Federal Court of Australia

Commissioner of Taxation v Burswood Nominees Limited as trustee for the Burswood Property Trust [2021] FCAFC 151

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    Paragraphs 1, 2 and 5 of the orders made by the primary judge on 6 October 2020 in proceeding NSD 1886 of 2018 be set aside and in lieu thereof it be ordered that:

(a)    The appeal against the appealable objection decision of 13 September 2018 for the February 2012 monthly tax period be dismissed.

(b)    Subject to paragraph 4 below, the applicant (Burswood Nominees Limited as trustee for the Burswood Property Trust) pay the respondent’s costs of the proceeding, as agreed or assessed.

3.    Subject to paragraph 4 below, the respondent pay the appellant’s costs of the appeal, as agreed or assessed.

4.    The respondent has leave to file and serve, by 4.00 pm on 27 August 2021, a written submission (of no more than two pages) in relation to costs (both of the proceeding at first instance and the appeal). In the event that the respondent files a submission, the appellant has leave to file and serve, by 4.00 pm on 3 September 2021, a written submission (of no more than two pages) in response, and the issue of costs will be determined on the papers.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    Paragraphs 1, 2 and 5 of the orders made by the primary judge on 6 October 2020 in proceeding NSD 1885 of 2018 be set aside and in lieu thereof it be ordered that:

(a)    The appeal against the appealable objection decision of 10 August 2018 for the June 2015 monthly tax period be dismissed.

(b)    Subject to paragraph 4 below, the applicant (Crown Melbourne Limited) pay the respondent’s costs of the proceeding, as agreed or assessed.

3.    Subject to paragraph 4 below, the respondent pay the appellant’s costs of the appeal, as agreed or assessed.

4.    The respondent has leave to file and serve, by 4.00 pm on 27 August 2021, a written submission (of no more than two pages) in relation to costs (both of the proceeding at first instance and the appeal). In the event that the respondent files a submission, the appellant has leave to file and serve, by 4.00 pm on 3 September 2021, a written submission (of no more than two pages) in response, and the issue of costs will be determined on the papers.

[Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.]

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The orders made by the primary judge on 16 February 2021 in proceeding NSD 1885 of 2018 be set aside and in lieu thereof it be ordered that:

(a)    The appeals against the appealable objection decisions of 10 August 2018 in respect of the following monthly tax periods:

(i)    31 August 2010; and

(ii)    28 February 2011 to 31 May 2015,

be dismissed.

(b)    Subject to paragraph 4 below, the applicant (Crown Melbourne Limited) pay the respondent’s costs of the proceeding, as agreed or assessed.

3.    Subject to paragraph 4 below, the respondent pay the appellant’s costs of the appeal, as agreed or assessed.

4.    The respondent has leave to file and serve, by 4.00 pm on 27 August 2021, a written submission (of no more than two pages) in relation to costs (both of the proceeding at first instance and the appeal). In the event that the respondent files a submission, the appellant has leave to file and serve, by 4.00 pm on 3 September 2021, a written submission (of no more than two pages) in response, and the issue of costs will be determined on the papers.

[Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.]

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The orders made by the primary judge on 16 February 2021 in proceeding NSD 1886 of 2018 be set aside and in lieu thereof it be ordered that:

(a)    The appeals against the appealable objection decisions of 13 September 2018 in respect of the following monthly tax periods:

  (i)    31 October 2007 to 30 June 2010;

  (ii)    31 July 2011 to 31 January 2012; and

  (iii)    31 March 2012 to 31 July 2012,

  be dismissed.

(b)    Subject to paragraph 4 below, the applicant (Burswood Nominees Limited as trustee for the Burswood Property Trust) pay the respondent’s costs of the proceeding, as agreed or assessed.

3.    Subject to paragraph 4 below, the respondent pay the appellant’s costs of the appeal, as agreed or assessed.

4.    The respondent has leave to file and serve, by 4.00 pm on 27 August 2021, a written submission (of no more than two pages) in relation to costs (both of the proceeding at first instance and the appeal). In the event that the respondent files a submission, the appellant has leave to file and serve, by 4.00 pm on 3 September 2021, a written submission (of no more than two pages) in response, and the issue of costs will be determined on the papers.

[Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.]

REASONS FOR JUDGMENT

THE COURT:

Introduction

1    The respondents to these appeals – Burswood Nominees Limited as trustee for the Burswood Property Trust (Burswood) and Crown Melbourne Limited (Crown) – are the owners and operators of casinos in Perth and Melbourne respectively (the casinos). During the relevant period, the casinos entered into agreements with persons, referred to as “junket tour operators”, in relation to “junkets”. The term “junket” is widely used in the casino industry to refer to a group of players who attend a casino together as a group for a set period of time, playing on special gambling terms and receiving VIP treatment. The agreements between the casinos and junket tour operators were in a standard form and examples were included in the evidence at first instance.

2    Where the casino entered into an agreement with a junket tour operator, all dealings in relation to the provision of funds, the provision of credit and issuing and cashing of chips were exclusively between the casino and the junket tour operator (or their agent). Depending on the type of program selected by the junket tour operator, commissions and/or rebates were payable by the casino to the junket tour operator, and rebates were payable by the junket tour operator to the casino. These commissions and rebates were taken into account in calculating a total amount payable, at the end of the junket, by the junket tour operator to the casino or by the casino to the junket tour operator.

3    The issue raised by these appeals concerns the treatment, for the purposes of the goods and services tax (GST), of the commissions and rebates, and the total amount payable, as described above. In particular, the issue is whether the special rules for gambling supplies in Div 126 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act) apply to these amounts.

4    The respondents contend, and the primary judge held (Crown Melbourne Limited v Commissioner of Taxation [2020] FCA 1295), that the special rules in Div 126 of the GST Act apply to the total amount payable by the junket tour operator to the casino or by the casino to the junket tour operator. The appellant (the Commissioner) contends that the special rules do not apply to the commissions and rebates, and they are to be dealt with under the ordinary GST rules. The Commissioner does not otherwise dispute the application of the special rules to the total amount payable.

5    The principal relevant provision for present purposes is s 126-10 of the GST Act (set out below). This provides for the calculation of a “global GST amount” in relation to gambling supplies. That amount is calculated by taking the “total amount wagered” (a defined expression) and subtracting the “total monetary prizes” (also a defined expression). The resulting amount is then multiplied by 1/11. The effect of this provision is that the GST on gambling supplies is to be applied to the margin of the person providing the gambling supplies.

6    For the reasons that follow, in our view the commissions and rebates, if viewed as separate amounts payable, do not form part of “total monetary prizes” or “total amount wagered” within the meaning of s 126-10. It follows that they are not to be taken into account in calculating the “global GST amount” under s 126-10, and the special rules in Div 126 do not apply to these amounts. Further, in relation to the total amount payable at the end of a junket by the junket tour operator to the casino or by the casino to the junket tour operator, in our view it is inconsistent with the scheme of Div 126, and with the terms of the relevant expressions, to treat this amount as constituting or forming part of the “total amount wagered” (if payable by the junket tour operator to the casino) or the “total monetary prizes” (if payable by the casino to the junket tour operator). Accordingly, in our respectful opinion, the primary judge erred.

7    It follows that the appeals are to be allowed and the relevant orders of the primary judge set aside. The respondents have not shown that the relevant assessments were excessive. It follows that, in lieu of the orders made by the primary judge, there should be orders that Burswood’s and Crown’s appeals against the Commissioner’s appealable objection decisions be dismissed.

Key Legislative Provisions

8    The proceedings at first instance involved monthly tax periods from July 2010 to July 2015 (in the case of Crown) and from October 2007 to June 2010 and from July 2011 to July 2012 (in the case of Burswood). We note that there are some discrepancies in the documents about the range of monthly tax periods covered by the proceedings at first instance. The periods we have identified are based on the notices of appeal filed by Crown and Burswood in the proceedings at first instance, namely proceedings NSD 1885 of 2018 and NSD 1886 of 2018. The parties provided the Court with a version of the GST Act compiled on 25 June 2015. We will refer to the provisions as in force on that date. It was not suggested that there were any material differences between that version of the legislation and the legislation as in force at other times during the relevant tax periods.

9    Chapter 2 of the GST Act set out the basic rules for the GST. Within that Chapter, Div 7 contained the central provisions. Section 7-1(1) relevantly provided that GST was payable on “taxable supplies”.

10    Division 9, also located in Ch 2, dealt with taxable supplies. Section 9-5 defined “taxable supply” in the following terms:

9-5    Taxable supplies

You make a taxable supply if:

 (a)    you make the supply for * consideration; and

(b)    the supply is made in the course or furtherance of an *enterprise that you *carry on; and

(c)    the supply is *connected with the indirect tax zone; and

(d)    you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

11    The word “consideration” was relevantly defined in s 9-15 as follows:

9-15    Consideration

(1)    Consideration includes:

(a)    any payment, or any act or forbearance, in connection with a supply of anything; and

(b)    any payment, or any act or forbearance, in response to or for the inducement of a supply of anything.

(2)    It does not matter whether the payment, act or forbearance was voluntary, or whether it was by the *recipient of the supply.

12    Division 17, which is located in Ch 2, dealt with net amounts and adjustments. Section 17-5 provided in part:

17-5    Net amounts

(1)    The net amount for a tax period applying to you is worked out using the following formula:

GST    –    Input tax credits

where:

GST is the sum of all of the GST for which you are liable on the *taxable supplies that are attributable to the tax period.

input tax credits is the sum of all of the input tax credits to which you are entitled for the *creditable acquisitions and *creditable importations that are attributable to the tax period.

