Qantas tax scam?

[Stephen65]

The courts must have this wrong. If I'm GST registered, I'll reclaim the GST whether or not I take the flight.

The ATO loses out, as I've legitimately reclaimed the GST on an invoice for services. If the service deliverer doesn't have to deliver the services the GST collected should still be payabl.

The only way the court decision would make sense is if the QF invoice stated something like "TAX INVOICE WHEN FLOWN" or equivalent.

If this court decision stands (it might get appealed to the High Court) I don't think you are entitled to claim that GST.

To claim GST on a transaction it has to be a "creditable acquisition" which is defined to mean acquiring something with the supply of that something being a taxable supply. If there is no taxable supply in the case of flights you don't take then there can't be a creditable acquisition either so the symmetry is maintained and the ATO does not lose out.

Caveat - this is my off the top of my head answer based on general principle, there may be something buried away in the GST special rules that deals with this.

 

[NM]

So all they will do is add a cancellation fee of 1/11th of the fare price. So you purchase a non-refundabe domestic fare for $110. Then you cancel and ask for the GST to be refunded. They say "certaily sir, we will process the $10 refund and apply it as a credit towards your $10 cancellation fee ... hmm, shall we just call it even?"

 

[serfty]

What was this court case?

All we have is the OP which indicated such happened.

... Qantas has just succeeded in a court case with the argument that if the passenger doesn't actually take the flight, there is no "taxable supply" and therefore Qantas doesn't have to pay the GST amount on to the government ... even if the fare is non-refundable. ...

When, Where & Why?

 

[markis10]

What was this court case?All we have is the OP which indicated such happened.When, Where & Why?

Federal Court in Sydney last Friday. Federal Court GST ruling set to impact services sector - Legal matters

 

[oz_mark]

So all they will do is add a cancellation fee of 1/11th of the fare price. So you purchase a non-refundabe domestic fare for $110. Then you cancel and ask for the GST to be refunded. They say "certaily sir, we will process the $10 refund and apply it as a credit towards your $10 cancellation fee ... hmm, shall we just call it even?"

Don't know about that. There was a change to the legislation that only allowed a company to seek a refund on the GST if they had refunded it to the customer back in 2008 (which is after the period that this case was about).

Press Release - Indirect Tax: Refunds and Amendment Time Limits [06/05/2008]


Which does of course beg the question of how much this decision would affect a cancellation now!

 

[airbound]

What was this court case?

All we have is the OP which indicated such happened.

When, Where & Why?

See Qantas Airways Ltd v Federal Commissioner of Taxation [2011] FCAFC 113.

See also Qantas Airways Ltd v Federal Commissioner of Taxation [2010] AATA 977 (the decision appealled against).

 

[SteveJohnson]

"GST ruling on $34m Qantas kept from no-show customers"

The High Court will rule today on whether Qantas can keep an extraordinary $34 million it has collected in GST from customers who did not show up, in a landmark judgment that hinges on what exactly is a service.
The Tax Office says Qantas and its subsidiary Jetstar owe $26.6 million in GST they collected on forfeited flights in the first eight years of the tax.
Qantas owes a further $7.6 million in GST it collected on tickets for which customers never bothered to claim refunds.
The airline says it cannot owe the money because it did not supply a flight, meaning it did not supply a service. The Tax Office says the fact that Qantas kept the fares and persuaded its customers it had done enough to keep the fares meant it did supply a service of some kind.

GST ruling on $34m Qantas kept from no-show customers

 

[trippin_the_rift]

Re: "GST ruling on $34m Qantas kept from no-show customers"

Will be an interesting outcome. Both sides have a solid argument.

The way I see it is when you book a flight you are buying a booking, and that booking trades for the flight. Similar to how prepaid mobile credit works where there is no GST when you buy the voucher and it's "enabled / gst taxable" once activated on the network.

Catch is, this means there are millions of businesses that have claimed GST credit for domestic flights which they may not have taken.

