ATO ID 2001/115: GST and Temporary exchange of a fishing quota
Date of decision: 24 March 2000
Business line: Indirect Tax

Issue
Is entity A, the holder of an 'individual transferable quota' in a fishery, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it temporarily exchanges its quota with the quota of entity B?

Decision
Yes, entity A is making a taxable supply under section 9-5 of the GST Act when it temporarily exchanges 'individual transferable quotas' with entity B.

Facts
Certain species of fish are protected by a quota system. In order to fish for these protected species, it is a requirement to hold an 'individual transferable quota' (ITQ). Entity A holds an ITQ. It agrees to exchange ITQs with entity B for one year. The ITQs revert back to the original holders at the end of the year. Entity A is registered for goods and services tax (GST). The temporary exchange of ITQs is in the course of entity A's enterprise and is connected with Australia.

Reasons for decision
Summary: An entity makes a taxable supply where the requirements of section 9-5 of the GST Act are satisfied. One of the requirements of a taxable supply is that an entity must make a supply for consideration (see paragraph 9-5(a) of the GST Act). The term 'supply' is broadly defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'. Paragraph 9-10(2)(e) of the GST Act further states that a 'supply' includes a creation, grant, transfer, assignment or surrender of any right. An ITQ consists of a bundle of rights which are transferable. The exchange of these rights is therefore a supply within the specific meaning of the term under paragraph 9-10(2)(e) of the GST Act. Consideration is defined in section 195-1 of the GST Act to mean 'any consideration within the meaning given by sections 9-15 and 9-17, in connection with the supply.' Subsection 9-15(1) of the GST Act provides that a payment, or any act or forbearance is consideration for a supply if it is 'in connection with', 'in response to or for the inducement of' a supply. Paragraph 12 of Goods and Services Tax Ruling GSTR 2001/6 also provides that consideration includes a payment in a non-monetary or in an 'in kind' form. This includes acts, forbearances, and goods or property. The consideration, in this instance, is non-monetary in that the consideration for the supply made by entity A of its quota to entity B is the supply of entity's B quota to entity A. Accordingly, entity A makes a supply for consideration when it exchanges its quota with the quota of entity B. The supply of the ITQ by entity A is a taxable supply in this case as the supply satisfies the other requirements of a taxable supply under section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. In the case of non-monetary consideration, the price of the supply will be its GST inclusive market value (paragraph 9-75(1)(b) of the GST Act).]

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-5(a) subsection 9-10(1) paragraph 9-10(2)(e) section 9-15 paragraph 9-15(1)(a) section 9-17 paragraph 9-75(1)(b) Division 38 Division 40 section 195-1
Related ATO interpretative decisions: ATO ID 2001/113 | ATO ID 2001/114
Subject references: Goods and Services Tax GST primary production GST fishing GST supplies acquisitions GST supply Taxable supply