(Notes omitted.)

13    Chapter 4 of the GST Act contained special rules. Within that Chapter, Div 126 contained special rules for the calculation of GST on taxable supplies involving gambling. Those rules overrode the provisions of Ch 2 (except for s 29-25, which is not relevant in this case), but only to the extent of any inconsistency: s 45-5.

14    Section 126-1 stated that gambling was dealt with by using a global accounting system that provided an alternative way of working out a taxpayer’s net amounts by incorporating the taxpayer’s net profits from taxable supplies involving gambling.

15    Section 126-5 provided as follows:

126-5    Global accounting system for gambling supplies

(1)    If you are liable for the GST on a *gambling supply, your net amount for the tax period to which the GST on the supply is attributable is as follows:

Global GST amount + Other GST – Input tax credits

where:

global GST amount is your *global GST amount for the tax period.

input tax credits is the sum of all of the input tax credits to which you are entitled on the *creditable acquisitions and *creditable importations that are attributable to the tax period.

Note:    Any supplies under the global accounting system will not have attracted input tax credits.

other GST is the sum of all of the GST for which you are liable on the *taxable supplies that are attributable to the tax period, other than *gambling supplies.

For the basic rules on what is attributable to a particular period, see Division 29.

(2)    However, the *net amount worked out under subsection (1) for the tax period:

(a)    may be increased or decreased if you have any *adjustments for the tax period; and

(b)    may be increased or decreased under Subdivision 21-A of the *Wine Tax Act; and

(c)    may be increased or decreased under Subdivision 13-A of the A New Tax System (Luxury Car Tax) Act 1999.

Note 1:    See Part 2-4 for the basic rules on adjustments.

Note 2:    Under Subdivision 21-A of the Wine Tax Act, amounts of wine tax increase the net amount, and amounts of wine tax credits reduce the net amount.

Note 3:    Under Subdivision 13-A of the A New Tax System (Luxury Car Tax) Act 1999, amounts of luxury car tax increase the net amount, and luxury car tax adjustments alter the net amount.

(3)    This section has effect despite section 17-5 (which is about net amounts).

Note:    If you are a *GST instalment payer your net amount is reduced by GST instalments you have paid: see section 162-105.

16    The expressions “gambling supply”, which is used in the above provision, and “gambling event” were defined in s 126-35:

126-35     Meaning of gambling supply and gambling event

(1)    A gambling supply is a *taxable supply involving:

(a)    the supply of a ticket (however described) in a lottery, raffle or similar undertaking; or

(b)    the acceptance of a bet (however described) relating to the outcome of a *gambling event.

(2)    A gambling event is:

  (a)    the conducting of a lottery or raffle, or similar undertaking; or

(b)    a race, game, or sporting event, or any other event, for which there is an outcome.

17    Section 126-10, which is the critical provision for present purposes, was in the following terms:

126-10    Global GST amounts

(1)    Your global GST amount for a tax period is as follows:

where:

total amounts wagered is the sum of the *consideration for all of your *gambling supplies that are attributable to that tax period.

total monetary prizes is the sum of:

(a)    the *monetary prizes you are liable to pay, during the tax period, on the outcome of gambling events (whether or not any of those gambling events, or the *gambling supplies to which the monetary prizes relate, take place during the tax period); and

(b)    any amounts of *money you are liable to pay, during the tax period, under agreements between you and *recipients of your gambling supplies, to repay to them a proportion of their losses relating to those supplies (whether or not the supplies take place during the tax period).

For the basic rules on what is attributable to a particular period, see Division 29.

(2)    However, your global GST amount is zero for any tax period in which total monetary prizes exceeds total amounts wagered.

(3)    In working out the total monetary prizes for a tax period, disregard any *monetary prizes you are liable to pay, during the tax period, that relate to supplies that are *GST-free.

(4)    Your global GST amount for a tax period may be affected by sections 126-15 and 126-20.

18    The word “consideration” was defined in the Dictionary as having the meaning given by ss 9-15 and 9-17. Section 9-15 has been set out above. Section 9-17 is not relevant for present purposes.

19    The expression “monetary prize” was defined in s 195-1 as meaning:

monetary prize means:

 (a)    any prize, or part of a prize, in the form of *money; or

(b)    if the prize is given at a casino—any prize, or part of a prize, in the form of *money or in the form of gambling chips that may be redeemed for money.

Factual context

20    The following outline of the factual context is substantially based on the factual outline in the reasons for judgment of the primary judge. No issue was taken on appeal with her Honour’s outline of the factual context.

21    Her Honour’s factual outline was based on the evidence of Ken Barton, who at the time of affirming his affidavits was the Chief Financial Officer of Crown Resorts Limited (which is effectively the parent company of both respondents). Mr Barton’s evidence was not challenged by the Commissioner, save that rulings were made under s 136 of the Evidence Act 1995 (Cth) limiting the use to be made of parts of that evidence.

22    In describing the relevant agreements and arrangements, it is convenient to adopt the present tense, as did the primary judge. However, it should be noted that the description of the agreements and arrangements set out in the following paragraphs relates to the relevant monthly tax periods rather than the present position.

The operations

23    The main source of revenue of both respondents is from making gambling supplies and the profit they make depends on the volume of wagers made and the outcome of gambling events. In all games offered by the casinos the odds for each game are slightly in favour of the casino. Two of the most popular games that the casinos offer are roulette and baccarat. In roulette, the casino will have one or two house numbers – “0” and “00” – in addition to the numbers 1 through to 36 on the roulette wheel. A patron who places a winning bet on a number will be paid at the odds of 36 to 1 and a patron who places a bet on “red or black” or “even or odd” (or some other combination involving the numbers 1 to 36) will lose if the house number comes up. This gives mathematical odds in favour of the casino of 2.7% or 5.26% for one or two house numbers respectively. That is, for every $100 wagered, the casino can expect to receive a gross margin of $2.70 or $5.26 for one or two house numbers respectively. In baccarat, the casino has a theoretical win rate of 1.35% (that is, for every $100 wagered, it can expect to receive a gross win of $1.35).

24    The casinos’ gross profit over time depends on the volume of bets placed. Accordingly, the casinos seek to attract as much betting volume as possible. The respondents compete with other casinos for international VIP gambling volume and in order to do this, they offer special gambling terms (which reduce the theoretical win rate for the casinos) and a range of complimentary allowances and incidental benefits to VIP patrons (premium players or “high-rollers”) and (during the relevant monthly tax periods) “junket tour operators”. The special gambling terms may include turnover commissions (based on the volume of wagers multiplied by an agreed rate) and win and loss rebates (based on the actual wins and losses on the gambling that takes place, reduced by multiplying the win or loss by an agreed rate). As the turnover commission and rebate entitlements can only be determined at the end of the gambling period, it is only at the end of the gambling period that there is a settlement of what is owed by, or to, the casino. Mr Barton described the commission and rebate entitlements as “notional amounts”, which are “all merely part of the calculation of the single gross amount owed by or to the Casino at the end of the agreed gambling period, or when the premium player or the [junket tour operator] has decided to stop gambling early”. According to Mr Barton, “[n]one of these notional amounts can ever be claimed for separate payment during or at the conclusion of the gambling activities. A premium player or a [junket tour operator] can only claim payment of a single amount that is calculated by reference to these integers in the formula”. The computation of that single amount also includes such other adjustments as may be relevant, such as for complimentary or other benefits.

Individual VIP players

25    Although the focus for present purposes is on the agreements between the casinos and junket tour operators, it is helpful first to refer (as did the primary judge) to arrangements between the casinos and individual VIP players, to provide background and context.

26    The casinos have special areas where wealthy (generally foreign) patrons, also known as premium players or “high-rollers”, can attend to play roulette and baccarat and receive a premium or “VIP” experience. The VIP experience includes the offering of a selection of special gambling terms and a range of complimentary allowances and incidental benefits.

27    When a VIP player wants to gamble at the casino, the player will negotiate directly with casino personnel with respect to the range of special gambling terms the casino is willing to offer to them at the time. A VIP player can select one of two types of programs, either a commission based program or a (loss) rebate based program, each with different special gambling terms. The special gambling terms are recorded in a document called “Table Games Premium Player Program Agreement (International)” (Premium Player Program Agreement) or similarly named document which is signed by casino personnel and the VIP player.

28    Mr Barton described a commission based program as one where:

… the Casinos offer to provide a notional credit based solely on gambling volume (the total value of all bets placed) against the “ordinary” gross win or loss produced by that volume to give rise to what is referred to as a net win or net loss. That incentive is often called volume “Commission”.

29    Mr Barton elaborated as follows:

If a VIP player selects a “Commission” based program … the gambling result, that is, the total amount to be paid by the VIP player to Crown or by Crown to the VIP player upon settlement at the end of the program … will be calculated having regard to the volume of bets placed (ie turnover) multiplied by the “commission rate” stipulated in the Premium Player Program Agreement. The Program and calculation of the amount payable to the individual VIP player is referred to as a “Commission” based program. The Casino does not use the word “commission” in the sense of a payment for any services rendered by the VIP player. It is the word the Casino chooses to use in offering special gambling terms to the VIP player. It is used specifically to represent a notional percentage credit for volume and is also used generally (interchangeably with final rebate) to describe the difference between the notional ordinary win or loss and the actual win or loss.

30    Mr Barton described a (loss) rebate based program as one where:

… the total amount to be paid by the VIP player to the Casino upon settlement at the end of the program will be calculated having regard to the VIP player’s notional ordinary gambling loss over the course of the program multiplied by the “rebate percentage”. If the result of the VIP player’s gambling is a notional win at the end of the program, no rebate amount will be taken into account in the calculation of the amount to be paid to the VIP player at the conclusion of the program.

