Qantas tax scam?

[gbh]

So, when you pay a fare to Qantas, the fare includes the 10% GST that Qantas is obliged to pass on to the government.

Qantas has just succeeded in a court case with the argument that if the passenger doesn't actually take the flight, there is no "taxable supply" and therefore Qantas doesn't have to pay the GST amount on to the government ... even if the fare is non-refundable.

So, if you pay for a non-refundable fare, you pay GST on it, but if you don't fly, Qantas just pockets the money: both the amount you paid for the service AND the amount you paid for GST. Does that seem right to anyone?

 

[serfty]

Need to know more about the case and the court's ruling to make an informed comment.

 

[markis10]

Scam - no, I dont see why they should be forced to refund something when its the pax breaking the contract.

 

[awilcockson]

If this is true, then wow, just wow.

 

[awilcockson]

I dont see why they should be forced to refund something when its the pax breaking the contract.

That's fine, but I don't think they should get to pocket the GST though!

 

[markis10]

That's fine, but I don't think they should get to pocket the GST though!

And the passenger screen charge, airport charge etc etc

 

[Mal]

Scam - no, I dont see why they should be forced to refund something when its the pax breaking the contract.

You may find that EU precedent does allow for this (in the EU - Not Australia unless it is also agreed here by the courts).

I don't find it unreasonable to force carriers to refund "taxes" (ie GST, and the various airport levies) to a person who doesn't take a flight, where the carrier is not charged for them.

Pure pocket money IMHO.

 

[Stephen65]

It depends on the terms of the contract between you and Qantas. GST is not a separate component of the price you pay such that you can say that if the supplier doesn't pay GST you are entitled to 1/11th of the fare back. Rather the law is that if its a taxable supply the supplier must pay the government 1/11th of the consideration they receive for supplying the service as GST.

Whether or not the merchant pays GST to the government, or gets it back, has no bearing on your entitlement to a refund of the purchase price or any part of it. Any such entitlement is governed by your contract with the supplier. If the terms provide that the entire purchase price is forfeited if you cancel then
that's just tough luck. The fact that Qantas don't have to pay the GST is no more unfair than the fact that they get to keep the rest of the fare without having to incur the costs of flying you around.

If you want to avoid this situation book refundable fares.

 

[marks]

I know in the UK there used to be a requirement to refund charges/taxes, etc.

My sister used to get a LCC offers all the time for £10 or £5 plus taxes.
If you couldn't make it or changed your mind you would lose the fare but the gov, airport, security, VAT, etc is refunded....

Cheers.

 

[Stephen65]

It would depend on the terms of the contract, whether the taxes are part of the fare or specifically extra items only chargeable if you fly and the terms of the law imposing those taxes.

It's certainly possible to have additional fees or taxes that you are liable to pay only if and when you fly. In such cases the airline is collecting a tax for the government and if the conditions requiring that collection don't exist you'd ordinarily expect to be given a refund.

 

[gbh]

It depends on the terms of the contract between you and Qantas. GST is not a separate component of the price you pay such that you can say that if the supplier doesn't pay GST you are entitled to 1/11th of the fare back.

If that's the case, then why do domestic e-tickets expressly state the GST amount?

Also, you can't contract of paying GST. Either I have bought SOMETHING when I pay for my ticket (such as the right to be carried) and therefore there's a taxable supply and GST is payable, or I there's no consideration from Qantas, in which case the non-refundability is not enforceable and Qantas has opened itself to a class action for unjust enrichment. They can't have it both ways.

The fact that Qantas don't have to pay the GST is no more unfair than the fact that they get to keep the rest of the fare without having to incur the costs of flying you around.

Of course it's different. They took the money on the basis that it was a tax that had to be paid based on the purchase price. Again, your contention only works if Qantas has not supplied me with anything in return for the purchase price, in which case, I'll have the whole lot back, thanks.

 

[Stephen65]

E-tickets (and receipts in general) state the amount of GST so that you know whether it's a transaction to which GST applies (some transactions are GST free or exempt) and so that if you are entitled to claim a GST credit for the transaction you know the correct amount. Usually the GST amount is 1/11th of the price but there are occasional cases where it is not so having the GST stated is important.

Your second point is an issue as between you and Qantas. It's perfectly possible and legal to offer services on a no-refund basis provided that the term is known and the refund is only forfeited if the cancellation is caused by the other party. There is no element of unjust enrichment involved because you knew when you entered the contract that if you canceled then the fare would be lost and it was your choice to cancel. So while Qantas may be enriched by your cancellation there is nothing unjust about it. The consideration Qantas give you in exchange for your fare is agreeing to transport you as provided on the ticket - subject however to your right to cancel.

Your third point is not correct either. When Qantas charge you a fare they charge you one price. They do not charge you a price plus GST - which is why such advertising is banned. The price you pay Qantas is the price you pay for the service. Whether or not Qantas is obliged to pass on 1/11th of that to the ATO is neither here nor there as between you and Qantas, no more than any other cost Qantas has to pay a third party as a result of selling you a fare which cost they may save if you do not travel.

Your issue is really with the concept of Qantas being able to withhold a refund if the passenger cancels a non-refundable ticket. There is nothing illegal about this provided it was the basis on which the fare was sold and it makes economic sense to allow it because it means cheaper non-refundable fares can be offered. Again, if you do not wish to buy fares on this basis you always have the option of buying the same seat on a slightly more expensive refundable fare.

