• Service: Tax, Indirect Tax
  • Type: Regulatory update
  • Date: 1/10/2013

Tax Insights

KPMG's analysis of tax issues and developments.

Justin Ward

Justin Ward
Director, Indirect Tax

+61 3 9288 5339

Groundhog day – revisiting the fundamentals of GST 

by Justin Ward, Indirect Tax Specialist

What now? 

Recent decisions of the Full Federal Court and High Court challenge conventional thinking so that:

  • receipt of consideration does not automatically result in goods and services tax (GST) becoming payable
  • consideration received from multiple parties – the receipt of two mutually exclusive negotiated contractual amounts - may contribute to the GST liability for a single supply
  • consideration provided to third parties in the supply chain now requires careful analysis
  • from 1 July 2010, the intention and application of a new third party payment adjustment regime should be reviewed.


What’s this about?

On 18 September 2013, the Full Federal Court (AP Group Limited v Commissioner of Taxation [2013] FCAFC 105) dismissed a cross-appeal impacting various incentive payments made by automotive distributors to motor vehicle dealers


The Commissioner argued two incentive payments (retail target and wholesale target incentives) made by the automotive distributors were consideration for a supply made by AP Group and were subject to GST. The majority held AP Group did not make any ‘supply’ to the automotive distributors for which GST should be payable.


AP Group’s appeal focused on a finding from the Administrative Appeals Tribunal of Australia (AATA) that two of the incentive payments (fleet support and run-out model support incentives) were ‘third party’ consideration for a supply of a car made by AP Group (the motor vehicle dealer) to the end customer – the effect being that GST would be payable on the total consideration received.


The Full Federal Court affirmed the AAT’s decision that there was a direct and immediate connection between the incentive received and the sale of the car to the end customer. This is consistent with the December 2009 Full Federal Court decision of TT-Line but raises new questions on the adjustment rules introduced to deal with such payments.


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