30 Sep 09 Supply of foreign currency not GST-free - Travelex
The Full Federal Court, by majority (Stone and Edmonds JJ, Mansfield J dissenting), has dismissed the taxpayer's appeal from the decision of Emmett J, who held that the sale by the taxpayer of foreign currency (Fijian dollars) at Sydney Airport to a passenger who had passed through the departure side of the Customs barrier was not a GST-free supply within Item 4(a) in the table in s 38-190(1) of the GST Act.
Item 4 provides that a supply (except to the extent that it is a supply of goods or real property) is GST-free if it is a supply that is made in relation to rights if: (a) the rights are for use outside Australia; or (b) the supply is to an entity that is not an Australian resident and is outside Australia when the thing supplied is done. It was common ground that the foreign currency was neither goods nor real property. The question for decision, therefore, was whether the supply of the foreign currency was a supply "in relation to rights".
The taxpayer argued that the right to use the Fijian currency as legal tender in Fiji, which was supplied for use outside Australia, was the relevant right that had been supplied for the purposes of item 4(a).
In reply, the Commissioner submitted that the dominant aspect of the supply in question was the supply of the actual bank notes, not the rights that flowed from the acquisition of the bank notes. In making that submission, the Commissioner relied on the definition of "supply" which includes in s 9-10(2)(e) "a creation, grant, transfer, assignment or surrender of any right". In the Commissioner’s view, Item 4 in the table in ss 38-190(1) does not apply to a supply of rights that are merely ancillary or incidental to the dominant aspect of the supply.
Stone J (Edmonds J agreeing) rejected the taxpayer's submission, instead, their Honours accepted the Commissioner's submission. Stone J said, at para 55:
"Generally the GST Act avoids describing supplies in technical legal language in favour of describing them as practical business transactions "made in the course or furtherance of an enterprise that you carry on"; s 9-5(b). Consistent with that approach one just would not speak of a transaction such as the Fijian Currency Transaction as being either a supply of rights or a supply in relation to rights."
Mansfield J, dissenting, said at para 23:
"In my judgment, the supply of Fijian bank notes was a supply in relation to rights for use outside Australia, within the meaning of item 4 of s 38-190(1) of the GST Act. As noted, it was a supply of a thing and it was clearly for use outside Australia. There is no element of "consumption" within Australia of those bank notes. The supply of that thing is capable of falling within the description in s 38-190(1). If the bank notes were "goods", so as to come within s 38-185(1), they would have been GST exempt, being exported immediately upon their issue and not re-imported: s 38-185(2). One may ask rhetorically what would be the legislative policy behind a supply of bank notes in the circumstances not being GST-free, when exported goods and services generally are GST-free. None is apparent to me. None was put forward by the [Commissioner]."
Travelex Limited v FCT  FCAFC 133 (Full Federal Court; Mansfield, Stone and Edmonds JJ; 29 September 2009).
For a copy of the decision, go here