In Commissioner of Taxation v Qantas Airways Ltd [2012] HCA 41 the High Court of Australia decided that Qantas and Jetset were liable to pay GST on fares received from prospective passengers who failed to take the flights for which reservations and payment had been made, and where no refund was claimed or none was available.

The fares were calculated to recover from the customer the GST payable on the amount of those fares. The GST component of the fares for flights not taken was not refunded to customers. The GST in dispute totalled $34,275,917.

Qantas contended that GST was not payable on the unused fares.

At issue was whether there was no taxable supply as there was a total failure of consideration (because the flights did not occur) or whether GST was payable pursuant to the making of a contract between the airline and the customer under which the airline supplied rights, obligations and services in addition to the proposed flight.

After reviewing the Qantas conditions the High Court concluded (by a 4 to 1 majority):

“The Qantas conditions and the Jetstar conditions did not provide an unconditional promise to carry the passenger and baggage on a particular flight. They supplied something less than that. This was at least a promise to use best endeavours to carry the passenger and baggage, having regard to the circumstances of the business operations of the airline. This was a “taxable supply” for which the consideration, being the fare, was received.

The GST payable for that taxable supply was attributable to and included in the calculation of the Qantas net amount for the tax periods in issue in this litigation and the assessments objected to were not shown to be excessive.”