into the agreement (and after the date of Royal Assent), the suite of goods and related services, viewed as a single supply, specifically identified in the agreement, was materially different to the supply identified before the Royal Assent date, as was the consideration for it.  On this basis, the consideration for supplies after the Royal Assent date was not "identified or capable of being worked out" by the pre-Royal Assent date agreement, as required by s 13.

If the AAT were wrong in this regard, the AAT held that the taxpayer had given the Commissioner a valid notice for the purposes of s 105-55 of Sch 1 to the Taxation Administration Act 1953 and item 16(2) of Schedule 2 to the Tax Laws Amendment (2008 Measures No 3) Act 2008, but that the Commissioner correctly exercised his discretion to refuse the refund. This was because there would be a windfall gain either to the taxpayer or Airlink. The AAT concluded, at para 79:

"In the present circumstances, there would be a windfall gain if a refund were to be made. Either National Jet would receive a windfall, or Airlink would, in circumstances where neither of them are or have been out of pocket on account of any overpaid GST. Ultimately, customers of Airlink have born the impact of GST and they would not enjoy any refund made. In these circumstances, if there was an amount refundable without consideration of the s 105-65 discretion, that discretion ought to be exercised and no refund made. A practical business approach to administration of the GST laws is not consistent with allowing windfall gains. And to the extent that community standards and expectations have a role to play, those standards and expectations would require denial of windfall gains for two large company groups where the real cost of the overpaid GST has been born by the wider community paying fares for airline travel and transportation."

National Jet Systems Pty Ltd and FCT [2011] AATA 766 (AAT, Justice Downes P and O'Loughlin SM, 31 October 2011).


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