31    Mr Barton deposed that whether a commission based program is selected or a loss rebate based program is selected, there is no requirement under the terms of the Premium Player Program Agreement for the VIP player to place a bet at the casino. However, if the VIP player does not place a bet, he or she will not be able to take advantage of the commission component, rebate component or complimentary allowance component of the Premium Player Program Agreement as these are computed on the basis of the amount of the VIP player’s gambling turnover or gambling loss.

Junket tour operators

32    As noted above, the term “junket” is widely used in the casino industry to refer to a group of players who attend a casino together as a group for a set period of time, playing on special gambling terms and receiving VIP treatment. The businesses that arrange the junkets for participating players are referred to as “junket tour operators” and the participating players are the clients of the junket tour operators.

33    When a junket tour operator has a group of players who wish to attend Crown Melbourne or Crown Perth, the junket tour operator will negotiate the special gambling terms and VIP treatment that the casino is willing to offer at the time, with the casino concerned. Those negotiations occur prior to the commencement of the junket. Once negotiated, the casino and junket tour operator enter into a “Table Games Junket Program Agreement” (Junket Program Agreement) containing the terms and conditions governing the junket. The junket tour operator will indicate on the Junket Program Agreement the names of the players who will participate in the junket. Some junket tour operators participate as players in the junkets they have organised and, in other cases, they do not. If a junket tour operator does not accompany the junket players, the junket tour operator must appoint an agent to deal with the casino on their behalf. Each junket is allocated a set of special gambling chips, which are unique to that junket, to be used by the junket participants for the duration of the program. These special gambling chips help the casino to track the turnover and notional gambling win and loss of each junket.

34    As noted above, where the casino enters into a Junket Program Agreement with a junket tour operator, all dealings in relation to the provision of funds, the provision of credit and issuing and cashing of chips are exclusively between the casino and the junket tour operator (or their agent). The casino’s credit and identification checks are of the junket tour operator, not of the individual players, and the amount of credit the casino is willing to provide to the junket tour operator is based on those credit checks. In some cases, the casino may also perform credit checks on the participants in a junket to ensure that the junket tour operator will not face collection issues from junket participants that may, in turn, cause the casino to have issues collecting from the junket tour operator. At the conclusion of the junket, the casino will calculate the amount owing by the junket tour operator to the casino or by the casino to the junket tour operator. The casino does not pay any amounts to the players participating in the junket. Mr Barton deposed that the junket tour operator will have its own payment arrangements with the players but Crown and Burswood do not know what those arrangements are.

35    The casinos will usually offer slightly more advantageous special gambling terms to a junket tour operator than to a player who would individually qualify as a VIP player. The main reason for this is a junket of players is likely to have more turnover than an individual VIP player, and the greater the number of players who place bets, the greater the casino’s return is likely to be statistically, as over time the casino’s theoretical gambling revenue is determined by the volume of bets placed.

36    There are several types of special gambling terms or programs which a junket tour operator can select. Like the special gambling terms available for individual VIP players, these programs include commission based programs and rebate based programs. There is also an additional program offered to junkets which is not available to individual VIP players called a hybrid program, involving both volume commissions and win/loss rebates, which can either be based on the gross wins or losses or the net wins or losses. If based on the gross wins or losses, the rebate is calculated independently of the commission. If based on the net wins or losses, the rebate is calculated by the gross wins or losses adjusted by the commission calculated for the junket. Mr Barton explained that if a junket tour operator selects a hybrid program, the total amount to be paid by the junket tour operator to the casino or by the casino to the junket tour operator upon settlement at the end of the program will be calculated having regard both to the volume of bets placed (i.e. turnover) of all junket participants and the overall gambling win or loss of all junket participants.

37    Mr Barton deposed that whether a commission based program, a rebate based program or hybrid program is selected, there is no requirement for the junket participants to place a bet at the casino under the terms of the Junket Program Agreement. If the junket participants do not place a bet, the junket tour operator will not be able to take advantage of the commission component, the rebate component or (where applicable) the complimentary allowance component of the Junket Program Agreement (as it is calculated on the basis of the amount of the total gambling turnover or ordinary gambling win or loss of all junket participants). They may still however receive incidental benefits.

Settlement sheet

38    The casinos monitor the total turnover and ordinary gambling win or loss of each junket using a casino management system called “SYCO”. The information recorded in SYCO can be used to determine the complimentary privileges and other incidental benefits which will be provided and to plan what areas of the VIP rooms and salons should be set aside for each junket.

39    For the junket overall, the information recorded in SYCO and calculated by SYCO includes:

(a)    the special gambling chips taken out from the “cage” by the junket tour operator. The cage is the counter at which all transactions involving the exchange by patrons of gambling chips for cash are conducted at the casino;

(b)    the special gambling chips returned to the cage by the junket tour operator;

(c)    the actual ordinary gambling win or loss of the junket participants;

(d)    the theoretical ordinary gambling win or loss of the junket participants based upon the casino’s historical records and statistics;

(e)    the turnover of the junket;

(f)    the gaming hours of all junket participants;

(g)    actual room, food, beverage and travel expenses incurred by the junket; and

(h)    the period of time over which the gambling took place.

40    For each junket participant, the information recorded in SYCO includes:

(a)    the notional ordinary gambling win or loss;

(b)    the actual turnover of the junket participant; and

(c)    the arrival and departure dates of the junket participant.

41    At the conclusion of the junket, the casino will calculate the commission and rebates applicable to the junket program selected using the information contained in SYCO and record it on a settlement sheet. The settlement sheet records a number of different integers which form the basis of this calculation and give rise to a single amount owing by, or to, the casino for the junket. These include:

(a)    the notional ordinary gambling win or loss which comprises the value of the special gambling chips the junket tour operator or their representative obtained from the cage, less the special gaming chips returned to the cage;

(b)    the agreed reduction to the notional ordinary gambling win or loss for rebate programs;

(c)    the agreed percentage of the actual amount of chips wagered for “commission” based programs; and

(d)    the agreed reduction to the notional ordinary gambling wins or losses after, or in addition to, applying the agreed percentage of the actual amount of chips gambled for net hybrid programs and gross hybrid programs respectively.

42    In some cases a “partial” settlement could occur whilst the junket is still in progress. In this instance, a separate settlement sheet is provided for the partial settlement in advance of “full settlement”.

Junket Program Agreement

43    The evidence at first instance included an example of a Junket Program Agreement between Burswood and a junket tour operator dated June 2015, as well as similar agreements between Burswood and other junket tour operators. Also in evidence were examples of Junket Program Agreements between Crown and junket tour operators, using much the same template. There was no dispute at first instance, and there is no dispute on appeal, that the example Junket Program Agreements were representative of the agreements applicable during the relevant tax periods.

44    Relevant provisions of the template agreement, as recorded in the June 2015 example agreement, include:

Terms & Conditions

1.    Interpretation

…

Junket has the same meaning as in the Casino Control Act 1984 (WA);

…

2.    Program Qualification

This program will only apply to gaming tables in International Gaming Facility (IGF) at Crown Perth. Commission programs apply to Baccarat and Roulette only.

3.    Commission

Subject to the terms of this Agreement, Crown Perth will pay the Junket Operator commission in the amount that is equal to the percentage selected in the Reference Schedule multiplied by the Program’s total turnover as recorded by Crown Perth personnel at the time of settlement.

4.    Rebate on Gross Win / Loss

a)    Subject to the terms of this Agreement, Crown Perth will pay the Junket Operator a rebate in the amount that is equal to the percentage selected in the Reference Schedule multiplied by the Junket Operator’s gross loss as recorded by Crown Perth personnel at the time of settlement.

b)    Subject to the terms of this Agreement, the Junket Operator will pay Crown Perth a rebate in the amount that is equal to the percentage selected in the Reference Schedule multiplied by the Junket Operator’s gross win as recorded by Crown Perth personnel at the time of settlement.

c)    No partial settlements are permitted on Rebate on Gross Win / Loss programs.

5.    Rebate on Net Win / Loss

a)    Subject to the terms of this Agreement, Crown Perth will pay the Junket Operator a rebate in the amount that is equal to the percentage selected in the Reference Schedule multiplied by the Junket Operator’s net loss as recorded by Crown Perth at the time of settlement.

b)    Subject to the terms of this Agreement, the Junket Operator will pay Crown Perth a rebate in the amount that is equal to the percentage selected in the Reference Schedule multiplied by the Junket Operator’s net win as recorded by Crown Perth at the time of settlement.

c)    No partial settlements are permitted on Rebate on Net Win / Loss programs.

6.    Discount on Loss

a)    Subject to the terms of this Agreement, Crown Perth will pay the Junket Operator a set percentage in the amount that is equal to the percentage selected in the Reference Schedule multiplied by the Junket Operator’s gross loss as recorded by Crown Perth at the time of settlement.

b)    No partial settlements are permitted on discount on loss programs.

7.    Early Settlement Discount

Where payment on cheque cashing / credit facilities is received in full and in cleared funds within 20 business days from the draw down date, where applicable, the commission rate will be increased to the rate applicable to cash Front Money as described in the Reference Schedule.