 

[samh004]

Just read about this in the SMH, I agree with Qantas' argument, but also realise if they win they could be facing a class action. Though I guess a lot of services could be facing a class action too, who would in turn be suing the tax office for the GST they paid back, so if Qantas win, it's going to be a real mess all over.

Assuming Qantas win, the issue is whether the GST portion of a fare is as non-refundable as the fare itself. I have no idea what the law says about that, but would assume its part of the fare as fares these days are priced to include it. At least that'd be their argument.




 

[medhead]

GST might be price inclusive but it is still a separate tax. The problem I see is that qantas must be claiming they never supplied a service. In which case I'm not sure how they think collecting GST is acceptable or possibly legal.


Sent from the Throne

 

[samh004]

GST might be price inclusive but it is still a separate tax. The problem I see is that qantas must be claiming they never supplied a service. In which case I'm not sure how they think collecting GST is acceptable or possibly legal.

If they win this does have implications for other businesses too right? Those other businesses may not have held onto the money, but customers might want it back regardless.

As an example, I booked a flight on Tiger in 2010 I think it was. Didn't take it, assume there was GST on the fare, but received no refund of it. If Qantas wins then Tiger, via the tax office, owes me some money?



 

[serfty]

If they win this does have implications for other businesses too right? Those other businesses may not have held onto the money, but customers might want it back regardless.

As an example, I booked a flight on Tiger in 2010 I think it was. Didn't take it, assume there was GST on the fare, but received no refund of it. If Qantas wins then Tiger, via the tax office, owes me some money?



More to the point, what about a business who purchases two "non refundable" tickets for their employee for travel on the same day? Only one is intended to get used, but input tax credits are claimed on both.

 

[cmon0005]

Qantas loses case:
Qantas loses landmark GST court case - ABC News (Australian Broadcasting Corporation)

 

[serfty]

Qantas to cough up GST on unused tickets

yEp!

The High Court ruled by majority that Qantas made a "taxable supply" whenever it received a booking.


"Flights were sold and bookings taken on the basis that Qantas would use its best endeavours to carry the passenger and baggage," the judgment says.


"Consequently, even if the passenger did not actually travel, there was a taxable supply incurring GST liability."


That meant Qantas had to hand over the tax passengers paid.


Qantas originally appealed to the Federal Court when the Tax Office demanded GST payment, and it ruled in favour of Qantas.


But the taxation commissioner launched another appeal to the High Court, leading to today's decision.

​

 

[markis10]

A quick review of the material does not answer the question, over what period is the $34 Million been collected, given it represents $340 Million of fares where refunds were not given????

 

[oz_mark]

A quick review of the material does not answer the question, over what period is the $34 Million been collected, given it represents $340 Million of fares where refunds were not given????

That would likely be:

But the Tax Office, whose claim related to GST collected in the first eight years of the tax,

Qantas to cough up GST on unused tickets

 

[markis10]

That would likely be:


Qantas to cough up GST on unused tickets

Thanks, so on average $42.5 Millon dollars of throwaway ticket revenue yearly, I wonder what it averages now?

 

[NM]

So if I buy an item from a grocery or department store, and obviously the price I pay includes GST, the store has to send the GST component to the ATO. If I then return the goods for a refund, does the store have to refund the GST as well or does the ATM deem that there was a "best endeavour" by the store and hence the store is still required to pay the ATO the GST amount, even though I no longer have the item? Its a thin line between returning an unwanted product for a refund and cancelling or no-showing for an unwanted flight.

 

[anat0l]

...the ruling would not affect the company's [Qantas'] bottom line because the GST had already been paid to the tax office.

I don't get it. If the GST has already been paid to the government, then who is exactly chasing after who for what amount of money?

Unless the government is coming back to claim interest, or underpayment dues...

 

[markis10]

I don't get it. If the GST has already been paid to the government, then who is exactly chasing after who for what amount of money?

Unless the government is coming back to claim interest, or underpayment dues...

They probably paid the amount after the first case was heard, this is the second appeal.