Travelex Limited v Commissioner of Taxation

STATUTORY FRAMEWORK 8 Section 7-1 of the GST Act relevantly provides that GST is payable on taxable supplies. Under s 9-10(1) of the GST Act, a supply is any form of supply whatsoever. Section 9-10(2) provides that, without limiting s 9-10(1), supply also includes any of the following: (a) a supply of goods; (b) a supply of services; (c) a provision of advice or information; (d) a grant, assignment or surrender of real property; (e) a creation, grant, transfer, assignment or surrender of any right; (f) a financial supply; (g) an entry into, or release from, an obligation: (i) to do anything, (ii) to refrain from an act, or (iii) to tolerate an act or situation; (h) any combination of any two or more of the matters referred to in (a) to (g). 9 Thus, s 9-10(2) describes several kinds of supply that will constitute supply for the purposes of the GST Act. Relevantly, for present purposes, s 9-10(2) describes supply by reference to "goods", "services" and "any right" and by reference to "a financial supply". None of the terms goods, services or right is defined in the GST Act. Those terms must therefore be construed, in the context in which they appear in the GST Act, according to their ordinary English meanings. 10 However, under s 40-5(2), financial supply has the meaning given by the A New Tax System (Goods and Services Tax) Regulations 1999 (Cth) (the Regulations). Regulation 40-5.09(1) relevantly provides that the provision, acquisition or disposal of an interest mentioned in r 40-5.09(3) is a financial supply if the provision, acquisition or disposal is for consideration, is in the course or furtherance of an enterprise and is connected with Australia, and the supplier is registered as a financial supply provider in relation to supply of the interest. Regulation 40-5.09(3) relevantly provides that an interest, for the purposes of Regulation 40-5.09(1), is an interest in or under Australian currency, the currency of a foreign country or an agreement to buy or sell currency of either kind. The term currency is not defined either in the GST Act or the Regulations. 11 Under s 9-10(4), a supply does not include a supply of money, unless the money is provided as consideration for a supply that is a supply of money. Under s 195-1 the term money relevantly includes currency, whether of Australia or any other country. However, the definition of money in s 195-1 recognises that some items that would be currency are not money. Thus, the term money does not include a collector's piece, an investment article, an item of numismatic interest, or currency the market value of which exceeds its stated value as legal tender in the country of issue. Clearly, the Fijian Currency Transaction was a supply of money where money was provided as consideration for that supply. Accordingly, notwithstanding s 9-10(4), there was a supply for the purposes of the GST Act. 12 Section 9-5 relevantly provides that a person makes a taxable supply if: · the person makes the supply for consideration; · the supply is made in the course of furtherance of an enterprise that the person carries on; · the supply is connected with Australia; and · the person is registered. It is common ground that each of those pre-requisites was satisfied in relation to the Fijian Currency Transaction. However, under s 9-5, a supply is not a taxable supply to the extent that it is GST-free or input taxed. 13 Section 9-30(1)(a) relevantly provides that a supply is GST-free if it is GST-free under Division 38. Section 9-30(2)(a) relevantly provides that a supply is input taxed if it is input taxed under Division 40. However, s 9-30(3)(a) relevantly provides that, to the extent that a supply would be both GST-free and input taxed, the supply is GST-free and not input taxed. 14 If a supply is GST-free, no GST is payable on the supply, but an entitlement to an input tax credit for anything acquired or imported to make the supply is not affected. If a supply is input taxed then no GST is payable on the supply and there is no entitlement to an input tax credit for anything acquired or imported to make the supply. Under s 40-5(1) of the GST Act, a financial supply is input taxed. Accordingly, a financial supply is not a taxable supply to that extent. However, by reason of s 9-30(3)(a), even if the Fijian Currency Transaction was a financial supply, it would not be input taxed to the extent that it is also GST-free. 15 Subdivision 38-E in Division 38 is concerned with "Exports and other Supplies that are for Consumption outside Australia". The matters dealt with in Subdivision 38-E are as follows: · s 38-185 - exports of goods · s 38-187 - lease, etc, of goods for use outside Australia · s 38-188 - tooling used by non-residents to manufacture goods for export · s 38-190 - supplies of things, other than goods or real property, for consumption outside Australia. Section 38-190 is critical to the question raised in this proceeding. However, s 38-185 may also have some bearing on the question. 