8.    Complimentary Privileges

a)    Providing the junket achieves a minimum of A$3,000,000 / HKD$21,000,000 in Non Negotiable chip turnover, or A$6,000,000 / HKD$42,000,000 in commission based play chip turnover, Crown Perth will provide a Complimentary Allowance as specified in the Reference Schedule to cover in-house room and food & beverage costs incurred by the Junket Operator. The allowance for complimentaries cannot be redeemed for cash or cash equivalent. The allowance cannot be used for gratuities, retail products (including tours) or other items taken away from Crown Perth outlets. Expenditure incurred in excess of the allowance is the responsibility of the operator.

b)    Crown Perth will provide complimentary airport transfers to the Junket Operator and the players involved in the Program.

9.    Front Money

a)    Subject to clause 9 (b), the Junket Operator must provide Front Money to Crown Perth of at least A$500,000 / HKD $3,500,000.

b)    Unless otherwise pre-arranged, Front Money must be cash or cash equivalent, which must be cleared funds.

c)    A copy of any bank draft, intended as Front Money, must be forwarded to Crown Perth at least 48 banking hours prior to the commencement of the junket, to enable verification and clearance.

10.    Settlement Transactions

a)    All commission payable to the Junket Operator upon settlement will be telegraphically transferred to the overseas bank account nominated by the Junket Operator.

b)    Crown Perth Cheques & telegraphic transfers will not be processed until settlement, unless otherwise agreed by Crown Perth Executive Management.

c)    All proceeds of settlement must be utilised to redeem CCF, credit facility, foreign currency (cash or drafts), telegraphic transfer, bank cheques and any other value items held by Crown Perth as Front Money.

d)    If the Junket Operator departs Crown Perth without settling in accordance with this Agreement, Crown Perth will have full authorisation to complete the settlement on the Junket Operator’s behalf and distribute funds as mentioned in clause 10 (c). Any additional funds will be placed in the Junket Operator’s deposit account awaiting further instructions from the Junket Operator.

…

12.    Administration

The Junket Operator must provide the names, passport numbers, room requirements, and any other information required by Crown Perth to VIP Services at least 48 hours prior to the group’s arrival.

…

15.    Binding Agreement

The Junket Operator acknowledges and accepts that under the Gaming and Betting (Contracts and Securities) Act 1985, funds advanced for the purpose of lawful gaming is recoverable in court and is given for lawful consideration.

Non-Exclusive Overseas Gaming Promotion Agreement

The terms and conditions of the current Non-Exclusive Overseas Gaming Promotion Agreement between the Junket Operator and Crown Perth, dated 20/11/2012, are hereby incorporated into and form part of this agreement. In the event of any inconsistency arising, this Junket Program agreement will prevail.

(Italics emphasis added.)

Promotion Agreement

45    Also in evidence at first instance were examples of signed agreements based on the casinos’ template “Non-Exclusive Overseas Gaming Promotion Agreement” (Promotion Agreement). The evidence is that the Promotion Agreements are entered into only once between the junket tour operator and the casino and before any junkets take place. The evidence also is that it is possible that a Promotion Agreement may be signed many years before the junket tour operator arranges a junket to the casino, and that a junket tour operator may sign the agreement but never send a junket to the casino. In contrast, a Junket Program Agreement is negotiated and signed each time a junket takes place and is sent to the operations team in preparation for the commencement of the junket.

46    Mr Barton deposed that the operations team would “almost never see the Promotion Agreement signed by a [junket tour operator]”. His understanding from various discussions with casino personnel was that the Promotion Agreements serve the general purpose of increasing the practical likelihood a junket tour operator would consider arranging groups of VIP players to come to the casinos, based on a sense of engagement from the junket tour operator created by signing a written document. According to Mr Barton, the document is also intended to give a junket tour operator a level of confidence as to what special gambling terms may generally be offered by the casino, which the casino treats as a non-binding memorandum of understanding. His evidence also was that it was his understanding that no junket tour operator had ever claimed from the casinos any entitlement to money under a Promotion Agreement nor, he deposed, would the casinos entertain any such claim.

47    Mr Barton deposed that Burswood did not enter into Promotion Agreements with junket tour operators before 5 June 2010, as prior to that time junket tour operators were required under the Casino Control Regulations 1999 (WA) to make a formal application to, and obtain approval from, the Gaming and Wagering Commission of Western Australia (Gaming Commission) to be a junket tour operator and operate junkets at Crown Perth. From 5 June 2010, there was no longer any legislative requirement for junket tour operators to obtain approval from the Gaming Commission to operate junkets. From this time onwards Burswood started entering into Promotion Agreements with junket tour operators, but if a junket tour operator had previously obtained approval from the Gaming Commission to conduct junkets at Crown Perth, it was not Burswood’s practice to require the junket tour operator to sign a Promotion Agreement.

48    Examples of Promotion Agreements based on the casinos’ template Promotion Agreement that were in evidence at first instance contained the following terms. Again, there was (and is) no dispute between the parties that the examples in evidence were representative of Promotion Agreements with junket tour operators on foot during the relevant tax periods.

49    The recitals to the agreement state (where the “Operator” refers to the junket tour operator):

A.    The Operator carries on a prominent and reputable business of marketing, promoting and arranging Junkets to various gaming establishments around the world including Australia. The Operator withes [sic] to include the Burswood Entertainment Complex as one such destination.

B.    The Operator desires to increase commission revenues by the inclusion of Burswood to which Junkets can be promoted and arranged to visit and Burswood wishes to increase gaming revenues by receiving into its casino premises high net worth players arranged by the Operator.

C.    Following representations and negotiations between Burswood and the Operator (together “the Parties”), the Parties have agreed that the Operator will, for reward, market, promote and arrange Junkets of one or more persons to the Burswood Entertainment Complex upon the terms and conditions set out in this agreement.

D.    The Parties now wish to document the aforementioned terms and conditions previously agreed between themselves.

50    Relevant clauses include:

2.    APPOINTMENT

Subject to the terms and conditions of this agreement, Burswood appoints the Operator on a non-exclusive basis to market, promote and arrange Junkets to the Casino and the Operator accepts the appointment on a non-exclusive basis.

3.    TERM

This agreement will commence on the date of this agreement and, subject to clause 11, may be terminated by either party upon twenty one (21) days notice [sic] in writing to the other party.

4.    OPERATOR’S OBLIGATIONS

4.1    The Operator is an independent contractor and is not an agent, employee or legal representative of Burswood. The Operator is not authorised to do business in the name of Burswood or to bind Burswood in any way.

4.2    At the Operator’s own expense and prior to the Junket Players arriving in Australia, the Operator will undertake the following activities in the Territory and not in Australia in relation to the marketing, promotion and arrangement of Junkets.

(a)    actively develop markets for, advertise, solicit and promote participation in Junkets by gaming patrons, residing in the Territory, who have substantial personal financial resources, enjoy or are known to enjoy gaming;

(b)    attend to all passport, visa and immigration requirements of Junket Players so as to assist their prompt and trouble free travel to Australia;

(c)    in respect of Accompanied Junkets, attend to collection of Front Money and transfer of Front Money to Burswood by telegraphic transfer or other mutually acceptable means of funds transfer;

(d)    to the extent necessary to fulfil its obligations under this agreement, develop and maintain active, trained staff at the Operator’s own expense;

(e)    attend to Junket Players’ travel itineraries, purchase of air fares, confirmation of flights, confirmations to Burswood of anticipated arrival and departure dates/times, confirmation of Junket Player numbers and any special requirements of a Junket Player;

(f)    attend to prior arrangement of airport transfers, departure taxes, accommodation (inclusive of hotel services) for Junket Players.

4.3    The Operator and Burswood’s overseas representative(s) may meet periodically and at that meeting the Operator will advise Burswood of its promotional activities including details of key potential Junket Players and full information on the state of the market for Junkets.

4.4    The Operator will observe all directions and instructions given by Burswood in relation to the marketing, promotion and arrangement of Junkets to the Casino and, in the absence of any such directions or instructions in relation to any particular matter, will act in a manner which is most beneficial to interest [sic] of both Parties.

4.5    The Operator assumes full responsibility for claims arising in connection with the marketing, promotion and arrangement of Junkets by the Operator, and will defend and hold Burswood harmless from any and all claims, demands, suits or liabilities arising out of any acts or omissions of the Operator, its employees, appointees, legal representatives and agents whether based upon breach of contract, negligence, strict liability or otherwise, and including claims arising from the Operator’s breach of any of the provisions of this agreement.

4.6    The Operator will notify Burswood immediately of all and any complaints made by a Junket Player and will promptly and diligently investigate and report on the complaint to Burswood. Bruswood [sic] will be entitled to investigate any such complaint either in conjunction with the Operator or independently if it so decides. Any action to be taken in respect of any complaints will first be agreed between the Parties.

4.7    The Operator acknowledges that by completing a Junket Program Agreement or a Letter of Introduction before the arrival of each Junket, he/she has nominated the Junket as being either:

(a)    an Accompanied Junket; or

(b)    an Unaccompanied Junket.

4.8    In respect of an Unaccompanied Junket, nothing stated in, or performed pursuant to, this agreement, will relieve the Operator of ensuring Burswood has received accurate details of Junket Player’s [sic] names and arrival details prior to arrival of the player(s), save for service in writing by the Operator of those details.

4.9    The Front Money in respect of an Accompanied Junket will not be less than A$500,000 per Junket; or such other minimum amount as may be determined from time to time in accordance with clause 13.2.

4.10    For the avoidance of doubt between the Parties, it is acknowledged that:

(a)    the Operator and Junket Players are free to negotiate and conclude separate arrangements between themselves but in so doing the Operator can not [sic] and will not represent or bind Burswood in those separate arrangements;

(b)    any separate arrangements made between the Operator and Junket Players in respect of other matters will not impact Burswood’s obligations in respect of the Operator and vice versa; and

(c)    the Operator’s obligations under clause 4 of this agreement will be performed entirely outside Australia.

