Commissioner of Taxation v Secretary to the Department of Transport (Vic)
Document type: Decision Impact Statement
Venue: Federal Court of Australia (VID 845 of 2009)
Judgment date: 9 July 2010
Date published: 20 June 2012

Summary of decision:
Outlines the ATO's response to this matter which concerned whether a subsidy provider made creditable acquisitions in respect of the subsidy payments and was therefore entitled to input tax credits under the GST Act.

Overview of facts:
The Department of Transport (DOT), through the Victorian Taxi Directorate (VTD), administers taxi-cab licences and the Multi Purpose Taxi Program (MPTP) in the State of Victoria pursuant to the Transport Act 1983 (Vic). The DOT is registered for GST. | Under the MPTP, the DOT provides a 50% subsidy of the metered taxi-cab fare (up to a specified maximum per trip and a specified maximum per year) for taxi-cab travel to Victorian residents who suffer from a severe and permanent disability and are unable to independently access public transport (a MPTP Member and for the purposes of the transactions in question, the passenger in the taxi). | Every taxi-cab licence requires the taxi-cab to be fitted out to facilitate the implementation of the MPTP and to be operated in accordance with the terms of the MPTP. | The metered taxi-cab fare payable by a passenger is calculated at the end of the taxi-cab ride. The passenger pays the metered taxi-cab fare, less the subsidy. | The taxi-cab trip undertaken by the passenger is reported to the VTD. Before the trip commences, the passenger presents an MPTP card to the taxi-cab operator which is then validated electronically by DOT. The DOT pays the MPTP subsidy to the taxi-cab operator or, if the passenger paid the whole of the fare, the DOT pays the MPTP subsidy to the passenger. | Issues decided by the court | The issue in dispute in this matter was whether the DOT made creditable acquisitions in accordance with section 11-5 of the GST Act in respect to the payments it made to taxi-cab operators under the MPTP and was therefore entitled to input tax credits under section 11-20 of the GST Act. | The majority of the Full Federal Court (Kenny and Dodds-Streeton JJ) held that the DOT made creditable acquisitions in respect to the payments it made under the MPTP. | The majority held that a taxi-cab operator made two supplies: the supply of transport to the passenger and the supply to the DOT of the service of transporting the MPTP member. The subsidy payment was consideration for the supply to the DOT and therefore the DOT acquired a taxable supply from the taxi-cab operator for the purposes of paragraph 11-5(b). | The Court observed that the suggestion that there will be a supply made in every case that consideration is provided is an erroneous proposition. | Having found that the DOT made creditable acquisitions in respect of the payments it made under the MPTP, it concluded that the DOT was entitled to input tax credits under section 11-20 of the GST Act.

Issues decided:
The issue in dispute in this matter was whether the DOT made creditable acquisitions in accordance with section 11-5 of the GST Act in respect to the payments it made to taxi-cab operators under the MPTP and was therefore entitled to input tax credits under section 11-20 of the GST Act. The majority of the Full Federal Court (Kenny and Dodds-Streeton JJ) held that the DOT made creditable acquisitions in respect to the payments it made under the MPTP. The majority held that a taxi-cab operator made two supplies: the supply of transport to the passenger and the supply to the DOT of the service of transporting the MPTP member. The subsidy payment was consideration for the supply to the DOT and therefore the DOT acquired a taxable supply from the taxi-cab operator for the purposes of paragraph 11-5(b). The Court observed that the suggestion that there will be a supply made in every case that consideration is provided is an erroneous proposition. Having found that the DOT made creditable acquisitions in respect of the payments it made under the MPTP, it concluded that the DOT was entitled to input tax credits under section 11-20 of the GST Act.

ATO view of decision:
The Commissioner considers that, as a result of the decision, a broader approach than that taken by the ATO to date when analysing subsidy arrangements of this kind is required. | In that regard, the Commissioner notes that the majority of the Court took into account two factors in deciding that the taxi-cab operators made supplies to the DOT for which the subsidy payments were held to be consideration: • Having regard to the arrangements for electronic 'validation' before the journeys began, the taxi-cab operator was doing what the DOT had 'in effect' asked it to do on the basis that the DoT would make the payment. • The identified supply to DOT of this service of transporting the MPTP member enabled the DOT to fulfil its objects under the relevant Transport Act and to perform its functions. [Paragraph 56 of judgment] | • Having regard to the arrangements for electronic 'validation' before the journeys began, the taxi-cab operator was doing what the DOT had 'in effect' asked it to do on the basis that the DoT would make the payment. • The identified supply to DOT of this service of transporting the MPTP member enabled the DOT to fulfil its objects under the relevant Transport Act and to perform its functions. [Paragraph 56 of judgment]

Administrative treatment:
Implications on current Public Rulings & Determinations | The Commissioner issued addenda on 14 December 2012 to GSTR 2006/9 and GSTR 2006/10 that set out the Commissioner's views as to when supplies may be identified under a tripartite arrangement following the Court's decision. | The Commissioner issued GSTR 2012/2 on 30 May 2012 which sets out the Commissioner's views on when a financial assistance payment is consideration for a supply. GSTR 2000/11 was withdrawn, subject to a transitional provision extending to 1 January 2013, from 30 May 2012. GSTR 2012/2 references the Court's decision. | The Commissioner has also reviewed the following products and considers that the views expressed there do not require amendment following the Court's decision: GSTD 2001/1, GSTR 2001/4, GSTD 2006/1, and GSTR 2006/1.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 7-1 7-5 7-10 7-15 9-5 9-10 9-15 9-20 9-40 9-70 9-75 11-5 11-10 11-15 11-20 11-25 17-5 29-10 33-5 35-10 149-5 149-15 184-1 195-1 Subdivision 40-A Div 78 Div 111 A New Tax System (Australian Business Number ) Act 1999 41 Acts Interpretation Act 1901 (Cth) 15AA Transport Act 1983 (Vic) 2(1) 4 86 87 88 90 139 140 143 143 144 146 147 147 149 150 153 156 157 158 Div 5 of Part VI Transport (Taxi-Cab) Regulations 2005 (Vic) 29 41 43
Case references: Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 [1892] 2 QBD 484 Customs and Excise Commissioners v Redrow Group plc [1999] 1 WLR 408 HP Mercantile Pty Ltd v Federal Commissioner of Taxation (2005) 143 FCR 553 [2005] FCAFC 126 2005 ATC 4571 60 ATR 106 Mallinson v Scottish Australian Investment Co Ltd (1920) 28 CLR 66 (1920) 26 ALR 225 [1920] HCA 51 Secretary to the Department of Transport (Victoria) v Commissioner of Taxation (2009) 261 ALR 39 [2009] FCA 1209 (2009) 2009 ATC 20-140 (2009) 73 ATR 690 TT-Line Company Pty Ltd v Federal Commissioner of Taxation (2009) 181 FCR 400 (2009) 2009 ATC 20-157 (2009) 74 ATR 771
Subject references: GST multiparty arrangement government entity taxi-cab operators Multi Purpose Taxi Program transport services of disabled passengers subsidy creditable acquisition acquisition supply taxable supply consideration input tax credits