Travelex Ltd v Commissioner of Taxation

• Jurisdiction: Australia Federal only
• Judge: French CJ,Hayne J.,Heydon J.
• Judgment Date: 29 September 2010
• Neutral Citation: 2010-0929 HCA C,[2010] HCA 33
• Court: High Court
• Docket Number: S79/2010
• Date: 29 September 2010

[2010] HCA 33

HIGH COURT OF AUSTRALIA

French CJ, Hayne, Heydon, Crennan and Bell JJ

S79/2010

Travelex Ltd

Appellant

and

Commissioner of Taxation

Respondent

Representation

R C Cordara SC with J O Hmelnitsky and P P Parisi for the appellant (instructed by Mallesons Stephen Jaques)

S J Gageler SC, Solicitor-General of the Commonwealth with B C Kasep for the respondent (instructed by Australian Government Solicitor)

A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 9-5, 9-10, 9-30, Div 38. .

A New Tax System (Goods and Services Tax) Regulations 1999 (Cth), Div 40..

Travelex Ltd v Commissioner of Taxation

Taxes and duties — GST — Whether supply ‘GST-free’ under s 38-190(1) of A New Tax System (Goods and Services Tax) Act 1999 (Cth) — Foreign currency sold on departures side of customs barrier at Australian international airport — Acquired for use outside Australia — Whether an input taxed financial supply or a supply in relation to rights.

Words and phrases — ‘financial supply’, ‘supply in relation to rights’.

ORDER

• 1. Appeal allowed with costs.

• 2. Set aside the order of the Full Court of the Federal Court `of Australia made on 29 September 2009, and in its place order that:

  • (a) the appeal to that Court be allowed with costs; and

  • (b) the order of Emmett J made on 19 December 2008 be set aside, and in its place:

    • (i) there be a declaration that the sale by Travelex Ltd of 400 Fijian dollars to Geoffrey Urquhart on 25 November 2007 on the departures side of the Customs barrier at Sydney International Airport was a supply of or in relation to rights and a GST-free supply by reason of item 4(a) of the table in s 38-190(1) of A New Tax System (Goods and Services Tax) Act 1999 (Cth); and

    • (ii) it be ordered that the Commissioner of Taxation pay Travelex Ltd's costs of the proceedings.

1 French CJ and Hayne J. The appellant (‘Travelex’) buys and sells foreign currency. One of the places Travelex does that is on the departures side of the Customs barrier at Sydney International Airport. When Travelex sells foreign currency there, to a traveller who intends to use the currency overseas, is the supply ‘GST-free’?

2 The answer to that question depends upon the application of a number of interrelated provisions of A New Tax System (Goods and Services Tax) Act 1999 (Cth) (‘the Act’) and Regulations made under the Act: A New Tax System (Goods and Services Tax) Regulations 1999 (Cth) (‘the Regulations’). It is necessary to ask whether the supply is ‘GST-free’ because Travelex submitted that, if the supply is GST-free, it could claim associated input tax credits which it could not claim if the supply is input taxed. (The validity of this submission was not in issue in the appeal.)

3 A supply is GST-free if it is (among other things) GST-free under Div 38 of the Act 1. A supply is input taxed if it is (again, among other things) input taxed under Div 40 of the Act 2. To the extent that a supply would, apart from s 9-30(3), be both GST-free and input taxed, it is treated 3 as GST-free and not input taxed.

4 Although the determinative issue in the appeal depends upon the construction and application of Div 38 (and, in particular, s 38-190(1)) 4, it is

important to begin by examining why the sale of foreign currency constitutes a supply. That examination shows that there is a supply because there is a transfer of ownership, the subject of which is money. Both of those observations are important in deciding the central question in the appeal: whether there is a supply ‘in relation to’ rights.

5 The chain of provisions engaged in this matter is very long. It is desirable, therefore, to identify important links in that chain. When Travelex sells foreign currency, there is a species of what the Act refers to as a ‘supply’. There is a ‘supply’ because the sale of foreign currency is a ‘financial supply’. There is a ‘financial supply’ because there is a disposal (by Travelex) of an interest in the currency of a foreign country. There being a supply of the kind identified, the question which determines whether the supply is GST-free is posed by s 38-190. More particularly, in respect of a foreign currency transaction of the kind identified, does the supply have three characteristics: (a) it is not a supply of goods or real property; (b) it is a supply made ‘in relation to rights’; and (c) ‘the rights are for use outside Australia’? Argument in this Court was directed principally to the second of those three characteristics. The Commissioner did not contend that the sale was a supply of goods. The Commissioner accepted that the currency sold was for use outside Australia. These reasons will show that the supply which is identified by the Act (the disposal of an interest in foreign currency) is a supply ‘in relation to’ rights for use outside Australia.