5.    BURSWOOD’S OBLIGATIONS

Burswood will provide the following services to Junkets:

(a)    Upon request from the Operator:

    (i)    airport transfers upon arrival and departure;

    (ii)    re-confirmation of departing flight(s)

(iii)    hotel room reservations and confirmations on behalf of the Junket;

The cost(s) of which may, by prior mutual agreement, be recoverable against the Operator on a reasonable and equitable basis;

(b)    Upon request but at no additional cost;

(i)    confirmation of Front Monies received;

(ii)    remittance by telegraphic transfer or electronic funds transfer to the nominated overseas bank account of:

    -    the Operator – the commission; and

-    the junket player/s – surplus Front Money and gaming winnings (as appropriate)

(c)    Burswood will extend all due hospitality, care and personal attention as is commensurate with a Junket Player’s status and play rating;

(d)    Burswood will ensure conduct and rules of the Games played at the Casino are consistently applied at all times for all Junket Players; and

(e)    Burswood will provide any other services specific to a particular Junket or Junket Player as agreed with the Operator.

6.    COMMISSION

6.1    In consideration of the matters referred to in clause 4.2, Burswood will pay the Operator a commission in respect of each Junket arranged by the Operator. The amount of commission payable by Burswood to the Operator will be calculated as a percentage of net Turnover (or mutually acceptable derivative thereof) of a Junket. If the Operator (or an agent) elects to accompany a particular Junket he/she will not be paid any additional amount by Burswood. The aforementioned percentage will be negotiated between the Parties and agreed before the Junket arrives at the Casino and will be largely (though not entirely) dependant [sic] upon whether the Junket is to be an:

(a)    Accompanied Junket – in respect of which any rebates payable to the players, will be paid by the Junket Operator and not by Burswood; or

(b)    Unaccompanied Junket – in respect of which the Junket Operator receives a payment as agreed in the Letter of Introduction and this payment is separate and distinct from any agreement between Burswood and the introduced player(s).

6.2    Burswood will take into account the following factors in determining the commission percentage of a Junket:

   (a)    the type of Junket program;

(b)    amount of Front Money to be provided;

(c)    number of players;

(d)    complimentary services to be supplied at expense of Burswood;

(e)    Whether the Junket is Accompanied or Unaccompanied;

(f)    Any other factors mutually agreed between the Parties.

6.3    Calculation of the commission in relation to each Junket will be based solely upon records kept by Burswood in respect of the Turnover of each Junket and confirmed on the relevant Settlement Sheet.

6.4    In relation to each Accompanied junket, Burswood will deliver to the Operator for signing in the Territory, a junket Program Agreement detailing, amongst other things, the percentage of commission to be used. The Junket Program Agreement will be given by the Operator to Crown before the intended arrival of the Junket at the Casino.

6.5    In relation to each Unaccompanied Junket, Burswood will deliver to the Operator for signing in the Territory, a completed Letter of Introduction for Table Players detailing, amongst other things, the commission rate. The Letter of Introduction will be given by the Operator to Crown before the intended arrival of the player(s) to Burswood.

6.6    It is acknowledged by the parties that where the commission calculated pursuant to clause 6 of this agreement represents a repayment by Burswood of a portion of the participating players losses [sic], whether theoretical or actual, the commission will be paid according to the specific details agreed in the Junket Program Agreement or the Letter of Introduction.

6.7    Commission will be paid in a foreign currency and will be paid overseas by remission by telegraphic transfer or electronic funds transfer to the nominated bank account of the Operator.

6.8    If the Parties fail to agree on the calculation of commission in relation to any Junket within twenty one (21) days of commencing a Junket, this agreement may be immediately terminated by either party.

…

9.    CONFIDENTIALITY

9.1    The Operator agrees to hold in confidence and to use only for the purposes of this agreement any and all Confidential Information disclosed by Burswood, under this agreement. The Operator will limit disclosure of such information only to those employees of the Operator who are required to have access to it for the performance of their duties. The Operator acknowledges that all Confidential Information disclosed by Burswood prior to the effective date of this agreement will be deemed to have been disclosed pursuant to the provisions of this clause.

9.2    The provisions of clause 9.1 will not apply to any information which the Operator can prove:

(a)    was in the public domain when it was given to the Operator;

(b)    after being given to the Operator becomes part of the public domain except through disclosure contrary to this agreement; or

(c)    was lawfully received from another person having the unrestricted legal right to disclose that information without requiring the maintenance of confidentiality.

9.3    The foregoing obligations concerning confidentiality and limitation of use of confidential information will survive the expiration or termination of this agreement.

…

11.    TERMINATION

11.1    Notwithstanding clause 3, either party may terminate this agreement in writing without further notice should the other party be in material breach of any of the provisions of this agreement and have failed to remedy such breach within fourteen (14) days of receipt of notice from the party not in default requiring the breach to be remedied.

11.2    If the Operator enters or is placed in receivership or provisional liquidation or liquidation (except for the purposes of amalgamation or reconstruction) or an application is made for the winding up of the Operator, or if the Operator becomes insolvent, makes an assignment for the benefit or its creditors [sic], or if an encumbrancer takes possession of any of the Operator’s assets, Burswood may, at its sole discretion, terminate this agreement forthwith by written notice.

11.3    Burswood will terminate this agreement forthwith by written notice if the Gaming and Wagering Commission formally advise [sic] Burswood not to have any further dealings with the Junket Operator.

(Italics emphasis added.)

The assessments

51    At all relevant times, Crown was the representative member of the Crown Melbourne Limited GST Group pursuant to Div 48 of the GST Act. During the monthly tax periods from July 2010 to June 2011 and from August 2012 to November 2015, Burswood was a member of that GST group.

52    For each of the relevant monthly tax periods, the respondents lodged business activity statements which took turnover commission and win/loss rebates into account when calculating their global GST amounts under s 126-10 of the GST Act. By the assessments in issue, the Commissioner excluded the amounts of commission and win/loss rebates from the calculation of the respondents’ global GST amounts attributable to those tax periods on the basis that such commissions and rebates do not come within Div 126 of the GST Act, either as “consideration” for or in connection with the respondents’ gambling supplies or “monetary prizes” that the respondents are liable to pay on the outcome of gambling events and therefore are not to be included in the computation of the GST global amounts of the respondents.

The proceedings at first instance

53    The respondents appealed to the Federal Court from the objection decisions pursuant to Pt IVC of the Taxation Administration Act 1953 (Cth). There were two proceedings at first instance – proceeding NSD 1885 of 2018 (commenced by Crown) and NSD 1886 of 2018 (commenced by Burswood).

54    By agreement of the parties, there was an initial hearing relating to two sample periods – February 2012 (for Burswood) and June 2015 (for Crown).

55    On 10 September 2020, the primary judge published reasons for judgment in relation to the sample periods. Her Honour set out the factual context (which has been substantially reproduced above) and summarised the parties’ submissions. Her Honour’s consideration of the issues is set out at [52]-[74] of the reasons for judgment.

56    Her Honour stated at [52] that the application of Div 126 of the GST Act to the commissions and rebates depended on whether they satisfy the criterion of “consideration for” gambling supplies (see the definition of “total amount wagered” in s 126-10, set out above) or “monetary prizes that you are liable to pay” on the outcome of gambling events (see the definition of “total monetary prizes” in s 126-10).

57    Her Honour discussed the meaning of relevant expressions, including “consideration” and “monetary prizes”, at [53]-[55]. At [56], her Honour stated that the question whether the commissions and rebates were to be dealt with under Div 126 was an inquiry that “begins in the agreements the parties made”, referring to Commissioner of State Revenue (Vic) v Lend Lease [2014] HCA 51; (2014) 254 CLR 142 (Lend Lease) at [51]. Her Honour stated that there were four sets of transactional documents to consider: the Promotion Agreement; the Junket Program Agreement; the settlement sheet; and the respondents’ standard rules for the games played by junket players. Her Honour considered these at [57]-[67]. In the course of this section of her reasons, the primary judge rejected the respondents’ contention that the Promotion Agreement was an “illusory contract”: at [61].

58    Her Honour held, at [63], that the Promotion Agreement and the Junket Program Agreement should be read as a single integrated document and, save as to any inconsistency, should be read harmoniously.

59    Her Honour found, at [65], that “the services provided by the junket tour operator to the casino in arranging the junket are the consideration for the commission, rebates and discounts on loss which the casino ‘will pay’”.

60    Having accepted the Commissioner’s contractual analysis, the primary judge did not accept his contentions as to the GST treatment of the commissions and rebates. Her Honour’s core reasoning was at [68]-[71]:

68    Contrary to the Commissioner’s contention however, that contractual analysis does not of itself provide the answer to the correct treatment of commission and rebates for GST purposes and whether the special rules contained in Div 126 of the GST Act apply. On the facts, there are two supplies: (1) the services provided by the junket tour operator in arranging the junket; and (2) the gambling supplies provided by the [respondents] under the junket arrangement, which are the relevant supplies for the purposes of Div 126. The Commissioner’s contractual analysis fails to address the relevant transaction, which is the provision of gambling supplies by the [respondents] and the characterisation of commission and rebates in that context for the purposes of the application of the special GST rules. There are three responses to the Commissioner’s case.

