Yesterday the Full Federal Court handed down its decision in ATS Pacific Pty Ltd v Commissioner of Taxation  FCAFC 33. The Court dismissed the taxpayer’s appeal and allowed the Commissioner’s cross-appeal.
Justice Edmonds (who delivered the lead judgment – Pagone and Davies JJ agreed with his Honour) observed that the case involved the proper characterisation of the supply by Australian travel agents or tour operators to non-resident travel agents or tour operators in booking or arranging accommodation, goods and services for the customers of the non-resident travel agents or tour operators, namely the non-resent tourists. His Honour also noted that this issue had previous come before the Federal Court in Saga Holidays Ltd v Commissioner of Taxation  FCA 1892; (2005) 149 FCR 41 (Conti J); on appeal Saga Holidays Ltd v Commissioner of Taxation  FCAFC 191; (2006) 156 FCR 256 and observed that:
The advent of these two cases so early in the life of the GST says something about the difficulty of drafting legislation to give effect to the policy design of the GST, in the factual context of the way in which tours to Australia are packaged and sold to non-resident tourists, where the policy design is, undeniably, that “[g]oods and services consumed by tourists in Australia, such as meals and hotel accommodation are subject to GST under the general rules” (Explanatory Memorandum, A New Tax System (Goods and Services Tax) Bill 1998 (Cth) at 12).
Critically, the Full Federal Court rejected the appellant’s contention that the characterisation of the supply was to be determined having regard to the terms of the contract and considered that, at the end of the day, the determination of the characterisation of the supply in a case such as the present was a matter of practical or business reality. This approach can be compared with the recent decision of the UK Supreme Court earlier this month in Revenue & Customs v Secret Hotels2 Ltd  UKSC 16 (considered in an earlier post) where the Supreme Court appeared to rely more heavily on contract law principles to characterise the supply made under similar circumstances.
My analysis of the decision can be accessed here. I published an analysis of the decision of the primary judge at the time of judgment and I have extended that analysis to include the appeal.