16 Section 38-190(1) provides that the third column of the table contained in s 38-190 sets out supplies that are GST-free, except to the extent that they are supplies of goods or real property. That table relevantly provides as follows: Item Topic These supplies are GST-free (except to the extent that they are supplies of goods or *real property)…

4 Rights a supply that is made in relation to rights if:

(b) the supply is to an entity that is not an *Australian resident and is outside Australia when the thing supplied is done. 17 Section 38-185(1) of the GST Act provides that the third column of the table contained in s 38-185 sets out supplies that are GST-free. That table relevantly provides as follows: Item Topic These supplies are GST-free …

1 Export of goods a supply of goods, but only if the supplier exports - general them from Australia before, or within 60 days (or such further period as the Commissioner allows) after:

(a) the day on which the supplier receives any of the *consideration for the supply; or (b) if, on an earlier day, the supplier gives an *invoice for the supply - the day on which the supplier gives the invoice. … 7 Goods exported a supply of goods to a *relevant traveller, but only if: by travellers as (a) the supply is made in accordance with the rules accompanied specified in the regulations; and baggage (b) the goods are exported as accompanied baggage of the relevant traveller. 18 Section 38-185(3) provides that a supplier of goods is treated, for the purposes of Item 1 in the table in s 38-185, as having exported the goods from Australia if, before the goods are exported, the supplier supplies them to an entity that is not registered, that entity exports the goods from Australia, the goods have been entered for export, within the meaning of s 113 of the Customs Act 1901 (Cth), since their supply the goods have not been altered or used, except to the extent necessary to prepare them for export, and the supplier has sufficient documentary evidence to show that the goods were exported. Regulation 38.185.01 provides that, for Item 7 of the table in s 38-185, the rules set out in Schedule 5 are specified in relation to the supply of goods to a relevant traveller. While there does not appear to be any reason why those rules could not be complied with in relation to the supply of foreign currency, there is no evidence that they were complied with as such in relation to the Fijian Currency Transaction. However, for the reasons given below, even with the extention provided by s 38-185(3), Item 1 in the table in s 38-185 is not relevant to the Fijian Currency Transaction because the Fijian bank notes are not 'goods' within the meaning of the GST Act.

THE QUESTION 19 In its application as originally filed, Travelex claimed a declaration that any sale of foreign currency by it on the departures side of the Customs barrier at Australian international airports is a supply of rights and a GST-free supply by reason of Item 4(a) of s 38-190(1) of the GST Act. In the alternative, Travelex claimed a declaration that any such sale of foreign currency is a supply of goods and a GST-free supply by reason of Item 7 of s 38-185(1) of the GST Act. 20 By its amended application, Travelex claimed, in addition, a declaration that the Fijian Currency Transaction was a supply of or in relation to rights, and a GST-free supply by reason of Item 4(a) of s 38-190(1). It also claimed a declaration that the Fijian Currency Transaction was a supply of or in relation to goods and a GST-free supply by reason of Item 7 of s 38-185(1). 21 At the hearing, Travelex abandoned all reliance upon Item 7 in the table in s 38-185(1) of the GST Act. It also accepted that it could not obtain a declaration concerning any sale of foreign currency in the terms originally claimed. Accordingly, the only question for the Court is whether Travelex is entitled to a declaration that the Fijian Currency Transaction was a supply made in relation to rights and, if so, whether the rights were for use outside Australia, such that it was a GST-free supply by reason of Item 4(a) in s 38-190(1) of the GST Act.