 

[docjames]

I have had friends successfully seek refund of taxes etc on a JQi sale fare that they subsequently couldnt travel on and was "non-refundable".

 

[gbh]

E-tickets (and receipts in general) state the amount of GST so that you know whether it's a transaction to which GST applies (some transactions are GST free or exempt) and so that if you are entitled to claim a GST credit for the transaction you know the correct amount. Usually the GST amount is 1/11th of the price but there are occasional cases where it is not so having the GST stated is important.

In what sense is an E-ticket not a record of the contract between the passenger and the airline?

Your second point is an issue as between you and Qantas.

No, it's not. The issue is that Qantas is characterizing the payment of the fare two different ways for different purposes. They are telling me that I have a contract, one of the terms of which is that they can retain the fare whether or not I fly. For that to be true, there must be consideration on their part ... ie, I must have received SOMETHING for my money.

But they are telling the tax office that, no, there's no consideration, and therefore no taxable supply, so they don't have to pass on the amount that they TOLD ME was going to be passed on as GST.

They can't have it both ways ... or at least, if they try to, it's a class action waiting to happen.

Your issue is really with the concept of Qantas being able to withhold a refund if the passenger cancels a non-refundable ticket. There is nothing illegal about this provided it was the basis on which the fare was sold and it makes economic sense to allow it because it means cheaper non-refundable fares can be offered. Again, if you do not wish to buy fares on this basis you always have the option of buying the same seat on a slightly more expensive refundable fare.

Again, no, my issue is that if they keep my money, they need to pay GST on it. I have no problem with refundable fares per se, I just think that Qantas is cheating either me or the ATO, which I guess comes back to the same thing.

 

[Stephen65]

An e-ticket or receipt is at least a partial record of the contract, however that is not the reason why the GST is stated which is due to a specific requirement in the GST legislation.

You're confusing two different concepts - first, whether a contract is formed because Qantas supplies you consideration in exchange for your fare, which is an issue of common law contract and secondly the operation of the GST laws that provide for the payment of GST in certain circumstances.

In the context of your contract with Qantas the consideration Qantas gives you at the time you form the contract is their promise to fly you on the terms and conditions of the ticket. You give them money and they promise to transport you and at that moment you have a contract. Should you choose not to take the journey then Qantas' consideration doesn't just vanish.

The second context is the GST legislation where Qantas is obliged to pay GST on the taxable supplies it makes. Qantas has an obligation to remit 1/11th of the value of the taxable supply, which is usually the fare or consideration you pay it, to the ATO. The important point is that a GST obligation only arises if a taxable supply has been made.

In the case you refer to is that the Court found that the taxable supply for GST purposes is the actual transportation, not the promise to transport. So if for whatever reason Qantas does not transport you then there is no taxable supply arises and no obligation to pay GST regardless of the fact that it collected a fare from you which it does not intend to refund.

In this case it is perfectly possible for Qantas to have its cake and eat it too - it gets to keep your entire fare because you agreed that your fare was non-refundable and it doesn't have to pay GST because it never flew you and thus made no taxable supply. It's a consequence of the law of formation of contracts not matching up with the GST law.

 

[serfty]

Need to know more about the case and the court's ruling to make an informed comment.

This still needs to be addressed before I would comment.

 

[gbh]

In the case you refer to is that the Court found that the taxable supply for GST purposes is the actual transportation, not the promise to transport. So if for whatever reason Qantas does not transport you then there is no taxable supply arises and no obligation to pay GST regardless of the fact that it collected a fare from you which it does not intend to refund.

In this case it is perfectly possible for Qantas to have its cake and eat it too - it gets to keep your entire fare because you agreed that your fare was non-refundable and it doesn't have to pay GST because it never flew you and thus made no taxable supply. It's a consequence of the law of formation of contracts not matching up with the GST law.

Look - I agree with the way you characterize the case. I just think the judgment was wrong, because there was no compelling reason why the court couldn't have chosen to take a broader view of what the taxable supply was ... and one that was consistent with the contract as both parties would have understood it.

I also think that whatever the law is - and I assume it will be changed forthwith - it's a sneaky, dishonest practice. Law and commercial morality are not, as you know, the same thing.

I also think that Qantas is inviting some terrible publicity when aviation and travel journalists pick up on it ... as they inevitably will. It plays into the growing perception of the coughpy values of Qantas as an organization.

 

[greenfish]

The courts must have this wrong. If I'm GST registered, I'll reclaim the GST whether or not I take the flight.

The ATO loses out, as I've legitimately reclaimed the GST on an invoice for services. If the service deliverer doesn't have to deliver the services the GST collected should still be payabl.

The only way the court decision would make sense is if the QF invoice stated something like "TAX INVOICE WHEN FLOWN" or equivalent.

 

[ozmille]

Been reading this with interest. Am I correct in reading that only QF does this?

 

[Travel Guru]

I have had friends successfully seek refund of taxes etc on a JQi sale fare that they subsequently couldnt travel on and was "non-refundable".

On a non-refundable ticket you still have every right to submit a request for a refund, I certainly do on behalf of clients on non-refundable international tickets quite frequently, not sure why it would be any different on a domestic, can't say i've ever looked into it, but international you most definitely can.

TG