On 2 May 2014 the ATO published an interim Decision Impact Statement on the decision of the Full Court of the Federal Court in ATS Pacific Pty Ltd v FCT  FCAFC 33. Note that this is an interim statement only, because the taxpayer has lodged an application for special leave to appeal to the High Court. A final Decision Impact Statement will be issued after the finalisation of the High Court proceedings.
The case was about an Australian travel company (ATS), which carried on an enterprise of contracting for and making supplies to non-resident travel agents (“NR Travel Agents”) in relation to accommodation and other travel services in Australia (“Products”) which were then provided to non-resident tourists (“NR Tourists”) by Australian service providers. At first instance in the Federal Court, Bennett J held that the taxpayer contracted to supply, or ensure the supply of, the Products to the non-resident tourists, and their supply was not exempt under s 38-190 of the GST Act. In contrast, Bennett J held that the amount by which the fees charged by the taxpayer to the non-resident travel agents exceeded the cost of the Products (referred to in the judgment as “the margin”), being a fee for the arranging and booking service provided by the taxpayer (which the court held was a separate supply), was GST-free pursuant to item 2 in the table in s 38-190(1) of the GST Act: ATS Pacific Pty Ltd v FCT  FCA 341.
The Full Court of the Federal Court rejected the taxpayer’s appeals and upheld the Commissioner’s appeals. The court held that the taxpayer made one supply only, and that this supply was properly characterised as the supply of a promise to a NR travel agent to ensure that the Products were supplied to the NR tourists. The court found that this supply was wholly taxable, and that no part of the supply was GST-free.
The ATO has outlined the following administrative treatment in the light of this decision.
In the previous version of this interim Decision Impact Statement, the Commissioner advised affected taxpayers that they may lodge GST returns in accordance with Justice Bennett’s decision (for any activity statements lodged on or after 15 April 2013), without the Commissioner amending their assessments. The Commissioner noted, however, that if he was successful in his cross-appeal, he would, subject to further appeal processes being exhausted, seek to recover:
- any unpaid GST on the margin that results from lodging in this manner, and
- any refunds paid to taxpayers that, following Justice Bennett’s decision, claimed refunds of GST they paid on the margin in previous tax periods.
The Commissioner will seek to recover the amounts in question only if, after the finalisation of any High Court proceedings, the Full Federal Court decision stands.
Affected taxpayers do, however, have the option of self-revising activity statements and voluntarily paying the relevant amounts now. For any taxpayer that chooses to do this, the general interest charge (GIC) applying to the amounts in question will be remitted in full (providing the self-revisions and payments are made within 28 days of the publication of this version of the interim DIS).
Taxpayers that choose to pay amounts now should contact the following ATO officer by email or by phone to confirm that the appropriate revisions to activity statements have been made and the resulting liabilities paid. This will ensure that any applicable GIC is remitted:
Craig Morelande - ATO Debt - Strategic Recovery
PH: (07) 3149 5173
On the question of refund requests for previous tax periods, the ATO advises that some taxpayers have made requests for the Commissioner to exercise the discretion under s 105-65 of Schedule 1 to the Taxation Administration Act 1953 to refund GST they paid on the margin in previous tax periods. The Commissioner appreciates the effort that these taxpayers have gone to in providing data to support their requests. However, the Commissioner will cease to consider these requests (which are based on Justice Bennett’s decision at first instance). Should the High Court overturn the Full Federal Court’s decision, the Commissioner will resume consideration of the requests, if appropriate.
The Full Federal Court decision overturns Justice Bennett’s decision at first instance. The Commissioner expects that affected taxpayers will lodge activity statements in accordance with the Full Federal Court decision.