MONEY AS GOODS 22 The Fijian currency supplied to Mr Urquhart pursuant to the Fijian Currency Transaction consisted of bank notes issued by the Reserve Bank of Fiji. They were money within the meaning of s 195-1 of the GST Act. Apart from any provisions of the GST Act, the Fijian bank notes, being paper or plastic, may have been goods under the general law, at least for some purposes. However, it is common ground that the Fijian Currency Transaction was not a supply of goods within the meaning of the GST Act. That explains the abandonment of reliance on Item 7 in the table in s 38-185(1). 23 Currency, consisting of coins and bank notes, is tangible property, in the sense that they can be transferred by delivery and can be the subject of possession. However, because of the particular significance that is attached to currency as being money, currency that consists of coins or bank notes will, for many purposes, not be regarded as goods. 24 In that regard, the term "currency" may have different usages in relation to money. In the sense in which I have just used it, the term is a synonym for the medium of exchange itself, namely, coins and bank notes circulating in a particular polity. In another possible usage, the term refers to a characteristic feature of the proprietary regime that applies to money. That is to say, the full force of the general rule on derivate transfers of title does not apply to title to money, in that title to money is exempt from the maxim nemo dat quod non habet. In that regard, currency refers to the negotiability of money, such that, as a general rule, the right to money is inseparable from the possession of it. Where coins or bank notes are delivered in payment of a debt or for the provision of goods or services, it is not incumbent upon the recipient of the coins or bank notes to enquire into the title of the payer. Not only possession of, but also property in, coins and bank notes passes by mere delivery, irrespective of the title of the payer (see Miller v Race (1758) 1 Burrow 452 and David Fox, Property Rights in Money (Oxford University Press: Oxford, 2008) at 265-6 and the authorities there cited). 25 Money is any generally accepted medium of exchange for goods and services and for the payment of debts (see Butterworth's Australian Legal Dictionary at 759). Currency and legal tender are examples of money. However, a thing can be money and can operate as a generally accepted medium and means of exchange, without being legal tender. Thus, bank notes have historically been treated as money, notwithstanding that they were not legal tender. It is common consent and conduct that gives a thing the character of money (see Miller v Race (1758) 1 Burrow 452 at 457). Money is that which passes freely from hand to hand throughout the community in final discharge of debts and full payment for commodities, being accepted equally without reference to the character or credit of the person who offers it and without the intention of the person who receives it to consume it or apply it to any other use than in turn to tender it to others in discharge of debts or payment for commodities (see Moss v Hancock [1899] 2 QB 111 at 116). 26 A polity may enact legislation with a view to organising its currency. Such legislation will define the unit of account by reference to name and any applicable subdivisions of the unit. In relation to physical money, the applicable domestic law of a polity will lay down rules on legal tender, being the technical specifications for coins and notes. The monetary system of the polity will normally comprise a central bank that enjoys the exclusive privilege of issuing legal tender. 27 Legal tender is concerned with the prescription of that which is, at any particular time, to be a lawful mode of payment within a polity (Watson v Lee (1979) 144 CLR 374 at 398). Legal tender is such money, in the legal sense, as the polity defines in legislation that organises the monetary system. Accordingly, those tangible objects, which might otherwise be goods, that are legal tender necessarily have the quality of money, although not all money is necessarily legal tender (Charles Proctor, Mann on the Legal Aspect of Money, Sixth Edition (Oxford University Press: Oxford, 2005) at 66). 28 A tender, in discharge of a debt, made in any currency that, at the time of tender, is lawful money, will be effective to discharge the debt (Jolley v Mainka (1933) 49 CLR 242 at 259). An essential quality of money that is legal tender is its sufficiency to discharge a debt (Jolley's Case at 261). Accordingly, a money debt incurred in a polity that is payable in that polity may be discharged by a payment of currency that is legal tender in that polity. 