69    First, I accept the [respondents’] submission that a contractual relationship exists as between the [respondents], the junket tour operator and the junket players with respect to the conduct of a junket at the casino upon gambling taking place. When there is gambling, the effect of the gambling is that the junket players agree to be bound by the rules that apply to the gambling: The Satanita case. Those rules are to be found in the standard rules set by the casino, as modified by the terms of the junket program selected by the junket tour operator and recorded in the Junket Program Agreement with respect to any gambling that takes place. As matter of contract law, the terms agreed by the casino with the junket tour operator with respect to the conduct of a junket at the casino constitute an offer by the casino to make gambling supplies to junket participants on the terms agreed, and the commencement of gambling by the junket players constitutes acceptance of that offer. Under those terms, there is an amount either paid by or to the junket tour operator at the conclusion of the junket, to be calculated by the collective wins and losses of the junket players and then adjusted by the commission and/or rebates to be paid under the special terms that apply to the particular junket.

70    Secondly, I accept that the accounting for the outcome of the [respondents’] gambling supplies is one integrated and indivisible transaction of which the commission and rebates to be paid to the junket tour operator by the casino and the rebates to be paid by the junket tour operator to the casino are inseverable components, such that it can be said that commission and rebates are not separate and distinct amounts to be disintegrated from the collective win/loss results. Rather, they are amounts which are required to be taken into account as stipulated by the Junket Program Agreement in settling what is to be paid and by whom as the result of the gambling, as evidenced by the settlement sheets, and either form part of the “consideration for” the [respondents’] gambling supplies or the “monetary prize” which the [respondents] are liable to pay on the outcome of the gambling under the junket arrangement, depending on whether it is a net win to the casino or a net loss to the casino: cf Lend Lease.

71    Thirdly, and importantly, the High Court in Qantas rejected a strictly contractual approach to the application of the GST Act. It was held in relation to s 9-5(a) of the GST Act that the word “for” in the phrase “the supply for *consideration” was not used to adopt contractual principles but required “a connection or relationship between the supply and the consideration”: Qantas at 292 [14] per Gummow, Hayne, Kiefel and Bell JJ. In that case, the majority found that fares received from prospective passengers who failed to take the flights for which reservation and payment were made were still “consideration for” a taxable supply by the airline, even though the airline supplied “something less than” actual air travel. Their Honours held that it was sufficient that there was “at least a promise to use best endeavours to carry the passenger and baggage, having regard to the circumstances of the business operations of the airline”: Qantas at 299 [33] per Gummow, Hayne, Kiefel and Bell JJ. It is therefore not determinative that, in the case of a junket, the casino contracts directly with the junket tour operator and not the individual players. What is relevant for the purposes of Div 126 is that the [respondents’] gambling supplies are made to the participating junket players, with the adjustments for commission and rebates reckoned upon the gambling supplies actually made and by reference to the outcome of the gambling events. The operation of Div 126 does not depend on the characterisation of the commission and rebates as “consideration” as a matter of strict contractual principle: Qantas. Equally so, the definition of “monetary prize” is apt to apply where an amount is payable by the casino to the junket tour operator on the reckoning of collective gambling wins and losses adjusted by commission and rebates.

61    Accordingly, her Honour concluded at [75] that the respondents had shown the assessments for the sample periods – February 2012 for Burswood and June 2015 for Crown – to be excessive.

62    The parties were ordered to provide a draft form of order to give effect to the reasons for judgment.

63    On 6 October 2020, her Honour made orders dealing with the two sample periods. In proceeding NSD 1885 of 2018, her Honour ordered that Crown’s appeal relating to the June 2015 monthly tax period be allowed, and that the objection decision in respect of that monthly tax period be set aside. In proceeding NSD 1886 of 2018, her Honour ordered that Burswood’s appeal relating to the February 2012 monthly tax period be allowed, and that the objection decision in respect of that monthly tax period be set aside.

64    In each proceeding, the parties were given a period of time in which to either:

(a)    provide to the Court a proposed form of order to give effect to the Court’s reasons for judgment for the balance of the monthly tax periods in dispute in the proceeding (that is, all of the relevant monthly tax periods other than the sample period); or

(b)    approach the Court to have the matter listed for a case management hearing in respect of the balance of the monthly tax periods in dispute in the proceeding.

65    On 16 February 2021, her Honour made orders in each proceeding relating to the balance of the monthly tax periods in dispute in the proceeding. The effect of those orders was to apply the Court’s reasons for judgment to the other monthly tax periods in dispute in the proceedings. (We note that the orders made by the primary judge did not deal with all of the monthly tax periods covered by the notice of appeal filed by Crown at first instance, but nothing turns on this for present purposes.)

The appeals

66    The Commissioner appeals from the whole of the judgment of the primary judge, and the substantive orders made by the primary judge on 6 October 2020 on 16 February 2021 in each proceeding. There are four appeals before the Court, which may be summarised as follows:

(a)    NSD 1196 of 2020, which relates to the Burswood proceeding below and the orders made on 6 October 2020;

(b)    NSD 1197 of 2020, which relates to the Crown proceeding below and the orders made on 6 October 2020;

(c)    NSD 217 of 2021, which relates to the Crown proceeding below and the orders made on 16 February 2021; and

(d)    NSD 218 of 2021, which relates to the Burswood proceeding below and the orders made on 16 February 2021.

67    The Commissioner’s grounds of appeal are essentially the same in each appeal. By way of example, the Commissioner’s notice of appeal in proceeding NSD 1196 of 2020 contains the following grounds:

1.    The primary judge erred in holding, at [69], that a contractual relationship comes into existence as between the respondent, a junket tour operator and junket players with respect to the conduct of the junket at the casino upon gambling taking place, the terms of which contract are identified by her Honour at [69].

2.    The primary judge erred in holding, at [70], that the accounting for the outcome of the respondent’s gambling supplies is one integrated and indivisible transaction of which the commission and rebates to be paid to a junket tour operator by the respondent and the rebates to be paid by a junket tour operator to the respondent are inseverable components, such that it can be said that commission and rebates are not separate and distinct amounts to be disintegrated from the collective win/loss results.

3.    Having found that the Promotion Agreements and Junket Program Agreements between the respondent and junket tour operators created enforceable contracts under which consideration in the form of commissions and rebates was payable by the respondent in respect of services provided by the junket operators in arranging junkets, the primary judge erred, at [71], in concluding that the reasoning in Commissioner of Taxation v Qantas Airways Ltd (2012) 247 CLR 286 permitted her to disregard those contracts and/or supported her determination that the commissions and rebates constitute consideration for the respondent’s gambling supplies.

4.    The primary judge erred in holding at [68]-[71] and [75] that:

a.    the commissions and rebates paid by the Applicant to junket tour operators; and

b.    the rebates paid by junket tour operators to the Applicant;

for the February 2012 tax period should be included in the sum of the consideration for the Applicant’s gambling supplies attributable to that tax period and therefore within the definition of “total amounts wagered” for that tax period within the meaning of section 126-10(1) of the GST Act in circumstances where there was a “net win” to the Applicant at the conclusion of a gambling junket.

5.    The primary judge erred in holding at [68]-[71] and [75] that:

a.    the commissions and rebates paid by the Applicant to junket tour operators; and

b.    the rebates paid by junket tour operators to the Applicant;

for the February 2012 tax period should be included in the “total monetary prizes” for that tax period within the meaning of section 126-10(1) of the GST Act in circumstances where there was a “net loss” to the Applicant at the conclusion of a gambling junket.

68    Burswood has filed a notice of contention in each of the appeals to which it is a respondent. Similarly, Crown has filed a notice of contention in each of the appeals to which it is a respondent. The notices of contention are all in essentially the same terms. It is sufficient to refer to Burswood’s notice of contention in proceeding NSD 1196 of 2020. By that notice, Burswood contends that the decision of the primary judge should be affirmed on the following additional grounds:

There is only one relevant concluded gambling contract, which arises when actual gambling takes place

1.    The primary judge erred in rejecting (at Reasons [59]-[61]) the Respondent’s submission, recorded at Reasons [58], that the Promotion Agreement of itself does not have legal contractual force.

2.    The primary judge ought to have held, on the authority of York Air Conditioning and Refrigeration (A/sia) Proprietary Limited v The Commonwealth referred to at Reasons [59] and the cases cited therein, that the Promotion Agreement was not a concluded contract because, inter alia, the parties contemplated that essential contractual provisions were yet to be negotiated between them.

3.    The primary judge erred in the precise identification of the terms of the gambling contract between the respondent, the JTO and the VIP players in the final sentence in Reasons [69]. Her Honour ought to have held that the collective win/loss results on nonnegotiable chips, the turnover commissions, the gross and net win rebates and the gross and net loss rebates, are inseverable notional components of an integrated and indivisible gambling contract, being integers in the calculation of a single monetary gambling win or loss either payable to or by the Respondent at the conclusion of the junket. Her Honour ought to have found that this gambling contract gave rise to only one legal monetary gambling obligation, not legally distinct monetary obligations for each notional component, albeit integrated and indivisible. The primary judge ought to have found that her Honour’s conclusion in favour of the Respondent at Reasons [70] for GST purposes - that “commission and rebates are not separate and distinct amounts to be disintegrated from the collective win/loss results” – obtains also on a strictly contractual approach.

Even as separate components for GST purposes, the turnover commissions and rebates are for or in connection with gambling supplies

4.    The primary judge ought to have found that if, contrary to her Honour’s finding at Reasons [70], the turnover commissions, the gross and net win rebates and the gross and net loss rebates are to be disintegrated for GST purposes from the single monetary gambling win or loss either payable to or by the Respondent at the conclusion of each junket, each component itself would either fall within the meaning of consideration for or in connection with gambling supplies or “total monetary prizes” for the purposes of s 126-10 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act).

