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Monday, 27 September 1999
Page: 8896


Senator LUDWIG —My question is to Senator Kemp, the Assistant Treasurer. Can the minister confirm the statement by a spokesperson for the Treasurer to the Australian Financial Review that `the law does not apply GST to frequent flyer points'? Given that the definition in the GST act is `a supply is any form of supply whatsoever', does the redemption of frequent flyer points for an airline ticket constitute a supply for the purposes of the act? How would the value of an airline ticket for GST purposes be determined? Would it be, for instance, at the full economy rate or at the discount economy rate?


Senator KEMP (Assistant Treasurer) —In relation to frequent flyer points, the government's objective is to ensure that consumers are not taxed twice—once when the points are accrued and once again when the points are redeemed. Senator, we are particularly keen to ensure in relation to that issue that people are not taxed twice. That is the government's position.


Senator LUDWIG —Madam President, I ask a supplementary question. If, as the Treasurer's spokesperson has stated, the law does not apply the GST to frequent flyer points, why then did the commissioner, Mr Carmody, confirm that the frequent flyer issue was being discussed with both major domestic airlines? Does this mean that the Treasurer's office was in fact wrong and that the GST liability does indeed arise on free airline tickets due to the definition of `supply' and `consideration' as found in the GST act?


Senator KEMP (Assistant Treasurer) —Of course the application is being discussed with the airlines. This is a consultative government. It discusses issues with people, unlike the previous government. Let me make it very clear, Senator: as I said, the government's objective in this area is to ensure that consumers are not taxed twice—once when the points are accrued and once again when the points are redeemed.