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- Federal Court decision allows input tax credits on taxi-cab subsidies for DOT Secretary to the Department of Transport (Vic) v FCT
Federal Court decision allows input tax credits on taxi-cab subsidies for DOT Secretary to the Department of Transport (Vic) v FCT
- By Moore Stephens
- Published 15/12/2009
- Public perspective
- Unrated
In the much anticipated Federal Court decision, the Victorian Department of Transport (“DOT”) was held to be entitled to input tax credits for subsidy payments to taxi-cab operators for its services to severely disabled passengers under the Multi Purpose Taxi Program (MPTP). The decision of the case seems to be pulling the applicability of GST rules for Government departments positively towards commercial businesses.
Facts
The MPTP is administered under the DOT to provide 50% subsidy of the metered taxi-cab fare for severely disabled passengers (MPTP members). This means MPTP members are only required to pay 50% of the taxi-cab fare at end of the each trip, the remaining will be paid by DOT as a subsidy to the taxi-cab operator. The issue in dispute was whether the DOT had ‘acquired anything for a creditable purpose’ in order for it to be an input tax credit as it pays for the remaining 50% of the fare.
Details
The Commissioner argued that the DOT did not acquire anything, and that there was no contract between the taxi-cab operator and the Department, and there was no consideration paid.
The Court found that the DOT had acquired the ‘service’ for the carriage of disabled persons for which the DOT paid consideration in the form of subsidy payment. In effect, the DOT is considered to be carrying on an enterprise (a State Government department) that acquires a service (transport) for a creditable purpose (the carrying on of the business of the State Government department) which is a taxable supply made to the DOT for consideration.
In regards to the contract between the taxi-cab operator and the DOT, the Court suggested that by taking the MPTP Member, the taxi-cab operator may be considered to accept the standing offer made by the DOT to pay part of the fare by the passenger. Thus a duty or obligation arises for DOT to pay the outstanding amount.
The Court also used an analogy of a commercial content of a law firm providing Cabcharges to its employees. The law firm would be an enterprise acquiring the service (taxi-cab transport) for a creditable purpose (carrying on the business of the law firm) which is a taxable supply made for consideration (the payment of the taxi-cab fare through Cabcharge). Therefore it would be entitled to input tax credits for the GST paid on the taxi-cab fare.
Nevertheless, given the Federal Court’s decision, Government departments claiming input tax credits should ensure that they are making an acquisition for a creditable purpose and that they are complying with legislations.
Should you require any assistance or any additional details concerning this article, please contact Stephen O’Flynn, Stephen Adrian, Tim Olynyk or Robert Jackson on (03) 9614 4444.
Facts
The MPTP is administered under the DOT to provide 50% subsidy of the metered taxi-cab fare for severely disabled passengers (MPTP members). This means MPTP members are only required to pay 50% of the taxi-cab fare at end of the each trip, the remaining will be paid by DOT as a subsidy to the taxi-cab operator. The issue in dispute was whether the DOT had ‘acquired anything for a creditable purpose’ in order for it to be an input tax credit as it pays for the remaining 50% of the fare.
Details
The Commissioner argued that the DOT did not acquire anything, and that there was no contract between the taxi-cab operator and the Department, and there was no consideration paid.
The Court found that the DOT had acquired the ‘service’ for the carriage of disabled persons for which the DOT paid consideration in the form of subsidy payment. In effect, the DOT is considered to be carrying on an enterprise (a State Government department) that acquires a service (transport) for a creditable purpose (the carrying on of the business of the State Government department) which is a taxable supply made to the DOT for consideration.
In regards to the contract between the taxi-cab operator and the DOT, the Court suggested that by taking the MPTP Member, the taxi-cab operator may be considered to accept the standing offer made by the DOT to pay part of the fare by the passenger. Thus a duty or obligation arises for DOT to pay the outstanding amount.
The Court also used an analogy of a commercial content of a law firm providing Cabcharges to its employees. The law firm would be an enterprise acquiring the service (taxi-cab transport) for a creditable purpose (carrying on the business of the law firm) which is a taxable supply made for consideration (the payment of the taxi-cab fare through Cabcharge). Therefore it would be entitled to input tax credits for the GST paid on the taxi-cab fare.
Nevertheless, given the Federal Court’s decision, Government departments claiming input tax credits should ensure that they are making an acquisition for a creditable purpose and that they are complying with legislations.
Should you require any assistance or any additional details concerning this article, please contact Stephen O’Flynn, Stephen Adrian, Tim Olynyk or Robert Jackson on (03) 9614 4444.