5.    The primary judge ought to have found that even if the turnover commissions, gross and net win rebates and the gross and net loss rebates could be also characterised as separate consideration for services supplied by the JTOs under Chapter 2 of the GST Act (as contended by the Appellant but denied by the Respondent) that character (i) did not alter their character as part of the consideration for or in connection with the Respondent’s gambling supplies or total monetary prizes under Division 126 in Chapter 4 of the GST Act or (ii) if there were an inconsistency in having both Chapter 2 and Chapter 4 characters (which is denied), the Division 126 character prevailed by reason of s 45-5 GST Act.

Alternatively to 1 to 5 above, the Promotion Agreement requires commissions and rebates provided by the Respondent to be repayments of losses and therefore part of total monetary prizes

6.    Further and in the alternative, the primary judge ought to have considered and held that even if the Promotion Agreement were, contrary to her Honour’s finding, to determine the character of the turnover commissions and rebates, then, on its proper construction, where the players make a collective gross loss, the commissions and rebates that reduce that loss are repayments of a portion of the players’ loss and therefore within the meaning of “total monetary prizes” under paragraph (b) of the definition in s.126-10 of the GST Act.

Consideration

69    Consistently with the way the case was generally presented by the parties, we will consider the grounds of appeal together, rather than ground by ground. It is convenient to deal with the grounds in the notices of contention in the course of considering the notices of appeal.

70    The principles of statutory construction are well established and need not be discussed in detail. It is sufficient to refer to: s 15AA of the Acts Interpretation Act 1901 (Cth); Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503 at [39]; Certain Lloyd’s Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378 at [25]-[26]; and SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 262 CLR 362 at [14].

71    The special rules in Div 126 of the GST Act were introduced to reduce the administrative complexity that entities that make gambling supplies would have faced in applying the ordinary GST rules. The explanatory memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 (Cth) explained at [6.202]-[6.203]:

6.202    GST applies to gambling conducted by registered or required to be registered entities. This includes gambling in casinos, gaming machines in clubs and hotels, lotteries, raffles, betting on racing and other events⎯subsection 126-35.

6.203    However, determining individual bets or ticket sales (wagers) and prizes and then applying GST and input tax credits would be difficult. For example, a casino operator would have to apply GST on every spin of the roulette wheel for every player for every square on the table. For this reason, the GST on gambling is applied to the margin of the person providing the gambling opportunity (for example, the casino operator). Applying the margin to gambling activities achieves the same result as applying GST to individual wagers and allowing input tax credits in relation to prizes paid out.

72    Reflecting that purpose, s 126-10 of the GST Act provides for the calculation of a “global GST amount”. This is calculated by taking the “total amount wagered” and subtracting the “total monetary prizes”. The resulting amount is then multiplied by 1/11. The effect of this provision is that GST on gambling supplies is to be applied to the margin of the person providing the gambling supplies.

73    The expressions “total amount wagered” and “total monetary prizes” are defined in s 126-10. The following aspects of those definitions are noted:

(a)    The expression “total amount wagered” is defined as meaning the sum of the “consideration for all of [the taxpayer’s] gambling supplies” that are attributable to the relevant tax period. The word “consideration” is defined in s 9-15, which has been set out above. In AP Group Ltd v Federal Commissioner of Taxation [2013] FCAFC 105; (2013) 214 FCR 301, it was held that, while the consideration must be “in connection with” the supply, the supply must also be “for” the consideration: at [33] per Edmonds and Jagot JJ. The expression “gambling supplies” is defined in s 126-35(1), which has been set out above. It means a taxable supply involving (relevantly) “the acceptance of a bet (however described) relating to the outcome of a gambling event”. The expression “gambling event” is in turn defined as meaning (relevantly) “a race, game, or sporting event, or any other event, for which there is an outcome”: s 126-35(2).

(b)    The expression “total monetary prizes” is defined as meaning the sum of (relevantly) “the monetary prizes [the taxpayer is] liable to pay, during the tax period, on the outcome of gambling events …”: see paragraph (a) of the definition in s 126-10. Paragraph (b) of the definition can be put to one side because it refers to amounts of money that the taxpayer is liable to pay “under agreements between [the taxpayer] and recipients of [the taxpayer’s] gambling supplies, to repay to them a proportion of their losses relating to those supplies” (emphasis added). Here, assuming the casino made gambling supplies in the case of a junket covered by the agreements described above, the recipients of the gambling supplies were the players rather than the junket tour operator (unless the junket tour operator was also a player). Accordingly, any payments by the casinos to the junket tour operators were not to the recipient of the gambling supplies, and were therefore outside paragraph (b) of the definition.

74    The following features of the contractual bargain between the casino and the junket tour operator, and the commercial context, should be noted.

75    First, the Promotion Agreement provided, in express terms in cl 6.1, that the commission was payable by the casino to the junket tour operator “in consideration of” the matters referred to in cl 4.2, that is, the marketing, promotion and arrangement of the junket (see [50] above). Further, the primary judge found at [65], in our view correctly, that the word “commission” in cl 6.1 of the Promotion Agreement also captured rebates to be paid by the casino to the junket tour operator under the Junket Program Agreement. The primary judge also found at [65], in our view correctly, that “the services provided by the junket tour operator to the casino in arranging the junket are the consideration for the commission, rebates and discounts on loss which the casino ‘will pay’”.

76    Secondly, all dealings in relation to the provision of funds, the provision of credit and issuing and cashing of chips take place exclusively between the casino and the junket tour operator (or their agent). The casino does not receive from, or pay to, individual participants any amounts of money.

77    Thirdly, there is no evidence regarding the payment arrangements between the junket tour operator and the individual participants in a junket. There is no evidence as to what amounts the junket tour operator may pass on or retain, or what remuneration might be received by a junket tour operator from individual participants.

78    Fourthly, having regard to the three matters referred to above and the circumstances generally, the junkets are best seen as a particular type of commercial arrangement between the casinos and the junket tour operators, that is quite different from the ordinary relationship between the casinos and individual players. Among other things, there may be no relationship between the success or lack thereof of the individual player during the junket, and the amount of money ultimately payable by the junket tour operator to the player or by the player to the junket tour operator.

79    It is convenient to start by considering the GST treatment of the commissions and the rebates, if viewed as separate amounts payable, and then to consider the total amount payable. We note that the agreements impose an obligation on the casino to pay the commissions and rebates. For example, cl 3 of the Junket Program Agreement provides that Crown Perth “will pay” the junket tour operator a commission, and clauses 4 and 5 provide that the casino “will pay” a rebate.

80    Having regard, in particular, to the contractual and contextual matters referred to above, in our view, in a case where a commission or rebate is payable by the casino to the junket tour operator, the commission or rebate is not aptly characterised as forming part of “total monetary prizes” (being the potentially relevant expression in s 126-10). As discussed above, the contractual provisions state expressly that the commission is payable for the marketing, promotion and arrangement of junkets by the junket tour operator to the casino: see cl 6.1 of the Promotion Agreement. The expression “total monetary prizes” in s 126-10 relevantly refers to the sum of “the monetary prizes [the taxpayer is] liable to pay, during the tax period, on the outcome of gambling events …”. The expression “monetary prize” is defined in s 195-1 as meaning (relevantly) “any prize, or part of a prize, in the form of money or in the form of gambling chips that may be redeemed for money”. The word “prize” is not defined and takes its ordinary meaning, which in the present context is “that which is won in a lottery or the like” (Macquarie Dictionary, online edition, second meaning of “prize”). The commissions and rebates are not “prizes” within the ordinary meaning of that word. They are amounts payable by the casino to the junket operator referable to the commercial relationship between them and additional to any amount referable to winnings. It follows that they are not “monetary prizes” as defined.

81    Further, the commissions and rebates are not payable “on the outcome of gambling events” as referred to in the definition of “total monetary prizes”. They are payable as consideration for the provision or marketing and other services by the junket tour operator. The respondents submit that a junket program “is a gambling event in itself, in that the players are established in a special salon, are issued with non-cashable chips, and gamble over a set period of time for one monetary result to be determined only when the ‘dealing’s done’”. The expression “gambling event” is defined in s 126-35 as meaning, relevantly, “a race, game, or sporting event, or any other event, for which there is an outcome”. This is not apt to refer to the junket as a whole; it refers, rather, in the present context, to each particular game of gambling.

82    For these reasons, the commissions and rebates payable by the casino to the junket tour operator do not form part of “total monetary prizes”.

83    Turning to rebates payable by the junket tour operator to the casino, and having regard to the contractual and contextual matters referred to above, it is difficult to see how these amounts can form part of the expression “total amount wagered” (being the potentially relevant expression in s 126-10). That expression is defined as meaning the sum of the “consideration for all of [the taxpayer’s] gambling supplies”. “Gambling supplies” is defined in s 126-35(1) as meaning, relevantly, “the acceptance of a bet (however described) relating to the outcome of a gambling event”. The definition of “total amount wagered” is apt to pick up, for example, bets placed by players at a casino on a game of roulette or baccarat. The rebates payable by a junket tour operator to the casino are payments to be made as part of, and in connection with, the commercial arrangements for the junket agreed between the casino and the junket tour operator; the rebates are not payments to be made in consideration for the gambling supplies. For these reasons, the rebates payable by the junket tour operator to the casino do not form part of the “total amount wagered” within the meaning of s 126-10.

