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The Full Federal Court (Stone, Edmonds and Perram JJ) has upheld the taxpayer's appeal from the decision of the AAT, which had held that GST was payable by Qantas Airways in circumstances where a passenger books and pays for airline travel, but subsequently cancels the booking or does not turn up for the flight and does not receive a refund.

At issue was the question whether there was a supply for the purposes of the GST Act. The AAT held that what Qantas had done for such a passenger, and in return for the "fare" that the passenger had paid, was hold itself ready in accordance with its Conditions of Carriage (not a particular flight at a particular time or in a particular seat) to carry the passenger and his baggage and to avoid delay in doing so. According to the AAT, that "holding itself ready" was a sufficient service to give rise to the imposition of GST.

On appeal, Qantas argued that the air journey was the supply in contemplation, it did not occur, and therefore no supply occurred; as such no GST liability was, in the event, triggered. The Full Federal Court agreed. In rejecting the Commissioner's analysis that there were multiple supplies, Edmonds and Perram JJ said, at para 57:

"Here, the transaction does not even comprise numerous aspects. It merely comprises the provision of domestic air travel by Qantas. That is the substance and reality of the transaction, and, as the Tribunal correctly found, that is what (the purpose) the passenger pays his or her fare for. The Tribunal erred in artificially splitting the transaction, and in the absence of the principal supply, looked for things otherwise incidental to that supply."

Their Honours also said, at para 58:

"If there were any doubt as to what the fare is paid for, it is confirmed in the conditions of carriage for both Qantas and Jetstar which state: 'Your fare covers the flight(s) for you and your Baggage Allowance'."

Qantas Airways Limited v FCT [2011] FCAFC 113 (Full Federal Court; Stone, Edmonds and Perram JJ; 1 September 2011).


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