Qantas Airways Limited v Commissioner of Taxation: A non-refundable, cancelled airfare is not taxable supply

The Full Court of the Federal Court has today upheld the appeal of Qantas, in Qantas Airways Limited v Commissioner of Taxation [2011] FCAFC 113.

The court unanimously ruled that non-refundable fares which are paid for but not used, because they are cancelled or because the customer does not present to board do not constitute taxable supply for the purposes of section 9-5 of A New Tax System (Goods and Services Tax) Act 1999.

The court found that the supply was “merely the provision of domestic air travel by Qantas. That is the substance and reality of the transaction…that is what (the purpose) the passenger pays his or her fare for”.

In overturning the AAT’s decision, the court ruled that “supply” was not satisfied by reservation and general acts of preparation to board a passenger by the Airline. Thus, a cancelled and non-refundable booking was not subject to GST.

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