84    The respondents submit that the commissions and rebates, if viewed as separate components from the total amount payable, “move the gambling transaction”. The respondents emphasise that, if no gambling takes place, nothing is due and payable. In light of this, the respondents submit that the commissions and rebates payable by the casino to the junket tour operator are amounts the respondents are liable to pay “as specially agreed prizes determined on the outcome of the gambling events”, and the rebates payable by the junket tour operators to the casino are consideration for their gambling supplies. We do not accept this characterisation of the commissions and rebates. In a case where no gambling takes place, the marketing and other services provided by the junket tour operator to the casino are of little or no value to the casino. The fact that no commissions and rebates are payable by the casino to the junket tour operator in this scenario is consistent with the amounts being payable for the marketing and other services provided by the junket tour operator (rather than being specially agreed prizes on the outcome of gambling events). Further, the fact that no rebates are payable by the junket tour operator to the casino simply reflects the commercial arrangements between the casino and the junket tour operator in relation to the junket; it does not establish a sufficient connection between the rebates and the supply of gambling services such that the rebates fall within the statutory concept of “total amount wagered”.

85    For these reasons, the commissions and rebates, if viewed as separate amounts payable, do not form part of “total monetary prizes” or “total amount wagered”. It follows that they are not to be taken into account in calculating the “global GST amount” under s 126-10, and the special rules in Div 126 do not apply to these amounts.

86    To this point, we have considered the issue of the correct GST treatment by considering the commissions and rebates. However, the respondents’ submissions focus, to a large extent, on the total amount payable at the end of a junket, rather than on the commissions and rebates. We will therefore now consider the issue with reference to the total amount payable.

87    In circumstances where the total amount payable is calculated taking into account the commissions and rebates payable by the casino to the junket tour operator, and the rebates payable by the junket tour operator to the casino, which amounts do not fall within the statutory concepts of the “total monetary prizes” or the “total amount wagered” (for the reasons set out above), the total amount payable also does not fall within those concepts.

88    Putting this another way, the total amount payable at the end of a junket (which is a net amount taking into account winnings, losses, commissions and rebates), if payable by the junket tour operator to the casino, is not aptly described as consideration for the taxpayer’s gambling supplies, and therefore should not be treated as constituting or forming part of the “total amount wagered”. Likewise, the total amount payable, if payable by the casino to the junket tour operator, is not aptly described as a monetary prize that the taxpayer is liable to pay, and therefore should not be treated as constituting or forming part of the “total monetary prizes”.

89    Further, the scheme of Div 126 is to calculate the “total amount wagered” and subtract the “total monetary prizes”; the resulting figure is then multiplied by 1/11. That scheme envisages a single calculation of a net amount, being the difference between the “total amount wagered” and the “total monetary prizes”. It would be inconsistent with that scheme for there to be another calculation of a net amount, and for that other net amount to then form one of the inputs in calculating the net amount under s 126-10. But that is what would happen if the total amount payable at the end of a junket (which is a net amount taking into account winnings, losses, commissions and rebates for the junket) were treated as an input into the formula in s 126-10.

90    The primary judge’s core reasoning for concluding that the total amount payable at the end of the junket (including the commissions and rebates) should be treated as constituting or forming part of the “total amount wagered” or the “total monetary prizes” for the purposes of s 126-10 was contained in [68]-[71] of the reasons for judgment, set out above. In our respectful opinion, the three reasons there set out do not support that characterisation of the payments.

91    The primary judge’s first reason, at [69], was that a tripartite contractual relationship existed as between the respondents, the junket tour operator and the junket players with respect to the conduct of a junket at the casino upon gambling taking place, relying on the judgment of the House of Lords in Clarke v Earl of Dunraven & Mount-Earl [1897] AC 59 (The Satanita). In our view, the primary judge erred in finding that such a contractual relationship existed. First, The Satanita is distinguishable. In that case, the Court found that participation in a yacht race gave rise to contractual relationships as between the participants, in accordance with the rules of the race. The general principle that participation in a competition may give rise to contractual relationships as between participants does not support a broader conclusion that the individual junket participants become parties to a tripartite relationship with both the casino and the junket tour operator. Secondly, there was no evidence before the Court at first instance that individual participants saw or were otherwise aware of the specific terms of the Junket Program Agreement (unlike the participants in The Satanita, who each provided an undertaking to be bound by the relevant rules). Thirdly, the existence of a tripartite contractual relationship is inconsistent with, or at least does not sit easily with, cl 4.10 of the Promotion Agreement, which provides that the junket tour operator and the junket players are free to negotiate and conclude separate arrangements between themselves, and this will not affect the obligations of the casino to the junket tour operator and vice versa.

92    The primary judge’s second reason, at [70], was that the accounting for the outcome of the respondents’ gambling supplies was “one integrated and indivisible transaction of which the commission and rebates … are inseverable components”. Accordingly, in the primary judge’s view, the commissions and rebates “are not separate and distinct amounts to be disintegrated from the collective win/loss results”.  There are two principal difficulties with this characterisation of the transaction. First, under the contractual framework, the commission was expressed to be payable by the casino to the junket tour operator as consideration for the marketing and other services provided by the junket tour operator: see cl 6.1 of the Promotion Agreement and [65] of the primary judge’s reasons for judgment. Given this, we do not consider it correct to see the transaction as “one integrated and indivisible transaction” for the purposes of determining whether the total amount payable constitutes or forms part of the “total amount wagered” or the “total monetary prizes” as defined. The commissions and rebates were of a different character from the losses and winnings, and that difference is relevant in determining whether the total amount payable falls within the statutory concepts. Secondly and in any event, for the reasons given at [89] above, it is inconsistent with the scheme of Div 126 for there to be another calculation of a net amount, and for that other net amount to then form one of the inputs in calculating the net amount under s 126-10. We note for completeness that, while the High Court in Lend Lease at [53]-[62] characterised the transaction in question in that case as “single, integrated and indivisible”, the issue before the Court in that case (that is, whether the consideration “for” certain transfers included the performance of certain promises under a Development Agreement) was very different from the present issue, which concerns whether the total amount payable (including the commissions and rebates) falls within the statutory expressions “total amount wagered” or “total monetary prizes”.

93    The primary judge’s third reason, at [71], was that “the [respondents’] gambling supplies are made to the participating junket players, with the adjustments for commission and rebates reckoned upon the gambling supplies actually made and by reference to the outcome of the gambling events”, relying on the judgment of the High Court in Commissioner of Taxation v Qantas Airways Limited [2012] HCA 41; (2012) 247 CLR 286 (Qantas). In our view, having regard to the contractual framework, it is not correct to treat the commissions and rebates as mere adjustments to the gambling winnings and losses. As discussed above, the Promotion Agreement, in cl 6.1, provided that the commission payable by the casino was payable as consideration for the marketing and other services provided by the junket tour operator. In light of this provision, and the contractual framework and commercial context more generally, the commissions and rebates were not merely adjustments to the gambling winnings and losses; they were of a different character and this is relevant in characterising the payments in issue. This analysis is, in our view, consistent with the statement of the majority of the High Court (Gummow, Hayne, Kiefel and Bell JJ) in Qantas at [14] that, in the phrase “the supply for consideration” (emphasis added), which appears in the definition of “taxable supplies” in s 9-5(a) of the GST Act, the word “for” is “not used to adopt contractual principles”. Rather, it “requires a connection or relationship between the supply and the consideration”. In the present case, the issue is quite different; it is whether the total amount payable (including the commissions and rebates) constitutes or forms part of the statutory concepts “total amount wagered” or “total monetary prizes”. Further, in addressing the issue before the High Court in Qantas, the majority gave close consideration to the contractual framework: see at [29]-[33].

94    For these reasons, we consider that the primary judge erred in concluding that the total amount payable at the end of a junket (including the commissions and rebates) constitutes or forms part of the “total amount wagered” (if payable by the junket tour operator to the casino) or the “total monetary prizes” (if payable by the casino to the junket tour operator).

95    In connection with their notices of contention, the respondents submit that the primary judge misconstrued the contractual obligations under the Promotion Agreement at [59]-[61] of the reasons for judgment. The respondents submit that the primary judge ought to have found that the Promotion Agreement was a framework relationship agreement or a non-binding “agreement to agree”, in that no junket had been identified and the respondents merely agreed that special options would be inserted into actual Junket Program Agreements, relying on Placer Development Ltd v Commonwealth [1969] HCA 29; (1969) 121 CLR 353 at 356, 359-361, 369-370. In our view, no error is shown in the primary judge’s analysis of the Promotion Agreement at [59]-[67] of the reasons for judgment. While it is true that the Promotion Agreement left some important matters to be agreed in the Junket Program Agreement, it nevertheless created rights and obligations in relation to several matters (as set out at [60] of the reasons for judgment). Further and in any event, as the primary judge found at [63], the terms and conditions of the Promotion Agreement were expressly incorporated into the Junket Program Agreement (save that the Junket Program Agreement prevailed to the extent of any inconsistency). Thus we do not accept the respondents’ submission that the Promotion Agreement is irrelevant to the GST treatment of the commissions and rebates, and the total amount payable.

Conclusion

96    For the reasons set out above, the Commissioner’s grounds of appeal are substantially made out, and the grounds in the notices of contention are rejected. The appeals are therefore to be allowed and the substantive orders of the primary judge set aside. The respondents have not shown that the relevant assessments are excessive. Accordingly, in lieu of the orders made by the primary judge, there should be orders that the appeals against the appealable objection decisions be dismissed. In relation to costs, there is no apparent reason why costs should not follow the event, both at first instance and on appeal.

Associate:

Dated:    23 August 2021