6 Before setting out, and then examining, the relevant provisions of the Act and Regulations, it is as well to say something briefly about the proceedings and how they come to this Court.

Proceedings in the Federal Court

7 Travelex commenced proceedings in the Federal Court of Australia seeking a declaration about the application of the Act to ‘any sale of foreign currency by [Travelex] on the departures side of the Customs barrier at Australian international airports’. Alternatively, Travelex sought a declaration in relation to a particular sale of Fijian currency which had been made on the departures side of the Customs barrier at Sydney International Airport to Mr Geoffrey Urquhart, the tax manager of the group of companies which includes Travelex. In this Court, Travelex did not pursue the wider declaration. It sought a declaration that the particular sale of Fijian currency was not subject to GST.

8 At first instance, Emmett J rejected Travelex's arguments and dismissed 5 the proceeding. Emmett J concluded 6 that there could be a supply ‘in relation to rights’ only ‘if the essential character or substance of the supply, or of a separately identifiable part of the supply, is one of rights’. There is not a supply ‘in relation to rights’ ‘where the supply of rights is merely integral, ancillary or incidental to another dominant part of the supply, the supply being characterised by the dominant part’ 7.

9 Travelex appealed to the Full Court of the Federal Court of Australia. That Court, by majority (Stone and Edmonds JJ, Mansfield J dissenting), dismissed 8 the appeal. The majority agreed 9 with the primary judge that the

relevant inquiry required identification of the ‘predominant’ aspect of the supply as distinct from any rights ‘incidental to the supply of the bank notes’.

10 In dissent, Mansfield J made a number of references to the policy and purpose of the Act 10, with which the Commissioner took issue in this Court. Having regard to what he identified as the purpose of the Act, to tax consumption within Australia, Mansfield J concluded 11 that the relationship between the rights to use the Fijian bank notes as legal tender in Fiji, and the supply of the notes, was sufficient to constitute a supply ‘in relation to’ those rights.

11 By special leave, Travelex now appeals to this Court. The appeal should be allowed.

The Act

12 Part 1-2 of the Act tells the reader how to use the Act. As s 2-1 says, the Act ‘begins (in Chapter 2) with the basic rules about the GST, and then sets out in Chapter 3 the exemptions from the GST and in Chapter 4 the special rules that can apply in particular cases’. Section 2-1 points out that the Act ‘concludes with definitions and other interpretative material’. As s 3-1(1) says, ‘[m]any of the terms used in the law relating to the GST are defined’. Definition of a term used in the Act is often identified in the text of the Act by printing an asterisk before the term that is defined, but those marks are not reproduced in these reasons.

13 What the Act identifies as its ‘central provisions’ are set out in ss 7-1 to 7-15. Section 7-1(1) provides that GST is payable on ‘taxable supplies’ and ‘taxable importations’. What is a taxable supply is stated in s 9-5. That provides:

‘You make a taxable supply if:

• (a) you make the supply for consideration; and

• (b) the supply is made in the course or furtherance of an enterprise that you carry on; and

• (c) the supply is connected with Australia; and

• (d) you are registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.’

Supply

14 Section 9-10(1) provides that a ‘ supply is any form of supply whatsoever’. Section 9-10(2) amplifies the already general provision of s 9-10(1) by providing that [w]ithout limiting subsection (1), supply includes’ any of a number of specified matters, including ‘(f) a financial supply’.

15 Section 9-10(4) deals separately with a supply of money. It provides that: ‘However, a supply does not include a supply of money unless the money is provided as consideration for a supply that is a supply of money.’ ‘[M]oney’ is defined in s 195-1 as including ‘currency (whether of Australia or of any other country)’ and ‘any negotiable instrument used or circulated, or intended for use or circulation, as currency (whether of Australia or of any other country)’. The exceptions to the definition of ‘money’ (which include such things as collectors' pieces, investment articles and items of numismatic interest) may be put aside as irrelevant for present purposes. A sale of foreign currency falls within the ‘unless’ clause in s 9-10(4). In such a sale money is provided as consideration for a supply that is a supply of money (the foreign currency).

Financial supply

16 As has already been noted, a ‘financial supply’ is a species of supply. ‘[F]inancial supply’ is defined in s 195-1 as having ‘the meaning given by the regulations made for the...