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GST treatment of motor industry payments finally resolved


24 October 2013: The parties have not sought to appeal the decision of the Full Federal Court in the case of AP Group Limited v Commissioner of Taxation, dated 18 September 2013. The taxpayer was advised by Deloitte.  

This was an appeal by the taxpayer, and a cross appeal by the ATO, on the decision of the Administrative Appeals Tribunal (AAT) dated 14 September 2012. The taxpayer argued before the AAT that it had overpaid GST on the receipt of five categories of incentive payments. The AAT agreed with the taxpayer in respect of three categories of payments being ‘transit allowances’, ‘retail target incentives’ and ‘wholesale target incentives’. The AAT, however, disagreed with the taxpayer on ‘fleet rebates’ and ‘run-out model support payments’.  

The Full Federal Court upheld the AAT’s decision, resulting in a partial win for the motor dealers and partial win for the ATO.

Jon Graham, Indirect Tax Leader at Deloitte, said: “This is a very important test case looking at some of the most fundamental building blocks upon which the GST system in Australia is built. The case tested what constitutes a ‘supply’ and what constitutes ‘consideration’ and the level of connection that is needed between the two in order to render a transaction subject to GST.”

For the motor industry, this has been a grey area since GST was introduced on 1 July 2000 with all of the parties, including the ATO, uncertain as to the correct treatment.  

Deloitte, acting for a group of motor dealers, had been in discussions with senior ATO personnel from as early as 2008, but it was agreed that the only way to obtain certainty on the matter was to litigate using a test case. Deloitte assisted AP Group in putting forward a test case on behalf of a larger group of motor dealers.

Mr Graham said: “The taxpayer tried to convince the ATO and the courts that fleet rebates and run-out bonuses should be treated as discounts to the underlying motor vehicles because this is how the distributors and the dealers always saw the payments commercially. There will be disappointment that the courts didn’t characterise them in this way for GST purposes, but the decision does bring much-needed certainty to the GST treatment of these payments to all parties in the supply chain.”  

“Some motor dealers will now be entitled to refunds in respect of GST overpaid although, because of the four-year time restrictions for making GST refunds, it will only be available for those dealers who commenced an action with the ATO many years ago.”

Lead partner of Deloitte Motor Industry Services, Grant Cameron said: “The refunds will be welcomed by Australian motor dealers however, they will not be as large as those received in the Kap motors case that Deloitte led in 2008."

The decision is expected to have ramifications for other sectors where there are similar incentive payments, such as volume rebates between wholesalers and retailers.  

Mr Graham said: “The real story here is that it took 13 years after the tax was introduced to get certainty on the GST treatment. This is just one example of the uncertainties that continue to exist in GST. In a Deloitte survey of in-house tax advisers in 2010, 50 per cent of respondents identified the number of fundamental GST concepts still being grey areas as their biggest disappointment in the 10 years since GST was introduced.”

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Last Updated: 


Jon Graham
Deloitte Autralia
Job Title:
Partner, Tax
Tel: +61 2 9322 7421
Johnny Sollitt-Davis
Deloitte Australia
Job Title:
Corporate Affairs & Communications
Tel: +61 3 9671 6177, Mobile: 0431 134 850




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