TT-Line Company Ltd v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (NSD 685 of 2009)
Judgment date: 18 December 2009
Date published: 1 September 2011
Decision outcome: Favourable.

Summary of decision:
Outlines the ATO response to this matter which concerned whether payments were consideration for supplies made to third parties and whether the payments were specifically covered by an appropriation under an Australian law for GST purposes.

Overview of facts:
1. The Commonwealth Government established the Bass Strait Passenger Vehicle Equalisation Scheme (the Scheme) with the stated aim of reducing the costs associated with the transport by sea of passenger vehicles across Bass Strait. The Scheme operates under Ministerial Directions. Under the Scheme eligible passengers were entitled to a rebate in respect of the costs of transporting eligible vehicles on a Bass Strait crossing. The rebate in question was paid out of funds allocated by the Commonwealth under the Appropriation Act (No 1) 2007-2008 . | 2. The Ministerial Directions allow for the rebate under the Scheme to be paid either: a. directly to the commercial shipping service that provides the transport of the eligible passenger where that commercial shipping service provided a reduction in the eligible passenger's vehicle fare at the time of the booking of the travel; or b. directly to the eligible passenger where the eligible passenger did not receive a reduction in his or her fare. | a. directly to the commercial shipping service that provides the transport of the eligible passenger where that commercial shipping service provided a reduction in the eligible passenger's vehicle fare at the time of the booking of the travel; or b. directly to the eligible passenger where the eligible passenger did not receive a reduction in his or her fare. | 3. The matter proceeded by way of agreed facts, examining one particular transaction. Under the transaction, the appellant ("TT-Line") made a supply of transport service to an eligible passenger with an eligible vehicle. The fare paid by the eligible passenger for this service had been reduced by the amount of the relevant rebate. TT-Line claimed a rebate under the Scheme. | 4. TT-Line is a government related entity for the purposes of the GST provisions. | Issues decided by the court | The issues in dispute in this matter were: 1. Whether the amount received by TT-Line from the Commonwealth by way of reimbursement under the Scheme was consideration in connection with the supply of transport services to the passenger within the meaning of subsection 9-15(1) of the GST Act. 2. Whether the amount received by TT-Line from the Commonwealth by way of reimbursement under the Scheme was a payment made by one government related entity to another government related entity specifically covered by an appropriation under an Australian law within the meaning of paragraph 9-15(3)(c) of the GST Act. | 1. Whether the amount received by TT-Line from the Commonwealth by way of reimbursement under the Scheme was consideration in connection with the supply of transport services to the passenger within the meaning of subsection 9-15(1) of the GST Act. 2. Whether the amount received by TT-Line from the Commonwealth by way of reimbursement under the Scheme was a payment made by one government related entity to another government related entity specifically covered by an appropriation under an Australian law within the meaning of paragraph 9-15(3)(c) of the GST Act. | (1) Whether the payments fall within subsection 9-15(1) of the GST Act: | The Full Federal Court unanimously found that the payments were consideration under subsection 9-15(1) for the supply of transport services made by TT-Line to the eligible passenger. | (2) Whether the payments fall within paragraph 9-15(3)(c) of the GST Act: | The Full Federal Court unanimously found that the payments did not fall within paragraph 9-15(3)(c). | Emmett J. held that the object of the exemption in paragraph 9-15(3)(c) is to ensure that there will be no GST where the purpose of the relevant appropriation is to provide funds to a government related entity. To satisfy the provision, it must be clear that the appropriation is for the benefit of a government related entity. This was not the effect of the appropriation which was to provide a benefit to eligible passengers in respect of the carriage of eligible passenger vehicles (at [24]). | Edmonds J., with whom Perram J. agreed, found at [62], that paragraph 9-15(3)(c) should be interpreted by reference to the underlying policy that the GST is generally to apply to government related entities, organisations and instrumentalities - Commonwealth, State and local - in the same way as it does to non-government entities. The exclusion created by paragraph 9-15(3)(c) is only intended to operate where, by the terms of the appropriation, the services can only be supplied by a government related entity. It is not intended to extend to payments, pursuant to an appropriation, for a supply of services which can, under the terms of the appropriation, be supplied by a government related entity or a non-government related entity (even if the appropriation is otherwise specific as to amount and its particular purpose).

