Commissioner issues draft Determination on when the supply of a credit card is GST-free; High Court decision on refunds

Yesterday the Commissioner issued draft GST Determination GSTD 2014/D1 ‘Goods and services tax: in what circumstances is the supply of a credit card GST-free under paragraph (a) of Item 4 in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999?

The Commissioner takes the view that the supply of a credit card facility is a “supply made in relation to “rights within paragraph (a) of Item 4 in ss 38-190(1) as it is a supply of a thing comprising a bundle of rights that derives its value exclusively, or almost exclusively, from those rights.

The Commissioner considers that the supply will be GST-free under Item 4 to the extent that the cardholder will use the facility when he or she physically outside Australia and provided that the cardholder’s location outside Australia is integral to the use of the card.

The Determination acknowledges the following alternative views which are not supported by the Commissioner:

  • the relevant right is the right to tender the credit card and this right is used where the payment obligation is discharged (i.e., the location of the merchant) – the physical location of the cardholder is irrelevant
  • the relevant right is the ongoing use of the right to credit over time – the extent to which the cardholder is outside Australia  over the period of time will determine the relevant GST-free component.

Comments on the draft determination are due by 2 May 2014.

High Court decision

Yesterday the High Court handed down its decision in Thiess v Collector of Customs [2014] HCA 12. The Court agreed with the Supreme Court of Queensland that the taxpayer was statutorily barred from a claim to recover overpaid customs duty and GST.

The taxpayer imported a yacht and his customs agent mistakenly believed the yacht was 108 tonnes (it was actually 160 tonnes) and ascribed the wrong tariff classification which resulted in customs duty of $494,472 and GST of $49,447 being paid. The true position was that no customs duty or GST was payable.

After the prescribed period in the Customs Act, the taxpayer discovered the mistake and brought an action in the Supreme Court for the recovery of the customs duty and the GST. The claim was framed principally as one for one for money had and received, relying on the money having been paid under a mistake of fact, and in the alternative as one for restitution in equity or for equitable compensation.

The Court of Appeal determined that the Commonwealth had lawful defences to the claim: s 167(4) of the Act provided a defence in so far as the claim was to recover the amount of $494,472 paid as customs duty; s 36 of the Taxation Administration Act 1953 (Cth) provided a defence in so far as the claim was to recover the additional amount of $49,447 paid as GST. I should note that s 36 to the TAA was the predecessor to s 105-55 of Schedule 1 to the TAA.

The High Court unanimously agreed. The Court did not discuss s 36 of the TAA, noting that the taxpayer conceded that he cannot recover the amount paid as GST if he is prevented by s 167(4) from recovering the amount paid as customs duty.

Section 167(4) of the Customs Act provides as follow:

(4) No action shall lie for the recovery of any sum paid to the Customs as the duty payable in respect of any goods, unless the payment is made under protest in pursuance of this section and the action is commenced within the following times:

(a) In case the sum is paid as the duty payable under any Customs Tariff, within 6 months after the date of the payment; or

(b) In case the sum is paid as the duty payable under a Customs Tariff or Customs Tariff alteration proposed in the Parliament, within 6 months after the Act, by which the Customs Tariff or Customs Tariff alteration proposed in the Parliament is made law, is assented to.

The section provides a time limit on recover of overpaid customs duty and effects a statutory bar to recovery in similar terms to s 105-55 of Schedule 1 to the TAA for GST, although taxpayers have 4 years under that section.

The High Court also observed that the section removed any right at common law to recover overpaid customs duty and to introduce “a statutory action” for the refund of overpaid duty. Section 105-55 would appear to have the same effect, through its interaction with s 8AAZLF of the TAA and s 35-5 of the GST Act. If the taxpayer is barred from taking that statutory action (e.g., because of the passage of time), then no other action is available to the taxpayer to recover.

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