Commissioner of Taxation v Qantas Airways Limited

The Commissioner of Taxation appealed to the High Court of Australia against a decision of the Full Court of the Federal Court concerning the application of goods and services tax (GST) to airfares that were either non-refundable or refundable but unclaimed by the passenger. The dispute centred on whether Qantas Airways Limited was liable to remit GST on such fares when a customer cancelled their flight or failed to take it.

The legal issues before the High Court were whether a taxable supply had been made under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) in circumstances where a passenger paid for air travel but did not undertake the flight, and whether the airline was liable to remit GST on non-refundable or unclaimed refundable fares. Specifically, the court had to determine what constituted the "supply" and the "consideration" for that supply in the context of airline ticket sales.

The High Court allowed the Commissioner's appeal, setting aside the Full Court's orders. The Court reasoned that the essence and sole purpose of the transaction between the airline and the customer was the carriage by air. If the actual travel did not occur, there was no taxable supply of carriage. The Court distinguished this from situations where the airline retained the fare as a consequence of the passenger's failure to board, noting that in such cases, there had been no failure by the airline in its performance of the contract. The Court concluded that the Full Court had erred in looking for other "acts" that might satisfy the definition of supply when the primary supply, carriage, had not occurred.

Consequently, the High Court ordered that the appeal to the Full Court be dismissed with costs, and the Commissioner's appeal to the High Court was allowed with costs.