29 Section 21 of the Reserve Bank of Fiji Act, 1983, (the Reserve Bank Act) provides that the monetary unit of Fiji is the dollar, divided into 100 cents. The Reserve Bank of Fiji is established under s 3 of the Reserve Bank Act. Section 22 provides that the Reserve Bank is to have the sole right of issuing currency in Fiji and that no other person is to issue currency or any documents or tokens payable to bearer on demand having the appearance of or purporting to be currency. Section 24 provides that currency issued by the Reserve Bank is to be legal tender in Fiji, in the case of notes, for the payment of any amount. However, s 26 provides that the Reserve Bank is to have power to call in, for the purpose of withdrawing from circulation, any currency issued by it, on payment of the face value thereof. Any currency so recalled ceases to be legal tender, providing that the holders of any currency are entitled at any time to claim payment from the Reserve Bank of the face value of the currency. Under s 27, the Reserve Bank is to issue, reissue and exchange on demand, and without charge, currency that it has issued. 30 A debt incurred in Fiji, which is payable in Fiji, may be discharged by payment of currency that is legal tender in Fiji. Thus, the bank notes supplied to Mr Urquhart by Travelex pursuant to the Fijian Currency Transaction could be used by him, in Fiji, to discharge a debt, such as a debt arising from the purchase of food, drinks or stationery or the provision of taxi services. 31 The word goods, in ordinary English usage, designates moveable personal property, especially merchandise used in trade and commerce. The word refers to choses in possession, as distinct from choses in action, and is to be contrasted with immoveables, being interests in land. Goods are tangible, personal property capable of physical possession and which are capable of transfer by delivery. 32 Coins and bank notes that are legal tender in Australia will, for most purposes, not be goods within Australia. More particularly, they will not be goods within the meaning of the GST Act. However, the question of whether foreign currency is in the same category as Australian currency, when considered in Australia, may produce a difference answer. 33 Clearly, bank notes issued by the central bank of a polity other than Australia, while they may be legal tender within that polity, will not, in the absence of some Australian legislation, be legal tender in Australia. On the other hand, such foreign currency could, in practice, be accepted in a transaction conducted in Australia. That would depend upon the consent of the parties and not upon any formal obligation on the part of the creditor (Mann at 67). Foreign currency has no particular legal status or standing in Australia that would make coins or bank notes issued by the central bank of a foreign polity anything different from medals or tokens that would constitute goods in Australia. The mere fact that the foreign currency might be legal tender in another polity does not make it legal tender in Australia. The mere fact that it might be money does not necessarily mean that, in Australia, it is not goods. 34 However, even if a supply of foreign currency may be a supply of chattels under the general law, the GST Act treats supply of foreign currency as being a supply of currency. That is to be seen in the definition of money in s 195-1, which treats foreign currency as being on the same footing as Australian currency. For example, Division 11 of the GST Act deals with creditable acquisitions. The term acquisition is defined in s 11-10 as being any form of acquisition whatsoever, including a number of acquisitions that correspond with s 9-10(2). Section 11-10(3) corresponds with s 9-10(4) and provides that an acquisition does not include an acquisition of money unless the money is provided as consideration for a supply that is a supply of money. Thus, ss 9-10(4), 11-10(3), the definition of money in s 195-1, and the definition of financial supply in the Regulations pursuant to s 40-5(2) show that the GST Act treats money, being both Australian currency and foreign currency, as being in a category that is distinct from goods. 35 It is essential for the case mounted by Travelex that it be accepted that the supply constituted by the Fijian Currency Transaction was not a supply of goods, since a supply of goods is expressly excluded from Item 4 of the table in s 38-190. As I have said, the proceeding has been conducted on the basis that foreign currency, being the currency of Fiji, is not goods for the purposes of s 38-190. Both the Commissioner and Travelex have accepted that the structure and scheme of the GST Act indicate that the supply constituted by the Fijian Currency Transaction was not a supply of goods. I accept that, for the purposes of the GST Act, a supply of money, whether Australian currency or foreign currency, is not a supply of goods.

