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Is entity A, the holder of an 'individual transferable quota' in a fishery, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it temporarily exchanges its quota with the quota of entity B?

Yes, entity A is making a taxable supply under section 9-5 of the GST Act when it temporarily exchanges 'individual transferable quotas' with entity B.

Certain species of fish are protected by a quota system. In order to fish for these protected species, it is a requirement to hold an 'individual transferable quota' (ITQ).

Entity A holds an ITQ. It agrees to exchange ITQs with entity B for one year. The ITQs revert back to the original holders at the end of the year.

Entity A is registered for goods and services tax (GST). The temporary exchange of ITQs is in the course of entity A's enterprise and is connected with Australia.

An entity makes a taxable supply where the requirements of section 9-5 of the GST Act are satisfied. One of the requirements of a taxable supply is that an entity must make a supply for consideration (see paragraph 9-5(a) of the GST Act).

The term 'supply' is broadly defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'. Paragraph 9-10(2)(e) of the GST Act further states that a 'supply' includes a creation, grant, transfer, assignment or surrender of any right.

An ITQ consists of a bundle of rights which are transferable. The exchange of these rights is therefore a supply within the specific meaning of the term under paragraph 9-10(2)(e) of the GST Act.

Consideration is defined in section 195-1 of the GST Act to mean 'any consideration within the meaning given by sections 9-15 and 9-17, in connection with the supply.'

Subsection 9-15(1) of the GST Act provides that a payment, or any act or forbearance is consideration for a supply if it is 'in connection with', 'in response to or for the inducement of' a supply. Paragraph 12 of Goods and Services Tax Ruling GSTR 2001/6 also provides that consideration includes a payment in a non-monetary or in an 'in kind' form. This includes acts, forbearances, and goods or property.

The consideration, in this instance, is non-monetary in that the consideration for the supply made by entity A of its quota to entity B is the supply of entity's B quota to entity A.

Accordingly, entity A makes a supply for consideration when it exchanges its quota with the quota of entity B. The supply of the ITQ by entity A is a taxable supply in this case as the supply satisfies the other requirements of a taxable supply under section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. [Note: Where the requirements of section 9-5 of the GST Act have been satisfied, entity B will also be making a taxable supply to entity A.

In the case of non-monetary consideration, the price of the supply will be its GST inclusive market value (paragraph 9-75(1)(b) of the GST Act).]

Date of amendment Part Comment 22 April 2013 Issue Space inserted after the word 'quota' Reason for Decision Amended by inserting section 9-17. As of 1 July 2012, section 9-17 is included within the definition of consideration as defined by section 195-1. Legislative References Section 9-15 and section 9-17 added

Date of amendment | Part | Comment

22 April 2013 | Issue | Space inserted after the word 'quota'

Reason for Decision | Amended by inserting section 9-17. As of 1 July 2012, section 9-17 is included within the definition of consideration as defined by section 195-1.

Legislative References | Section 9-15 and section 9-17 added