Issues decided:
The issues in dispute in this matter were: 1. Whether the amount received by TT-Line from the Commonwealth by way of reimbursement under the Scheme was consideration in connection with the supply of transport services to the passenger within the meaning of subsection 9-15(1) of the GST Act. 2. Whether the amount received by TT-Line from the Commonwealth by way of reimbursement under the Scheme was a payment made by one government related entity to another government related entity specifically covered by an appropriation under an Australian law within the meaning of paragraph 9-15(3)(c) of the GST Act. 1. Whether the amount received by TT-Line from the Commonwealth by way of reimbursement under the Scheme was consideration in connection with the supply of transport services to the passenger within the meaning of subsection 9-15(1) of the GST Act. 2. Whether the amount received by TT-Line from the Commonwealth by way of reimbursement under the Scheme was a payment made by one government related entity to another government related entity specifically covered by an appropriation under an Australian law within the meaning of paragraph 9-15(3)(c) of the GST Act. | (1) Whether the payments fall within subsection 9-15(1) of the GST Act:: The Full Federal Court unanimously found that the payments were consideration under subsection 9-15(1) for the supply of transport services made by TT-Line to the eligible passenger. | (2) Whether the payments fall within paragraph 9-15(3)(c) of the GST Act:: The Full Federal Court unanimously found that the payments did not fall within paragraph 9-15(3)(c). Emmett J. held that the object of the exemption in paragraph 9-15(3)(c) is to ensure that there will be no GST where the purpose of the relevant appropriation is to provide funds to a government related entity. To satisfy the provision, it must be clear that the appropriation is for the benefit of a government related entity. This was not the effect of the appropriation which was to provide a benefit to eligible passengers in respect of the carriage of eligible passenger vehicles (at [24]). Edmonds J., with whom Perram J. agreed, found at [62], that paragraph 9-15(3)(c) should be interpreted by reference to the underlying policy that the GST is generally to apply to government related entities, organisations and instrumentalities - Commonwealth, State and local - in the same way as it does to non-government entities. The exclusion created by paragraph 9-15(3)(c) is only intended to operate where, by the terms of the appropriation, the services can only be supplied by a government related entity. It is not intended to extend to payments, pursuant to an appropriation, for a supply of services which can, under the terms of the appropriation, be supplied by a government related entity or a non-government related entity (even if the appropriation is otherwise specific as to amount and its particular purpose).

ATO view of decision:
The decision of the Court supports the views of the Commissioner in relation to the application of subsection 9-15(1) as set out in GSTR 2006/9 . While favourable to the Commissioner, the reasoning of the Court in relation to the interpretation of paragraph 9-15(3)(c) differs to how the Commissioner has expressed his views on this issue in GSTR 2006/11. The view expressed in GSTR 2006/11 is that for a payment to come within paragraph 9-15(3)(c), the payment has to be of a funding nature and not commercial in character.

Administrative treatment:
None affected

Legislative references: The Constitution 114 A New Tax System (Goods and Services Tax) Act 1999 9-5 9-15 9-40 A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 Sch 2 Appropriation Act (No 1) 2007-2008 Sch 2
Case references: American Express International Inc v Commissioner of Taxation (2009) 73 ATR 173 [2009] FCA 683 2009 ATC 20-113 Berry v Federal Commissioner of Taxation (1953) 89 CLR 653 (1953) 10 ATD 262 [1953] HCA 70 Combet v Commonwealth (2005) 224 CLR 494 [2005] HCA 61 221 ALR 621
Subject references: Consideration as defined in section 9-15 of the A New Tax System (Goods and Services Tax) Act 1999 Whether an amount received under the scheme is a payment 'in connection with' the supply of travel services Whether a payment under the scheme is a payment specifically covered by an appropriation under an Australian law within the meaning of paragraph 9-15(3)(c) of the GST Act