THE SUPPLY IN QUESTION 36 It is clear that the Fijian Currency Transaction involved a supply within the meaning of the GST Act. It is common ground that it was a financial supply and would be input taxed. However, that is of no present relevance since, if the supply in question was GST-free, it was not input taxed. The Court is not presently concerned with the consequences that would flow if the supply constituted by the Fijian Currency Transaction was not GST-free. 37 Travelex contends that, by engaging in the business of foreign exchange transactions at the Travelex Counter, it was providing a service within s 9-10(2)(b). It may be true, in one sense, that Travelex was providing a service. It is doubtless convenient for a traveller at Sydney Airport, after passing through the Customs barrier to the departures side of the Airport, to be able to exchange one currency for another. Travelex derives a benefit in relation to such transactions entered into by it. It describes the benefit as a commission. However, the reasoning that leads to the conclusion that there was no supply of goods involved in the Fijian Currency Transaction, also demonstrates that there was no supply of services, within the meaning of the GST Act. There was a financial supply. There was a supply of money the consideration for which was a supply of money. The structure and scheme of the GST Act makes clear that the Fijian Currency Transaction did not involve a supply of services within the meaning of s 9-10(2)(b). 38 By reason of the acquisition by Mr Urquhart of the Fijian bank notes, he may have acquired, as an incident of being the owner or holder of the bank notes, one or more rights, in one sense. I shall return to that question below when dealing specifically with the language of Item 4 of s 38-190. However, the structure and scheme of the GST Act makes clear that the Fijian Currency Transaction was not the creation, grant, transfer, assignment or surrender of a right within the meaning of s 9-10(2)(e). 39 There can be no suggestion that the supply constituted by the Fijian Currency Transaction was a provision of advice or information within the meaning of s 9-10(2)(c). The term real property is expansively defined for the purposes of the GST Act, however there can be no suggestion that the Fijian Currency Transaction involved a grant, assignment or surrender of real property within the meaning of s 9-10(2)(d).

SUPPLY IN RELATION TO RIGHTS 40 The question is whether the supply constituted by the Fijian Currency Transaction, however it is characterised, was made in relation to rights. Travelex contends that the supply was made in relation to the rights that arose by reason of Mr Urquhart's being the holder or owner of bank notes issued by the Reserve Bank of Fiji. It says that those rights were for use outside Australia, within the meaning of Item 4(a). That latter proposition may well be sound. The real question, however, is whether the former proposition is sound, namely, whether the supply constituted by the Fijian Currency Transaction was made in relation to such rights and whether such rights can fairly be characterised as rights within the meaning of Item 4. 41 The application of Item 4 of s 38-190(1) does not turn on the characterisation of the supply in question. The question requires that attention be directed to the Fijian Currency Transaction. 42 The phrase in relation to is a wide one, which signifies some connection or association between two subject matters. The connection or association may be direct or indirect, substantial or real. However, the connection or association must be relevant to the inquiry at hand. The sufficiency of the connection or association will depend upon the subject matter of the enquiry, the statutory framework within which the enquiry is conducted and the particular facts of the case in question. The degree of connection or association is to be gleaned from the context in which the phrase is found in the statutory framework (see HP Mercantile Pty Ltd v Commissioner of Taxation (2005) 143 FCR 553 at [35]). Travelex contends that there is a substantial and immediate connection between the supply constituted by the Fijian Currency Transaction and the so called rights described above. 43 Travelex says that, as the holder or owner of the Fijian bank notes, Mr Urquhart had a means of exchange in Fiji. From a practical and business point of view, he obtained the right to spend the bank notes in Fiji since, as legal tender in Fiji, the bank notes were sufficient to discharge a debt owed in Fiji. Travelex says that, as the holder or owner of the Fijian bank notes, Mr Urquhart obtained the right to spend the bank notes by tendering them in discharge of a debt that he incurred in Fiji for the purchase of, for example, stationery, drinks or taxi fares. It says that the supply constituted by the Fijian Currency Transaction was therefore also a supply in relation to that so called right. Travelex also contends that, even if the only right that Mr Urquhart acquired was a right of exchange as against the Reserve Bank of Fiji, that is a right within the meaning of Item 4, being a right that can only ever be used outside Australia. Travelex says that, since that right is an incident of being the owner or holder of the Fijian bank notes in question, the supply in question, constituted by the Fijian Currency Transaction, was a supply in relation to that right. 