ACN 154 520 199 Pty Ltd (in liquidation) v Commissioner of Taxation, [2020] FCAFC 190

The applicant (“ACN 154”) described its business to the respondent (the Commissioner) as involving the acquisition and refining of scrap gold (i.e., gold that was not in investment form) produce precious metal (relevantly defined in the GST Act to mean gold, in an investment form, of at least 99.5% fineness) for sale to dealers. The majority of the scrap gold acquired by ACN 154 was already of at least 99.99% fineness, but nevertheless was scrap gold because it was not in investment form.

Under s. 38-385 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the “GST Act”), a supply of precious metal was “GST-free” if, relevantly, it was the “first supply of that precious metal after its refining by … the supplier”. In the course of allowing ACN 154’s appeal and in finding that the above supplies came within s. 38-385, the Court stated (at paras. 137, 145):

[N]either the text nor the context of s 38-385 supports the construction adopted … by the Tribunal, namely that “processes which are not directed towards increasing the metallic purity of the gold above the requisite standard of fineness (99.5% in the case of gold) should not be regarded as ‘refining’”. The ordinary meaning of the word “refining” … and the statutory context suggest that the word “refining” in s 38-385 is referring to a process by which metal is brought to a finer state or form. It may be accepted that, as the Commissioner submits, this is concerned with increasing the metallic fineness of the metal. But this does not require that the process be directed towards increasing the metallic fineness of the metal above the requisite standard of fineness (99.5% in the case of gold). …

It is the nature of the processes, rather than their purpose, that is critical in determining whether they constitute “refining”. Thus, even if …the primary objective of these processes was to provide quality assurance (rather than to increase the metallic purity), the processes nevertheless constituted “refining” in the sense outlined above.

An Australian GST provision effectively zero-rated a supply of “precious metal” (relevantly defined as gold, in an investment form, of at least 99.5% fineness) if it was the “first supply of that precious metal after its refining by … the supplier”. The Australian Commissioner argued that an Australian company did not qualify as refining gold “scrap” purchased by it (which was generally of at least 99.99% fineness, but nevertheless was scrap gold because it was not in investment form) because its mooted refining was of gold that thus already exceeded the statutory threshold of 99.95% fineness.

Before rejecting this position, the Full Court first stated (at para. 28):

The expression “investment form”, which is used in the definition of “precious metal”, is not defined in the GST Act. As noted at [30] of the Tribunal’s reasons, the Commissioner articulated a definition in GSTR 2003/10: Goods and Services Tax: What is ‘precious metal’ for the purposes of GST? That document stated at [29]:

… for gold, silver or platinum to be in an investment form for the purposes of the GST Act, it must be in a form that:

• is capable of being traded on the international bullion market, that is, it must be a bar, wafer or coin;
• bears a mark or characteristic accepted as identifying and guaranteeing its fineness and quality; and
• is usually traded at a price that is determined by reference to the spot price of the metal it contains.

It was common ground before the Tribunal that the above view of what constitutes “investment form” was generally accepted; the parties also agreed that, absent a recognised mark and indication of fineness, a gold bar will not be “precious metal” irrespective of its degree of metallic purity … .