Background
AusNet Services Limited was the representative member of a GST group that included AusNet Electricity Services Pty Ltd (AES), a licensed electricity distributor in Victoria. AES supplied customers with connection services and ongoing electricity-distribution services. Although retailers handled billing and payments, AES provided those services directly to customers.
Under Victoria’s regulatory regime, AES had to make Guaranteed Service Level payments to affected customers when it failed to meet prescribed standards, including timely connections and appointments and minimum reliability standards. AES made approximately $16 million in such payments between March 2019 and December 2020. AusNet claimed approximately $1.4 million in decreasing GST adjustments under Division 134 or, alternatively, Division 19 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth). The Commissioner disallowed its objection, and AusNet appealed.
The Court’s Holding
Justice Moshinsky dismissed the appeal. The Court held that AES supplied the relevant services directly to customers, rather than supplying them to retailers for onward supply. Division 134 therefore could not apply because its required supply-chain arrangement was absent.
Division 19 also did not apply because the Guaranteed Service Level payments were not adjustment events that changed the consideration for AES’s services. They were standalone regulatory payments intended to acknowledge customer inconvenience and encourage improved reliability. They were not structured as discounts or rebates, did not correlate with the prices charged, could be payable when fees had been waived, and could exceed the charge for a connection service. AusNet was therefore not entitled to decreasing adjustments, and it was ordered to pay the Commissioner’s costs.
Key Takeaways
- A payment associated with deficient performance does not necessarily reduce the consideration for the underlying supply for GST purposes.
- Division 134 was unavailable because AES supplied its connection and distribution services directly to customers, with retailers serving as billing and payment intermediaries.
- Fixed regulatory payments that operate independently of service charges may be standalone payments rather than Division 19 adjustment events.
Why It Matters
The decision distinguishes regulatory compensation or incentive payments from price reductions for GST purposes. A practical connection between a payment and a service failure is insufficient by itself; the payment must change the consideration for the particular supply.
Regulated utilities and other businesses operating service-guarantee schemes should examine the governing instruments, contractual arrangements, payment calculations, and invoicing treatment before treating customer payments as GST adjustments.