44 The Commissioner contends that the phrase a supply that is made in relation to rights, as it appears in Item 4, should be construed as meaning a supply of rights. The Commissioner attaches significance to s 9-10(2)(e), in so far as that provision refers to the creation, grant, transfer, assignment or surrender of any right. The Commissioner says that Item 4 is concerned only with a supply that would fall within that provision; only such a supply would be a supply that was made in relation to rights. That is to say, item 4 is concerned with a supply in relation to a right that could be the subject of creation, grant, transfer, assignment or surrender by Travelex. 45 There is much to be said for the Commission's construction. The drafting technique employed in the GST Act and, by setting things out in tables, results in the use of abbreviations and the absence of finite sentences. Thus, the Commission says that the phrase "a supply that is made in relation to rights" should be understood as meaning "a creation, grant, transfer, assignment or surrender of any rights". 46 The so called rights, as described by Travelex, which are incidents of being the holder or owner of bank notes issued by the Reserve Bank of Fiji, are clearly not the subject of any creation, grant or surrender by Travelex. Nor could they be said to be the subject of any transfer or assignment by Travelex, merely because they are incidents that pass with ownership or possession of the bank notes. As the owner of a chattel, such as a book, a person is entitled to handle, read and deal with the book, something that the person, if not the owner, could not do without the consent or licence of the owner. A supply of a book would not be a supply that was made in relation to the right to handle or read the book. It would be a supply of goods. A supply in relation to rights must be something more than the supply of goods the ownership of which has incidents that might in some senses be described as rights. An incident that is the consequence of a supply, whether or not that incident can fairly be characterised as a right, is not something in relation to which the supply is made. 47 There is no sufficient connection or association between the supply constituted by the Fijian Currency Transaction within the meaning of the GST Act and the incidents of being the owner or holder of bank notes. The incidents of being the owner or holder of bank notes issued by the Reserve Bank of Fiji are not rights in relation to which a supply of the bank notes is made within the meaning of Item 4. 48 The so-called rights identified by Travelex, being the incidents of holding or owning bank notes, are not relevantly connected with the supply constituted by the Fijian Currency Transaction, such that it can be said that the supply of the bank notes was a supply made in relation to those so called rights. The supply was a supply of the physical notes, albeit that the physical notes are money within the meaning of the GST Act and are legal tender in Fiji and carry the incidents identified. The subject matter of the supply was bank notes having a face value of 400 Fijian dollars. The incidents of being the holder or owner of those bank notes were simply the consequences of becoming holder or owner. The supply was not relevantly in relation to those incidents. 49 Item 4 only applies to a supply if the essential character or substance of the supply, or of a separately identifiable part of the supply, is one of rights. Item 4 does not apply where the supply of rights is merely integral, ancillary or incidental to another dominant part of the supply, the supply being characterised by the dominant part. Before a supply can be said to be made in relation to a right within Item 4, the right must bind the parties in some way. The word right has a very broad meaning under the general law and might fairly be described as a benefit or claim entitling a person to be treated in a certain way. A supply that does not bind the parties in some way is not a supply that is made in relation to rights. A supply that is made in relation to rights in Item 4 in the table in s 38-190(1) means a supply of the rights by way of the creation, grant, transfer or assignment of the rights or a supply by way of the surrender of the rights.

CONCLUSION 50 Accordingly, the declaration claimed by Travelex should be refused. The proceeding should be dismissed with costs. I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Counsel for the Applicant: Mr A Robertson SC and Mr JO Hmelnitsky Solicitor for the Applicant: PricewaterhouseCoopers Counsel for the Respondent: Mr AH Slater QC and Mr BL Jones Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 9 October 2008 Date of Judgment: 19 December 2008